Earlier, I wrote a post on What You Need to Know About Obtaining a Contractor’s License in California. This post focuses on what you need to know about maintaining your contractor’s license in California. As with my earlier post, I’ve borrowed liberally from the California Contractors License Board’s (“CSLB”) excellent publication California Contractors License Law & Reference Book. So, without further ado . . .
How long is a California contractor’s license valid for?
A California contractor’s license is initially valid for two years after it is issued. Approximately 60 days before the license is due to expire the CSLB will send the licensee a renewal application. The licensee must return the renewal application to the CSLB before expiration of the licensee’s license or it will be cancelled.
If renewed on “active” status, a license may be renewed for an additional two years. If renewed on “inactive” status, a license may be renewed for four years.
What happens if I inactivate my contractor’s license and how do I reactivate it?
An inactive contractor’s license is considered to be “on hold.” While your license is inactive, you cannot bid or perform work as a licensed contractor. However, you do not need to maintain any bonds or workers compensation insurance while your license is inactive nor do you need to have a Responsible Managing Officer (“RMO”), Responsible Managing Employee (“RME”), Responsible Managing Member or Responsible Managing Manager. To inactivate your license, you need to submit an Application to Inactivate Contractor’s License together with your current pocket license.
To reactivate an inactive contractor’s license, you will need to submit an Application to Reactivate Inactive Contractor’s License, together with all required bonds, proof of insurance if you are a limited liability company (“LLC”), proof of workers compensation insurance if you have California employees and the required application fee (currently $360).
What about bonds, proof of insurance, and proof of worker’s compensation insurance?
Bonds and insurance policies expire. Bonds can be valid for one year or up to five years depending on the surety. Insurance policies typically expire after a year. You must ensure that your license bond and qualifier bond (unless you qualify for an exemption) are renewed before they expire. And, if you operate as a LLC, that your surety bond is renewed before it expires, and that you have submitted proof of a current insurance policy. In addition, if you have employees in California, you must ensure that you have submitted proof of a current worker’s compensation insurance policy. Make sure that effective date is the same as the cancellation date of the old bonds and insurance policies. If your bonds or insurance policies expire the CSLB will send you a notice of suspension.
What happens if my construction company is sued and a judgment is entered against the company?
Contractors are required to report construction-related civil court judgments to the CSLB within 90 days of the judgment date. The CSLB will then send notice to the contractor that it has 90 days from the date of the notice to resolve the judgment, and if the judgment is not resolved within that period, that the licensee’s license will be suspended.
Note: The CSLB broadly construes “construction-related,” so if you did not pay your office rent, your office utility bills, your subcontractor, material supplier, or employees, the CSLB will consider the judgment to be “construction-related.”
A contractor can prove that a judgment has been resolved by submitting either: (1) an Acknowledgement of Satisfaction of Judgment; (2) a notarized statement from the judgment creditor that the judgment has been paid in full; or (3) a copy of the front and back of a cancelled check payable to the judgment creditor. If providing a copy of a cancelled check you must provide the telephone number of the judgment creditor so that the CSLB can verify that the payment was received by the judgment creditor.
Note: If you file for bankruptcy and submit proof of the bankruptcy filing including the name of the judgment creditor on the list of creditors, or if you file proof that an appeal of the judgment has been filed, the CSLB will stay enforcement.
Can I add a classification to my contractor’s license?
Yes. To add a classification you must submit a separate Application for Additional Classification for each classification you are adding. However, for C-61 (Limited Specialty) classifications, you can request multiple C-61 classifications on a single Application for Additional Classification.
In order to add classification to your contractor’s license you must:
Select a qualifying individual who holds a license in the same classification you are adding;
Have the qualifying individual describe in detail four years of experience within the last 10 yeas as a journeyman, foreman, supervisor or contractor in the classification in which he or she is serving as the qualifying individual together with verification of the claimed experience;
Unless the qualifying individual qualifies for a waiver, he or she must pass the trade examination for the classification and, if he or she has not done so previously, pass the Law and Business Examination.
If the qualifying individual is a RME, he or she must inactivate his or her individual license.
File any required bonds; and
Submit the required application processing fee (currently $75).
You can also remove a classification by filing an Application to Remove Classification From License.
What if one the official personnel previously listed on the CSLB’s records leaves the company?
It depends on who the contractor’s license was issued to and whether the person leaving is a RMO or RME.
Sole Proprietorships - If the contractor’s license was issued to an individual doing business as a sole proprietorship, the individual license cannot be transferred, even if the business is sold to another person. If the individual with the contractor’s license dies, a death certificate must be submitted to the CSLB, and the license will be cancelled. If the individual with the contractor’s license no longer wishes to conduct business, the individual may either cancel the license by submitting a Cancellation Notice to the CSLB, or inactivate the license by submitting an Application to Inactivate Contractor’s License to the CSLB.
