Licenses for Limited Liability Companies (LLC)
The passage of Senate Bill 392 (Statutes of 2010, Chapter 698) authorized CSLB to issue contractor licenses to limited liability companies (LLCs).
Please note: Effective January 1, 2016, the required amount of a contractor’s bond increased from $12,500 to $15,000. This change was the result of Senate Bill 467 (Hill). This increase also applies to cash deposits filed with CSLB in lieu of a contractor’s bond.
The bond of qualifying individual remains at $12,500.
Below are some primary requirements for and components of LLC licenses.
$100,000 LLC Employee/Worker Bond
A $100,000 surety bond (in addition to the $15,000 contractor bond) is required for the issuance of both active and inactive licenses, reissuance, reinstatement, reactivation, and renewal of an LLC license for the benefit of any employee or worker damaged by the LLC’s failure to pay wages, interest on wages, or fringe benefits, as well as other contributions (not required for inactive LLC licenses). (Business and Professions [B&P] Code section 7071.6.5) Please note: check with your bonding company regarding premium costs for this bond.
$1 Million Liability Insurance Minimum
Liability insurance with the cumulative limit of at least $1 million for licensees with five or fewer persons listed as members of the personnel of record is required. Also, an additional $100,000 is required for each additional member of the personnel of record, not required to exceed $5 million total. (B&P Code section 7071.19)
Beginning January 1, 2014, B&P Code section 7071.19 (c) required that LLC liability insurance policies be written by insurers that are "duly licensed by this state or an eligible surplus line insurer." According to the legal office of the California Department of Insurance (CDI), the only insurers that are duly licensed by the State of California are admitted insurers that are licensed by CDI, searchable on their website under Insurance Company Profiles. Eligible surplus line insurers include those listed on CDI’s List of Approved Surplus Line Insurers (LASLI) and other eligible carriers as determined by law.
Personnel of Record
Every person who is an officer, member, responsible manager, or director must be listed as personnel of record on LLC applications. (B&P Code section 7065)
LLC licenses must be qualified by a responsible managing employee (RME), responsible managing officer (RMO), responsible managing manager, or responsible managing member. (B&P Code section 7065)
$1 Million Personal Liability during Secretary of State Suspension
If an LLC license is suspended for failing to be registered and in good standing with the Secretary of State, each person within the LLC may be held personally liable up to $1 million each during the time the LLC is suspended. (B&P Code section 7076.2)
Liability Insurance Information on Contracts
Specific general liability insurance information is required to be included on the LLC’s home improvement and service and repair contracts. (B&P Code sections 7159 and 7159.10)
License Number Reissuance
Sole owner and corporate license numbers may be reissued to LLCs under certain circumstances. (B&P Code section 7075.1)
Joint Venture Licenses
An LLC may be listed as an entity on a joint venture license. (B&P Code section 7029)
LLCs may serve as a general partner on a partnership license provided the LLC meets the above requirements relating to the additional surety bond and liability insurance. An LLC serving as a limited partner on a partnership license is not required to meet the additional surety bond and liability insurance requirements.
Business Name Styles
According to the Secretary of State’s office, LLC business names have specific requirements and restrictions. Interested parties should contact the Secretary of State’s office directly for full information about LLC business name issues. Briefly, LLC business names must comply with the following.
- The name of an LLC must end with the phrase "Limited Liability Company" or the abbreviation "LLC" or "L.L.C." The words "Limited" and "Company" may be abbreviated to "Ltd." and "Co.," respectively. (Corporations Code section 17701.08 (a))
- The name of an LLC may not include the words "bank," "trust," "trustee," "incorporated," "inc.," "corporation," or "corp." (Corporations Code section 17701.08 (e))
- The name of an LLC may not include the words "insurer" or "insurance company" or any words suggesting that it is in the business of issuing policies of insurance and assuming insurance risks. (Corporations Code section 17701.08 (e))
- If the name of a foreign (out-of-state or out-of-country) LLC does not conform to the requirements of Corporations Code section 17701.08, the foreign LLC must adopt an alternative name that complies with Section 17701.08 to transact intrastate business in this state. (Corporations Code section 17708.05)
Most other requirements and provisions that apply to corporate licenses also will apply to LLC licenses.