Based on the passing of SB 392 in 2010, the Contractors State License Board can now process applications by LLCs for contractor’s licenses. However, you should know that there are some additional requirements for an LLC to obtain a contractor’s license. For example, the LLC application must include as Personnel of Record all directors, officers, members, and responsible managers. The LLC is also required to obtain a $100,000 surety bond in addition to the already required $12,500 contractor bond. The LLC must obtain liability insurance with a minimum aggregate limit of $1 million. See Cal. Bus. & Prof. Bus. & Prof. Code §§ 7065, 7071.6.5 and 7071.19.
The benefits of an LLC, as opposed to an S corporation, are that operational requirements are rather informal and that there are less formal corporate formalities. LLCs offer greater flexibility in ownership and ease of operation. For example, during limited cash flow situations, it is much easier for an LLC to take draws. Also, LLC’s allow you to split equity and profit interests like a partnership, providing much more flexibility to bring in junior partners or sweat equity partners at little to no cost compared to a corporation where profits have to be tied to shares of stock. These advantages along with not having the annual minute requirements of corporations are a great benefit to small business owners.
To view the primary requirements of an LLC, click here