Raffles International Institute Module: Design and Business Law (AUS) Lecturer: Sandra Draskovic, M.Arch

1. DESIGN AND BUSINESS LAW
FORMS OF BUSINESS OWNERSHIP
RAFFLES INTERNATIONAL INSTITUTE
FEBUARY 2014
LECTURER: SANDRA DRASKOVIC

2. What to do?
Defining the „what‟ of an interior design practice provides the
basis of one‟s identity and will have an influence on everything
that follows.
Choices?
Many choices need to be made: small big details like choosing
a name and tricky details, such as making
it a one (wo)man show or joining a team.
Type of organization?
In order decide on a type of organization that will match the
work produced, you will need to find out what kind of product
you are interested to deliver, and if your are able to deliver it.

3. STARTING A COMPANY –MAJOR
CONSIDERATION:
1. BUSINESS TO SELL AFTER
need o be structured and organized in a way that
can be managed by other person with easy way of
transfer of responsibilities to gain financial reward
upon leaving/selling
2. BUSINESS AS A PROFESSIONAL JOB
POSITION
designer starts a company around his/her name and
style, which can be harder transferred and sold to
other person – less desirable

4. • Main intention for setting a company is success of
a business
• Owner must take responsibilities of all aspects of
a business such as: salaries of employees, non paid
leaves, paid leaves, vacations, sick leaves, insurance
plan, running projects, public relationship and
networking, marketing, social responsibilities,
structuring…
• Initial investment and years of devotion to a
business growth and establishment – between 3-7
years is required to sacrifice with specific life style to
make a successful interior design practice

5. • CERTAIN PERSONALITY TO START UP A
BUSINESS:
1. Are you in a good health? Physical and Emotional
strength?
2. Do you have energy it takes for a business to
succeed? Limitless physical energy – exercise, fit,
sport, recreation?
3. Are you self-started and self-motivated, who takes
initiative?
4. Are you person that get things done?
5. Can you go well with other people and all kind of
people‟s characters, various backgrounds, ages,
nationalities, personalities?

6. • CERTAIN PERSONALITY TO START UP A
BUSINESS:
6. Are you a leader? Can you motivate them to
follow you and your ideas?
7. Are you ready to take responsibilities? Do you
understand all the bits and pieces of the interior
design practice and what does it mean before setting
your own?
8. Are you a good worker? Can you be fully
dedicated to a task in hand?
9. Are you well organized?
10. Are you capable of taking decisions? Quickly in
necessary?

7. • CERTAIN PERSONALITY TO START UP A
BUSINESS:
11. Do people have confidence in you? Do people
believe you will finish the job and that it will be done
properly?
12. Are you type of a committed person? It requires a
lot of energy.
13. Are passionate about your profession? It takes
strong motivation to carry business through.
Enthusiasm is important.
14. Are you good communicator that express clearly
and speak firmly in a professional manner?

8. • CERTAIN PERSONALITY TO START UP A
BUSINESS:
15. Do you understand interior design field? Do you
understand all the works you are going to do? Do you
have skills to do them?
16. Have you had a business training? How to set up
business in a certain environment e.g Mongolia?
17. Can you foreseen potential problems? Do you
have investment? Did you choose location?

9. • One thing is certain: the choice of
location for a new design practice is about
finding adequate office space at an
affordable price and deciding on where this
place might be.
Set up location
or where to go
• The current generation of designers
starting up a practice can in fact fully
benefit from a professional title recognized
through-out the Asia and from the growing
globalization of both education and job
market.
• Each location entails specific conditions
that determine much of the opportunities
and difficulties involved in starting up a
practice.

