Critical Classification Application Under Review

Critical Classification Application Under ReviewI’m often asked, pretty much daily, what should an applicant do when they are dealing with a critical classification application under review.

If you are applying for the C10 Electrical, B General Building, A General Engineering, C20 HVAC, etc. and your application is under review, this email Q&A and I had with a C10 applicant might also help you or somebody you know.

Q. Based on my application you looked at, what are the odds of them accepting it without requiring more documentation?

A. Slim to none. They’ve been asking all applicants with a critical classification for additional documents.

Q. If the odds are very low they accept as is then what do they increase by if I include documentation (1099s, permits, materials receipts, tax returns) with the application on the first submittal or should I wait for them to ask?

A. You should submit any/all documents you have with the app. If they find it acceptable, they’ll schedule you for the exam. If not, they’ll ask for more documentation.

Q. I have lots of different documentation but not a fully complete timeline record of EVERYTHING. Do they show any leniency to applicants who include lots of information from the start?

A. Not that I’ve experienced.

Q. I do have enough documented experience over the last ten years to get a B but would only consider that if it was a stepping stone which made it easier to get the C-10 later. Do you think this would help me to get the C-10 if I put off applying for 2 to 3 years? Could having a B potentially work against me getting a C-10 in two to three years?

A. To get either you’ll have to provide the written documentation. The B requires experience in framing and at least two unrelated trades. The C10 could be easier to get if your experience is directly and solely related to the c10. If you were to get the B and then apply for a c10 in a couple three years, it might be harder to show at least 4 yrs of c10 experience. Also, if you have the B you cannot bid on or sign contracts for a single trade like the c10.

Q. Would it help to get sign offs on shorter term experience from more B contractors who I have done electrical for?  This goes back to the more information included with the original submittal, does it decrease the odds of them requiring more documentation / increase the chances they accept the application as is.

A. Submitting more work experience forms does not generally help or hurt. They’ve made the certifier a moot point because of the documentation requirement.

Q. Does it carry any weight if I include some projects done for homeowners and include their permits, check written to me, materials receipts, and invoice?

A. That would help. But the permit would have to be in your name in order for you to get “credit” for it.

Q. Do you think submitting a 1099 for experience where the employer box is checked is a red flag and should be used as self-employment experience instead? I know that the experience with the C-10 i work for definitely is an employee relationship rather than a contract type, I show up when he tells me to show up and act on his direction under his supervision.

A. How does the CSLB look at 1099s in this regard? As a 1099 “employee” you are working as self-employed. Only if you are on payroll for the company would you be considered an employee.

Q. Based on the letter you attached in your previous email showing request for more info to that applicant,  if I were to get a similar letter and respond with not enough documentation then would that void my application or would there be another opportunity to submit more? When does the application usually drop dead?

A. If you did not submit enough documentation to satisfy the licensing department they would send you an “options letter.” This letter gives you the option to withdraw the app, use some other qualified individual to act as the qualifier on your license, or go to a formal investigation. If you choose the formal investigation, they will send you to the exams and an investigator will be assigned. That investigator will ask you for more/the same documentation that the licensing unit asked for. The investigator will also contact your certifiers to verify your experience. If the investigator does not approve of your experience you can either withdraw the app or they will deny your app. A denial means you’d have to wait a year before reapplying, and you’d have a denial flag on your name in their system.

Q. If I do submit my application and it ultimately gets tossed then can I re apply later with other documentation? Does the CSLB keep a copy of previous applications on file and refer back to those in this sort of scenario?

A. As answered in Q6, a denial has a one year waiting period. If you withdraw the app on your own, you can reapply at any time. The new app would be subjected to the same documentation and you’d have to re-submit everything plus any new documentation.

Q. The above question sorta relates to if it helps to apply for a B first and what experience is submitted with that. I would hate to shoot myself in the foot.

A. The issue is… when you apply for an additional classification, they will not accept experience that you submitted previously for the original classification. If your contracts are only for C10 work, you’ll want to apply for the C10 with the initial license.

