Study guide · Law & Business · Business Organization and Licensing
Advertising and Salespeople: What You Put in Front of the Public
About 18 minutes · 6 sections
What this guide covers
An advertisement is a legal act. Put out a sign, a truck door, a directory listing, or a post offering construction work, and you have brought yourself under the contractors license law — even if the work you actually do would have been exempt from licensing. Advertise a trade your license does not cover and you have committed a misdemeanor with a fine attached, whether or not anyone ever hires you. Put someone else's license number on it and the exposure jumps to a felony-grade penalty. And if you sell home improvement work through other people, both the registration on their side and the paperwork on yours are the board's business — including a security interest that becomes worthless if the person who sold the job was not registered.
Key terms
- Classification (in an ad)
- The branch of contracting your license covers. The rule for advertising is a match rule: what you advertise has to be work the classification you hold covers.
- Home improvement salesperson
- Someone registered with the board who solicits, sells, negotiates, or executes home improvement contracts on behalf of a licensed home improvement contractor.
The rules the exam tests
7 rules · 4 minAdvertising and the license number
Advertising as a contractor puts you under the Contractors State License Law.
counts the same way: a sign, card, or other device that tells the public you are a contractor, or your name or business name placed in a classified ad or directory under a classification for construction or work of improvement covered by that law. Any one of these is enough. The law then applies even if your operations as a builder are otherwise exempt from it.
On the job
The statute makes the act of advertising the trigger, so a person cannot advertise for construction work and then rely on an exemption that would have covered the work itself.
Exact wording
A person who advertises, or puts out any sign, card, or other device that would indicate to the public that the person is a contractor, or who causes their name or business name to be included in a classified advertisement or directory under a classification for construction or work of improvement covered by the Contractors State License Law, is subject to that law regardless of whether their operations as a builder are otherwise exempted from it.
You must hold a license in the classification you advertise. Otherwise it is a misdemeanor.
This reaches any person advertising construction or a work of improvement covered by the Contractors State License Law, whether licensed in another classification or not licensed at all. Advertising without a valid license in the classification advertised is a misdemeanor. Exception: a licensed building or engineering contractor may advertise as a general contractor.
On the job
The test is a match between the ad and the classification held, with one exception the statute writes into the same sentence for building and engineering contractors.
Exact wording
It is a misdemeanor for any person to advertise for construction or work of improvement covered by the Contractors State License Law unless that person holds a valid license under that law in the classification so advertised, except that a licensed building or engineering contractor may advertise as a general contractor.
Advertising includes signs, cards, building markings, print, broadcast, electronic ads, and directory listings.
For the ban on advertising without a license in the classification advertised, advertising includes but is not limited to: any card, sign, or device you issue to any person; any sign or marking you cause, permit, or allow on or in a building or structure; a newspaper or magazine; airwave or any electronic transmission; and a directory listing under construction or work of improvement covered by the Contractors State License Law. Each of these counts with or without any limiting qualifications, so a disclaimer in the ad keeps it an ad.
On the job
The definition is written wide and non-exhaustive — and the with-or-without-limiting-qualifications clause means disclaimers do not take an ad outside it.
Exact wording
For the prohibition on advertising without a license in the classification advertised, advertising includes, but is not limited to, issuing any card, sign, or device to any person; causing, permitting, or allowing any sign or marking on or in any building or structure; a newspaper or magazine; airwave or any electronic transmission; and a directory listing under construction or work of improvement covered by the Contractors State License Law — with or without any limiting qualifications.
If you advertise outside your classification, you pay $700 to $1,000 plus any other punishment.
The fine applies to advertising construction work in a classification your license does not cover. You pay at least $700 and no more than $1,000, and that amount is in addition to any other punishment imposed for the violation.
On the job
The fine attaches to the advertisement itself — no one has to hire you — and it stacks on top of any other punishment for the violation.
Exact wording
A violation of the prohibition on advertising without a license in the classification advertised is punishable by a fine of not less than $700 and not more than $1,000, and that fine is in addition to any other punishment imposed for the violation.
An unlicensed person may advertise a job under $1,000 only with a not-licensed statement.
The not-licensed statement must appear in the advertisement itself and must say the person is not licensed under the Contractors State License Law. The price must be less than $1,000 as an : labor, material, and all other items on the project or undertaking. Both conditions apply to construction work or a work of improvement covered by that law.
On the job
This is the one lawful route for an unlicensed person to advertise, and it takes both halves — the under-$1,000 aggregate price and the not-licensed statement in the ad itself.
