Under California state law, it is mandatory for anyone undertaking a construction project costing over $500 in labor and materials to have an active Contractor’s License. However, the licensing process can be quite extensive and cumbersome for the average business investor whose only interest is seeing the finalized product. Moreover, many investors live out of state and are reluctant to make the journey while running another active business. This is where Responsible Managing Officers or RMOs come in.
An RMO is an industry professional who has already gone through the process of acquiring and maintaining an active Contractor’s License. These individuals are licensed contractors who are able to serve as license qualifiers and supervisors in California due to certain clauses included in the California Business and Professions Code. These clauses, Codes §7065.1 and §7068.1 act as legal loopholes that allow companies to forego the exams needed to get Contractor’s Licenses by hiring RMOs to act as supervising officers.
While acquiring a Contractor’s License can be difficult for some, if you have a knack for law and construction as well as a desire to increase your monthly income stream without doubling your workload, then becoming an RMO might just be your thing.
RMO: An Overview of Rules
- An RMO can act as a qualifying individual for more than one license, but not more than 3 firms in any one-year period. This is only true if at least one of the following conditions exist:
- The RMO has at least 20% common equity ownership in each firm.
- The second firm that the RMO works for is a subsidiary or joint venture with the first.
- The majority of the partners or officers in both (or all 3) firms are the same.
- RMOs can work with licensed corporations and/or licensed LLCs.
- If an RMO disassociates with the 3rd firm, he/she must wait one year before associating with a new third firm.
As an RMO, you can be a qualifying officer with up to three companies at a time. General duties of an RMO include job site visits and occasional inspections to make sure everything is running smoothly. RMOs can also act as mentors to newly licensed contractors that are just starting out. Both options can have you working part-time and making a respectable income.
How to Become an RMO
In order to qualify to become an RMO, you must first go through the process of becoming a licensed contractor and then promote yourself as a qualifying officer. The first process can be a bit tricky, but here is where you can find some in-depth info to get started:
The California Contractors State License Board features a convenient list of steps needed to prepare, apply for, and attain a state contractor license.
The first step provides you with some need-to-know information before applying. In brief, here are some of the points listed in the first step that you should be aware of before beginning exam preparation:
- An individual or group engaged in a project that costs $500 or more in labor and materials must be licensed by the California Contractors State License Board (CSLB)
- Contractors who plan on working with Asbestos or other hazardous substances must adhere to additional safety and reporting requirements as well as take additional tests/courses such as; the EPA-accredited asbestos abatement course, for example.
- Contractors who install or remove underground storage tanks are also subject to additional hazardous substance tests, regulations, and courses.
- Working on projects over $500 without a license is illegal and will result in penalty payments and possible convictions. Statewide Investigative Fraud Team(s) (SWIFT) regularly conduct job site stings.
- Contractors Licenses may be issued to individuals, corporations, LLCs, and partnerships.
- If a business acquires a license and ownership of the business changes, the new owner does NOT receive the Contractor’s License –with a possible exception if the business is a corporation. However, a qualifying individual must be in place to maintain the validity of the license.
- A “qualifying individual” is either an RMO or RME.
- CSLB applications include questions regarding criminal records. If a crime is found to be substantially related to RMO duties or not properly disclosed, your license application may be denied. You must not have a misdemeanor on record in the last 3 years or a felony in the last 7 years. You must also submit fingerprints for review by CSLB.
General Qualifications to Become a Licensed Contractor in California
According to the CSLB website, to qualify to receive a Contractor’s License, you must be at least 18 years old and have the necessary construction business management experience (including experience in field supervision) or be mentored by an existing RMO.
The experience accumulated must total at least 4 years at the journey, foreman, supervisor, or contractor level within the 10 years immediately before filing the application. This means that you must be active for 4 years within the industry, no more than 10 years since applying for your contractor’s license.
You don’t need to meet any financial requirements to become a licensed contractor, but you must have a bond in place with the CSLB of $15,000 as insurance for customers against possible damage as a result of poor workmanship while still applying. More information about the bond can be found on the Bond Requirement Page of the CSLB website.
When applying for a Contractor’s License, you must also submit and add “trade” applications to your license if you plan on carrying out the duties related to that particular trade. For example, contractors who wish to supervise water heating installation or repair must apply for a C-4 – Boiler, Hot Water Heating and Steam Fitting Contractor license. A full list of licenses can be found on the CSLB website.
Contractor Application and Exam
Licensing exam requirements are lengthy, but can be understood by following the bullet points presented in Step 2 on the CSLB website. The steps involved in filing your application are as follows:
- Complete the application for an Original Contractor’s License. On this page, you can also find applications for adding trades to existing licenses, changing corporate RMOs (needed for corporations that want to employ you in place of a prior RMO), and many more. For the application, you have 3 filing options – use the easy-to-fill online application, print out a blank form and mail it once complete, or order a form to be mailed to you and mail it back when you’re done.
- NOTE: Regardless of the option you choose, the fee for filing is $330. Also, you can only apply for one classification or “trade” at a time. After your license is issued, you may apply for additional classifications.
- Make sure your application is dated, signed, and completed. Be sure to proofread your application or the process may be delayed!
- Pay the $330 application fee and send all the required documents to the address listed on CSLB.ca.gov
- The CSLB will acknowledge your submission with a letter that contains a Fee Number and four-digit PIN, along with instructions on how to check on the progress of your application using the Application Status Check page.
What to Expect on the Exam
The contractor exam consists of two parts. According to the CSLB Guide, all qualifying individuals are required to pass the standard Law and Business exam as well as a second test covering the specific trade they are applying for.
After you have submitted your application, a study guide featuring a list of topics covered by the necessary exams will be sent to you along with your Notice to Appear for Examination.
The Law and Business exam is made up of multiple choice questions covering business management and construction laws. We recommend checking out this study guide in preparation for the exam. The CSLB also features a suggested reference book page that can provide you with more preparation tools
I Passed the Exam, Now What?
After having your applications approved and passing the exams, you are given a bond and fee notification. This notification lists the additional fees, information, and bonds that must be paid and/or submitted in order to complete the process. The additional items needed are:
- A licensing fee of $200 that covers your license for 2 years.
- File a $12,500 Qualifying Individual Bond – unless you own at least 10% of the voting stock of the company that you want to serve as an RMO for.
- If you are a newly licensed contractor, you must also file an additional $15,000 bond.
- You must complete an asbestos open book examination if you think you may have to work on projects where asbestos is present.
- You must make sure you have an active Workers Compensation License before beginning your practice as a contractor.
At the end of the process, you will receive a wall certificate that includes either your name or the name of your company as well as a pocket card that lists your license information. Your license must be renewed every 2 years if active and every 4 years if inactive.
You can now qualify your own company’s license and also locate new contractors and serve as their RMO.
Contractor license California laws exist to ensure that all public construction projects are carried out in a professional and safe manner. By having a seasoned professional employed as a qualifying officer, companies can not only save valuable time, but also provide employment opportunities to contractors in need.
Don’t be discouraged by the process! While the steps to getting licensed are extensive and can take several months, those that enjoy working in the construction industry can create lucrative and rewarding careers by becoming contractors.
By investing some time into becoming a contractor today you can qualify as an RMO for new contractors and create a stable foundation for a long-lasting, lucrative future in the construction industry.