I should complete the exams in six months and I am already on my own. Currently, business is very good. What else should I be looking into to set up my practice . Insurance? business license?. I already have an office and equipment. Obivously, keeping overhead to a minimum is key.
Some of their publications are a little pricey but they are very highly regarded. They also have a free email newsletter. I know of several companies who have contracted them to do audits and it's been very helpful to firms who want to grow or just stay where they are and not lose their shirts.
Probably depends on where you are in terms of what exactly you need. It's a good idea to get a couple of "how to start your own small business in X state" to figure out what to do... It also depends on if you are a sole proprieter or have partners. For a sole proprieter I think all you need to do may be to apply for business licenses in the cities you do business with. This basically means you will have to pay taxes to these cities...
I've never heard of a bldg. dept. not accepting plans from someone without a business license (whereas they won't give permits to contractors who don't have one), so it depends where you are and how correct you want to be.
It's more complicated if you have partners and/or want to incorporate. Here in Los Angeles for a partnership we had to file a fictitious business name statement with the county. This basically provides a record for the county of who owns any given business. Once you have that, you can file for a federal tax ID # (needed for a partnership), which you use to file taxes for the partnership. You also need it to set up a separate bank account. I would highly recommend setting up a separate account for work even if you are the only owner - it will make taxes easier and as you workload grows may make the transition to employees easier as well. It helps to have a program to track expenses - I use quickbooks but it is somewhat complicated and quicken etc. should be more than enough.
Anyways, we are learning as we go as well, but there are ton of references for people starting on their own. The AIA has some decent guides - haven't purchased them myself but they seem helpful. I would also consider professional liability insurance, particularly if you are working on larger progects and are not incorporated. We are now looking into insurance and it will be quite expensive (because we do design/build), however I have been quoted $3,000/yr for the minimum errors & omissions insurance and that doesn't seem too bad. Liability insurance is not required for a sole proprietor, and I know many people on their own who have never had it, but it does seem better to have that safety net just in case. Apparently it is nearly if not impossible to get it if you are not licensed, so you will have to wait on that anyway for the moment. In the long run I think incorporating provides better protection - if you have the time to make sure you are keeping the records up to date. Incorporating has some tax advantages after a certain point, but doesn't make a whole lot of sense at the beginning from what I can tell (we are looking into it - probably will become an S-corp in 2005).
All this seems daunting and does take a lot of time, but there are so many self-help references you shouldn't have a problem. We also have found an accountant to prepare our taxes who is a CPA with many years experience. Much more expensive than our old tax guy, but very worth it in terms of being able to ask questions and knowing we are doing things correctly.
Good luck.
R.A.,
Just out of curiousity, how did you decide it was time (or feasible) to start your own firm? It's something I've batted about with some friends a little but, quite frankly, scares me to death. Did too many sidejobs start you off or did you start and then seek clients?
R.A.
I appreciate the input/advice. If I can avoid liab. or E&O insurance it would be great at least for the time being. I have a CPA and a Attorney who can get me setup with and S.corp or Sole proprietorship or whatever. I'm curious if my state will require me to get some type of insurance at the time of licensure. I guess a phone call will solve that. Honestly, I don't know whether employees are in my near future. Depends... My town is rather small and good help is truly hard to find. But, as is anything things can change.
Low overhead has kept my prices down and I have no trouble getting work. I'm not going to make more than I did at my last job but my stress level is down and vacations are no problem.
Kellhammer
I believe that insurance is not required to start your firm. However, it may be required by your client. Architecture is just like any other business, if your product does not work, you have to give the money back (+ there is the health and welfare part of it). Therefore it is best to be prepared for the worse.
If you use AIA contract documents, they give architects good protection. Basically, the architect is only responsible for the aesthetics of the projects, that is if you have consultants.
