aia chicago - kick-start your design business - practice basics

Practice Basics a.k.a. – “Lessons learned hard” or “It’s always a trick question”

AIA ChicagoKick-Start Your Design Business

November 17, 2010

Christopher M. Dasse, AIA & LEED APstudio D architecture LLC

AIA ChicagoKick-Start Your Design BusinessNovember 17, 2010

Organization Types: • Sole Proprietor

Most liability exposureSimplest tax rulesSimplest structure – one owner

• Partnership, Limited Liability Partnership• Corporation, Professional Corporation, S-Corp• Limited Liability Company

Reduced Liability exposureEach has different tax rulesMore complicated structure – Potentially multiple owners or partnersPartnership or investor agreements

• http://www.cyberdriveillinois.com/ departments/business_services/ home.htmlAll forms available online or organization filed online

Organization TypesF. E. I. N.LicensingInsuranceLegal ServicesContracts / AgreementsEmployeesAccountingFinancingMarketingOffice


F. E. I. N.Federal Employer Identification Number

• Required for:Bank accountsTax returnPayrollW-9 / Pay requestsCredit Applications

• http://www.irs.gov/businesses/small/article/0,,id=98350,00.html

Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContracts / AgreementsEmployeesAccountingFinancingMarketingOffice


Licensing

• State

Individual’s Professional LicenseYour personal architect’s license

Design Firm License2/3 of ownership must be licensedDesign Director must be designated

• Local Business License

Not required in Chicagohttp://www.cityofchicago.org/city/en/depts/bacp/supp_info/business_licenseexemptions.html

Check with local municipality

Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContractsEmployeesAccountingFinancingMarketingOffice


Insurance• Professional Liability

• General Liability

• General Liability Umbrella

• Automobile

• Workers Compensation

• Employee Benefits



Professional LiabilityAlso 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

CoverageGross receiptsTypes of projects“Loss” history

Multiple Limits Available$500K, $1M to $2M typicalProject Specific for additional coverageLife time Limits

Multiple Deductibles$5K & $10K typical

What it actually covers -Legal defense teamSettlement amountsJudgments

What it excludes -Criminal negligence

Organization TypeF. E. I. N.LicensingInsurance

Professional LiabilityGeneral LiabilityGeneral Liability UmbrellaAutomobileWorker’s CompensationEmployee Benefit

Legal ServicesContracts / AgreementsEmployeesAccountingFinancingMarketingOffice


General Liability

Premium is determined byEquipment

InventoryTypes 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





General Liability Umbrella

When does come into play? When a claim exceeds the limits of the policies it is tied to.

Premium is determined byThe policies it is

tied toAmount of

additional coverage





Automobile

Company owned vs. employee owned

Multiple Limits Available$500K, $1M to $2M typical

Multiple Deductibles$500 & $1000 typical

Premium is determined byPrimary driver(s)Where it is parked at

nightMake, model & age of

auto





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 byNumber of employeesEmployee SalariesEmployee Job Description





Employee Benefit

Medical & DentalFactors in determining premiumCoverageNumber of employeesSometimes health of employeeSometimes gender of employee

ST & LT Disability Factors in determining premiumEmployee compensationHealth of employee Before Tax / After Tax

Life InsuranceFactors in determining premiumCoverageHealth of employeeBefore Tax / After Tax





Legal Services• General Business

Organizational

• ContractsDraft a “short form” agreementReview potential pitfalls in any

agreement

• LitigationCourt room or procedural specialistConstructionLiens CollectionsEmployer-Employee

• License Look Upwww.iardc.org

Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContractsEmployeesAccountingFinancingMarketingOffice


Contracts / Agreements• Owner-Architect

• Architect-Consultant

• Employer-Employee



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 infoProperty identificationScope of physical workScope of servicesCopyrightsLegal RemediesLimitations of LiabilityCompensation terms

Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContracts / Agreements

Owner-ArchitectArchitect-ConsultantEmployer-Employee

EmployeesAccountingFinancingMarketingOffice


Contracts / Agreements

• Architect-Consultant

Similar requirements as Owner-Architect -All client infoProperty identificationScope of physical workScope of servicesCopyrightsLegal RemediesLimitations of LiabilityCompensation termsTax IDs Insurance Requirements





Contracts / Agreements• Employer-Employee

“Employee at Will”Hours of OperationBreaks / LunchesCompensationPaid time offConfidentialityNon-CompetitionSide WorkCompany Property & Resources





Employees vs. Subcontractors• What’s the difference?

Is it really just 1099 vs. W2Especially as it relates to Architecture

• Employees-Regular payrollPayroll taxesState Unemployment insurance (tax)Worker’s Compensation insuranceEmployment agreementsLaws regarding discriminationBenefits

Organization TypeF. E. I. N.LicensingInsuranceLegal ServicesContracts / AgreementsEmployeesAccounting FinancingMarketingOffice


Accounting• Accounting Software

Single point of tracking all financialsBe regular with updating dataMinimizes CPA costs

• C.P.A.-Certified Public Accountant – www.IDFPR.comSchedule to review 2-3 times annually Completes tax returns

• Payroll ServicesChecks, direct deposit & taxesW-2sGovernmental issues



Financing• Loans from banks

Traditional business loan / L.O.C. not likely

Personal GuaranteePledge Collateral

• Loans from Family or FriendsHave a written agreementUnlicensed ownership – max 1/3

• Credit cardsIf personal – separate for businessCorporate is betterGovernmental issues

• Small loans / leasesSmall loans often easier, regardless of

creditEquipment, Software, Insurance, etc.



Marketing• Know your target client base!!!• Repeat Clients & Referrals

Best and most consistent

• Partnering w/ complimentary servicesGeneral ContractorsInsurance AdjustersPermit Expeditors

• InternetLinked In, Facebook, Twitter, SlideshareBloggingBBB, Yelp and other review sites

• Traditional AdvertisingTypically do not workPhone book, newspaper, etc.

• Pro Bono ProjectsOpen the door to new project typesGreat source of Referrals



Office• Home

Free rentHard to meet with clientsHard to eliminate distractions

• Commercial OptionsRent from another firmRent from an incubatorRent direct from landlord

• Additional itemsSharing resources – printers, furniture,

etc.Internal referrals


aia chicago - kick-start your design business - practice basics

Business

general liability premium

design business

chicago http

typical multiple deductibles

local business license

html organization type

trick question aia chicago

online organization