Practice Management - Business Operations Flashcards
What are the 5 categories in ‘Business Operations’?
- Business Organization
- Office Organization
- Ethical Standards
- Human Resources
- Business Development
What are the 5 ways for a firm to be structured?
- Sole Proprietorship
- General or Limited Partnership
- Corporation
- Limited Liability Company (LLC) or Limited Liability Partnership (LLP)
- Joint Venture
Sole Proprietorship
Firm structure in which:
- firm owned by individual
- simplest type of business
- personal assets at risk if sued
- pay self-employment tax to cover social security and Medicare taxes
General Partnership
Firm structure in which:
- firm owned by 2 or more people
- partners share management, profits, and risks of the business
- income shared among partners
- income reported on personal tax forms
- pay self-employment tax to cover social security and Medicare taxes
- each partner personally liable for business risks and liabilities
- easy to form
- partnership agreement is advisable
- each partner has different skills/strengths to contribute
- primary disadvantage = all partners are liable and responsible for actions of others
Limited Partnership
Firm structure in which:
- similar to general firm except that firm has at least 1 general partner and at least 1 limited partner
General partners:
- invest in business, manage it, and are financially responsible
Limited partners:
- are investors who receive a portion of the profit
- have no say in management
- are only liable to the extent of their investment
Corporations
Firm structure in which:
- financially and legally separate from shareholders
- retains profits
- profits taxed at lower rate than individuals
- taxed separately from shareholders = taxed twice
- business license must be registered with the state in which it practices
- high initial cost to start
- complicated to form: need a lawyer to draw up formal articles and file with state office
Shareholders:
- own corporation through shares
- earn dividends
- taxed on dividends separately from Corporation taxes
- only liable for money invested (personal assets not at risk if company is sued)
- elect directors
Directors:
- responsible for broad policy decision
- act in best interest of shareholders
- Elect officers
Officers:
- carry out day-to-day management
S Corporation
A firm structure in which:
- type of corporation
- does not retain profits and pay out dividends in usual manner
- allocates income and losses directly to shareholders in proportion to holders = avoids tax on corporate income
- advantageous when business loses money
- offers all advantages of a standard corporation
- limited to small, domestic business corporation with < 100 shareholders
Shareholders:
- report their shares of income and losses on personal federal tax returns
- taxed at individual rates
- advantageous when tax rates favor individual over corporation
Professional Corporation
A firm structure in which:
- type of corporation
- allowed by many states for professionals (architects, lawyers, doctors, etc)
- main difference = liability for malpractice limited to the person responsible for the act (aka licensed architect)
Limited Liability Companies (LLCs) & Limited Liability Partnerships (LLPs)
A firm structure in which:
- Combine advantages of a partnership/sole proprietorship + limited liability of a corporation
- not separate entity from members = business itself is not taxed (except by some states)
- LLC certificate or other business license may be required
Members:
- no personal liability
- reports profits and losses on personal federal tax returns
- considered self employed = pay tax for social security and Medicare
Joint Ventures
A firm structure in which:
- temporary association of 2 or more persons/firms
- treated like partnership = not legal entity separate from members
- cannot be sued
- taxed as partnership where members are taxed separately
- purpose = complete specific project or goal
- dissolved when project/goal is completed/reached
- Teaming Agreement (or Memorandum of Understanding) forms basis of Joint Venture
Teaming Agreement (or Memorandum of Understanding)
- Formal, written agreement that forms basis of a Joint Venture
- outlines duties/responsibilities, division of profits/losses, completion of work
- not a formal business organization
- Can be used to form a prime-consultant agreement
Standard of Care
* need more on this, check other NCARB resources
Legal concept, defined as the level of skill and diligence that a reasonably prudent architect would exercise in:
- same community (ex. hurricane detailing in Florida)
- same time frame (aka at time project was designed/built, not at time of dispute)
- given same or similar facts and circumstances (aka: information known at time of decision)
Requires architect to practice with reasonable care, not perfection
What is a result of raising the standard of care? What language should be avoided?
- raises architect’s liability
- makes architects work uninsurable
- “with the highest standards”
- promising or guaranteeing results
AIA Document A201-2017
General Conditions of the Contract for Construction
- When to Use: Umbrella document for design-bid-build
- Various design-bid-build contracts refer to and incorporate by reference
In case of hazardous materials and substances:
- contract must stop work and notify O/A
- Owner must obtain services of a licensed lab to verify presence material
- Architect’s responsibility = reply in writing if have reasonable objection to entity proposed by owner. If so, propose different entity.
