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Limited Liability Company?

Limited Liability Company?

Limited Liability Company?

What are the benefits of starting an engineering firm as an LLC?

I understand why anyone in the engineering profession would be concerned with limiting your liability, but how is the company structured to achieve this?

Also, what are you giving up to get this decrease in liability?

Any insight on this is greatly appreciated..

RE: Limited Liability Company?

When I looked into it in the UK, a long time ago

Cost - a partnership was much cheaper to run

Credit - a limited liability company would find it much harder to raise credit from banks than a partnership

Legal liability - when push comes to shove the lawyers will chase the money, hiding behind articles of incorporation may work if your lawyers are better than theirs.



Greg Locock

SIG:Please see FAQ731-376: Eng-Tips.com Forum Policies for tips on how to make the best use of Eng-Tips.

RE: Limited Liability Company?

This has been discussed many many many times in these forums.  The thing that swayed it for me was that incorporation does not protect a PE from personal liability (an LLC cannot stamp a drawing, a person does that) so the risk that I would be sheilding myself from was trivial.  The costs were not.  In an LLC (or Subchapter S or regular corpoation or PLLC), you have to establish salaries, pay Social Security, have a board of directors.  In a Sole Proprietorship or Partnership there is no line between what the company does and what you do so if you really screw the pooch your family can wind up living under a bridge while you're in jail.  In an LLC the same action that lost your house in a Sole Proprietorship would also lose your house since the LLC cannot protect a PE from personal liablity for things he stamps.


David Simpson, PE
MuleShoe Engineering
Please see FAQ731-376: Eng-Tips.com Forum Policies for tips on how to make the best use of Eng-Tips Fora.

Remember, being ignorant isn't your fault; staying ignorant is.  

RE: Limited Liability Company?

An LLC or PLLC that has one member (owner) and no employees can be considered a disregarded entity and basically you can run everything through a Schedule C on your 1040; very similar to a sole prop. I reviewed this with my attorney and accountant prior to establishing.

David is absolutely correct that the protection is limited. I did find that the costs In NY were relatively small to start (quite a bit less than $1,000 with the majority cost being the advertising of the formation in the local paper). Look at the regulations, laws, etc that govern the formation in your state.

It really depends on what you want long term. If you feel the business will grow beyond one person it does provide a structure to accomplish this. Some people will claim having LLC or PLLC makes the company look more professional/legitimate for a one person firm; however, that is subjective. Again, it will not protect you from professional liability.

I hope this helped somewhat.


RE: Limited Liability Company?

In the UK there are several advantages, mainly tax/NI based to operating through a limited company. I still have professional liability insurance. Some larger companies won't deal with sole traders...

Re Greg's comments - lawyers can only chase what is there - if you haven't signed any paperwork accepting personal liability for debt etc then the liability is limited to the assets of the company.

See the PCG guide for some information
http://www.pcgroup.org.uk/cms/index.php - scroll about half way down the page and follow links for PCG guides, you'll have to register to get a copy.

Regards, HM

No more things should be presumed to exist than are absolutely necessary - William of Occam

RE: Limited Liability Company?

HamishMcTavish...perhaps your comment on Greg's comment is true in the UK; however, in the US you incur personal liability as a licensed engineer without regard to corporate structure or "paperwork".  You can't contractually disclaim negligence and that's usually the culprit in personal liability for engineers.

RE: Limited Liability Company?

Hey Ron, that's a whole can of worms over here!

Engineers in the UK are not licensed - as far as i know the only ones sitting an exam are the structural engineers who are chartered through the Institution of Structural Engineers. The rest are Chartered via a panel assessment / interview process.

In addition anybody in the UK can call themselves an engineer...i think that has been the subject of a few threads in the past so say no more!

Regarding negligence - i don't think you can contractually disclaim it over here either but it's a long time since my courses on contract law so don't quote me on that

regards, HM

No more things should be presumed to exist than are absolutely necessary - William of Occam

RE: Limited Liability Company?

Talk to your lawyer and accountant....

RE: Limited Liability Company?

HM...that same can of worms here as well.  Makes you wonder sometimes whether it would just be better to be a McDonald's manager.....

Would you like fries (chips) with that? shadeshappy

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