The importance of registration: Learn what one contractor failed to do that cost him $1 million
Every state has different laws regarding business registration. Here are three steps to ensuring payment when working outside your home state:
Register your business with the new state’s Secretary of State’s Office (foreign entity).
Check construction registration requirements with the state and local level where you will be working and register if required.
Update your contract for that state’s legal requirements: especially important for residential work.
If business is good and you decide to expand outside of the state you started your business in, know that every state is different. Every state has different legal requirements to secure payment for services and products provided. The first thing you must do is register your business as a “foreign entity” with the Secretary of State’s office in the new state.
The second thing you need to be sure to do is register as a contractor with the state or local municipalities. A failure to do so may mean that your business will be working for free because your business is operating illegally. This is exactly what happened to a contractor on a commercial project in Idaho where the general contractor and owner took a hard line and said we do not have to pay you because you failed to register as a contractor with the state licensing board. It cost the contractor over $1 million. The registration with the Idaho Contractor’s board cost $50. Not only was the contactor prevented from filing a lawsuit for breach of contract and unjust enrichment but the contractor also lost the right to file a mechanic’s lien on the property. This is a harsh result, but an important lesson.
The third thing you need to do especially if you are performing residential work, is to make sure you have the state specific requirements to have a valid contract with a homeowner. Every state has very different requirements. If you try to use the contract you had been using in your home state, you might risk doing the work for free because your contract does not meet the new state’s requirements.
Contact Galvanize Law Group for legal requirements for business registrations in Texas, Wyoming, Arkansas, Oregon, and Massachusetts, or if working outside of one of these states, we can help you find an attorney to assist you with your matter.