There are three layers of state licensing that impact engineering firms — secretary of state (SOS) registrations, professional engineer licenses, and engineering firm licenses. Because each state has different requirements, managing firm licensing can feel like a moving target, one designed to trip you up, tie your staff in knots, and eat away at your bottom line. But it doesn’t need to be that way. By understanding the requirements in each state and how they dovetail with your operations, your firm can turn licensing into a source of competitive and financial gain.
This article provides an overview of state requirements with a focus on areas that frequently cause problems for large and growing firms, such as registering in new states, gaining board approvals, having the right staff in place, corporate structure and ownership considerations, naming concerns, and the order in which everything needs to be accomplished. It concludes with tips for managing licenses across multiple jurisdictions to help firms realize the bottom-line benefits of proactive license management.
Register with the state
To begin operations in a new state, firms need to register with the SOS to gain authority to transact business, among other requirements (www.harborcompliance.com/landing-pages/understanding-business-licensing). In 37 states (www.harborcompliance.com/information/engineering-license), firms must also apply to the state board of engineers for a firm license. States that don’t require engineering firm licenses include Colorado, Hawaii, Iowa, Maine, New Mexico, Oregon, Utah, and Vermont, plus the District of Columbia.
Five additional states impose requirements other than licensing such as registration, name approval, or other records to be filed. In California, for example, firms must file an Organization Record following precise specifications and register every engineering branch office under ownership of a licensed engineer, a process that can wind up being every bit as complex as a state license. In Tennessee, firms must file a disclosure showing that a Tennessee-licensed engineer oversees services. In Michigan, firms must receive board approval, while Pennsylvania firms must do so only if their names include “engineer” or “engineering.” In Massachusetts, firms may need to file a regulatory board certificate with the SOS before forming a professional entity. In all, 42 states impose some license or registration requirement on engineering firms.
Order of operations
Each professional board has unique requirements and a set process for licensure. In some states, including Idaho, New Hampshire, New York, North Carolina, and Rhode Island, firms must receive board approval before registering with the SOS, while in most states, the order is reversed. For this reason, it’s important to review SOS and board requirements together before beginning any applications to prevent delays or rejected filings.
Engineer in responsible charge
In all 50 states, a firm must have a licensed engineer on staff. Where firm licenses are required, the firm must appoint a licensed engineer in responsible charge for all services provided by the firm. In some states, if the firm has branch offices, those must be registered as well, and some may require an engineer in responsible charge for each branch location.
It is easy to forget that the firm license is always dependent on the underlying individual licenses. If a responsible engineer leaves the firm, the firm must notify the engineering board within a specified time frame and appoint a replacement. Failure to do so may lead to a lapsed license and loss of your right to work in the state. Since individual licenses are usually filed under the engineer’s home address, you may need to notify the board whenever an engineer in charge moves.
Requirements also vary based on firm structure. For example, in Vermont, engineering firms wishing to incorporate must be formed as professional corporations (PCs) or professional limited liability companies (PLLCs), while in New Jersey, foreign engineering firms are not permitted to form PCs. Because these requirements are “all over the map,” it’s important to examine them in detail whenever you are contemplating moving into a new state.
In some states, you may need to amend your articles of incorporation or create board resolutions to secure a license. Looking for these entity-level requirements will help avoid surprises down the road.
Ownership and management
Many states impose management or ownership requirements on engineering firms. In Georgia, for example, all stockholders in a PC as well as one board member and the president must be a licensed engineer. In some cases, the requirements include engineers licensed in any state; others can be satisfied only by in-state licensees. For example, in New York, all partners must be licensed in New York State.
Because of these requirements, firms frequently find that they must adjust their ownership or management structure or even form a new entity when entering a new state, as many engineering firms are not owned solely by licensed professionals.
In some states, referring to a licensed profession in the firm’s name carries specific requirements. As previously noted, Pennsylvania firms must register if their names include some form of “engineer;” in New York, you may be required to file a fictitious name if your name omits such a reference. In some states, the name requirements depend on the number of licensed engineers in your firm.
Requirements also center on names of individual practitioners. In North Carolina, for example, individuals whose names are included in the firm name must be licensed within North Carolina. Once again, it pays to review SOS and state board requirements in detail before beginning any filings in a new state.
Application fees and processing times
Firm license fees range from $0 in Georgia and California to $600 in Alaska. The most common filing fee is $100; the average is $135.
Like individual engineering licenses, most firm licenses are approved at monthly or quarterly board meetings, so timing depends on the board’s meeting schedule. Turnaround typically ranges from four to eight weeks, but it can take much longer. In New York, for example, approval usually takes from three to five months.
If a firm changes its name or address, it must notify the engineering board and fill out a new certificate of authorization or change form, depending on the state. Many firms don’t realize that before doing so, they must change their name with the SOS. Interestingly, in some states this requires prior approval of the engineering board!
In addition, most licenses must be renewed every one to two years. If your firm has been disciplined by any state licensing board, this must usually be disclosed in initial applications and renewals.
Because it takes time to prepare a filing, and approvals depend on board meeting schedules, it’s critical to plan ahead for licensing when considering growth opportunities and to make sure your applications are accurate the first time. One missing item can mean a rejection, which means waiting again for the next board meeting. It is frustrating for a firm’s sales team to identify a major opportunity in a new state only to miss the bidding window because of a delayed or rejected license application. Sometimes firms will take the risk and bid anyway. This can have disastrous consequences because penalties for missing or lapsed licenses are substantial.
Individual and firm licenses elevate the engineering profession, uphold standards, and protect the public. By embracing the strategic value of licensing and implementing a sound management plan, firms can turn an unpredictable source of aggravation and expense into a solid investment that pays dividends long into the future.
Tips for successful license management
To maintain licenses across your enterprise and keep pace with growth opportunities, firms should take the following steps:
- Use appropriate software to track all individual and firm licenses and renewal dates throughout your entire operation.
- Set up automated reminders of renewal dates and other important deadlines.
- Include licensing as an early step in your sales and growth plans.
- Examine secretary of state and licensing board requirements side-by-side before beginning any applications.
- Pay special attention to requirements concerning firm name, structure, branch locations, ownership, management, and individual engineer licenses.
- Create a system to notify the license board immediately whenever key licensed individuals leave the firm or change addresses, possibly directly through payroll.
- Include a means to notify the board if your firm changes its name or address or opens new branch offices.
Jerri-Lynn Wier is an attorney and compliance specialist for Harbor Compliance (www.harborcompliance.com/compliance-solutions-engineering-firms), a provider of license and entity management solutions for businesses. She has 20 years of experience in insurance, business, and election compliance, and has licensed numerous large engineering and architectural firms. Contact her at 888-995-5895 or firstname.lastname@example.org. Detailed specific state-level licensing information is available on the company’s engineering guides at www.harborcompliance.com/information/engineering-license.