ARCH 810H2

PROFESSIONAL PRACTICE
Lecture 02
Forms/Styles of Architectural Practices
Name: Lawrence Ogunsanya

Email : ogunsanya@ukzn.ac.za
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Forms/Styles of Practice in
Architecture
INTRODUCTION
Choosing a suitable company structure involves the
following:
Liability exposure
Legal and tax protections for your operations.
Cost of formation, Start-up and future capital
requirement.
Level of Control and Managerial ability
Business goals
Management succession plans
Positive and negative attributes of each company style
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Forms/Styles of Practice in
Architecture

a private (Sole proprietary)

company
a partnership
an incorporated company
a close corporation

A PRIVATE (SOLE PROPRIETARY)

COMPANY
A sole proprietorship is the simplest and most
common structure available for a business.
It is an unincorporated business owned and
operated by one individual with no distinction
between the business and you, the owner.
You are entitled to all profits and are responsible
for all your businesss debts, losses, and
liabilities.

A PRIVATE (SOLE PROPRIETARY)

COMPANY

Advantages
Simple to create
Least costly form of practice
Profit incentive
Total decision-making
No special legal restrictions
Easy to discontinue

A PRIVATE (SOLE PROPRIETARY)

COMPANY

Disadvantages
Unlimited personal liability
Limited skills and abilities
Limited access to capital
Lack of continuity of business: The death of
owner dissolves the business unless
there is a will to the contrary.

PARTNERSHIP
A partnership is a single business where two or more
people share ownership.
Each partner contributes to all aspects of the business,
including money, property, labour, or skill. In return, each
partner shares in the profits and losses of the business.
Partnership agreement include:
Determining the ownership split, e.g., 60/40, 70/30, etc.
Every business needs a leader or point person for
accountability, thus avoiding the 50/50 split.
Including exit strategy terms allowing owners to walk
away or be bought out.
Agreeing to decisions regarding money, e.g., profit and
loss sharing and compensation.
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PARTNERSHIP
There are three general types of partnership
arrangements:
General Partnerships assume that profits, liability, and
management duties are divided equally among partners.
Limited Partnerships are more complex than general
partnerships. Limited partnerships allow partners to
have limited liability as well as limited input with
management decisions. These limits depend on the
extent of each partners investment percentage. Limited
partnerships are attractive to investors of short-term
projects.
Joint Ventures act as general partnership, but for
only a limited period of time or for a single project.
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PARTNERSHIP
Advantages
Easy and Inexpensive. Partnerships are generally an
inexpensive and easily formed business structure.
Shared Financial Commitment. Each partner is
equally invested in the success of the business.
Partnerships have the advantage of pooling resources
to obtain capital.
Complementary Skills. A good partnership should reap
the benefits of being able to utilize the strengths,
resources, and expertise of each partner.
Partnership Incentives. Partnerships offer employees
the opportunity to become a partner. Partnership
incentives often attract highly-motivated and qualified
employees.
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PARTNERSHIP
Disadvantages
Joint and Individual Liability. Partnerships retain full,
shared liability among the owners. Partners are not only
liable for their own actions, but also for the business
debts and decisions made by other partners.
Disagreements Among Partners. When multiple
people are involved, you will have multiple opinions that
could lead to disagreements.
Shared Profits. Because partnerships are jointly
owned, each partner must share the successes and
profits of their business with the other partners. An
unequal contribution of time, effort, or resources can
cause discord among partners.
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AN INCORPORATED COMPANY
The incorporated company is intended for professions (i.e.
: architects, quantity surveyors, engineers etc.)
A incorporation is a separate legal entity from the person or
people forming it. Directors and officers purchase shares in
the business and have responsibility for its operation.
An incorporated company appears to be a suitable form of
business association where partnership is not desired,
where directors are all fully involved in the work of the
company and where there are more than ten principals.

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AN INCORPORATED COMPANY
Advantages
Protects the owner's assets against the company's
liabilities and additional tax deductions.
Unlike proprietorships and partnerships, the life of the
corporation is not dependent on the life of a particular
individual or individuals. It can continue indefinitely until it
accomplishes its objective, merges with another business.
Can raise capital through the sale of stock

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AN INCORPORATED COMPANY
Disadvantages
They are more expensive to set up and operate than
partnerships and sole proprietorships.
Require a lot of paperwork, periodic filings with the state
and annual fees.
Require annual meetings and require owners and directors
to observe certain formalities.
It needs a separate credit and bank accounts which
means, you can't mix business and personal funds under
the law once you have incorporated.

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CLOSED CORPORATION COMPANY

A close corporation is generally a smaller corporation
that elects close corporation status and is therefore
entitled to operate without the strict formalities normally
required in the operation of standard corporations.
This type of company was legislated specifically to cater
for small company structured enterprises. It is suitable
for one or two person or family-run businesses.
The number of members in a Close Corporation may
not exceed 10. The minimum is l. The members must be
natural - not judicial - persons; i.e. a company may not
be a CC member.
Statutory regulations governing Close Corporations are
simpler and less onerous than for other corporations.
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CLOSED CORPORATION COMPANY

Advantages
Registration of a close corporation is relatively simple
and inexpensive when compared to a company.
They require fewer formalities than standard
corporations.
Is a separate legal entity and is therefore not affected by
the death of a member.
Members are not individually liable for the debts of the
CC.
Members will not pay tax on all the profits of the close
corporation as is the case with a partnership. The close
corporation will pay tax at a flat rate.
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CLOSED CORPORATION COMPANY

Disadvantages
Close corporations are governed by both bylaws and a
shareholders' agreement, which are a more complicated
and restrictive set of governance rules.
More legal requirements than a sole proprietorship or
partnership.
All the members have to give their consent for the
disposal of a members interest and they have to be
given preference to third parties to acquire the interest.
Constant rate of tax, regardless of the income level of
the company.
Shareholders have increased responsibility and
participation.
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SO WHICH PRACTICE STYLE/FORM

IS SUITABLE FOR YOU?

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OTHER FACTORS TO CONSIDER

Licensing and Regulations

Securing any necessary permits or licenses to practice.
Insurance
Cover not only errors and omissions but liability and your
health.
Brand
what does your business stand for? This part comes even
before you name your firm. What would be the tagline of your
website or book? Whats the story youre trying to tell?

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Questions

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