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License and Registration Please

Timothy R. Hughes, Esq.
Hughes & Associates, P.L.L.C.

           
Electrical contractors are often familiar with licensing requirements. What electrical contractors may not know, however, is that failure to properly obtain or maintain licenses may have serious financial ramifications. If you fail to obtain proper licensing, you may seriously inhibit your ability to get paid for your work.

In addition, registering a corporate entity is an entirely separate process from electrical licensing. Failure to properly create or register a corporation can also have major financial impacts. Thus, you need to be familiar with both corporate filing requirements and licensing requirements in your particular jurisdiction.

Individual and/or Corporate Electrical Licenses

Electricians are generally required to obtain licenses. Unlike certain other trades where life safety issues, in particular fire suppression, are less prevalent, electricians tend to face extensive and detailed examinations and licensing. You are likely well acquainted with licensing standards and testing in your jurisdiction.

In contrast, many of you are likely unfamiliar with the distinction between licenses for individuals and those for corporations or other business entities. Many states require professional licensing for not only individuals, but also for corporations. You may be in total compliance with the law as to your individual license, but still be in trouble if your corporation is unlicensed.

Potential Impacts of Lack of Licensure

Failure to obtain a license and then performing electrical services may be a criminal offense in your jurisdiction. You could face fines and even potential jail time for performing electrical services in violation of your state’s licensing requirements.

In addition, failing to maintain proper licensing could translate into an inability to enforce payment for your work. Different states have different rules with regards to this question. Some states have a very harsh “bright line” rule that if you lack a license, you cannot compel payment for your work. Some states say that you may be forced to disgorge payment received for work without a required license. Other states have a safe harbor which permits you to recover payments as long as you can demonstrate a good faith belief that a license was not required or that you were in compliance.

The main point is that the payment ramifications of licensure could cripple your company. Given these serious consequences, you should be fully educated on the licensing requirements for both you as an individual and your business.


Business Registration

The requirement for registration of business entities runs parallel to and separate from corporate and individual electrical licensing. If you want to operate as a corporation, you need to file the proper papers to create or register your corporation.

Many people become confused when they work in multiple jurisdictions. You need to file initial papers to create a corporation. If you perform work in other jurisdictions, you may be required to file papers to authorize you to transact business as a foreign corporation in those locations. Failing to properly document your corporate status could threaten your ability to file suit or eliminate corporate protections from personal liability. Prior to either formation of your corporation or entry of the business into a new market, you need to be fully aware of all corporate filing requirements.

Conclusion

Electricians are highly regulated and licensure is a basic assumption. You should also be familiar with the requirements for corporate or business licensure and also for corporate registration to ensure that your business is properly created and registered. A failure to do so could translate to a loss of corporate protection and ability to recovery damages. Given that such a failure could be fatal to your business, education in this arena is critical to your business success.