Licensing and Business Law
The $500 line and the 7031 bar
California requires a contractor's license for any job priced at $500 or more in labor and materials. Licensing is by classification: A (general engineering), B (general building), and C specialties, plus limited specialties. Work outside your classification is unlicensed contracting. The most tested consequence is Business and Professions Code section 7031: an unlicensed contractor - or one whose license was expired, suspended, or improperly issued - cannot sue to collect compensation for work performed, and may have to disgorge payments already received. Substantial compliance is not a defense.
Home improvement contracts have their own rules under B&P 7159: writing required, a specified notice of cancellation, a down payment capped at $1,000 or 10 percent of the contract price (whichever is less), and required disclosures about liens and workers' compensation. Advertising must include the license number, and bids and contracts should as well.
Trap: subcontractors sometimes argue the prime contractor's license covers them. It does not - every entity contracting directly with an owner or another contractor needs its own license. Aiding an unlicensed person to contract is itself a violation.
Rule of thumb: before signing, confirm three things - the exact entity name and license number match CSLB records, the classification covers the scope, and the license is active with no suspension.