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The Different Types of LLCs

Starting a business in California? You need to be sure that you select the right legal entity. Companies need the best foundation in order to thrive. A limited liability company (LLC) offers several potential advantages. Lynnette Ariathurai is a Fremont business formation attorney who has experience with the full range of LLCs. We can help you find the right one for your company. In this article, you will find an overview of the different types of LLCs in California.

What is a Limited Liability Company (LLC)?

The California Franchise Tax Board explains that an LLC is “a business entity that blends partnership and corporate structures.” It is a business structure that offers favorable liability protection while offering the tax flexibility and relative ease of formation of a partnership or sole proprietorship. In California, LLCs are created by filing Articles of Organization with the Secretary of State. The owners of an LLC are called members. A key advantage is that they are generally not personally liable for the company’s debts or legal obligations. Still, LLCs must comply with specific requirements in the state, including paying an annual franchise tax and filing regular reports.

An Overview of the Three Types of LLCs in California

Single-member LLCs

The most straightforward type of LLC in California is a single-member LLC. It only has one owner (member), but it still offers full personal liability protection while keeping management and tax filing relatively simple. It is a popular choice for solo entrepreneurs, consultants, or freelancers who want legal separation between personal and business assets. The member can elect to be taxed as a sole proprietorship (more common) or corporation (an option). To be clear, there is no need to divide decision-making. The single owner retains full control over daily operations of the business.

Single-member LLCs must still comply with California’s annual franchise tax and filing obligations.

Multi-member LLCs

Multiple parties can own and operate an LLC in California. A multi-member LLC is a company that has two or more owners. Multi-member LLCs offer a collaborative ownership structure with shared responsibilities. This may be the right entity for businesses with multiple partners. Each member has an ownership interest. The LLC will allocate profits, losses, and responsibilities according to an operating agreement. Multi-member LLCs should have a professionally drafted operating agreement. Most multi-member LLCs are taxed as a partnership. With that being said, corporate tax treatment is an option. It provides limited liability for all members. That means that personal assets are protected from business liabilities.

Manager-managed LLCs

Finally, in California, a manager-managed LLC is a type of LLC where the members (owners) designate one or more managers to handle day-to-day business operations. That manager may or may not actually be one of the members. The model is ideal when investors want limited involvement in management or when the business needs professional management. Members retain ownership rights but delegate operational control. That can help to streamline decision-making. Of course, non-manager members must put a great deal of trust into the people who oversee day-to-day business operations. Notably, California allows both member-managers and non-member managers.

Contact Our California Business Formation Lawyer for LLCs Today

Lynnette Ariathurai is a California business formation lawyer who provides solutions-focused guidance and support to clients. If you have any questions about the different types of LLCs, please do not hesitate to contact us today for a fully confidential consultation. With an office in Fremont, we provide business formation services throughout the Bay Area.

limited liability company, LLC types, manager-managed LLCmedical, multi-member LLC, single-member LLC

When to Create a C Corp

Choosing the right business structure can have major implications for taxes, liability, and long-term growth. A C corporation offers distinct advantages. At the same time, they can be complicated and costly to set up, so it is certainly not the right option for every situation. Here, our Fremont business formation lawyer provides a guide to C corporations, including an explanation of the structure, the advantages and disadvantages, and examples of when to create one.

What is a C Corporation?

A C corporation (C corp) is a legal business structure that is wholly separate and distinct from its owners. It is the most common type of corporation in the United States. A C corp can enter into contracts, own assets, sue and be sued, and is taxed independently of its owners. One key feature is that profits are taxed at the corporate level and again at the shareholder level when distributed as dividends. Indeed, the California Franchise Tax Board explains that a C corp pays taxes on its earnings directly. The shareholders of the C corp are taxed separately from the business.

