Business Operations Flashcards
sole proprietorship
• Owned by individual • Advantages ○ Easy to set up ○ Total management control by owner ○ Tax advantages § Losses can be deducted from gross income of the business • Disadvantages ○ Owner is liable for losses ○ Personal assets can be seized ○ Capital and credit of firm based on personal credit Difficult to pass on, usually dissolved
partnership
• Two or more general partners share in management profit and rist
• Income is shared and is personally liable for risk
• Limited partner = general partner is financially responsible & has management control, limited partner = invest but have no say in management, theyre only liable for their investment
• Advantage
○ Easy to form
○ Brings together peopole with many skills
• Disadvantage
○ All partners are responsible for other partners
○ Personal assets are at stake
Income is taxed at individual rates
corporations
c & s
3 levels of participants
• C corp - association of indiviudals exists as a legal entity apart from its members
• 3 levels of participants
○ Stockholders - owners of the corp in proportion to the number of shares they own
○ Directors - act in best interest of stockholders and responsible for policy
○ Officers- carry out corp management
• Financially and legally separate from shareholders
• Advantages
○ Raise capital through share of stock
○ Shareholders personal assets not at risk
○ Taxed at lower rates than individuals = savings
• Disadvantages
○ Taxed twice - individaul dividends & corporations
○ Initial cost to start
• S corp
○ Does not retain profit and pay dividends in the same way
§ Allocates income and loss dirctly to sharholders in proportion to their holdings
§ Report income and loss on personal federal tax returns and taxed at individual rate
□ Avoids tax on corporate income
○ Limited to small businesses
§ Domestic company with no more than 100 shareholders
• Professional corp
Liability for malpractice is limited to person responsible
LLC & LLP
• Formed like a partnership
• Investers and managers … non members can manage
• Advantages of partnership with limited liablity of corp
○ No personal liablity
○ LLC is not a separate entity - does not get taxed
○ Members of LLC are considered to be self employed so they must report and pay self employment tax for social security and medicare
○ LLC can be an S corp - LLC legally but taxed as S corp
LLC is easier to set up than corp
Joint Venture
• Temporary association of two or more firms for one project
• Treated like a partnership - not a legal entity separate from its members, cannot be sued like a corporation
• May be taxed as partnership or as individual members separately
• Needs teaming agreement
To out line roles and contractual relationships
Standard of Care
• Level of skill and diligence that a prudent architect would exercise in the same community time frame and circumstances/budget/schedule
Raising the standard of care with language in the contract / guaranteeing results can increase architects liability or make work uninsurable
Departmental vs Studio Organization
• Departmental / horizontal / flat
○ Staff is organized into departments with different specialities
○ Every department works on every project as needed
○ Efficient and standardized BUT inflexible and resistant to change
○ Employees do not always gain breadth of experience
• Studio / vertical / tall
○ Each studio is responsible for an entire project
○ Can be created and dissolved as needed or kept for specialties like retail studio vs residential studio
○ Advantage of close communication
• Outsourcing
Manage fluctuating work load without continuously hiring and firing
Business Licenses
• Corporation must be registered with the state
• Given ID number by secretary of states office
• Sometimes - make a filing with the state registration board and obtain a certificate of authorization in order to offer services to the public
LLC cert or other type of license may be required for LLC
Taxes
Taxes
• Businesses must withold taxes for each employess and forward it to IRS
• business files form SS4 - application for employer ID number which is used in tax filings
• Business must submit @4 (employees witholding allowance)for each employee
• W2 at the beginning of every year showing pages paid along with taxes witheld
• Sole proprietors and some partnerships
○ Federal and state income tax must be filed as estimated taxes every quarter
○ Also must pay self employment tax to cover social security and medicade
• Tax on goods from out of state
• Personal property tax on furniture and equitpment
• City taxes, income, employment, occupational taxes, property taxes
Professional Licensing
Professional Licensing • Renewal annaully • Continuting education reqs • Accredited degree, AREs, AXP hours • Broadly Experienced Architects program allows ppl to pass without a formal degree- needs axp and ARE still • Reciprocal licenses in other states ○ Complete states cont ed reqs ○ Proof of licensure Complete any supplemental exams
Ethical Standards-
Violations
Dropped Prohibitions
Ethical Standards
• AIA code of Ethics and Professional Conduct
• Violations determined by legal authority
• Violations lead to:
○ Admonishment
○ Censure - published descripion in AIA periodical
○ Suspension of membership
○ Termination of memebership
• Dropped prohibitions
○ Compete for projects on basis of fee
○ Advertise
○ Replace another architect on a project
○ Be involved with construction
Offer free design for purpose of securing commission
Ethical Standards-
3 tiers
Canons
• 3 tiers of ethices
○ Cannons - broad principles of conduct
○ Ethical standards - specific goals to aspire to
○ Rules of conduct - specific mandatory statements
• Canons
○ General obligations
○ To public
○ To client
○ To profession
○ To colleagues
To environment
Hiring
Hiring
• Ads, hiring firms, university placments, job postings
• Employment contract vs employment at will
○ No written contract, can be fired or quit at any time without explanation
• Noncompete cloause / restrictive covenatnt - restricts who employee may work for after leaving, setting up a business in same area, working for firms clients, or passin on confidential info
• Freelance / independent contracot
○ Avoids witholding taxes and paying benefits
○ IRS determinations
§ Behavioral, financial control and relationship between employer
Hired for specific project, uses own equipment, can work for other firms, rieves no benefits
Management and Communication
Management and Communication
• Good management = business plan, policy statements, financial plans, and project management procedures
• Transparency in short and long term goals
Open communications for how to improve and keep everyone happy
Personnel policy manual
Personnel policy manual
• Help direct communications
Includes office org, employment policies, office procedures, salaries, benefits and professional development
