CSLB Law & Business ExamBusiness Organization and LicensingHard
A sole proprietor contractor decides to incorporate her business to gain liability protection. Regarding her existing individual contractor's license, what must she do?
- AContinue operating under the sole proprietor license indefinitely
- BSimply notify CSLB of a name change on the same license number
- CApply for a new license under the corporate entity, since a license cannot be transferred between entity types
- DAmend the existing license to add 'Inc.' to the business name
Show answer & explanationAnswer & explanation
Correct answer: C. Apply for a new license under the corporate entity, since a license cannot be transferred between entity types
CSLB licenses are issued to a specific legal entity and cannot be transferred or converted between entity types (e.g., sole proprietorship to corporation). A new license application, with its own bond and qualifying individual, must be filed for the new entity.
Why the other options are wrong
- A. Continuing to operate as the old entity after incorporating would misrepresent the license structure.
- B. A name change alone does not account for the change in legal entity structure.
- D. Simply amending the name does not satisfy CSLB's entity-change requirements.
Change of Entity Rule
A CSLB license is tied to a specific legal entity; changing entity types (sole prop to corp/LLC) requires a brand-new license application.
- Licenses cannot transfer between entity types
- New entity needs its own bond and qualifier
- Old license must be canceled or allowed to expire
Memory trick: 'New entity, new license — no shortcuts.'