aia chicago - kick-start your design business - practice basics
DESCRIPTION
November 17, 2010 Presentation at the AIA Chicago. This is intended to be a checklist for those starting an architectural practice.TRANSCRIPT
Practice Basics a.k.a. – “Lessons learned hard” or “It’s always a trick question”
AIA ChicagoKick-Start Your Design Business
November 17, 2010
Christopher M. Dasse, AIA & LEED APstudio D architecture LLC
AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010
Organization Types: • Sole Proprietor
Most liability exposureSimplest tax rulesSimplest structure – one owner
• Partnership, Limited Liability Partnership• Corporation, Professional Corporation, S-Corp• Limited Liability Company
Reduced Liability exposureEach has different tax rulesMore complicated structure – Potentially multiple owners or partnersPartnership or investor agreements
• http://www.cyberdriveillinois.com/ departments/business_services/ home.htmlAll forms available online or organization filed online
Organization TypesF. E. I. N.LicensingInsuranceLegal ServicesContracts / AgreementsEmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010
F. E. I. N.Federal Employer Identification Number
• Required for:Bank accountsTax returnPayrollW-9 / Pay requestsCredit Applications
• http://www.irs.gov/businesses/small/article/0,,id=98350,00.html
Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContracts / AgreementsEmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010
Licensing
• State
Individual’s Professional LicenseYour personal architect’s license
Design Firm License2/3 of ownership must be licensedDesign Director must be designated
• Local Business License
Not required in Chicagohttp://www.cityofchicago.org/city/en/depts/bacp/supp_info/business_licenseexemptions.html
Check with local municipality
Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContractsEmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010
Insurance• Professional Liability
• General Liability
• General Liability Umbrella
• Automobile
• Workers Compensation
• Employee Benefits
Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContracts / AgreementsEmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010
Professional LiabilityAlso 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
CoverageGross receiptsTypes of projects“Loss” history
Multiple Limits Available$500K, $1M to $2M typicalProject Specific for additional coverageLife time Limits
Multiple Deductibles$5K & $10K typical
What it actually covers -Legal defense teamSettlement amountsJudgments
What it excludes -Criminal negligence
Organization TypeF. E. I. N.LicensingInsurance
Professional LiabilityGeneral LiabilityGeneral Liability UmbrellaAutomobileWorker’s CompensationEmployee Benefit
Legal ServicesContracts / AgreementsEmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010
General Liability
Premium is determined byEquipment
InventoryTypes 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 TypeF. E. I. N.LicensingInsurance
Professional LiabilityGeneral LiabilityGeneral Liability UmbrellaAutomobileWorker’s CompensationEmployee Benefit
Legal ServicesContracts / AgreementsEmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 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 byThe policies it is
tied toAmount of
additional coverage
Organization TypeF. E. I. N.LicensingInsurance
Professional LiabilityGeneral LiabilityGeneral Liability UmbrellaAutomobileWorker’s CompensationEmployee Benefit
Legal ServicesContracts / AgreementsEmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010
Automobile
Company owned vs. employee owned
Multiple Limits Available$500K, $1M to $2M typical
Multiple Deductibles$500 & $1000 typical
Premium is determined byPrimary driver(s)Where it is parked at
nightMake, model & age of
auto
Organization TypeF. E. I. N.LicensingInsurance
Professional LiabilityGeneral LiabilityGeneral Liability UmbrellaAutomobileWorker’s CompensationEmployee Benefit
Legal ServicesContracts / AgreementsEmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 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 byNumber of employeesEmployee SalariesEmployee Job Description
Organization TypeF. E. I. N.LicensingInsurance
Professional LiabilityGeneral LiabilityGeneral Liability UmbrellaAutomobileWorker’s CompensationEmployee Benefit
Legal ServicesContracts / AgreementsEmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010
Employee Benefit
Medical & DentalFactors in determining premiumCoverageNumber of employeesSometimes health of employeeSometimes gender of employee
ST & LT Disability Factors in determining premiumEmployee compensationHealth of employee Before Tax / After Tax
Life InsuranceFactors in determining premiumCoverageHealth of employeeBefore Tax / After Tax
Organization TypeF. E. I. N.LicensingInsurance
Professional LiabilityGeneral LiabilityGeneral Liability UmbrellaAutomobileWorker’s CompensationEmployee Benefit
Legal ServicesContracts / AgreementsEmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010
Legal Services• General Business
Organizational
• ContractsDraft a “short form” agreementReview potential pitfalls in any
agreement
• LitigationCourt room or procedural specialistConstructionLiens CollectionsEmployer-Employee
• License Look Upwww.iardc.org
Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContractsEmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010
Contracts / Agreements• Owner-Architect
• Architect-Consultant
• Employer-Employee
Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContracts / AgreementsEmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 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 infoProperty identificationScope of physical workScope of servicesCopyrightsLegal RemediesLimitations of LiabilityCompensation terms
Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContracts / Agreements
Owner-ArchitectArchitect-ConsultantEmployer-Employee
EmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010
Contracts / Agreements
• Architect-Consultant
Similar requirements as Owner-Architect -All client infoProperty identificationScope of physical workScope of servicesCopyrightsLegal RemediesLimitations of LiabilityCompensation termsTax IDs Insurance Requirements
Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContracts / Agreements
Owner-ArchitectArchitect-ConsultantEmployer-Employee
EmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010
Contracts / Agreements• Employer-Employee
“Employee at Will”Hours of OperationBreaks / LunchesCompensationPaid time offConfidentialityNon-CompetitionSide WorkCompany Property & Resources
Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContracts / Agreements
Owner-ArchitectArchitect-ConsultantEmployer-Employee
EmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010
Employees vs. Subcontractors• What’s the difference?
Is it really just 1099 vs. W2Especially as it relates to Architecture
• Employees-Regular payrollPayroll taxesState Unemployment insurance (tax)Worker’s Compensation insuranceEmployment agreementsLaws regarding discriminationBenefits
Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContracts / AgreementsEmployeesAccounting FinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010
Accounting• Accounting Software
Single point of tracking all financialsBe regular with updating dataMinimizes CPA costs
• C.P.A.-Certified Public Accountant – www.IDFPR.comSchedule to review 2-3 times annually Completes tax returns
• Payroll ServicesChecks, direct deposit & taxesW-2sGovernmental issues
Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContracts / AgreementsEmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010
Financing• Loans from banks
Traditional business loan / L.O.C. not likely
Personal GuaranteePledge Collateral
• Loans from Family or FriendsHave a written agreementUnlicensed ownership – max 1/3
• Credit cardsIf personal – separate for businessCorporate is betterGovernmental issues
• Small loans / leasesSmall loans often easier, regardless of
creditEquipment, Software, Insurance, etc.
Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContracts / AgreementsEmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010
Marketing• Know your target client base!!!• Repeat Clients & Referrals
Best and most consistent
• Partnering w/ complimentary servicesGeneral ContractorsInsurance AdjustersPermit Expeditors
• InternetLinked In, Facebook, Twitter, SlideshareBloggingBBB, Yelp and other review sites
• Traditional AdvertisingTypically do not workPhone book, newspaper, etc.
• Pro Bono ProjectsOpen the door to new project typesGreat source of Referrals
Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContracts / AgreementsEmployeesAccountingFinancingMarketingOffice
AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010
Office• Home
Free rentHard to meet with clientsHard to eliminate distractions
• Commercial OptionsRent from another firmRent from an incubatorRent direct from landlord
• Additional itemsSharing resources – printers, furniture,
etc.Internal referrals
Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContracts / AgreementsEmployeesAccountingFinancingMarketingOffice