The legal side of running a design business
The legal side of running a design business scares lots of people (including me when I first started in business!).
The unfortunate truth is that many design professionals put their head in the sand and try not to think about their legal obligations and ensure they have the proper policies and documentation in place.
But as a result it means lots of people are operating unprotected in an industry that is fraught with potential liability and problematic legal relationships.
Having correct advice and agreements can be a game changer for your business and that's why I partner with a solicitor who is specialises in the legalities of the interior design industry.
But it wasn’t always like this…
When I first started with my business I pieced together my own Terms of Use fo my website and for years I worked with a client agreement that I had put together using the clauses I found in a whole range of different free templates. I luckily never had any issues with a single one of my projects. But in hindsight I was very lucky about that.
I wrote a post about why you shouldn’t be DIYing your legal work - you can read that here.
Once I did actually seek legal advice and showed my agreement to my lawyer she said that although parts of my agreement were fine I had really been working with a document that wasn’t that strong in the areas that mattered – in particular around the limitation of liability – that being my exposure to risk if something were to go wrong.
The lesson I’ve learned over the years is that if you aren’t going to bother seeking professional advice on your contracts, proposals and other documents you need for your business then you are leaving yourself exposed to risk and liability.
It is always best to seek expert advice in this area
In my business courses + templates for designers I am always honest and upfront about where to put your start up costs and I don’t hide the fact that it will cost you some money to set up your business. But I want people to put this money towards the areas that I think matter the most - and seeking legal advice from someone who has had experience working with home design professionals is an investment that I think is 100% worth making.
Some things just aren’t worth spending money on – like your logo and your website, which can easily be done yourself – and some things really are – like your legal and accounting advice.
I think a lot of people start businesses and don’t realise or accept what a big responsibility they are taking on.
You must not take this lightly and go in to your business with no protection and an exposure to risk. You can do what I did in the early years of my business and cobble together legal documents and paperwork that you need – but the fact is that if you do ever get in to trouble then this sort of document isn’t going to be worth anything.
So don’t do what I did – instead start your business out properly and in the way you intend to grow it – and that is to set the important things in place so that as your business grows you won’t be worried about whether your contracts are protecting you, which will give you so much confidence as you start working with your clients.
In addition, once you have your legal documents in place you can go in to client meetings and projects with the peace of mind that you are limiting your liability and doing business safely – and trust me - this will give you a lot more confidence.
You will also actually understand what the clauses in your agreements mean and you will be able to talk in a knowledgeable way with your clients about these when they have questions, as you will have had them explained to you properly by an expert.
If you are nervous about your own legal obligations and whether you are covered here are a number of things to think about…
Does your business have the right structure?
Choosing the legal structure for your business is one of the most important early decisions you will need to make. But it can be confusing to know which avenue to go down as there are multiple options – each with different pros and cons.
Many early stage design professionals don’t make a clear decision on this when they are getting started and essentially end up just merging their personal and business interests, not realising that this leaves them at risk (and is also not legal in a number of cases).
If you are serious about getting your business up and running then getting it properly structured from the start is really important. I strongly encourage you to seek advice from your accountant on which structure is right for you to get started with as each person has circumstances unique to them. In addition each structure has different tax benefits and levels of risk to you personally – so you will want to know which one is best for your own situation.
In this blog post I go over the different types of business structures but it’s best to seek professional advice on this.
How water tight are your processes and procedures?
Do you have a clear path that your clients follow when they start working with you and concise documentation that covers the work you are doing together?
These would include your fee/design proposals and client agreements at a minimum as well as a Client Welcome Pack and disclaimers on your design drawings and procedures for checking off drawings before they go in to production.
In addition - are you ensuring that all decisions you make with clients are put in writing - e.g. via text/email. All of these written touch points help govern how you work and will save you a lot of hassle if issues arise. But make sure your documentation has all been drafted and reviewed by a lawyer - or use something prepared for the industry specifically. You want to try and work with a legal team who has experience with our business and industry. My experience is that not all lawyers understand the intricacies of the design industry and how it works.
