LLC vs. S Corp and moonlighting 5

[Senselessticker]

Let's say hypothetically...I'm considering doing some moonlighting work. Let's assume I inform my boss/company and there is no problem there. If I want to start an actual business to do this moonlighting work, does anyone know where I can find a good resource describing the advantages / disadvantages of LLC vs. an S Corp? Many Thanks for any good rescources!

 

[Ashereng]

What is LLC and S Corp?

I have heard of LLP (Limited Liability Partnership) and companies that incorporate.

For a single person, the choices are usually sole proprietor, or incorporation. I suppose you can go the LLP route as a single person, not sure though.

If you want more info, a good place to start would be your accountant (CFP, CMA, CA, etc). The local "entrepreneur office" would also be a good resource. A lawyer doesn't hurt - especially if you are in the US.

 

[zdas04]

LLC is a "Limited Liability Corporation". "Sub-chpater S" is a reference to the IRS code that creates a different sort of limited liability corporation. The intent of LLC and S corporations is to allow a small business to limit their liability while avoiding some of the requirements of a full-fledged corporation.

When I was making this decision I talked to a lawyer and to an accountant. Both recommended the LLC route, but I thought their recommendations were more about future fees to them than actual benefits to my company. I did some research on the web that seemed to confirm my first impressions (I have not done business with either the lawyer or the accountant since) and I'm doing business as a Sole Proprietor.

Check with a lawyer and an accountant that you feel you can trust. Then carefully evaluate their recommendations in the calm of your own mind. If the two don't jibe then either try a different pair of crooks or use Google.

The key to me was the risk/cost ratios. In my case neither an LLC nor an S corp would protect my personal assets in a dispute about an engineering decision (the PE imparts personal liability in most cases). Once I got to that point I couldn't see paying these folks several hundred dollars up front and several thousand a year thereafter.

Good luck to you, and don't make any decisions based on what you read in this forum--use that information to formulate your own questions to professionals that you employ.



David Simpson, PE
MuleShoe Engineering

http://www.muleshoe-eng.com

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

The harder I work, the luckier I seem

 

[zcp]

Here are some links I found useful when I was getting started

http://www.business.gov/phases/launching/choose_structure/basic_structures.html

http://www.nolo.com/resource.cfm/catID/1745D9A3-D50D-4AAD-BFB3ED609A4EE3F5/111/

Go to your state government website and check out the small business information. They will have the most relevant information for your particular situation.





ZCP

http://www.phoenix-engineer.com

 

[Senselessticker]

Thanks for the advice folks! Also...I still have a couple of years until I can sit for the PE exam, so I don't have to worry about the liabilities involved there (at least for now). Thanks Again!

 

[swertel]

Then you really can't do much in the way of consulting.

--Scott

For some pleasure reading, try FAQ731-376

 

[Senselessticker]

Is there a legal reason why I cannot "consult" while not liscensed? Let's assume I give a GC advice and direction, maybe even do some of the CAD work myself. The GC then has a liscensed PE review and sign. Have any laws been broken? I'm asking because I don't know...Thanks.

 

[zdas04]

There are a number of threads in this forum on that exact topic. It really depends on what you're offering and what your local laws are. Don't assume that they will be logical or straightforward, they won't be.

I couldn't get a business license in my city with the word "engineering" in my business name until I produced proof that I had a New Mexico PE. I could have called the company "MuleShoe Consulting", and then as long as I didn't "hold out to the public that I was providing engineering services" then to quote you "no law was broken" if I didn't have a PE. Whether I would have any clients without my PE is a completely different discussion. Maybe I would since PE's are pretty rare in Oil & Gas, but again maybe I wouldn't.

The laws on licensing are very complex and again, don't assume you know the answer after reading some posts in eng-tips.com.

David Simpson, PE
MuleShoe Engineering

http://www.muleshoe-eng.com

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

The harder I work, the luckier I seem

 

[swertel]

Sorry I didn't have time to elaborate on my message at the time. David summed it up very well for me.

To add on to that story, I have a current job I will be inheriting because the visionary and his contract designer realized they will need a PE signature on the design. They approached me and I can't ethically stamp the design just because I did a drawing check. The designer conceeded to this point very honestly, realizing he probably shouldn't have taken the job in the first place.

