AIA Chicago - Kick-Start Your Design Business - Practice Basics
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November 17, 2010 Presentation at the AIA Chicago. This is intended to be a checklist for those starting an architectural practice.
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AIA Chicago - Kick-Start Your Design Business - Practice Basics
- 1. Practice Basics a.k.a. – “Lessons learned hard” or “It’s always a trick question” AIA Chicago Kick-Start Your Design Business November 17, 2010 Christopher M. Dasse, AIA & LEED AP studio D architecture LLC
- 2. AIA Chicago Kick-Start Your Design Business November 17, 2010 Organization Types: • Sole Proprietor Most liability exposure Simplest tax rules Simplest structure – one owner • Partnership, Limited Liability Partnership • Corporation, Professional Corporation, S- Corp • Limited Liability Company Reduced Liability exposure Each has different tax rules More complicated structure – Potentially multiple owners or partners Partnership or investor agreements • http://www.cyberdriveillinois.com/ departments/business_services/ home.html All forms available online or organization filed online Organization Types F. E. I. N. Licensing Insurance Legal Services Contracts / Agreements Employees Accounting Financing Marketing Office
- 3. AIA Chicago Kick-Start Your Design Business November 17, 2010 F. E. I. N. Federal Employer Identification Number • Required for: Bank accounts Tax return Payroll W-9 / Pay requests Credit Applications • http://www.irs.gov/businesses/small /article/0,,id=98350,00.html Organization Type F. E. I. N. Licensing Insurance Legal Services Contracts / Agreements Employees Accounting Financing Marketing Office
- 4. AIA Chicago Kick-Start Your Design Business November 17, 2010 Licensing • State Individual’s Professional License Your personal architect’s license Design Firm License 2/3 of ownership must be licensed Design Director must be designated • Local Business License Not required in Chicago http://www.cityofchicago.org/city/en/depts/bacp/supp_inf o/business_licenseexemptions.html Check with local municipality Organization Type F. E. I. N. Licensing Insurance Legal Services Contracts Employees Accounting Financing Marketing Office
- 5. AIA Chicago Kick-Start Your Design Business November 17, 2010 Insurance • Professional Liability • General Liability • General Liability Umbrella • Automobile • Workers Compensation • Employee Benefits Organization Type F. E. I. N. Licensing Insurance Legal Services Contracts / Agreements Employees Accounting Financing Marketing Office
- 6. AIA Chicago Kick-Start Your Design Business November 17, 2010 Professional Liability Also known as “Error and Omissions” When does it come into play? When a complaint (lawsuit) is filed alleging fault in your design. Premium is determined by Coverage Gross receipts Types of projects “Loss” history Multiple Limits Available $500K, $1M to $2M typical Project Specific for additional coverage Life time Limits Multiple Deductibles $5K & $10K typical What it actually covers - Legal defense team Settlement amounts Judgments What it excludes - Criminal negligence Organization Type F. E. I. N. Licensing Insurance Professional Liability General Liability General Liability Umbrella Automobile Worker’s Compensation Employee Benefit Legal Services Contracts / Agreements Employees Accounting Financing Marketing Office
- 7. AIA Chicago Kick-Start Your Design Business November 17, 2010 General Liability Premium is determined by Equipment Inventory Types of business “Loss” history Multiple Limits Available $500K, $1M to $2M typical Multiple Deductibles $5K & $10K typical What it actually covers - Theft, Fire, some Water! What it specifically will exclude – Flood, criminal negligence May or may not cover – Employee autos site visits & deliveries Organization Type F. E. I. N. Licensing Insurance Professional Liability General Liability General Liability Umbrella Automobile Worker’s Compensation Employee Benefit Legal Services Contracts / Agreements Employees Accounting Financing Marketing Office
- 8. AIA Chicago Kick-Start Your Design Business November 17, 2010 General Liability Umbrella When does come into play? When a claim exceeds the limits of the policies it is tied to. Premium is determined by The policies it is tied to Amount of additional coverage Organization Type F. E. I. N. Licensing Insurance Professional Liability General Liability General Liability Umbrella Automobile Worker’s Compensation Employee Benefit Legal Services Contracts / Agreements Employees Accounting Financing Marketing Office
- 9. AIA Chicago Kick-Start Your Design Business November 17, 2010 Automobile Company owned vs. employee owned Multiple Limits Available $500K, $1M to $2M typical Multiple Deductibles $500 & $1000 typical Premium is determined by Primary driver(s) Where it is parked at night Make, model & age of auto Organization Type F. E. I. N. Licensing Insurance Professional Liability General Liability General Liability Umbrella Automobile Worker’s Compensation Employee Benefit Legal Services Contracts / Agreements Employees Accounting Financing Marketing Office
- 10. AIA Chicago Kick-Start Your Design Business November 17, 2010 Worker’s Compensation Owner may be excluded Legally required when you have employees. Limits dictated by State Law $500K for bodily injury by accident for each employee $500K for bodily injury by disease for each employee $500K for bodily injury by disease for policy limit Multiple Deductibles $500 & $1000 typical Premium is determined by Number of employees Employee Salaries Employee Job Description Organization Type F. E. I. N. Licensing Insurance Professional Liability General Liability General Liability Umbrella Automobile Worker’s Compensation Employee Benefit Legal Services Contracts / Agreements Employees Accounting Financing Marketing Office
