Death of a Contractor: End of the Road or a New Beginning

Death of a Contractor: End of the Road or a New Beginning?

The state of California requires all contractors to maintain an active license to conduct business and related construction activities, including bidding on jobs and accepting project contracts. Without an active license, business operations come to a halt, leading to reputational damage, and prevention of providing continued support to current clients. Different conditions cause a license to become inactive or suspended, from not having a surety bond on file to the death of the contractor.

The loss of a family member is a difficult and confusing time. When the deceased is a contractor, along with many other tough decisions to be made, the family must choose to maintain the contractor’s business to carry on their legacy or close the business for good. Either way, it puts the family between a rock and a hard place, so Jet’s Construction Team is here to help guide families through it.

If the remaining partners or family plan to cancel the license, the Contractors State License Board (CSLB) must be notified within 90 days with a written cancellation request and a copy of the death certificate. This comprehensive guide details the steps to manage the passing of a contractor in California with specifics related to the business’s entity type.

Sole Proprietorship

Should the sole owner pass away, the license must be canceled, as there are no partners to take over. To do so, a family member of the deceased will need to complete and file a voluntary cancellation form and include a copy of the death certificate or the obituary. The CSLB will also allow an administrator of the estate to file the necessary documents.

An immediate family member of the deceased can request a temporary license continuance from the CSLB to finish any current projects. Immediate family members include: 

• Parents
• Siblings
• Spouses
• Children
• Step children
• Sons/daughters-in-law

The continuance form must be submitted to the CSLB within 90 days of the death date recorded on the certificate. Once the continuance is approved, current projects can continue to be worked on and new projects may be taken, within a reasonable time as set by the Board. 

In certain instances, a sole owner license can be reassigned pending a written request sent to the CSLB, along with a completed contractor license application form. The license can be reassigned as long as the person requesting the reassignment is an immediate family member of the deceased and the license is needed to continue the existing business. For example, if the contractor passes away, but his son wants to keep the business going under the same license number, the son could apply for the reassignment. Some of the benefits of keeping the same license number are maintaining the established business reputation and retaining the license history, which ultimately aids in acquiring future jobs.

Partnerships

Partnerships are entities that have two or more general partners associated. The license is issued on the basis that these partners will operate the business together. In the event one of these general partners passes away, the license will be canceled. The remaining partner(s) must send a written notice to the CSLB within 90 days of the death. Failure to notify the License Board within the prescribed timeframe will result in disciplinary action. 

The remaining partner(s) can send a request for license continuance to the CSLB to continue operating the business in the interim. Once approved by the CSLB, the continuance period will be up to a maximum of one year. If the remaining partners wish to continue the business after the continuance period has ended, a new license number will need to be applied for. Furthermore, if any new partners are added on, a new license will need to be issued for the new partnership structure.

Limited Liability Companies

Limited Liability Companies (LLC) are a specific type of partnership in the eyes of the Contractors State License Board. These entities are made up of partners classified as either “general” or “limited” partners. 

General partners are the people who make most of the operating decisions for the business. Limited partners typically consist of investors that serve a more passive role when it comes to decision making. If a general partner passes away, the license will be canceled. Any remaining partners wishing to continue doing business will need to apply for a new license. 

However, in the case of a limited partner, their death will not affect the status of the license so long as two conditions are met: 

1. There are other general partners 
2.  A minimum of one additional limited partner is on the license 

Any remaining partners can request a continuance to finish any projects that are currently in progress, but they are prohibited from taking on any new contracts. Once the continuance period ends, the remaining partners will have to file for a new license to continue contracting. In the event the business only has one limited partner and that person passes away, then the license is canceled upon their death.

Corporations

Unlike Limited Liability Companies (LLC), corporations are unique. Corporations, unlike other structures, are considered their own independent entity and thus can hold the license. Therefore, any death or dissociation of officers does not affect the status of the license. Similarly, new officers can be added on without any disruption of the license. In the event the corporation dissolves or there is a change in their registration number, as issued by the California Secretary of State, a new contractor license will need to be issued.  

Let Jet Surety assist you with any licensing questions. Feel free to reach out to us via email at [email protected] or (916) 836-5330 and we can answer any of your questions.