10. Types of architectural and interior design companies?
As an design student, your primary and perhaps only focus is the
craft or art of design. Your dream is to make a job out of your
passion, so you start your own interior design firm.
Starting a successful business takes more than talent, knowledge
and passion. Often, young architects forget that organization is
equally important.
Setting up office entails implicit choices about, for example:
• business structure, and plan
• working method and delivery
• organization structure
• type of clients

11. PREPARE A BUSINESS PLAN / WRITTEN
ACTION PLAN:
•
•
•
•
•
•
•
PLANNING & INVESTMENT
What are your area of specialties?
When do you expect to start?
Where you will be based? Where you will be
located?
How will you charge fees/. How you will base
markup/hourly charges?
What are you going to sell?
What is the planning for earning profit?
Forecast of investment and expanses?

12. PREPARE A BUSINESS PLAN / WRITTEN ACTION
PLAN:
•
•
•
CLIENT
Strategy for attracting clients, networking,
marketing?
STAFF
How you will choose employees? What
qualifications you will take into consideration? Will
you organize training? People are the most important
asset of the company.
MARKET
Understand the market, its possibilities, what is
competition like?

13. PREPARE A BUSINESS PLAN / WRITTEN ACTION
PLAN:
•
•
RESOURCES
Do you have a network of resources: dealers,
contractors, manufacturers, showrooms to serve
business, to produce, to build, to maintain…
FINANCE
Do you have funds for starting the business? Do you
have saved money or you will take loans? Do you know
the law related to loans and lending institutions? Maybe
you will need to consult attorney or accountant to advice
you and evaluate stakeholders? Foreseen business and
break down analysis for 1-3 years.

14. ADVANTAGES
&
DISADVANTAGES
OF RUNNING A BUSINESS:
• COMPLETE CONTROL
•DECISION MAKING
FREEDOM
• DIRECTING A BUSINESS
AND ACTIVITIES IN OWN
WAY/STYLE
• COMPLETE FREEDOM
TO ESTABLISH OWN
IDEAS, VISIONS
• YOU DETERMINE THE
PROFIT
• JOB SECURITY
• GREAT SATISFACTION
• GIVE TO GAIN, YOU
MUST BRING
INVESTMENT INTO
BUSINESS
• LONG HOURS OF
DEDICATION TO WORK 1215H / PER DAY
• BIG RISKS TO LOOSE
INVESTMENT IF BUSINESS
IS FAILURE
• INCOME WILL
FLUCTUATE
•FULL RESPONSABILITIES
• YOU FALL UNDER THE
STATE LAW / INSURANCE /
LEGISLATIONS

15. POFESSIONALS T ASSIST YOU DEVELOPING OWN
BUSINESS:
1. ACCOUNTANT – ensure financial advices and
protection, breakdown analysis of the investment and
finances
2. BANKER/LENDING INSTITUTION-loan consultant
3. BUSINESS CONSULTANT-familiar with an interior
design field (for planning)
4. INSURANCE ADVISOR-how to cover major risks if
something goes wrong
5. LAWYER-structure the business / ownership
according to the law
6. FINANCIAL ADVSOR-attorney, financial planning,
profit and growth planning

16. Types of design firms - concept/services:
1. STUDIO
2. OFFICE
3. BUSINESS

17. The Design Studio
Distinctive to this type of design firm is its strong
leader or „guru‟, who leaves a distinct signature
on each and every project. To them, projects are
just a means to an end to make their precious and
often most creative and innovative ideas
materialize their dream. Clients are just considered
stakeholders in the process of realizing the idea.

18. The Design Office
Offices are focused on providing service, experience,
and reliability. In projects, offices try to keep a
balance between pleasing the client with a design
that complies with the client‟s wishes and reaching
an acceptable aesthetic quality. Offices make sure
that the project can proceed as planned and risks are
minimized. The relationship with clients is often
viewed as the most important factor for the office.

19. The Design Business
In the design business, technical expertise and
quality of the product are essential. Functional and
technical feasibility, legal requirements, and a
devotion to efficiency are important from the very
start of
a project. Businesses can deliver good technical
quality at a relatively low cost. This makes them
reliable contractors, who are able to make design a
profitable business.

