Contractor licenses held through a qualifier: the resignation that can cost the LLC everything the customer paid

In California, a contracting LLC whose qualifier leaves has 90 days to replace that person. At the end of the 90 days, the license is automatically suspended (Cal. Bus. & Prof. Code § 7068.2). A contractor can sue for its pay only if it was licensed “at all times during the performance” of the contract, “regardless of the merits,” and a customer who paid an unlicensed contractor can sue to “recover all compensation paid” (§ 7031(a), (b)). One employee’s resignation, left unanswered for 90 days, can turn a profitable job into a refund claim for the whole price.

The rule has a release valve. California allows one 90-day extension for good cause, and § 7031(e) has a narrow substantial-compliance exception. Neither one helps a company that did not notice the clock was running.

In a qualifier state, the license belongs to the LLC and the key to it belongs to one person.

The license belongs to the LLC; the key belongs to one person

Most states license a contracting company through an individual. The company holds the license, but it qualifies for it only because a licensed person who passed the exam and has the experience is attached to it. California calls that person a responsible managing officer, member, manager or employee. Florida and Georgia call it a qualifying agent. Arizona and Nevada say qualifying party. Virginia uses a designated employee and a qualified individual. Texas electrical contractors use a master electrician of record.

The person must actually be there. A California responsible managing employee must be a permanent employee actively engaged in the classification of work for at least 32 hours a week or 80 percent of the business’s operating hours, whichever is less (§ 7068(c), read on a code mirror). North Carolina’s rule requires 20 hours a week or a majority of the hours the company operates, and says an independent contractor cannot qualify (21 N.C. Admin. Code 12.0205, as amended in 2018).

That makes the qualifier the single point of failure for the whole business. The same structure appears for engineering firms in Florida, described on engineering and architecture firms. In contracting, the stakes are higher, because the consequence of losing the license reaches back into every contract in progress.

California: 90 days, one extension, then disgorgement

When a qualifier leaves, the licensee or the qualifier must notify the Contractors State License Board in writing within 90 days, and the licensee has 90 days from the date of disassociation to replace the qualifier. If no replacement is in place, the license is automatically suspended or the classification removed at the end of the 90 days. If the notice is late, the suspension takes effect on the date the board receives it, and late notice is itself grounds for discipline (§ 7068.2).

The extension is narrow. The board may grant one 90-day extension for good cause, such as a dispute over the date of disassociation, the qualifier’s death, or a processing delay at the board or another agency. The petition must arrive within the original 90 days, and an application to replace the qualifier must already be on file. For a disputed date or a death, the outside limit is 180 days (§ 7068.2). The board’s own instructions add a detail that matters for drafting: the extension request “must be signed by an officer listed on the license.”

The departing qualifier does not walk away clean either. The qualifier remains responsible for the company’s construction operations until the date of disassociation or the date the board receives notice, whichever is later (§ 7068.2).

In California, the license is suspended at the end of 90 days without a replacement qualifier, and a contractor must be licensed at all times during performance to be paid.

Now put numbers on it. An LLC signs a $1,200,000 remodel. Three months in, with $500,000 paid, its only qualifier resigns. The company files the notice but does not find a replacement, and the license is suspended at the end of the 90 days, with the job half done. From that day, the company cannot sue for the balance, because it was not licensed at all times during performance. And the customer can sue under § 7031(b) for all compensation paid. The statute does not prorate.

Florida: 60 days, and no new contracts in the meantime

Florida is harsher on day one. When a business’s only qualifying agent leaves, the business must notify the Department of Business and Professional Regulation and has 60 days to employ a new one. Until it does, “the business organization may not engage in contracting.” The one exception is a temporary, nonrenewable certificate the department may grant to the company’s financially responsible officer, president or partner, and it only lets the company finish incomplete contracts: those awarded or signed before the qualifier left, or bid low and awarded later (Fla. Stat. § 489.119(3)(a)).

The penalty sits in a separate statute. A business organization without a primary or secondary qualifying agent for the scope of work is unlicensed, and contracts made by an unlicensed contractor are unenforceable by the contractor, in law or in equity. Licensure is tested on the contract’s effective date, or the date the last party signed, or the first day work or materials were furnished. And the unlicensed contractor has no lien or bond claim (§ 489.128).

In Florida, a contract signed while the company has no qualifying agent is unenforceable by the company, with no lien and no bond claim.

So the 60 days is a hiring window, not a grace period. A contract signed on day 10 of the vacancy, without the temporary certificate, is a contract by an unlicensed business. The company cannot enforce it and cannot lien the property if the owner stops paying.

