Starting a business of your own is one of the best ways to earn more money and create the freedom and independence we all want in life. After all, who wants to be an employee forever? This is why many professionals in California have ventured into creating their own companies and corporations. In this article, our experts have listed down the basics of starting an engineering company.  

What is an Engineering Corporation? 

An engineering corporation is a type of corporation that is officially registered with the California Secretary of State and is engaged in the business of providing services in line with the engineering profession.  

There are various subcategories of the engineering profession. For example, there are three basic types of Engineer Corporations: Civil Engineer corporations; Electrical engineer corporations, and Mechanical Engineering corporations. Below is a breakdown of these subcategories: 

1. Civil engineering includes studies or activities in connection with fixed works for irrigation, drainage, waterpower, water supply, flood control, inland waterways, harbors, municipal improvements, railroads, highways, tunnels, airports and airways, purification of water, sewerage, refuse disposal, foundations, grading, framed and homogeneous structures, buildings, or bridges. Civil engineering also includes city and regional planning concerning the features listed above. Civil engineers licensed prior to January 1, 1982, (with a license number before 33966) are authorized to practice all land surveying and engineering surveying. (B&P Code §§ 6731, 6731.1)  
2. Electrical engineering includes studies or activities relating to the generation, transmission, and utilization of electrical energy, including the design of electrical, electronic, and magnetic circuits and the technical control of their operation and of the design of electrical gear. It is concerned with research, organizational and economic aspects of the above. (B&P Code § 6731.5)  
3. Mechanical engineering deals with engineering problems relating to the generation, transmission, and utilization of energy in the thermal or mechanical form and also within engineering problems relating to the production of tools, machinery, and their products and to heating, ventilation, refrigeration, and plumbing. (B&P Code § 6731.6)  

What are the California State Laws that Regulate Engineering Corporations? 

All engineering corporations (including professional corporations) must abide by these California State Laws and Codes: 

1. California Corporations Code
2. Professional Engineers Act (PEA)  found within the California Business and Professions Code (CA B&P) §§ 6700 et seq.  
3. Licensing Statute CA B&P §§ 6750 – 6766  
4. Licensing Regulations California Code of Regulations, Title 16, Div. 5, §§ 400 – 476 

Read the full text of these laws and codes by going to the end of this article! 

Forming an Engineering Company in California — Things to Consider  

If you’re planning to start your own Engineering Company in California, here are the most important things to consider: 

Naming an Engineering Corporation – What are the Restrictions? 

According to California B&P §6738(a)(3), if the name of the business contains the name of a person, that person must be a licensed engineer, a licensed land surveyor, a licensed architect, or a registered geologist.  

An engineering corporation can also be named after a deceased or retired person, provided that the following conditions are met: 

1. the person’s name had been used in the name of the business, or a predecessor in interest of the business, prior to and after the death or retirement of the person;  
2. the person was an owner, partner, or officer of the business or of the predecessor in interest of the business;  
3. the person was licensed as a professional engineer, land surveyor, architect, or geologist;  
4. the person, if retired, consents to the use of the name  

Any offer, promotion, or advertisement by the business that contains the name of any individual in the business, other than by use of the name of an individual in the business name, shall clearly and specifically designate the license or registration discipline of each individual named.

An out-of-state business with a branch office in this state shall meet these requirements and shall have an owner, partner, or officer who is in charge of the engineering work in the branch in this state, who is licensed in this state, and who is physically present at the branch office in this state on a regular basis. However, the name of the business may contain the name of any person not licensed in this state if that person is appropriately registered or licensed in another state.

The Use of a Fictitious Business Name  

Engineering corporations are allowed to use a Fictitious Business Name: Doing-Business-As (DBA) or a fictitious name. However, if the name includes the name of any person, the requirements of California B&P §6738(a)(3) must be strictly met.  

Setting up the Bylaws in the Company 

A properly established set of bylaws is necessary for an engineering corporation to operate efficiently. Bylaws are created at the start of the business, and they include the rules and guidelines in addressing issues, such as the tasks of the board of directors, the frequency of shareholder meetings, etc.  

Who can be a Shareholder in an Engineering Corporation?  Who can be an officer/director?  

Anybody may be an officer of director of an engineering corporation. There are no restrictions.

Do I have to set up a professional corporation?

The answer is no.  At one time, there was some confusion as to whether not an engineer was required to form a professional corporation versus a general stock corporation.

For most professions, the answer is that you must form a professional corporation if you’re performing services for clients that require a license issued by the state.  Unlike practically any other corporation where “Professional Services” (meaning any type of professional services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Business and Professions Code) are offered as the service of the corporation, engineers are not required to form a professional corporation. Instead, they may form a general stock corporation:

According to the board for professional engineers, land surveyors and geologists, “..engineering corporations are formed as general corporations and not as professional corporations.

One giant advantage to having the engineering business set up as a general stock corporation is that a person not licensed as an engineer may be a shareholder, director, or an officer of the corporation.

However, there is a limit to this rule: A person who is not licensed as a civil, electrical, or mechanical engineer may not be the sole owner of a civil, electrical, or mechanical engineering corporation.

Additional Certificates/Documents?  

This section answers concerns about licenses and other required documents. 

Does an engineering business need to be licensed by the Board?  

No. But, a licensed engineer who is associated as a partner, member, officer, or employee in responsible charge of professional engineering services offered or performed by a firm, partnership, or corporation must file an Organization Record with the Board for Professional Engineers and Land Surveyors within 30 days of such association.   

Organization Record Forms

The law requires all licensees who offer civil, electrical, or mechanical engineering or land surveying services through a business entity to file an Organization Record (OR) form with the Board. The information that must be provided on the OR form includes the name of the business; the addresses of the primary and branch offices (if any); the types of professional services provided through the business; the names of all of the owners, partners, or officers (both licensed and unlicensed); and the names of all of the Professional Engineers and/or Professional Land Surveyors who are in responsible charge of the professional services provided. A new OR form must be filed whenever any of this information changes.

Additionally, if you leave a business where you were in responsible charge of the professional services, then you must file a Disassociation Record form.

It is your responsibility as a licensee to make sure current information is on file with the Board.

It is important to note that there are separate Organization Record Forms for Businesses Whose Principal Office is in California, Organization Record Form for Businesses Whose Principal Office is Located Outside of California, and the Disassociation forms. All forms are available from the Board for Professional Engineers and Land Surveyors. You may fill them out online, then print them out, sign them, and mail them to the Board at the mailing address listed on the forms.

What are the licensing requirements?  

According to the California Business and Professions Code, all engineering companies must comply with the following:  

1. Have at least one engineer licensed in CA as an owner, partner, or officer in charge of the engineering practice of the business;  
2. All civil, mechanical, and electrical engineering services must be performed by or under the responsible charge of a professional engineer licensed in the appropriate branch of professional engineering. 

An unlicensed person is not allowed to be the sole owner of an engineering business in California. 

Get expert advice from an incorporation attorney! Find one by clicking here!

Full California Laws/Codes that Apply to Engineering Corporations

More Coming soon!