Deciding to take the plunge working on your own as an engineer is an exciting time, but it can also be stressful and confusing. Wondering what steps you should take in order to be set up correctly?
We have compiled a short list of the major steps we took when going out on our own. Hopefully this will help you enjoy the numerous benefits of working for yourself as an engineer. This list is not meant to be completely exhaustive, but can help set the proper foundation for long-term success.
1. Choose a business entity
Every business needs a structure for tax and liability purposes. You can choose to be a sole proprietor, an LLC, or a corporation. Each has its advantages and disadvantages. We recommend reviewing the information at the links below to make the best decision based off of your individual situation. Our founders used an LLC for their previous engineering firm and found it to be a good fit in regards to limitation of liability, operational ease, and tax treatment.
2. Get assistance from an accountant
Your newly-formed business could benefit from an expert in accounting. From setting up books to providing insights into deductions and taxes, money spent here can pay dividends down the road.
3. Determine your strategy for risk (Insurance?)
Do you planning on offering your services as an Engineer of Record (EOR)? If you plan on sealing drawings for other firms, you'll generally be exposed to more liability and will need a
game plan for protecting yourself if a mistake happens. For professional services, E&O (errors and omissions) insurance fills this role.
We recommend obtaining the correct level of insurance for the type and size of work you plan on doing. Some consultants may prefer to obtain General Business Liability insurance, read the fine print on what the policy may cover. You may find the insurance is providing negligible protection for single consultants who work from home.
4. Fulfill any state board of engineering requirements
Do you plan on sealing engineering drawings in a particular state? Or do you plan on bidding on tasks or projects where a representative of the firm seals the drawings? Some states require you to register your business as a firm in their particular state if you are offering engineering services to the general public. You'll want to see what your obligations are in accordance with the Engineering Practice Act for your particular state.
5. Get the proper hardware and software
Since you are an independent contractor, you'll provide all your own hardware and software. We recommend having a dedicated computer for your consulting work that is "clean" and virus/malware free. Keep your personal computing separate from your business operations. Install a good antivirus software program and always keep it up to date. Security is a major concern for everyone, especially engineering firms. Minimum security requirements of your machine will be stipulated in the contract, so don't forget about this important step.
Pro tip: spend the money on software that saves you time. Scanning a signature for the 100th time gets old, digital signatures are becoming universally accepted.
6. Outline an execution concept
Save yourself some headache down the road and spend some time determining how you’ll complete work and perform all the business functions associated with completing engineering work. This is where organization will pay off. Where will files be stored? It’ll be easier if you already have a standard folder structure set up. Are the files backed up? What will you use for transmittals/submittals? Retyping the same transmittal cover letter over and over isn’t efficient. After you figure out how your business will operate, develop templates for documents you’ll use frequently.
Disclaimer time: What we are providing above is guidance from our personal experience. It is not professional advice. The information provided here and on this website does not, and is not intended to, constitute legal or financial advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.