Practice Management (PcM) Flashcards
Business Organization
the legal structure of an architectural firm
Types:
Sole Proprietorship
General Partnership / Limited Partnership
Corporation (C vs. S)
Limited Liability Company / Limited Liability Partnership
Joint Venture
Office Organization
the way the firm organizes to complete its work
work organization
support staff
regulations governing architectural practice
Work Organization
Departmental Organization - also called horizontal or flat organization
Studio Organization - also called vertical or tall organization:
smaller firms can work more informally and divide work as needed
Outsourcing:
contracting with another company to do some of the work needed for a project (ex: renderings)
Support Staff:
employees other than the professional staff and senior management (admins, IT, etc.)
Departmental Organization
also called horizontal or flat organization
staff is organized into departments, each specializing in a different function (marketing, design, etc.)
very efficient with a standardized process of moving a project through different departments, makes use of many specialists, and
creates economies of scale
can also make a business inflexible/resistant to innovation and change, tough to communicate, lack of shared knowledge
Studio Organization
also called vertical or tall organization
organized around studios with each completing a project start to finish without the need for outside assistance
encourages communication among the team
can be combined with other departments such as those that provide specification writing
Ethical Standards
the accepted principles of correct professional conduct
Human Resources
the practices and legal responsibilities pertaining to employing others
Business Development
the use of marketing and public relations to increase business
Sole Proprietorship
Business is owned by an individual.
Advantages: ease of setup, total management control by the owner, and possible tax advantages to the owner because business
expenses and losses may be deducted from the gross income of the business
Disadvantages: owner is personally liable for the company’s debts and losses (owner’s personal income, personal property, and
other assets can be seized to pay any judgments in a lawsuit), raising capital and establishing credit depends entirely on the
owner’s personal credit rating and assets
When the owner stops practicing, the firm ceases to exist.
Partnerships:
General vs. Limited
General Partnership:
Two or more people share in the management, profits, and risks of the business.
Income is shared among these partners and is reported on personal tax forms.
Each partner is personally liable for business debts and liabilities.
Limited Partnership:
At least one general partner and at least one limited partner.
General partners invest in the business, manage it, and are financially responsible for it.
Limited partners are investors - receive a share of profits, but have no “general” roles like listed above. They are also only liable to
the extent of their investment.
Disadvantages: all the partners are responsible and liable for the actions of the others, personal assets are vulnerable (like w/ sole
proprietorship), income is taxed at individual rates, and if one partner withdraws then the business is usually dissolved
(C) Corporation
an association of individuals that exists as a legal entity apart from its members
can be created by formal articles of incorporation (drawn up by an attorney and then properly filed w/ the state)
shareholders: owners of the corporation in proportion to the # of shares they own; they elect directors; only financially responsible
for the amount of money he or she invests
directors: must act in the best interests of the shareholders with broad policy decisions; they elect officers
officers: carry out the day-to-day management of the corporation
Advantages: easy to raise capital through sales of stock in corporation, taxed at lower rates than individuals, reduced liability
Disadvantages: corporation is taxed on profits and shareholders are taxed on dividends (taxed twice), initial cost to start the
business, continuing paperwork and formal requirements to maintain it
(S) Corporation
similar to a C Corporation, but allocates its income and losses directly to shareholders in proportion to their holdings. Shareholders
then report this on their own tax returns and are taxed at individual rates (avoiding the tax on the corporation)
offers all the advantages of a C Corporation
can only exist as a domestic company with no more than 100 shareholders (along with other restrictions)
Professional Corporation
similar to other corporations, but liability for malpractice is usually limited to the person responsible for the act
Limited Liability Companies & Limited Liability Partnerships
combines the advantages of a partnership or sole proprietorship with the limited liability of a corporation
formed like a partnership with investors (members) and managers; it is possible for a non-member to be a manager
Advantages: liability is limited to a member’s investment with no personal liability, the business is not taxed, easier to setup and
operate than a corporation
Disadvantages: members must report profits and losses on personal tax returns, members are “self-employed” and pay taxes to
Social Security and Medicare
Joint Venture
a temporary association of two or more persons or firms for the purpose of completing a specific project or goal that is typically
dissolved when project or goal is complete/reached
based on a formal, written agreement describing the duties and responsibilities of each party involved, how profits will be divided,
and how the work will be completed
a “teaming agreement” or “memorandum of understanding” is developed which defines roles, responsibilities, and contractual
relationships that will be established if the joint venture is formed. The teaming agreement is not a formal business organization,
but is used to market the teams and forms the basis of the joint venture.
treated like a partnership (not a legal entity in itself separate from members and cannot be sued like a corporation)
profits are taxed according to the state in which the joint venture operates
Standard of Care
a legal concept, defined as the level of skill and diligence that a reasonably prudent architect would exercise in the same
community, in the same time frame (at the time the project is designed or built), and given the same or similar facts and
circumstances (budget, scheduling, complexity of the project, etc.)
