You can qualify to be ‘responsible’ without owning a piece of that rock! Another contractor won’t have to go far to become a ‘foreign entity’, while another learns about a ‘common law’ relationship. And we nail down the fact that there’s no substitute for ‘hammer time’…

Q: We are acquiring a business and the seller has suggested that she can come on the license as the Responsible Managing Officer (RMO). Are we required to give her a percentage of ownership for her to act in this capacity?

A: No, an RMO is not required to have any ownership unless the individual is acting as the qualifier for another company at the same time.

Q: I am a licensed contractor in California and I have some work coming up in the State of Nevada. Do I need to set up a separate company in Nevada, or how does that work? I will be using all the same employees and insurances, etc.

A: You can set up a separate company in Nevada, but you are not required to. You can use your California company and register it as a “foreign” entity in Nevada and keep everything under the same Company. Let me know if you’d like our assistance with the Nevada licensing process.

Q: Can a licensee retain his sole proprietor license and qualify for a subsidiary in which he owns 20% of its parent company under 7068.1(b)? The parent company does not engage in activities requiring a contractor’s license, so the subsidiary is the entity for which we are interested in obtaining a license. The subsidiary is wholly owned by the parent.

A: The “common ownership” scenario outlined in 7068.1(b) only works if the parent company is licensed. He can always retain his license while qualifying another company, but if he does not have at least 20% ownership in the company he is qualifying, he would need to retain it on “Inactive” status.

Q: I have been licensed for over 30 years in the State of California. I started as a sole proprietor back in 90’s, and at some point along the way my CPArecommended that I incorporate, so I did, and I was able to transfer my personal license to the ‘SCorp’. I am slowing down now and I plan to retire at some point early next year. My wife who has done my taxes for the last several years, suggested that I go back to being a sole proprietor to avoid the need to file two separate tax returns, one personal and one for the business and avoid paying corporate taxes any longer. Am I able to transfer my license number back to a sole proprietor business?

A: Unfortunately, not the case. License numbers are transferrable from Sole Owner to Corp/LLC and from Corp to LLC under certain circumstances, but Corporate/LLC licenses are not transferrable to a Sole Proprietorship. Once you transfer your Sole Owner number to a corporation, the number belongs to the corporation.

Q: As you know, you just assisted me with obtaining a Limited Liability Company (LLC) license with a Responsible Managing Employee (RME). I had my RME sign an agreement to qualify the license in order to avoid the extra time it takes to go through the testing process, plus you had reviewed my experience and suggested I would need more trade experience in order to Qualify myself. Now that we have the license, is there a school I can attend to quickly meet the experience requirement? 

A: No. The CSLB will consider college education as credit toward the experience requirement, but there is no specific school you can attend in order to qualify more quickly. 

While knowledge is power, knowing where to go for the answers is half the battle. Get expert assistance immediately when you call 866-443-0657, email [email protected].

By Shauna Krause, President, Capitol Services, Inc.- www.cutredtape.com