Kalb's Q & A For California Contractors

Staff | September 28, 2010

Q: We currently have three branches here in California, all of which are owned by our parent company under one license. We have just hired a new individual to be the RME. He will be working full time at one branch and training our installers at the other branches. He will be responsible to supervise and check installs for every branch. Is it proper for him to be the qualifier for all our branches? Can the qualifier (RME) be an employee of another division of our parent company? If these are dumb questions please let me know.

A: The only dumb question is the one NOT asked. As long as the work is being performed under one company name with one contractor's license, your Responsible Managing Employee (RME) can be responsible for all work performed by the different branches. However, if these "branches" were actually freestanding companies, then each one would need its own license and own qualifier.

Although the division you reference may be owned by the same parent company, the RME is supposed to be employed by the entity that holds the contractor's license and is performing the work.

Q: We have an associate — "Dave" — with an active CA contractor's license ("B" and "C-36") and we would like to bring him on as an RME or RMO. Currently we have a sole proprietorship, and "Dave" has his own as well. We're considering changing the business form to a LLC or LP and forming a subsidiary company with Dave to start working together. What is the best way to deal with making him an RME/RMO so we can bring in his contractor's license, while giving everyone involved the maximum amount of liability protection?

A: You have several options. Since you hold a sole owner license, "Dave" can become the RME on one or both classifications (as long as this does not duplicate your current license class). You could form a Limited (LP) or General Partnership (GP) between you and Dave (with Dave as RME or qualifying partner) or you could form a corporation with him as the RME or RMO. The RMO option is by definition only for corporate licenses. Finally, both you and your associate could become licensed as a Joint Venture. Forming a Limited Liability Company (LLC) is not a good option since the CSLB will not issue a license to this type of entity.

If Dave is a RME on any of the options above, he will need to inactivate his current license. As an RMO (or qualifying partner) owning 20 percent or more, he has the option of keeping his license active.

I cannot address the issue of "liability protection" except to say that no matter what type of license he qualifies, Dave will be responsible for the work performed.

Q: We are two sole proprietor general contractors that want to form a business partnership. My research has taken me to the joint venture contractor's license. Could you tell me if this is an appropriate way to put a partnership together? Will our present licenses be affected?

A: Forming a Joint Venture (JV)) would be one option. Forming a "general partnership" (GP) would be a second option. For contractor licensing purposes a JV consists of two or more licensed contractors both (or all) of which must be active and in good standing. A partnership can be formed as long as one listed individual holds a valid contractor's license. Joint Ventures are the simplest type of license to apply for and usually take less than 10 days to be issued.

Because trouble often begins when partnerships break up, whether you form a JV or GP, I would strongly recommend consulting an attorney to draw up a legal agreement. The new license will belong to both of you and should not impact your existing sole owner licenses.

Knowledge is power. Knowing where to go for the answers is half the battle.

Get expert assistance immediately when you e-mail info@cutredtape.com , call (916) 443-0657, fax (916) 443-1908, or write me at Capitol Services, Inc., 1225 8th St. Ste. 580, Sacramento, CA 95814.