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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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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

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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