Licensing

Becoming

Become a licensed contractor in California

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When is a license required?

The state of California requires anyone who’s doing construction work over the amount of $500 for labor and material, to have a license. You’re required to show experience as well as pass a vigorous test and then you become licensed. You are not allowed to split large projects into smaller segments under $500 and the most important part is that most customers, homeowners, will want to verify your license. They want to verify that you are licensed and registered and that you qualify to do work in their homes.

What are the risks of working unlicensed?

The risk of working unlicensed is a criminal misdemeanor offense and will result in you having a criminal record. Then, in addition to that, CSLB, which is the state license board, is conducting sting operations and there’s a good chance you’ll be caught if you work without a license.

It is important to know that if you do work with your license, the homeowner is not required to pay you. You will never be able to take them to court and if you do, the homeowner will win and ask for any payment back. So the risk is really great but not worth getting a criminal record or losing the hard work that you’ve put into the project.

What type of opportunities open up when you are licensed? 

You’ll be able to bid on larger jobs and you will learn a lot of informative information about construction. You’ll be able to go to the city, pull permits for the clients and work legitimately and charge more for your work as a licensed contractor. In addition, you will be able to advertise yourself, join lead generation programs and websites and applications like Yelp. 

How can I get a license in California?

There are two ways to obtain a contractor’s license in California.

You need 4 years of experience and pass Trade & Law exams:

Most people who can show proven construction experience for at least four years or more, qualify to take the State Exam. The exam is divided into two tests that are conducted by the license board: The trade test and the law test, which, once you pass, provide you with an issued a license. The new contractors get a unique license number and are then included in the registration and are on the public CSLB website. They are allowed to conduct construction work legally in the field of their classification.

Partner up with a RMO:

Another option is to partner up with an existing licensed contractor who acts as a responsible managing officer. In short, they are called RMO. 

The RMO is a qualifier for your license. You submit an application for a license which you will then get a new license number. As long as you have a Responsible Managing Officer overlooking and supervising your projects and your business, then your license is valid and you qualify to do the same work that any licensed contractor is qualified to do.

Skip the test and get licensed faster with a business mentor support

When you partner up with a RMO you are able to skip the test as well as the studying and you’re able to qualify even if you don’t have four years of experience. When going down this route, your license is typically issued much faster and the most important benefit is that you get an experienced mentor who can give you advice when you face challenges. In addition, your mentor can help resolve disputes and be a source of knowledge and can help support throughout the time you are working together. 

Pools of RMOs ready to work:

RMO agency has a pool of qualified Responsible Managing Officers who are on contract and ready to partner with you. The mentor is somebody who is going to be helping you throughout the period that you’re using the license and will be closely involved with you. So it’s important that you have a good relationship and connection with.

Keep your license clean for 5 years and become your own RMO

The program lasts for five years and the reason is that once you can demonstrate that you’ve been in business for five years and you had no complaints then you will no longer need a Responsible Managing Officer. Furthermore, you will be qualified to get your own license from the license board. So during those five years, it is important that you stay out of trouble, you work legally and address any issues that you have with your clients so you don’t have any open complaints or unresolved complaints.

We celebrate that event by helping you apply to become your own Responsible Managing Officer for your license and you no longer need to pay us. 

The licensed board certainly recognizes that five years of construction and dealing with customers and homeowners successfully is a good sign that you are certainly qualified to be a contractor and you will not have to take the test. You will be able to keep the same license number you’ve worked under for the last five years.

We’ve been in business since 2006 and have matched hundreds of successful contractors and Responsible Managing Officers. Our company has gained a lot of experience in this area and we are confident that you’ll be successful if you partner with RMO agency.

