Don't Get Nailed for Hammering without a License

            Before you or your business perform any type of construction undertaking, you should consult with an attorney regarding the required licensing and permits to avoid a financial penalty. There are three types of contractor licenses in Louisiana: commercial, residential, and mold remediation. The oversight and approval of such licensing is governed by the Louisiana Contractor's Licensing Board. Whether you are a Louisiana resident, owner of an entity organized in Louisiana, or an out of state individual or entity, a Louisiana contractor's license is required before work can begin.

            If you are going to be performing work in the name of a business entity, you first need to register your business with the Louisiana Secretary of State. Once the business is registered, you must determine who the qualifying party will be for the contractor's license.

            Every license designated to a contractor must have a qualifying party. A qualifying party is a natural person designated by the contractor to represent the contractor for the purpose of complying with the provisions in the Contractors Licensing Law and Rules and Regulations. A qualifying party is the person who holds the exam scores, and is not the owner of the license unless he/she is a sole proprietor.

             A company can have a number of qualifying parties, and an owner of a company may be a qualifying party on more than one license for any company that he or she owns.

            The next step is to complete an application for a contractor's license. All bids, contracts, and advertisements must be in the properly licensed name as it appears on the current license and official records of the Licensing Board for Contractors. LAC § 46:133. For example, if John Smith holds a license in his individual name, the license is not valid for John Smith, LLC. So, if you intend to contract for construction in the name of your business, the application for licensing should be completed in the name of your business.

            The application must also have an attached financial affidavit verifying the applicant has a net worth of at least $10,000. Additionally, the applicant must show proof of insurance coverage for general liability of at least $100,000 and worker's compensation insurance if there will be employees.

            Once the application and attachments are completed, the remaining step toward licensure is payment of the application fee, exam fees, and pass the examinations. The license application fee is $100, and there are two $120 exam fees.

            Once the qualifying party passes the exams, the license is issued. If a foreign entity and a Louisiana entity which to join in a joint venture for a construction project, both entities must be licensed in Louisiana. However, the qualifying party for the foreign entity may be added to the license of an already licensed Louisiana entity by completing the “Adding a Qualifying Party to an Existing License” application along with the “Application for Qualifying Party.” Although, this will not make the existing license in the foreign entity's name. You cannot transfer a license from an individual to a company or from one company to another.

            To illustrate this point, lets say the license is issued to Louisiana entity Awesome Builder, LLC and its qualifying party is Mr. Joe Awesome. The foreign entity is owned by Mr. John Construction and is named Cool Construction, LLC. Mr. John Construction can be added as a qualifying party to the Awesome Builder, LLC license, but Cool Construction, LLC cannot be added to the license because this would be a transfer to another company. The only way the new company can be added to a license is through a merger in which the entity is the surviving company, but ownership of the company is the same as the original owner on the license. This is found in LAC § 46:131.

            Louisiana Regulation LAC § 46:131 provides the license for which a person becomes a qualifying party belongs to the licensee, a corporate license belongs to the corporation; a partnership license belongs to the partnership; a limited liability company license belongs to the limited liability company, and an individual license belongs to the individual, regardless of the status of the qualifying party of the entity.

            The only caveat to this process is if Mr. John Construction of the out of state entity is licensed in a state with reciprocity.

            If the out of state entity belongs in a state with reciprocity, the trade portion of the Louisiana licensing exam may be waived. La. R.S. 37:2164 is the statute governing reciprocity and provides “Any applicant holding a license in good standing in a comparable classification in another state recognized by the respective agency as a reciprocity state may have the trade portion of the examination waived upon written certification from that state in which the applicant is licensed. The business law portion of the examination and the provisions of R.S. 37:2156.1 shall not be waived. Applicants shall comply with all other licensing requirements of this state; however, for good cause, the

board may waive any other licensing requirement.”

            The process of registering your business with the Louisiana Secretary of State and gaining licensure with the Louisiana Contractor's Licensing Board can be a tedious process, but the trusted attorneys at Business Law Group can guide you through the process with ease and offer support to help your construction venture be as successful as possible.