Architects and their practices are highly regulated because of their charge to safeguard life, health, property and the public welfare. In most states, architecture may be practiced only through very specific entity types in order to ensure that ownership and management of the firm is controlled by licensed professionals. Unlike non-licensed businesses, design professional firms cannot just form a corporation, partnership or other type of entity and begin operations. Design professionals must comply with the regulatory authority that oversees licensed professionals within each state.
In 31 states, any entity providing architectural services must be approved in some fashion by the licensing authority in that state. In most states that do not require the firm itself to be approved, there is a registration requirement that enables the regulatory authority to ensure that the individual(s) providing architectural services are appropriately licensed.
While the state itself will allow a multitude of entity types, the licensing authority may require that licensed professionals operate only through specific entity types. For example, the New York State Education Department does not allow architects to form general corporations but offers a special breed of entity, the Design Professional Service Corporation, which allows for a limited amount of ownership and management by non-licensed professionals.
Accordingly, before establishing an architecture firm within a particular state, it is important to understand:
- What entity types are permissible for design professional firms;
- What, if any, restrictions the regulatory body puts on licensed v. non-licensed owners, directors and officers;
- Whether owners, directors and officers must be licensed by that specific state; and
- The steps involved in the entity formation and, specifically, the interplay of the approval process between the state itself (entity formation) and the regulatory authority (licensing).
LicenseSure keeps abreast of the requirements in each of the 50 states and helps design professionals navigate this complicated process.
The Benefit Corporation is considered a hybrid of a for-profit corporation and a not-for-profit in that the directors do not run the corporation solely to maximize corporate value for its shareholders.
Design professionals all over the world have taken to heart the words famously crooned by Frank Sinatra, "I want to be a part of it, New York, New York."
Starting a business and forming an entity are two different things.
A gratifying part of my business is helping design professionals start their own practices. I usually have a gut feeling about who is going to make it, and who may decide that being an employee wasn’t so bad after all.
I am seeing a lot of action on the Design Professional Service Corporation (DPC) front. The DPC is the only entity in which New York permits non-licensed owners of architecture, engineering and other design professional firms.
Many of my clients and potential clients are in the process of setting up their own design firms.
Starting an architectural firm is a big decision. One of the next big decisions for the architectural entrepreneur is deciding what form of business entity will be appropriate for your current practice as well as your future practice.
When a client comes to us to form a New York business, the first step we take is to evaluate the proposed name of the entity.