 

Pitfalls

Pitfalls to avoid to keep your license in good standing

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#1 Not completing your final audit when you stop working with State Fund:

In recent years, we have been running into more and more problems with contractors who had State Fund workers compensation insurance. If you had a state fund policy and for any reason whatsoever you decide you don’t need it anymore – and you stop filing the returns without doing a final audit, they will continue to bill you. They will bill you based on a higher rate and it will accumulate. Eventually, you will end up with a large bill that can be anywhere between $20,000-$50,000, and if you don’t contest, you or your RMO will not be able to get a new policy with them. If you have no more employees or you don’t need worker’s comp policy anymore and you want to close the account. They may just ask you for a final return. We suggest you do the audit and close the account properly so you don’t have a problem next time you need workers comp or the next time you are hiring people.

#2 Moving and not updating your address with CSLB

You will not receive your renewal documents and you will not be able to renew your license if you don’t update your address with CSLB which can lead to an expired license until you fix that. Unfortunately, you will not be allowed to conduct any work and it can be expensive fines if you get caught. It is really important that you keep a current address on file with the license board. Save yourself from the extra citation by keeping your correct address on file.

#3 Collect more than the allowed deposit (Up to 10% or $1,000 whichever is less)

If you collect more than the legal deposit on a contract (10% of the total amount or $1,000 maximum, whichever is less), this is a really easy way to invalidate your contract with the homeowner. If the homeowner decides to dispute the contract or doesn’t want to pay you a payment, you will not be able to take that contract to court because it’s going to be an invalid contract. You must stick to the rules. The licensing board will not be on your side trying to help you when you violated one of their major rules. Contrary to regular business practices, even a verbal agreement is considered an invalid legal agreement. Construction law is different and a specific contract/language must be used between a contractor and a homeowner to make it valid.

#4 Not having a legal written contract with all the necessary clauses

A handshake and verbal agreement is not a valid contract. You must have the formal contract that includes all the legal requirements that are specified by the license board. It is easy to find them at a contractor bookstore and you can customize them with your name and you can add the other variables. They are all legal and they will withstand any investigation and court hearings. Anything else will not. You will lose any case you have if you don’t have the legal format that is required by the license board on your contract.

#5 Not giving your clients 3-day notice to rescind

When a contract is signed, you must give your customer a three-day notice with a right that they can rescind the contract and then be able to cancel within three days. When there is an urgency, you can have them typically sign a waiver. However, in construction law, you can not do it unless you have a valid reason. If you ignore the three-day notice, any work you did during those three days, the homeowner is not required to pay you. If you want to take that chance, that is up to you. We would like you to know that you are taking a risk.

#6 Advertising without a license number

If you distribute flyers without your license number or put an ad on Craigslist / Yelp without a Contractor’s License- you are exposing yourself to the risk of a citation. It is really easy to catch and it is a no-brainer for the investigator. Also, if you run into any problems with the customer, the homeowner, it will just be added to the complaints. That means you will have the complaint of whatever the customer is complaining about plus all the violations- such as charging too much on the deposit or not having your license number listed in the ads. These tips are the easiest way to protect yourself or at least not expose yourself unnecessary to additional citations which you will not be able to argue against.

#7 If you work with a RMO – Not allowing sufficient supervision by the RMO

It is important for you to understand that your RMO is exposed to risk through your business. If you don’t obtain a worker’s compensation insurance policy or have issues with customers, then his/her license is at risk and therefore it is extremely important that you cooperate with your RMO. You need to respond to the RMO and that includes allowing supervision of your projects & operations. If the RMO feels that he/she is being ignored or not having access to important information- he/she will resign based on those reasons.

RMO agency will not give you a substitute RMO, and there should be no reason for you to not allow supervision. We will not be able to replace the RMO for you.

#8 Not pulling permits when needed

Another easy way to get a citation that you can not dispute is taking on jobs without permits. You can not dispute that if a permit was required and you did not apply for it. You will be guilty as charged, you will be cited and your license might get suspended, and in some cases revoked. It depends on what else went on. Get your permits!