Know the Advantages and Disadvantages of a C Corp

The Benefits of a C Corp

As a C corp is a fully distinct legal entity, it offers very strong liability protection. Shareholders are shielded from personal responsibility for business debts and lawsuits. Further, a C corp also allows for unlimited shareholders. That makes it an attractive structure for raising capital and attracting investors. C Corps can also issue multiple classes of stock. The flexibility in ownership and fundraising makes them a great business entity for companies that have massive growth potential.

The Drawbacks of C Corp

C corps are not right for every situation. One major drawback of a C Corp is double taxation. Remember, the profits are taxed at both the corporate level and again when distributed to shareholders as dividends. C Corps also face extensive recordkeeping, regulatory compliance, and reporting requirements. That can increase the start-up costs and administrative costs.

Examples of When to Create a C Corp in California

You Plan to Raise Venture Capital

Most venture capital firms require investment in a C corporation because it allows for preferred stock and scalable equity structures. Forming a C corp in California positions your business to raise money from outside investors.

You Intend to Go Public in the Future

C corps are the required structure for companies that want to file an initial public offering (IPO). Establishing a C corp early helps to position a business for going public.

You Want to Offer Stock Options to Employees

C corps can issue stock options and other equity incentives that are attractive to top talent. It is a significant benefit because it can make it easier to recruit and retain employees in California’s competitive business environment.

You Anticipate Substantial Profits That Will Be Reinvested

A downside of a C corp is that it is subject to double taxation. However, an advantage of being taxed separately from their owners is that these businesses can reinvest profits without immediate tax consequences for shareholders. It is a strategy that can help grow the company.

Contact Our California Business Formation Lawyer for C Corps Today

Lynnette Ariathurai is a California business formation attorney who has the knowledge and experience that companies can trust. If you have any questions about creating a C corporation, we are here to help. Contact us today for a strictly confidential consultation. From our Fremont office, our firm works closely with C corps throughout the Bay Area.

When to Create an S-Corp for Your Business?

Are you building or transitioning a business in California? You may be considering structuring it as an S-corporation (S-corp). S-corps can be great businesses—but they are not the right choice for every situation. You need the proper business entity. Here, our Fremont business formation lawyer provides a comprehensive guide for when to create an S-corp in California.

What is an S-Corporation?

The California Franchise Tax Board explains that an S-corp is “a corporation that elects to be taxed as a pass-through entity.” Technically speaking, an S corp is not itself a type of business entity but rather a tax election that eligible corporations can make with the Internal Revenue Service (IRS). When a California corporation (or qualified LLC) elects S corp status, it becomes a pass-through entity for federal tax purposes. That means that profits and losses “pass through” to shareholders and are reported on their personal tax returns.

When to Create an S-Corporation in California

Choosing to operate as an S corporation can be financially advantageous—but only in the right circumstances. For it to be the best choice, you have to qualify for S-corp status and there must be tangible benefits to making the election. The S-corp structure is typically best suited for businesses that have:

Steady profits
All owners are U.S. citizens or green card holders and reside in U.S.
Have overhead expenses, ie: hold inventory, lease commercial space, own valuable assets, etc. and desire tax benefits.

In California, S corps must first be formed as a corporation (or LLC) and then file Form 2553 with the IRS. Beyond that, California imposes an annual franchise tax of either $800 or 1.5 percent of net income—whichever one is greater.

Business law tip: The timing of the S corp election is important. Businesses expecting to generate substantial net income—particularly when the owner is actively working in the business—often benefit most. If your business is just launching or not yet turning a consistent profit, the costs and compliance requirements of S corp status may outweigh the tax advantages

Examples of Businesses that Work Well as S-Corps

Professional Services Firms

Accountants, architects, and marketing agencies with high profits and low overhead can use S corp status to reduce self-employment taxes.

Consulting and IT Businesses

Solo consultants or firms with a few employees may find S corp tax treatment efficient once income exceeds a certain threshold.

Marketing and Creative Agencies

These service-based businesses often generate stable revenue and have minimal overhead. For that reason, they can sometimes be ideal candidates for the tax advantages of S corp status.

