Saturday, January 3, 2015

Establishing an Architectural Office: Single Proprietorship

Most young architects who want to establish their own office will opt to start small. The type of office organization very suitable for this kind of objective is the single proprietorship. It is a very popular choice for new firms and is the simplest structure. This is an unincorporated business with no legal distinction between the owner and the business entity. You are entitled to all profits and are liable for all debt, losses and liabilities.

The primary advantage in a single proprietorship is that the proprietor or the individual owner is his own boss. He/she is the principal architect or the architect-of-record for the projects that will be undertaken. In that case, the entire responsibility, up to handling the financial and other aspects of the office will be borne by the owner. The architect-owner must be very knowledgeable about contract preparations, production of working drawings, estimating and doing specifications writing. He/she must also learn the business end of the office, the cash flow, and even the process of finding clients. And because the burden of the work is relegated to one person. the architect-owner will have to work days, nights, and even weekends to keep his office open and meet deadlines. Although sole proprietorship is easy to form and relatively easy to understand, another major disadvantage is that you are personally liable for all business debt, loss and liability. You have no personal protection from actions against the business including any liabilities caused by an employee.

Because of its simplicity, there is a tendency that activities of the architecture practice is mixed with unrelated business endeavors and personal matters. It is best to isolate the personal activities from the business side since it is possible for an individuals financial matters to become entangled with the finances of the proprietorship.  A separate booking is needed especially for tax reporting purposes.

On the other hand, while the architect may be a good designer and like to do this type of work, most often, someone must be out there finding projects to keep the office alive. The same is also true in other phases of the project.  The advent of mobile phones may have minimized the advantage of a small office, especially for a one-man office, but in case the architect is out of the office, visits of walk-in clients may be missed.

Finances to operate the offices are available through one source - the owner. A small office usually does small work and perhaps better quality because of the attention made but it is also small in peso value. If draftsmen are employed, there is always the problem of keeping them busy if projects are not available, and the additional lack of ability to do all phases of the project may cause some problems. Smaller offices may seem to employ less experienced draftsmen, probably because the salary outlay is lower, so that draftsmen may not be thoroughly trained or able to make decisions without the approval of the boss. And certainly, if any trouble arises on a project because of some mistakes in the documents, the one who assumes the entire responsibility is the architect-owner.

Single proprietorship may be rewarding for those who like to take the entire responsibility, and can handle the financial and other aspects that go with it. There is pride in being able to feel that you, and you alone, operate a successful business doing quality work. There is also the responsibility to keep employees happily employed. Because of the time spent by the owner in finding work and processing it thoroughly, there may be some problems with regards to time spent for family. There is also a small chance of bagging multi-million pesos projects, due strictly to office size, but as the office continues to grow, this issue may be gradually eliminated.

The major advantage of the small office is simply because the office is small. Work that requires more facilities than are available in this office size may go somewhere simply because of this fact. One method that may be used, is of course to increase the office force as occasion warrants. It may mean changes in office operations and additional paperwork. An option is to undertake bigger projects by networking with another architectural office by association, but this may limit the freedom experienced by a single owner. It does not mean that an office led by a single proprietor has to be small. Many large offices now started as a small single-owner operations, but grew by good management and still maintained the single-owner status by employing the expertise necessary.

According to Wikipedia, small firms with less than 5 people usually have no formal organizational structure, depending on the personal relationships of the principals and employees to organize the work. Medium-sized firms with 5 to 50 employees are often organized departmentally in departments such as design, production, business development, and construction administration. Large firms of over 50 people may be organized departmentally, regionally, or in studios specializing in project types.


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