Ch.33 Interior design business practices

Question 1

In this structure the company is owned by the individual and operates under either the individuals name or a company name. To set this up, it is only necessary to establish your name and location for the business, open a company bank account, have stationary printed, obtain whatever licenses are needed by local jurisdiction.

Answer 1

Sole proprietorship

Question 2

Two or more people share in the management, profits, and risks of the business. Income from the business is taxed as ordinary income on personal tax forms. If necessary, employees can be hired as with any form of business. These are relatively easy to form and provide a business with the skills and talents of several people rather than just one, as with a soul proprietorship. In most cases, these are formed because each of the partners Spring Street organization in particular talent such as business development, design, or technical knowledge

Answer 2

 General partnership

Question 3

This type of organization has one or more general partners and other limited partners. As with a general partnership, the general partners invest in the company, manage it, and are financially responsible. The limited partners are simply investors and receive a portion of the profits. They have no say in management or of the company and are liable only for the extent of their investment. Limited partners have generally given way to limited liability company

Answer 3

Limited partnership

Question 4

This is an association of individuals, created by statutory requirements, having an existence independent from its members. The formation and conduct of these are governed by laws of individual states, and formal articles of incorporation must be drawn up by an attorney and filed with appropriate state office to legally form. Because it is a separate legal entity, it is financially and legally independent from the stockholders. As such, stockholders are financially liable only for the amount of money invested in the corporation. If it is sued, personal assets of the stockholders are not at risk

Answer 4

Corporation

Question 5

How is a corporation taxed

Answer 5

On two levels: it is taxed on its profits, and shareholders are taxed on their dividends. Additionally, corporations have a continuity independent of changes in stockholders, deaths of members of its board of directors, or changes in the principles.

Question 6

These have certain eligibility requirements and offer all advantages of standard corporations, but the profits or losses are paid or deducted from the stockholders personal income taxes in proportion to the shares of stock they hold. This can be an advantage when there are losses or when the state tax rates shift to financial benefits so that the individual is taxed rather than the corporation

Answer 6

Subchapter S corporation

Question 7

Many states also allow for these which is a professional such as an interior designer, architect, lawyer, Dr., or accountant. This form of business is similar to other corporations excepted liability for a male practice is generally limited to the person responsible. However, each state has its own laws regarding the burden of liability in this

Answer 7

Professional corporation

Question 8

These are two hybrid business organizations that combine the advantage of a corporation and a partnership. The partnership requirement of these vary according to state in which the business is established, but basically each is formed like a partnership where the investors are called members and those who manage or called managers. Unlike with partnerships, it is possible to have nonmembers as managers.

Answer 8

LLC or LLP Limited liability company or limited liability partnership

Question 9

A temporary association of two or more persons or firms for the purpose of completing a project. This business type is typically used for interior design firms when a project is too large or too complex to be completed by a single firm. It can also be used when one firm does not have the expertise in a particular building type than the partnering firm has. With these, a formal, written agreement should be developed to describe the duties and responsibilities of each firm, how profits and losses should be divided, and how work will be done. These are typically treated as partnerships and cannot be sued like a corporation can. Depending on the state in which the ease operate, profits may be taxed his partnerships

Answer 9

Joint venture

Question 10

A project moved to the office from one apartment to another. There may be a marketing department, design department, pacification department, contract documents department, and a construction administration department. Well this type of organization is efficient and can take advantages of many types and specialist, communication between department about any particular project could be a challenge. It also discourages it makes it impossible for anyone to gain of breath of experience or Sharon I’ll let you know other aspects of project planning

Answer 10

Departmental organization

Question 11

Based on a very small groups in the business, called studios. Each studios responsible for completing an entire project, from initial planning to production and can destruction administration. Members of each studio have the necessary expertise to provide all or most of the work required on the project. Products and be assigned to studios based on their expertise, or studios can be formed when dissolved as needed.

Answer 11

Studio organization

Question 12

Type of insurance that protects the designer in case some action by the designer causes bodily injury or property damage.

Answer 12

Professional liability insurance

Question 13

This coverage response to problems resulting from things such as incorrect specifications, mistakes on drawings, and incorrect installation of furniture

Answer 13

Malpractice insurance or errors and omissions insurance

Question 14

This type of insurance includes a range of insurance to protect against claims of property damage, liability, personal injury caused by designer or employees, consultants or other people hired by the designer.