Every Case is Different: Speak to a Business Formation Lawyer

While S corporation status certainly offers key tax advantages, it is not suitable for every business model. An experienced California business formation lawyer can help you weigh the pros and cons of creating an s corp based on your earnings, industry, and your long-term goals.

Contact Our California Business Attorney for S-Corps Today

Lynnette Ariathurai is a California business formation attorney with the skills and experience to handle S-corps. If you have any questions or concerns about forming an S-corp, we are here to help. Contact us today for a completely confidential, no obligation consultation. From our Fremont office, we handle S-corporation formation throughout the Bay Area.

forming an S-corp, new business structuring, s-corporation

When & Why to Create an LLC for Your Business

Are you preparing to start a business in the Bay Area? You may be considering forming a limited liability company (LLC). LLCs offer a number of advantages—but they are not the right option for every situation. Here, our Fremont business formation attorney highlights key things to know about when to create an LLC in California.

What is a Limited Liability Company (LLC)?

The California Franchise Tax Board explains that an LLC “blends partnership and corporate structures.” An LLC offers its owners—called “members” in California—personal liability protection. That means that they are generally not personally responsible for business debts and legal obligations. At the same time, an LLC allows for pass-through taxation. The profits and losses are reported on the members’ personal tax returns.

When to Create an LLC in California

An LLC is one of the most popular business entities in California. Deciding when to form an LLC always depends on the specific goals and risks associated with your business. Here are some of the most notable reasons why it might be the right choice to create an LLC:

You need liability protection: An LLC is a smart choice when you want to protect your personal assets from liability. If your business involves customers, clients, or contracts—or you have employees, equipment, or significant financial exposure—an LLC can shield your home, personal bank accounts, and other assets.
You want ownership clarity: Another good time to form an LLC is when you are entering into a business arrangement with another party. An LLC allows multiple owners to clearly define ownership shares, profit distribution, and decision-making authority. It can be all within an operating agreement.
You prefer a simplified start-up: In comparison to some other business entities that offer liability protection—most notably, traditional C-corporations—LLCs are faster and less expensive to set up. The simplified creation process is a significant advantage.

Examples of Businesses that Work Well as LLCs

Freelance Services and Consulting Services

Independent consultants, designers, or marketing professionals often choose LLCs to separate their personal assets from business risk all while retaining tax flexibility.

Real Estate Investment and Property Management

Real estate investors commonly use LLCs to hold properties and reduce personal liability for tenant issues or property-related claims.

Retail Businesses and E-commerce Businesses

Whether operating a local boutique or an online shop, retail businesses benefit from the liability shield of an LLC and its flexible tax options.

Every Situation is Different: Consult With a Business Formation Lawyer

An LLC may or may not be the right business structure for your specific situation. Every situation involves its own set of facts and circumstances. Your needs and your long-term objectives matter. A business formation lawyer with experience setting up LLCs can help.

Contact Our California Business Lawyer for LLCs Today

Lynnette Ariathurai is a California business formation attorney who has extensive experience helping clients form LLCs. If you have any questions about when to create an LLC, we are here to help. Contact us today for a fully confidential consultation. With an office in Fremont, we handle LLC formation throughout the Bay Area.

forming an LLC, limited liability company, new business structuring

Legal Services for Medical Practices from Formation through Sale

For physicians, owning and operating their own professional practice can be a great opportunity. At the same time, it is complicated. California physicians face unique challenges throughout the lifecycle of a medical practice. As a small business owner and a California business attorney, Lynnette Ariathurai provides solutions-driven representation to medical practices. Here, our Bay Area business lawyer provides an overview of key things medical practices need to know about business law—from open to close.

Forming a Medical Practice

Starting a medical practice in California requires strict compliance with the state’s professional corporation rules. Physicians must form a Medical Corporation under the Moscone-Knox Professional Corporation Act. A key element of the law is that it only allows licensed professionals to own shares and serve as officers or directors. You will also need to obtain a federal employee identification number (EIN) and provide the registration to the California Medical Board.

