Published in the Idaho Business Review, November 2006 

From Registration Renewal to Contract Review, There’s Plenty to Cross Off Your To-Do List. 

With the end of the year rapidly approaching, business owners should take the time to review the status of their business.  Over the last few years the construction industry has become more heavily regulated, making compliance more difficult.  In addition, many businesses have grown to the point where it is impossible to keep on top of compliance issues without a formal review.  While not a complete exhaustive list, what follows is a list of some business matters that often seem to be overlooked by owners of construction businesses. 

Licensing and Registration 

This was the year that contractor registration became a requirement for contractors to conduct business in the state of Idaho.  The registration needs to be renewed annually. Failure to renew on time will result in cancellation of your registration which likely means you lose your lien rights and your right to sue for work completed.  You should take steps to make sure you know the expiration date for your registration, and calendar renewal far in advance.          

It appears as though the renewal application will require new worker’s compensation and liability insurance certificates.   Take the opportunity to ensure that all of your coverage, including vehicle and builder’s risk, is current and at sufficient levels to protect you and to comply with contractual obligations.           

In addition to annual renewal, the law requires that contractors prominently display their registration number in their place of business and on all advertising, contracts, purchase orders, subcontracts, permits and letterhead.  Failure to due so can lead to fines and loss of your registration.  Over the last year I have been surprised by how few contractors are complying with this provision.  Enforcement is likely to be stepped up, and now is a good time to ensure your business documents reflect your registration number.           

The law also requires subcontractors and suppliers to take reasonable steps to ensure that those contractors they conduct business with are registered as well.  Every time a subcontractor or a supplier enters into a contract they should confirm the contractor’s registration.  If you have not made this your practice this past year, you should now confirm the registration of all contractors with whom you conduct business.

In addition to the requirements for registration, specialty trades and public works contractors are required to obtain licenses.  At least annually you should check to ensure you are taking all necessary steps to keep your licenses current.  

Company Annual Reports

Most contractors elect to set up their business as a corporation or LLC in order to obtain liability protection and/or favorable tax treatment.  Annual reports for these companies need to be filed with the Secretary of State or the company may be dissolved. This may prevent you from being able to file a lawsuit.  Companies that conduct business in other states may need to register to do business in those states as well.          

In addition, at least annually, the LLC or corporation should hold a meeting and conduct all business required by their operating agreement or bylaws.  In the case of corporations, bylaws almost always require a shareholder vote on directors, who in turn appoint the officers.  Official minutes of the meeting should be made.  Failure to follow these formalities can result in the loss of liability protection. 

Contract Review

As noted above, your contracts must include your contractor registration number.  In addition, in the event you enter into contracts with homeowners to repair an existing home or to sell a new home, you must make certain written disclosures related to mechanics lien as set forth in Idaho Code 45-525.  Once the job is complete you are also required to provide the homeowner a list of subcontractors and suppliers for the job.  The initial disclosures should be built right into your contract form.  As a reminder to both you and the purchaser, you may also want your contract to reference this list that must be provided upon completion.  Failure to comply with both components is deemed an automatic violation of Idaho’s Consumer Protection Act.          

You should also review your residential contract form to ensure that timelines for remedying defects match those set forth in Idaho’s Notice and Opportunity to Repair Act, which generally sets forth the rights and obligations of homeowners dealing with defective construction.  The Act provides certain protections for contractors who follow certain timelines.  Adopting these timelines into your contract will help ensure that you do not lose these protections. We have been fortunate in our part of the country to enjoy a healthy business climate this year. 

With companies so busy it is conceivable that some compliance details could fall through the cracks and go unnoticed until a problem surfaces.  Take the time to give your business its annual check-up, and if you have any questions regarding regulations that affect your company, talk to your legal advisor.  Remember that old saying, an ounce of prevention is worth a pound of cure!