20. WORKING METHOD & CHARACTERISTICS

21. STUDIO

22. OFFICE

23. BUSINESS

24. Employees and type of architecture firm: what is the
attraction?
1. The studio attracts young, promising designers from all over
the world. Most of these designers have the aspiration to leave
the studio one day to become a „guru‟ themselves.
2. The design office attracts designers who are willing to commit
themselves for the long run. Becoming a partner and even
taking over the firm is a viable option‟
3. The design business attracts designers that appreciate
technically complex designs and want to optimize the building
process. Designers that value a technically reliable result and
like working in professional project structures.

25. Personal skills and talents of the designer:
When you start your own design firm, solo or as a partnership with
kindred spirits, the entire operation depends on your talents and
skills. Your education has provided you with knowledge and skills
concerning aesthetics, design techniques, a certain technical
expertise, etc. This is an essential starting point, but in itself not
enough to be successful as an architect.

26. Personal skills and talents of the designer:

27. Personal skills and talents of the designer:

28. FIELD OF ACTION / SERVICES
Purist, All-Rounder or Cross-Breeder?
For more than half of the practices surveyed, a
substantial part of the work lies outside of the field of
interior design.
Apart from the services provided to other companies,
their portfolio includes teaching (60.4 % of the
practices), graphic and webpage design, journalism,
and event management (41.5%). While operating in an
expanded field of action may help to generate more
commissions, it does not offer higher income margins
than design.

32. Trademark / logo / name / brand

33. Setting the right form of ownership:
1.
2.
3.
4.
5.
6.
7.
Sole proprietorship
Partnership
Corporation
Association
Joint Venture
Trust
Franchise

34. LIABILITY
• Defined as an obligation of an entity arising from past
transactions or events, the settlement of which may
result in the transfer or use of assets, provision of
services or other yielding of economic benefits in the
future.
•In law, a person is legally liable when they are
financially and legally responsible for something.

35. LIMITED LIABILITY
• Limited liability is a form of business ownership
in which business owners or company member are
legally responsible for no more than the amount
that they have contributed to a venture. If for
example, a business goes bankrupt an owner with
limited liability will not lose unrelated assets such
as a personal residence. This is the standard model
for larger businesses, in which a shareholder will
only lose the amount invested.

36. UNLIMITED LIABILITY
• If the company incurs a business dept a creditor
will have a right to claim against the sole
proprietor‟s personal assets, such as family house or
any other personal or business assets

37. 1. SOLE PROPRIETORSHIP
Nature of structure:
Simple – individual proprietor owns the business
Establishment:
Just start – registration of a Business names Act
(Australia), Business number and Taxation
Governing Law:
Ordinary business law (AUS)
Raising Finance:
Limited to the proprietors resources
Liability:
Unlimited liability

38. 1. SOLE PROPRIETORSHIP
•Simple organization of a one person, “one man
show” o sole proprietor,
• Easy to establish
• All profit earned by business belongs to the owner
/ also who bears all the loses.
• Owner - Total authority over the operation
• Unlimited liability – all company debts are debts
of the proprietorship, not the members of the
company

39. ADVANTAGES
• You are the BOSS with a
complete control over the
decision making process and
running the business
• Least expensive to set up
•Easiest to form legally
•All the profit is kept by the
owner so you can withdraw
money
•Does not pay the income
taxes
•Report gain or loss on
individual income tax returns
&
DISADVANTAGES
• If owner dies, the business
may come to an end
•Enormous freedom
•Big responsibilities and
pressure “one man show”
• Big risks if company fails
• Creditor can claim personal
assets and properties (home,
car, savings)
• Unlimited liability – the
worst feature
• Sometimes small companies
doesn‟t look promising to
attract big clients and high
quality employees (young)

40. 2. PARTNERSHIP
Nature of structure:
Carrying on business as principal and agent of each
other, one or more partners. Silent partner
Establishment:
Written partnership agreement, lease, Business name,
joint bank account
Governing Law:
Partnership Acts of states and territories and common
law(AUS)
Raising Finance:
Limited to the partners‟ resources
Liability:
Limited liability

41. 2. PARTNERSHIP
• Association of two or more persons formed to operate a
business together for a profit
• Business relation which subsists between persons on a
business in common with a view of profit
• Legal agreement between partners “Articles of copartnership” or “Partnership agreement” to establish
understanding between or among partners in a business
• It can be based on a limited or unlimited liability
• Partnerships can be established between different
professionals to enrich the company: interior designer,
lighting designer, furniture designer, wood engineer..