#9 Hiring unlicensed subcontractors (Remember they are considered to be your employees)

Hiring unlicensed subcontractors is a bit tricky. They appeared to be contractors. They have their own crews, they provide their own labor and materials and they act like a contractor. You set a price with them either by the phone or a set price agreed on in person. You don’t pay for labor and you don’t pay for time. It is very convenient. Many unlicensed subcontractors are providing a lot of work. An unlicensed contractor is simply an employee in the eyes of the law. That means that you are required to deduct taxes and pay workers comp. If you are a licensed- then you are considered a contractor. If you’re unlicensed, your an employee- it is as simple as that. Otherwise, you’re exposing yourself to risk, not just to the license board but also with the IRS and the state. It is a risk not worth taking.

#10 running the risk of operating with no liability insurance

The license board does not require you to have liability insurance (as a corporation). However, it is very beneficial to have one because the risks are high. You’re dealing with homeowners homes. These are pricey projects and any damage can amount to a high cost. The one big benefit of having liability insurance is that when you get sued, the liability insurance will protect you. They will pay for you for legal costs to protect you because they’re protecting themselves, since you are insured and they’re the ones who are going to have to pay for the damage. They will either defend you or settle the case. Either way, that alone is worth getting liability insurance.

  • CSLB require LLCs to carry liability Insurance

One exception to the liability insurance is a LLC (limited liability corporation)- the license board does require LLCs to have liability insurance.

#11 Declaring to be exempt and hiring employees or unlicensed subcontractors

Another insurance that is not required by the license board is workers’ compensation. The reason it is not required is that you might be entitled to exempt. You and any other officer in your corporation can be exempt from worker’s compensation. That’s why it’s not required, however, it is highly recommended. If you have employees or if you hire subcontractors who are not licensed, you are required to have them covered by worker’s compensation.

#12 Doing work under a suspended license

Any work you do under these circumstances is a violation of the construction license law. You will be cited and not be able to collect money for the work done when your license is suspended. You must stop the work completely. Any work you continue is a violation of the code, violation of the contract and the homeowner will not have to pay you for that work

#13 Not responding to important CSLB letters regarding complaint /accusations. You will lose your right to defend yourself!

So you’ve got a complaint and you’ve ignored it? You did not respond to the license board? They are left with no choice and they will give you a citation or proceed to an accusation. They will not give you the chance to present your case and eventually your license will be suspended or revoked. You have a right to a hearing, mediation or arbitration and you have a right to defend yourself against any complaints. However you need to do it within a specific time frame. Any procrastination or ignoring requests on the license will result in you losing your rights for this case.

Become Licensed

Guide: How to Become a Licensed Contractor in California

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With all of the rules and regulations surrounding the construction industry, California companies have it rough these days. Due to stringent state laws, companies are required to attain contractor’s licenses to perform any construction projects over $500. Failure to do so often leads to massive fines and possible jail time. Getting your license takes months, sometimes even years of test-taking and preparation, but what if there was another way?

According to the California State License Board’s B&P Code 7065.1, all of the exams needed to attain a license can be skipped by working with a Responsible Managing Officer, or RMO for short. RMOs are licensed qualifiers who act both as supervisors and mentors to companies performing construction projects. By hiring an RMO, a company qualifying for a license can meet the requirements needed to get one without having to take any exams.

After getting licensed, new contractors can then act as RMOs themselves and help others achieve success in the construction industry. In the long run, contractors who decide to become RMOs create a stable network that values knowledge and hands-on experience resulting in Win-Win business opportunities for those both in pursuit of education and those willing to offer it.

The path to success in the construction industry is tough but simple – all you have to do is follow the steps to getting licensed and join the RMO community. Those who dare take the first step toward becoming licensed contractors can enjoy long-lasting and financially rewarding careers as RMOs. Why not start today?

 

What Type of License Do I Need?

While there is no such thing as an RMO license, anyone interested in becoming an RMO or performing construction duties in the state of California must attain at least a general contractor license. Contractor licenses are broken down into three branches, each of which has its own general area of focus or classification;

–          (A) General Engineering Contractor

The General Engineering License is geared toward companies that perform work requiring specialized knowledge of irrigation, plumbing, highway/road construction, chemical, and industrial plant maintenance, excavating, parks and recreation services, and other similar fields.

