Legal Question in Construction Law in California

The business entity that will enter into the contracts for which a contractors license is required, is the entity that must be licensed. As a sole proprietor you and the entity are one and the same. Once you form an LLC and want to have it be the contracting entity, you will need a license for the LLC. An LLC, just like a corporation, qualifies for it's license with a responsible managing officer (RMO) or a responsible managing employee (RME). Since LLC's are owned by "members" the Business and Professions code now also recognizes responsible managing members (RMM). Depending on how you structure the business and its management and control, presumably you would be the RMO, RME, or RMM for the LLC's license. Be sure to bear in mind that the RMO, RME or RMM must devote substantially all their work time to the business of the licensee corporation or LLC, so once you start doing business as an LLC, you must stop doing any contracts in your own name and/or under your individual license. All the requirements for the new LLC license can be found on the CSLB website at: http://www.cslb.ca.gov/GeneralInformation/About/LLC.asp

Since you are licensed by the State as a contractor, you cannot perform contracting through an LLC. You must use a corporation as the limited liability entity.

Well, it looks to me as though Mr. McCormick and Mr. Beal disagree upon whether a contracting business can be operated by an LLC. Who is right?

The Contractors State License Board's Web site says:

"The passage of Senate Bill 392 (Statutes of 2010, Chapter 698) authorizes CSLB to issue contractor licenses to limited liability companies (LLCs). The law says that CSLB shall begin processing LLC applications no later than January 1, 2012.

"CSLB is now accepting applications for licensure from LLCs. LLC applications can be obtained from CSLB�s website."

As of January 1, 2012, California is allowing a properly-licensed LLC to operate and perform construction services. There are slightly different requirements than for corporations. Additionally, you can utilize partnerships and joint ventures, but each has unique requirements. My construction law blog, www.buildinglawblog.comm has an article on the requirements for contractors wishing to form an LLC. Furthermore, it is incorrect to state you can only be affiliated with one business performing construction.

Thank you. An excellent change, finally. I have been complaining to Sacramento for years about this.