Buying a Medical Practice

You may be considering buying a medical practice in California. There are options for structuring the purchase agreement. You could buy the entire medical practice—which means acquiring all assets, liabilities, and operational responsibilities. Alternatively, you could complete an asset purchase. That involves selecting specific assets to acquire—and it can allow you to avoid taking on most of the practice’s liabilities. However, the downside of an asset purchase is that you may lose access to contracts/licenses that could otherwise be transferable through purchasing the whole business.

Structuring a Medical Practice (Compensation for Physicians)

When you set up a medical practice, one of the biggest questions about structure is how the physicians will be compensated. Notably, the fee-splitting laws for physicians in California are strictly enforced. Our state prohibits physicians from engaging in fee-splitting arrangements with non-licensed individuals or entities, particularly when compensation is tied to patient referrals. A violation of the law can result in severe penalties, including fines and even potential suspension or revocation of the professional corporation’s registration. Medical practices must ensure that compensation structures are based on legitimate services rendered, not on the volume of referrals.

Selling a Medical Practice

Selling a medical practice in California is complicated. When doing so, it is crucial that you ensure transparency by accurately disclosing the practice’s financial status to potential buyers, informing active patients about the sale in advance, and properly transferring patient records, which requires explicit consent to comply with HIPAA regulations. A California business lawyer can help you draft a comprehensive sale agreement and notify the California Medical Board of changes in ownership.

Closing a Medical Practice

Preparing to wind down your medical practice? Shutting down a medical practice involves more than simply ending operations—it is a highly regulated process and physicians have clear legal duties. To start, you must give patients adequate written notice, provide them access to their medical records, and ensure continuity of care during the transition. California law also requires retaining patient records for a set period—usually at least seven years. Physicians must also be prepared to notify all relevant agencies and properly dispose of any controlled substances.

Contact Our California Business Lawyer for Medical Practices to Today

Lynnette Ariathurai is a California business attorney with extensive experience working with medical practices. We advise physicians on the full range of business matters related to their medical practice—from open to close. Contact us today for your fully confidential, no obligation initial consultation. With an office in Fremont, we serve clients throughout the Bay Area.

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Commercial Leases – Good Reasons to be Reviewed by an Experienced Attorney

A commercial lease is a legally binding contract between a tenant (business or organization) and a landlord. The specific terms of the lease matter. They will govern the relationship between the commercial landlord and the commercial tenant. A lawyer should always review a commercial lease. Your attorney will ensure that the terms of the lease are clear, fair, and reasonably aligned with your business’s long-term needs. Here, our Fremont business attorney explains why it is so important to have your commercial lease reviewed by an attorney.

Commercial Leases are Lightly Regulated in California

In California, commercial leases are not subject to the same regulations as residential leases. Commercial tenants have less protection under landlord-tenant law. They are largely protected by contract law. Indeed, commercial leases are largely dictated by the terms agreed upon by both parties, and courts will generally enforce them as written. Without legal review, a business may unknowingly commit to burdensome terms, hidden fees, or one-sided obligations that could hinder the operations of your company and undermine its financial well-being.

Note: On January 1st, 2025, Senate Bill 1103 (SB 1103) took effect in California. The law provides some additional legal protections for “qualified commercial tenants.” These tenants are generally very small businesses, particularly in the restaurant industry.

