Engineering firms have regulatory hurdles to clear at every phase in their development.
When expanding into new geographies, firms quickly find that
what works in one state often doesn’t apply in the next. Perhaps their name cannot be registered
in a new jurisdiction, or their present ownership is unacceptable, or their corporate structure
is not allowed. Or they submit an application only to find that the new state follows a
different process and they’ve missed a prerequisite, sending them back to the beginning.
Maintaining licenses and good standing throughout their
existing footprint presents further challenges, including license renewals, tracking continuing
education credits, coordinating COAs and qualifier licenses, and maintaining accurate records
with state authorities. Any disconnect between these disparate aspects of compliance can
jeopardize the firm’s licensing and ability to perform.
Many of these nuances are not captured in state websites, leaving firms to uncover them through
a slow process of exploration and discovery. This can tie up significant staff time and even
impede performance and growth.
For example, when entering a new state, firms must register with the secretary of state to do
business as an out-of-state or “foreign” firm. In 37 states,
firms must also apply for a COA through the state engineering licensing board. In five additional
states, firms must complete requirements other than licensing before offering services. (Some
of these requirements can be every bit as time-consuming as a full-blown license application,
so don’t assume lack of a license equates to easy entry).
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Since firms must generally obtain COAs before offering services in a state, the timeline to
licensing is critical to business development. Yet at the time of this writing, obtaining a COA
can take anywhere from 4 to 22 weeks, depending on the state.
Add to this the fact that some jurisdictions are rejecting as many as 4 out 5 applications for
minor paperwork missteps, and you begin to see the complexity of the regulatory landscape
engineering firms must navigate at each stage of the corporate lifecycle.
The following highlights areas that most commonly trip up engineering firms managing licensing
across multiple jurisdictions. In addition to researching the requirements thoroughly, you can
take advantage of our full range of AE
compliance solutions, from purpose-built software to expert services to make the task easier.
Entering New States
When evaluating opportunities in new jurisdictions, it’s important to check requirements
concerning the following:
Order of Operations
In most states, registration with the SOS precedes firm licensing. Yet in a few states, firms
must receive approval from the engineering licensing board before registering with the SOS.
It’s important to research the order of steps in a new state before beginning any applications.
In some states, engineering firms must include some form of the word “engineering” in their
names, while in others, firms are subject to additional requirements if their names contain
such as reference. As a result, firms often need to adopt fictitious names to operate in new
Engineering firms are required to form under a specific structure in many states. For example,
in Vermont, engineering firms must form as professional corporations (PCs) or professional
limited liability companies, while in New Jersey, out-of-state engineering firms are forbidden
from forming a PC. For this reason, corporate structure should be examined early and carefully
when contemplating a new jurisdiction.
Ownership and Management Requirements
Another area to consider when licensing an engineering firm in new geographies is ownership and
management. Many states require firms to have a specific share of ownership by licensed
engineering professionals. In New York, which is one of the more stringent states for
engineering firms, all partners must be licensed in New York. In other states, licensed
engineers must hold specific management positions in the firm. Because of these requirements,
firms may need to form a new entity under a different mix of owners to work in a particular
Design Firm Licenses
Some states combine the applications for engineering with other AE disciplines into a single
design firm application. Illinois, for instance, uses a general design firm application for
architecture, land surveying, professional engineering, and structural engineering.
"Harbor Compliance has our backs. They make everything so easy. In the middle of this
exciting and stressful time, I know the licensing aspect will not be stressful."
Valerie Craft Mitchell, CEO, Craft Electric
Once licensed, firms must work to maintain COAs, licenses of individual qualifiers, and good
standing of their entity in each state.
Most COAs 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 renewals. In addition, firms should track
renewals of individual engineer licenses, particularly for engineers in responsible charge.
Since renewals require continuing education (CE), it’s important for firms to have a system in
place for tracking CE credits and reminding engineers of upcoming renewal deadlines.
Maintaining Accurate Records
Firms must also maintain accurate records with state agencies. To change their names or addresses,
firms must notify the engineering board and fill out new certificate of authorization or change
forms, depending on the state. Many firms don’t realize that if they are changing their name,
they must first register the change with the secretary of state. Interestingly, in some states
this requires prior approval of the engineering board!
Tracking Qualifier Licenses
In addition, firms must be vigilant in tracking the licenses of qualifying engineers and promptly
reporting changes in their information or status to state agencies. If a qualifier leaves, the
firm has a limited time to appoint a replacement or risk forfeiting the COA. Because most firms
lack software to connect COAs and qualifier licenses,
this is a major source of inadvertent unlicensed activity within the industry.
Branch Office Registration
In some states, branch offices must be registered individually with the secretary of state. Some
states require an engineer in responsible charge for each branch location. In addition, it’s
important to accurately document which branch offices and associated engineers will be providing
services on a particular contract and ensure that they are properly licensed according to the
requirements of the state where the work is being done. This is another area that frequently
trips up multi-state firms.
Corporate Lifecycle Filings
In addition to managing COAs and qualifier licenses, engineering firms must maintain good
standing in each state by maintaining registered agent service and submitting annual reports
and other corporate lifecycle filings. Deadlines vary with each jurisdiction, so firms need a
reliable means for tracking deadlines and alerting staff
of upcoming due dates to safeguard their good standing.
Streamline Paperwork and Eliminate Risk
For engineering firms, licensing and entity management will always be complex. But with the right
technology and support, your firm can navigate these complexities with confidence, agility,
and efficiency. Our software and fully managed services
for engineering firms provide the resources you need to reduce risk, reclaim staff hours spent
on government paperwork, and capture more opportunities.