Architect Roles, Consultants, Profession vs Business

• An architect has multiple roles including advisor, general manager, educator, social consciousness, umpire, supervisor, and auditor.

Consultants:

• Consultants are needed during both pre-construction and during construction.
• Structural engineers, MEP engineers, surveyors, and expeditors are consultants.
• MEP stands for Mechanical, Electrical, and Plumbing.
• An expediter is needed if the project is in NYC.
• Millworkers, fabricators, contractors, and other installers/trades are consultants.

Profession vs Business

• Business objectives are earning profit.
• Professional objectives are rendering service.
• Business qualifications requires nothing.
• Professional qualifications require specialized knowledge.
• Business establishments require entrepreneur decisions and fulfillment of legal formalities.
• Professional establishments require membership of the professional and certificate to practice.
• Businesses have no prescribed code of conduct.
• Professions require a code of conduct to be followed.
• Businesses advertise to increase sales,
• Professions prohibit advertisement.
• Businesses rewards are profit.
• Professions rewards are professional fees.
• Businesses always have risk factors.
• Professions don't always have risk factors.
• Transfer of interest in a business is possible.
• Transfer of interest in a profession is not possible.
• Businesses need capital based on the size and nature of the business.
• Professions requires limited capital.

Architecture Practice – Setting Up the Office

• An office is an entity different from yourself.
• Capital invested is a loan to the office.
• The office should pay back the money in the form of profit with interest too.
• Start your own proprietary firm.
• Open a fresh bank account apart from ongoing personal account.
• Operate an office account strictly for the office.
• Capital is deposited in the office account.
• All office expenses are paid from the office account.
• Fees are deposited in the office account.
• Maintain a detailed Pay In Slip Book for all checks with proper Bill No.
• The office account is usually a current account without interest.

Business Structures:

• Sole Proprietorship.
• Partnership.
• Corporation.
• LLC

Sole Proprietorship

• Any individual who conducts business.
• There is no legal distinction between the business and the individual.
• The income is treated as personal income.
• There are no special liability protections.
• May use an assumed name (d/b/a).
• May have employees.
• Employees can be agents within the scope of their employment.

Partnership

• Similar to a sole proprietorship owned jointly by two or more people combined into one partnership.
• Governed by state law.
• The Uniform Partnership Act are default agreements.
• Court can create law.
• A partnership agreement is a contract between partners.
• Individual partners are responsible for the debts of the entire partnership.
• Profits and losses are taxed pro rata to the partners' interests.
• Rights and duties may be divided in any agreed percentage.
• One partner may have 75% of the profits and only 33% of the losses.
• Partners are not guaranteed a salary; they share profits.
• Each partner is the agent of the others and of the partnership.
• Each partner has full authority to act or bind the partnership.
• All knowledge is fully attributable to the partnership.
• Partnership duties are similar to agency duties, but operate in a two-way direction.
• Income is treated as personal income.
• "Limited" partnerships are primarily a financing mechanism.
• The role of a general partner is the same as with a regular partnership.
• "Limited" partners have no authority to manage or bind the partnership and are only liable to the extent of their individual financial contribution.

Corporation

• Corporations are legal entities like people.
• Governed by state law.
• Examples of governing laws are the Illinois Business Corporation Act, Articles of Incorporation, by-laws, and Shareholder agreements in close corporations.
• The owners (shareholders) of the corporation have rights.
• Rights include voting for directors.
• Rights also include receiving dividends and liquidation rights upon corporate dissolution.
• Corporate hierarchy consists of Shareholders, Directors, Officers, and Employees.
• Shareholders are not agents.
• Directors are agents and owe fiduciary duties.
• Officers are agents and owe fiduciary duties.
• Employees are limited agents depending on the scope of employment.
• There is no personal liability for corporate malfeasance.
• Shareholders, officers, directors, and employees are not liable for corporate acts.
• Complex, restrictive tax, and accounting treatments like double taxation of dividends.
• Piercing the corporate veil is not true if it is a sham or shell corp.
• Professional corporations are set up to practice a particular licensed profession.
• Examples of licensed professions are law and architecture.
• Laws vary from state to state.
• Generally obsolete in Illinois.

LLC

• LLC is a hybrid between a corporation and a partnership.
• It is a separate legal entity, like a corporation.
• Tax and accounting include treatment of a partnership and liability protections of a corporation.
• Governed by state law.
• LLCs are governed by the Illinois Limited Liability Company Act.
• Not as much court-created law exists such as traditional corporation law.
• Operating agreements act like corporate by-laws.
• The hierarchy is similar to a corporation.
• "Members" are owners/unit holders (like shareholders).
• "Managers" are like officers and directors.
• May have employees just like any corporation.
• LLCs are usually the best vehicle for complex organizations.
• LLCs are often seen as single-purpose entities in the construction world.
• LLCs are good for joining unique business partners.