Important Provisions to Be Aware of in a Commercial Lease

With a commercial lease, the basics always matter. You need to know about things like the monthly rate, the duration of the agreement, and any restrictions on the use of the property. Beyond that, commercial leases in California also often include additional (important) provisions, such as:

CAM/net charges: Common area maintenance (CAM) and net charges often include costs for property upkeep, but a key issue is whether major asset replacements or property improvements can be passed directly to the tenant. Without clear lease terms, tenants may be responsible for significant costs, such as roof repairs or an HVAC replacement.
CAM/NNN (included/excluded costs): Commercial tenants should carefully review what expenses are included in CAM and NNN charges. In some cases, landlords may attempt to shift excessive costs onto tenants. Some leases allow landlords to pass through expenses such as administrative fees, capital improvements, or largely unrelated operational costs.
Duty to repair and replace: A lease should clearly define which party is responsible for repairs and replacements, particularly for critical systems like plumbing, HVAC, and structural elements. Some agreements make the tenant responsible for maintaining all or part of systems even if they were at the end of their lifespan when the lease began.
Renewal (options to extend a lease): You need to understand your right to renew. An option to extend a lease is not always an automatic renewal. Rather, it may be a right that must be properly exercised under specific conditions. Tenants should carefully review the terms, including rent adjustments, deadlines for exercising the option, and any additional requirements that may limit their ability to renew.

Contact A California Commercial Lease Review Attorney Today

Lynnette Ariathurai is a California business attorney with extensive experience drafting, negotiating, and reviewing commercial lease agreements. If you have any questions about a commercial lease, we are here to help. Contact us today for a fully confidential, no obligation initial consultation. With an office in Fremont, we handle commercial lease reviews throughout the Bay Area.

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What is Private Mediation and How Does it Work to Resolve a Dispute?

Is your business locked in any type of dispute? If so, you are undoubtedly looking for the best option to resolve the problem in a favorable manner. Litigation has a lot of downsides—it can be time-consuming and expensive. Mediation is a form of non-adversarial alternative dispute resolution (ADR). Lynnette Ariathurai is a California lawyer with extensive experience handling business mediation. Here, our Fremont business attorney explains what private mediation is and discusses how it works to move a commercial dispute towards a resolution.

What is Private Business Mediation in California?

In California, private mediation is a voluntary, non-adversarial process that is an alternative to litigation. As explained by the California Department of Consumer Affairs, mediation is when “a neutral person(s) facilitates communication between the disputants to assist them in reaching a reconciliation, settlement, or other understanding” in a structured environment where parties to a dispute—including a commercial dispute—can attempt to work out a settlement.

How Mediation Works to Resolve a Dispute in California

Mediation can be a highly effective tool for resolving disputes in California—especially in cases where parties have at least some common ground, are interested in preserving a relationship, and/or want to avoid the time and cost of litigation. Here is an overview of how private mediation works:

The parties must agree to mediate: Private commercial mediation is voluntary in California. The process does not start until the parties to a dispute agree to mediate. For mediation to be effective, all parties must have a good faith intent to resolve the matter.
A neutral mediator is selected: The mediator is a trained professional who helps to facilitate communication and negotiation. The parties to a business dispute must select an agreed-upon mediator. It is best to look for a mediator with relevant experience.
You need to prepare for mediation: Proper preparation is key to mediation—not just to get the best outcome, but also to help move the case towards dispute resolution. You should gather and prepare all relevant evidence.
The mediator helps to facilitate resolution: The role of the mediator is to help facilitate the resolution of a dispute. To be clear, the mediator is not empowered to make any final decisions. It is their role to clarify key issues and facilitate a resolution.
Agreement is voluntary—parties can withdraw: In California, business mediation is fundamentally voluntary. The parties are not required to agree to a settlement. They retain the right to withdraw from mediation without an agreement if one cannot be reached.

Business mediation is complicated. To get the most out of the process, it is crucial that you and your company are properly prepared and that you know what to expect. A top-tier California business mediation lawyer can help you navigate all aspects of the process.

Contact Our California Business Mediation Attorney Today

Lynnette Ariathurai is a California business mediation lawyer who is committed to helping companies find the best solution. If you have any questions about the mediation process for dispute resolution, please do not hesitate to contact us for a fully confidential, no obligation consultation. From our Fremont office, we provide business mediation services throughout the Bay Area.

