Hello, Allison -
Regarding LLCs, LLPs, and professional liability:
I can almost guarantee that the decision is state by state, and that there will be some minor differences in the rules and what is allowed.
When I learned about a dozen years ago that my fellow stockholders were kicking another stockholder and me (and about 1/4 of the staff) off of the ship (it was the stupid economy), I chose being a plain sole proprietor, no employees, as my business organization form, and secured general and professional liability coverage.
At the time, I don't think that professionals in Washington could organize as an LLC. I believe that has changed - now you can, but only if you carry a certain amount of professional liability coverage. I haven't bothered to revisit the decision.
A quick search shows that California doesn't allow architectural LLCs.
If you are nervous about liability exposure, look into increasing your coverage. I was pleasantly surprised at the low cost of going from $1 million to $2 million when a school district requested that.
If you are at all contemplating providing services in other states, you will find that there are different ways of doing business, becoming registered as a "foreign" entity, that they have different approaches to whether or not they collect an annual "license" feefor the privilege of working in their state, etc. ~23 years ago I led my former firm's work for an international apparel company, became registered in about 13 other states, and spent maybe 10% of my time making sure we didn't run afoul of various state licensing boards and treasurers.
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Joel Niemi AIA
Joel Niemi Architect
Snohomish, WA
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Original Message:
Sent: 08-09-2023 05:46 PM
From: Alison Kendall
Subject: Small Firm Payment Structures
I have a very small firm in California and I've been told that I cannot form an LLC as an Architect to reduce liability exposure, that as a licensed professional my only real protection is professional liability insurance. I'd like to clarify this question, as it appears that some of the very large architecture firms are either LLPs or Corporations. It isn't clear if the options vary by state, either.
Would love to get some advice for very small (ie 1-2 people) firms.
Alison
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Alison Kendall Architect AIA
Kendall Architecture Planning + Design
Santa Monica CA
Original Message:
Sent: 08-08-2023 06:06 PM
From: Charles Gaidica
Subject: Small Firm Payment Structures
Hello community!
Appreciate all the knowledge I've gained from this forum and have a question of my own I'm hoping to gain some insight on in terms of best practices.
For context, I fairly recently became a part owner of the small firm I work for. We are set up as an LLC and as everyone who works for the firm is an owner we have never had the 'need' for a payroll service - we simply have an operating agreement through which we have set appropriate compensation which is drawn from our revenue on a monthly basis.
Prior to my involvement I know this system was put in place for its simplicity, but I've now taken over most of the financial responsibilities for the firm and am questioning whether we should have things set up differently?
Thanks for any insight!
Best,
Charlie Gaidica, AIA, NCARB
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Charles Gaidica AIA
Skilform
Royal Oak MI
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