Partnerships - If the general or qualifying partner leaves the partnership the contractor’s license of the partnership a Disassociation Request must be submitted to the CSLB within 90 days of the date the general or qualifying partner left the partnership. However, the remaining partners may request a one year continuance of the license to complete projects in progress. A request for continuance must be submitted to the CSLB within 90 days of the date the general or qualifying partner left the partnership. If the remaining partners wish to remain in business beyond the one-year continuance they will need to appy for a new contractor’s license.
Corporations and Limited Liability Companies – If any of the listed officers of a corporation or limited liability company leaves the corporation or limited liability company this change must be reported to the CSLB within 90 days of the listed officer leaving the company.
RMOs, RMEs, Responsible Managing Member, and Responsible Managing Manager- If a qualifying individual, either a RMO, RME, Responsible Managing Member or Responsible Managing Manager, leaves the company, this change must be reported to the CSLB within 90 days of the qualifying individual leaving the company by filing a Disassociation Notice. You must replace the RMO, RME, Responsible Managing Member or Responsible Managing Manager within 90 days of the date the qualifying individual left the company by filing an Application for Replacing the Qualifying Individual and the required application fee. An Application for Replacing the Qualifying Individual can also be used as the Disassociation Notice if the qualifying individual is replaced immediately.
Note: You may petition the CSLB for reconsideration if you dispute the date of disassociation on which a suspension is based. You may also petition the CSLB if you can show good cause for failing to notify the CSLB within 90 days of the date of a disassociation. However, the CSLB must receive the petition within 90 days from the date the CSLB sends notice that the contractor’s license will be suspended if the qualifying individual is not replaced.
What if the RMO, Responsible Managing Member, or Responsible Managing Manager’s share of the voting stock or equity of the corporation or LLC, which allowed the qualifying individual to qualify for an exemption from the qualifying individual bond, falls below 10%?
If the RMO, Responsible Managing Member, or Responsible Managing Manager’s share of the voting stock or equity of the corporation or LLC falls below 10% of the voting stock or equity of the corporation or LLC, he or she will no longer be eligible for the exemption from the qualifying individual bond (currently $12,500), and a Bond of Qualifying Individual form must be submitted to the CSLB within 90 days of the change.
What if I change my company name or address listed in the CSLB records?
You must submit an Application to Change Business Name and/or Address to the CSLB within 90 days after there has been a change in the name or address of the company.
What if I change the business type of my company?
The CLSB issues contractor’s licenses to five types of entities: (1) individuals; (2) partnerships; (3) corporations; (4) limited liability companies; and (5) joint venturers. Because licenses are issued to the specific type of entity, a new contractor’s license is required if the business type of the company changes, say from a sole proprietorship to a corporation or from a partnership to several sole proprietorships.
As such, you will need to submit an Application for Original License if your business entity type changes. However, if you took the exam for the previous license and are applying for the same classification previously held you will not need to re-take the examination.
Because a new contractor’s license must be issued if there is a change in the business type of a company you will usually get a new license number. However, if the previous license was issued to an individual, and the individual is forming a corporation in which he or she owns 51% or more of the voting stock of the corporation, he or she may request that the previous license number be reissued to the corporation.
What if my contractor’s license is revoked and I want my license to be reinstated or reissued?
If your license is revoked for violating the Contractors State License Law,and you wish to have your license reinstated or reissued you must file a disciplinary bond. The amount of the disciplinary bond is based on the seriousness of the violation but may not be less than $15,000 nor more than ten times the amount of the contractor’s bond (currently $12,500).
Under what circumstances can my contractor’s license be cancelled?
A license is cancelled when any of the following arises:
Individual License: Death of the owner;
Partnership License: Death or disassociation of a general or qualifying partner;
Corporate and LLC Licenses: Notification by the licensee of merger, dissolution, or surrender of the right to do business in California; or
Joint Venture License: Cancellation, revocation, or withdrawal of any of the businesses that formed the joint venture.
You must submit a License Cancellation Request to the CSLB within 90 days of occurrence of any these circumstances. A corporate or LLC license will also be cancelled 60 days after the CSLB discovers that the corporation or LLC has merged, dissolved, or surrendered the right to do business in California. Of course, a licensee may also voluntarily request cancellation of a license at any time by filing a License Cancellation Request.
If my license is cancelled is there any way my business can continue to temporarily operate?
Yes. Under certain circumstances, a request to continue operations may be granted for up to 1 year, with extensions past 1 year, as approved by the CSLB. The rules as to who may apply for a continuance depends on the type of license:
Sole Ownership: If the owner dies, a member of his or her immediate family may apply for a continuance;
Partnership: If a general partner or the qualifying partner dies or disassociates, the remaining partners listed in the CSLB’s records may apply for a continuance; and
Joint Ventures: If any of the partners of a joint venture cancels, revokes, or withdraws from the joint venture, the remaining joint venture partner or partners listed in the CSLB’s records may apply for a continuance.
A request for continuance must be made to the CSLB within 90 days from the date of a death or disassociation.