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Q: Who must be licensed as a contractor?
A: All businesses or individuals who construct or alter any building, highway, road, parking facility, railroad, excavation, or other structure in California must be licensed by the California Contractors State License Board (CSLB) if the total cost (labor and materials) of one or more contracts on the project is $500 or more. Contractors, including subcontractors, specialty contractors, and persons engaged in the business of home improvement (with the exception of joint ventures and projects involving federal funding) must be licensed before submitting bids. Licenses may be issued to individuals, partnerships, corporations, or joint ventures. The CSLB does not issue licenses to Limited Liability Companies (LLC's).
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Q: What happens if I contract without a license?
A: Contractor's license is not necessary as long as you advertise yourself as an unlicensed contractor, provide your customers with a written statement that you are unlicensed and never contract for jobs costing $500 or more, including labor and materials. The Contractors State License Board has established statewide investigative fraud teams that focus on unlicensed contractors and the underground economy. These units conduct stings and sweeps to curtail illegal contracting activities. Contracting without a license is a misdemeanor. Unlicensed contractors face potential sentences of up to one year in county jail and potential administrative fines from $200 to $15,000. The CSLB filed 1,355 nonlicensee citations and referred 1194 nonlicensees to the District Attorney during the 2002-2003 fiscal year. Stings and sweeps are publicized to ensure maximum consumer education.
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Q: What kind of experience is required for a contractor's license?
A: At least four years of experience is required to qualify to take the examination. Credit for experience is given only for experience at a journey level or as a foreman, supervising employee, contractor, or owner-builder. All experience claims must be verified by a qualified and responsible person, such as a homeowner, an employer, fellow employee, other journeyman, contractor, union representative, building inspector, architect, or engineer. The person verifying your claim must have firsthand knowledge of your experience--that is, he or she must have observed the work that you have done--and must complete the experience certification portion of the application.
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Q: What are the contractor license classifications?
A: The CSLB issues licenses to contract in particular trades or fields of the construction profession. Each separate trade is recognized as a "classification." You may add as many classifications to your license as you can qualify for.The CSLB issues licenses for the following classifications: (back)
 Class "A"
General Engineering Contractor. The principal business is in connection with fixed works requiring specialized engineering knowledge and skill.
 Class "B"
General Building Contractor. The principal business is in connection with any structure built, being built, or to be built, requiring in its construction the use of at least two unrelated building trades or crafts; however, framing or carpentry projects may be performed without limitation. In some instances, a general building contractor may take a contract for projects involving one trade only if the general contractor holds the appropriate specialty license or subcontracts with an appropriately licensed specialty contractor to perform the work..
 Class "C"
Specialty Contractor. There are 41 separate "C" license classifications, listed below, for contractors whose construction work requires special skill and whose principal contracting business involves the use of specialized building trades or crafts Manufacturers are considered to be contractors if engaged in on-site construction, alteration, or repair.
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_CLASSIFICATION
CODE
_Boiler, Hot Water Heating and Steam Fitting
C-4
_Building Moving and Demolition
C-21
_Cabinet, Millwork and Finish Carpentry
C-6
_Concrete
C-8
_Constuction Zone Traffic Control
C-31
_Drywall
C-9
_Earthwork and Paving
C-12
_Electrical (General)
C-10
_Electrical Signs
C-45
_Elevator
C-11
_Fencing
C-13
_Fire Protection
C-16
_Flooring and Floor Covering
C-15
_Framing and Rough Carpentry
C-5
_General Manufactured Housing
C-47
_Glazing
C-17
_Insulation and Acoustical
C-2
_Landscaping
C-27
_Lathing and Plastering
C-35
_Limited Specialty
C-61
_Lock and Security Equipment
C-28
_Low Voltage Systems
C-7
_Masonry
C-29
_Ornamental Metals
C-23
_Painting and Decorating
C-33
_Parking and Highway Improvement
C-32
_Pipeline
C-34
_Plumbing
C-36
_Refrigeration
C-38
_Roofing
C-39
_Sanitation System
C-42
_Sheet Metal
C-43
_Solar
C-46
_Steel, Reinforcing
C-50
_Steel, Structural
C-51
_Swimming Pool
C-53
_Tile (Ceramic and Mosaic)
C-54
_Warm-Air Heating, Ventilating and Air Conditioning
C-20
_Water Conditioning
C-55
_Welding
C-60
_Well-Drilling (Water)
C-57
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Q: What are the license bond requirements for California Contractors?

A: Contractors are legally required to maintain a form of security deposit as a guarantee that they will perform in a good and workmanlike manner. Surety bonds are commonly used for this purpose.