Q. If I do include lots of documentation with the application before they ask then could this tick off the reviewer by being overwhelmed with paperwork or does it make me look more serious and more well prepared? (sort of already asked this question above)

A. Better to send everything with the initial submittal. Saves them from having to send you a letter requesting the docs and having to sit on the application until you reply to their letter.

Q. How would you approach this if you were in my shoes?

A. Create a chronological binder with all the documentation I had, submit it with the application, cross my fingers.

Q. Do you think I should just suck it up and do another year working for the C-10 guy (1099) or would you suggest a different route to document experience if you think I should wait to have a better documented history?

A. This all depends on the documentation you have now. If you feel it shows a solid four years (minimum) of experience, I’d say apply now. If you went thru the app process and the cslb said you needed one more year, withdraw your app work another year, then resubmit everything.

Q. Guessing you have seen others in my same predicament so what has made the biggest differences for them being able to get their applications accepted?

A. How well prepared your documentation is.

Q. The C-10 guy I work for has mentioned partnering with me a few times. Would there be some mid-term benefits to going this route and getting on his license then applying for my own later? I am not sure how this works but have heard of others getting brought in that way. The guy is a bit hard to work for / with so this would be a last resort but good to know the answers if it comes to that.

A. This scenario is included in the cslb “options” letter. You could use someone else to be your qualifier. After X amount of years, you could apply to replace that qualifier on the license.

So if you find yourself with a critical classification application under review, let me know and we can discuss your specific circumstances. I offer a very affordable consultation service. Click here if you’d like to discuss what you can do.

S Corporations and Salaries

Continuing my research in comparing an S corporation to a sole proprietor, I found this article on nolo.com that discusses how to pay yourself, other officers, and shareholders.

S Corporations and Salaries: How much should I pay myself?

An S corporation (also called a Subchapter S corporation) is a small corporation that has elected to be taxed much the same as a partnership by the IRS. An S corporation is a pass-through entity—income and losses pass through the corporation to the owners’ personal tax returns. Many small business owners use S corporations. One of the biggest reasons is that an S corporation can save a business owner Social Security and Medicare taxes. However, this has become a hot button issue for the IRS.

An S corporation shareholder who performs more than minor services for the corporation will be its employee for tax purposes, as well as a shareholder. In effect, an active shareholder in a S corporation wears at least two hats: as a shareholder (owner) of the corporation, and as an employee of that corporation. This allows for savings on Social Security and Medicare taxes because such taxes need not be paid on distributions of earnings and profits from the corporation to its shareholders. Thus, to the extent they pay themselves shareholder distributions instead of employee salary, S corporation shareholder/employees can save big money on payroll taxes.

It’s up to the people who run an S corporation—its officers and directors—to decide how much salary to pay the corporation’s employees. When you are employed by an S corporation that you own (alone or with others), you’ll be the one making this decision. In fact, 70% of all S corporations are owned by just one person, so the owner has complete discretion to decide on his or her salary.

However, an S corporation must pay reasonable employee compensation (subject to employment taxes) to a shareholder-employee in return for the services the employee provides before a distribution (not subject to employment taxes) may be given to the shareholder-employee.

Unfortunately, many S corporation owners have gone overboard and had their corporations pay them no employee compensation at all, thus avoiding having to pay any payroll taxes. The IRS Inspector General found that in 2000 about 440,000 single shareholder S corporations paid no salary to their owners, costing the government billions in lost payroll taxes. As a result the IRS stepped up enforcement on this issue and audited thousands of S corps that paid their owners little or no salary.

If the IRS concludes that an S corporation owner has attempted to evade payroll taxes by disguising employee salary as corporate distributions, it can recharacterize the distributions as salary and require payment of employment taxes and penalties which can include payroll tax penalties of up to 100% plus negligence penalties. The IRS will do so if it concludes that the corporation paid the employee unreasonably low compensation for his or her services. For example, a CPA who incorporated his practice took a $24,000 annual salary from his S corporation and received $220,000 in dividends which were free of employment taxes. The IRS said that his salary was unreasonably low and that $175,000 of the dividends should be treated as wages subject to employment taxes. The court upheld the IRS’s power to recharacterize the dividends as wages subject to employment tax. (Watson v. United States, (DC IA 05/27/2010) 105 AFTR 2d ¶ 2010–908.)