The question now becomes, since this designer now understands the situation and has relinquished his role in the design, do I still have an ethical obligation to report him for practicing engineering without a license considering that he is outside of my municipality and I don't know the laws of his location? To add some more light on the scenerio, he is a degreed engineer, just no license, and I will most likely have to subcontract to him for additional FEA work that is beyond my proficiency and use his professional judgement in interpreting the results. (Since this is, afterall, an ethics forum.)

--Scott

For some pleasure reading, try FAQ731-376

 

[zdas04]

Swertel,
Think about the case (that actually happened to me once) where you need a piece of specialized software for an engineering analysis. You don't have the time/skills to write it yourself. You write the specifications, hire a kid (in my case a high school student) to turn the specifications into code, carefully verify the program with simplified data (but the full analysis is just too involved to take the time to verify it with real-world data), run the program, since the results look "reasonable" you include them in an engineering report.

I had no problem with this scenario being "engineering work done by me or under my direct supervision". Another PE might have since a non-engineer provided a black box piece of the analysis.

As far as having the FEA engineer run an analysis and provide you with an expert opinion, is that any different than sending a fluid sample to a Lab and including the results in your analysis? Or including a printout from Ceasar II when you haven't verified the program calcs?

David

 

[IRstuff]

It's mostly a matter of due diligence.

While you might not know or manage the inner workings of a Lab, you could and should send test samples to verify accuracy, check with other clients, etc.

TTFN

 

[FACS]

Actually, when the time comes, talk to you accountant; that's probably what you lawyer is going to recommend.

I am both an "S" Corp and a LLC, for reasons explained to me by my accountant; most of which is tax benefits and liability exposure. You can do a Google search on the subjects and get some pretty good information. Have it sorted out before you file, and have a lawyer file your articles of incorporation.

But the bottom line is to get an accounant on board before you do anything.

Charlie

http://www.facsco.com

 

[Senselessticker]

Swertel,

I'm not sure I'm understanding you. Are you meaning that you "cannot" stamp someone else's design for legal reasons? Or you "will not" stamp someone else's design because you were not involved? I do not know all the governing laws, but is seems to be that if someone is "paying" you as P.E. to review, stamp, and sign someone else's work (even if the design is produced by a non-lisenced subcontracting consultant)...everything is perfectly legit. In my mind the practice of engineering begins and ends at the stamp regardless of what events, design, anlysis, etc.. etc.. occured to produce any drawing, spec, calculation, etc.. etc.. As long as a non-liscensed designer/consultant does not claim to be practicing engineering (i.e. stamping and signing documents)...no laws have been broken...correct?

 

[Ashereng]

If you have checked the design yourself, and are satisfied that all pertinent information has been included, and reviewed, done your due dilligence, then you can legally and ethically stamp the drawing. You have, in essence, done the work.

If you are just "looking" over someone elses work, and it "looks" right, it may be legal, but probably not ethical.

 

[JAE]

Ashereng is right.

Senselessticker - you can't seal/sign another person's engineering work unless you had direct supervision over their efforts.

So if someone comes to you with a "finished" engineering design, and asks you to seal/sign it, and you don't do a full design check of every calc., detail, etc., and you seal and sign it you are breaking the engineering laws in most US states.

This is called plan stamping. If you read the engineering newsletters of the various US state engineering boards, they are full of reports of individuals being fined, put on probation, or losing their license due to this practice.

 

[Senselessticker]

Thanks again for all the posts folks.

Can anyone point me towards some literature about such "engineering laws"? I'm very curious because I'm being offered some moonlighting work by some GC's and developers which would consist of troubleshooting code issues, lighting design, redlining drawings, CAD, etc.. etc.. But I've been told that "they" will take care of getting a P.E. to review and sign off on my work. Should I be seeing red flags?

 

[Ashereng]

Senselessticker,

In my jurisdiction, you can get it from the engineering society.

We have documents on:
The Act
Regulations
Code of Ethics
By-Laws

Your questions on whether you can legally/ethically stamp something is well illustrated and documented in my association's web site's documentation. I am sure there is similar liturature in your association's.

 

[zdas04]

Look at the NCEES web site for things that are general across the states. Then Google your state name with "Professional Engineering" and you should get to your board page. All of them I've been to have links to the state laws that created the board and to the convenents that the board as adopted.

David

David Simpson, PE
MuleShoe Engineering

http://www.muleshoe-eng.com

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

The harder I work, the luckier I seem