license law and business

What is the minimum bond amount required for a contractor license in California ?

$25,000

What is the first-time penalty for acting as a contractor without a license in California?

It is misdemeanor for first time offense with up to

What does CSLB issue to a contractor for a

Minor violation as a warning ?

Notice of correct notice

How long are citations against licensed contractors disclosed to the public?

5 years

What is the maximum allowed down payment for a home improvement contract in California ?

$1,000 or 10% of the contract price, whichever is less

Which business structure provides liability protection similar to a corporation but has different tax treatment?

Limited liability company (LLC)

What type of bond guarantees both job completion and payment of all labor and materials?

A performance and payment both guarantees both job and completion and payment of all labor and materials

What is the minimum liability insurance required for a limited liability company (LLC) with five or fewer personnel ?

$1 million dollars

What is the purpose of a disciplinary bond for contractors?

To protect the public by ensuring that the contractor fulfills their obligations and complies with regulations of they are allowed to resume work

What agency is responsible for licensing and regulating contractors in California ?

Contractors license board (CSLB)

What is the main purpose of the contractors state license board?

To protect consumers by regulating the construction industry

Which of the following violations could lead to a contractor’s license suspension?

•fraud or misrepresentation

•failing to pay subcontractors, failure to complete work

•poor workmanship, building codes violations

•working without insurance or bond

Answer: All of the Above

Which license classification requires workers compensation insurance, even if the contractor has no employees?

C-39 roofing, C-8 (concrete) C-20 (HVAC), C-22 (Asbestos Abatement)

and D-49 (tree service)

What is the role of the statewide Investigative fraud team (SWIFT)

To investigating and combating unlicensed contracting and construction related fraud

What is the maximum civil penalty CSLB can impose for serious violations?

$30,000

What is the first step CSLB takes when a complaint if filed against a licensed contractor?

Review the complaint to determine if it falls under CSLB jurisdiction

What is required of a home improvement salesperson (HIS) before they begin working?

Registration and issuance of a registration number by CSLB and be associated by a licensed contractor

Which business entity allows its owners to report income as a personal income while enjoying limited liability?

LLC by using the pass-through taxation of a sole proprietorship

What type of bond is mandatory for all licensed contractors in California?

Contractor license bond

What is the purpose of a mechanics lien?

To ensure payment for labor or materials used in a project

What is the penalty for failing to secure a worker’s compensation insurance for employees?

• Stop order to halt all work

• fines up to 100,000

• misdemeanor criminal charges

Answer: All of the above

What financial statement summarizes a company’s assets, liabilities and equity?

Balance sheet

Under California law, how long does a homeowner have to cancel a home improvement contract if they are over 65 years old?

5 business days without penalty or obligation

What is the penalty for subsequently (multiple offenses) acting as a contractor without a license in California?

Subsequent Offenses: stricter penalties, including a mandatory 90-day jail sentence and a fine of 20% of the contract price or $5,000 percent whichever is greater

How often must a contractor renew their license in California?

Every 2 years

What Type of insurance is mandatory for all limited liability companies (LLCs) in California?

Commercial general liability insurance baúles at $1 million dollars

What does the term “ percentage of completion method” refer to in accounting for contractors?

Method of recognizing revenue and expenses on long term construction projects based on the progress of the project . Revenue is recognized proportionally as the work is completed, rather than waiting until the entire project is finished

What is the monetary fine for an unlicensed contractor acting as a contractor in California?

$200 and up to $15,000

What must a contractor disclose to a homeowner if they do not carry commercial general liability insurance?

They must notify the homeowner in writing

What is the primary role of the CSLB registrar of a contractor ?

Enforcing contractor licensing laws and disciplinary actions

How many classifications of a contractors licenses does CSLB regulate?

Over 40

In California which type of contractor is required to carry a $100,000 surety bond in addition to the $25,000 contractor bond?

Limited liability company (LLC)

What is the statute of limitations for filing a complaint about a contractor s home improvement contract violating?

4 years

What must a contractor provide before stating any home improvement work?

A copy of the signed and dated contract

When does the CSLB disclosure accusation that result in license suspension?

From the date the accusation is officially filed and for 5 years after settlement

What is the penalty for a contractor who uses false or deceptive advertising?

Disciplinary actions by CSLB such as a misdemeanor charge, fine up to $2,500, possible license suspension or revocation

How are the complaints against unlicensed contractors processed by CSLB?

•review and verify the complaint to confirm the individual is operating without a license

•refer the case to the statewide investigative fraud team (SWIFT)

•SWIFT may conduct undercover sting operations or site inspections to gather evidence

• if violations are confirmed, CSLB can issue: citations, fines

• and even criminal charges, as unlicensed contracting is a misdemeanor in California

What happens if a contractor violates probation terms set by the CSLB?

Their license is suspended or revoked, fines or penalties, possible legal action

What document must a contractor file with CSLB if they do not have employees and wish to avoid worker’s compensation insurance?

A certificate of worker’s compensation exemption

Which method of accounting allows contractors to report income and expenses only when the project is completed?

Completed contract method

What is a joint control agreement in a home improvement contract?

An agreement where the neutral third party (usually a joint control company or escrow agent) manages the homeowner’s funds and releases payments to the contractor only as specific project milestones are completed

What type of insurance is required by the law for contractors with employees?

Worker’s compensation insurance

Which type of bond guarantees the payment of a labor and materials on a project?

Payment bond

What must be included in a home improvement contract’s description of work?

• A clear and detailed scope of work

• materials to be used (type,grade,quantity, etc.)

•specific tasks or improvements to be completed

•Location of work ( e.g, kitchen, exterior etc)

•any plans, drawings or specifications relevant to the project

Home improvement contracts must include

•contractors information- name, address, and license number of the contractor

• homeowner’s information- name and address of the property owner

• description of work

•total contract price

•Downpayment

•payment schedule

•aproxímate start and completion dates

•mechanic’s lien warning

•notice of right to cancel

•CSLB Notice- a statement informing homeowners about the CSLB and how to check a contractors license

When must a contractor notify CSLB of a change in their business address?

Within 90 days

What does a contractors need to provide for work requiring permit?

Proof of the required permit and inspection approvals

When does the contractor state license board (CSLB) send a renewal notice before the license expires?

60 days

What is the primary goal of construction safety regulations?

To protect workers from injury, illness and death and to ensure safe working environments

Who can file a complaint against a contractor with CSLB?

Any entity, including homeowners, consumers, contractors, employees, suppliers, gov agencies or concerned members of the public