- 11. AIA Chicago Kick-Start Your Design Business November 17, 2010 Employee Benefit Medical & Dental Factors in determining premium Coverage Number of employees Sometimes health of employee Sometimes gender of employee ST & LT Disability Factors in determining premium Employee compensation Health of employee Before Tax / After Tax Life Insurance Factors in determining premium Coverage Health of employee Before Tax / After Tax Organization Type F. E. I. N. Licensing Insurance Professional Liability General Liability General Liability Umbrella Automobile Worker’s Compensation Employee Benefit Legal Services Contracts / Agreements Employees Accounting Financing Marketing Office
- 12. AIA Chicago Kick-Start Your Design Business November 17, 2010 Legal Services • General Business Organizational • Contracts Draft a “short form” agreement Review potential pitfalls in any agreement • Litigation Court room or procedural specialist Construction Liens Collections Employer-Employee • License Look Up www.iardc.org Organization Type F. E. I. N. Licensing Insurance Legal Services Contracts Employees Accounting Financing Marketing Office
- 13. AIA Chicago Kick-Start Your Design Business November 17, 2010 Contracts / Agreements • Owner-Architect • Architect-Consultant • Employer-Employee Organization Type F. E. I. N. Licensing Insurance Legal Services Contracts / Agreements Employees Accounting Financing Marketing Office
- 14. AIA Chicago Kick-Start Your Design Business November 17, 2010 Contracts / Agreements • Owner-Architect Small projects – “Short form” boiler plate drafted by attorney Medium to large projects- Use the AIA with minimal deviations All contracts should have- All client info Property identification Scope of physical work Scope of services Copyrights Legal Remedies Limitations of Liability Compensation terms Organization Type F. E. I. N. Licensing Insurance Legal Services Contracts / Agreements Owner-Architect Architect-Consultant Employer-Employee Employees Accounting Financing Marketing Office
- 15. AIA Chicago Kick-Start Your Design Business November 17, 2010 Contracts / Agreements • Architect-Consultant Similar requirements as Owner-Architect - All client info Property identification Scope of physical work Scope of services Copyrights Legal Remedies Limitations of Liability Compensation terms Tax IDs Insurance Requirements Organization Type F. E. I. N. Licensing Insurance Legal Services Contracts / Agreements Owner-Architect Architect-Consultant Employer-Employee Employees Accounting Financing Marketing Office
- 16. AIA Chicago Kick-Start Your Design Business November 17, 2010 Contracts / Agreements • Employer-Employee “Employee at Will” Hours of Operation Breaks / Lunches Compensation Paid time off Confidentiality Non-Competition Side Work Company Property & Resources Organization Type F. E. I. N. Licensing Insurance Legal Services Contracts / Agreements Owner-Architect Architect-Consultant Employer-Employee Employees Accounting Financing Marketing Office
- 17. AIA Chicago Kick-Start Your Design Business November 17, 2010 Employees vs. Subcontractors • What’s the difference? Is it really just 1099 vs. W2 Especially as it relates to Architecture • Employees- Regular payroll Payroll taxes State Unemployment insurance (tax) Worker’s Compensation insurance Employment agreements Laws regarding discrimination Benefits Organization Type F. E. I. N. Licensing Insurance Legal Services Contracts / Agreements Employees Accounting Financing Marketing Office
- 18. AIA Chicago Kick-Start Your Design Business November 17, 2010 Accounting • Accounting Software Single point of tracking all financials Be regular with updating data Minimizes CPA costs • C.P.A.- Certified Public Accountant – www.IDFPR.com Schedule to review 2-3 times annually Completes tax returns • Payroll Services Checks, direct deposit & taxes W-2s Governmental issues Organization Type F. E. I. N. Licensing Insurance Legal Services Contracts / Agreements Employees Accounting Financing Marketing Office
- 19. AIA Chicago Kick-Start Your Design Business November 17, 2010 Financing • Loans from banks Traditional business loan / L.O.C. not likely Personal Guarantee Pledge Collateral • Loans from Family or Friends Have a written agreement Unlicensed ownership – max 1/3 • Credit cards If personal – separate for business Corporate is better Governmental issues • Small loans / leases Small loans often easier, regardless of credit Equipment, Software, Insurance, etc. Organization Type F. E. I. N. Licensing Insurance Legal Services Contracts / Agreements Employees Accounting Financing Marketing Office
- 20. AIA Chicago Kick-Start Your Design Business November 17, 2010 Marketing • Know your target client base!!! • Repeat Clients & Referrals Best and most consistent • Partnering w/ complimentary services General Contractors Insurance Adjusters Permit Expeditors • Internet Linked In, Facebook, Twitter, Slideshare Blogging BBB, Yelp and other review sites • Traditional Advertising Typically do not work Phone book, newspaper, etc. • Pro Bono Projects Open the door to new project types Great source of Referrals Organization Type F. E. I. N. Licensing Insurance Legal Services Contracts / Agreements Employees Accounting Financing Marketing Office
- 21. AIA Chicago Kick-Start Your Design Business November 17, 2010 Office • Home Free rent Hard to meet with clients Hard to eliminate distractions • Commercial Options Rent from another firm Rent from an incubator Rent direct from landlord • Additional items Sharing resources – printers, furniture, etc. Internal referrals Organization Type F. E. I. N. Licensing Insurance Legal Services Contracts / Agreements Employees Accounting Financing Marketing Office