Video Summary:

In this transcript from a video, Andy Gale from Gale & Vallance in Orange County addresses a common question: can an engineering firm be an LLC in California? He explains the legal framework surrounding LLCs for professional services, clarifies why engineering corporations are treated differently, and walks viewers through the relevant California Corporations Code, Business and Professions Code, and California Code of Regulations.

To learn more about whether can an engineering firm be an LLC in California and avoid compliance issues, check out our detailed article on California LLC rules for engineering firms.

Please note: This video does not constitute legal advice. Laws may change, and every situation is unique. We recommend contacting an attorney regarding your specific case before making business entity decisions.

Transcript

00:00:07 – Common Questions About LLCs for Professionals
it’s not uncommon that we get lots of questions every week from various professionals as to whether or not they can or cannot form their business entity as a limited liability company.

Based on all of the Google research that a lot of people do these days, they get caught up in this sort of internet myth that LLCs are simple and easy, and you don’t need evil lawyers, and you can save a lot of money, and it costs you 75 bucks and just do this stuff yourself.

And when you combine that with the A-type personalities that you get with professionals, you get a lot of people just trying to do stuff themselves. And/or you get, you know, lawyers or accountants that think they’re lawyers and can form corporations and end up getting their clients into a lot of trouble.

00:01:05 – The Complexity of Forming Corporations for Professionals
And when it comes to forming corporations, unfortunately, as it relates to professionals, there’s a lot of different code sections that you have to look to just to get sort of definitive answers.

You can start in the Corporations Code, and then you can go to the Business Professions Code. Then you can go to the California Code of Regulations, and then you’re finally having to deal with your particular board and asking them questions.

So I’d received a question this week wherein the client asks:
“Your website says that an engineering company cannot be an LLC. However, I see many examples of this and have a California lawyer telling me it’s fine.”

00:01:54 – The Legal Walkthrough on LLCs and Professional Services
The basic walkthrough is this: if you go to the code section that deals with limited liability companies and what they can and cannot do, you’ll see that within that particular code — the California Limited Liability Company Act — it says quite clearly that nothing in this title shall be construed to permit a domestic limited liability company to render professional services.

And obviously, when you’re trying to form an engineering company, most oftentimes engineers are rendering those professional services.

And then, when it says, “Well, what are the professional services?” you need to go to a different section of the Corporations Code wherein it says that a professional service means any type of professional services that may be lawfully rendered only pursuant to a license authorized by the Business and Professions Code.

Then it takes us down to here, which says that this chapter does not prohibit civil, electrical, or mechanical engineers from practicing or offering to practice within the scope of their license these kinds of services — so civil, electrical, mechanical — as a sole proprietorship, partnership, limited liability partnership, or corporation.

And you’ll notice quite clearly that limited liability companies are excluded from this list.

00:03:23 – Preventing Mistakes and Compliance Issues
So that’s kind of how you logically weave your way through that problem, and hopefully this will prevent some other lawyers from making mistakes on behalf of their clients.

And more importantly, perhaps accountants who think that they should be doing legal work, and/or worse, when you get those A-type personalities where they think they can just do it themselves and then subsequently end up in a big headache.

California LLC Rules for Engineering Firms – Final Thoughts

If you’re wondering can an engineering firm be an LLC in California, the answer is generally no under current state law, since LLCs are prohibited from rendering professional services that require state licensure, including engineering. Instead, engineers must typically operate as a corporation, limited liability partnership, sole proprietorship, or general partnership.

Always verify the most recent statutes and regulations, and consult with an experienced business attorney before making your decision. The right legal structure can help protect your business, avoid compliance issues, and ensure you meet California’s licensing requirements.