Before an active contractor's license can be issued or renewed, or an inactive license made active, the licensee must have a current Contractor's Bond, or an approved alternative to the bond, on file with the CSLB. The Contractor's Bond shall be in the amount of $12,500 for all classifications. In addition, a Qualifying Individual must carry a $12,500 bond or an approved alternative to the bond, on file for each responsible managing employee (RME). You must also have a $12,500 Bond of Qualifying Individual on file for each responsible managing officer (RMO) unless the RMO owns 10 percent or more of the voting stock of the corporation.

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Q: What does the contractors license bond cover?
  A: The contractor's bond is for the benefit of the following:  
  
Any homeowner contracting for home improvement upon the homeowner's personal family residence damaged as a result of a violation Contractors License Law.
Any person damaged as a result of a willful and deliberate violation of California Contractors License Law by the licensee, or by the fraud of the licensee in the execution or performance of a construction contract.
Any employee of the licensee damaged by the licensee's failure to pay wages.
 
 
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Q: What is a Contract Surety Bond?
  A: A Contract Surety Bond is a three-party instrument between a surety, the contractor and the project owner. The agreement binds the contractor to comply with the terms and conditions of a contract. If the contractor is unable to successfully perform the contract, the surety assumes the contractor's responsibilities and ensures that the project is completed. Below are the three types of contract bonds that can make up a surety guarantee  
  
Bid - Bond which guarantees that the bidder on a contract will enter into the contract and furnish the required payment and performance bonds.
Payment - Bond which guarantees payment from the contractor of money to persons who furnish labor, materials equipment and/or supplies for use in the performance of the contract.
Performance - Bond which guarantees that the contractor will perform the contract in accordance with its terms.
  
Premium for the above Contract Surety Bond package is typically 2-3% of the contract amount.Note that private jobs are underwritten with more scrutiny as the surety must obtain evidence that the owner has sufficient funds to pay for the contract.
 
 
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Q: What are the General Liability Requirements for California Contractors?
  A: Pursuant to California Business & Professions Code §7164 (SB 2029), contractors building single-family residences and home improvement contractors must provide this notice (http://www.cslb.ca.gov/forms/glisfd.pdf) and disclose whether or not they carry commercial general liability insurance.
 
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Q: What does General Liability insurance cover?
  A: Commercial General Liability Insurance can protect against third-party bodily injury and accidental property damage. It is not intended to cover the work the contractor performs. 
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Q: Is General Liability insurance required?
  A: No. But the Contractors State License Board strongly recommends that all contractors carry it. General Liability Insurance has become and industry standard. No insurance? No job! 
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Q: What are the Workers' Compensation Requirements for California Contractors?
  A: California law requires every employer to carry insurance to cover the cost of occupational injuries and illnesses. This insurance requirement is mandatory even if you have only one part-time employee. Companies based out-of-state with employees hired in California must also have California workers' compensation insurance. Contractors who do not have employees are required to file a certificate of exemption 
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Q: What does Workers' Compensation insurance cover?
  A: Workers' compensation provides benefits to employees who are injured or become ill during the course of or due to employment.  
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Q: What are the advantages of incorporating?
  A: One of the primary advantages of incorporation is the limited liability the corporate entity affords its shareholders. Typically, shareholders and directors are not liable for the debts and obligations of the corporation; thus, creditors will not come knocking at the door of a shareholder or director to pay debts of the corporation. In a partnership or sole proprietorship the owner's personal assets may be used to pay debts of the business. Maintaining the limited liability of a corporation requires that the shareholders and directors follow all the rules of governance, including holding annual meetings and maintaining meeting minutes, which is why we offer corporate forms disks and corporate kits as part of our complete incorporation package. 
  
Other advantages:
A corporation's life is not dependent upon its members. A corporation possesses the feature of unlimited life. If an owner dies or wishes to sell his or her interest, the corporation will continue to exist and do business.
Ownership of a corporation is easily transferable.
Capital can be raised more easily through the sale of stock.
A corporation possesses centralized management.
 
 
 
 
Q: What is an S corporation?
  A: Standard business corporations or C corporations are required to pay income tax on taxable income generated by the corporation. Making a subchapter S election by completing and filing federal Form 2553 with the IRS is a way to avoid having your corporation treated as a separately taxable entity.
An S corporation is a standard business corporation that has elected a special tax status with the IRS. This tax treatment allows the corporation not to be a separately taxable entity. Instead, the income of the corporation is treated like the income of a partnership or sole proprietorship; the income is "passed-through" to the shareholders. Thus, shareholder's individual tax returns report the income or loss generated by an S corporation.
To be classified as an S corporation, a corporation must make a timely filing of Form 2553 to the IRS. This election must be made by March 15 if the corporation is a calendar year taxpayer, in order for the election to take effect for the current tax year. A corporation may later decide to elect S corporation status, but this decision would not take effect until the following year.
In order to qualify for S corporation status, the S corporation can have no more than 75 shareholders and must make the election to be an S corporation . The shareholders cannot be non-resident aliens. Also, an S corporation cannot issue preferred shares of stock with spec
 
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