Exact wording
A person who is not licensed under the Contractors State License Law may advertise for construction work or a work of improvement covered by that law only if two things are both true: the aggregate contract price for labor, material, and all other items on the project or undertaking is less than $1,000, and the person states in the advertisement that the person is not licensed under that law.
You break the law by using a license number to defraud. Your own expired number counts.
The offense takes both mental states: willful and intentional use, plus intent to defraud. It reaches you whether you are licensed or unlicensed, and it covers any number that does not correspond to a currently valid license you hold—one that has lapsed, been revoked, or never existed. The penalty is a fine of no more than $10,000, or imprisonment in state prison or county jail for no more than one year, or both, and that penalty is cumulative to the penalties available under all other laws of this state.
On the job
The test is whether the number corresponds to a currently valid license held by the user — so even a contractor using their own expired number can be inside it, when the mental-state elements are met.
Exact wording
Any person, licensed or unlicensed, who willfully and intentionally uses, with intent to defraud, a contractor's license number that does not correspond to the number on a currently valid contractor's license held by that person is punishable by a fine not exceeding $10,000, or by imprisonment in state prison or in county jail for not more than one year, or by both that fine and imprisonment, and that penalty is cumulative to the penalties available under all other laws of this state.
Put your license number on every contract, subcontract, call for bid, and ad you issue.
Subcontracts count too. If you hold a license, the number goes on all four—construction contracts, subcontracts, , and every form of advertising you use—in the form the registrar of contractors prescribes.
On the job
The number goes on the paper you put out in every direction — contracts with the owner, calls for bid down to subs and suppliers, and advertising out to the public.
Exact wording
Every person licensed under the Contractors State License Law must include their license number in all construction contracts, in subcontracts and calls for bid, and in all forms of advertising they use, as prescribed by the registrar of contractors.
Take away
8 rules · 4 minHome improvement salespersons
A home improvement salesperson must register with the board before selling for a licensed contractor.
A home improvement salesperson is a person registered under the Contractors State License Law who solicits, sells, negotiates, or executes contracts for home improvements, for the sale, installation, or furnishing of home improvement goods or services, or of swimming pools, spas, or hot tubs, on behalf of a home improvement contractor licensed under that law. Without that registration, the person may not engage in the business of, or act in the capacity of, a home improvement salesperson.
On the job
Selling home improvement work on a licensed contractor's behalf is a registered occupation in its own right — the board tracks the seller, not just the contractor.
Exact wording
A home improvement salesperson is a person registered under the Contractors State License Law and engaged in the business of soliciting, selling, negotiating, or executing contracts for home improvements, for the sale, installation, or furnishing of home improvement goods or services, or of swimming pools, spas, or hot tubs, on behalf of a home improvement contractor licensed under that law; a home improvement salesperson must register with the board in order to engage in the business of, or act in the capacity of, a home improvement salesperson.
Your salesperson must give the contractor's name and license number before soliciting or selling begins.
The salesperson gives the owner or tenant the business name and license number of the contractor represented in that transaction, before soliciting, selling, negotiating, or executing a contract for home improvements, for home improvement goods or services, or for a swimming pool, spa, or hot tub. The salesperson may be employed by one home improvement contractor or by more than one, but your hiring and separation reports still apply. Skipping that identification is a cause of disciplinary action.
On the job
Before any selling starts, the owner or tenant learns which contractor the salesperson represents for that transaction — business name and license number — and skipping that identification is itself a cause for discipline.
Exact wording
Subject to the contractor's reporting duties for hiring and separation, a home improvement salesperson may be employed by one or by more than one home improvement contractor, but before engaging in any of the activities in that definition — soliciting, selling, negotiating, or executing contracts for home improvements, for home improvement goods or services, or for swimming pools, spas, or hot tubs — the salesperson must identify to the owner or tenant the business name and license number of the contractor they are representing for that transaction, and failure to do so is a cause of disciplinary action.
Officers, general partners, and qualifiers on the license record do not register as salespersons.
No home improvement salesperson registration is required for an officer of record of a licensed corporation, or a manager, member, or officer of record of a licensed limited liability company; a general partner listed on a licensed partnership's license record; a qualifying person; a salesperson whose sales are all made from negotiations the prospective buyer started at or with a general merchandise retail establishment operating from a fixed location; a person who contacts the prospective buyer for the exclusive purpose of scheduling appointments for a registered home improvement salesperson; and a bona fide service repairperson employed by a licensed contractor whose repair or service call is limited to the service, repair, or emergency repair the buyer initially requested. The first three exemptions apply only to individuals listed as , at the time of the sales transaction, for the licensee responsible for soliciting, negotiating, or contracting for the service or improvement.