Florida also splits the qualifier’s role. An approved financially responsible officer takes financial responsibility off the primary qualifier, and the board’s form warns that failing to appoint one leaves the primary qualifier financially responsible (DBPR form CILB 16, revised July 2024).

The clock in other states

Every qualifier state sets its own clock, and they do not agree.

State	Notice deadline	Replacement window	What happens at the end
California	90 days	90 days, one extension, 180 days at most for death or a disputed date	License suspended or classification removed
Florida	Notice required, no day count	60 days, with no new contracting meanwhile	Business cannot contract
Arizona	15 days	60 days	License automatically suspended
Nevada	10 days; late notice means automatic suspension	Up to 30 days, extendable for good cause	Board may suspend or revoke
North Carolina	10 days (2018 rule)	90 days, with no new bids or contracts meanwhile	License no longer valid
Georgia	30 days for the qualifier, 45 for the company	120 days	License placed on inactive status
Virginia	60 days for a qualified individual, 120 for a designated employee	Not stated	Not stated in the rule
Texas (electrical)	30 business days	Not confirmed	Not confirmed

Sources: Cal. Bus. & Prof. Code § 7068.2; Fla. Stat. § 489.119(3)(a); Ariz. Rev. Stat. § 32-1127.01; Nev. Rev. Stat. § 624.285 and the Nevada board’s disassociation form; N.C. Gen. Stat. § 87-10(c1) and 21 N.C. Admin. Code 12.0205; Ga. Comp. R. & Regs. 553-11-.02; 18 Va. Admin. Code 50-22-220; 16 Tex. Admin. Code § 73.51. Last verified October 2026.

Nevada’s 10 days is the shortest fuse. The board’s form says that if the licensee fails to notify the board within the 10-day period, the license “must be automatically suspended,” and it comes back only when the qualifier is replaced. In Georgia, filing the replacement application keeps the license active while it is pending, and a temporary license is available to finish incomplete contracts (O.C.G.A. § 43-41-9(e)(1), read on a code mirror).

In Nevada, missing a 10-day notice after the qualifier leaves suspends the license automatically.

Ownership floors that a buyout can break

Several states tie a qualifier’s ability to serve more than one company to an ownership percentage. In California, a person who qualifies one licensee may qualify another only with at least 20 percent of the equity of each, a parent and subsidiary relationship, or a common majority of managers or officers, and even then may serve no more than three firms in a year (§ 7068.1, read on a code mirror). Arizona allows one additional licensee, with common ownership of at least 25 percent of each (Ariz. Rev. Stat. § 32-1127(A)). Nevada’s board uses 25 percent. Florida’s form lets an applicant who owns 20 percent or more of the additional business skip a board appearance. A Texas master electrician may be assigned to more than one electrical contractor only if the master owns more than 50 percent; otherwise the master must be an employee of one contractor (Texas Department of Licensing and Regulation guidance).

California adds a bond rule on top. A qualifier who is not an owner files a $25,000 qualifying individual’s bond, but an LLC’s qualifier who owns at least 10 percent of the membership interests is exempt (§ 7071.9).

In California, a buyout that takes the qualifier below 20 percent of a second company can end that person’s ability to qualify it.

Put that against an ordinary operating agreement. A qualifier owns 22 percent of each of two California contracting LLCs and qualifies both. A capital call in the second company that the qualifier cannot meet dilutes them to 15 percent. Nobody sold anything, and the second company has lost its qualifier, possibly without anyone noticing that a licensing clock had started.

The structuring consequence: buy-sell, capital call and redemption provisions in a contracting LLC should be checked against the license ownership floors in each state where the qualifier serves. A redemption or dilution of a qualifier-member should not take effect until a replacement qualifier is in place.

What a California LLC carries that a corporation does not

California lets LLCs hold contractor licenses, and charges them for the privilege. On top of the $25,000 contractor’s bond every licensee files (§ 7071.6), an LLC must keep a $100,000 surety bond that protects its employees’ wages and fringe benefits (§ 7071.6.5). It must also carry liability insurance with an aggregate limit of at least $1,000,000 if five or fewer people are on its personnel of record, plus $100,000 for each additional person, up to $5,000,000 (§ 7071.19). The board’s 2025 law book confirms those amounts.

An LLC with eight people on its personnel of record needs at least $1,300,000 in aggregate coverage. If claims erode the limit and it is not restored by the next period, the license is suspended by operation of law (§ 7071.19).

A California contracting LLC needs $1,000,000 of liability insurance plus $100,000 for every person on its personnel of record past five.

Every person added to the personnel of record raises the floor. Which members an LLC must list is a board disclosure question this page did not review. The insurance cost is a reason to settle it before admitting investors.

