2... Forms of Practise

Question 1

What are the differences between a private and public limited liability company?

Answer 1

The main differences between these types of company is that public companies have shares traded on the stock exchange, and private companies are not.
There are therefore differences in how the companies are run: such as Public companies being able to raise funds more easily, yet being answerable to their shareholders. Private companies are more likely to be owned by their founders, their management or a group of private investors, which can make the management dynamic quite different.

Question 2

What differences did you find between Capita and Define?

Answer 2

• time and finance spent on training, CPD, social events, research
• career progression and promotion
• “red tape” around finance and security
• learning from other disciplines in a large, multi-disciplinary office
• type of project: larger infrastructure projects vs smaller, more varied, higher quality projects
• creativity and sustainability

Question 3

Give some examples of forms/types of practice?

Answer 3

There are several different forms of practice available to landscape architects, such as a sole practitioner, partnership and company. These can be structured either in the private or public sectors, or as a not-for profit organisation such as a charity or co-operative.

Question 4

Give some examples of public sector bodies a LA may work in?

Answer 4

Local authority, national park authority or organisations such as the Forestry Commission or Natural England.

Question 5

What is a sole practitioner?

Answer 5

A sole practitioner is a form of practice normally involving one individual (but they can employ others) who both owns and runs the business. It is a simple businesss structure and easy to set up, and receives all profit. However, the business is not a separate legal entity to the individual - the individual is liable for all debts - personal assets are at risk.

Question 6

What is a partnership?

Answer 6

A partnership is a form of practise whereby there is more than one ‘partner’, who share workload, knowledge, profits and liabilities/risk of personal assets. They are formed under the partnership act, and the structure/responsibilities will be set out in a partnership agreement.

Question 7

What are the pros of a partnership?

Answer 7

• Easy to set up
• partners can share responsibility, liability and workload
• partnership ethos

Question 8

What are the cons of a partnership?

Answer 8

• like a sole practitioner, a partnership is not a separate legal entity, which means personal assets are at risk
• possible conflict between partners
• agreements made by one partner bind all others
• cannot sell on… partnership would have to be dissolved if anyone wants to leave

Question 9

What is a LLP (limited liability partnership)?

Answer 9

In addition to the collaborative characteristics of a partnership, LLPs allows collective limited liability - the LLP becomes a separate legal entity therefore personal assets are protected. LLPs are formed under the LLP Act and have defined conflict resolution. Slightly less simple to set up (register with companies house), and have to share finances on companies house.

Question 10

What is a limited liability company?

Answer 10

It is similar to a partnership in that liability is limited, and it has to be registered at companies house. Pros: it pays less tax (corporation), easier to remove unsatisfactory directors than it is partners, easier to raise funds due to the option of having shareholders. Cons: more paperwork and formalities, and financial info shared on companies house..
Pubic Limited liability companies list shares on the Stockmarket. These companies are more driven by their shareholders - e.g. more driven by profit.

Question 11

What is the structure of public sector practices?

Answer 11

Landscape architects working in the public sector may work in agencies such as Natural England, which comes under DEFRA, or for local planning authorities or national park authorities.

Question 12

What is the structure of a local authority?

Answer 12

Local authorities are led by a council-elected leader and cabinet. They consist of several departments, such as planning. These departments are then made up of individual officers, such as planners, tree officers and landscape architects.

Question 13

What is the difference between a sole trader and a LLC?

Answer 13

LI membership type, appropriate insurance, register at companies house, company is separate legal entity so protects the sole trader’s personal finances

Question 14

Tell us about your company?

Answer 14

Define is a private limited liability company, owned by two directors with 20 employees. We are a relatively small practice providing services in landscape architecture, urban design and town planning, mostly in the private housing sector.

Question 15

In a partnership, how do partners share liability?

Answer 15

Each partner is bound to share responsibility of the practice, including the actions of fellow partners. This liability is not limited to assets of the company - personal assets also at risk.

Question 16

In an LLP, how do partners share liability?

Answer 16

Because the LLP is a separate legal entity to its partners, partners are only liable up to the limit of the partnership’s assets (not personal assets).

Question 17

In a company, how do various persons share liability?

Answer 17

• Shareholders: Not personally liable for the torts and obligations incurred by the company or other shareholders. In a public company, this is slightly different - may be liable for unpaid amount on their shares.
• Directors: Not liable for company debts or torts, only their own torts. Can be sued personally but likely it will be covered by PII.
• Employees: Also not liable for company debts or torts, only their own torts. Can be sued personally but likely it will be covered by PII.

Question 18

What is the difference in liability between a landscape architect in a private vs public practice?

Answer 18

Private: may have legal responsibility for other employees such as partners or other employees, and may be liable for debts of the practice.
Public: Landscape Architects can only be responsible for their own acts relating to their profession.

Question 19

What would you need to consider when setting up a practise?

Answer 19

• whether you want personal assets protected from any liability claims
• how much effort involved in setting up
• how much admin involved in running
• whether you would like to share responsibility and knowledge with anyone, such as a partner in a partnership or another director.

Question 20

How does a LLC differ from a LLP?

Answer 20

1. Formation:
   They are formed in slightly different ways: they are both registered with companies house, but company is incorporated under the companies act and LLP incorporated under the LLP Act (with partnership agreement private, whereas LLC is on companies house).
2. If someone leaves:
   Partnership cannot continue if only one partner leaves, whereas a company continues whoever leaves or joins. LLCs can be sold, and shares sold.
3. Tax:
   LLP carries out self-assessment per member, LLC is treated as a separate entity to members and is subject to corporation tax.
4. Liability is similar:
   members of a partnership and directors of a company are liable for their own torts, and liability is limited to the extent of the assets of the partnership or company (not person assets, like a sole trader or traditional partnership).

If seeking to set up my own practise, I would be sure to consult solicitors / financial advisors to ensure I was making the best decision I can for my business.

Question 21

What are the pros and cons of a company vs a LLP?

Answer 21

LLP is more simple to set up and manage and has less paperwork and admin involved in running it. Both have the advantage of protecting personal assets

Question 22

What would you consider when setting up a practise?

Answer 22

• whether would like to share responsibility and liability (this would be a partnership, or company)
• how much admin and cost I am happy with for the startup and management: companies are more complex than a partnership or sole trader.
• The degree of risk: for sole traders and traditional partnerships, personal assets are at risk - whereas with the others the practise is a separate legal entity.
• the amount of flexibility I require in terms of management (parterships more flexible), or control over removing people (e.g. easier to remove a director than a partner - may require dissolution in a partnership)
• Whether I would like to sell shares on the Stockmarket, or if I would consider selling the business in the future.
• Tax: companies tend to pay less tax than a partnership.

Question 23

What is the difference between public and private limited liability companies?

Answer 23

They are very similar - the main difference is that shares for public companies are traded publicly on a stock exchange.
There are minor differences in the liabilities of shareholders, and it easier to raise funds in a private company.