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Arbitration Clauses in a Contract: When Arbitration Can and Cannot be in a Contract in California

Arbitration is a private dispute resolution process where parties agree to have a neutral third party (the arbitrator) hear their case and make an (often) binding decision. It is not uncommon for business contracts—but commercial agreements and employment agreements—to contain mandatory pre-dispute arbitration clauses. You may be wondering: Is an arbitration clause enforceable in California? The answer is presumptively “yes”—but there are certain requirements that it must meet. Here, our Fremont business lawyer explains the key things to know about when an arbitration clause can and cannot be in a contract in California.

Arbitration Clauses are Generally Enforceable in California

A pre-dispute arbitration clause is a contractual provision requiring parties to resolve future disputes through arbitration instead of litigation. It is commonly included in consumer, employment, and commercial contracts. California lawmakers have long viewed mandatory arbitration provisions with skepticism. In 2019, Assembly Bill 51 (AB 51) was passed in the state to prohibit employers from requiring employees or applicants to sign arbitration agreements as a condition of employment. However, its enforcement was challenged. On January 1st, 2024, a federal court issued a permanent injunction. The court determined that the Federal Arbitration Act (FAA) preempts AB 51. As such, arbitration clauses for employment contracts are still lawful in California.

While Permissible, Arbitration Clauses Must Meet Certain Standards in California

Even though AB 51 never took effect, mandatory arbitration clauses must meet certain criteria to be lawful in California. The California Supreme Court set the standard in the case of Armendariz v. Foundation Health Psychare Services, Inc. Here are five key elements:

Arbitrator must be neutral: In California, arbitration clauses must ensure that the arbitrator is impartial and free from any conflicts of interest.
More than minimal discovery must be allowed: While arbitration does not include a full discovery process, it cannot be limited to only “minimal” discovery.
Fees for the arbitration cannot be unreasonable: Businesses and employers cannot impose excessive arbitration costs on customers and employees.
All forms of relief available in court must be possible remedy: Arbitration agreements must not limit the types of damages or remedies that a party could otherwise seek in court.
The arbitration must be decided in writing: Finally, the arbitrator must make his or her decision in writing with a basic explanation of the basis of the ruling.

Beyond that, a mandatory arbitration provision in California may also potentially be considered invalid and unenforceable if it is substantively unconscionable. For example, a contract arbitration clause that requires an employee to waive all PAGA claims rights has been previously deemed overly broad and substantively unconscionable by courts.

Speak to Our California Arbitration Attorney for a Confidential Consultation

Lynnette Ariathurai is a California business lawyer who has the experience to help companies and employers with the full range of arbitration cases. Contact us today for a fully confidential, no obligation initial consultation. With an office in Fremont, we serve business throughout the region, including in Union City, San Leandro, San Jose, and Santa Clara.

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Forming a Medical Corporation

Are you considering forming a medical corporation in the Bay Area? It is crucial that you have the knowledge and resources to put the best structure in place for your business. There are special rules and regulations for the formation of professional medical corporations in California. Here, our Fremont attorney for starting a business highlights the dos and the don’ts for forming a medical corporation in California.

The Dos and Don’ts for Forming a Medical Corporation in California

DO Ensure Full Compliance With California Ownership Regulations

There are special requirements for the ownership of medical corporations in California. The Moscone-Knox Professional Corporation Act mandates that medical corporations in California must be owned by licensed professionals. Further, licensed physicians must hold at least 51 percent of shares. The remaining (minority) ownership may be limited to certain allied health professionals. Unauthorized ownership can lead to serious regulatory sanctions.

DO Follow California Naming Conventions for Medical Corporations

California imposes strict naming requirements for medical corporations to prevent misleading or deceptive business identities. The corporation’s name must include “Medical Corporation” or a similar professional designation. It should reasonably align with the physician’s licensed name.

DO Clearly Separate the Clinical Practice from Administrative Matters

A well-structured medical corporation should maintain a clear distinction between clinical decision-making and business operations. Physicians must retain full control over medical judgments and patient care. Administrative staff and even third party companies can handle other matters, such as finances, billing, marketing, and human resources (HR).