On the job
Three of the six exemptions are tied to being on the board's record at the moment of the sale, so a title alone does not carry them.
Exact wording
Six categories of people are not required to register as home improvement salespersons: an officer of record of a licensed corporation, or a manager, member, or officer of record of a licensed limited liability company; a general partner listed on the license record of a licensed partnership; a qualifying person; a salesperson whose sales are all made pursuant to negotiations initiated by the prospective buyer at or with a general merchandise retail establishment operating from a fixed location; a person who contacts the prospective buyer for the exclusive purpose of scheduling appointments for a registered home improvement salesperson; and a bona fide service repairperson employed by a licensed contractor whose repair or service call is limited to the service, repair, or emergency repair the buyer initially requested. The first three of those exemptions — the officer, manager, or member of a licensed corporation or limited liability company, the general partner, and the qualifying person — apply only to individuals who, at the time of the sales transaction, are listed as personnel of record for the licensee responsible for soliciting, negotiating, or contracting for the service or improvement.
A salesperson must hold registration before the sales transaction, not after. Selling first is a misdemeanor.
The registrar issues the registration, and it must be current and valid at the time of the sales transaction. The rule covers selling for one or more home improvement contractors in California, or selling home improvement goods or services in California.
On the job
The registration must be current and valid AT THE TIME of the sales transaction — selling first and registering afterward is the misdemeanor.
Exact wording
It is a misdemeanor for a person to engage in the occupation of salesperson for one or more home improvement contractors in California, or of home improvement goods or services in California, without having a current and valid home improvement salesperson registration issued by the registrar at the time of the sales transaction.
You cannot enforce a on a contract an unregistered home improvement salesperson solicited.
Your security interest holds only if the person who solicited was a duly registered home improvement salesperson, or was exempt from registration, when the homeowner signed the contract that salesperson solicited. This rule covers any security interest you take to secure payment for home improvement solicitation or contracting.
On the job
The consequence falls on the contractor's ability to collect rather than only on the unregistered salesperson, which is what makes the registration the contractor's problem too.
Exact wording
A security interest taken by a contractor to secure payment for home improvement solicitation or contracting is unenforceable if the person who solicited the act or contract was not a duly registered home improvement salesperson, and was not exempt from registration, at the time the homeowner signed the home improvement contract the salesperson solicited.
Tell the registrar before a home improvement salesperson starts work for you.
The notice must be in writing on the form the registrar prescribes, and must give the registered salesperson's name and registration number. Notify the registrar again within 90 days after that salesperson stops working for you.
On the job
The two reports run in opposite directions — the hire notice goes in BEFORE the salesperson starts, the separation notice within 90 days after they stop.
Exact wording
A licensed home improvement contractor must notify the registrar in writing, on a form prescribed by the registrar, about the employment of a registered home improvement salesperson — including that salesperson's name and registration number — and must submit the form before the salesperson begins work for the contractor; when a registered home improvement salesperson ceases to be employed by the contractor, the contractor must notify the registrar in writing on a prescribed form, including the name and registration number, within 90 days after the salesperson ceases to be employed.
You face discipline if you employ an unregistered person to sell home improvement contracts.
The person selling for you must be registered as a home improvement salesperson. You also face discipline when that salesperson is registered but you fail to file the required employment or separation report with the registrar.
On the job
Both failures land on the contractor — failing to file the reports and employing an unregistered salesperson are each their own ground for discipline.
Exact wording
A home improvement contractor who employs a registered home improvement salesperson to sell home improvement contracts but fails to file the required employment or separation report with the registrar is subject to disciplinary action, and a home improvement contractor who employs a person to sell home improvement contracts while that person is not registered as a home improvement salesperson is subject to disciplinary action.
Apply for salesperson registration on the registrar's form with the fee. The registrar may refuse it.
An applicant for home improvement salesperson registration files a written application with the registrar, on the registrar's prescribed form, with the fee fixed by the Contractors State License Law. The registrar may refuse registration on the grounds the law specifies.
On the job
Registration runs through the registrar's own form and fee, and the registrar may refuse it on the statutory grounds — it is an application that can be denied, not a formality.
Exact wording
An applicant for a home improvement salesperson registration must submit a written application to the registrar on a form prescribed by the registrar, accompanied by the fee fixed by the Contractors State License Law, and the registrar may refuse to register the applicant on the grounds the law specifies for such a refusal.
Take away
- A home improvement salesperson must register with the board before selling for a licensed contractor.