–          (B) General Building Contractor

The General Building License is geared toward companies that are in the process of maintaining or constructing buildings used for support, shelter, human and animal enclosure, and other similar works that require the use of at least 2 or more trades or crafts. Unlike with the previous license, the General Building Contractor must observe two additional clauses within the license article.

b). A General Building Contractor may take a prime or subcontract for a framing or carpentry project if the contract also requires knowledgeable skill in 2 unrelated building trades or if the contractor holds a specialized license appropriate for framing and/or carpentry work.

c). A General Building Contractor is not allowed to contract any project requiring work related to C-16 Fire Protection or C-57 Well Drilling classification. This is due to the safety regulations surrounding these particular trades.

–          (C) Specialty Contractor

A Specialty Contractor is a contractor whose operation requires a specific set of specialized skills and knowledge. Generally, this kind of license is geared toward those that want to perform: 1) fire extinguishing system testing or service work and/or 2) carpet, linoleum, or floor covering installation work. However, other subsects exist within the Class “C” Specialty Contractor group.

Class “C” Licenses can be broken down to more specific areas geared toward professions such as C11 – Elevator Contractor or C33 – Painting and Decorating Contractor. There are many more categories within the Class C field and each one requires a specific set of skills; therefore we encourage you to visit the CSLB website for more information and links to each classification.

 

How to Apply for a License?

 

If you are not currently a qualifying individual or working with one, then taking the high road and applying for a contractor’s license is definitely a step in the right direction. Getting licensed yourself by taking the necessary exams can be beneficial for those lacking the means needed to hire an RMO or RME, those who are unable to network, or those who simply prefer test-taking to additional field experience.

If you and the project you want to work on do not qualify for an exemption, then you must apply for a license by first filling out the application for an Original Contractor’s License and paying the $330 filing fee.

Then, you must provide a Certification of Work Experience form 13A-11 to prove that you have the necessary job site experience to be considered for licensure. These qualifications are 4 years of experience as either of the following:

–          A journeyman -> a worker who can perform the trade in question without supervision or one that has completed a full apprenticeship program.

–          A foreman -> an individual who has the knowledge and skills of a journeyman and directly supervises physical construction.

–          A contractor -> someone who is already licensed and wishes to apply for a new license.

–          An owner-builder -> an individual with the experience of a journeyman who performs work on his/her own property (must submit a new form per project).

After submitting the application along with the necessary work experience form, you will be allowed to take the exam for your contractor’s license. The exam consists of two parts, a Law and Business exam as well as a specific trade exam covering the classification you are interested in. The CSLB website suggests purchasing the California Contractors License Law & Reference Book as well as several other handy study guides to help you prepare for the licensing exams.

After passing your exam, you are required to file a $12,500-$15,000 bond with the CSLB, submit a sample of your fingerprints for a background check, and provide proof of having an active Worker’s Compensation License. California contractors must tread a long road before becoming licensed. However, the penalties for working in construction without a license are severe and should be taken quite seriously. When it comes to career decisions, it is always better to remain on the right side of the law.

 

Can I Become a Contractor Without a License?

Currently, there is no legal way to become a contractor without a license in the state of California. However, individuals who meet at least one of the following conditions can qualify for an exemption:

The following can be explored further on the CSLB website.

§  Individuals or companies engaged in a project with a cumulative cost of less than $500.

§  Handymen that do not work in an individually established business, have no direct control over work performed and do not determine the final results of the project.

§  Public personnel working on public projects.

§  Officers of a court operating within the scope of their office.

§  Public utility workers working under specified conditions.

§  Oil and gas operations performed by the owner or lessee of a property.

§  Owner-builders who improve existing structures or build structures on their property either on their own or with their own wage employees.

§  Salesmen or installers of finished products that do not become fixed parts of a structure.

