A developer is wanting to own an architectural division to have an end-to-end process from design to construction. Using my stamp and PLLC registered firm name, but I would oversee production. The client leads are generated through the developer so no spin-off opportunity.
The developer is insistent on having bank account control of the architectural revenue, which demotes me to a COO or VP position. If I don't take the deal the developer will outsource another architect to review drawings, making me miss a lucrative opportunity.
My question is, is this legal and is there any failsafe in the profession that would provide me protection?
We will be asking a architectural attorney for guidance.
Legal? Maybe! Rules/laws regarding who can own an architecture firm vary a lot from state to state. Ownership of an architecture firm by people without architecture licenses isn't permitted everywhere. The attorney can help you figure that out. Same goes for what a business entity can be called. Some places will require the company name to contain the name of the architect.
What do you mean by "protection"? Is the plan for you and the developer to co-own the PLLC?
def not legal in my part of the world but I figure any licensed arch should know this stuff. Maybe why this developer is picking a green victim for “partnership”.
...its not a partnership, he doesn't share. I own the PLLC and the developer owns a series of companies. He wants to absorb the PLLC under his umbrella company which I would require control of the finances.
In our state a PLLC has to be 66% under an architects license for ownership. But it doesn't state anything regarding umbrella company ownership. It may be a loophole similar to paying an outside architectural consultant to review and stamp drawings.
May 1, 21 6:04 pm ·
·
thisisnotmyname
The intent of these laws is that architects have always majority ownership. I don't doubt a good attorney may find a work around, big engineering firms with non-architect ownership often set up
special business arrangements to facilitate them doing architecture. Just make sure your developer friend pays all of the attorney fees to figure this out. Then have your own lawyer and your state board review it.
May 2, 21 9:22 am ·
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archytype
Good point on the state board reviewing it.
May 2, 21 9:34 am ·
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shellarchitect
I guess I don't understand the difference between owning the firm and having sole control over the finances. I'm guess no one else here really knows either. I hope you share the opinion of your attorny.
Miles, are you aware that M&As are in fact normal activities for businesses?
May 23, 21 8:26 pm ·
·
rcz1001
Look over the details of the proposal very VERY carefully. While there are some cases where it is a good deal for both the architects and the developer. However, a lot of time, the deal is one-sided to the benefit of the developer at the detriment of the architect. Who has the leverage in the negotiation?
if it’s not you it’ll be someone else. Sounds like this guy wants to create the next Katerra. They have inhouse architects as well as partnerships with established design firms.
May 1, 21 6:28 pm ·
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archytype
If you're making 300k a year and selling your name is it worth it? I was offered 50% of profits for 6 months meaning if I don't perform or the firm outgrows me it gets renegotiated. I was also offered 25% revenue in my bank account with resettling every quarter.
if you're familiar with Airoom... same concept its a ruthless chop shop for the basic employees but someone has to be the VP to make the CEO super rich.
I'm concerned that this proposed deal seems doomed to not last very long. The developer appears to only need a stamp, and seems to have little or no appreciation of any particular skills or talents the OP has. Most developers spend a lot of time figuring out how to shave their expenses and are always looking for a better deal for themselves. I fear it's only a matter of time before the developer finds another way to accomplish the stamping function for less money and leaves the OP high and dry.
I think it's much worse than that. With financial control the developer can easily cook the books, and probably already does in the normal course of business.
The “stamp” is probably an architect’s most valuable asset and the thing most coveted by customers. By simple giving control of it away, you lose all leverage in an instant. This developer can hold the money over your head for years while he/she takes in the profits. The developer can force you to make questionable decisions to toe their profit line while you put your name and license at risk. Why on earth would anyone take such a deal? It’s a lose-lose situation.
If they’re willing to pay you $300k for this arrangement, they have enough money to pay you as a practitioner with your own practice.
Put together a deal team to get a proper valuation (see here) and fully understand the legal / financial implications (i.e. what OP is selling / getting / getting left with) before deciding on if OP wants to sell or not.
If the developer is willing to pay a good price then this could be a good opportunity to exit.
Developer (Non-Architect) Wants To Own Bank Account For Architect Firm
A developer is wanting to own an architectural division to have an end-to-end process from design to construction. Using my stamp and PLLC registered firm name, but I would oversee production. The client leads are generated through the developer so no spin-off opportunity.
