Prior to January 1, 2011, the California Corporations Code prohibited LLCs from rendering “professional services as defined in section 13401 and 13401.3” of the Corporations Code. Section 13401 defines “professional services” to include those where a license is required by the California Business & Professions Code. The Business & Professions Code requires contractors, architects, professional engineers and others in the construction industry to be licensed.
The new law comprehensively amends the Business & Professions Code to give LLCs the same status as other corporations and to allow them to obtain a contractor’s license under the same rules that apply to corporations. Section 17002 of the Corporations Code is also amended to allow companies that provide “professional services” to be LLCs as long as Business & Professions Code allows it.
Also, previously the California State License Board (CSLB) allowed issuance of contractors licenses only to “individuals, partnerships and corporations” and now they can be issued to “individuals, firms, partnerships, corporations, limited liability companies, associations, organizations, or any combination thereof.”
There are two important conditions associated with obtaining a contractors license as an LLC:
The CSLB does not have to start processing applications until January 1, 2012, but is expected to start sooner and will be accepting applications in late 2011.
There are advantages of doing business as LLC, such as:
The new law allows the transfer of an existing license number to the LLC under certain conditions.
An individual who currently owns a license may reassign his or her license to an LLC if the individual formed the LLC and maintains more than 50 percent voting power in the LLC.
Kilpatrick Townsend & Stockton LLP has extensive experience in advising contractors on licensing issues and in forming LLCs.
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