Thus, as a general rule, it is advisable to have your S corporation pay you at least some salary–which can be on the low end of the reasonableness scale. How low can you go and still pay yourself a reasonable salary? There are no precise guidelines. IRS officials have stated that they make the determination on a case-by-case basis. Among the factors the IRS and courts consider are:

  • the duties performed by the employee
  • the volume of business handled
  • the type of work and amount of responsibility
  • the complexity of the business
  • the time and effort devoted to the business
  • the timing and manner of paying bonuses to key people
  • use of a formula to determine compensation
  • the cost of living in the locality
  • the ability and achievements of the individual employee performing the service
  • the pay compared with the gross and net income of the business, as well as with distributions to shareholders
  • the company’s policy regarding pay for all employees, and
  • the payment history for each employee.

After examining all the circumstances, they establish a range of reasonable salaries, from low to high. In one case, the IRS concluded that a reasonable salary for an Arkansas certified public accountant was $45,000 to $49,000. The accountant in that case had paid himself no salary and received $83,000 in corporate distributions. The IRS used salary information from a large financial services recruiting firm to determine what was reasonable. (Barron v. Comm’r, T.C. Summ. 2001-10.) Some IRS offices have software that provides salary information for a variety of occupations throughout the country. An S corporation (also called a Subchapter S corporation) is a small corporation that has elected to be taxed much the same as a partnership by the IRS. An S corporation is a pass-through entity—income and losses pass through the corporation to the owners’ personal tax returns. Many small business owners use S corporations. One of the biggest reasons is that an S corporation can save a business owner Social Security and Medicare taxes. However, this has become a hot button issue for the IRS.

An S corporation shareholder who performs more than minor services for the corporation will be its employee for tax purposes, as well as a shareholder. In effect, an active shareholder in a S corporation wears at least two hats: as a shareholder (owner) of the corporation, and as an employee of that corporation. This allows for savings on Social Security and Medicare taxes because such taxes need not be paid on distributions of earnings and profits from the corporation to its shareholders. Thus, to the extent they pay themselves shareholder distributions instead of employee salary, S corporation shareholder/employees can save big money on payroll taxes.

It’s up to the people who run an S corporation—its officers and directors—to decide how much salary to pay the corporation’s employees. When you are employed by an S corporation that you own (alone or with others), you’ll be the one making this decision. In fact, 70% of all S corporations are owned by just one person, so the owner has complete discretion to decide on his or her salary.

However, an S corporation must pay reasonable employee compensation (subject to employment taxes) to a shareholder-employee in return for the services the employee provides before a distribution (not subject to employment taxes) may be given to the shareholder-employee.

Unfortunately, many S corporation owners have gone overboard and had their corporations pay them no employee compensation at all, thus avoiding having to pay any payroll taxes. The IRS Inspector General found that in 2000 about 440,000 single shareholder S corporations paid no salary to their owners, costing the government billions in lost payroll taxes. As a result the IRS stepped up enforcement on this issue and audited thousands of S corps that paid their owners little or no salary.

If the IRS concludes that an S corporation owner has attempted to evade payroll taxes by disguising employee salary as corporate distributions, it can recharacterize the distributions as salary and require payment of employment taxes and penalties which can include payroll tax penalties of up to 100% plus negligence penalties. The IRS will do so if it concludes that the corporation paid the employee unreasonably low compensation for his or her services. For example, a CPA who incorporated his practice took a $24,000 annual salary from his S corporation and received $220,000 in dividends which were free of employment taxes. The IRS said that his salary was unreasonably low and that $175,000 of the dividends should be treated as wages subject to employment taxes. The court upheld the IRS’s power to recharacterize the dividends as wages subject to employment tax. (Watson v. United States, (DC IA 05/27/2010) 105 AFTR 2d ¶ 2010–908.)

