Business Operations Flashcards
(95 cards)
1
Q
What are the advantages of a sole proprietorship?
A
- Ease of Set up
- Total management control by the owner
- Possible tax advantages to the owner because business expenses and losses may be deducted from the gross income of the business.
2
Q
What are the disadvantages of a sole proprietorship?
A
- The owner is personally liable for the company’s debts and losses
- If sued, the personal income, personal property, and other assets can be seized to pay any judgements
- Raising capital and establishing credit will depend entirely on the owner’s personal credit rating and assets.
3
Q
What is a general partnership?
A
Where two or more people, called general partners, share in the management, profits, and risks of the business.
4
Q
(T/F) Income is shared among the general partners and is reported on personal tax forms, each general partner is not personally liable for business debts and liabilities.
A
False
Each general partner IS personally liable for business debts and liabilities.
5
Q
What is a limited partnership?
A
Similar to a general partnership, but has at least one general partner and one limited partner.
6
Q
What are the roles of general partners in a limited partnership?
A
General partners invest in the business, manage it, and are financially responsible for it.
7
Q
What can limited partners do in a limited partnership?
A
Limited partners are investors who receive a portion of the profits, but who have no say in the management of the company and are liable only to the extent of their investment.
8
Q
What is the key difference between limited partners and general partners?
A
Limited partners are only liable to the extent of their investment while general partners are personally held liable.
9
Q
In the formation of a partnership, there are similar additional requirements from which business organization?
A
Sole Proprietorship
10
Q
What is the primary disadvantage of a partnership?
A
All the partners are responsible and liable for the actions of the others.
11
Q
In a partnership and sole proprietorship, what are vulnerable to lawsuits and other claims?
A
Personal assets
12
Q
What is another disadvantage of a partnership?
A
Income is taxed at individual rates.
13
Q
What is a corporation?
A
It is an association of individuals that exists as a legal entity apart from its members.
14
Q
What is the necessary course of action that needs to be taken in order to form a corporation?
A
- Can only be created in accordance with statutory requirements.
- Formal articles of incorporation must be drawn up by an attorney and filed with the appropriate state office. The specific regulations and requirements are governed by state law.
15
Q
What are the three levels of participants in a corporation and what are their roles?
A
- Stockholders - owners of the corporation in proportion to the number of shares they own, they also elect directors.
- Directors - have the fiduciary duty to act in the best interest of the stockholders and are responsible for broad policy decisions; they elect officers.
- Officers carry out the day-to-day management of the corporation.
16
Q
(T/F) A corporation is financially and legally independent from its shareholders.
A
True, each shareholder is financially liable only for the amount of money he or she has invested in the corporation.
17
Q
What is the greatest advantage of the corporation?
A
If the corporation is sued, the personal assets of the shareholders are not at risk.
18
Q
Can a corporation continue to function after a change in shareholders, directors, and principals has occurred?
A
Yes
19
Q
Corporations are generally taxed lower than individuals, which 2 business organizations are taxed as individual?
A
Partnership and sole proprietorship
20
Q
Why is the corporate income taxed twice?
A
As the corporation and the shareholders are separate legal entities, they are taxed separately. The corporation on its profits and the shareholders on their dividends.
21
Q
What are the primary disadvantages of a corporation?
A
- Initial cost to establish the business
2. Continuing paperwork and formal requirements necessary to maintain it.
22
Q
What is the difference between a C Corporation and an S Corporation?
A
An S Corporation does not retain profits and pay out dividends in the usual manner.
They allocate its income and losses directly to shareholders in proportion to their holdings.
MAIN IDEA There is no double tax (No tax on income of corporation)
23
Q
In an S Corporation, how do shareholders report their shares of the business’s income and losses?
A
They are shared on their personal federal tax returns and are assessed tax at their individual rates.
24
Q
In an S Corporation, When is it considered advantageous for shareholders’ personal federal tax returns to be assessed at their individual rates?
A
When the business loses money or when tax rates favor the individual over the corporation.
25
What are the limitations of an S corporation?
1. It is limited to small business corporations.
| 2. A corporation must be a domestic company with no more than 100 shareholders; there are other restrictions as well.
