2008 Issue

www.utahengineerscouncil.org 46 T HIS ARTICLE HIGHLIGHTS A NUMBER OF THE QUESTIONS YOU SHOULD ASK YOURSELF AND YOUR POTENTIAL CLIENT BEFORE ANY CONTRACTS ARE SIGNED AND WORK BEGINS. What type of business entity is your client? There are four common entities with which you are likely to enter into a contract: sole proprietors, partnerships, corporations, and limited liability companies. A sole proprietor is actually just an individual, including those who do business under an assumed business name. Therefore, do not assume that a business is a corporation or limited liability company simply because the name of the business is not the name of an individual. An association of two or more persons engaged in a business is a partnership. Generally, there is no actual business entity formed. Rather, the partners share in the profits and losses of the business as individuals. A corporation is a legal entity separate from its officers and shareholders. It protects its officers and shareholders from personal liability for the corporation’s actions, including breach of a contract. Only authorized agents of the corporation may bind it to contracts; verify that you are dealing with an authorized representative. Limited liability companies shield their members from personal liability like corporations. However, limited liability companies are not burdened with many of the same formalities a corporation requires. As a result, the use of limited liability companies has increased exponentially in recent years as many discover the ease of their creation and operation. Like corporations, only authorized representatives of the limited liability company may bind it. What is the financial status of your client? In order for your client to pay for your professional services, your client must have a solid financial status or backing. Likewise, should a dispute arise, the financial status of your client will generally limit any recovery. Do You Know Who Your Client Is? By Adam T. Mow, AIA, Esq. The question may seem simple and innocent enough: Do you know who your client is? Most believe that the correct answer is whoever entered into the contract for your professional services. While that is technically correct, your analysis should go deeper. You should know the answer before a contract is ever signed.