Thus, as a general rule, it is advisable to have your S corporation pay you at least some salary–which can be on the low end of the reasonableness scale. How low can you go and still pay yourself a reasonable salary? There are no precise guidelines. IRS officials have stated that they make the determination on a case-by-case basis. Among the factors the IRS and courts consider are:

  • the duties performed by the employee
  • the volume of business handled
  • the type of work and amount of responsibility
  • the complexity of the business
  • the time and effort devoted to the business
  • the timing and manner of paying bonuses to key people
  • use of a formula to determine compensation
  • the cost of living in the locality
  • the ability and achievements of the individual employee performing the service
  • the pay compared with the gross and net income of the business, as well as with distributions to shareholders
  • the company’s policy regarding pay for all employees, and
  • the payment history for each employee.

After examining all the circumstances, they establish a range of reasonable salaries, from low to high. In one case, the IRS concluded that a reasonable salary for an Arkansas certified public accountant was $45,000 to $49,000. The accountant in that case had paid himself no salary and received $83,000 in corporate distributions. The IRS used salary information from a large financial services recruiting firm to determine what was reasonable. (Barron v. Comm’r, T.C. Summ. 2001-10.) Some IRS offices have software that provides salary information for a variety of occupations throughout the country.

http://www.nolo.com/legal-encyclopedia/s-corporations-salaries-an-irs-hot-button-issue.html

by: Stephen Fishman, J.D.

End of article

What will be interesting is what, if anything, will happen after the next presidential election. Several of the candidates are pushing for a flat tax or a use/consumption tax. Personally speaking, I agree with the flat tax, but it is something that would actually work.

Again, if you are interested in creating a corporation and incorporating your construction license, I can help. Send me an email and we’ll discuss your options.

Comparing Corporations to Sole Proprietorships

Comparing Corporations to Sole Proprietorships Comparing Sole Proprietorships  to CorporationsI’m asked all the time if a new contractor should be a sole proprietor (sole owner) or a corporation.

I’m currently a sole owner but have been incorporated in the past. I’ve been thinking of incorporating again for the possible tax benefits and personal liability protection and thought I’d do a little research. Below is an article I found on LegalZoom.com that compares the different types of business entities. I thought you might benefit from this information as well.

Comparing Corporations to Sole Proprietorships and Partnerships

Corporations enjoy many advantages over partnerships and sole proprietorships, but there are also some disadvantages to consider.

Advantages of a corporation versus a sole proprietorship or partnership

Shareholders in a corporation are not liable for corporate debts

This is the most important attribute of a corporation. In a sole proprietorship or a partnership, the owners are personally responsible for business debts. If the assets of the sole proprietorship or partnership cannot satisfy the debt, creditors can go after each owner’s personal bank account, house, etc. to make up the difference. On the other hand, if a corporation runs out of funds, its owners are usually not liable.

Please note that under certain circumstances, an individual shareholder may be liable for corporate debts, if, for example, a shareholder personally guarantees a corporate debt. Also, under certain circumstances, a court may determine that justice requires disregarding the corporate form and treating the acts and liabilities of a corporation as the acts and liabilities of the shareholders. This is sometimes referred to as “piercing the corporate veil.” Some of these circumstances where a court may decide to pierce the corporate veil include:

  • If personal funds are intermingled with corporate funds
  • If a corporation fails to have director and shareholder meetings
  • If the corporation has minimal capitalization or minimal insurance
  • If the corporation fails to pay state taxes or otherwise violates state law (like defrauding customers)

Corporations offer self-employment tax savings

Earnings from a sole proprietorship are subject to self-employment taxes, which are currently a combined 13.3% on the first $106,800 of income. With a corporation, only salaries (and not profits) are subject to such taxes. This can save you thousands of dollars per year.

For example, if a sole proprietorship earns $80,000, a 13.3% tax would have to be paid on the entire $80,000. Assume that a corporation also earns $80,000, but $35,000 of that amount is paid in salary, and $45,000 is deemed as profit. In this case, the self-employment tax would not be paid on the $45,000 profit. This saves you over $5,000 per year. Please note, however, that you should pay yourself a reasonable salary.

Corporations have continuous life

Unlike a sole proprietorship or partnership, a corporation does not expire upon the death of its shareholders, directors or officers.

