Architects & Engineers - Contracts (Part 2): Name That Client

Can you name your client? I mean, really name "it" by entity type, e.g., individual (sole proprietor), LLC, Inc., LP. Why do you care? If you don’t like working for free, you care (pro bono architects and engineers, stop reading here).

A client usually has one big obligation - payment. To pursue a payment claim, you need to demand money from the right person/company, which means you must know your client's correct name. Makes sense, right?

Also, if your project is located in Texas, you must have a signed, written contract with the landowner or its agent to have lien rights. With no lien rights, the only option for nonpayment is to sue - sometimes not much of an option. Again, you must know your client's correct name to evaluate lien rights.

What to do?

First, be sure the contract (yes, you need a signed, written contract) clearly identifies your client by name. Examples of proper business names are "ABC limited liability company," "ABC, LLC,” "ABC corporation," "ABC Co.," "ABC corp.," "ABC, inc.," "ABC, limited partnership," or "ABC, LP." Also, be sure the client's name in the beginning of the contract is the same as that used in the signature block, with a duly authorized representative signing on behalf of that name.

Second, once you have a proper name, take that name and do some online research. Go to the webpage for the comptroller or secretary of state for the state (a) in which your client was formed, or (b) your client's principal place of business. If you don't know either, Delaware is a good place to look:

https://icis.corp.delaware.gov/Ecorp/EntitySearch/NameSearch.aspx)

Texas is:

https://mycpa.cpa.state.tx.us/coa/

This search should tell you if your client (a) exists and/or (b) is in “good standing.” If your search yields no results, then you know the client did not register that name in that state (the client may have registered in another state, so ask for this if needed). If your search confirms registration, but the named business is not in "good standing" or its status has ended, that is bad news. It means that the client hasn’t paid taxes to the state, which makes it less likely you will be paid.

Bottom line: if you can’t find your client using a secretary of state/comptroller search, or if you find your client only to discover that it isn’t in good standing, strongly consider walking away from the project. I don’t have enough fingers and toes to count the number of times I was called about a fee/nonpayment claims, only to discover that the “client” wasn’t identified in the contract, didn’t exist, or was not in good standing (defunct).

If you find your client and it is in good standing, then do an online search of the property records to determine if it owns the real estate for the project (remember, no contract with property owner = no lien rights). For Dallas County, search the appraisal district’s website, www.dcad.org. Most appraisal districts use a similar url.

Have questions? Let me know.

Next time: “why I care about the standard of care [in my contract].”