The Basics of Doing Business in Other States
by James E. Robinson, Esq.
If you are a firm of New York licensed design professionals and are doing business outside of New York or if you have visions of expanding your business beyond New York’s borders and want to test the viability of expansion by bidding on a project in another state, the following will be of interest to you.
Licensed design professionals (architects, engineers, land surveyors, and landscape architects) who individually are licensed and authorized to practice in other states may do so, as individuals. However, for a New York firm to do business in another state, the firm as a whole must become qualified to practice in that other state.
From a public policy perspective, states want to oversee and control those who provide design services within their borders since faulty design services can have serious safety repercussions – buildings may crumble and bridges collapse. For that primary reason, the penalties can be great for doing business in a state where a licensed design firm does not have proper authority. For example, in some states it may be a criminal offense, (ranging from a misdemeanor to a felony) to practice without authority. In many states, if a client does not pay the design firm’s fees, the unauthorized firm may be rendered powerless to collect its fees. The state may penalize the unauthorized firm by denying it access to that state’s court system. In addition, financial penalties may be imposed by the state where the design firm is operating without authority.
The procedures to obtain authority to practice in another state vary widely from state to state. In most cases, qualification to practice in another state typically involves satisfying two conditions: (i) registering the New York firm where it will do business, and (ii) obtaining a certificate of authority from the professional board in that state. Sometimes a third condition will come into play if there is a requirement that the firm adopt a different name for use in the new jurisdiction.
In some states, there are relatively few formalities to obtain authority to practice in that state while at the other extreme, there are states that will not recognize New York professional firms at all. In that instance, it is necessary to form a new entity in the state where the design firm seeks to do business.
Before venturing beyond New York’s borders, it is recommended that a design firm carefully investigate the requirements for obtaining authority in the particular state where it seeks to do business since the authorization process can take several weeks to several months depending on the state’s review and approval process.
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Please note that this article is intended only as a general discussion of the issues attendant to practicing in multiple jurisdictions and that it should not be taken as creating an attorney-client relationship or as legal advice with respect to any particular person, business or situation. Circumstances and the applicable legal principles vary from state to state.