I just began a construction job as a sole proprietor and I’m getting ready to send a California contractors preliminary 20 day notice and my question is: will it be a problem if by the end of job we become an llc or an inc? Thank you.
Jan 16, 2019
That's a fair question, and we get questions like this one relatively often. When a preliminary notice is sent, that notice will preserve the right to lien for the party that sends it. That seems intuitive, but when that party might change forms throughout the life of the job, it might not be as obvious. So, when a sole proprietor sends a preliminary notice, they are preserving their right to later file a mechanics lien, and if a lien later needed to be filed, the safest way to proceed would be to file that lien under the same name/identity under which notice was sent. Another option to avoid any turbulence or confusion down the line would be to indicate the future name of the business as well on whatever notice is given. After all, one of the primary reasons notice is required is so that owners and contractors will be fully aware of who's working on their project. Making it clear that the business is being performed under one name now, but will transition to another name later could be a good way to straddle the fence. At the end of the day, a business' name change and/or entity change might not have all that much of an effect on whether a filed lien would be valid or invalid - it's entirely possible (and not even unreasonable) that a court might find that information irrelevant when determining the validity of a lien. Still - remaining proactive and avoiding problems before they even present themselves is almost always a better option than remaining reactive or merely hoping for the best.