Corporations make raising money easier

A corporation has many avenues to raise capital. It can sell shares of stock and create new types of stock, such as preferred stock, with different voting or profit characteristics. Plus, investors can rest assured knowing they are not personally liable for corporate debts.

Transferring the ownership interests of a corporation is easier

Ownership interests in a corporation may be sold to third parties without disturbing the continued operation of the business. A sole proprietorship or partnership, on the other hand, cannot be sold whole. Instead, each of its assets, licenses and permits must be individually transferred. Plus, new bank accounts and tax identification numbers are required.

Advantages of a sole proprietorship and partnership versus a corporation

Comparing Corporations to Sole Proprietorships and Partnerships

Corporations enjoy many advantages over partnerships and sole proprietorships, but there are also some disadvantages to consider. [Read more…]

5 Benefits of Becoming a Master Electrician

C10 Electrical California Contractors LicenseI found a great article on ElectricianTalk.com that discusses the benefits of becoming a Master Electrician. It provides some great advice and helpful information.

5 Benefits of Becoming a Master Electrician

Once you’ve worked as a journeyman electrician for a few years and gotten some skills under your belt, you may start to consider taking the tests to become a master electrician. The qualifying tests can be extremely difficult; some people take a month or more off work just to study for the tests.

Getting your license can seem like a full time job in itself, but it can definitely pay off in the end. The difference between journeyman and master can be seen on the job site, but the benefits of being a master also show before your first job as a master begins.

Professional Pride

If you take pride in a job well done, you’re probably the type of person who constantly tries to learn new and better ways to do your work. Leaning to do your job better can give you more confidence on the job. When you become a master electrician, you know you have the knowledge and experience to take on jobs most journeyman electricians can’t do. You can take pride in the knowledge that you’ve earned a special job designation and all its benefits through your hard work and gained knowledge.

Increased Income

While earning more on the job isn’t the only reason for becoming a master electrician, the typical raise in pay can help almost any budget. On average, journeyman electricians earn a little over $22 an hour as of July 2015. Master electricians, on the other hand, average almost $26 an hour. Masters have more responsibilities and have a more varied work schedule, but the raise in pay can be well worth the time and effort it takes to get the license. Depending on your company and the average pay in your part of the country, your pay can be much higher if your specialties are in high demand.

Professional Respect

On most job sites, a person who knows more techniques and can get the job done better is respected by his fellow crew members, especially if he shares this knowledge. Just knowing how hard it is to pass the master electrician’s tests will automatically cause most journeyman to give you some added props on the work site. When it comes to clients or prospective clients, your expert rating will automatically place you higher in their eyes than the average workman. They’ll respect your opinion about the proposed project and will be more willing to go along with suggestions you might make for getting the job done more easily or with a better result.

Job Variety

Apprentice and journeyman electricians do a large variety of jobs, so the job isn’t as dull and boring as some. Eventually, though, you may want to take your work day to the next level. In addition to the basic electrician job duties, a master supervises all the other crew members on the job. He orders supplies, coordinates teams to make sure all parts of the job finish at the same time and ensures that everything and everyone on the job site operates as planned. After you become a master you’ll also acquire the following responsibilities:

• Pulling permits for the job site
• Purchasing and providing supplies, equipment and other inventory for the crew
• Working with the site manager
• Conduct business and consultations with the homeowner or project owner
• Ensure that all safety guidelines are met on the job site

You’ll have less hands-on electrical work to do and more management jobs, but the new challenges will add an additional spice to your work day.

Job Prospects

You may be perfectly happy with your current employment, but that may change in the future. Company ownerships change hands, families relocate on a regular basis and the economy rises and falls. Becoming a master electrician is one way of making your job prospects much more secure in the future. Despite the extra cost of hiring a master, companies are almost always more willing to hire someone with more knowledge and experience than less experienced workers, especially in positions of high responsibility. It just makes good business sense.

If you get tired of working for someone else and decide to create your own company, it’s easier to  go out on your own if you’re the expert. Every new company needs to have a master electrician to supervise projects from start to finish. As a master, you’ll not only save money you might otherwise have to spend, your increased knowledge of the trade will enhance your crew management skills.