Kel - I would doubt that your state requires insurance - CA doesn't and we seem to have some of the toughest rules... I also have never had a client ask if we had professional liability insurance, and honestly I don't think they think about it as an issue (on residential jobs anyway). However we have definitely been blamed immediately when there is a problem with the construction - whether it be leaks, framing that wasn't done right, etc. There is always the chance that you will be wrapped up in construction defects - whether you are really responsible or not. We have been worried about the liability because we are neither incorporated nor have insurance, but that should be solved within 6 months at the latest. For the past year or so we've been doing relatively small jobs and basically going on the assumption that worst case scenario we can cover problems that arise (we've had to go and fix things that contractors did wrong ourselves before we became design/build in order to appease clients - we've also had to give some part of the fees back on one project where the clients threatened to sue us - it happens in every profession sooner or later if you own your own business and you just have to accept it). Now that we're getting bigger jobs though we are going to get the insurance and incorporate and just shell out the cash, knowing it will be worth the piece of mind.
Mum - deciding to go out on our own was the combination of several factors. I worked full time in architecture for about the first 9 months of our company while my two partners (husband and another friend) did smaller construction jobs. We had a few design side jobs and had thought about going out on our own just as a design firm but it didn't seem economically feasible. My partners hadn't been satisfied with any of their office jobs and doing our own thing in some ways was a choice of last resort (for our sanity). My husband decided to get his contractor's license and I basically joined them full time right before he got it - it was a risk in that we didn't have enough work to support all three of us (but too much for me to have a full time job) but we were counting on the crazy remodel market continuing for a while and that the construction side would support the design part. It was slow at first and we've all been broke for a while (and used up our savings), but things are starting to heat up and it looks like we'll at least be in business for another year based on the work we have now and hopefully it will continue. The design/build aspect has helped a huge amount and that is mostly what we do now, though occasionally we'll do a design only or construction only job but we're planning to phase those out as soon as we can. I do know people that do only design on their own and have managed ok - they usually have a significant other who has a different line of work though. I don't know if there is ever a "right time", starting a company is always a risk and the best you can do is save up and have a cushion and then just work like crazy. Another interesting thing is that we didn't have that much work coming in until we officially "launched" the company and announced that we were all working full time on it, were licensed, etc. A lot of the work has been referrals from friends who are designers but have full time jobs and don't have time to do work for their friends or families. Since they know we're available they pass it along to us, which has worked out fairly well.
I stay can't say whether we will be successfull in the long run, but we're learning a huge amount and it is very rewarding for the moment. It's also very stressfull, and for the moment we have to put off starting a family. We'll just see how that plays out over time and our priorities change...
Also, for others considering going out on your own... we really do work all the time and are making very little money for the moment. Though the fees seem decent if you have constant work, you have to factor in all your overhead - which starts out small but grows quickly if you want to take on more than a few jobs at a time. Our overhead will be approaching 3,000/month with liability insurance and we don't even have an office outside our house or employees yet (though we do have a few friends we hire occasionally to help out). We are all having to forgoe things we would be able to afford if we worked for someone else - new cars, new clothes, vacations... but we have what we need, and the knowledge that we're doing something for ourselves instead of feeling powerless and spending time complaining about about our jobs seems worth it for now.
Mum
I thought I would toss in some of my thoughts. I worked for 15 years at a design/ build firm while finishing my degree. I had side work coming at me all the time but never enough ( I thought) to live off of. Plus, I really didn't want to leave my job until I had my license. I took one part of the exam about a year ago and started studying for the next. Well, almost a year later and I still hadn't taken it. I knew the only way to finish these test was to have more flexibility to study and I left my job. But, believe me there was many discussions with my wife about how I was going to do this and make it work. Once she was agreeable did I finally put in my notice. My wife works full time and so far is OK with the change which has been great. I earn enough to pay the bills We forgoe things like R.A. said. But it has really been working out. I wouldn't say I work more hours but I definitely work any time Like sat. and sun. alot Which my wife doesn't like but, a discussion we've had many times about the fact it is the nature of the business. I guess in some sense I work better that way since I don't feel pressure to be creative or productive. When there is a tough time I remind myself that this is something I have always wanted and now this is my chance.
After the ARE
I should complete the exams in six months and I am already on my own. Currently, business is very good. What else should I be looking into to set up my practice . Insurance? business license?. I already have an office and equipment. Obivously, keeping overhead to a minimum is key.
