PX- Chapter 33: Business Practices Flashcards
Name the ways a design firm can be structured
Sole Proprietorship partnership corporation Limited Liability Company Limited Liability Partnerships Joint Ventures
what is a sole proprietorship and what are the pros and cons
owned by one person
pro- easy to set up, some tax advantages
con- the owner is personally liable for all debts and losses
company doesn’t exist if the owner quits or dies
which is the simplest kind of business structure
sole proprietorship
what is a general partnership business structure. pros and cons
two ore more people share in management, profits and risks of a business
pro- easy to form, also good to have more than one person in charge with different talents
con- all the partners are liable for the actions of the others. each partner is responsible for claims against their personal assets. Also bad cause one person might want to leave then you’re hooped
what is a limited partnership business structure. pros and cons
one or more general partners and other limited partners. the limited people are just investors that receive a portion of the profit and don’t do anything with the company. their personal assets are not on the line, only their investment amount.
what is a corporation business structure? what are the pros and cons
associate of individuals where the company is independent from its members- separate legal entity so that if the corporation is sued, the personal assets of the stockholders are not at risk. but their investment is.
pro- no personal risk, lower taxes generally, can continue if the principle changes or the board members change.
con- initial setup costs and the paperwork to maintain the business
what is a limited liability company and LL partnership
hybrid business organizations that combine the advantages of the corporation and partnership
pro- liability is limited to a member’s investment- no personal liability. Also taxed like partnerships OR corporations- only one level of tax unlike the corporations. Generally easier to set up and operate than corporations
what is a joint venture
temporary associate or two or more ppl or firms to complete a project.
used when a design firm doesn’t have the experience needed to complete a project so it hooks up with another firm
treated like a partnership
name and describe two types of office organization within a design firm
departmental- project moves from one department to the other. good cause efficient but bad for communication and doesn’t let employees grown and learn
studio- various smaller groups that sees the whole project through. good to share ideas, everyone can learn.
what types of insurance should an interior designer get
professional liability and general liability, property, personal injury protection and workers comp
what is professional liability insurance
protects the designer in case something the designer did causes injury or property damage- aka malpractice or errors and omissions. problems from things like wrong specs or drawings
what is general liability insurance
basically general insurance - protect against claims of property damage, liability and personal injury cause by the designer or employees or anyone hired by the designer (like a consultant).
what is personal injury protection insurance
protects the designer against charges of slander, libel, defamation of character etc.
what kind of insurance should the contractor have
workers comp, claims for injury/sickness/death
personal injury including slander etc
insurance for any portion of the work that is stored off the job site
what are current assets vs just assets
current assets- resources of a business that are converted into cash within one year
assets- tangible or intangible resource that can be measured in monetary terms- current assets is branched under this
what is direct labour
labour of all staff that can be directly charged to the client/project
what is discretionary distribution
distribution of profits to owners and non owners- like bonuses
what is fixed asset
resources that are used by the business and are long term like equipment and property
what is indirect labour
all labour not charged to a project like admin time
what are liabilites
claims made by people outside the business OR by the owners of the business against the total assets of the business
what is overhead
expenses to keep the business operating regarless of if there is profict- like rent, power, internet etc
what are the two basic accounting methods (don’t describe yet)
Cash Accounting
Accrual accounting
what is cash accounting
revenue and expenses are recognized at the actual time the bueiness receives the cash or pays a bill. fairly simple. CANNOT be used by a corporation OR if a business has an inventory
what is accrual accounting
revenue and expenses are recognized at the time they a re earned weather or not the cash changes hands. Like if you invoice someone for $100, that money is automatically listed as revenue even if you have not been paid yet
better for getting an overall picture of the financial status of a business
which is the simplest form of accounting
cash accounting
what is a net worth
the firm’s total assets MINUS the total liabilities (claims against the firm)
what is owner’s equity
the money invested in a business by the owner or a stockholder
how can you control expenses
by reducing overhead costs, especially people who do not work on project work.
what is the most important type of accounting reports for designers and what does it do
project progress report- monitors the progress of individual jobs- shows the hours and labour costs for each phase with the amount to date and compares
what is the average collection period of a ID invoice
60-75 days
what is the “age” of an invoice
the time that has based between invoice date and payment date
what is a time analysis report
shows each employee’s hours spent on project work vs non project work.
what is a minimum percentage for the chargeable ration of an employee
65% for the break even point
how do you determine an employee’s billing rate
is their salary, plus their benefits, office overhead plus profit
what is a net multiplier when it comes to billing rates
dividing net revenue of the firm by the cost of direct labour. covers things like benefits, indirect labour, overhead & profit.
usually around 2.7 to 3. so if a designer is paid $40/hr their billing rate is $120/hr
what must a firm do if they are going to be the reseller of goods for tax purposes
get a sales tax license or a resale license. allows the designer to pass on the sales tax to the client
what is a practice act
anyone who wants to practice as an interior designer must meet certain requirements and obtain a license
what is a titles act
regulates who can use the term “interior designer”
what can’t a person ask someone being interviewed about
age, birthday, marital status, national origin, race or maiden name
what should you review of someone you’re considering employing
their past work and resume, portfolio and one or more interviews
what does it mean when an employment contract is “employment at will”
there is no written contract and the employee can be terminated at any time without explenation
how does an interior designer define their “duties”- in which ways
- by a contract (written or oral)
- legistlative enactment like building codes
- by their conduct- how the person conducts themselves (implied duties)
what are implied duties of an interior designer
cooperate with the contracotr/vendor
not to interfere with the contractor or vendor’s work
inform the contractor of relevant info that affects the job’s profess ( like errors)
assist the owner in coordinating schedules and requirements of other contractors not reporting to the GContractor
what is liability
legal responsibility for injury or damage to another person or property
what is neglegence
failure to use due care to avoid harming another person or property
what can a designer do to limit liability
use good contracts and follow them do good quality control document EVERYTHING be careful of last minute changes and subs- most of claims are from this have sufficient liability insuracnce
when should you NOT hire a consultant for a project
if your need is long term- just hire the person
inexperienced consultant
overqualified consultant
not during a crisis
