How to not lose your builders license.
Hello,
I own a seamless gutter company in the great state of Michigan. A siding contractor that I have a long standing business relationship with has been using his partners builders license for the company. The partner is an officer of the company, but does nothing but offer use of his license and collect a check for 5% of the gross profits of the company for his “services”. After years of working together, they have decided to split ways and the siding contractor has asked me if I would be willing to sign on as an officer of his company for the same arrangement: 5% of gross profits for nothing more than having a licensed officer on the company payroll.
I know the contractor pretty well, as well as all of the people that work for him (a couple of the guys have been there for over 15 years) and he has a great reputation with his customers as well as his suppliers. I have no reason to beleive that he has any intentions of screwing me over.
Can anybody tell me what type of risk I would potentially expose myself to by doing this? Am I responsible for all of the work that he does under my license? What would happen if he did some crappy work on someones house and caused damage?
If anyone shed some light on this I would be grateful. Thanks!
Phil
Replies
B/4 I did anything..........
I'd talk with my insurance agent about this. If your name on a paper opens up your liability to encompass his business, then 5% is pocket change. Never been sued or made a business claim, but in the case of his operation, what responsibility do the officers have?
Thanks Calvin
I am already planning to talk to my insurance agent but I know that he has his own Liability and WC policies. I would asssume that any insurance claims made under his companies name (his name on the contract) would be covered by his policy. Then again, MY builders license number would be on the permit (right?). My bigger concern is my license being arnished by bad work or bad business practices on his part. Or the left field, worst case scenarios: "Oh yeah, I took that guys deposit for the roof and took it to the Casino/ snorted it up my nose/ needed it to pay my mistress' credit card". That kind of thing. Once again, if I thought he would actually do something like this, I would not even consider doing this. But there is a big difference in having faith in someone and being able to walk away, and risking losing evrything I have worked for over the years.
Any thoughts?
Well, first you should find out whether it's really legal and considered legit to do this in your state. Check with whatever agency controls licensing in your state (and read the rules yourself) to find out the rules.
Not too many thoughts on the license.......
As in this state there is no State Licensing necessary for my remodeling operation. We can be licensed by various municipalities and counties but this is more an attempt to garner the info necessary for tax purposes.
Once you get the legalities figured out, consider the number. 5% of gross is alot more than 5% of the company profit on the job. Where does the 5% come from?
One added thought, all that work done under your license-Do you now feel any responsibility for that work?
Too be honest...
...until I get his last 3 years tax returns and profit and loss statements in front of me, I am not all that concerned with whether or not he is talking about 5% of Gross profit or Gross sales. At this point I just want to know what potential I am opening myself up to in regard to putting my name on his work.
To answer your question though, I would be proud to have my name asscociated with his jobs. I have been in the Gutter/Siding buisness since 2001 and I can easliy say that his company does those best looking Vinyl Siding/Aluminum Trim jobs I have ever seen bar none. And I have seen my share. I am a bit of a perfectionist, and I have had to hang my gutters on more hack trim jobs than I would like to admit in the name of keeping the business moving forward. I am proud to follow behind his jobs and be able to put the finishing touch on them.
Why doesn't he get his own license?
Why?
My question is why doesn't the siding contractor just get licensed himself?
The michigan builders license (or even just the remodlers license) is not that difficult a test to pass.
I'd be concerned about te reasons he doesn't (or can't) get licensed.
Terry
Good point
That was my first question for him when he approached me about this. He has taken the exam 5 separate times (even with study classes) and has failed every time. He does fine on the code portion but fails the construction portion. The guy is a VERY talented salesman with some very good installers working for him. But lets just say, I wouldn't let him hang a picture frame in my house. He personally sells around $500,000.00 a year but doesn't have any skills in the trade. With that said, I have never built a house before and don't no any more a bout code than I need to and I aced the Builders exam first try with minimal studying. Like you said...not that hard.
Could there be some other reason he CAN"T get a license? Could credit history keep you from being eligible? Is there a way to find out if he had a license and lost it?
Michigan Builders License
Michigan now requires 60 hours of pre-license training at an accredited training center prior to being allowed to take the licensing examination. Then, a mandatory 7 hours per year of continued education to maintain the license. The initial 60 hour course costs anywhere between $600 to $900. Continued ed. courses are usually free, offered at lumberyards by vendors.
It's all on the Michigan government website:
http://www.michigan.gov/dleg/0,1607,7-154-35299_35414_35455---,00.html
Many years ago I was told by a pre-license workshop instructor that something like 20% of Michigan builders licenses were actually held by builder wives or inactive partners.
DC
First, you must understand one thing. As stated by the U.S. Supreme Court about construction contractors: "They do not labor as mechanics, but superintend work done by others." Winder v. Caldwell, 55 U.S. 434, page 445. So a contractor is a supervisor.
When states or cities license for regulation or revenue they are faced with 2 choices. Do they want to license the mechanics who perform labor or do they want to license those who supervise? A contractor's license is a supervisor's license. Generally, legislation aimed at contractors goes something like this: The legislation will state that no person, firm, or corporation shall engage in, for example, electrical contracting without first obtaining a license. The application will require that the supervisor be named in the application and such supervisor must take an examination before a license is issued. The legislation will state that the supervisor must directly supervise at the job site. Obviously a job cannot be supervised from the office, from the golf course, from the fishin' hole, or any other off site place. For examples, see City of Milwaukee v. Rissling, 184 Wis. 517, 199 N.W. 61; City of Shreveport v. Bayse, 166 La. 689, 117 So. 775; State ex rel. Grantham v. City of Memphis, 151 Tenn. 1, 266 S.W. 1038. In the first two, electrical supervisors were required to qualify for licenses. In the third, plumbing supervisors were required to qualify for licenses. In the Bayse case, the legislation required that supervision be actual, direct, and continuous. These cases were all predecessors to today's licensing. Each person, firm, or corporation is treated alike. Each gets one supervisor. The law in my state operates like this. Since every license is dependent on the supervisor, unsupervised jobs are unlicensed jobs.
Of course what always happens is greed. The thought process is if X amount of dollars can be made from one supervised job, how much more can be made from multiple unsupervised jobs. But you must look at it from the state's perspective. Their perspective is that the public is being protected because there are qualified supervisors at the job sites. And generally in addition to the regulatory license is a privilege tax for revenue. If there are 30 plumbing projects taking place in scattered locations, a different supervisor at each project means revenue from 30 projects. If one person, firm, or corporation could have all 30 projects without supervising, then the state would have only the privilege tax from one entity instead of 30. If the privilege tax was $1000.00, then 30 times $1000.00 is $30,000.00. In comparison, 1 times $1000.00 is $1000.00. Which one do you think the state prefers?
I would want to be covered by a D&O policy at his expense.
I am licensed in Michigan, they changed the regs a couple years ago. Michigan now reguires that a license be held in the name of the corporation, LLC, or partnership, (I dont recall the exact wording)
Most I know have kept their personal license , and applied for another in the name of the business entity . Their is no additional test if you currently hold a liscense, but you do have another fee, (of course!)
So you could apply for a separate license in the name of the siding company, your name would be there as the "qualifying officer" Your license for your gutter company would remain separate, and unaffected by actions of the siding company.
and yes, its entirely legal.
I'm not sure about the 5% figure though, I guess it depends on 5% of what exactly? As an officer of his corporation, you are assuming some risk.