Until 2012 a California contractor wanting limited liability protection for owners of the business had to use a corporation.  The Contractors State License Board (“CSLB”) could not issue a license to a limited liability company.  That has now changed.  Senate Bill 392, which became law in 2010, required the CSLB to begin processing applications for licensure of limited liability companies no later than January 1, 2012.  The law imposes several requirements in order for a limited liability company to obtain and maintain a license.  One such requirement is that a $100,000 surety bond is required to protect employees from a failure to pay wages and benefits.  In addition a specified minimum amount of liability insurance is required, the minimum amount depending on the number of personnel of record. 

This legislation offers contractors a choice.  Some may prefer the pass thorough tax characteristics of a limited liability company over the tax characteristics of a corporation. 

If you have any questions, please contact L. Michael Telleen at mtelleen@carr-mcclellan.com or at (650) 342-9600.