Seeking Advice Re: Business Entity Type - Engineering Exemption in MA

[cray54]

I have been seeking general advice regarding the choice of business entity for a company that will be performing engineering within R&D and manufacturing work. From a strictly accounting and business structure perspective, LLC has been recommended.

On my review of the Massachusetts laws, I'm not sure an LLC is covered in their engineering exemptions for manufacturing and research (The law specifically references employees of corporations; but an LLC is not technically a corporation). I asked the engineering licensure board, and they could not clarify for me.

I'm looking for guidance, probably from a lawyer with experience here. Can anyone make a recommendation for the right person to ask for this advice in Massachusetts (Ideally that is affordable for a small startup, or is friendly to small businesses)?

Thank you, Chris

 

[jhnblgr]

https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXVI/Chapter112/Section81r

g) the performance of engineering work or services by employees of a corporation engaged in manufacturing, research or development operations, which work or services are performed in connection with the research or development activities of, or the manufacture, sale, installation, maintenance, repair or service of the products of, such corporation, or of its parents, affiliates or subsidiaries; provided, that such research or development activities which are not related to the manufacture, sale, installation, maintenance, repair or service of the products of such corporation, or of its parents, affiliates or subsidiaries, are not primarily in connection with the construction of fixed works which are to be made available for use by the general public;

 

[cray54]

Yes, that is the section in question. I did not lay out the details here because I expected "you need a lawyer" to be the answer. I'm happy to discuss it here, though. The plan was to organize this business as an LLC, and for the employees and owner(s) to do engineering related to manufacturing and R&D.

The following questions are regarding Licensed Engineers and related exemptions. In MGL Ch. 112, § 81R (g) regarding exemption, the following is stated:

"the performance of engineering work or services by employees of a corporation engaged in manufacturing, research or development operations..."

Regarding "Corporation":
Is this word intended to include a business structured as an LLC (an LLC is not a corporation)? It seems the intent is to mean "business", but other paragraphs in section 81R reference things like firms and partnerships, while this section does not. Does a business need to be structured as a corporation in MA in order to meet this exemption?

Regarding "Employees":
Does "employees" in this section apply to owners/members of an LLC? For tax purposes, an owner of an LLC is not considered an employee as their taxes are filed in a different manner. For the purposes of engineering exemption, however, is the owner of an LLC considered an employee of that business?

Thank you.

 

[SWComposites]

I suspect that MGL statement was written long before LLCs were invented.

 

[jhnblgr]

Not really sure what you are driving at. Are you asking if you need to be a P.E. to run the business typically PLLC or PC. Or do you operate under industry exemption?

 

[EngrPaper]

Not a lawyer nor an accountant, so take this for what it is.

I think SWComposites is right - "corporation" is a generic term for incorporated entities. I think an LLC would easily fall under that category. But idk if there is something MA specific. In my home state, all laws regarding firms/companies/corporations whatever apply to LLCs and C-Corps alike with regard to engineering.

Yes, I would expect any limitations on "employees" to fall on the owner as well, in so far as the owner is performing work on behalf of the firm. And in some cases, the owner is an employee of the firm for an LLC. You seem to be confusing the legal entity of the LLC with its tax filing status, which can be sole-prop pass thru, S-Corp, or maybe even something else I am not aware of.

 

[cray54]

...You seem to be confusing the legal entity of the LLC with its tax filing status...

I am intentionally using tax filing definitions as those are the only definitions I have found in the MA rules. That said, an LLC is specifically not a corporation, even though you can elect to have it taxed as one.

I suspect that MGL statement was written long before LLCs were invented.

I think SWComposites is right - "corporation" is a generic term...

This seems like a logical explanation, a law that was not updated to reflect this business entity and structure.

 

[cray54]

...Are you asking if you need to be a P.E. to run the business typically PLLC or PC. Or do you operate under industry exemption?

I am specifically asking about Engineering Exemption. I suppose another way: according to MA State law, can a business be organized as an LLC and have members legally operate under the exemption applying to manufacturing and R&D, or does it not apply to them?

 

[jhnblgr]

https://fxbinc.com/wp-content/uploads/2016/10/state-by-state-summary-licensure-law-exemptions.pdf

Appears that it maybe exempt.

Check similar companies websites to see what they are.