Engineering Administration 1

[Numberseven]

Any one has tips as to how gradually shut down (looking to retire)a small structural office after 19 years of operation? No one to take over. Have clients and have work, but work always fluctuates(as we all know), but it has been lots of fun. Thanks for any comments!

 

[dik]

You might interview other local consultants and see if they want to purchase your operation... failing that, find a young engineer and spend a year training him to take over the operation... else just wrap it up...

Where are you located?

Dik

 

[SlideRuleEra]

Well, it wasn't an engineering office, but once-upon-a-time I performed an orderly shutdown of a small, heavy construction company - it took almost a year, working full time. It's mainly a business "project" so there should be a lot of similarities.

Here are my experiences and views:

1. Talk with your accountant to see if your (corporate?) structure would have value if sold outright. Other firms may receive a financial benefit by purchasing an ongoing company shell (complete with employees, minus you). If not, then...

2. Privately talk with any key employees who you want to stay on for a while. The same day tell EVERYONE in the company exactly what you plan to do. I guarantee you that the employees know more about the details of your business than you think they do - without information, rumors start. Some employees, may leave immediately, but you are probably better off without them anyway.

3. As soon as possible brief your customers/clients, suppliers, AND competitors - you want to help your employees get new jobs when the time comes.

4. Obviously, stop taking on new work. Complete existing projects in an orderly, professional manner.

5. As resources are no longer needed, get rid of them, hopefully by selling.

6. Be sure to continue the everyday administration of business matters (tax withholding, insurance coverage, bill payment, etc.)

7. As things come to a stop, do whatever it takes to help former employees get good jobs. I held a "job fair" on the final construction site and invited competitors to come interview employees. Remain available as a reference.

8. See your accountant to close out the books, file final tax return, cancel corporate charter, etc.

9. Distribute net proceeds to investors.

Doing this is a challenge, but has its rewards.

Best Wishes

http://www.SlideRuleEra.net

 

[GregLocock]

What happens with the ongoing professional liabilities? ie, who gets sued?


Cheers

Greg Locock

Please see FAQ731-376 for tips on how to make the best use of Eng-Tips.

 

[SlideRuleEra]

Greg - Commercial insurance may be purchased to take on the liability. This even applies for a company/individual going out of business. The process is called "subrogation".

http://www.SlideRuleEra.net

 

[rb1957]

if a company stops doing business, and the legal identity ceases to exist ... who is there to be sued ?

 

[jike]

who is there to be sued ?

The PE who stamped the drawings.

 

[sundale]

As far as liability goes, most states make the engineer of record personally responsible/liable for everything he/she stamps. Although the corporation (business entity) is defunct, the individual engineer is not dead and also has liability for the statute of repose (5+2 years in CO, 10 years in NM, other states probably similar).

You should talk to your liability carrier about purchasing "tail" insurance (no pun intended, that's what it is called). I shut down my own little one man structural company two years ago and was only able to purchase 3 years of "tail" insurance.

Colorado is one of the few states that do not allow torts against the husband go against the wife, or visa versa. Thus, I "own" nothing: the house, cars, etc. are all in my wife's name. This may be an option too. Specifically, if you have no real personal assets, and you are retired and have no wage to garnish, then I expect it would not be worth a lawyer's time to go after you in the event of a claim.

 

[Numberseven]

Thanks for all the good comments. I have for some some time now been realizing that to shutdown a business may be as hard as starting a new one. My business is in the Chicago area (some one asked) and I will be on the lookout for an engineer to train and take over. My guys are great, but they do not appear to be inerested. I beleive most of us think it is too risky starting a business or even maintaining it along with famly obligations. However, in my case, I felt I would would not be fulfilled without "running the show" and meeting the chalenges (oh boy!! it's hard but it feels good). I advise planning for continuity starting EARLY. More comments are welcome.

 

[JAE]

sundale - I'm currently licensed in about 20 states and none that I'm aware of have any special tort laws that allow an engineer, working under a corporate firm, to be personally sued for projects in which they sign/seal and then have trouble. I'm not licensed in NM so perhaps something is unique down there, but the whole purpose of a corporation is to "be" and entity which does business with other entities, thus, I as an employee of said corporation cannot be sued personally as I have no (zero zilch) contractual relationship to the client (as an individual). Thus, the client can only legally sue the corporation.

 

[sundale]

JAE, I have always heard (from engineers and insurance agents) that the EOR is potentially personably liable, even though there is an engineering corporation, for malpractice torts. A know another structural engineer and a surveyor who did what I did: put all assets in their wife's name for professional liability reasons.

The plaintiff's lawyer needs to get through the corporation first, which in legal slang is called "piercing the corporate veil". Now whether piercing the corporate veil means being able to name the business principals and/or the specific EOR as a defendant is not super clear to me.

My limited understanding is that it is unlikely, but not impossible, to be held personally liable as either the EOR or a principal. I may be wrong about this and honestly I hope you are right.

This is getting off topic but is a very interesting question. Want to post this as a separate thread?

 

[archeng59]

If you don't have any in-house people who want to keep your company running, consider making a phase-out deal with one of your competitors that you consider a friend. You could create a joint venture type of agreement where you introduce your clients to his/her firm over a period of time. During the phase-out period, you become less and less involved with projects. Your current clients get a chance to continue working with you while they become clients for your partner/competitor. of course, part of the agreement would be continued employment for any of your employees that want to stick around. Part of the agreement needs to be an assumption of liability by your partner for all new work.