End of article

If you are interested in obtaining your C10 Electrical CSLB Contractors License, please let me know. I’d be happy to answer any questions you may have.

EMPLOYMENT LAW FOR CONTRACTORS

The Green Law Group Presents:
EMPLOYMENT LAW
FOR CONTRACTORS

AUGUST 25, 2015
TOPICS:
  • The difference between exempt and non-exempt employees
  • When can project managers and superintendents be exempt from overtime
  • When can you use different wage rates for travel time
  • When do you have to reimburse employees for mileage to commute to project sites
  • When do contractors have to pay for commute time to and between projects
  • The insurance contractors need for their employees’ vehicles
  • Rules that restrict access to employee driver’s license records
  • Minimum wage requirements for piece work
  • Liability for undocumented workers
  • How cell phones, emailing and texting after hours can result in overtime claims
  • What happens when your supervisors don’t know the rules
  • Severance Agreements
  • Employment Arbitration Agreements
  • EPL Insuranc

 

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CONTRACTORS, CREDIT MANAGERS, 
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WHERE
1777 E Los Angeles Ave
Simi Valley, CA 93065
WHEN
The Last Tuesday of Every Month
WHY
Knowledge is Power
TIME
7:00 a.m. to 8:30 a.m.
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RSVP
SPONSORS
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Join Us for Our Free 
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Aug. 25Employment Law for Contractors
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Contact your State Representative

If you are having problems with the Contractors State License Board (CSLB), you should contact your State Representative.

Contact your State RepresentativeBelow is a letter I received from my Rep back in 2013 in response to a complaint I filed. As you’ll see, they contacted the CSLB on my behalf.

My take-away from this letter is that they just repeated what the CSLB told the Rep’s contact person. And even though this was not the outcome I was hoping for, they still told the CSLB (in essence) that people are filing formal complaints. I should have pressed the issue more with the Rep’s office, but at the time the CSLB app process in place was new and there was no history to bolster my complaint.

It’s clear now that they are profiling applicants based on the classification they are applying for. I have learned in recent months that the CSLB is no longer using the term “critical classifications.” I believe they dropped the term because they know that it equates to an underground regulation.

Some people wonder that if by filing a complaint with your Rep, the CSLB will retaliate by denying your application. It would be illegal for the CSLB to do that, and they tend to fear the Legislature, so I think you should feel comfortable filing such a complaint.

Bottom line, if you’re having trouble dealing with, getting answers from, being harassed by the CSLB, you should contact your State Representative. Click here to find out who your Rep is.

Cooley ltr_a

Cooley brochure

Starting a Construction Business

Starting a construction businessStarting a construction business isn’t easy by any means. There is a lot of planning and steps to take. I’m going to attempt to break it down to the basics.

First, what business entity to choose. If you choose a corporation or LLC you’ll want to file your articles of incorporation with the Secretary of State (SOS). This is a service I offer, but if you prefer to use an online company click here.

Next you’ll want to obtain a Federal Employer ID number. You can get this number from the IRS using their online system. It will provide you with the FEIN in just minutes.

You will need to apply for a business license in your city or county. Here is a page of helpful information regarding business licenses.

If you are going to use a fictitious business name (FBN) you’ll need to apply for it in your city or county. Generally, the same government office that issues business licenses will also handle the FBN filing.

Opening a business bank account. You’ll need a copy of the filed FBN statement with you when you open the bank account. Unless you are using your personal name as your business name, the bank will not open a business account for you unless you have the filed FBN statement.

After the SOS has issued your corporate number, you can then apply for your contractor’s license. I offer a full range of license application services. Whether you need me to complete all of your documents for you, or just a review of the documents you’ve prepared, I’ll be happy to assist you.

If you are applying for a sole owner (sole proprietor) license, you can apply for your contractor’s license at any time. If you use your personal name for the business name on your contractor’s license, you will not need to file a FBN with your city our county.

