Subject: Re: Engineering from Home - Protecting Perso
Date: Tue, 03 Apr 2001 11:09:44 -0700
I found the replies to your request interesting, however, there were
some important points which were not mentioned (or at least I didn't see
them). I admire anyone starting a business so let me respectfully add
the following to the responses.
1.) Before you start there are two things you need for professional
service and advice: a lawyer; and an accountant. You're best off to
find these BEFORE you have an urgent and pressing need for them.
2.) For a start-up situation there are some financial considerations.
Start-up costs may be significant, therefore, it may be better to write
these off against personal income now before you incorporate rather than
waiting to have corporate income to write them off against.
Incorporation does cost both time and money in maintaining separate
records and filing separate reports, income taxes etc. See your
advisors in Point 1, above.
3.) Regarding asset protection, most common law countries divide civil
law into categories including contract law, and tort law (and others
that I am not familiar with). Contract law deals with contracts,
whether written, verbal, actual, or deemed, etc. etc. These include
rental agreements, contracts for services, and many more. Tort law
deals with responsibility for your actions and includes negligence and
abuse of privilege. Under contract law shareholders of corporations are
not usually liable for the corporations debts, however, directors may be
in some circumstances (hence, banks usually require personal guarantees
for loans to corporations). Under tort law incorporation may offer
little or no protection for directors, employees, and sometimes even
shareholders, particularly if it can be shown that their actions, or
lack of action was irresponsible and that someone suffered damages
because of this. There are other alternatives such as putting your
assets in someone else's name (spouse or relative, for example).
Discuss this with your advisor in Point 1, above.
4.) Regarding insurance there are several points to consider. You may
want to consider both professional liability and general liability
insurance. Some clients won't give you work if you're not insured.
Many will allow you to limit your liabilities to insurance in force.
You may feel as a responsible engineer that you want to provide the
added protection to your clients. Professional liability insurance
usually covers the legal costs and these can push you into bankruptcy
even if you win. Lawyers want their money up front or they usually
won't defend you. I don't consider the "deep pockets" argument very
valid as a reason for not insuring; if you're insured it's not your
Good luck if you decide to go with this.
H. Daryl Richardson
> Thank you everyone for your response to my inquiry as always your comments
> are VERY helpful.
> I want to clear a few things up. This out of home business would be in the
> state of CA and will probably be while I am NOT employed by another firm.
> Additonally, I do not have problem taking responsibility for my actions if I
> am in err. However, I do agree with Dennis and some of the other engineers,
> there are opportunistic lawyers who try to drag the engineer into a frivolous
> lawsuit just because he/she has insurance or just for the hell of it.
> Again, thanks for your comments. As usually its been very helpful to hear
> different points of view regarding the subject matter.