Corporate Credentials Noncompliance
By Lexi Selvig
In the professional world of successful architecture, engineering, landscape architecture, planning and construction, noncompliance isn’t an option. Corporate credentials compliance responsibilities are riddled with ever-changing non-universal requirements, whether practicing as a single professional or with multiple disciplines in several states. Now that we have your attention, are you thinking, “Do we comply, how can we comply, who can we rely on for professional guidance to comply? Let’s learn about noncompliance issues and how to avoid serious legal consequences with steep financial penalties.
A principal of a multi-discipline firm registered to practice in 52 US jurisdictions recently stated, “I understand the law until it gets in the way of doing business.” A couple of leaders in this firm (not all Principals were informed of this action) decided they wanted to set up an umbrella corporation to then engage in design-build projects. Initially there was no corporate compliance review/audit of 52 US jurisdictions. Of course, the firm’s legal counsel was pleased to set up the umbrella corporation. However, the law firm only considered the business laws in the jurisdiction where the firm was originally registered to practice.
Upon the threat of a seasoned administrator within the firm – “I am not going to jail for what you guys have done” – the firm’s Principal COO initiated an independent legal corporate compliance review/audit. The firm received a complete 17-page report with legal recommendations and actions to be taken.
Naïveté Still Flourishes in the 21st Century:
A professional A/E association executive recently said, “I have not had one inquiry in the last 37 1/2 years about corporate compliance issues.” To this we say, “Really!” Professional associations do not necessarily know the truth nor the whole truth of firms and their internal politics. Firms may be extra cautious about their failings in credentialing for various reasons – embarrassment because disciplinary action becomes public information, potential conflict with a client’s contractual agreement, and possibly relationship instability with supporting industry consultants.
Corporate Organizational Structure:
Corporate credentials compliance issues can simply arise because of changes in leadership, changes in ownership, elevation of an associate to principal, retirement, no transition planning due to death or even a disaster such as a fire or catastrophic weather event.
Another example of a compliance issue comes from a New York engineering licensing statute.
Can a Professional Service Corporation (PC), Registered Limited Liability Partnership (RLLP), or Professional Service Limited Liability Company (PLLC) offer stock ownership to non-licensees?
No. The ownership of PC’s, RLLP’s, and PLLC’s providing architecture, landscape architecture, engineering, geology, and/or land surveying services will still be restricted to those who are licensed and registered in New York in the profession(s) of architecture, landscape architecture, engineering, geology, and land surveying, respectively. In order to allow non-licensees to have an ownership interest, a D.P.C. must be formed.
Jurisdiction Business Licensing Requirements:
Within the United States, Washington D.C., and three US territories, each business licensing jurisdiction has its own requirements which are not universal across the remaining 53. To confirm how complicated a jurisdiction can be, below is an example of business licensing requirements for the State of North Carolina with respect to architecture, engineering and landscape architecture.
Case Study: A Complicated Compliance Review
A firm practicing in 22 jurisdictions is considering expanding to include five new jurisdictions. The following is an example of the firm’s in-house best solution for managing corporate credentials and jurisdiction requirements.
Now, let’s learn how a detailed report with recommendations can save the firm time, money, and legal ramifications.
Compliance Affects Marketing Professional Services:
Currently, while the economy for commercial construction growth is humming along, A/E firms design, engineer, and construct in many locations across the US and internationally, too. It is not uncommon to initiate design and engineering in a new jurisdiction without full knowledge of the requirements to practice. Even more critical, marketing professional services without following jurisdiction statute requirements can and has resulted in serious financial penalties/consequences. It is best to research and know the laws per jurisdiction prior to submitting an RFP, or forming a joint venture partnership to practice engineering, architecture, landscape architecture, interior design, etc. The business relationship may not be acceptable to the new jurisdiction with current corporate structures.
It is challenging to simplify the many complications facing corporate compliance within the professional A/E community. It is complex and detailed, and a moving target based on the actions of 54 separate US jurisdictions.
An overall legal compliance review/audit with a report and recommendations from a respected legal corporate credentials compliance services firm may be necessary to maintain “good standing” per jurisdiction.
Lexi Selvig, President of LS Credentialing Services, provides legal corporate credentials compliance management services in addition to individual professional credentials management/maintenance services exclusively to the international A/E community. She can be reached at firstname.lastname@example.org. Visit her company’s website at www.aecredentialing.com.