Selling the company or changing its form

A contractor’s license does not travel. Arizona says it plainly: the license is nontransferable (Ariz. Rev. Stat. § 32-1124(B)). The license stays with the entity, which is why buyers acquire contracting companies by buying the equity.

The equity sale is not invisible. Arizona requires immediate notice when 25 percent or more of the ownership is transferred, and after a hearing the registrar may require a new qualifying party when 50 percent or more has changed hands (§§ 32-1151.01, 32-1125(E)). Nevada requires an application before or within 30 days after a change in an LLC’s managers or managing members (Nev. Admin. Code 624.665, read on a code mirror).

Changing the entity is worse than changing the owners. Virginia licenses are issued to firms, are not transferable, and become void on the formation or dissolution of a corporation or LLC; the firm returns the license and files a new application within 30 days (18 Va. Admin. Code 50-22-210). Georgia says a change from a corporation to an LLC is not a name change and requires a new application (Ga. Comp. R. & Regs. 553-11-.01). New York City’s Department of Buildings requires a contractor with a new employer identification number to register as a new registrant.

In Virginia, converting the licensed company into a new LLC before a sale voids the contractor’s license.

The structuring consequence: buy the membership interests of the existing licensed LLC rather than its assets, and do not convert, merge or drop the business into a new entity before closing. The seller’s qualifier staying on, or a replacement already approved, is a closing condition, with a covenant to cooperate through the state’s replacement window.

What the qualifier personally risks

California makes failing to supervise a crime. A qualifier who does not exercise the required supervision and control commits a misdemeanor punishable by up to six months in county jail, a fine of $3,000 to $5,000, or both (§ 7068.1, read on a code mirror). The LLC’s liability shield does not touch that. A licensee who lends a license to a company they do not run is taking a personal criminal risk.

Arizona goes the other way on civil liability. The qualifying party answers for the licensee’s violations for licensing purposes, but the statute says this “does not impose personal liability on the qualifying party” (Ariz. Rev. Stat. § 32-1127(B)). Florida makes all primary qualifiers jointly responsible for supervising the company’s work and finances, unless a financially responsible officer takes the financial side (Fla. Stat. § 489.1195(1)).

Washington has no qualifier at all. Contractors register rather than license, with a $30,000 bond for a general contractor or $15,000 for a specialty contractor (Rev. Code Wash. § 18.27.040). But the registration follows the people. The state may deny registration where an owner, principal or officer was tied to a prior business with an unpaid final judgment, or where the applicant is a successor to that business, and must suspend an active registration over an unpaid judgment against the registrant or its owner, principal or officer (§ 18.27.030). Forming a fresh LLC does not wash a contractor’s judgment history in Washington.

What the operating agreement should say

Employment law decides when the qualifier can quit. Licensing law decides what the quitting costs. The operating agreement, or a separate qualifier agreement, is the only place the company can close the gap between the two.

Require advance written notice of resignation at least as long as the state’s replacement window: 90 days in California, 60 in Florida, 120 in Georgia. Require the departing qualifier to sign the board’s disassociation form with an effective date the company controls, and to cooperate with any extension petition. Name the officers who will be listed on the license, so that someone with authority can sign the California extension request the day it is needed. Keep a standby qualifier identified, and if possible already employed. And make the death provisions work with the license: an estate that takes 60 days to appoint a representative leaves the company with no one able to file, and in California the extension petition has to arrive within the first 90 days with a replacement application already on file.

A qualifier who controls the timing of their own departure controls whether the company stays licensed.

The bottom line

A contracting LLC holds its license only as long as one licensed person stays attached to it.

California suspends the license at the end of 90 days without a replacement, and an unlicensed contractor can be sued for all compensation paid.

Florida bars new contracting from the day the only qualifying agent leaves, and a contract signed in the gap cannot be enforced or liened.

Ownership floors of 20 or 25 percent decide whether one qualifier can serve two companies, so a capital call or buyout can end a qualification.

Converting or reorganizing a licensed company before a sale can void the license; buy the existing LLC’s interests and keep the qualifier through closing.

The operating agreement should make the qualifier’s notice period at least as long as the state’s replacement window.

What this page does not cover

The four ownership models that run through every licensed business are on who is allowed to own a licensed business. Buy-sell drafting generally is on transfers and buy-sell. Texas trades other than electrical, the unlicensed-contractor statutes of Arizona, Nevada, Georgia and Virginia, and home improvement licensing were not reviewed for this page. New York City’s pending bill to license general contractors, Intro 771 of 2026, was not confirmed as enacted when this page was verified.

Last verified October 2026.