Status Change/License Change and Other Licensing Tidbits
 
 
CSLB Approval Required for Change in Business.  For those of you contractors who may be considering changing your business from a sole proprietor to a corporation (and it is generally a good idea), you should beware that the Board requires notification and issuance of a new license for such business entity changes.  Licenses are associated with the business and not necessarily the qualifier.  Thus, licenses are not really simply transferable from one business to another, even if the qualifying person is the same for both.  
 
To obtain this new license, one must submit a new Application for Original License along with a 7065 Exam Waiver application.  (If you previously took the exam for your current license, passed it, and are applying for the same classification previously held, no exam is required.)  One must pay the required fees (of course), post a new bond, and provide proof of workers' compensation insurance (or file an exemption) for the new business under the new business name..  
 
Like Your Old License Number?  There are a few exceptions where the Board will allow one to keep the old license number.  For example, if the original license is for a sole ownership business which is incorporating and the qualifier owns more than half of the business, the original license may be reissued.  A request must be submitted with the application.
 
Wait For It!  Remember, until you are approved and the new license is issued by the Contractors State License Board, one cannot contract in the name of the new business without the proper license in hand.  I suggest submitting the application as soon as possible to the Board to avoid any lapse in licensing.  
 
This can be confusing; let me give the most common example. Incorporation starts with the Secretary of State, which is a different and separate governmental critter from the Board.  One files the Articles of Incorporation with the Secretary of State.  When the stamped Articles are returned, this indicates the entity is now a corporation and open for business.  Many contractors at this point presume the process is complete.  But further approval is needed from the Board - which takes several months - before the new corporation can do business as a contractor.
 
When the business type changes and starts operating but a new license is not issued, the risk is huge - the business faces all the legal risks of being an unlicensed contractor.  This includes exposure of the contractor to the Business & Professions Code Section 7031 requirement of disgorgement of all monies paid by a client.
 
Properly Licensed as a Partnership?  Contractors will sometimes loosely use the term "partner" or "partnership."  Be careful in this situation.  The Board considers a partnership a separate entity - like a sole proprietorship or corporation - that requires a separate license.  I recently came across an issue with a contractor client regarding whether the business was properly licensed as a partnership.  The contractor was licensed as a sole proprietorship, but the business perhaps operated as a partnership.
 
            The matter is being sorted out; stay tuned.
            
 
Previous Articles. For my previous articles, please visit SFBA NARI's website and click on the link "In the News/Newsletter" under "For the Trade."  They are also available on my website under "Articles.."  As always, my discussions are summary in nature and intended to simply give you a heads up on various topics and issues. 
 
Bryant H. Byrnes, Esq. practices construction law in the San Francisco Bay Area and is counsel to the SFBA NARI Board of Directors.  Questions?  His website is www.bryantbyrnes.com.  Feel free to contact Bryant by email at bhbatty@pacbell.net.