- Once hazardous material has been rendered harmless, architect to issue change order for increased contract time and sum
- Architect’s Standard of Care = to make reasonable effort to determine if testing and remediation entries proposed by the owner are adequate, and later determine if terms of change order are fair
C401-2017
Standard Form of Agreement Between Architect and Consultant
What are 3 important aspects to be considered in the organization of an architectural office?
- Work organization (how a firm’s staff is organized)
- Support staff
- Regulations governing architectural practice
What is ‘work organization’? What are 3 types?
- how a firm’s staff is organized
- Departmental organization / horizontal organization / flat organization
- Studio organization / vertical organization / tall organization
- Outsourcing
Departmental Organization / Horizontal Organization / Flat Organization
- type of work organization aka staff organization
- staff organized into departments
- each department specialized in different function/phase
Pros:
- efficient
- allows for standardization
Cons:
- Inflexible and resistant to change
- Difficult for employees to gain breadth of experience
- Communication is difficult
Studio Organization / Vertical Organization / Tall Organization
- type of work organization aka staff organization
- groups of employees called studios
- each studio responsible for a completing an entire project from beginning to end
- can be created/dissolved as needs arise
Pros:
- close and immediate communication between members
- works well with project manager system
Outsourcing
- type of work organization aka staff organization
- contracting with another company to do work for a project
- ex. CD sets or renderings
Pros:
- good way to manage workload
Cons:
- requires careful management and coordination
Support Staff
- part of office organization
- includes employees other than professional staff or seniors
- ex. administrative, receptionists, marketing, model builders, etc
What are 3 regulations governing architectural practice?
- Business Licenses
- Taxes
- Professional Licensing and Regulation
Business licenses
- allows business to practice
- serves as basis for taxation
- for corporations, it must be registered in state where a business practices
Certificate of Authorization (COA)
- required in some states by the state registration board in order to provide services to the public
- in addition to a business license
What form must a company provide to the IRS?
What tax forms must a company provide to and collect from employees?
Provide to IRS:
IRS Form SS-4, Application for Employer Identification Number (EIN)
Collect from employees:
Form W-4, Employee’s Withholding Certificate
Form I-9, Employment Eligibility Verification
Provide to employees:
Form W-2, Wage and Tax Statement
Form W-2
Wage and Tax Statement:
- company supplies to each employee by Jan. 31 for personal taxes
- shows all wages paid to employee over calendar year
- shows all taxes withheld over calendar year
Form W-4
Employee’s Withholding Certificate:
- company collects from employee
- documents employee deductions
IRS Form SS-4
Application for Employer Identification Number (EIN):
- company files with the IRS
- used in tax filings and other correspondence with IRS
Other than income tax, what are taxes that a company may need to pay?
- goods purchased from out of state (by the business or for resale)
- personal property tax on furniture and equipment used by business (by state)
- city taxes
- property taxes (if owning property)
After becoming licensed in one state, how can an architect apply for reciprocal licensure in other states?
- Providing documentation of education, experience, and exam status
- Meet state’s continuing education requirements
- Meeting any additional state requirements
4 parts of Professional Development for a licensed architect
- Continuing education
- Membership in Professional organizations
- Participation in Community organizations
- Teaching
What is the goal of Continuing Education?
Develop the knowledge and skills necessary to offer competent services to the public.
What are the 2 types of continuing education?
- Mandatory Continuing Education (formal learning)
2. Informal learning.
Mandatory Continuing Education (MCE)
- structured, mandatory learning
- required and approved by local jurisdictions or the AIA
- most requirements based on unit time periods of one hour
What are the MCE units of time period called by the AIA and NCARB? Others?
AIA = Learning Units (LU)
NCARB = Continuing Education Hours (CEH)
Others = Professional Development Units (PDU)
What are the 2 broad categories of Mandatory Continuing Education (MCE)?
- Health, safety, and welfare units = aka structure integrity or soundness of a building
- health = benefits user of building/site or environment
- safety = limit/prevent accidental death/injury of users
- welfare = engender positive emotional response for users and enable equal access to building - All other units not related to health, safety, and welfare
What are the approved providers for Mandatory Continuing Education (MCE)?