The developer is insistent on having bank account control of the architectural revenue, which demotes me to a COO or VP position. If I don't take the deal the developer will outsource another architect to review drawings, making me miss a lucrative opportunity.
My question is, is this legal and is there any failsafe in the profession that would provide me protection?
We will be asking a architectural attorney for guidance.
Legal? Maybe! Rules/laws regarding who can own an architecture firm vary a lot from state to state. Ownership of an architecture firm by people without architecture licenses isn't permitted everywhere. The attorney can help you figure that out. Same goes for what a business entity can be called. Some places will require the company name to contain the name of the architect.
What do you mean by "protection"? Is the plan for you and the developer to co-own the PLLC?
def not legal in my part of the world but I figure any licensed arch should know this stuff. Maybe why this developer is picking a green victim for “partnership”.
...its not a partnership, he doesn't share. I own the PLLC and the developer owns a series of companies. He wants to absorb the PLLC under his umbrella company which I would require control of the finances.
In our state a PLLC has to be 66% under an architects license for ownership. But it doesn't state anything regarding umbrella company ownership. It may be a loophole similar to paying an outside architectural consultant to review and stamp drawings.
The intent of these laws is that architects have always majority ownership. I don't doubt a good attorney may find a work around, big engineering firms with non-architect ownership often set up special business arrangements to facilitate them doing architecture. Just make sure your developer friend pays all of the attorney fees to figure this out. Then have your own lawyer and your state board review it.
Good point on the state board reviewing it.
I guess I don't understand the difference between owning the firm and having sole control over the finances. I'm guess no one else here really knows either. I hope you share the opinion of your attorny.
I would tell them to go f--- off. They already showed their cards and a hint into their intent.
"I'll take your business name and manage all the finances - this is a great deal for you!"
I would laugh in the face of anyone who offered up a "deal" like that - especially based on a threat (outsource to someone else).
How do you spell indentured servant?
oof, yeah...not a deal I'd like to be any part of
Miles, are you aware that M&As are in fact normal activities for businesses?
Look over the details of the proposal very VERY carefully. While there are some cases where it is a good deal for both the architects and the developer. However, a lot of time, the deal is one-sided to the benefit of the developer at the detriment of the architect. Who has the leverage in the negotiation?
if it’s not you it’ll be someone else. Sounds like this guy wants to create the next Katerra. They have inhouse architects as well as partnerships with established design firms.
If you're making 300k a year and selling your name is it worth it? I was offered 50% of profits for 6 months meaning if I don't perform or the firm outgrows me it gets renegotiated. I was also offered 25% revenue in my bank account with resettling every quarter.
And if there aren’t any profits?
There's already huge profits, I've kept them in my business account thus far.
Are you being asked to put up any money to start the PLLC or provide any personal guarantee for any debts it may accrue?
The developer would pay staff. But lawsuits would be on me for the architecture.
“I've kept them in my business account thus far.” It won’t be your account if you take this “deal”, LOL
if you're familiar with Airoom... same concept its a ruthless chop shop for the basic employees but someone has to be the VP to make the CEO super rich.
So looking for some solid advice here and hopefully a free consult prior to meeting the attorney.
"If you are making $300,000 a year and selling your name is it worth it?"
No.
So they would control all the money and you'd have all the liability? No thanks.
"lawsuits would be on me for the architecture"
3 words: Nope, nope, and NOPE!
I wouldn't be working for some Donald Trump-like sleeze.
I'm concerned that this proposed deal seems doomed to not last very long. The developer appears to only need a stamp, and seems to have little or no appreciation of any particular skills or talents the OP has. Most developers spend a lot of time figuring out how to shave their expenses and are always looking for a better deal for themselves. I fear it's only a matter of time before the developer finds another way to accomplish the stamping function for less money and leaves the OP high and dry.
I think it's much worse than that. With financial control the developer can easily cook the books, and probably already does in the normal course of business.
If they’re willing to pay you $300k for this arrangement, they have enough money to pay you as a practitioner with your own practice.
Lots of nonsense spewed here.
Put together a deal team to get a proper valuation (see here) and fully understand the legal / financial implications (i.e. what OP is selling / getting / getting left with) before deciding on if OP wants to sell or not.
If the developer is willing to pay a good price then this could be a good opportunity to exit.
Shut up scammer.
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