A California contractor forms a Limited Liability Company (LLC) to operate their contracting business. What is required regarding the contractor's license and the LLC?
Correct Answer
A) A new license application must be submitted with the LLC as the applicant and a qualifying individual designated
Business and Professions Code Section 7065 requires that when a contractor changes business entity type, a new license application must be submitted. The LLC becomes the license holder with a designated qualifying individual responsible for the license, regardless of ownership percentage.
Why This Is the Correct Answer
Business and Professions Code Section 7065 requires that when a contractor changes business entity type, a new license application must be submitted. The LLC becomes the license holder with a designated qualifying individual responsible for the license, regardless of ownership percentage.
Why the Other Options Are Wrong
Option B: No new license is required if the same person owns 100% of the LLC
Even 100% ownership does not allow license transfer. The LLC is a distinct legal entity under California law. The individual's license belongs to them personally — it cannot be used by the LLC regardless of ownership percentage.
Option C: The existing license can be transferred by filing a simple name change form
There is no simple 'name change form' to transfer a license between different types of entities. A name change form is only used when the same entity changes its business name, not when a new type of entity is formed. A full new application is required.
Option D: The LLC automatically inherits the individual's contractor license
Licenses never automatically transfer or inherit to a new entity. Each legal entity must independently qualify for and obtain its own contractor's license through the CSLB application process.
Memory Technique
Each business entity type = its own license. Think of it as a person needing their own ID card — your LLC is a different 'person' than you individually, so it needs its own license 'ID.'
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