Canadian firm doing work in the US 3

[jimmytwotimes]

I'm a Canadian citizen living in Canada. I've got no current ties to the US; the only exception being I am licensed in a few US states (in addition to an Ontario license).

As I get more experience I see the appeal in trying to go out on my own. However, based on my experience, I don't think it would make financial sense if I limited myself to the Canadian market. I am just wondering if anyone has any "high level" guidance as to what would be involved in opening a Canadian firm and providing engineering services in the US.

I would focus on working with contractors to do small-scale delegated design items...not looking at designing major stuff (if that matters). I'm really just looking for a place to start - if I pursued anything I would definitely seek professional help for this.

 

[Enable]

Can you tell us a bit why you think small delegated design work / temporary works isn't feasible in Ontario? I work in that market and I would say it's the exact opposite. EORs are delegating everything but the ETABs modelling these days and there is a ton of work to be done at home!

I cant help with the cross-border engineering, maybe KootK who does a lot of it will be able to help a bit more. But as far as the obvious: you'll need to keep your license current in those jurisdictions, you'll need whatever equivalent of a CofA they have, and you'll need to figure out inspection coordination. If you are doing smaller items I would imagine inspections might be a problem or you'll have to burden the contractor with that (ask them to get a third party locally), which would be typical for large builds but small items I am not sure (we self-inspect all our designs for example and I think that's the standard for smaller delegated stuff but not positive).

Also I'm pretty sure (93% confidence here) that operating cross-border you will need to file taxes for each state you work in. For smaller design fees the overhead might be killer (lawyer / accountant / whatever for each state) and you'll want to include that in your calculus.

Best of luck on going out on your own!

 

[jimmytwotimes]

Thanks for the response Enable. Truth be told I am still in the dreaming phase so I certainly wouldn't rule out only working on the Canadian side. Ontario is a damn expensive place to live though and engineering salaries are not great here. I semi-recently finished the marriage/house/kids thing (age 32) and need a bit of time to build a nest egg if I were to take the plunge. Realistically I think spending the next 2 years putting a real plan in place and building/reinforcing contacts would make sense.

My expertise has been in facade engineering - mostly curtain wall but also misc. stuff like canopies, skylights, sunshading elements, etc...I work on pretty big projects in the US/Canada currently, so if I went solo I'd want to scale that back a bit and focus on more local stuff to build clients. I want to be the engineering department for smaller installers that can't justify a full time engineer. Then go from there - engineering on larger projects, work as a consultant for architects, or divert into other delegated design stuff.

It's a good point about overhead though. Lots of small firms that do this kind of stuff seem to have licenses in many provinces/states...it seems like it could be expensive in terms of insurance etc...

 

[KootK]

1) I've been doing pretty much exactly what you've proposed since 2016, albeit mostly with small buildings projects and delegated design stuff.

2) I've never had to file taxes in any of the US states in which I've worked. In a nutshell, I believe that you only have to file taxes in jurisdictions where you have a physical/legal presence. Simply working on projects in a particular jurisdiction doesn't trigger a tax burden in that jurisdiction in my experience.

3) Inspection requirements have been largely unproblematic. Where requirements are minimal, it's at my discretion. Where the requirements are hardcore special inspection stuff, it tends to be pretty easy to line up a 3rd party inspector. I could see this being tricky for temporary works stuff though.

4) I anticipated that getting US coverage for my Canadian insurance policy would be a hassle. I was pleasantly surprised to find that was not the case. I basically have the cheapest policy that it is possible for an engineering firm to have and my US work didn't affect the economics of that at all. Big insurance firms are accustomed to working across borders in a way that small fish engineering firms are not it seems.

5) You do indeed need to figure out the Certificate of Authorization business for each state which can be annoying. Depending on where you're doing work, you may need a certificate of authorization, the equivalent of a permit to practice, or to be registered with the state department of commerce. Or some combination of those things. In this respect, I wish that I had set myself up as a sole practitioner rather than as a corporation. Many jurisdictions give sole practitioners a break on this stuff and it would have been nice to have been able to avail myself of that.

6) Different states can vary wildly with respect to how helpful they are towards foreign engineers attempting to do business in their jurisdiction. Wyoming was so kind to me that I'm half tempted to move there. Illinois has treated me so badly that I half wonder if there's someone living there by the same name as me who's on the registered sex offender list or ten years behind on child support.

7) In general, I agree with your strategic thinking on this. I've done very well on my US work which offers three advantages for me:

a) The exchange rate.

b) The size of the markets involved. I've done the best in very populous states that have the SE requirement like California, Illinois, and Florida. California alone is as large of a construction market as Canada is.

c) There are some Canadian component suppliers who value a relationship with a local engineer who can also take care of their US work. For this, it is advantageous to be able to stamp work in a LOT of US jurisdictions if possible. I loosely team up with a few other engineers for this purpose in order to get greater coverage without having to get all set up sparsely populated states for one off assignments.

