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New Practice Setup

What is the best legal setup for my new practice with a friend?

My friend and I wish to set up a small architectural practice, designing primarily residential projects initially. He is a few years older, fully qualified and ARB registered, whereas I am at present only qualified to RIBA Part 1, albeit with more than 15 years of experience in the industry. What is the best legal setup for us to fairly divide the responsibilities and liabilities, which we want to be completely equal? I do not want my new business partner to be more exposed from a liability point of view than is completely necessary, and I certianly do not want him to bear personal/financial/legal responsibility for my work, which I feel should absolutely be my own. We are both insistent that this new business is to be a completely fair partnership between us, and that the legal structure should be a reflection of this.

mdw

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4 answers

  • 0

sarah_77

When I was deciding whether to be self employed or a limited company, the most useful info came via HMRC. I suggest you start with the advice on their website. They link to BusinessLink and the like and there are explanations of the various set ups, legal liabilities etc.

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  • 0

aa_87 [ Editor ]

Hi,

Have at www.companieshouse.gov.uk they have advice on Limited Companies (LTD) and Limited Liability Partnerships (LLP). There is a growing trend towards LLP's in architectural practices. You should look at the implications on your liability of these options. Also you might want to consider tax when you are weighing up the options, as Sarah as pointed out above. The HMRC website (www.hmrc.gov.uk) will give you advice on this.

The Part 3 course is designed to help architects set up their own practice. I would suggest you do a Part 3 course, I know you aren't Part 2 qualified, but you can take the lecture/ seminar series which cover many of the issues you need to know to set up your own business. You need to be confident that you understand your legal liability, insurance and even office management issues.

Good luck and good on you.

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  • 0

john toppin [ Editor ]

From a liability perspective only:

Generally, for either a Limited Company or Limited Liability Partnership - if you and your friend were 50:50 Shareholders or Partners you would have equal risk and equal reward.

If you were 50:50 Partners in a traditional Partnership you would normally both have equal reward but unlimited liability.

I would recommend you speak to a lawyer to get advice on the best structure for liability and on having a proper shareholders agreement or partnership agreement drawn up that reflects your wishes.

There are differences as far as tax is concerned and for LLP and Partnerships you will both usually be treated as self employed. In a Limited Company you would both normally be employed by that company, commonly as its Directors. Talk to a qualified tax advisor.

(btw I am not a tax advisor or a solicitor).

As to why do this at all, see http://bit.ly/aJynCb

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  • 0

v bird

There is a lot of excellent information for anyone wanting to set up a business on www.businesslink.gov.uk. David Littlefield's book 'An Architect's Guide to Running a Practice' (Architectural Press) is an inexpensive and useful source of specific information.

Ultimately the decision should be yours, but as the previous respondents have said, invest in legal and financial advice before you jump in - it will be money well spent.

The proportion of responsibility you have for the company is something you set at your startup - 50/50 is absolutely fine. As long as the paperwork says that that's the split of responsibility/risk, then that's what it is! Provided at least one of your partners/directors is a qualified architect you can be RIBA registered and use the term architect in your company name.

From a professional point of view it might be worth your while contacting CIAT (www.ciat.org.uk) to find out if your degree and experience combined might qualify you as an architectural technologist.

You will need to check with your insurers that both parties are equally covered. This is not likely to be a problem, however, as it is the practice that carries the insurance, not the individual. You need to make sure that all paperwork relating to practice projects is under the name of the practice and not individual names.

Best of luck!

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