Posted on 02/22/2016 9:32:52 AM PST by Alberta's Child
I do not know what liabilities could be associated with the consulting you do. If you are not at risk for advise or consult that is purchased, then an LLC seems simple to start with. You can always incorporate for added protection. If you are consulting on things like Construction Safety and have any licenses that carry professional recognition (Structural Engineer for instance), then you are at risk from everything from E&O to malpractice.
Since you are the only employer and employee, it comes down to what level of risk you are protecting yourself from.
Avoid partnerships. It rarely works out.
Talk to your lawyer to make sure you can use clients from previous employment. You might get in to some trouble.
Hawaii has constant CE jobs. Check it out sometime.
“Are there any unique challenges with establishing an LLC in one state and conducting business in another?”
Yes. You MUST register in each State that you intend to do business in. You register with the Secretary of State, usually online, as a foreign corporation. Failure to do that voids all corporate protections including all business insurances within that State.
My goal is to set this up with enough risk capital so that I can cover 24 months of regular living expenses even with zero revenue, if necessary. That's not likely to happen, since I wouldn't keep at it that long if I have no revenue.
Do you have your PE?
Some good advice in this thread, some a little off.
PM sent.
Most clients don’t care that you are a home based business, most, but not all. If you cannot afford a small business office, about $500/month, then at the very least get a local post office box, about $40/year. Use that for company mailings when possible (some mailings require a physical address so no PO boxes).
Thanks! The financial side of the business is something I’m less concerned about, since I have a lot of experience in that area. One of my peculiar characteristics as an engineer is that I seem to know more about tax law and business finances than the people who do my taxes.
To protect your secretary of state documents use their security protections if they offer them. Here in Colorado we have secured business filings, so any filings (and some can be very dangerous to illegally have filed such as change of ownership) require a PIN to file. Great piece of mind.
“but I know this designation has no meaning under Federal tax law.”
It actually does. Urban legend that it doesn’t.
That is all good advice. One advantage of this transition is that I may be doing it at a perfect time. Some of the work I do is not typical of what my company does, and they’ve been pretty open about their lack of enthusiasm for it. And yet we have a number of ongoing projects that I am managing, and they would probably be perfectly happy to hand them over to me or have me complete them on a contract basis. This would be a big help in getting this thing off the ground.
Be sure you do market research first to see if there are enough customers at your location who can support your business. Have you actually gone out there and lined up customers? How are they going to find you? You seem to be concentrating on the technical details of starting a business, but if you can’t find enough customers, it doesn’t matter how good you are in what you do. You may need to also consider relocating to another location with a larger customer base.
An LLC is fine. It means a dissatisfied customer can’t go after personal property. It’s good enough for Fiat/,Chrysler.
To help make costs easier, I recommend gnuCash as starter accounting system. Works fairly well, does double entry accounting, and easy enough to use. AS you grow and engage an accountant they will most likely have their favorite accounting software, but gnuCash works well enough for free.
Are you a very good salesperson?
Good at selling yourself?
That is by far the most important factor in being a consultant. Sadly, it is far more important than being actually good at what you do and having a good reputation in your field.
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When I was working on my MBA, my university had a program where teams of MBA and Business PHD students helped (at no charge) a wide variety of businesses get started or improve existing operations. If you have a nearby college that has an MBA program, you could check with them for help.
And while I was working on my Business PHD, the Business Department several times sent people looking for help but not being selected for the team projects to me, and I’d help them out with some things for a couple hundred bucks. I don’t know if that is a common practice or not.
Liability, especially in the end goal of protecting personal assets, is your biggest concern. Unless you’ve got tens of millions to protect, they are entirely at risk just paying the legal fees to defend them. You should look into sharing that risk with an insurer who would handle the legal costs in case of a claim (with a policy large enough that it would be cheaper for then to defend than just pay out.)
Knowing your bonding limits is also important in your situation, and setting up your company to be in the most advantageous compliance with those requirements is critical.
Also, meticulous record keeping will be required with no less than the project documentation your present company maintains, otherwise you expose yourself to the claim that you sought to evade those ‘standard practices’ when you left the company you’re with (which invalidates the LLC shield.)
Pay the consultation fee to a local lawyer who sues civil engineers and find out what the pitfalls really are.
“An LLC is fine. It means a dissatisfied customer can’t go after personal property. It’s good enough for Fiat/,Chrysler.”
And for companies like the Microsoft Network MSN.
I intend to use a P.O. box, but through a family member I have access to an office I can use as a physical address if that is necessary.
Best place to start and gets lots of information and great advice for minimal costs is:
www.gosmallbiz.com
It’s owned by Fran Tarkenton.
J.D.I. - (JUST DO IT!) We were in business for
ourselves for about 30 yrs. - Husband was a free agent
for the federal court. I typed his statements &
inventories, reports & letters (before e-mail). We
traveled quite a bit, mostly in-state, so were back
home after a few overnight trips. - Money was ok; but we
did NOT get filthy rich just because we worked for
(in a roundabout way) the government! He’s retired now
for the past 7 yrs. and piddles around selling on ebay;
does ok there. - As an agent, he did investigative work.
As long as people were honest with him; he did all he
could to help them get through the process, but if they
tried to lie to him and hide stuff; they just made it
difficult for themselves.
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