You might take a look at this:
http://www.zwa.com/index.asp
Some of their publications are a little pricey but they are very highly regarded. They also have a free email newsletter. I know of several companies who have contracted them to do audits and it's been very helpful to firms who want to grow or just stay where they are and not lose their shirts.
That sounds like overhead to me.
Yes, for larger, established companies, but they also have lots of resources for starting out.
Do you need professional liability insurance if you're doing a side job (like designing a house)?
Probably depends on where you are in terms of what exactly you need. It's a good idea to get a couple of "how to start your own small business in X state" to figure out what to do... It also depends on if you are a sole proprieter or have partners. For a sole proprieter I think all you need to do may be to apply for business licenses in the cities you do business with. This basically means you will have to pay taxes to these cities...
I've never heard of a bldg. dept. not accepting plans from someone without a business license (whereas they won't give permits to contractors who don't have one), so it depends where you are and how correct you want to be.
It's more complicated if you have partners and/or want to incorporate. Here in Los Angeles for a partnership we had to file a fictitious business name statement with the county. This basically provides a record for the county of who owns any given business. Once you have that, you can file for a federal tax ID # (needed for a partnership), which you use to file taxes for the partnership. You also need it to set up a separate bank account. I would highly recommend setting up a separate account for work even if you are the only owner - it will make taxes easier and as you workload grows may make the transition to employees easier as well. It helps to have a program to track expenses - I use quickbooks but it is somewhat complicated and quicken etc. should be more than enough.
Anyways, we are learning as we go as well, but there are ton of references for people starting on their own. The AIA has some decent guides - haven't purchased them myself but they seem helpful. I would also consider professional liability insurance, particularly if you are working on larger progects and are not incorporated. We are now looking into insurance and it will be quite expensive (because we do design/build), however I have been quoted $3,000/yr for the minimum errors & omissions insurance and that doesn't seem too bad. Liability insurance is not required for a sole proprietor, and I know many people on their own who have never had it, but it does seem better to have that safety net just in case. Apparently it is nearly if not impossible to get it if you are not licensed, so you will have to wait on that anyway for the moment. In the long run I think incorporating provides better protection - if you have the time to make sure you are keeping the records up to date. Incorporating has some tax advantages after a certain point, but doesn't make a whole lot of sense at the beginning from what I can tell (we are looking into it - probably will become an S-corp in 2005).
All this seems daunting and does take a lot of time, but there are so many self-help references you shouldn't have a problem. We also have found an accountant to prepare our taxes who is a CPA with many years experience. Much more expensive than our old tax guy, but very worth it in terms of being able to ask questions and knowing we are doing things correctly.
Good luck.
R.A.,
Just out of curiousity, how did you decide it was time (or feasible) to start your own firm? It's something I've batted about with some friends a little but, quite frankly, scares me to death. Did too many sidejobs start you off or did you start and then seek clients?
R.A.
I appreciate the input/advice. If I can avoid liab. or E&O insurance it would be great at least for the time being. I have a CPA and a Attorney who can get me setup with and S.corp or Sole proprietorship or whatever. I'm curious if my state will require me to get some type of insurance at the time of licensure. I guess a phone call will solve that. Honestly, I don't know whether employees are in my near future. Depends... My town is rather small and good help is truly hard to find. But, as is anything things can change.
Low overhead has kept my prices down and I have no trouble getting work. I'm not going to make more than I did at my last job but my stress level is down and vacations are no problem.
Kellhammer
I believe that insurance is not required to start your firm. However, it may be required by your client. Architecture is just like any other business, if your product does not work, you have to give the money back (+ there is the health and welfare part of it). Therefore it is best to be prepared for the worse.
If you use AIA contract documents, they give architects good protection. Basically, the architect is only responsible for the aesthetics of the projects, that is if you have consultants.
