Business organization & licensing: CSLB Law & Business Practice Questions

Since January 1, 2025, an unlicensed handyman may do a job without a contractor's license only if the total price for labor and materials is below what amount (and no permit is needed and no one is hired)?

AB 2622 raised the minor-work exemption in B&P §7048 from $500 to $1,000, counting labor, materials and everything else. The job also cannot need a building permit, and the person cannot employ anyone.

An unlicensed person quotes $850 to replace a bathroom fan and plans to bring a paid helper. The work needs no permit. Does the minor-work exemption apply?

Under §7048(c) the exemption does not apply to anyone who employs another person to do or help with the work, even when the price is under $1,000.

A homeowner wants a $2,400 fence. The unlicensed worker offers to write three separate $800 contracts. What is the legal effect?

Section 7048(b) removes the exemption when a project is divided into contracts under $1,000 to evade the licensing law, or when the work is part of a larger operation.

When may a person without a contractor's license advertise for construction work?

Section 7027.2 lets an unlicensed person advertise only for projects under $1,000 in total, and the ad must say the person is not licensed under the Contractors License Law.

What is the amount of the contractor's bond that an active California licensee must keep on file with CSLB?

Since January 1, 2023, §7071.6 requires a $25,000 contractor's bond for issuing, renewing or keeping an active license. The old amount was $15,000.

A corporation qualifies through a responsible managing employee (RME) who owns no stock. What additional bond is required?

When the qualifier is not the owner, a general partner or a joint licensee, §7071.9 requires a separate $25,000 qualifying individual's bond that cannot be combined with the contractor's bond.

A responsible managing officer (RMO) can be excused from the qualifying individual's bond if the RMO owns at least what share of the corporation's voting stock?

Section 7071.9(c) exempts an RMO who owns 10 percent or more of the corporation's voting stock from filing the qualifying individual's bond. The 20 percent figure is the common-ownership test for qualifying more than one firm.

In addition to the contractor's bond, a limited liability company (LLC) license requires a surety bond of what amount for the benefit of its workers?

Section 7071.6.5 requires LLC licensees to keep a $100,000 bond that protects employees who are not paid wages, interest on wages or fringe benefits.

An LLC contractor has four persons listed on its personnel of record. What is the minimum aggregate limit of the liability insurance it must carry?

Under §7071.19 an LLC with five or fewer persons on the personnel of record needs at least $1 million in aggregate liability coverage.

An LLC licensee lists eight persons on its personnel of record. What minimum aggregate liability insurance does §7071.19 require?

The base is $1 million for up to five persons, plus $100,000 for each person beyond five: 3 x $100,000 = $300,000, for $1.3 million. The required amount never has to exceed $5 million.

What is the most a surety will pay in total on wage and fringe-benefit claims against a contractor's bond?

Section 7071.11(a) caps the surety's total liability for wage and fringe-benefit claims at $4,000. If the bond cannot pay all claims, it is split among claimants in proportion to their claims.

Which of these persons is NOT a listed beneficiary of the contractor's bond?

Section 7071.5 lists homeowners, single-family home owners, people damaged by willful violations or fraud, unpaid employees and unpaid fringe-benefit trusts. Losing a bid is not a covered loss.

An applicant has an unpaid final court judgment owed to a supplier. What must the applicant do before CSLB issues the license?

Under §7071.17 an applicant with an unsatisfied final judgment to a contractor, subcontractor, consumer, supplier or employee must post a bond equal to the judgment (or show a notarized accord). The bond stays on file at least one year.

A contractor's truck says "Guaranteed by our state bond." What is the problem?

Section 7071.13 makes any reference to a required license bond in advertising or solicitation a ground for suspension, because the bond is a minimum legal requirement, not a guarantee.

How long is an active California contractor license valid before it must be renewed?

Under §7140 a license expires two years from the last day of the month in which it was issued, or two years after the date it last expired if renewed.