Answer 14

General liability insurance

Question 15

This provides protection in case a product or an installation completed by the designer or subcontractor does some injury to the client after the designer or subcontractor gives up possession of the product. Sometimes the designer will also buy insurance to cover the possibility that contractors are subcontractors do not have their own valid insurance

Answer 15

Product liability insurance

Question 16

Type of insurance that protects the designers building in its contents to get disaster so just fire, theft, and flood. Even if the designer rent space, This type of insurance protects the continents in any stock the designer may be holding for the client

Answer 16

Property insurance

Question 17

Type of insurance that protects the interior designer against charges of slander, defamation of character, misrepresentation, and other torts

Answer 17

Personal injury protection insurance

Question 18

A civil wrong that causes injury to another person

Answer 18

Tort

Question 19

Type of insurance that covers liability and property damage to vehicles on the news for the business and can include protection against claims made by employees using their own cars while on company business

Answer 19

Automobile insurance

Question 20

Type of insurance that is mandatory in all states and protects employees in the event of injury caused by work related activities

Answer 20

Worker’s Compensation insurance

Question 21

Type of accounting that all businesses must do in order to keep track of money from day-to-day operations like banking taxes and auditing

Answer 21

Basic accounting

Question 22

Type of management that the firm owner knows the financial status of the business and can use financial reporting to make decisions critical to the firms survival and profit

Answer 22

Active Financial management

Question 23

Leaves from the supplier of goods and services but not yet paid for

Answer 23

Accounts payable

Question 24

Money that others oh to the business through invoices for services

Answer 24

Accounts receivable

Question 25

Any type of tangible or intangible resource that can be measured in monetary terms. These include current, fixed, and other

Answer 25

 asset

Question 26

A list of various accounts of business uses to keep track of money along with corresponding account numbers used for data processing

Answer 26

Chart of accounts

Question 27

Resources of a business that are converted into cash within one year

Answer 27

Current assets

Question 28

All labor of technical staff, principles, and support staff that is directly chargeable to projects

Answer 28

Direct labor

Question 29

The expensive employee salaries plus the cost of mandatory and discretionary expenses and benefits such as payroll taxes, health insurance, and the like

Answer 29

Direct personnel expenses

Question 30

Voluntary distribution of profits to owners and non-owners, such as performance bonuses, profit-sharing, incentive compensation, and the lake. Some interior design firms view this is necessary expense in order to be competitive in attracting qualified personnel, while other firms view it is a profit item

Answer 30

Discretionary distribution

Question 31

Resources that are used for the business and that are long-term items, such as equipment and property

Answer 31

Fixed asset

Question 32

All the revenue generated by business for a period of time stated

Answer 32

Gross revenue

Question 33

Claims by people outside the business and claims by the owners of the business against the total assets of the business

Answer 33

Liabilities

Question 34

All labor not charged to a project or revenue producing account, such as administration, general office time, and marketing

Answer 34

Indirect labor

Question 35

Miscellaneous resources such as securities or copyrights

Answer 35

Other assets

Question 36

Expenses incurred in order to keep a business operating whether or not any revenue is being generated, such as rent, power, and telephone

Answer 36

Overhead

Question 37

With this type of accounting, revenue and expenses are recognized at the same time the business receives cash or pays bills

Answer 37

Cash accounting

Question 38

With this type of accounting, revenue and expenses are recognized at the time they earned or incurred, whether or not cash changes hands.

Answer 38

Accrual accounting

Question 39

All transactions are listed chronologically in a journal. They are then posted to a ledger in which transactions are grouped into individual accounts. Although legacy terms such as journal and ledger are still used in accounting, nearly all the smallest businesses perform accounting functions with computer programs, some of which are designed specifically for design firms

Answer 39

Double entry bookkeeping

Question 40

Summarizes all assets and liabilities inches the financial position of a business. All the assets listed must be exactly equal to the liabilities listed. One important part of this is the net worth of the business or the owners equity.

Answer 40

Balance sheet

Question 41

Total assets less the total liabilities

Answer 41

Net worth

Question 42

The money invested into a business by the owners or stockholders. Another way to view this, in the way it normally shows on a balance sheet, is the total assets must equal total liabilities plus the net worth or the owners equity

Answer 42

Owners equity

Question 43

Lists all the income and expenses of a business for a certain period of time. The difference between all the income and all the expenses gives the profits or the losses for that period

Answer 43

Profit and loss statement or income statement

Question 44

Shows actual inflows and outflows of cash in cash equivalents. These are important reports because a business is month-to-month financial health depends on it being able to meet payroll and pay its bills

Answer 44

Cash flow statement

Question 45

Define as money, checks, or anything else accepted by banks

Answer 45

Cash

Question 46

Short term investments that can be quickly converted to cash

Answer 46

Cash equivalent

Question 47

Airport there is more detailed and computer generated version of a manually produced chart to monitor the progress of individual jobs. This shows the hours in labor cost for each phase of a project for the current reporting. As well as the amount to date and compares these numbers with the estimated hours in dollars.