Make sure you aren't doing business in areas your are unlicensed or unqualified for
For example, many design professionals are unaware that they aren't actually allowed to act in the capacity of project manager once construction starts on a project (this is the case in Australia anyway). They think they are able to coordinate trades and oversee builders but this puts them at great risk if something goes wrong (unless they are licensed or qualified to do this). So be careful what you are saying you are able to do for clients and make sure you aren't overstepping your boundaries or putting yourself in situations that you are not covered for. And make sure you don't enter in to contractual relationships with trades on behalf of your clients - this one is a massive no-no!
Clients normally don’t understand the delineation of roles in a project so it’s your job to help them understand this and point them in the direction of the correct trades and consultants to help with the different parts of their project.
Often clients will want us to do everything for them as we build strong relationships with our clients as their interior designer. So they often ask us to do tasks or roles that aren’t part of what we should be doing. But don’t get in the trap of being asked to work on parts of the project that put you and your business at risk. If you aren’t sure what those areas are then this is why you need a lawyer to help you!
Managing trades and ‘project management’
Managing trades is another area where people are sometimes not clear on what they are allowed and not allowed to be doing.
The way I dealt with this in order to avoid getting in hot water around the management of trades was to help a client find builders and trades and then to step away and allow them to form the contractual relationship between themselves. You never want to get in a position where you are signing contracts on behalf of your clients and make sure you also don’t engage any trades on behalf of your clients.
Also make sure you advise your clients to check all trades on site have current licenses and certificates if they want to be sure they are covered.
As a general rule the client is responsible for the contract with the builder, paying the builder, providing access to site, paying subcontractors and ultimately meeting timeframe goals. You also should only be advising on design intent as a project starts - you should not be instructing trades/contractors on different aspects of a build. This is not your role and you need to make that clear.
As a designer you generally can visit site, review progress, ask questions about design intent, review and/or question invoices on behalf of your client (but not pay these) and oversee the work from a design perspective. But these are all the areas you want to make sure are clearly spelled out by a lawyer inside your agreement.
You will find that good builders/contractors will want to call on you for design decisions throughout the build, but make sure your clients are aware and happy for this relationship to occur.
Think about your role as a link between trade and clients – so conversations about design matters can flow through you - but you should not be responsible for oversight of any trades (unless you are qualified and licensed to do this).
Think about the risk of your business
The other thing I would say about the legal aspect of business is to think about what business services you offer and the real risk of these.
Some people panic unnecessarily over the legal side of their design business. If your business is largely selecting furniture and soft furnishings - then your scope of potential liability is going to be far less than for people who are working in large scale commercial deign projects with lots of moving parts. That doesn't mean there aren't risks you should still be considering, but also make sure you don't freak out over risks that aren't necessarily there.
So most importantly - seek legal advice in relation to your business and make sure you know what you can and can't be doing and where any potential risks lie.
So these are just some of the many areas that expose you to risk as you start to work as a designer. I don’t want this post to put you off or make you feel concerned. The good news is that if you seek the right legal advice and get good documentation in place then you will be limiting the risk for any of these things to happen in your business.
All in all my biggest message in this post is to spend some money on seeking legal advice and getting your design processes set up and your contracts and agreements put in place properly.
Don’t do DIY legal work – it’s just not worth it if something does go wrong in your business.
Disclaimer: I am not a lawyer and the information in this post is based on my experience working as an interior designer in Australia. Please seek your own professional advice from a qualified lawyer.
Courses and Templates for Designers and Architects
DO YOU WANT TO….
Improve your professionalism?
Find more clients?
Bring in more revenue?
Create better systems and processes?
Then check out my business courses and templates for designers and architects.
These courses and templates leave you with work done - not just a long list of things you need to do next. We have a really strong focus on taking action and getting things created that improve your business.
Enjoy the rest of your day and I’ll catch you next time!
Clare x