- Your salesperson must give the contractor's name and license number before soliciting or selling begins.
- Officers, general partners, and qualifiers on the license record do not register as salespersons.
7 rules · 4 minSubcontracting by a general contractor
You are a general building contractor when structures are your principal contracting business.
A qualifying structure is one built, being built, or to be built for the support, shelter, and enclosure of persons, animals, chattels, or movable property of any kind, and its construction requires at least two unrelated building trades or crafts. That business may also be doing or superintending the whole structure or any part of it. The classification does not cover anyone who merely furnishes materials or supplies under Section 7045 without fabricating them into, or consuming them in, the general building contractor's work.
On the job
The counting rules about trades only matter once the project is structure work at all, so the definition is the gate the other rules sit behind.
Exact wording
A general building contractor is a contractor whose principal contracting business is in connection with any structure built, being built, or to be built for the support, shelter, and enclosure of persons, animals, chattels, or movable property of any kind, requiring in its construction the use of at least two unrelated building trades or crafts, or to do or superintend the whole or any part of it. It does not include anyone who merely furnishes materials or supplies under section 7045 without fabricating them into, or consuming them in the performance of, the general building contractor's work.
Take prime work beyond framing only with two unrelated trades, the classification, or a licensed sub.
As a general building contractor, you need any one of three conditions: the prime contract requires at least two unrelated building trades or crafts other than framing or carpentry; you hold the appropriate license classification; or you subcontract with an appropriately licensed contractor to perform the work.
On the job
The subcontracting-it-out route is the one the subcontract rule takes away — and the fire protection and C-57 carve-out sits outside this three-route analysis entirely.
Exact wording
A general building contractor may not take a PRIME contract for a project involving trades other than framing or carpentry unless one of three things is true: the prime contract requires at least two unrelated building trades or crafts other than framing or carpentry, the general building contractor holds the appropriate license classification, or the general building contractor subcontracts with an appropriately licensed contractor to perform the work.
As a general building contractor, you cannot take a subcontract by subbing the work out.
You may take a subcontract involving trades other than framing or carpentry only if the subcontract requires at least two unrelated trades or crafts other than framing or carpentry, or you hold the appropriate license classification. Subcontracting the work out to an appropriately licensed contractor does not bring it within the classification you hold, so it does not make the subcontract lawful. Fire protection systems and C-57 well drilling follow a separate rule.
On the job
The statute gives a general building contractor three ways out on a prime contract but only two on a subcontract, so the same job can be lawful as a prime and unlawful as a sub.
Exact wording
A general building contractor may not take a SUBCONTRACT involving trades other than framing or carpentry unless the subcontract requires at least two unrelated trades or crafts other than framing or carpentry, or the general building contractor holds the appropriate license classification — subcontracting the work to an appropriately licensed contractor is not an available cure for a subcontract under this rule; the fire protection and C-57 well drilling rule is separate.
You may take framing or carpentry as prime or subcontract. Neither counts toward two unrelated trades.
As a general building contractor, on a project that involves other trades you must calculate two unrelated trades before you take the prime contract or the subcontract. Framing and carpentry count as neither one.
On the job
Framing and carpentry are the B contractor's home ground — free to take alone in either posture, but never usable as a counter when counting the two unrelated trades on other projects.
Exact wording
A general building contractor may take either a prime contract or a subcontract for a framing or carpentry project, and may not count framing or carpentry when calculating the two unrelated trades needed to take a prime contract or subcontract for a project involving other trades.
You need the right license or a licensed subcontractor for fire protection and well drilling.
As a general building contractor, you may not contract for any project that includes a fire protection system or C-57 well drilling work unless you hold the appropriate classification or subcontract that work to an appropriately licensed contractor. This is a carve-out from the two unrelated trades test: that route never authorizes fire protection or well drilling work. The rule is written in terms of contracting generally, rather than naming prime contracts and subcontracts separately.
On the job
Two unrelated trades is the usual test, and this is where it stops working: no amount of trade-counting lets a B license take fire protection or well drilling. Note also that subdivision (b) withholds the subcontracting cure when a general building contractor takes a SUBCONTRACT involving other trades, so do not assume the cure is available in every posture.
Exact wording
A general building contractor may not contract for any project that includes a fire protection system or C-57 well drilling work unless the general building contractor holds the appropriate license classification or subcontracts with the appropriately licensed contractor. This is a carve-out from the two-unrelated-trades analysis: that route never authorizes fire protection or well drilling work. Subdivision (c) is written in terms of contracting generally rather than naming prime contracts and subcontracts separately.