Kel - I would doubt that your state requires insurance - CA doesn't and we seem to have some of the toughest rules... I also have never had a client ask if we had professional liability insurance, and honestly I don't think they think about it as an issue (on residential jobs anyway). However we have definitely been blamed immediately when there is a problem with the construction - whether it be leaks, framing that wasn't done right, etc. There is always the chance that you will be wrapped up in construction defects - whether you are really responsible or not. We have been worried about the liability because we are neither incorporated nor have insurance, but that should be solved within 6 months at the latest. For the past year or so we've been doing relatively small jobs and basically going on the assumption that worst case scenario we can cover problems that arise (we've had to go and fix things that contractors did wrong ourselves before we became design/build in order to appease clients - we've also had to give some part of the fees back on one project where the clients threatened to sue us - it happens in every profession sooner or later if you own your own business and you just have to accept it). Now that we're getting bigger jobs though we are going to get the insurance and incorporate and just shell out the cash, knowing it will be worth the piece of mind.
Mum - deciding to go out on our own was the combination of several factors. I worked full time in architecture for about the first 9 months of our company while my two partners (husband and another friend) did smaller construction jobs. We had a few design side jobs and had thought about going out on our own just as a design firm but it didn't seem economically feasible. My partners hadn't been satisfied with any of their office jobs and doing our own thing in some ways was a choice of last resort (for our sanity). My husband decided to get his contractor's license and I basically joined them full time right before he got it - it was a risk in that we didn't have enough work to support all three of us (but too much for me to have a full time job) but we were counting on the crazy remodel market continuing for a while and that the construction side would support the design part. It was slow at first and we've all been broke for a while (and used up our savings), but things are starting to heat up and it looks like we'll at least be in business for another year based on the work we have now and hopefully it will continue. The design/build aspect has helped a huge amount and that is mostly what we do now, though occasionally we'll do a design only or construction only job but we're planning to phase those out as soon as we can. I do know people that do only design on their own and have managed ok - they usually have a significant other who has a different line of work though. I don't know if there is ever a "right time", starting a company is always a risk and the best you can do is save up and have a cushion and then just work like crazy. Another interesting thing is that we didn't have that much work coming in until we officially "launched" the company and announced that we were all working full time on it, were licensed, etc. A lot of the work has been referrals from friends who are designers but have full time jobs and don't have time to do work for their friends or families. Since they know we're available they pass it along to us, which has worked out fairly well.
I stay can't say whether we will be successfull in the long run, but we're learning a huge amount and it is very rewarding for the moment. It's also very stressfull, and for the moment we have to put off starting a family. We'll just see how that plays out over time and our priorities change...
Also, for others considering going out on your own... we really do work all the time and are making very little money for the moment. Though the fees seem decent if you have constant work, you have to factor in all your overhead - which starts out small but grows quickly if you want to take on more than a few jobs at a time. Our overhead will be approaching 3,000/month with liability insurance and we don't even have an office outside our house or employees yet (though we do have a few friends we hire occasionally to help out). We are all having to forgoe things we would be able to afford if we worked for someone else - new cars, new clothes, vacations... but we have what we need, and the knowledge that we're doing something for ourselves instead of feeling powerless and spending time complaining about about our jobs seems worth it for now.
Mum
I thought I would toss in some of my thoughts. I worked for 15 years at a design/ build firm while finishing my degree. I had side work coming at me all the time but never enough ( I thought) to live off of. Plus, I really didn't want to leave my job until I had my license. I took one part of the exam about a year ago and started studying for the next. Well, almost a year later and I still hadn't taken it. I knew the only way to finish these test was to have more flexibility to study and I left my job. But, believe me there was many discussions with my wife about how I was going to do this and make it work. Once she was agreeable did I finally put in my notice. My wife works full time and so far is OK with the change which has been great. I earn enough to pay the bills We forgoe things like R.A. said. But it has really been working out. I wouldn't say I work more hours but I definitely work any time Like sat. and sun. alot Which my wife doesn't like but, a discussion we've had many times about the fact it is the nature of the business. I guess in some sense I work better that way since I don't feel pressure to be creative or productive. When there is a tough time I remind myself that this is something I have always wanted and now this is my chance.
Thanks for your responses. You certainly have my respect for taking the plunge.
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