Business Type Flashcards
(35 cards)
1
Q
Define Sole Proprietorship- Liability? Taxes? when is it over?
A
- default for individual who hasn’t taken on any formal action
- no liability protection, all personal assets are at risk
- doesn’t file a return/pay tax, all income and losses reported on owner’s tax return
- dissolves upon owner’s death
2
Q
Define General Partnership- Liability? who manages? Taxes?
A
- 2 or more architects practicing together, regardless of whether they’ve taken any formal legal steps
- generally all partners actively participate in management
- each partner liable for actions of the other partners, liability may extend beyond one’s partnership interest and reach personal assets
- taxes reported through individual tax return
3
Q
Define Limited Liability Partnership (LLP) - Who’s Protected? Liability?
A
- personal assets of partners, other than their ownership interest in LLP are protected against liability for business claims
- partners remain liable for their own professional negligence, even when on behalf of LLP
4
Q
Define Business Corporation - Who are the participants?
A
- most common form for architect firm firm
- 3 levels of participants: stockholder, directors, officers
5
Q
Define Stockholder, Liability?
A
- owners of corporation, ownership is based on shares of stocks
- personal assets are protected against liability
- typically remain liable for their own professional negligence
6
Q
Define Directors EDIT
A
- elected by stockholders and have a fiduciary duty to act in their best interest
- responsible for broad policy decisions
7
Q
Define Officers
A
- elected by directors
- carry out day to day management of corporation
8
Q
C Corporation aka…, ownership? liability? taxes?
A
- Publicly Traded Corporation
so large that stock is publicly traded - ownership interest is typically held by outside stockholders who aren’t actively involved in management of firm
- limited overlap between 3 participants
- pay taxes on income, after taxes profits passed to stockholders then file on their taxes again
9
Q
S Corporation aka… Ownership? Liability? Taxes?
A
- Closely Held Corporation
- owned by stockholders who are actively engaged in practice
- some or all stockholders also act as corporate directors and officers
- ownership doesn’t go to outsiders, less than 100 stockholders
- can opt out of federal taxes and do individual stockholder taxes
10
Q
Professional Corporation
A
- available in some states
- more restrictions on ownership, liability protection, and insurance
- rarely selected
11
Q
Limited Liability Company (LLC), levels of participants and roles? Liability? Taxes?
A
- 2 levels of participants:
– mems are owners of LLC
– managers are elected by members and have fiduciary duty to act in their best interest, responsible for both policy decisions and day to day management - personal assets protected against liability, except for fraud
- most closely held
- owned by members who are actively engaged in practice and also act as members
- for tax treated like sole/partnership and report on individual taxes
12
Q
What type of Ownership Structure do firms usually start as?
A
Sole Proprietorships
13
Q
What are benefits of expanding from Sole Proprietorships? (6)
A
- increase flexibility in ability to serve clients
- ability to develop specialties/areas of expertise
- financial stability for firm
- increase capital resources available to firm
- shared responsibilities in risk and reward
- increase growth opportunity for key staff
14
Q
Define Shared Studio/Team Based Organization, typically what firms use this?
A
- staff work freely across range of projects
- common for small and midsize firms that do specific project types or similar scale projects
15
Q
What are benefits of studio organization?
A
- flexibility to move staff freely to work as it comes to office
- work horizontally
- opportunity and professional freedom
16
Q
Explain studios organized by discipline
A
- separate studios around a discipline, ie urban design or interior design
- allows for variation in organization and business methodologies to emerge around best practices in each area
17
Q
Explain studios organized by project type
what is it, when is it desirable and whats a con
A
- ie education, high rise, hospitality, etc
- desirable for firms trying to attain expertise in specialized area
- con - can be too specialized, change in economic market might affect studios
18
Q
Studios organized by principal
A
- organized by 1 or more principles with number of staff dedicated to working with particular subset of firm
- con - may struggle to maintain office wide standards
19
Q
Pros of Sole Proprietorship
A
- ease of setup
- total management and control by owner
- business expenses and losses may be deducted from gross income of business
20
Q
Cons of Sole Proprietorship
A
- Ownership is personally liable for CO debts and losses
- raising capital and establishing credit depends entirely on owners personal credit ratings and assets
- success or failure dependent mainly on work and personal reputation of owner
- may be difficult to sell
- when owner stops, firm will close
21
Q
Pros of Partnerships
A
- generally easy to form
- agreement is advisable
22
Q
Cons of Partnerships
(liability and taxes)
A
- all partners liable for actions of others
- personal assets are vulnerable
- income tax is individual
23
Q
Pros of C Corporation (c)
A
- personal assets not at risk
- has continuity if there are any changes in shareholders, directors, etc
- easy to raise capital by selling stocks
- usually taxed lower than individual
- cooperation and shareholders taxed separately, income is taxed twice
24
Q
Cons of C Corporation
A
- initial cost to establish
- continuing paperwork and require works to maintain it
25
Pros for LLP
| (liability? taxes? considered what? set up?)
- liability limited to members' investment, a member has no personal liability
- business itself not taxed
- profit and losses on personal federal tax returns
- all members considered self employed
- generally easier to set up than corporation
26
Define Joint Ventures
| what is it, when is it used, how is it formed, how is it taxed?
- temporary association of two or more persons or firms for purpose of completing specific project and achieving specific goal
- used when project is too large/complex/requires expertise
- formal agreement
- depending on state can be taxed as partnership or individual
27
Pros of Departmental Organization aka Horizontal/Staff
- efficient
- allowing standardized and fine tune its processes
- make full use of many specialties
- create economies of scale
28
Cons of Departmental Organization aka Horizontal/flat
- difficult for employees to gain experience and share knowledge outside their specialties
28
Describe Departmental Organization, aka horizontal/flat
- staff organized into departments, each specialized in different functions
- each department works on every project as needed
29
Describe Studio Organization aka vertical/tall organization
- each studio responsible for entire project
- members have expertise needed to accomplish all or most of work
- can be created or dissolved as needed
30
Pros of Studio Organization
- close and immediate communication among members
- synergy from sharing ideas and group problem solving
- work daily with project manager
- daily contact with design, production and client
31
what does outsourcing require more of?
management and coordination
32
talk about business licenses, who requires them? what do you need to do?
- most local jurisdictions requires every business license
- corporation must be registered with state
- sometimes must make filing with state registration board and obtain certificate of authorization
33
how often do you review arch license?
- arch must obtain license to practice and review it annually or biannually
34
what do you need to apply for to have a license in another state when you're already licensed?
- reciprocal licensure
