California Now Licensing LLC’s as Contractors

As a result of legislation passed in 2010 (Statutes of 2010, Chapter 698), the California Contractors State License Board (CSLB) is authorized to issue contractor licenses to limited liability companies (LLCs). The CSLB issued the first contractor’s license to a limited liability company (LLC) on January 19, 2012. Applications for licensing an LLC to be a contractor can be obtained from the CSLB’s website.

Here are some requirements for an LLC to be licensed:

  • A $100,000 surety bond (in addition to the $12,500 contractor bond) for the benefit of any employee or worker damaged by the LLC’s failure to pay wages, interest on wages, or fringe benefits, as well as other contributions (not required for an officially inactive LLC license).
  • At a minimum, a $1,000,000 liability insurance policy. If there are six or more persons listed as members of the personnel of record, an additional $100,000 is required for each additional member. The maximum policy amount required is $5,000,000.
  • Every person who is an officer, member, responsible manager, or director must be listed as personnel of record on the LLC application.
  • An LLC license must be qualified by the appearance of a responsible managing employee (RME), responsible managing officer (RMO), responsible managing manager, or responsible managing member.
  • If an LLC is suspended for failing to be in good standing with the Secretary of State, each officer, director, manager, responsible managing employee, responsible managing member, responsible managing manager, and responsible managing officer of the LLC may be personally liable up to $1,000,000 for damages resulting to third parties in connection with the company’s performance, during the period of suspension, of any act or contract where a license is required by the Business & Professions Code. There is a substantial compliance exception.
  •  Certain liability insurance information is required to be included on the LLC’s home improvement and service and repair contracts.

An LLC may be listed as an entity on a joint venture license.

An LLC may serve as a general partner on a partnership license provided the LLC meets the requirements noted above relating to the additional surety bond and liability insurance. An LLC serving as a limited partner on a partnership license is not required to meet the additional surety bond and liability insurance requirements.

Sole owner and corporate license numbers may be reissued to LLCs under certain circumstances.

Most other requirements and provisions that apply to corporate licenses will also apply to LLC licenses.

According to the CSLB Registrar, the licensing division has had to reject many applications because they were submitted without the correct information. A common reason for rejection is not including the LLC registration number that is issued by the California Secretary of State. That number must be included on page one of the CSLB application. Companies should not submit the LLC application to CSLB until the Secretary of State has issued the number.

Another common problem is that the personnel listed on the application do not match those reported by the Secretary of State. The names and number of personnel listed on the application must match all of the personnel information provided to the CLSB by the Secretary of State.

The Secretary of State currently has a backlog in processing Statement of Information forms (Form LLC-12) (both initial filings and updates), which the CSLB requires for reporting the LLC’s personnel (members and managers). The CSLB will not process the LLC license application until all information is consistent with the Secretary of State’s records since the information is necessary for CSLB to determine the appropriate amount of required LLC liability insurance (between $1 million and $5 million, depending on the number of personnel).

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