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Flashcards in Business Operations Deck (58)
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What are the 5 types of business organizations?

1. Sole proprietorship
2. General or limited partnership
3. Corporation
4. Limited liability corporation or limited liability partnership
5. Joint venture


Sole propietorship

-owned by individual; company can operate under owner's name or company name


Advantages of a sole proprietorship

-easy to set up
-total mgmt control by owner
- tax benefits expenses/losses can be deducted from company's gross income


Disadvantages of a sole proprietorship

-owner totally liable for company's debts/ losses - owner's personal property and assets can be seized to pay for judgements if company gets sued
- raising capital and credit depends on the owner’s own personal credit rating and assets
- difficult to sell


General partnership

Two or more people share in management, profits, and risks. Income shared among partners, reported on personal taxes. Each partner is personally liable for business debts liabilities


Limited partnership

Sim. To general partnership. Has at least 1 general and 1 limited partner. Limited partners are investors who receive portion of profits but have no say in management of company. Limited partners are only liable to the extent of their investment


Advantages of general or limited partnerships

1. easy to form
2. Each partner brings particular talent


Disadvantages to a general or limited partnership

-All partners liable
- income taxed at individual rates



Association of individuals that exists as a legal entity apart from its members. To form, formal articles of incorporation must be drawn up by attorney and filed with state office. Financially and legally independent from shareholders


Two types of corporations

C corporation and S corporation


Hierarchy of a corporation






Owners of corp. In proportion to the # of shares they own -elect directors



Act in best interest of shareholders. Responsible for broad policy decisions



Elected by directors. Carry out day-to-day management


Advantages of corporation

1. Shareholders only liable for amount of their investment
2. Personal assets not at risk
3. Easy to raise capital thru sales of stock
4. Taxed at lower rates than individ.


Disadvantages of a corporation

1. Corporation and shareholders taxed separately (effectively twice)
2. Initial cost to setup and to maintain


S corporation

Usually less than 100 people. Allocate income and losses directly to shareholders in proportion to holdings.taxed @ individual rates


Advantages to S corporation

-Same as C corporation
-Avoids tax on corporate income


Disadvantage to S corporation

-size restrictions
- must be domestic


Who's liable in a professional corporation?

- The person responsible


Joint venture

Temp, association of two or more people/firms to complete specific project /goal. Usually formed when project is too large for one firm. Dissolved when project is complete.


Teaming agreement

Developed before joint venture. Outlines roles, resp., and contractual relationships that will be established if the proj. Is awarded


In a joint venture, what do taxes depend on?

State law


Limited liability corporation and limited liability partnership

Combine advantages of partnership /sole proprietorship with limited liability of a corporation. Formed like a partnership but possible for non -member to be manager


Advantages of LLC/LLP

1. Liability limited to a person's investment
2. Easier to set up than corporation


Disadvantage to LLC / LLP

1. Business not taxed
2. Profits / losses passed thru to each member which must be reported on personal Fed. Tax return
3. Must pay self-employment tax for ss and Medicare


Standard of care

Legal concept, level of skill and diligence that a reasonably prudent architect would exercise in same community, time frame, given same facts and circumstances


What is AIA doc 201?

General conditions of the contract for construction. Outlines what contractor should do when he/she comes across hazardous or unknown circumstances during construction.


What must happen when a contractor finds hazardous materials or substances as outlined in AIA Doc 201?

1. Work must stop immediately
2. He must notify architect and owner
3. Owner must find entity to verify test material/substance and provide list of entities to architect and contractor
4. Architect and/or contractor must respond in writing it any objections
5. Once material is rendered harmless, contract sum and time are increased by change order


What must happen when a contractor finds an unknown condition as outlined by AIA Doc 201?

1. Must notify architect and owner before condition is disturbed and no later than 14 days after observing
- if contract other than AIA Docs are used the contractor can just notify the architect
2. Architect should notify owner
3. Architect should investigate to see if conditions will increase or decrease contractor's time req.
4. May need to request a consultant