26
What is a professional corporation?
It is for professionals such as architects, lawyers, doctors, accountants, and interior designers. This form of business is similar to other corporations except that liability for malpractice is generally limited to the person responsible for the act.
Each state has its own laws regarding the burden of liability in a professional corporation.
27
What is a Limited Liability Company (LLC) and a Limited liability partnership (LLP)?
They combine the advantages of a partnership or sole proprietorship with the limited liability of a corporation.
28
What are the investors called in an LLC?
Members
29
What is a nonmember in an LLC?
Anyone who does not invest in the company.
30
(T/F) In a partnership, it is possible for a non-member to be a manager.
No, limited partners cannot partake in any management.
31
(T/F) In a LLC, it is possible for a non-member to be a manager.
True.
32
What is the main advantage to an LLC and LLP?
Liability is limited to a member's investment; a member has no personal liability.
33
Since an LLC is not a separate entity and the business itself is not taxed, how are profits and losses passed?
They are passed through the business to each member who must report a profit or loss on his or her personal federal tax return.
Sometimes members are considered to be self-employed, so they must report and pay self-employment tax for Social Security and Medicare.
34
(T/F) An LLC is easier to set up and operate than a corporation.
True
35
Can members of an LLC elect to be classified as an S corporation? Why?
Yes, the organization remains an LLC from a legal standpoint but is taxed as an S corporation.
36
What is a joint venture?
A temporary association of two or more persons or firms for the purpose of completing a specific project or achieving a specific goal.
37
When is the joint venture typically dissolved?
When the project is completed or the goal is reached.
38
What should be the basis of a joint venture?
A Joint venture should be based on a formal, written agreement that describes the duties and responsibilities of each firm, how profits and losses will be divided, and how the work will be completed.
39
Given that a joint venture is treated like a partnership, what are the limitations?
It is not itself a legal entity independent from its members, and it cannot be sued as a corporation can.
Depending on the laws in the state in which the joint venture operates, profits may be taxed as a partnership, or the individual members of the joint venture may be taxed separately.
40
What should be developed prior to the formation of a joint venture?
A teaming agreement/memorandum of understanding
41
What is a teaming agreement (memorandum of understanding) and when should it be signed?
It defines the roles, responsibilities, and contractual relationships that will be established if the forms are awarded the project and the joint venture is formed.
A teaming agreement is not a formal business organization, but it can be used to market the team and forms the basis of a joint venture.
Can also be used if a firm wants to form a prime-consultant agreement.
42
What is the 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, and given the same or similar facts and circumstances.
43
In Standard of Care, what does "In the same time frame" Implicate?
Means at the time the project is designed or built, not at the time of the dispute.
44
In Standard of Care, what does "The same or similar facts and circumstances" mean?
Budget, scheduling, and the complexity of the project
45
What is a departmental organization (Horizontal/Flat Organization)?
Traditional structure that has specialized areas like marketing, design, specs, contract docs, construction admin.
Project moves from one department to another in its route from start to finish.
46
What is the main drawback to a departmental organization?
Although very efficient, it can make business inflexible and resistant to innovation and change.
47
What is a studio organization (Vertical Organization)?
Organized around groups of employees called studios.
Each Studio is responsible for completing an entire project, from initial planning to production and construction administration.
48
What are the advantages of a studio organization?
Close and immediate communication among members of the design team and the synergy that comes from sharing ideas and group problem solving.
Also work well with a strong project manager system, in which the PM has daily contact with the design and production teams as well as with the client.
49
Outsourcing, what is it?
Contracting with another company to do some of the work needed for a project.
50
Why would outsourcing be utilized in a firm?
It can be a way to manage a fluctuating workload without continually hiring and firing employees
51
What does a Support Staff include?
Includes employees other than the professional staff and senior management.
Example: Receptionist, administrative assistants, bookkeepers, marketing people, model builders, tech assistants
52
What does the function of a business license serve as?
It usually serves as the basis for taxation
53
What jurisdiction must a corporation be registered with?
The state in which it practices
54
Which office does a corporation receive a corporate identification number?
Secretary of state's office
55
In some states, a firm must make a filing with the state registration board and obtain a _______ in order to offer services to the public.
