September 2, 2011

 

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Question

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Ken,

I'm a licensed security contractor/agency and have an opportunity to partner with some people who need to operate under a license holder to work on fire alarm and security systems, mostly doing testing. I don't want them as employees, I want to work with them as sub-contractors.

I'm interested in striking a deal with them but had a couple questions relating to doing this legally and minimizing risk/exposure to liability:

1) Are there forms/contracts that will help us form this partnership?

 

2) Could you provide guidance as to business procedures, for example:

 

a. Must all billing come from my company?

 

b. I assume the sub-contractors need to carry insurance

 

i. If so, what type of insurance?

 

ii. Recommended liability limits?

 

c. Do I need to carry additional insurance when working with sub-contractors?

 

3) Any other issues that I may not be thinking of?

 

Robert

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Answer

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You are licensed. You have someone who isn't, but who has fire and security alarm work; mostly testing. You want to know the few specific issues you raise and also if there is "any other issues" you may not be thinking of. You don't want to employ the other person, but let him work as a subcontractor.

OK, well here are a few issues you may not be thinking about.

Losing your license for starters. Then, trying to figure out how you're going to earn a living. One more, dumping your company at bargain basement price because you can't provide alarm services any more.

You should not be enabling your unlicensed acquaintance to engage in your licensed business. Do you think I would let some open an office next to me and practice law under may license because he had clients?

Your buddy should come and work for you. Then you can provide the services you are licensed to perform and he can benefit from his connections. When he smartens up and gets his license maybe your arrangement can survive.

When you hire subcontractors you need to be sure that they are permitted to perform the work. If your employees need to be licensed or registered by you, then so must your subcontractors. You also have to be certain that your subcontractors carry proper insurance, workers comp, liability and any other insurance that is involved in their activities.

One final word of caution. While business arrangements are fine, writing in and asking for advice in this forum is definitely not enough legal advice to move ahead. You should not be making any business deal without benefit of counsel, legal counsel and other professionals if necessary. I was about to say that there is no substitute for proper advice going into a deal, but there is. it's called high legal fees for the litigation that follows. I guess that might be a consequence, not a substitute, but I hope my point is made. Making a deal? You may have to contact me off this forum and be prepared to pay for the advice.