May/June 2018

Communities: Private Practice
Licensing and Mobility: Is Your Firm Primed for Growth?

The world is more mobile than ever before, and businesses need to be agile to keep pace. For engineering firms, this means being able to respond quickly to opportunities wherever they arise. Yet realizing that goal while operating in a regulatory environment that isn’t built for speed or mobility presents challenges. For many firms, having to walk away from a major opportunity because the required licenses aren’t in place is a familiar pain.

Engineering firms can improve their mobility and win more business by understanding state requirements and aligning their licensing efforts with business development strategies.

The Mobility Challenge

Recent statistics from the National Council of Examiners for Engineering and Surveying underscore the importance of licensure mobility. Among engineers who participate in the NCEES Records Program, which provides a path to expedited comity licensure, nearly three-quarters are licensed in multiple states. Half of the licenses granted by states, on average, are to nonresident engineers.

NSPE and NCEES have been working with state engineering boards to promote mobility of licensure, as seen in the recent mobility pact between the Nevada and Wyoming state boards. These are promising developments. Yet separate applications are nonetheless required in each state.

Mobility at the firm level is significantly more complex. Firms have three basic layers of licensing to manage:

• Registering the business entity with the secretary of state and maintaining good standing;
• Securing and maintaining a firm license through the state engineering board where required; and
• Ensuring that the firm has licensed qualifying engineers where required.

Business Formation

Engineering firms may be formed through the secretary of state under a variety of corporate structures, including business corporations, partnerships, limited liability companies, professional LLCs, and professional corporations. Each state allows different structures subject to specific requirements. As part of the formation process, firms must appoint a registered agent to receive legal notices and other important documents.

In 37 states, engineering firms must also apply for a firm license (certificate of authorization) from the state engineering board. Five additional states require similar registrations, some of which are every bit as complex as a full-blown license application. The District of Columbia will begin requiring firm licenses in July 2018.

Engineering firms must have a licensed engineer on staff. Where firm licenses are required, a licensed engineer in responsible charge must be appointed. In some cases, firms may need an engineer in responsible charge of different branches of engineering, such as mechanical and electrical.

Entering New States

To enter a new state, firms must register with the secretary of state, which issues a certificate of authority to conduct business as an out-of-state entity. In some states the process starts with the engineering board. Each state has different name, management, and ownership requirements, which sometimes requires formation of a new business entity. To avoid rejected applications, it’s important to review all requirements side by side before beginning any filings.

Advertising and Submitting Proposals

In the rush to pursue opportunities, firms sometimes overlook the fact that all relevant individual and firm license requirements must be met before advertising, submitting proposals, or practicing in most jurisdictions. Individual engineers and firms have been cited for using the term “engineer” on business cards, project documents, resumes, websites, and social media without an active license to practice within the state.

Maintaining Operations

Firms must maintain their licenses and good standing by filing annual reports, maintaining registered agents, renewing firm licenses, and ensuring that individual licenses of qualifying professionals remain active. Firms must also notify state authorities of any changes in relevant information, such as office locations, ownership, and contact information. Missing a deadline or overlooking a required notification can jeopardize the firm license.

Turnover of Qualifying Professionals

Firm licenses are dependent on the individual licenses of engineers in responsible charge. If a responsible engineer leaves or suffers a license lapse, firms must appoint a replacement and notify state authorities within a prescribed time or risk forfeiting their license.

Opening Branches

In some states, branches must be registered separately, and an engineer in responsible charge may be required for each location. Misalignments between branch registrations and state requirements are a common source of licensing errors for firms.

Withdrawing From a State

Firms that are no longer active in a state should close down their presence with the secretary of state and the engineering board. Abandoning a state without fulfilling reporting and filing requirements can lead to substantial penalties.

Licensing remains a challenge for professional engineers and firms, but by taking an informed, proactive approach to the licensing process, firms can enhance mobility, reduce their risk of unlicensed practice, and lay the foundation for growth.

Jerri-Lynn Wier is an attorney and compliance specialist for Harbor Compliance, a provider of licensing and entity management solutions for businesses. She has 20 years of experience in insurance, business, and election compliance, and has licensed numerous large AEC firms. She can be contacted at [email protected].

Harbor Compliance is not an accounting or law firm and does not provide tax, financial, or legal advice.