Business License
allows the business to practice and usually serves as the basis for taxation
corporations have tax identification numbers
a certificate of authorizations (COA) is sometimes required in order to offer services to the public
Taxes
all businesses are required to pay taxes
businesses with employees must:
withhold taxes for each employee to be forwarded to the IRS
fill out a IRS Form SS-4 - Application for Employer Identification Number (EIN)
collect a copy of a Form W-4 - Employee’s Withholding Allowance Certificate from each employee
supply employees with Form W-2 - Wage and Tax Statement
for sole proprietorships and some partnerships:
federal and state income tax must be filed as estimated taxes every quarter
must pay self-employment tax to cover Social Security and Medicare taxes
some states apply a use tax on goods purchased from out of state and architect have to file a use tax certificate and pay what
amounts to a sales tax
some states charge a personal property tax on furniture and equipment used by the business
some cities have additional income, employment, occupational privilege, and use taxes
property taxes (if firm owns it’s own property)
Professional Licensing and Regulation
architects must have a license to practice and renew it annually or biannually
a min. # of continuing educational credits must be completed to maintain their license
to obtain license, a candidate must pass the Architect Registration Examination (ARE) given by the National Council of Architectural
Registration Boards (NCARB); states may require individual exams as well; a candidate must also have a bachelor or masters
degree from university accredited by the National Architectural Accrediting Board (NAAB); most states also require completion of
the Architectural Experience Program (AXP)
architects can apply to be licensed in other states by applying for a reciprocal licensure and submitting documentation of
education, experience, and exam status to the state’s licensing board; the architect must meet that state’s continuing education
requirements and take any additional tests that state requires
Ethical Standards
architect must abide by all federal, state, provincial, and local laws as well as any state laws governing the practice of architecture
main source of ethical standards for architects is from the American Institute of Architects (AIA) “Code of Ethics & Professional
Conduct” which provides min. standards of conduct, procedures for enforcement, and sanctions against AIA members who
violate the standards
AIA members who violate the AIA code can receive: non-public admonishment, censure (including a published description of the
violation in the AIA periodical), suspension of membership, or termination of membership
the AIA Code of Ethics is in three tiers - canons (broad principles of conduct), ethical standards (specific goas toward which
members should aspire), and rules of conduct (specific, mandatory statements that members must follow)
AIA Canon I, General Obligations
what members should do
maintain and improve their knowledge and skill
seek to raise architectural standards in aesthetics, education, research, training, and practice
respect and seek to improve society and the environment
exercise learned professional judgment
uphold human rights
not discriminate on the basis of race, religion, national origin, age, disability or sexual orientation
AIA Canon II, Obligations to the Public
what members should do
uphold the law
never try to influence a public official with a payment
never accept payments intended to influence their judgment
never help a client with anything fraudulent of illegal
promote and serve the public interest
render pro bono services
be involved in civic activities
strive to improve public appreciation of architecture
AIA Canon III, Obligations to the Client
what members should do
serve their clients competently and professionally
exercise unbiased judgment
not accept projects beyond their professional capacity
avoid conflicts of interest
be truthful in professional communications
keep clients informed about their projects
maintain client confidentiality
AIA Canon IV, Obligations to the Profession
what members should do
uphold the integrity and dignity of the profession
practice with honesty and fairness
not sign and seal documents for which they do not have responsible control
not knowingly make false statements
be honest about their qualifications and about the work they claim credit for
AIA Canon V, Obligations to Colleagues
what members should do
respect the rights of their colleagues and acknowledge their professional contributions
provide associates and employees with suitable working conditions and fair compensation
nurture fellow professionals through their education, internships, and careers
give credit to others for their professional work
AIA Canon VI, Obligations to the Environment
what members should do
be environmentally responsible
promote sustainable design in their professional work
advocate sustainable buildings and site design
use sustainable practices within their firms and encourage clients to do the same
Human Resources
known as “human resource management” or “personnel management”
involves the entire range of hiring, compensating, managing and terminating employees, along with any legal responsibilities
Compensation (examples of)
flextime flexible benefit packages office-sponsored events floating holidays sabbaticals flexible days off compensation alternatives (educational reimbursements, paid travel for seminars, etc.) annual performance bonuses profit sharing wellness (gym memberships) company cars community involvement (time off for volunteering) professional dues (AIA cost, payment for ARE exams, etc.) office amenities continuing education family and medical leave
National Labor Relations Act (Wagner Act)
allows private sector employees to organize into trade unions and protects union employees from unfair practices by employers
Equal Pay Act
requires equal pay for employees who have the same work duties, responsibilities, and experience
Employee Eligibility Verification
requires employers to verify the employee’s right to work in the US by maintaining an employee’s I-9 form for at least 3 years as well as for 1 year after termination
Wages and Fair Labor Standards Act (FLSA)
establishes minimum wage, overtime, pay, recordkeeping, and child labor standards in both the private sector and in government employment
Occupational Safety and Health Act of 1970 (OSHA)
requires employers to provide a safe work environment (first aid kits, posted material safety data sheets, fire extinguishers, etc.)
Health Insurance Portability and Accountability Act of 1996 (HIPAA)
protects the privacy of individually identifiable health information
Employee Retirement Income Security Act (ERISA)
sets minimum standards for pension plans in the private sector for those employees who have a pension plan program
Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA)
- over 20 employees
requires employers to continue group medical coverage if employment is terminated, working hours are reduced, employment is changes, or in the event of death, divorce, or other significant life events
Civil Rights Act of 1991
- over 15 employees
prohibits discrimination on the basis of sex, race, color, religion, or national origin
Age Discrimination in Employment Act of 1967 (ADEA)
- over 15 employees
prohibits age discrimination in employment for persons age 40 or over, including hiring, firing, segregation in the workplace, and reducing wages or salary
Family and Medical Leave Act of 1993 (FMLA)
- over 50 employees
requires that companies give an employee up to 12 weeks of unpaid leave for child, spousal, or parental care, without initiating retribution or jeopardizing the employee’s job
also applies to an employee with a serious health condition
firms that do any work for the federal or state government must comply with additional regulations
general ledger accounting
day-to-day operations
banking
taxes
auditing
provides firm-wide statements about the overall financial status of the business
project cost accounting
revenue
expenses
profit by individual projects
can help managers decide how to allocate resources, manage projects, and develop accurate proposals for new work
