Through the years, I’ve consulted with many companies who worked exclusively in a particular state or small region, and accordingly, knew the laws and landscape of that region reasonably well. However, when these companies eye other states or regions to expand their business, the complications of legal variances between those states should stand out as a large part of the expansion challenge.
Here are a few things you must keep in mind:
1. You may need to register your company as a foreign entity in each state.
2. Each state has different licensing laws, and so you must determine whether your work requires a license, and if so, to acquire the state-specific license.
3. Contracts are interpreted differently in every state (for example, pay when paid clauses may have one meaning in one state, but a completely different meaning in another). You should have an attorney in each state review the contract and make suggestions to ensure it is read in that state’s courts as you intent.
4. Mechanics lien deadlines and preliminary notice requirements are different in every state.
Lien Laws Present A Challenge If Expanding Your Business Into A Different State
Earlier this year Zlien exhibited at the CFMA annual conference in Orlando, Florida. During that event, Lisa Autino of Corbin Electric made a presentation titled “The ‘Gotchas’ of Subcontractor Expansion.” While the presentation was useful touched upon some of the items above-listed, it left out any discussion of how the lien laws fit into a plan to expand a construction business into multiple states.
Soon after the conference we wrote about this in “Challenges of Subcontractor Expansion and Where Mechanics Lien Law Fits In.”
This past weekend I stumbled upon an article in the Idaho Business Review that did address the challenge mechanics lien laws present when crossing state lines. Two Idaho attorneys discussed the dangers of chasing out-of-state work in that region, as a “booming construction market” in North Dakota is motivating lots of Idaho contractors to cross the border to find work in the neighboring state.
The article – Chasing out-of-state work may cost unsuspecting contractors – hits upon the mechanics lien law variances directly, stating:
[T]he differences between the lien laws in Idaho and North Dakota illustrate the need for care before expanding business outside of Idaho’s borders. These differences are both technical and substantive in nature.
The differences between Idaho and North Dakota’s mechanics lien laws can be striking, as can the differences between any two states. Zlien publishes a comprehensive guide to the lien laws in each of these states, which you can review and use to compare. See: Idaho Mechanics Lien Resources and North Dakota Mechanics Lien Resources.