Answer 47

Project progress report

Question 48

Can also generate the summary each project in the office in terms of the amount of revenue is generated, expenses, anvil services, percent complete, and profit or loss to date. This report can help the farm management find any projects that may be hurting overall profitability and need remedial action

Answer 48


 Office earnings report

Question 49

Shows the status of all invoices for a Projects, whether they can pay, and the age of each invoice, that is, the amount of time that has passed between invoice date and payment date. Any invoices not been paid for more than 60 days generally needs attention by The Firm principal whoever is responsible for getting invoices paid. For architecture in interior design businesses, the average collection. For invoices runs between 60 and 75 days

Answer 49

Aged accounts receivable report

Question 50

List each employee along with a number of hours spent on direct and indirect labor, including marketing, professional development, vacation time, sickleave, and holidays. Each office has a targeted percentage of time that technical employee should be spending on direct labor, and this report is an excellent way of monitoring such time. The most important ratio this report generates is the changeable ratio. Time analysis report

Question 51

This is the percentage of time, or dollars, spent on direct labor divided by the total time a dollar spent on direct and indirect labor in addition to vacation, holiday, and sickleave. This is about 65% for the average of a design firm is generally throughout thought to be about the break even point or the minimum that should be allowed. Some employees, such as the senior designers, will have a higher ratio because most of the time it’s been doing work on projects, while principles will spend more their time on non-charge

Answer 51

Changeable ratio were utilization rate

Question 52

Total current assets divided by total current liabilities. This is the measure of the firms ability to meet current obligations. The higher the ratio the better

Answer 52

Current ratio

Question 53

The percentage of profit based on net revenue, that is, the total amount of revenue less consultants fees and reimbursement expenses

Answer 53

Net profit before tax

Question 54

The ratio of total office overhead to direct labor. When he used to calculate fees, the ratio is multiplied by the estimated cost of direct labor. And the resulting product is added to the direct labor amount out

Answer 54

Overhead ratio 

Question 55

A refinement of the current ratio including only cash and equivalence, plus accounts receivable, divided by the current liabilities. It is more conservative measure than the current ratio because it includes only those assets that are more liquid

Answer 55

Quick ratio

Question 56

The amount of net revenue produced by technical staff members, that is, those staff members most directly involved with charging direct time in producing jobs

Answer 56

Revenue her technical staff

Question 57

The amount of net revenue produced per staff member per year, including part-time people and principles

Answer 57

Revenue per total staff

Question 58

Hourly rate that varies with staff member doing the work and possibly the type of service provided these are determined based on the amount of money in employees paid plus the cost of for the employees fringe benefits, plus the cost of overhead and allowance for profit. A net multiplier is used to determine billing rates

Answer 58

Billing rate

Question 59

A factor derived by dividing that revenue of design firms by the cost of direct labor. Is it covers fringe benefits, indirect labor, overhead, and profit.

Answer 59

Net multiplier

Question 60

Related to the net multiplier is a multiplier based on this. This is the cost of providing taxes, benefits, and like that are included with the employees base salary. The multiplier is then calculated to account for indirect labor and profit. Because benefits are already included with this, the multiplier is slightly less than the net multiplier.

Answer 60

Direct personal expense or DPE

Question 61

This is what most states require for an inter-design firm to resell goods. This type of license allows the designer to pass on the state sales tax to the client. The design business message remit the tax monthly along with standard boarding forms.

Answer 61

Sales tax license or a resale license or a transaction privilege tax license

Question 62

Some states have laws which require that anyone who wants to practice as an interior designer must meet certain requirements and obtain a license from the state to practice

Answer 62

Practice act

Question 63

Other states have these which regulate who may use the title of interior designer or some similar title, although anyone may have a business that offers interior design services as long as they may not use the regulated title

Answer 63

Title acts

Question 64

Any kind of payment to an employee for the work done. For interior design firms this includes a base salary or wage along with fringe benefits. In addition, some firms may offer bonuses based on profitability as a firm or fixed bonus is it holidays or others based on employees base salary

Answer 64

Compensation

Question 65

A formal review by an interior design form of how each employee is working. Evaluation‘s are normally conducted at a yearly interval for existing employees and more frequently for newly hired employees. Generally, a valuations to employees how they are doing and where they may need improvement

Answer 65

Performance evaluation

Question 66

Protects employees mostly union employees, from unfair labor practices by employers

Answer 66

National labor relations act also called Wagner act

Question 67

Requires equal pay for all employees who have the same work duties, responsibilities, and expertise

Answer 67

Equal pay act

Question 68

Requires that companies with 50 employees give an employee up to 12 weeks for a child, spouse, or parental care, without initiating retribution or jeopardizing the employees job

Answer 68

Family medical leave act

Question 69

Requires employers to provide a safe environment. Although primarily a.m. to construction sites, factories, and industrial plants, OSHA I can inspect offices and Levi fines for failure to provide things that is first aid kits, posted material safety data sheets, and fire extinguishers

