Ch 24 Bus Prac Flashcards
The company is owned by the individual and operates under the indiv. name or company name. Owner personally liable for all debts and losses of the compnay.
Sole proprietorship
Two or more people share in the management, profits, and risks of the business. Responsible for the actions of the other and taxed at an individual rate.
General partnership
General partners invest in the company, manage it, and are financially responsible. Limited partners are simply investors and receive a portion of the profits. Have no say in the running of the company and are liable only to the extent of their investment.
Limited parntership
Association of individuals, created by statutory requirements, having an existence independent from its members. Financially and legally independent from its stockholders. Taxed at a lower rate than are individuals. Taxed on profits and taxed on dividends.
Corporation
Certain eligability requirements and offer all the advantages of a standard corporation, but the profits and losses are paid or deducted from the stockholders personal income taxes in proportion to the shares of the stock they hold.
S corporation
For professionals like lawyers, interior designers, architects, etc. Similar to other coportations except that liablility for malpractice is generally limited to the person responsible.
Professional corporation
Particular requirements vary for each state. Formed like a partnership where the investors are called members and those who manage are called managers. Liability is limited to a member’s investment; a member has no personal liability. Taxed as a partnership or corporation, at the owners discretion, with only one level of taxation for members.
Limited Liability Company (LLC) or Limited Liability Partnership (LLP)
Temporary association of two or more persons or firms for the purpose of completing a project. Formal, written agreement developed. Treated as partnerships and cannot be sued as a corporation can.
Joint venture
Project moves through an office from one department to another.
Departmental organization
Protects the designer in case some action by the designer causes bodily injury or property damage. Covers things like incorrect specifications, mistakes on drawings, and incorrect installation of furniture.
Professional liability insurance
Includes a range of insurance to protect against claims of property damage, liability, and personal injury caused by the designer or employees, consultants, or other people hired by the designer. May include a product liability insurance. Sometimes the designer will also buy insurance that will cover the possibility that the contractors or subcontractors do not have their own valid insurance.
General liability insurance
Protects the designer’s building and its contents against disasters such as fire, theft, and flood. Even if the designer rents space this can protect the contents and any stock the designer may be holding for the client.
Property insurance
Covers liability and property damage to vehicles owned and used by the business.
Automobile insurance
Mandatory in all states and protects employees in the event of work-related injuries.
Workers compensation insurance
Requires that a contractor carry insurance that will protect from the following. Workers compensation. Damages due to bodily injury, occupational sickness, or death of employees. Claims for personal injury, which include slander, libel, false arrest, and similar actions. Claims for damages other than to the work because of destruction of tangible property. This includes loss of use resulting from damages. Claims for damages related to the use of motor vehicles. In addition, the contractor must carry insurance for any portions of the work that are stored off site or that are in transit to the site.
General Conditions of the Contract (Contractors insurance)
Claims from suppliers of goods or services not yet paid for.
Accounts payable
Money that others owe to the business through invoices for services.
Accounts receivable
Any type of tangible or intangible resources that can be measured in monetary terms.
Assets
List of the various accounts a business uses to keep track of money along with corresponding account numbers used for data processing.
Chart of accounts
Resources of a business that are converted into cash within one year.
Current assets
All labor of technical staff, principles, and support staff that is directly chargeable to projects.
Direct labor
The expense of employee salaries plus the cost of madatory and discretionary expenses and benefits such as payroll taxes, health insurance, etc.
Direct personnel expense
Voluntary distribution of profits to owners and non-owners, such as performance bonuses, profit sharing, etc.
Discretionary distribution
Resources that are used by the business and that are long-term items, such as equipment and property.
Fixed assets
All the revenue generated by a business for a period of time stated.
Gross revenue
All labor not charged to a project or a revenue-producing account, such as admin, etc.
Indirect labor
Claims by people outside the business and claims by the owners of the business against the total assets of the business.
Liabilities
Expenses incurred in order to keep a business operating whether or not any revenue is being generated, such as rent, power, and telephone.
Overhead
Revenue and expenses are recognized at the actual time the business receives the cash or pays a bill.
Cash accounting
Revenue and expenses are recognized at the time they are earned or incurred, whether or not cash changes hands.
Accrual accounting
Summarizes all assets and liabilities and shows the financial position of a business. All assets listed must equal liabilites listed.
Balance sheet
Total assets less the total liabilites.
Net worth
Money invested in a business by the owners and stockholders.
Owners equity
Lists all the income and expenses of a business for a certain period of time.
Profit and loss statement
Shows actual inflows and outflows of cash or cash equivalents.
Cash flow statement
Summarizes each project in the office in terms of the amount of revenue it has generated, expenses, unbilled services, percent complete, and profit or loss to date.
Office earnings report
Shows the status of all invoices for all projects.
Aged accounts receivable report
Percentage of time, or dollars, spent on direct labor divided by the total time or dollars spent on direct and indirect labor in addition to vacation, holiday, and sick leave.
Chargeable ratio (or utilization rate)
Total current assets divided by total current liabilites.
Current ratio
The percentage of profit based on net revenue, total annual revenue less consultant’s fees and reimbursable expenses.
Net profit before taxes
The ratio of total office overhead to total direct labor.
Overhead rate
Refinement of the current ratio and includes only cash and equivalents, plus accounts receivable, divided by total current liabilities.
Quick ratio
The amount of net revenue produced per technical staff member.
Revenue per technical staff
The amount of net revenue produced per staff member per year, including part-time people and principles.
Revenue per total staff
Based on the amount an employee is paid (salary rate) plus the cost for fringe benefits, office overhead, and allowance for profit.
Billing rate
Used to determine billing rates. A factor derived by dividing net revenue of the design firm by the cost of direct labor. Covers fringe benefits, indirect labor, overhead, and profit.
Net multiplier
The costs of providing taxes, benefits, and the like are included in the employee’s base salary.
Direct Personnel Expense (DPE)
Allows the designer to pass on the state sales tax to the client.
Sales tax license (resale license)
Who the employee may work for after leaving the present employer.
Noncompete clause (restrictive clause)
Interior designer’s conduct. Should interact with contractor or vendor/ not get in the way/inform them of information that may affect the job’s progress, including any problems or errors observed.
Implied duties
The legal responsibility for injury or damage to another person or property.
Liability
Knowledge shared with another or others regarding a private matter.
Privity
Attempt to hold harmless both the owner and the interior designer for any damages, claims, or losses resulting from the performance of any work on the project, whether by the contractor or others with whom the interior designer has no contractural relationship.
Indemnification clauses