Here is something that many new corporations miss… the SOS will notify the Franchise Tax Board (FTB) when the corporate number is issued and you will need to file a tax return, even if no business was conducted or if the contractor’s license was never issued. I have heard from people who formed an S corporation, received their contractor’s license number, but never conducted any business. They did not file a return with the FTB and they failed to pay the corporate taxes when due. When they tried to renew their license they discovered that the corporation was suspended at the SOS by the FTB for overdue taxes and penalties. I highly recommend finding a reputable CPA to help you.

To break it down….

  • Choose your business entity type
  • Submit your articles of incorporation with the SOS (if you’re forming a corp)
  • Apply for an FEIN with the IRS
  • Open a business bank account
  • Apply for your contractor’s license

As I said at the top, this is a basic list of what you need to do to start a construction business. It’s obviously more involved than this, I just wanted to give you the basics to get you started.

As always, I’m available to answer any questions that you may have. Everybody’s situation is different and I’d be happy to help you navigate through this process. Feel free to email your questions to me at ContractorLicenseService at gmail.com.

Report Unlicensed Activity

CSLB Unlicensed Contractor stingThe Contractors State License Board (CSLB) states that unlicensed contracting is part of California’s estimated annual $60 to $140 billion dollar underground economy. These individuals and businesses do not pay taxes, have general liability insurance or license surety bonds. The CSLB also believes that it is not unusual for them to be involved in other illegal activities as well.

What can you do if believe that an individual or business is contracting without a license? And can I report unlicensed activity?

File a complaint using this CSLB Advertising Complaint for Unlicensed Contractors form.

What is illegal contractor activity?

It is illegal for an unlicensed person to perform contracting work on any project valued at $500 or more in combined labor and material costs. Besides being illegal, unlicensed contractors lack accountability and have a high rate of involvement in construction scams. Unlicensed contractors are also creating unfair competition for licensed contractors who operate with bonds, insurance, and other responsible business practices.

What should you do if you know that an individual or business is using someone else’s license number illegally?

File a complaint using this CSLB Advertising Complaint for Unlicensed Contractors form.

What happens if you don’t renew you license on time?

You will be considered unlicensed until your renewal is processed. During this period you may not enter into any new contracts.

How does CSLB process complaints against unlicensed contractors?

When the Board receives a complaint against an unlicensed contractor, it may issue an administrative citation or file a criminal action with the local district attorney’s office. In some cases, it may initiate injunction proceedings against the non-licensee through the Office of the Attorney General or the district attorney.

Citation

The Registrar may issue a citation to an unlicensed contractor when there is probable cause to believe that the person is acting in the capacity of a contractor or engaging in the business of contracting without a license that is in good standing with CSLB. The citation includes an order of abatement to cease and desist and a civil penalty of up to $15,000. Unless the board receives a written appeal within fifteen (15) working days after the citation is served, the citation becomes a final order of the Registrar. The civil penalty is paid to CSLB.

If the citation is appealed, a mandatory settlement conference may be held to resolve the citation. If the matter is not settled, the appeal will be heard before an administrative law judge. The administrative law judge submits a decision to uphold, modify, or dismiss the citation. The decision is sent to the Registrar for adoption. If the cited unlicensed contractor continues to contract without a license, the Registrar may refer the case to the local district attorney for criminal action.

Criminal Action

CSLB may refer investigations to the local prosecutor to file criminal charges. If criminal charges are filed, the unlicensed contractor appears in local court, which renders a final decision on the case. The court may order a fine, probation, restitution, a jail sentence, or all of these.

Injunction

The Registrar may apply for an injunction with the superior court of either the county in which an alleged practice or transaction took place or the county in which the unlicensed person maintains a business or residence. An injunction restrains an unlicensed person from acting in the capacity or engaging in the business of contracting without a license that is in good standing with CSLB.

If you are unlicensed and need help with your application or you need study materials, the License Guru is here to help.

CSLB Gestapo Tactics

The CSLB may be taking notes (knowingly? or unknowingly?) out of Germany’s Gestapo playbook.

