The rules where you work $17
A first 30 days checklist, everyday forms, licenses, workers’ comp and taxes for California, with a yearly calendar. Instant PDF download.
Buy the packet: $17Digital product, all sales final. Informational only, not legal, financial, tax or business advice.
What California expects from a new trade business
California is the strictest place in the country to work without a license. If you needed one and didn't have it, you can't sue to collect, and your customer can sue to get back what they already paid you. An LLC here also owes $800 a year to the state, whether it makes money or not.
Anything over the minor-work limit needs a CSLB license
The Contractors State License Board (CSLB) licenses contractors statewide. There are general engineering (A), general building (B), residential remodeling (B-2) and specialty (C) licenses. Electrical is C-10, HVAC is C-20, and plumbing is C-36. You also keep a $25,000 contractor's bond on file.
Since 2025 the minor-work exemption is under $1,000 for labor and materials combined, up from $500. You lose it if the job needs a building permit, if you advertise as a contractor, if you employ anyone on the job, or if the work is part of a bigger job or split into smaller contracts.
Home jobs over $500 need a written, signed contract with the terms the law lists, including your license number and the Mechanics Lien Warning. The down payment can't top $1,000 or 10% of the contract, whichever is less, unless you carry an approved payment and performance bond. Unless you negotiated the deal at your place of business, the customer can cancel until midnight of the third business day, or the fifth if they're 65 or older.
Unlicensed contracting is a misdemeanor, up to $5,000 or six months in jail on a first conviction. You can't sue for your pay, and the customer can sue to recover everything they paid you. Ask a construction attorney before you take anything close to the line.
Source: CSLB 2026 License Law and Reference Book (B&P 7028, 7071.6) · CSLB industry bulletin on the $1,000 minor-work limit · CSLB licensing classifications · B&P Code 7031 (statute mirror) · B&P Code 7048 (statute mirror) · Civil Code 1689.6, right to cancel
Who to call: an attorney near you
Comp starts at one employee, and 2028 brings it to every licensee
California employers need workers' comp even with one employee. Some classes need it with no employees at all: concrete (C-8), HVAC (C-20), asbestos (C-22), roofing (C-39) and tree service (D-49). Starting January 1, 2028, the License Law requires a comp certificate on file for essentially every active license. The board has to report its process for verifying exemptions by January 2027, so watch for changes.
A worker doing licensed work is presumed to be your employee. A sub without a valid license can't be an independent contractor.
Corporate officers owning at least 10% and LLC managing members can sign a waiver, subject to conditions. Since 2026, employing workers without coverage draws a minimum civil penalty of $10,000 per violation for a sole owner and $20,000 for an entity. An insurance agent who writes contractors can sort out your classes.
Source: CSLB 2026 License Law and Reference Book (B&P 7125, 7125.4) · CSLB bulletin on C-8, C-20, C-22, D-49 · California DWC, information for employers · Labor Code 2750.5 (statute mirror) · Labor Code 3352 (statute mirror)
Who to call: an insurance agent near you
Getting paid: California's clock runs from day 20
California gives you lien rights, then takes them fast:
- Preliminary notice: given within 20 days of first furnishing work. Subs and suppliers send it to the owner, the direct contractor and any construction lender. If you contract with the owner, you only notify the lender. A late notice still works, but it only protects work from 20 days before it was served and after.
- Direct contractors record after finishing their contract, and before the earlier of 90 days after the whole job is complete or 60 days after a recorded notice of completion or cessation.
- Everyone else records after they stop working, and before the earlier of 90 days after completion or 30 days after that notice.
- Serve your claim on the owner with the Notice of Mechanics Lien and a proof of service affidavit. Skip this and the lien can't be enforced.
- Sue to enforce within 90 days of recording. Past that, the lien expires, unless a credit extension was recorded. If the owner bonds off your lien, you have six months from notice of the bond to sue on it.
Two traps. The owner of a home with four or fewer units who lives there doesn't have to send you a copy of a notice of completion, so your time can shrink without you hearing about it. And a lien waiver that isn't in the statute's form is void, while the statute's unconditional form binds you even if you never got paid. A construction attorney can check your forms and dates.
Source: Civil Code 8200 (statute mirror) · Civil Code 8204 (statute mirror) · Civil Code 8412 (statute mirror) · Civil Code 8414 (statute mirror) · Civil Code 8460 (statute mirror) · Civil Code 8416, claim of lien · Civil Code 8190, notice of completion copies · Civil Code 8424, release bond · Civil Code 8132, waiver forms · Civil Code 8134, waiver forms
Who to call: an attorney near you
Sales tax: you're the consumer of your materials, mostly
In California, a construction contractor is generally the consumer of the materials you furnish and install. Sales or use tax applies when you buy them or use them, and you build that cost into your price.
You can be treated as the retailer of materials if the contract explicitly transfers title before installation and states the material price separate from the install charge. On a lump-sum contract, listing materials or tax separately on the invoice doesn't change what kind of contract it is.
Fixtures, machinery and time-and-material contracts have their own rules in the state's construction regulation. A CPA who works with contractors can show you which ones reach your jobs.
Source: CDTFA Regulation 1521, construction contractors · CDTFA Publication 9, construction and building contractors
Who to call: a CPA or tax pro near you
LLC: $70 to form, $800 a year to keep
Articles of organization cost $70 with the Secretary of State. A $20 Statement of Information is due within 90 days, then every two years. The real cost is the Franchise Tax Board's $800 annual LLC tax, owed even if you do no business, until you cancel the company. It's due by the 15th day of the 4th month. If the LLC brings in more than $250,000, there's an added fee as well.
Profit from a typical LLC lands on your personal return, and California's income tax is graduated, with the 2025 schedule topping out at 12.3%. Whether an S-corp election makes sense is a numbers question. Take your real numbers to a CPA who works with contractors.
Source: Franchise Tax Board, limited liability company · California Secretary of State, business entity forms · Franchise Tax Board, 2025 tax rate schedules
Who to call: a CPA or tax pro near you
Education, not legal or tax advice. Rules change. Confirm anything here with a licensed pro in California before you rely on it. Last updated November 2026.