42. “Partnership agreement” defines
LAWYER to be appointed
• Contribution to the partnership by each party in terms of
cash, property, services…
• How profit or loses are going to be shared
• How authority / decision making is going to be divided
•Share of salaries, losses, profit
• Which withdrawals can be made
• How disagreement is going to be settled – introducing a
independent arbitrator
• How a new partner can be admitted
• What happens in terms of sudden death
• How assets are going to be divided in terms of partnership
termination

43. PARTNERSHIP
1. GENERAL – all partners have unlimited
liability
2. LIMITED - all partners are liable only to
extent of their investment in the company
One partner must be general with unlimited
liability active in a operations of a business
while limited liability partners can contribute to
the management of the company

44. ADVANTAGES
• Two head are always better
than one – usually 
• Sharing duties, responsibilities,
delegation of a work : one
person can do better design part
while other can be complement
for management part or public
relationships
• partnership is easy to start
• “partnership agreement”
• more human resources are
available
• sharing profit, ownership
• attracts skilled employees
&
DISADVANTAGES
• unlimited liability as the worst
case – major disadvantage
• e.g. an individual may be
willing to invest but because of
unlimited liability refuses to
become a general partner in a
company
• tax is paid by individual
partners in their own returns
• partnership property and shares
: real estate, physical property,
intangible property-intellectual
property in terms of termination
or leaving of one of the partners

45. 3. CORPORATION, INCORPORATED
COMPANY
• association of people set up for a common object to carry
on a business o other activities like manufacturing or doing
design execution.
• after Registration a company becomes a separate legal
person
• A corporation is a separate legal entity that has been
incorporated either directly through legislation or through a
registration process established by State law.
•Incorporated entities have legal rights and liabilities that
are distinct from their employees and shareholders.

46. 3. CORPORATION
Nature of structure:
Body corporate with separate legal personality. Director(s) and
shareholders. In a large company organization is complex
Establishment:
Registration under Australian Securities Investment commission
(ASIC)
Governing Law:
Corporation Act 2001
Raising Finance:
Limited to shareholders‟ equity, borrowings
Liability:
Limited liability of the shareholders, a shareholder's personal
liability is limited to the value of their shares in the corporation

47. CORPORATION (shareholders directors)
1. C COPORATION – corporation as a legal
entity is a subject to a federal corporation
icnome taxes
2. S CORPORATION- shareholders has certain
% of the ownership, has limited liability, profits
or losses are passed through shareholders,
doesn‟t pay income taxes
3. LLC – shareholders have limited liability
protection, profit, losses pass through
shareholders individuals, shareholders with the
structure of ownership

48. CORPORATION (STUCTURE)
1. CEO – chief executive officer, chairman of the
directors‟ board
2. CFO – chief financial officer, supervising
financial record
3. COO – chief operations officer
4. Chairman of the board
5. President
6. Boards of directors – represents shareholders
(members)
7. Outside directors
Directors’ duty is loyalty and good faith

49. ADVANTAGES
• limited liability as amain
advantage
•Shareholders are liable for
business debt to the extent of
their investment
• benefits available to
shareholders
•It is easier to transfer ownership
to the new owner – selling the
company or shares or ownership
transfer – business continues
• easier to raise capital and
attract investors without a need
to get involved as partnes
&
DISADVANTAGES
• more complex and numerous
regulations and requirements
• lot of formalities and
sometimes it can affects business
processes ( who is taking
decision, layers of reporting)
• “shareholders agreement”
• if shareholder wants to
withdraw, sell or return shares is
obliged to offer them to other
shareholders fist at specific or
determinable prices.
• right to vote for board of
directors & policies

50. 5. JOINT VENTURE
• is a business agreement in which the parties agree to
develop, for a finite time, a new entity and new assets by
contributing equity.
• two or more firm make agreement to work together under
the same contract while each firm remains independent and
responsible for own professional performances, expanses,
profit, losses.
• It is often formed to accomplish certain task on a large
project for a definite time, while the partnership operates
indefinitely.
• There are other types of companies such as JV limited by
guarantee, joint ventures limited by guarantee with partners
holding shares.