Answer 69

Occupational safety and health act

Question 70

Sometimes called a restrictive covenant, may include limits or prohibitions on such things as who the employer may work for during a specified amount of time after leaving the present employer, or whether or not the employee may set up a competing business in the same geographical area, working for the firms clients, or passing on confidential information to others

Answer 70

Noncompete clause

Question 71

Means that there is no written contract in the employee can be terminated at any time without explanation. Likewise, the employee can quit at any time without a given reason. However, the employee is still protected from being terminated because of age, sex, religion, other conditions mentioned previously

Answer 71

Employee at Will

Question 72

The concept of this is that one person, the agent, ask on behalf of another, the principal, in dealing with others, the third-party. An interior design, the agent is the interior designer, the principal is the owner or client, and third-party is the contractor or vendor. Legally speaking, when the agent consents to act on behalf of and represent the interests of the principal, the agent is empowered to create legal relationships between the principle and third parties

Answer 72

Agency

Question 73

What is it called when the law attempts to define what one person owes another person in a particular relationship including contracts. This is important in interior design and construction industry because of the multitude of formal and informal relationships.

Answer 73

Duty

Question 74

Legal responsibility for injury or damage to another person or property. Interior designers are constantly exposed to this for their actions are in actions were by simply being named is a responsible third-party and other claims. One of the primary ways the interior designer is liable is through negligence

Answer 74

Liability

Question 75

The failure to use do you care to avoid harming another person or property

Answer 75

Negligence

Question 76

The interior designer is theoretically protected from claims by parties with whom designers has no direct contractual relationship.

Answer 76

Privity

Question 77

Can simply be defined as a set of activities related to facilitating an honest exchange of some thing one party has for some thing another one needs. A number of techniques are used for the interior design firm.

Answer 77

 marketing

Question 78

Although This is not a specific marketing technique in itself, it is a fundamental requirement for Fessional firms and some thing that is applicable to other marketing aspect.

Answer 78

Corporate identity

Question 79

This is a source of information about a potential client who may need the service of an interior designer now or in the future. This can be a planned building project for which there is a need for design services. As more design verbs target their marketing efforts to the types of clients they want or the kinds of projects in which they specialize, finding and developing these is becoming increasingly more important

Answer 79

Leads

Question 80

A basic marketing tool for all design firms. It gives a brief description of the firm and its capabilities and service specialties and includes representative photographs of pass projects.

Answer 80

Brochure

Question 81

These are often used to present more detailed information about a firm and it’s work or to focus on how designer might approach a particular clients design problem. Slide shows were once commonly used because they’re relatively easy to assemble and can be customized for each client. Slide shows have been replaced by multimedia presentation, either is standalone presentations or using presentation programs like PowerPoint. These are fairly easy to customize for each client type and then produce and reproduce as required

Answer 81

Audiovisual presentations

Question 82

This is an effective way to keep of design firms name and work in front of a large audience on a regular basis. These are well designed pieces that are sent to past, present, and potential clients. These are relatively inexpensive marketing tools, but to be effective they must be produced on a regular basis, which takes commitment time and money

Answer 82

Newsletter

Question 83

Most firms have these provide an overview of the firm, examples of the types of projects to the farm dies, photographic images, and a listing of staff experience and capabilities.

Answer 83

 website

Question 84

Any pay communication in some type of media, such as newspapers, magazines, and television. Although once considered professionally unethical, this is now being used to reach a wise market. Unlike press release, articles, and other publicity tools, this is an advantage of being guaranteed to read to give an audience because firms do not have to depend on the decision of an editor to place their promotions

Answer 84

Advertising

Question 85

This differs from marketing and that it is not tied to a particular potential job or single potential client. Rather, it establishes and communicates the firms presents to various groups of Publix on many different levels. It seems to create a positive image of the farm on the part of some group of people. Of course, the most important audience group of the designer tries to communicate with her those who may lead to the designer service were able to recommend for them to others

Answer 85

Public relations

Question 86

A short statement concerning some news were the event related to the design firm that I sent to an appropriate publications with the hope that the editor will use it

Answer 86

Press release

Question 87

Any dealer manufacture representative subcontractor or treats person who supplies goods or services to an interior designer. In some cases, this may not work directly for or with the designer, but rather do a general contractor who is responsible for completing a project.

Answer 87

Trade source

Question 88

People who specialize in one type of construction or accessory so just furniture, Stainglass, fiber art. They’re working relationship on a project varies with the type of job in the preferred contracting method of the designer or client. For instance, they may contract with the interior designer work directly with the client wall contracting their efforts through the interior designer, or maybe hard by the general contractor as a subcontractor

Answer 88

Craft worker