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Why Architects Really Need to Be Incorporated

Timothy R. Hughes, Esq.
Hughes & Associates, P.L.L.C.

The most basic step any architect can do to protect themselves and their loved ones is to form a corporation.  Simply stated, you will never receive as great a return on investment to spend so little and receive so much in the form of legal protection. 

Why are corporations so wonderful?  A corporation is viewed as a separate legal entity from its officers, directors, and shareholders.  Under normal circumstances, the officers, directors and shareholders cannot be held personally liable for the corporation’s obligations.  While these individuals still can be found liable for their own personal wrong-doing, they are generally shielded from purely corporate liabilities.

Conventional wisdom through the mid-1990’s was that the corporate form offered architects little protection.  Most attorneys believed that licensed architects could be found personally liable for their malpractice if they had sealed drawings or even perhaps if they had significant project involvement.  Thus, the view was the corporations offered architects little protection from their greatest liability risk, malpractice claims.

In Virginia, this thinking was turned on its head by the case of Gerald M. Moore and Son, Inc. v. Drewry, 251 Va. 277, 467 S.E.2d 811 (1996).  In the Drewry case, the Supreme Court of Virginia ruled that an individual engineer could not be sued for the contract obligations of his corporate firm.  Thus, the corporate form indeed offers a great deal of protection to individual architects and engineers.

The corporation is not a panacea in all situations.  If you are sued for malpractice in cases involving personal injury or property damage, you can be sued directly even in Virginia.  Many entities dealing with corporations, such as lenders and landlords, may require personal guarantees of corporate ownership.  A failure to properly run the corporation, such as commingling personal and corporate assets, may permit attempts to “pierce the corporate veil”.  Finally, practicing in other jurisdictions, such as the District of Columbia and Maryland, may create exposure to personal claims on those projects.

Despite these limitations, corporate protection is simple and offers excellent protection against liability relative to the investment of effort and money required.  Thus, every architect in Virginia really does need to be incorporated.