"Purchasing an Existing Business"
28C SAN DIEGO DAILY TRANSCRIPT • MONDAY, MAY 5, 2008 Purchasing an existing construction company — is it a smart business move? are in the works. Eventually, we would would have to hire a new qualifier with- owner was to remain involved as RME, Construction like to change the name to something in 90 days of that individual leaving the then he must be regularly employed by similar to our current business. Is company (be aware that it often takes the company and actively involved in Law there anything else we should be tak- longer than 90 days for the CSLB to the operation of the business at least 32 By PAMELA J. SCHOLEFIELD ing into consideration? process the paperwork). And, that indi- hours per week (or 80 percent of the Answer: vidual would have to get a new license total business operating hours per Question: The business broker is doing you no issued to them if they wanted to start week, whichever is less). We are a small corporation with a C- favors with his suggestions of how to go their own business. But, in your case, it looks like you 8 (concrete) license. We have been about this because he obviously does Further, a license issued to one busi- will have to hire someone who has a looking for ways to expand our busi- not know, or possibly does not care, ness entity is not transferrable to current general contractor’s license ness, and a business broker approached about the many issues that you need to another business, except possibly in the and make them the qualifier, or find us with the idea of buying out an exist- evaluate. Your proposed venture, while case of a corporation. If the corpora- someone with the required experi- ing construction company in our area. seemingly straight forward, could be a tion’s registration number assigned by ence, and have them apply and take His says that we can “instantly” expand Pandora’s Box. the California Secretary of State the test. Either of these options could if we buy a company that is already First, many brokers and business remains the same after the sale of the take several months to process with established. This makes sense to us, but attorneys do not know that a contractor business, the same license can be used. the CSLB. If you end up owning a con- after several months of looking over can only be one of the following busi- The officers and the qualifying individ- struction company with no qualifier, it some of the available businesses, we’ve ness types: sole ownership, partner- ual do not necessarily have to remain is the same as doing work without a found a number of small general con- ship, limited partnership, corporation the same, but, as I explained, if the license. Thus, not having both a quali- tracting businesses up for sale for little or a joint venture. You cannot set up an qualifying individual does not remain, fier and a valid license in place when more than their equipment value. LLC (limited liability company) as he then they must be replaced with anoth- you take over the business could sub- These contractors are obviously victims suggested because the Contractor’s er qualifier within 90 days. ject your new company to severe of the economy and are not what we State License Board (“CSLB”) does not So, whether or not you can even keep financial penalties. had in mind. We did come across one issue licenses to LLC’s. and use the contractor’s license of the Aside from this licensure issue, there business owner who wants to retire due Also, many brokers and attorneys company you are buying depends on (1) are other business considerations you to deteriorating health issues. He also don’t know that the general contractor’s the type of entity the business is, and should take into account, which I will has a couple projects already going and license isn’t up for sale. It is not like a (2) if it is a corporation, whether or not address in next week’s column. a few others ready to start in the next liquor license that can get sold to the you are doing a stock purchase and • • • few months. The price is right, and we new owners along with the business truly taking over the entire business. Disclaimer are excited about starting off with some assets and trade name. This is because If the current business is a sole pro- The information in this article is good projects. of the need for a qualifier. prietorship, the contractor’s license based upon California law and is for Another attraction is that the busi- Even though, in general, a contrac- cannot be part of the deal. Once the general information only. Any informa- ness is a turn-key operation and will tor’s license is associated with the busi- current owner gives up ownership of tion or analysis presented here is include all trucks and equipment, ness and not necessarily the qualifier the business, the license goes with him. intended solely to inform and educate building lease, yellow-page advertise- (i.e. the person who passed the test and If the current owner was healthy the reader on general issues. Nothing ments, some of his employees who qualifies to hold a license), the license enough and wanted to remain active presented or referenced to, regarding want to stay on, and all current busi- itself is not “for sale.” The business is for a while, you could use him as the facts, documents or applicable laws, ness licenses, including his general only able to obtain a license (and qualifier for the new business as either constitutes legal advice. Before acting contractor’s license. The owner will license number) because an individual an RMO (Responsible Managing or relying on any information, includ- help train our personnel for a month is acting as the qualifier for the busi- Officer) or RME (Responsible ing any information presented here, or so since we only do concrete work. ness. But, if that particular individual Managing Employee). As an RMO he consult with a qualified attorney for We think with this training and our leaves the company, they cannot take must own 20 percent of the new com- your specific situation. own experience we can easily take over the license with them because it pany and have direct supervision and his business. The broker suggested belongs to the company. Except in the control of the construction operations. Scholefield holds an active PE license that we set up a limited liability com- case of a sole proprietorship, where the If the current owner maintains at least in Colorado, an undergraduate engi- pany with the same name as the other individual qualifier is the business. In 50 percent ownership, then his actual neering degree from the University of owner has been using to purchase the the case of any other business entity, license and number can be transferred Florida, and received her JD from the new business, and then we can hit the after the qualifier leaves they disassoci- to a new corporation upon proper University of San Diego. ground running with the projects that ate from the license and the company application to the CSLB. If the current Source Code: 20080502tca Home Depot to close 15 underperforming stores By HARRY R. WEBER housing market, put the brakes 2009 fiscal year, though it will no Nov. 18, 2003, when he told The The Associated Press Thursday on some of its future expan- longer pursue the opening of roughly Associated Press that The Home ATLANTA (AP) — It’s been 4 1/2 sion plans and said it would do what 50 U.S. stores that have been in its Depot Inc.’s robust new store growth years since former Home Depot Chief was previously unthinkable — close new store pipeline, in some cases for would continue unabated and sug- Executive Bob Nardelli’s bold predic- 15 of its underperforming flagship more than 10 years. gested the retailer may one day tion that the home improvement stores. “By building fewer stores, in the expand into Europe and Asia. retailer could sustain “unlimited It is the first time the world’s largest best locations, and making sure our The company has added about 600 growth” without significantly affect- home improvement store chain has existing stores are profitable, our stores since then, but has scaled back ing sales at established stores. ever closed a flagship store for per- company will be in a much stronger new store growth in the last few years. That statement was made during formance reasons. The move, to be competitive position,” said CEO Its only stores outside North America much better economic times. completed within the next two Frank Blake, who took over for are a dozen in China, and those were The Atlanta-based company, under months, will affect 1,300 employees. Nardelli in January 2007. obtained through an acquisition. different leadership, a different The company reiterated its inten- Nardelli, now the chief at automak- growth philosophy and amid an ailing tion to open 55 new stores in the er Chrysler LLC, had other ideas on See Home Depot on 35C