The new year brings options to design firms

New York's design firms received good news from Albany this past September when Governor Cuomo signed into law Bill S-2987/A-4581, which significantly impacts the laws regulating design professional corporations. The legislation takes effect on January 1, 2012 and introduces a new business entity, the "Design Professional Service Corporation" or D.P.C. Passage of the new law eases New York's restrictive ownership policies with regard to design service firms, permitting non-licensed professionals to hold a minority share of ownership in the state's engineering and architecture firms - a change that bodes well for professional design firms seeking flexibility in ownership. The advent of the Design Professional Services Corporation allows New York State firms to offer equity positions to non-licensed professionals, such as financial advisors, business development and marketing specialists, human resource managers, and computer and information technology specialists. This will not only benefit individual firms, but will strengthen New York's competitive position on a national and a global basis. A better business climate Whereas New York State law had previously prohibited non-licensed individuals from owning any portion of a firm that provided professional architecture or engineering services, many other states have allowed design firms to offer equity stakes to unlicensed individuals. Prior to passage of this bill, ownership in professional engineering companies in New York, other than grandfathered corporations, was limited to licensed professionals. The amended law will allow a less than 25 percent share of ownership in engineering firms by non-licensed personnel. The law will particularly benefit newer, smaller engineering firms, as well as DM/WBE companies, by leveling the playing field for them. Because the restrictive ownership policy was not enacted until 1935, firms established before this date already enjoyed full flexibility in ownership requirements. According to ACEC New York president Jay Simson, "Passage of the bill is a significant achievement for New York's design industry, and is the result of a collaborative effort by members of the American Council of Engineering Companies of New York (ACEC New York, www.acecny.org), the AIA, the New York Society of Professional Engineers, New York State Association of Professional Land Surveyors, and other trade and professional organizations, who have been working for years to amend the restrictive policies. This bill will help to keep companies' headquarters in New York and to recruit and retain non-licensed professionals at New York-based companies. It will provide firms with greater access to capital, further promoting creation and retention of jobs in the state. Today's action is a win for design professionals and for all those who live and work in the state." New opportunities with professional safeguards While broadening the options for non-licensed personnel, the legislation provides protections against breaches in public safety and professional ethics. In addition to the provision that mandates a super majority - 75 percent - ownership by licensed professionals, other controls under the new law include the following: The single largest shareholder must be a licensed professional; at least 75 percent of the board of director seats must be held by licensed professionals; and the president, chief executive officer, and chairman of the board of directors are required to be licensed professionals. Expanding ownership capabilities beyond licensed professionals will allow all employees to invest back into their companies, increase hiring and recruitment of key personnel, and positively impact businesses across the state. To assess your company's options, it is recommended that you consult with your legal and financial advisors.