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Kalb's Q & A For California Contractors

Q: I am the Responsible Managing Officer (RMO) on our license and will be traveling extensively during the next year. My corporation's president (who is not the qualifying individual) wants to work on several contracts even while I am physically away. If we iron out some "hold-harmless" agreement in the event of something going wrong and he agrees to take on the liability for any unforeseen pro...

August 18, 2008

Q: I am the Responsible Managing Officer (RMO) on our license and will be traveling extensively during the next year. My corporation's president (who is not the qualifying individual) wants to work on several contracts even while I am physically away. If we iron out some "hold-harmless" agreement in the event of something going wrong and he agrees to take on the liability for any unforeseen problem, is it possible this would shield me from potential misdemeanors? To clarify — I don't expect anything to go wrong, I am just not comfortable being held responsible for something that I was not overseeing, Thank you and I greatly appreciate your column.

A: It's your decision whether you want to remain as the Qualifier on this license. As RMO, the CSLB would STILL consider you responsible for the company's day-to-day construction activities, even with a "hold-harmless" agreement. In other words, I do not believe this will shield you from potential disciplinary actions by the state or other legal authorities.

I suggest that the president or another individual take over as the RMO (or RME) until you return. This would involve filing an application with the CSLB and testing by the new qualifier. If you remain as RMO during this year period — regardless whether you iron-out a "hold-harmless" agreement — I recommend contacting an attorney to get his legal opinion.

Q: I was just wondering if you could help me to clarify a few things ... First of all, is there a way to transfer a license to someone else? Here's the situation ... I am now in a "partnership" with my brother-in-law and would like to take some "time off" but do not want to lose the license nor the business. My concern is how I could 'be away' from the business but not lose the license? Could I just transfer it over to my brother in law and give him the full rights to the license/business? How long does my brother-in-law have to be in partnership with me (under the same license number) in order for me to attempt the transfer to him? Thank you for your response.

A: If you leave this partnership license for any reason it will be cancelled. Your brother-in-law could apply for a continuance but only to complete jobs in progress (i.e. no new jobs). There is no way to transfer a partnership license under any circumstances. If your brother-in-law has the required four years of experience, he can apply for his own license. Note, if you leave the license as a partnership and take some "time off," you will still be responsible for all work performed.

Q: I'm a California general contractor and recently met up with a friend of mine who has been in construction as long as I have. Things are really slow and I can't afford to pay workman's comp. If I made him a general partner of my sole proprietor, would I have to pay workman's comp in order for us to work together on jobs?

A: You cannot make him a general partner on your sole owner license. You could, however, form a partnership and apply for a new contractor's license. If ONLY you and your partner will be handling the construction — and have NO employees — you could file an exemption from workers' compensation with the CSLB.

Q: Does a RMO need to own any of the company to become the qualifier? Are any corporate titles better than others as far as the CSLB is concerned?

A: NO. There is no requirement that the responsible managing officer own any stock in the company. The CSLB does not care what title the RMO has. Who serves as president, secretary, treasurer, etc. is up to the corporation.

Q: We recently incorporated our business and I would like to know what forms I need in order to keep my same contractor's license for the new company. I downloaded the application entitled Examination Waiver (7065), but it also came with the Certification of Work Experience and the Licensed Sole Owner Applying for Corporate License forms. My question is, do we need the last two forms or do we only send the first three pages of this application? Thanks for any information you can give me

A: When applying for a new corporate contractor's license, you have the option of transferring your individual license to the company. This transfer requires that you, as responsible managing officer (RMO), must own 51 percent or more of the corporation. You will need to file the "Licensed Sole Owner Applying for Corporate License" form and answer 'yes' or 'no' to the transfer question. Once the transfer is completed, the license number cannot revert back to the individual contractor (it must stay with the corporation).

Since you are already qualified, there is no need to file the Certification of Work Experience page. It's interesting that you mentioned this because just yesterday I was asked by the CSLB to provide input on potential changes to their license applications. I suggested eliminating this unnecessary page, which is part of the "Examination Waiver (7065)" application, because it can be confusing.

Q: I am looking to reactivate my contractor's license. This corporation has been inactive for about 10 years. You helped me back in the '90s with another issue. What is the best way to go about doing this?

A: Nice to hear from you after these many years. I am sorry, but your license expired in 1999 and therefore cannot be "reactivated" or renewed. In addition, according to my research, the corporation is under suspension with the secretary of state (SOS), so you could not presently reactivate the license under any circumstances. If you want this license back, first resolve the outstanding issues with the state and then file a new original license application. From my experience, suspensions with the SOS are usually due to non-payment of taxes with the Franchise Tax Board (FTB).

As we discussed, although a company may stop contracting, unless you formally dissolve the corporation with the SOS and FTB, the state continues assessing a minimum tax of $800 per year. Add to this an estimated 10 years of interest and penalties, and you may owe up to $20,000.

I am sorry but there is more bad news. Unfortunately, since this license expired over five years ago (in 1999), you'll be required to re-take the law and trade exams to re-qualify this or any other license.

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

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

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