Can You Sell a Contracting Business to a Buyer Without a License?

Solar Installers, General Contractors, Electricians and Plumbers in California have something in common when it comes to selling their businesses. All of these businesses require a Contractors State Licensing Board (CSLB) license to operate. This can be an additional burden to the process of transitioning a business to a new owner. What if a potential buyer doesn’t have the necessary licenses? The easiest solution to this issue is to target investors that already have the Licenses needed to operate the business but this obviously limits the pool of potential buyers.

It is possible to sell a contracting business to an individual without a CSLB license but it requires some negotiation, trust and planning between the seller and buyer. To maintain their Contractor’s License a contracting business must employ or associate with a “Qualifying Individual” or “Qualifier”. A Qualifier has demonstrated knowledge and experience in the construction industry and can either be a Responsible Managing Officer (RMO) or a Responsible Managing Employee (RME) of the company.

An RMO/RME is according to California Law permanently employed by the applicant and is actively engaged in the operation of the applicant’s contracting business for at least 32 hours or 80 percent of the total hours per week such business is in operation, whichever is less. An RMO and RME may have different duties within the company but their responsibilities and liabilities with respect to the license are the same.

A contracting business can be sold to a buyer without a contractor’s license as long as the Qualifying Individual for the company is willing to continue to be employed by the business until the buyer is able to obtain the necessary licenses or hire a new Qualifying Individual. Under this approach managerial control will inherently be divided as the Seller’s Qualifying Individual will want to maintain close oversight of the contracting work being performed. Typically these situations are transitional because the new business owner will want to obtain the necessary licenses themselves or hire their own Qualifying Individual.

Exit Strategies Group has sold many California contracting businesses; some to investors who did not have the necessary CSLB licenses prior to the sale/acquisition transaction. With legal consultation, careful planning and development of trust between parties we help our clients to navigate this obstacle and successfully exit their contracting businesses.

Please contact Adam Wiskind at (707) 781-8744 or awiskind@exitstrategiesgroup.com about selling a Solar Installation Company, Construction Company or any other company requiring a California Contractor’s License.