§  Sellers of installed carpets who have retail furniture dealer’s licenses.

§  Security alarm company operators that sell, monitor, maintain and install alarm systems (excluding fire).

§  Individuals who install satellite antenna systems on residential property (must be registered with the Bureau of Electronic and Appliance Repair instead).

If you do not meet one of these conditions, then you must apply for a license. Penalties for operating without a contractor’s license are:

 

  • 1st time offenders -> misdemeanor charges + up to 6 months in jail and/or a $5,000 + an administrative fee of $200-15,000.
  • 2nd time offenders -> a mandatory 90-day jail sentence + forfeiture of 20% of the offending contract price or a $5000 fine.

 

RMO (Responsible Managing Officer)

 

Getting away with operating without a contractor’s license is a long shot. In order to work safely and legally, you must apply for a license before performing the work in your desired trade. Thankfully, the process can be sped up by employing an RMO to act as a qualifying officer for your company.

If you enjoy working with your hands and don’t want to delay that important construction project, then getting in touch with a seasoned professional is just for you. Working with an RMO will offer you real-world experience that a test booklet simply can’t match.

After earning your contractor’s license, you can pass your knowledge along by becoming an RMO yourself. As an industry professional you can then earn a comfortable living by performing part-time supervision duties for up to 3 companies at the same time. Why wait? Of course, becoming an RMO involves making connections. RMO Agency is a company dedicated to expanding and supporting the RMO community. The agency pairs journeymen with licensed contractors, supports individuals through the application process, and helps both junior and veteran contractors find work. Visit the website to learn more.

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Can I Rent a License?

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A question that often comes up in relation to construction licensing through a qualifier or Responsible Managing Officer (RMO) is ‘Can I rent a license?”  The answer is NO.

There is a mistaken belief that because the licensing exam is waived that means that the RMO’s personal license is being rented out. Renting a license for a fee is illegal and is a different relationship than the RMO-Contractor relationship created at RMO Agency.

First and foremost, when working with an RMO, a new license number is issued to a corporate entity. The license issued is NOT the RMO’s personal license number.

As Business and Professions Code section 7068.1 states, a contractor can waive the state exam and can become licensed using an RMO as long as:

The person qualifying on behalf of an individual or firm …shall be responsible for exercising that direct supervision and control of his or her employer’s or principal’s construction operations as is necessary to secure full compliance with this chapter and the rules and regulations of the board relating to the construction operations.

In plain English, an RMO can qualify a license as long as he or she makes sure that all construction operations under the license follow CSLB rules and regulations.

RMO Agency requires both its contractors and RMOs to sign a supervision mentorship plan that guides them to lead a relationship that is in compliance with CSLB requirements.

RMO Agency also provides the RMO with visit report templates to be completed during each visit in order to have the important details of any ongoing projects and ensure the proper steps have been taken such as pulling a permit, using a legal construction contract, etc..

In addition, RMO Agency provides clients access to a FREE secure online portal in which important construction documents can be shared for the purpose of organized record-keeping and sufficient supervision. Examples of documents uploaded are new construction contracts, permits, project photos and progress, visit reports and more.

Following RMO Agency’s supervision mentorship plan is an arrangement that benefits all parties:

  • The consumer hiring the contractor understands that the project is being done correctly with the proper supervision of the license qualifier.
  • The contractor knows he/she is working legally by having the operations details reviewed by the RMO
  • The RMO’s license is protected due to all the legal requirements being followed AND receives payment for supervisory services

RMO Agency requires all of its RMOs and contractors to follow all rules and regulations of the CSLB or be in breach of contract.

Due to the detailed supervision mentorship program and the support, education and tools provided by RMO Agency, it is safer to use RMO Agency to find your Responsible Managing Officer than to do it on your own. The Agency makes sure that everything is being done properly and legally — it dots all the i’s and crosses the t’s for you so that you don’t have to worry about a proper relationship with your license qualifier.