51. 5. JOINT VENTURE
• CASE STUDY:
• PROJECT OVERSEES – one-off project
• LARGE PROJECT – limited number of staff, inadequate
professionals, services
•AGREEMENT – Identify roles and shares of the
companies with clearly defined roles in a project, the roles,
responsibilities and obligations of each venture,
establishment of a management structure and decisionmaking process

52. 5. JOINT VENTURE
Nature of structure:
Carrying on business separately
Establishment:
Written joint venture agreement
Governing Law:
Contract
Raising Finance:
No investment needed
Liability:
Limited liability separately for all the debts of the join
venture

53. ADVANTAGES
• access to financial services,
new technologies, new
management practices – chance
for improvements
• competitive goals and
improved competitiveness
through challenging project
• limited liability only for own
activities and not responsible for
the act of venture
• can maintain privacy of a work
separated from other ventures
• strategic goals
• separate income taxes
&
DISADVANTAGES

54. 4. ASSOCIATION
Nature of structure:
Body corporate with separate legal personality. It can be
incorporated or unincorporated as a group of people
Establishment:
Establishment of the “Association constitution”
Governing Law:
Registered by the State law, Associations Incorporation
Acts of states and teritories
Raising Finance:
Limited to the member resources
Liability:
Members liability, Limited liability

55. 4. ASSOCIATION
a. Incorporated association(Inc.) is the forming of a new
corporation (a corporation being a legal entity that is
effectively recognized as a separate legal entity or person
under the law). The association may be a business, a nonprofit organization, sports club, art club, design club, or a
government of a new city or town.
b. An unincorporated association consists of two or more
members bound by the rules of a society which has at
some point in time, been founded. A Group of people
with a common interest with a purpose)

56. 4. ASSOCIATION – “Association constitution”
1.
2.
3.
4.
5.
6.
7.
8.
Who you are? What you do? How you operate?
How to become a member and how to deal with disputes?
What are the purposes or functions of the association?
Is there a need for an association? Is there any similar
association in the area?
Is the association likely to attract members and be supported?
How it will be financed?
Who will do the work inside association? Who are the
interested people, group of people, professionals to support
association?
What name should be used for commenced association? Inc =
Incorporated or Voluntary association

57. ADVANTAGES
•CAN ACCEPT GIFTS AND FUNDS
•CAN BORROW MONEY FOR THE
PURPOSE
•CAN BUY, OWN PROPERTIES
UNDER ITS COPORTAE NAME
RATHER THAN THE NAME OF
PERSON
•CAN CONTINUE REGARDLESS
OF THE CHANGE OF THE
MEMBERS
• CAN ENTER INTO THE
CONTRACT WITH
CORPORTATION
•CAN MAKE PROFIT BUT
CANNOT BE DIVIDED AMONG
MEMBERS
•CAN HAVE BANK ACCOUNT,
NAME, ENTITY
&
DISADVANTAGES
•FORMALITIES ARE UNDER
LEGISLATION: RULES,
RECORDS, AGM, ARBN,
AUDIT
•PUBLIC LIABILITY
INSURANCE IN CASE OF
BREACH OF ITS MANY
OBLIGATIONS
•ASSETS, RIGHTS AND
LIABILITIES AS A SEPARATE
LEGALE ENTITY
•EXPANCES AND PROFIT
ARE NOT BEARED BY THE
MEMBERS AND NOT GOING
BACK TO MEMBERS YET TO
ASSOCIATION