Establishing an architectural office: Corporations

In many cities, a corporation may be formed by architects. Simply explained, the corporation is a theoretical employer organization and all members (stockholders) are employees with financial responsibility limited by the amount of their investment. When a partnership becomes so large or unwieldy that efficient operation becomes difficult, the partners may decide that a corporation type office with its benefits, would be very interesting.

A corporation is formed by obtaining approval of articles of incorporation from the Securities and Exchange Commission, a charter from the city establishing a board of directors, and electing a slate of controlling officers. A stock issue is provided and may be common stock or preferred stock, the latter having priority or preference when dividends are declared. Stock may have an initial par value or no value and the investors either buy shares, or acquire them by their monetary interest in the office. This cash inflow provides the starting finances for the corporation. The board of directors and elected officers are responsible for the efficient operation of the corporation and all persons work for the corporation as employees and receives a salary, plus stock dividends, plus a bonus, if profits are more than those expected. Market value of stock fluctuates up or down from issue price depending upon amount of dividend or other indications of profitable operation and may not be indicated in stock market quotations.

Financial and size advantages are more rather obvious. With a greater number of stockholders, there is more money with which to work. As a large organization, it is possible to have more employees and more bigger work. Diversification of skills or abilities is also more possible. Departmentalization may also result, again bringing larger and more varied types of projects.

Proper business methods may bring a good return on any investment. All of this large work, larger office, and less personal in-office contact may lead to a feeling of factory workers, and stifled ambitious younger people. With a larger group of principals, it generally works out that individuals develop considerable personal skills in a particular area rather than improving over the entire field, and while some people do not object to a human boss, they do not like to be supervised by a corporation.

Bigness as related to a corporation, has its advantage and its disadvantage. From the standpoint of the client, the large corporate office generally has the advantage of being able to provide expert knowledge in a number of fields, a client wishing to build a special manufacturing plant probably will have better results with a large office with specialized interests, and most such offices are organized as corporations. From the standpoint of the employee, exposure in a large corporate office will give him a much different feel for projects than is generally possible in a small office. This may be good or bad, depending upon the individual. A by-product of a large corporate office may be the better understanding of business as it relates to the design professions.

Posted in: Architect,architectural office,PRBoA,PRC,Professional Regulation Commission,ProfPrac,SEC,Securities and Exchange Commission