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California Contractors Can Soon Do Business as LLCs

Newly chaptered SB 392 authorizes the issuance of a contractor’s license to a limited liability company (LLC), mirroring the provisions regulating contractor’s licenses issued to a corporation. This brings California into conformity with most states, which allow a LLC to hold a contractor’s license.

As reported by the Senate committee on Business, Professions and Economic Development, the sponsors of SB 392 “believe that the
LLC form of business has needed flexibility for distribution of profits and losses separate from control and ownership which benefits commerce with no foreseeable detriment.”

Notably, the primary difference between SB 392 and a similar bill that failed to get out of committee last year (SB 1337) is that SB 392 requires a contractor LLC to carry $1,000,000 in liability insurance or $500,000 in liquid assets to “ensure that workers are protected despite the absence of case law dealing with limited liability companies.” This bond requirement may mean that only larger contractor businesses will organize as LLCs under the bill.

The law is effective January 1, 2011, but the Contractors’ State License Board is required to begin processing applications for licensure from limited liability companies no later than January 1, 2012.

For comprehensive coverage of LLCs, go to Forming and Operating California Limited Liability Companies.

© The Regents of the University of California, 2010. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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