What is the most comprehensive type of partnership in the design-architecture sector?
As an Interior Design company inevitably you have partners, colleagues, contractors and you have a couple of options you might consider.
I bet you are confused why these bananas?
Don’t worry; you will understand later in this guide what I am trying to say.
If you are curious which is one is the most common work patterns, the answer shall be – hiring additional work-force on a permanent contracts on-board. Here is a list of five very different and important expert roles that an interior design company must have as a team:
- Interior Designers ( Kitchen designer, Lighting designer, Furniture designer etc.)
- 3D Visualisers Generalists or Expert Interior Design Visualisers
- CAD or BIM experts
- Design Managers
- Interior Design Assistants
on a permanent contracts on-board.
This is used to be the most commonly used business structure but doesn’t mean that it is the most efficient one (investment/profit wise) for the company. Each company has its structure of work, capacity and capability to work on one or few design projects at the same time. But let’s imagine the following scenario.
For this example let’s give a designer and its team a name – The Design Studio X. As in the real life, 85% of all design agencies are formed of small teams, so our Studio X will have a group of four. Two interior designers including the owner, one CAD specialist and one Design Manager. At the moment Studio X work simultaneously on two residential projects. Also, they are waiting to sign a new contract for another two residential projects. They are all very passionate and love what they do, BUT they might not know something that is about to happen.
At the moment they sign off the contract for these two new projects, the team’s current pipeline becomes swamped instantly between managing the current demand and is just about to start working on the newly assigned projects. Both interior designers are capable of creating the mood boards and handle all client meetings, while the design manager overseeс all ongoing (if any) construction and furniture work on sites.
The CAD specialist will need to jump back and forth between the old and new projects which will create a reduced performance and quality of work. With the time both interior designers will felt into the same reduced performance cycle as all four projects may, and they will run differently from one to another.
And here I am going to quote myself:
This is a common situation that used to happen to our Interior Design company, quite a few times in the past too. Luckily, we found a perfect working solution, which I am going to share with you very soon in the following months.
For now, let’s back to our case.
Any interior design company or architectural practice in that position will have reduced capability of taking new projects (while trying to grow), as every new project can derail the whole workflow system of the company, causing fails and loss of profit.
I tried to picture one of the many different scenarios that may happen to any interior design company. Reducing or stopping the flow of new projects entirely may harm the studio, as the sector is fast pacing and at the same time most of the companies rely on continuous of projects to drive their profits and scale or even keep up with the company’s expenses. When that chain is damaged or even worse – broken, it can have fatal consequences.
You have options
Ah, these bananas! As with that famous fruit that has its variations in colour, smell and flavour there are options for you to consider before taking decision for your company.
There are many possible solutions which will solve this problem as :
- hiring new staff
- outsourcing or sharing the profit with the new partnership company called joint venturing
- an official partnership that divides into two categories – standard and limited partnership
This time I will try to lay the foundations of three parts article where I will try to briefly explain every one of these solutions along with their pros and cons.
General and Limited Partnerships in Interior Design Company
The most common form of partnership. It has some positive sides in the short term, but it comes with many negative sides in the long run.
In general partnership, two or more people have joined together to operate a business.
They share the work; they share the decisions, initial funding, the loss and the distribution of the profits. A partnership is also a joint business formation for new practices, as it affords more than one person’s talents, finances, and design and business expertise in the operation of the practice.
It is always a good idea to prepare a partnership agreement if you are considering starting a business under this legal formation.
Though not generally required by law, a partnership agreement spells out who is responsible for what, how much capital is contributed by each partner, how the profits/losses will be shared, how the partners may draw dividends from the accounts for either personal income or operations of the firm, and how to dissolve the partnership should either partner not be willing or able to continue.
Partnerships are formed as quickly as a sole proprietorship, with the addition of the partnership agreement.
The ease of creation, as well as the basic concept of having more than one person involved in the ownership and decision making, are common reasons for starting an interior design practice as a general partnership.
The advantages and disadvantages
The advantages and disadvantages of this form of design practice are almost the same as a sole proprietorship. Each partner is also personally financially liable for judgements against, and losses of, the practice.
However, in a partnership, each partner is not only responsible for his or her actions, but also the actions and promises of the partners. If Partner A causes a wrong resulting in a lawsuit against the company, Partner B will also be liable for the debt that the trial may bring.
There are four other important points about a general partnership.
- First, profits and losses are shared based on the partnership agreement. If there is no such agreement, then gains and losses are divided according to the Partnership Act that governs 80% of the “marriage” between the partners (issued by the country where the company is registered).
- Second, unless there is a statement to the contrary in the partnership agreement, all general partners have an equal share of the responsibility in the decision making regarding operations.
- Third, any change in the make-up of the partnership generally means that the partnership is dissolved and a new business formation must be created. In other words, if one partner wishes to quit, the company no longer exists. The remaining person or partners must re-form the practice unless there were provisions in the partnership agreement concerning the continuity of the partnership.
- Fourth, with two or more people involved in the partnership, it is generally more natural for the business to obtain credit and loans for the operation of the company, but it has more in-depth management that might not be working if it is not set up correctly.
Right now you might be asking – So what? What is the actual decision and how do I solve my problem?
Hold on, this is not the end. Next week I will continue with the rest of the “Comprehensive forms of Interior Design Partnership” and I will give you more real-life examples and solutions.
Meanwhile, there are more resources and knowledge we have provided: Finding the right interior design contractors