Nowadays corporate structures, such as companies, exclude sole practitioners and partners from the architectural market. We live in a highly competitive society, and old forms of unions are not as effective today, as they were before.
Though the definition of a partnership sounds optimistic enough and tells that it “is an association of two or more persons to carry on a business for profit as co-owner” (Sweet, 1999), the statement is not as bright as one may expect it to be. First of all, debts which partners made during their joint work must be paid by both of them: “therefore, in the event that a business vendor… enforces a judgment against the partnership, each partner’s assets may be reached to satisfy the full amount of the claim” (Demkin, 2008).
It does not mean that both partners are guilty of a negligent act; though, they both are responsible, while shareholders of a company usually organize their business in terms of limited liability; thereby they are not personally responsible for the firm’s debts. It is important to know that a partnership lasts till the partner’s death. In this case the second partner would need a substantial sum to buy the other share, or it would be sold while a corporate structure exists even after the decease of a shareholder.
Corporate structures are much more successful in modern architectural business than partnerships. Such unions are more stable in the face of financial conflicts. Partners could hardly run a business as competent as corporate structures do: “most partnerships appoint a managing partner by taking the most senior person, often the highest fee-earner, and asking him to manage, for which he will have had no training and probably feels exposed in doing a job he doesn’t necessarily enjoy” (Whelan, 2003)., while corporate unions often hire specialists to fill up the gap.
The question of capital is also topical for partnerships: “Many partnerships have extreme difficulty in raising the necessary capital to advance the business, by the very nature of their structure. As of yet, outside investment is not allowed” (Whelan, 2003). Though, a shareholder may loan some sum of money to a corporate structure, as any other private individual.
At the same time, some problems, which sole practitioners deal with, rather remind drawbacks of partnership practice. First of all, sole practitioners’ sphere of action is not always connected with architecture. They deal with business concerns, which require special training and knowledge. “It is probably the most difficult form of practice” (Chappell and Willis, 2005). As has been mentioned above, a corporate structure usually does not have such problems.
Secondly, one needs great capital to start his/her sole practice. It is a money, time and force-consuming task to equip an office, organize proper advertising, and develop a good clients base. Staff, usually, is rather small which may also lead to professional isolation. A company does not only have tax advantages, or the ability to raise cash, it is also the result of many investments. Companies indeed develop faster. Staff of a company usually consists of competent experts, since corporate structures can afford them.
Autonomy, one of the biggest advantages of a sole practice may also become its main disadvantage: facing financial and administrative difficulties, a sole practitioner is also alone. “A Sole Practitioner is personally responsible, indirectly or not, for absolutely every facet of the business. From profitability to client satisfaction, to compliance and technology, the Sole Practitioner must become a jack-of-all-trades and a master of ALL” (Billota, 2008).
A sole principal takes all responsibility. If a client has some claims, a sole practitioner has to pay while company shareholders are not personally responsible in such situations. Sole practitioners do not obligatory work alone; they may employ workers from various spheres. Like all other employers, sole principles have certain liabilities to their employees. Thereby, they have some specific matters of concern, such as, for example, the obligation to ensure indemnity covering.
Premium costs are constantly increasing, and a sole practitioner may have certain difficulties if he/she faces the necessity to secure an adequate indemnity covering and costs of coverage. When a company needs money, it has several ways of capital raising, for example, issuing new shares. A sole practitioner has nothing besides his/her own funds.
Reference List
Billota, M, (2008). The Sole Practitioner vs The Enterprise. InFocus, 1(1), pp. 1-4.
Chappell, D., and George, W. N. B, 2005. The Architect in Practice. Hoboken: Wiley-Blackwell.
Demkin, J. A., 2008. The Architect’s Handbook of Professional Practice, 14th Ed. New York: Wiley & Sons, Inc.
Sweet, J., 1999. Legal Aspects of Architecture, Engineering and the Construction Process. Samutprakarn: CL-Engineering.
Whelan, J., 2003. Interview: the Corporate Structure vs. the Partnership. The Case for the Smaller Firm… Managing Partner. Web.