 

[Enable]

Thanks KootK that's good info to have. The taxes bit is interesting. I once worked for a firm that did work in Alaska and we got in trouble for not paying US taxes, which had to be retroactively worked out. No office or physical presence to speak of. But I wasn't privy to many details so perhaps some shenanigans went on that necessitated the taxes (or because it was government work). According to this BDO bulletin one just needs to be considered to do "trade or business" in order to be required to pay state taxes (and the bar is pretty low from what it lists anyways). Best to speak to an accountant I would say!

EDIT - to file taxes the bar is low...not necessarily pay since the tax-treaties with the US

 

[KootK]

I once worked for a firm that did work in Alaska and we got in trouble for not paying US taxes, which had to be retroactively worked out.

There are always those stories floating around, both for firms and for individuals, that make things scary (probably scarier than would be justified by the reality of it). I physically lived in the US for eight years and, every so often, I'd hear horror stories about that for individual taxes. I don't remember the details but, somehow, it wound up only affecting very high earners. Quite literally a "doctor" problem for Canadian MD's working in the US. Not so much for lowly structural engineers who don't seem to get paid enough for anybody to get to concerned about to whom they are paying taxes.

 

[KootK]

I've been fortunate in that my little brother is a high powered accountant who does cross border energy stuff. His being a accountant doesn't make me universally right about taxes but, so far, he's been a great help to me in navigating this stuff. The language used in the tax codes can be tricky for consultants because it tends to be geared towards:

1) Firms with people performing their work, physically, in foreign jurisdictions and;

2) Firms delivering physical products to foreign jurisdictions.

Those things are often considered to represent "carrying on business" in the foreign jurisdiction. Intellectual design work developed at home and then implemented by someone else in another jurisdiction seems to be treated differently in my experience.

 

[IRstuff]

One would hope so; otherwise, all those virtual receptionists in South Asia should be getting letters from the IRS.

TTFN (ta ta for now)
I can do absolutely anything. I'm an expert!

https://www.youtube.com/watch?v=BKorP55Aqvg

faq731-376 forum1529 Entire Forum list

http://www.eng-tips.com/forumlist.cfm

 

[KootK]

Fine point IRstuff.

An interesting, alternate version of this is how one determines the sales tax rate for interprovincial consulting services:

1) Based on the province in which the consultant was sitting when she did the work. Me in Alberta.

2) Based on the province that the purchaser was sitting in when she received the work. Client in Nova Scotia.

3) Based on the province the physical work described by the design will be constructed. Project in Manitoba.

This is CRA's Place of Supply concept. Again, I think that the answer is #1. That said, I've been doing #2 because I don't know for sure and every province's tax rate is equal to or higher than Alberta's.

 

[jimmytwotimes]

KootK - thank you for your thorough responses. Your first-hand insight is exactly the sort of thing I was hoping to hear. It's good to know insurance should be straightforward. Getting licensed in various states was a bit of a headache even with an NCEES record. I have to mentally prepare myself before doing that sort of paperwork. But good to know it sounds generally do-able.

- Do you have a work visa/green card in the US? I recall at least one state required an SSN for me to get a license. Which I was able to get because I have a TN visa through my current employer. Not sure how going self-employed would impact that though (or if it matters)

- Does the exchange rate for US work end up as much of a benefit as it seems on the surface? It seems like a cheat code to live in Canada and get paid in USD. Like you could hire/retain an engineer for a good amount of time I'd imagine at 70-90k CAD. Which seems like nearly entry level now if converted to USD as a salary. I know outsourcing has been around forever and remote work within the US is becoming more mainstream. But in my (albeit limited) experience it seems the salaries for structural engineers is much better in the US than Canada.

 

[KootK]

Do you have a work visa/green card in the US?

Nah, I'm a TN refugee, same as you.

I recall at least one state required an SSN for me to get a license.

You still have an SSN, just not one tied to a valid authorization to work status.

Does the exchange rate for US work end up as much of a benefit as it seems on the surface?

Yes, it does. I work it two ways:

1) Sometimes it garners me a healthier fee (133% buys some wiggle room);

2) Sometimes it allows me to be extra competitive (true outsourcing curse).

But in my (albeit limited) experience it seems the salaries for structural engineers is much better in the US than Canada.

My experience was the opposite but much depends on the TO/FROM markets. Structural engineering pays much better in Calgary, relative to our cost of living, than it did in Wisconsin relative to their cost of living.