Every contractor who has their own contracting business has struggled with the question of … “What name should I call my Company”? And… Just about every contractor who has added to the services they provided in the past or has changed from a sole proprietorship to something else has struggled with the question of …”Should I modify my Company Name to better fit the new services I am providing or to reflect my new status?” The point is, for whatever reason you have to change the name you have been doing business with and which you have printed on the contractors forms you use, be careful that the changes have not created a situation that lawyers refer to as “Operating Out Of Name Style!”
Let me illustrate… Joe Shingle is a roofing contractor located in California. Don’t let using California as an example fool you… The same problems Joe has created can happen in any state… not just California! When Joe applied for his California C39, Roofing Contractor License he placed the name “Joe The Roofer” in the box for his Company name and his business type was listed as “Sole Proprietorship.” After going through the process of filling out forms, showing experience as a roofer, taking the trade and law tests and showing financial responsibility, Joe is finally notified by CSLB (the California Contractors State Licensing Board) that he has passed the tests and is approved for a C39 Roofing Contractor License. Now Joe did his research and he was told that as a Sole Proprietor, Joe must file a fictitious business name statement since the name of Joe’s company is different than Joe’s actual name. This means that if Joe had named his company Joe Shingle, Roofing Contractor then Joe’s company name would be the same name as the Sole Proprietor who owns the company… Joe himself… but since the name of Joe’s company is different from the name of the sole proprietor who owns the company… then Joe is operating under a fictitious or assumed name so a fictitious business statement must be filed… which Joe does.
While in business as a roofer, Joe starts to get requests from his roofing customers to do other types of work. One customer asked him to give them a price to build a deck, another to re-model a kitchen. Since Joe cannot do this type of work with a C39 roofing license he turns down these requests. After a while Joe realizes how much income he is passing up and decides it is time to add a (B) General Building Contractor classification to his license. Joe again fills out the paperwork, shows experience, and takes the trade test for a “B” classification. A few months later Joe is informed that the “B” classification is now added to his original license for roofing but Joe realizes he has a problem with his company name. If Joe wants to build decks and remodel kitchens then the company name “Joe The Roofer” doesn’t really fit and might confuse his potential customers which means lost jobs and lost income! So Joe gets the bright idea that he should call himself “Joe The Roofer” for jobs involving work covered under his C39 roofing license and for the work he wants to do as a general contractor he will call his company “Joe The Remodeler.” Problem solved… or so Joe thought!
Here’s why… Joe has a license as, and operates his business under, the assumed name of “Joe The Roofer.” In the eyes of “THE LAW” and the CSLB, there is a contractor name Joe Shingle who is doing business as (dba) a company called “Joe The Roofer” that is licensed to do work under both a C39 and a B California Contractors License, however, no company called “Joe The Remodeler” has any contractor’s license whatsoever! This means while “Joe The Roofer” is duly licensed and has protection under the law, “Joe The Remodeler” is an unlicensed contractor and as such (per CA B&P Code Section 7031a) “Joe The Remodeler” is prohibited from recovering any money due him by using the courts. In fact “Joe The Remodeler” is violating Section 7117 of the same California Code for not being licensed. For this, Joe can be fined, have his license suspended or revoked, and possibly have a license violation become part of the public record which could discourage future customers from hiring Joe … all that because Joe thought it was a good idea to do business under another name!
This is an extreme example but serves to show why it is never a good idea to modify the proper name style listed originally when you opened your business, without “updating” your company’s records with the appropriate licensing/ registration agencies. All Joe had to do was contact CSLB and add the dba “Joe The Remodeler” to his existing license. While this example is using a California contractor, the same problems can occur, one way or another, in ANY state… even if the state does not require a license or a registration of contractors!
A common mistake we see here at ACT Contractors Forms, and try to prevent, is for contractors who purchase our form products for their construction business to do exactly what this blog post is all about… Use names for their business that are different from the names they are licensed under, have registered under or have filed fictitious names as. It is the routine of ACT Contractors Forms to go to any available state’s online licensing/registration database and check to make sure the name the license/registration is under is the same as the name on the paperwork we create for them and if not, advise them of the differences. When you add to or change words in your company name, change from sole proprietorship to partnership or LLC or to a Corporation, or even re-order the existing names such as “Joe The Roofer & Remodeler” to “Joe The Remodeler & Roofer”, YOU MUST be sure you have met all the requirements this change creates.
Let’s face it… as a contractor there are many things you can’t control… fortunately the forms you use and the name you use on them is not one of them. In Joe’s case, he may well be successful going to court and paying an attorney to “rack up” hours upon hours of billable time researching and arguing why Joe’s operating out of name style should not keep him from collecting in court, instead of the real issues, namely that the work Joe did wasn’t paid for. However, the thousands of dollars Joe would pay an attorney for this to happen would never be seen by Joe as a victory… just one more needless expense that cost him big time!