CSLB Gestapo TacticsWikipedia says, in part: http://en.wikipedia.org/wiki/Gestapo

“The basic Gestapo law passed by the government in 1936 gave the Gestapo carte blanche to operate without judicial review—in effect, putting it above the law.[13] The Gestapo was specifically exempted from responsibility to administrative courts, where citizens normally could sue the state to conform to laws.”

Here we are in 2015, and the CSLB has been acting in the same manner for years.

They create their own rules, laws, and regulations, none of which are subjected to judicial review. In effect, putting it above the law.

In a previous post I pointed out that the CSLB Spring Newsletter stated requirements that are not written in the law. Specifically, business name advertising.

In another post I discussed where the CSLB has been requiring out-of-state applicants to have their certifier’s signature notarized. Not written in the law.

Then of course there is the infamous “critical classifications” list. A list of specific classifications that are targeted and/or profiled and are subjected to additional review. The CSLB managers have told their staff that they can no longer use the term “critical classification.” Hmmm, I wonder why?

They continue to pursue this profiling by using the law that requires them to pull a minimum of 3% of ALL applications received for secondary review.

Pulling ALL “critical classification” applications is not a random sampling of ALL applications received. This is a prime example of the CSLB twisting the law as written in order to fit their needs.

The difference between the Gestapo and the CSLB is that there is no law that specifically gives the CSLB carte blanche. It’s worse than that…. they chose to enact these unlawful requirements on their own. No authorization by the legislature, nothing put to a public vote, No, they just make these rules as they go. Clearly, a State office that is out of control and in desperate need of being reigned in.

How long will the CSLB continue operating like the Gestapo of the 30’s and 40’s? Sadly, there is no crystal ball to provide that answer. All we can do is hope that someday the CSLB will stop using Gestapo tactics and will operate with transparency and within the law.

CSLB Spring 2015 Newsletter Part 2

In this edition of the CSLB Spring 2015 Newsletter part 2 I’ll discuss advertising rules for contractors.

On this page of the newsletter the CSLB discusses advertising rules. What caught my eye were two things.

Polar Solar CSLB newsletter1) The image they used in the article was taken in front of the CSLB headquarters building. I looked up the business name and found one company called Polar Solar Inc. located in Tarzana, Ca.

I thought, why would a SoCal contractor be at the CSLB HQ building. So I blew up the image and could see they used a fictitious phone number and a license number of 123456. I’m assuming they did this just as an example of the font size required by law. But I think they should have used an actual contractors vehicle ad to give a real world example. Perhaps they chose not to because they felt they were giving free advertising to an actual contractor. Either way, I think a real world example would have been more appropriate.

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I was recently asked by an applicant if he could advertise his business name (John Doe Construction) as JD Construction. This brings me to the second topic

2) The article states: “Also, remember that licensees must list the name of their business exactly as it appears in CSLB records for any advertisement, bid, or contract. Name style variations are not allowed. Contracts must be in the same form and type as specified in B&P Code section 7159.” I did not add the bold text, that’s exactly how it was printed in the newsletter.

I remember looking up advertising rules for the applicant mentioned above and I thought… “exactly as it appears”?? I don’t recall reading that in the law. So I did an extensive search of my contractors license law pdf using the search terms “exactly as it appears”, “business name”,  “advertising”, and “name style” and could find nothing that states the licensees business name had to be “exactly as it appears.”

B&P Code section 7059.1 Misleading or incompatible use of name styles, does not use any language that refers to “exactly as it appears.”

The above statement references B&P Code section 7159, that section also does not use the language “exactly as it appears” anywhere in the section.

So maybe the hour + I spent doing research wasn’t enough, maybe I somehow missed something, or maybe the CSLB is once again attempting to enforce something that doesn’t exist in the law as written. If it is in the law somewhere, and you find it, please share the law, regulation, or code section with me.

If you are a new follower to my blog or a long time reader, I may come across as overly critical of the Contractors State License Board. I don’t want to mislead you… I am! I am because the CSLB is overly critical of profiled applicants, of it’s employee’s, and of the industry overall. Somebody has to call it like it is.

If you want to read the entire CSLB Spring 2015 Newsletter, click here.

I’ve uploaded the Contractors License Law pdf here if you’d like to read it as well.