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. While a licensed architect can certainly just go out there and practice as a sole proprietor, formation of an appropriate business entity shields the architect from personal liability in most business contexts (architects cannot be shielded from claims arising out of their own negligence or misconduct, although that risk may be borne by an insurer).
Each state has its own rules about which entity types are permissible but listed below are descriptions of the most common entity types for design professionals, and the benefits and limitations of each type:
|Professional Limited Liability Company|
|Limited Liability Partnership|
|Subchapter S Election for Corporations|
Often, your goals for the new firm, the services and owners contemplated, and the costs of formation will dictate the appropriate entity type. Choosing the right entity for you is the first step to building success.
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.
Architects and their practices are highly regulated because of their charge to safeguard life, health, property and the public welfare.
Many of my clients and potential clients are in the process of setting up their own design firms.
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.