Types of Business Organisations For Architects

TYPES OF BUSINESS ORGANISATIONS
FOR ARCHITECTS
Sole Proprietorship
Partnership
Limited Liability Companies
(Private and Public)
Limited Liability Partnership
Group Practice
Consortium Arrangements
Sole Proprietorships
• A sole proprietorship is a legal entity with one liable
individual who ‘owns’ the business, and in effect,
holds all of the equity and all of the liability for the
business.
• A proprietor is usually a trader selling physical
products or services to customers
• An architect is practitioner professionally-qualified to
sell architectural services to clients
• The architect can practice either alone or with staff
employed by him
Advantages
• Autonomy at work.
• There are few formalities to setting up and
operating as a sole trader. This can keep costs
down and increase profits.
• The sole proprietor can make immediate
decisions, as there is no need to consult with
other parties.
• The business belongs to one individual thus all
profits belong to that person.
Disadvantages
• High risk
• Difficult to keep up with changes in the practice.
• If the business fails, all debts would have to be
met by the proprietor’s personal assets.
Liabilities are unlimited
• As a small business, sources of finance may be
difficult to obtain compared with larger
business.
Partnerships
• A partnership is defined as the relationship between
two or more persons carrying on business in
common with a view to profit
• Hence, it is a collection of individuals and not a
corporate body.
• There is no legal requirement for a written
agreement but it is highly recommended that a
partnership is formalised by a formal partnership
deed in which rights and responsibilities of the
partners are set out.
Advantages
• There are few formalities to setting up and trading as
a partnership.
• The financial resource of more than one person is
likely to be better than those of a sole proprietorship.
• Responsibility can be shared
• There are good opportunities of expansion due to the
ability of collective resources from all the partners
• Employees may share profits via bonuses.
Disadvantages
• Partnerships have unlimited liability
• One troublesome partner could cause difficulties
for the other partners , as the action of one
partner makes the others liable.
• Unless otherwise stated, the death of a partner
extinguishes the partnership
• Liability may affect a retired partner if the
liability was incurred during the currency of his
partnership
Limited Liability Company
Private or Public
• It is a company formed by members who freely subscribe
to be co-owners of the company through share holding
• A private limited liability company is a company in which
the liability of the members is limited by the extent of their
share holding
• There is no limit on the number of members that form a
LTD company, and a board of directors, who carry no
personal liability run the company.
• A limited liability company is governed by the Companies
Act and must register with the Corporate Affairs
Commission as such
Advantages
• Protection of personal assets
• It is easier for a LTD company than a partnership to raise funds from
outside sources of finance.
• Tax advantages over partnerships
• All employees, including directors are subject to PAYE
• It is easier to remove an unsatisfactory director than an
unsatisfactory partner.
• The company does not dissolve when a director leaves or shares
change hands and there are no complex legal procedures involved.
• Companies are internationally recognised and so it may be easier to
develop business relationships overseas than it would otherwise be
with a partnership.
Disadvantages
• The companies finances are in the public
domain as annual accounts have to be filed at
companies House.
• There can be an administrative burden.
Limited Liability Partnership
LLP
• Created and governed by the Limited Liability Partnership Act
2000 in the UK.
• Adopted in Nigeria. Lagos State Partnership Law 2003
amended 2009 incorporated LLP
• It is a hybrid business structure which seeks to retain the best
from traditional partnership and limited liability companies
this means an LLP can absorb the Partnership ethos
• The structure offers complete freedom of internal
organisation but two of its personnel must be designated to
perform duties similar to those of a company secretary and
director.
Advantages
• Confers legal personality on a partnership
• A limited liability partnership is liable for its debts and other
obligations but its members are not liable for the debts of
the partnership.
• There are no restrictions on the number of members.
• Registration with Registrar of Companies protects the
company’s name by law, and prevents anyone from trading
with the same name.
• The death or resignation of a director does not affect the
structure of the company which can continue to trade as
before.
Disadvantages
• There can be complex and costly start-up
procedure.
• Accounts must be prepared in accordance with
accounting standards and must be audited.
• If the turnover of the company is over a certain
threshold then company accounts must be
submitted every year. This can incur additional
cost as accountants and auditors are required.
Other Business Models
• Group Practice
• Consortium Arrangements

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TYPES OF BUSINESS ORGANISATIONS

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