Sole proprietor as engineer or business man.

[shacked]

A few times since I have started my business (residential structural) as a sole proprietorship, as I have been speaking with clients they have said that I was a business man. At the time I didn't put much thought into that label, until recently. My response should have been NO!

I am an engineer that provides my services. I do not have a web site or any marketing banter, with the exception of business cards. I rather despise the term, "business man" since I see that as a generic label that Western society gives someone that owns a business. When I hear the term business man, a picture of a person in a suit and tie carrying a briefcase comes to mind. A mindless fool chasing money instead of living life.

Just my thoughts.

Anyone care to expound on this thought?

 

[KootK]

I am a sole proprietor.

I would be flattered to be called a businessman.

My brother is a former accountant and a businessman in the truest sense of the word. And he has a take on this that I find convincing.

He says that I do not really have a "business" even though I am legally incorporated. What I am is self employed.

By his logic, a true business is one where the owners either have passive income generation or have the potential to have passive income generation in the future. His take is that, if the only way that I can make money is by doing the work, that's active income generation and, therefore, not really entrepreneurship. My brother cofounded a company that engages in natural resource extraction. Some weeks he works like a dog. Other weeks he just plays stick man on his laptop and waits for lunch to roll around. He makes about the same amount of money either way.

This is reflected in the situation that one encounters when attempting to sell a small engineering firm. If you are so small that the business likely dies when you do, you are probably just self employed and no one in their right mind would buy your business outright for any significant amount of money. At best, someone might agree to be your transitional successor and send a cut of the profits your way in exchange for the introductions that you make for them.

 

[human909]

I would say that description is accurate and your issue relies with you preconceived ideas of what a "business man" is. Sure in isolation the term "business man" conjures up images of suits and ties, briefcases, deals, money and the big corporate world. But that is a caricature.

In a strict and direct sense you run a business so you are a "business man". But I get your point. If your primary goal is simply to do engineering and get paid, then that is certainly a different goal from trying to run and grow a business.

There are heaps of nuances here. I've seen some young moderately experienced engineers start up their businesses hire a half a dozen people and get running. They are clearly focussed more focussed on the business side of things, likely driven by money and/or the desire to run a business rather than do engineering.

I know another amazing engineering who grew a business that spanned several states. He sold it all because he found himself spending too much time running a business with very little time left for his passion of engineering. He now just works for himself which is how he prefers it.

This is reflected in the situation that one encounters when attempting to sell a small engineering firm. If you are so small that the business likely dies when you do, you are probably just self employed and no one in their right mind would buy your business outright for any significant amount of money. At best, someone might agree to be your transitional successor and send a cut of the profits your way in exchange for the introductions that you make for them.

Hey! How did you know how I kickstarted my business?

 

[Ron247]

What would matter to me is what they envision a businessman to be since they used the term in conversation.

I have 2 habits when conversing with someone that have not educated me but have enlightened me. When someone renders an opinion on something, I ask why they think that. I like to understand why and hope I can learn something beyond the base opinion. In fact, I rarely care about the opinion more than the rationale. To my surprise easily 40% have no idea why they have an opinion on something, and many have extremely harsh opinions with no rationale behind it. My other habit is asking for a definition of something since I do know we use the same words but have different nuances in their meanings. "Fair" is one of my favorites to inquire about. There again, fair generally has a situational meaning but when questioned, their definition falls flat a lot when applied to other situations.

Look at some possible meanings of the word:
Businessman-you understand dealing with Clients
Businessman-you appear to able to successfully run a business
Businessman-you will lie when needed to appear to be able to run a business
Businessman-you are worried about the bottom line
Businessman-you are more about "selling the service" than professionally supplying the service
Businessman-you present yourself as more business than engineer
Businessman-9 to 5 and go home; i.e. business hours
Businessman-work as many hours as necessary

So, as I said, it matters what they mean when they say businessman. It is kinda like what hurts more, having an attractive person say you are ugly, or having an ugly person say you are ugly. I am sure each one has a different idea of "ugly".

 

[LOTE]

Unless you have one client and are essentially separate entities for liability purposes, anything more than this I would consider a business with you as the business owner, even if you do not have any employees/contractors/outsourcing. Whether you are a sole proprietor, LLC, Scorp, etc. is purely how you decide to pay taxes (aside from any legal protection they may provide).

The day you left your W-2 job, you became a business owner (I prefer the term business owner as businessman does have a sleazy car salesman in a suit vibe to me). Every decision you make now outside of doing actual engineering work is a business decision. Even making the decision to have business cards and not a website is a business decision based on how much work you want to bring in vs. how much you want to spend on marketing.

I am self employed, but I am structured as an Scorp to save on taxes. I have a board and have tax deductible board meetings, meals, and trips. I track everything with invoicing software so I can save the most on taxes. I consider all these business decisions, and I think it would be foolish not to do everything I can to maximumize the $ for the amount of work I am putting in.