As a specialty contractor, you may cross trades only for incidental and supplemental work.
Incidental and supplemental means the other-craft work serves completing your licensed craft's work, not standing as its own job. If the work meets both tests, you may take and execute the contract involving two or more crafts or trades.
On the job
This is the narrow reason a specialty contractor's contract can reach another trade at all — the other-trade work serves completing the licensed craft's work, not standing as its own job.
Exact wording
A specialty contractor may take and execute a contract involving the use of two or more crafts or trades if the performance of the work in the crafts or trades other than the one the specialty contractor is licensed in is incidental and supplemental to the performance of the work in the licensed craft.
A specialty contractor needs a majority of the public works project to take the prime contract.
On a public works project, the awarding authority — not the bidder — determines the license classification necessary to bid and perform the project. The awarding authority may in no case award a prime contract to a specialty contractor whose classification is less than a majority of the project. When a specialty contractor is authorized to bid a project, all work outside its license specialty, other than incidental and supplemental work, must be performed by a licensed subcontractor in compliance with the Subletting and Subcontracting Fair Practices Act.
On the job
On public works the classification question is decided up front by the awarding authority, and the majority rule polices what a specialty contractor may be awarded as the PRIME.
Exact wording
On public works contracts the awarding authority determines the license classification necessary to bid and perform the project, an awarding authority may in no case award a prime contract to a specialty contractor whose classification constitutes less than a majority of the project, and when a specialty contractor is authorized to bid a project all work outside its license specialty other than incidental and supplemental work must be performed by a licensed subcontractor in compliance with the Subletting and Subcontracting Fair Practices Act.
Take away
Important numbers to know
Where people go wrong
Sounds right: The work is exempt, so the advertising is exempt.
Where’s the catch?
Easy to mix up: The $1,000 project ceiling for unlicensed advertising vs. the $1,000 top of the out-of-classification fine
Which is which?
Sounds right: Advertising means only paid ads, not signs, cards, or directory listings.
Where’s the catch?
Sounds right: I can advertise a trade I plan to subcontract out.
Where’s the catch?
Sounds right: The license number only has to appear in ads and contracts.
Where’s the catch?
Sounds right: Using a number that is not mine is just paperwork.
Where’s the catch?
Sounds right: My salespeople are registered, so my paperwork is done.
Where’s the catch?
Easy to mix up: for a B contractor
Which is which?
Sounds right: Framing or carpentry counts toward the two unrelated trades.
Where’s the catch?
Glossary
Every term this guide defines, in one place. Each is also defined where it first appears.
- Aggregate contract price
- Labor, material, and all other items on a project or undertaking added together — not just the part you would be paid for one piece of it.
- Calls for bid
- The invitations a contractor puts out asking subcontractors or suppliers to bid on part of a job.
- Holding out
- Anything you put in front of the public that says you are a contractor — a sign, a card, a truck marking, an ad, a directory listing under a construction heading.
- Personnel of record
- The people the board has on file as standing behind a licensed business — officers, partners, members, managers, and the qualifier.
- Prime contract vs. subcontract
- A prime contract is the one with the owner. A subcontract is with the prime, not the owner. The license law's scope rules treat the two differently, so the same work can be lawful one way and not the other.
- Security interest
- A legal claim a contractor takes against the customer's property to secure payment. If it is unenforceable, the contractor cannot use it to collect.
Keep going
- Practice questions for Law & Business — Business Organization and Licensing is 13% of the exam.
- Job scenario: The Partner Who Left
- Job scenario: The Ninety Days
- Also in Business Organization and Licensing: Licensing: Getting the License, Keeping It, and Staying Inside It
- Also in Business Organization and Licensing: Company Organization: Who Actually Holds the License
- Every number on one page — this guide’s figures alongside every other Law & Business guide’s.
Test yourself: 9 questions for this guide
A paid account adds more ways to practice and prepare: study questions after every chapter, practice questions for every topic, timed practice exams, and job scenarios drawn from real jobs. A free account gets you one timed practice exam and saves your progress across devices. Here is one of this guide's questions:
You do handyman work and every job you take is small enough to be exempt from licensing. You put a magnetic sign on your truck: "Mike's Home Repairs." Are you now regulated?
AnswerYes. Putting out a sign or other device indicating to the public that you are a contractor makes you subject to the contractors license law regardless of whether your operations as a builder would otherwise be exempt. The exemption covers the work; it does not cover the advertising. A separate section carries the one narrow route by which an unlicensed person may advertise lawfully, on two conditions — see the tested core for what they are.
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