Certificate of authorization (COA)
56
For LLC and PLLC, what type of license is required?
LLC certificate
57
A business with employees must file IRS Form ____ which is what?
SS-4, Application for Employer Identification Number (EIN).
58
In the beginning of the year, what tax filing document must the business supply each employee with?
W-2, Wage and Tax statement, showing all wages paid in the previous year to the employee along with federal, state, city, and FICA taxes withheld.
59
How often must federal and state income tax be filed per year for sole proprietors and some partnerships?
Estimated Taxes every quarter
60
What other tax aside from federal and state income tax must sole proprietors and partnerships file?
Self-employment Tax - to cover social security and medicare taxes
61
What other taxes MAY the Architect have to file and what are they?
Use tax certificate - a tax on goods purchased from out of state. The Architect might have to pay what amounts to a sales tax.
Some states also charge a personal property tax on furniture and equipment that is used by the business.
City - Possible taxes include: City income taxes, employment taxes, occupational privilege taxes, and use taxes. Property taxes are also assessed if the firm owns property.
62
How often must an architect renew their license?
Annually or biannually
63
What is the main source of ethical standards for architects?
AIA Code of Ethics and Professional Conduct, regardless if it is just for AIA members.
64
If an AIA member is found in violation of the code of ethics, what is the course of action?
Santions may include non-public admonishment; censure, which includes publishing a description of the viuolation in an AIA periodical; suspension of membership; or termination of membership
65
Which Code of Ethics document has had some dropped prohibitions over the past couple of decades? (Year)
1909
66
What can an Architect do (that is considered ethical)? Name at least 3 out of 5
1. Compete for projects on the basis of fee
2. Advertise, as long as no misleading or false statements are made
3. Supplant or replace another architect on a project (though intentionally seeking to interfere with another architect's contractual relationship with a client may be illegal in some cases)
4. Be involved with construction, as on a design-build project
5. Offer free design services for the purpose of securing a commission, as long as the prospective client is not deceived or misled (for example, by implying that an informal preliminary sketch is actually a fully thought-out solution to the client's needs)
67
What are the three tiers of statements in the Code of Ethics? Describe all three of them
1. Canons - broad principles of conduct
2. Ethical Standards - specific goals toward which members should aspire
3. Rules of conduct - specific, mandatory statements that members must follow.
68
What is Canon I and name at least 4/6 ethical standards.
General Obligations
1. maintain and improve their knowledge and skill
2. seek to raise architectural standards in aesthetics, education, research, training, and practice
3. respect and seek to improve society and the environment
4. exercise learned professional judgement
5. uphold human rights
6. not discriminate on the basis of race, religion, national origin, age, disability, or sexual orientation
69
What is Canon II and name at least 6/8 ethical standards.
Obligations to the Public
1. uphold the law
2. never try to influence a public official with a payment
3. never accept payments intended to influence their judgment
4. never help a client with anything fraudulent or illegal
5. promote and serve the public interest
6. render pro bono services
7. be involved in civic activities
8. strive to improve public appreciation of architecture
70
What is Canon III and name at least 4/7 ethical standards.
Obligation to the Client
1. serve their clients competently and professionally
2. exercise unbiased judgment
3. not accept projects beyond their professional capacity
4. avoid conflicts of interest
5. be truthful in professional communications
6. keep clients informed about their projects
7. maintain client confidentiality
71
What is Canon IV and name at least 3/5 ethical standards.
Obligations to the Profession
1. uphold the integrity and dignity of the profession
2. practice with honesty and fairness
3. not sign and seal documents for which they do not have responsible control
4. not knowingly make false statements
5. be honest about their qualifications and about the work they claim credit for
72
What is Canon V and name at least 3/4 ethical standards.
Obligations to Colleagues
1. Respect the rights of their colleagues and acknowledge their professional contributions
2. provide associates and employees with suitable working conditions and fair compensation
3. nurture fellow professionals through their education, internships, and careers
4. give credit to others for their professional work
73
What is Canon VI and name at least 3/4 ethical standards.