I outsource my drafting to an outside company that specializes in drafting services, both to free up more time for engineering and because engineering is higher $ work (both love for engineering and business decision). I have a VA handle file management, bookkeeping, invoicing, client on-boarding, etc. so that I can spend more time engineering, both because I want to do more engineering and it is higher value work. I buy certain software because it saves time so I can spend more time doing more valueable engineering work, which is also a business decision.

It's one thing to want to keep it simple, but I think if you are not running your sole proprietorship like a business, you are selling yourself short.

 

[XR250]

I have a board and have tax deductible board meetings, meals, and trips

I still laugh at this.

 

[human909]

I know one engineer who tries to align pretty much all his regular international holidays with engineering conferences! Or even throw I several engineering 'research' visits to ancient Greek and Roman buildings and call in all tax deductable!

Of course if you need to bring your wife 'personal assistant' along too then that is a business expense too!

 

[XR250]

We can try to justify all of this tax dodging in our minds but it really comes down to what an IRS agent is going to accept IF you get audited. Taking my family to Disney World under the guise of a "Board Retreat", I seriously doubt it.

 

[LOTE]

Taking your family to Disney, no. But if you spend several days at a conference in Orlando that is close to the weekend, what you do in your off time is irrelevant to the IRS.
Meeting your board members at a half way point between you and your board members' houses (that just happens to be in the mountains in the fall), having a scheduled meeting with an agenda, taking meeting minutes, etc. and scheduling a meeting with your lawyer and a client who happen to be in that location as well, with everything well documented, yes.

 

[XR250]

Meeting your board members at a half way point between you and your board members' houses (that just happens to be in the mountains in the fall), having a scheduled meeting with an agenda, taking meeting minutes, etc.

Puleeze! Nobody is buying that your extended family is your "Board". No sole proprietor in our business needs a board.

 

[jhnblgr]

Puleeze! Nobody is buying that your extended family is your "Board". No sole proprietor in our business needs a board.

That and in some countries/states only Professional Engineers can be board members of the business. Also likely an ethics violation on top.

 

[human909]

That and in some countries/states only Professional Engineers can be board members of the business. Also likely an ethics violation on top.

While some states might have that requirement. Holding a board meeting for a company isn't an engineering task. It is often not even remotely close to engineering. It is a management activity related to the company, the business if you will. I don't see how engineering ethics would come into that. Corporate ethics yes, but we all know how much ethics that are practiced or are held accountable in the corporate world...

Regarding taking your wife personal assistant on trips. For this particular engineer that I mentioned his wife was working for him doing the books and drafting. So there was enough connection there to justify it as a business expense. Ethics wise, that is an individual choice. You know the true reason and motivation for the trip.

Puleeze! Nobody is buying that your extended family is your "Board". No sole proprietor in our business needs a board.

You don't need a board, but if you are incorporated then you likely can have a board and can have board meetings as part of you company fiduciary duty. I'd be surprised if there is a requirement on the revenue or number of employees you require before a board is 'allowed'. Your small sole proprietor business has higher profits and in some cases higher revenue than many massive tech firms.

Of course I'm neither an accountant, tax lawyer, nor even know any relevant local, state or government laws that apply to you. So my above assertions might be off in some localities.

For what it is worth in my locality it seems that 'meeting' minutes must be kept of annual resolutions made relating to the company. In the case of my company several resolutions were made, recorded in the meetings for legal reporting requirements.
~~~~~

The only tax lurk I've jumped on is to buy a new car in the name of my company. I felt a bit guilty as I had never owner a brand new car in my life, only second-hand cars. Due to my local tax laws and the type of car it was, I could claim 100% of the usage in the company name. (This wasn't even a loophole, this was explicitly allowed by tax law.) So now I have a semi fancy car with all the modern features.

 

[Greenalleycat]

My dad (45 years as a structural engineer) loves his one-liners
His applicable one here is: "I'm a consulting engineer, and there's a reason that the consulting comes first"
Now, I don't think 'consulting' = 'businessman', but his point was always that we aren't really hired for the strength of our engineering so much as the other associated skills
Our ability to communicate, to market ourselves, to generate connections etc

So, every engineer is going to need at least a dash of businessman in them if they want to succeed

 

[human909]

His applicable one here is: "I'm a consulting engineer, and there's a reason that the consulting comes first"

I like that and probably should use that more. Although my business has consulting in the title. I rarely describe myself as a consulting engineer, I should. It is particularly important in Aus, NZ and UK as engineer is not a protected title.

So, every engineer is going to need at least a dash of businessman in them if they want to succeed

I believe so. I've worked sales assistance jobs earlier in my life and I enjoyed them and was good at that work. I'm a people pleaser and my clients/customers come first. These are customer relation skills and in most cases at least 50% of the ability to acquire and retain clients comes from these skills as opposed to engineering acumen.

On the business strategy side of things I've been mostly idle as I'm otherwise run off my feet. But long term I want to broaden my client base to ensure I have a robust and diversified client base. At some stage I may to figure our a growth and client acquisition strategy. However currently they are coming to me through word of mouth.