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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