Obligations to the Environment
1. be environmentally responsible
2. promote sustainable design in their professional work
3. advocate sustainable buildings and site design
4. use sustainable practices within their firms and encourage clients to do the same
74
During the interview process, Equal Employment Opportunity laws made what illegal?
It made it illegal for an employer to ask a job candidate about age, date of birth, marital status, national origin, race, or maiden name
75
The Civil Rights Act of 1964, Equal Employment Opportunity Act of 1972, and Civil Rights Act of 1991 also made what illegal?
Discrimination on the basis of sex, race, color, religion, or national origin.
76
What did the Americans with Disabilities Act make illegal?
Discriminate on the basis of disabilities
77
What critical legal aspect of human resources is the condition under which employees are hired called?
Formal employment contract - spells out the employee's responsibilities, work duties, and compensation, as well as the firm's benefits, work conditions, termination procedures, and policies on accepting work from outside firms (moonlighting)
78
What is a noncompete clause (Restrictive covenant)?
Limits or prohibitions on such matters as who the employee may work for during a specified amount of time after leaving the firm, setting up a competing business in the same geographical area, working for the firm's clients, and passing on confidential information to others.
79
What is an employment at will?
There is no written contract and the employee can be terminated at any time without explanation.
Employee can also quit at any time without giving a reason.
Employee cannot be terminated because of age, sex, religion, and the other conditions mentioned previously.
80
What must the firm make sure of before hiring a freelancer?
The firm must be cautious that the freelancer is truly an independent contractor and cannot be classified by the Internal Revenue Service as an employee.
81
What are the three broad areas the IRS uses to determine if a worker is an employee or an independent contractor (freelancer)?
Behavioral control, financial control, and the relationship between the worker and employer.
82
What is the definition the IRS considers for a freelancer (Independent Contractor)?
Hired for a specific project, they control where and how they perform their work after given their initial assignment, they provide their own supplies and equipment, they receive no benefits from the firm other than payment for services, and they are free to work for other firms at the same time.
In addition, the architectural firm should establish the amount of payment as a set fee or on an hourly basis before beginning any work and be sure that the independent contractor is not otherwise financially tied to the firm.
83
What is an Employee Stock Ownership Plan? (ESOP)
Partial ownership in the firm.
The company sets up a trust, through which it gives employees stock, or possibly cash with which to buy stock. The contributed stock is then allocated to each employee based on one of several allowable formulas.
Over a period of time (10-15 years), the employee becomes fully vested.
ESOPs offer tax advantages and financing opportunities for the business.
84
National Labor Relations Act (Wagner Act)
Allows private sector employees to organize into trade unions and protects union employees from unfair labor practices by employers
85
Equal Pay Act
Requires equal pay for employees who have the same work duties, responsibilities, and experience.
86
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 three years as well as for one year after termination.
87
Wages and Fair Labor Standards Act (FLSA)
Establishes minimum wage, overtime, pay, recordkeeping, and child labor standards in both the private sector and in governing employment
88
Occupational Safety and Health Act of 1970 (OSHA)
Requires employers to provide a safe work environment. Although primarily aimed at construction sites, factories, and industrial plants, OSHA can inspect offices and levy fines for failure to provide things such as first aid kits, posted material safety data sheets, and fire extinguishers.
89
Health Insurance Portability and Accountability Act of 1996 (HIPAA)
Protects the privacy of individually identifiable health information.
90
Employee Retirement Income Security Act (ERISA)
Sets minimum standards for pension plans in the private sector for those employers who have a pension plan program.
91
Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA)
requires employers with 20 or more employees to continue group medical coverage if employment is terminated, working hours are reduced, employment is changed, or in the event of death, divorce, and other significant life events.
92
Civil Rights Act of 1991
Prohibits discrimination on the basis of sex, race, color, religion, or national origin.
93
Age Discrimination in Employment Act of 1967 (ADEA)
Prohibits age discrimination in employment for persons age 40 or over, including hiring, firing, segregation in the workplace, and reducing wages salary.
94
What are the common methods for a marketing plan?
Networking, corporate identity, brochures, websites, social media, newsletters, powerpoint presentations, advertising, past clients
95
Public Relations
Establishes and communicates the firm's presence to various groups of people on many different levels.