- AIA Continuing Education System (CES)
- NCARB Continuing Education (CE)
- Construction Specification Institute (CSI)
- American Concrete Institute (ACI)
- Various state and local agencies
AIA Continuing Education System (CES)
- AIA’s way of counting and recording continuing education
- AIA requires CE as condition of membership
- 18 LUs (learning units) required per year (12 from Health, Safety, and Welfare)
Informal learning component of Continuing Education
- just as important as formal learning
- no specific hours required
- reading professional journals/books
- lunch and learns
- discussions with colleagues
- visits from product vendors
- travel
What are the 3 types of professional organizations in which architects can be members?
- Constituency based (ex. AIA)
- Cause based (ex. The US Green Building Council)
- Knowledge based (ex. CSI)
What are the 2 guides for industry ethical standards? What are their main objectives?
NCARB Model Rules of Conduct
- Objective = protection of the health, safety, and welfare of the public
AIA The Code of Ethics and Professional Conduct: Addresses responsibilities to: - the public - the client - building industries - the art and science of architecture - continuum of knowledge and creation
NCARB Model Rules of Conduct - what is its objective and what are its rules?
Rules for ethical standards with the objective to protect the safety, health and welfare of the public.
Rule 1: Competence Rule 2: Conflict of Interest Rule 3: Full Disclosure Rule 4: Compliance with Laws Rule 5: Signing and Sealing Documents
NCARB Model Rules of Conduct: Rule 1
Competence:
An architect should:
- primary duty = protect public’s health, safety, and welfare
- act with reasonable care and competence (standard of care)
- design in accordance with applicable building laws
- perform services only when having the necessary knowledge and skill
- not be permitted to practice if member board deems professional competence to be substantially impared
NCARB Model Rules of Conduct: Rule 2
Conflict of Interest
An architect should:
- not accept compensation from more than one party on a project, unless fully disclosed in writing by all
- not solicit or accept compensation from material or equipment suppliers for endorsing their products in design/project
- not perform service is there is a conflict of interest not fully disclosed and waived in writing (ie. financial gains or judgment adversely affected)
- Render decision impartially when acting as independent interpreter of the contract documents or judge of contract performance
- when acting as AXP supervisor, not enter into inappropriate relationship with mentee
NCARB Model Rules of Conduct: Rule 3
Full Disclosure
An architect should:
- not make statements that are misleading, deceptive, or false
- disclose if being compensated for making public statement on architectural matters
- not misrepresent qualifications, capabilities, and experience of themselves or their firm
- not misrepresent or overstate scope fo responsibility on work claiming credit for
- Take the 3 following actions if the architect becomes aware of a decision made by the architect’s employer or client, against the architect’s advice, that violates applicable federal, state, or local building laws and regulations, and that will, in the architect’s judgement, materially and adversely affect the health and safety of the public:
1. Refuse to consent to the decision
2. Report the decision to the official charged with enforcement of building laws and regulations
3. Terminate the provision of services unless the architect is able to cause the matter to be resolved by other means
What are the 3 actions an architect must take if they become aware of a decision made by their employer or client, against the architect’s advice, that violates applicable building laws and regulations, and that will, in the architect’s judgement, materially and adversely affect the health and safety of the public?
- Refuse to consent to the decision
- Report the decision to the official charged with enforcement of building laws and regulations
- Terminate the provision of services unless the architect is able to cause the matter to be resolved by other means
NCARB Model Rules of Conduct: Rule 4
Compliance with Laws
An architect should:
- not violate the laws in relation to practice
- do not conduct fraud
- comply with licensing laws
- not bribe public officials about their projects
- do not deliberately disregard of others’ rights
- be subject to discipline if having violated employee’s lawful rights
NCARB Model Rules of Conduct: Rule 5
Signing and Sealing Documents
An architect should sign and seal only those technical submissions that were prepared under their responsible control except:
- those supplied by manufacturers, suppliers, installers, contractors, or the architect’s own consultants when submission will be included in architect’s technical submission and architect has reviewed for accuracy
- prototypical building documents prepared by a licensed architect as long as they comply with the requirements of project’s jurisdiction and are incorporated into architect’s own technical submission
