Using Your Contractor’s License With More Than One Business
In Florida, most people who have a contractor’s license operate through a business, usually a corporation or a limited liability company (LLC). And it is legal for a license holder to serve as a qualifying agent for more than one business. But like everything relating to a contractor’s license, there is a right to operate more than one business and a wrong way. In this article we’ll cover the right way, and some common mistakes contractors make in qualifying more than one business.
The Starting Point
In Florida, contractor’s licenses issued under Chapter 489, Florida Statutes, are only issued to individuals. The individual then connects that license to a business by becoming the qualifying agent of that business. It is this process of adding a qualifying agent to the business that enables the business to engage in contracting in the state of Florida.
Operating More Than One Business the Right Way
An individual who has been issued a contractor’s license under Chapter 489, Florida Statutes, can qualify multiple businesses. But in order to do so, that individual must go through the process of applying to be the qualifying agent for each business they intend to operate as a contracting business.
So for example, if John Smith has a Certified Building Contractor’s license, and wants to operate both Smith Residential Contracting, LLC and Smith Commercial Contracting, LLC, he would need to apply to serve as the qualifying agent for each company. Assuming each application is successful, John Smith would end the process with two license numbers, one for each company. John would then use those license numbers on the contracts, advertisements, and permits, for each business, separately.
Assuming the individual license holder meets the other requirements for serving as a qualifying agent (passing credit and criminal background checks, requisite experience, etc..), the real question is whether an individual seeking to qualify an additional business will be able to adequately supervise the construction activities of its current business and the new business or businesses. An individual is presumed to be able to adequately supervise one additional business if the individual (1) owns 20% or more of the additional business, or (2) is a W2 employee of the business. If an individual wants to qualify more than two businesses, then in addition to meeting the foregoing requirements, the individual will also need to appear before the relevant contractor licensing board to confirm his or her ability to supervise the company.
Operating More Than One Business the Wrong Way
There are a number of ways individual license holders can attempt to operate more than one business using their license that are improper and can result in fines, license revocation, other civil penalties, and even criminal prosecution. One of the most common ways is where a license holder uses their license to pull permits for other individuals who are operating under a different company. Imagine John Smith is the qualifying agent for Smith Residential Contracting, LLC. His friend, Bob Thompson does not have a contractor’s license, but opens a company called Bob’s Residential Contracting, LLC. Bob enters into contracts with property owners to build or remodel homes, and then has John pull the permits using John’s license. John also comes by the jobs periodically to inspect the work or help Bob with the projects. While that may sound like a friendly arrangement, Bob is engaged in unlicensed contracting, and John is aiding and abetting unlicensed contracting.
Another improper way to operate an additional business can occur when a properly licensed individual or company enters into a contract with property owner and then subcontracts all of the work to an unlicensed subcontractor, who then may further subcontract some of their work other individuals. To be clear, there are circumstances where this is acceptable. Under 489.113, Florida Statutes, licensed CGC, CBC, and CRC can subcontract certain scopes of work to unlicensed contractors as long as the work does not fall under one of the other license categories in Part I of Chapter 489, Florida Statutes. But where a licensed contractor is essentially just serving as a foil or straw man as part of the transaction, with the work and maybe even the payments flowing directly to an unlicensed person or company, that is likely to be prohibited under Chapter 489, Florida Statutes.
But Wait, There’s More
While this article covers qualifying an additional business at a high level, whether a particular business relationship is compliant with Chapter 489, Florida Statutes, can depend on a number of different factors, and contractors should consult with an attorney when considering operating more than one business using their license(s). Chapter 489, Florida Statutes, contains a number of exemptions, exceptions, and exceptions to exemptions. Whether these apply can be related to the size of the company, the scope of work, and who is actually performing the work.
About the Author:
Jason Lambert is a Florida Board Certified Construction Attorney and Partner in the Construction Industry Practice Group at Hill Ward Henderson, in Tampa, Florida. He is also the founder and chief contributor to the Hammer & Gavel construction law blog. Jason focuses his practice on representing contractors, subcontractors, and materials suppliers throughout the state of Florida. Before law school, Jason spent a decade working in the construction industry, primarily as a project manager and operations director for both new construction and remodeling. He can be reached at jason.lambert@hwhlaw.com or 813-227-8495.