DO File a Statement of Information Within 90 Days of Incorporation

When you form a medical corporation in California, you should file a Statement of Information with the California Secretary of State within 90 days of incorporation. Be proactive: Make sure all the required business formation paperwork is filed in a timely manner. You can use Form SI-550.

DON’T Violate California Licensing Requirements

Physicians who form a medical corporation should always be in full compliance with our state’s licensing requirements. Every shareholder, director, and officer of a medical corporation must hold a valid license in their respective field as per the California Business and Professions Code.

DON’T Neglect Corporate Record-Keeping Requirements

Medical corporations in California are subject to strict record-keeping requirements. Maintaining accurate and up-to-date corporate records is a legal requirement under California corporate law. A medical corporation must document meeting minutes, bylaws, stock issuance, tax filings, and financial records.

DON’T Mishandle Sensitive Patient Medical Records

A patient’s medical records are protected under the federal Health Insurance Portability and Accountability Act (HIPAA) and the California Confidentiality of Medical Information Act (CMIA). Mishandling medical data—whether through improper storage, unauthorized access, or insecure disposal—can lead to serious penalties.

Contact Our California Medical Corporation Formation Attorney Today

Lynnette Ariathurai is a California business formation lawyer with extensive experience helping clients navigate the dos and don’ts of forming medical corporations. Contact us today for a fully confidential, no obligation initial consultation. With an office in Fremont, we help entrepreneurs form medical corporations throughout the region, including in Newark, Hayward, East Bay, and Milpitas.

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Construction Contracts: What is Required to Be in a Home Improvement Contract for Residential Construction?

According to the data cited within the California Residential Remodeling/Renovation Market Study, home improvement is a multi-billion dollar industry in the state. For contractors, the remodeling and renovation business offers many different opportunities. Home improvement projects in California that exceed $500 in cost require a proper license and a written contract. Within this article, our California business lawyer highlights key things that are required to be in a home improvement contract for residential construction.

California CSLB Regulates Home Improvement Contracts

The Contractors State Licensing Board (CSLB) regulates residential home improvement contracts in California. As a construction company or contractor, it is imperative that you ensure full compliance with all CSLB requirements. A well-drafted contract not only ensures that your company will meet regulations, but it can also protect you if a dispute arises with a homeowner.

Key Requirements for a Home Improvement Contract in California

What does a contract for a residential home improvement project need to include in California? Here is an overview of the most notable requirements from the CSLB:

In writing: Home improvement contracts in California must be in writing to comply with CSLB regulations. A written contract helps to ensure clear terms. If your business is doing a home improvement project for $500 or more, the agreement must be in writing.
Contractor identification: The home improvement contract must include the contractor’s full name, address, license number, and contact information. It is imperative that a contractor accurately identifies itself within the agreement.
Description of materials and work: In California, a contract for a home improvement should also include comprehensive details of the materials and work. It should clarify the specific materials, quantities, and the scope of work.
Permitting information: There should also be terms regarding any permits that will be needed to complete the project. Among other things, this part of the agreement should clarify who is responsible for obtaining the permit(s).
Detailed payment schedule: A payment schedule, including the down payment and installment amounts, must be clearly outlined. All contractors engaged in residential home improvement work should note that California law puts limits on down payments ($1,000 or 10 percent of the contract, whichever is less).
Written change order (modifications): Issues can arise during home improvement projects. It is not uncommon for homeowners to request modifications. Any changes to the original contract must be documented with a written change order.

Note: The above listed requirements for residential remodeling and renovation projects in California apply to all home improvement projects valued at $500 or more.

Contact Our Bay Area Business Law Attorney Today

Lynnette Ariathurai is a business law attorney with extensive experience drafting and reviewing contracts. If you have any questions about a construction contract for a home improvement project, we are here as a resource. Contact us today for a fully confidential consultation. From our Fremont law office, our firm represents contracts throughout the Bay Area.

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