Below are The Answers to the Most Common Questions we get about The California $100,000 LLC Employee /Worker Bond.
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What is the Purpose of the LLC Employee Worker Bond?
The purpose of the LLC Employee Worker bond is to ensure the public will receive compensation for any damages should the contractor fail to comply with contractor licensing law. If an LLC license is suspended for failing to be registered and in good standing with the Secretary of State, each person within the LLC may be held personally liable up to $1 million each during the time the LLC is suspended. (B&P Code section 7076.2)
Who Needs It?
All contractors operating an LLC in the state of California. A $100,000 surety bond (in addition to the $25,000 contractor bond) is required for the issuance of both active and inactive licenses, reissuance, reinstatement, reactivation, and renewal of an LLC license for the benefit of any employee or worker damaged by the LLC’s failure to pay wages, interest on wages, or fringe benefits, as well as other contributions (not required for inactive LLC licenses). (Business and Professions [B&P] Code section 7071.6.5). California requires contractors who operate their business as an LLC to purchase the Contractor’s LLC Employee/Worker Bond as part of the application process for the Contractor License. The bond ensures that the contractor’s employees/workers will receive compensation for financial harm if the contractor fails to pay them for their labor. In short, the bond is a type of insurance that protects employees/workers if the contractor breaks licensing laws.
What is the Bond Amount?
The Bond amount is $100,000
What affects the cost of an LLC Employee Worker Bond?
The annual premium depends mainly on the owners’ credit and financial strength. Get your exact price with an online quote. If the business owner has excellent credit and is in good financial standing, the costs will be lower. For business owners with poor credit and poor financial standing, the costs will be higher.
What are some of the primary requirements for and components of LLC licenses?
$1 Million Liability Insurance Minimum
Liability insurance with a cumulative limit of at least $1 million for licensees with five or fewer persons listed as members of the personnel of record is required. Also, an additional $100,000 is required for each additional member of the personnel of record, not required to exceed $5 million in total. (B&P Code section 7071.19)
Personnel of Record
Every person who is an officer, member, responsible manager, or director must be listed as personnel of record on LLC applications. (B&P Code section 7065)
Qualifying Individual
LLC licenses must be qualified by a responsible managing employee (RME), responsible managing officer (RMO), responsible managing manager, or responsible managing member. (B&P Code section 7065)
Business Name Styles
According to the Secretary of State’s office, LLC business names have specific requirements and restrictions. Interested parties should contact the Secretary of State’s office directly for full information about LLC business name issues. Briefly, LLC business names must comply with the following.
- The name of an LLC must end with the phrase “Limited Liability Company” or the abbreviation “LLC” or “L.L.C.” The words “Limited” and “Company” may be abbreviated to “Ltd.” and “Co.,” respectively. (Corporations Code section 17701.08 (a))
- The name of an LLC may not include the words “bank,” “trust,” “trustee,” “incorporated,” “inc.,” “corporation,” or “corp.” (Corporations Code section 17701.08 (e))
- The name of an LLC may not include the words “insurer” or “insurance company” or any words suggesting that it is in the business of issuing policies of insurance and assuming insurance risks. (Corporations Code section 17701.08 (e))
- If the name of a foreign (out-of-state or out-of-country) LLC does not conform to the requirements of Corporations Code section 17701.08, the foreign LLC must adopt an alternative name that complies with Section 17701.08 to transact intrastate business in this state. (Corporations Code section 17708.05)