Understanding the Types of
Contractor Licenses in California
Choosing the wrong entity type is expensive to unwind. Contractors License Experts has advised California contractors on license structure since 2007 and maintains a 98% success rate on applications where clients provide the required documentation.
The CSLB issues contractors licenses to sole owners, partnerships, corporations, LLCs and joint ventures, and the entity type determines what the applicant must file. Every license requires a $25,000 contractor bond. An LLC additionally requires a $100,000 employee bond under Business and Professions Code section 7071.6.5 and at least $1 million in liability insurance.
Sole Ownership
🠞 Description: A simple and common choice for independent contractors, often referred to as a personal license.
🠞 Benefits: Easy setup and straightforward operations.
🠞 Considerations: Personal assets are not protected, and only the owner and a Responsible Managing Employee (RME) can be listed on the license.
Corporation
🠞 Description: A popular option for contractors seeking to protect their personal assets.
🠞 Benefits: Allows personnel changes (add, remove, or replace officers) and provides liability protection.
🠞 Requirements:
Active status with the Secretary of State
$25,000 contractor bond
Workers’ Compensation insurance or exemption
Limited Liability Company (LLC)
🠞 Description: Offers the same protections as a corporation with additional requirements.
🠞 Benefits: Liability protection and flexibility with personnel changes.
🠞 Requirements:
$100,000 LLC surety bond
General liability insurance
Compliance with corporate standards
🠞 Considerations: Higher costs due to required bonds and insurance.
Partnership
🠞 Description: A license for entities where two or more partners share ownership.
🠞 Benefits: Simple structure for collaborative businesses.
🠞 Considerations: Limited flexibility—any changes to personnel cancel the license. Protect your future by qualifying for a personal license before the partnership dissolves.
Joint Venture
🠞 Description: A temporary license issued between two existing licensed entities for specific projects.
🠞 Benefits: Quick setup with no fingerprinting requirement.
🠞 Considerations: No work experience credit is granted, making it suitable for short-term projects.
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FAQs
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Every California license needs a $25,000 contractor bond, and a $25,000 Bond of Qualifying Individual is required on top if the license is qualified by an RME, or by an RMO holding less than 10 percent of the voting stock. An LLC adds a $100,000 employee/worker bond and general liability insurance of at least $1 million. On top of the bonds sit CSLB application and initial license fees, which the Board sets and revises, plus formation costs if you are incorporating.
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Yes, but it is a new application rather than an amendment, and specific requirements have to be met. A California license is issued to a specific legal entity, so moving from a sole ownership to a corporation or LLC means licensing the new entity with the CSLB. You can either transfer your existing license number across to the new entity, or have a new number issued and keep the original license in your own name. Which route makes sense depends on what you intend to do with the old license afterwards.
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A sole ownership license is what most contractors would consider their personal license. Your personal assets are exposed, and the only people who can be listed are you and a Responsible Managing Employee. A corporate license is issued to the corporation itself, which gives liability protection and lets you add, remove or replace officers without interrupting the license. The corporation must be active with the Secretary of State and carry the $25,000 contractor bond plus workers' compensation coverage or an exemption.
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An LLC needs everything a corporate license needs, plus two things. A $100,000 employee/worker bond is required alongside the standard $25,000 contractor bond, under Business and Professions Code section 7071.6.5, covering employees for unpaid wages, interest and fringe benefits. The LLC must also carry liability insurance of at least $1 million where five or fewer people are listed as personnel of record, rising by $100,000 for each additional person up to a $5 million cap. Every officer, member and manager must be listed on the application.
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The license is cancelled. When a general partner or the qualifying partner disassociates from a California partnership license, the Contractors State License Board cancels it, and written notice has to reach CSLB headquarters within 90 days of the disassociation date. Under Business and Professions Code section 7076, the remaining partners can request a continuance to finish work already in progress, but that is a wind down rather than a fix. The safer move is for each partner to qualify for their own license before the partnership ends.
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A joint venture license is issued to two or more already licensed entities working together, and it exists for that arrangement rather than as a permanent business structure. Because every party is already licensed, there is no examination and no fingerprinting. You will need a contractor bond issued in the joint venture's own name, and either workers' compensation coverage or an exemption depending on whether the joint venture itself is hiring anyone.