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Flashcards in Practice Management - Business Operations Deck (120)
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What are the 5 categories in 'Business Operations'?

1. Business Organization
2. Office Organization
3. Ethical Standards
4. Human Resources
5. Business Development


What are the 5 ways for a firm to be structured?

1. Sole Proprietorship
2. General or Limited Partnership
3. Corporation
4. Limited Liability Company (LLC) or Limited Liability Partnership (LLP)
5. Joint Venture


Sole Proprietorship

Firm structure in which:
- firm owned by individual
- simplest type of business
- personal assets at risk if sued
- pay self-employment tax to cover social security and Medicare taxes


General Partnership

Firm structure in which:
- firm owned by 2 or more people
- partners share management, profits, and risks of the business
- income shared among partners
- income reported on personal tax forms
- pay self-employment tax to cover social security and Medicare taxes
- each partner personally liable for business risks and liabilities
- easy to form
- partnership agreement is advisable
- each partner has different skills/strengths to contribute
- primary disadvantage = all partners are liable and responsible for actions of others


Limited Partnership

Firm structure in which:
- similar to general firm except that firm has at least 1 general partner and at least 1 limited partner

General partners:
- invest in business, manage it, and are financially responsible

Limited partners:
- are investors who receive a portion of the profit
- have no say in management
- are only liable to the extent of their investment



Firm structure in which:
- financially and legally separate from shareholders
- retains profits
- profits taxed at lower rate than individuals
- taxed separately from shareholders = taxed twice
- business license must be registered with the state in which it practices
- high initial cost to start
- complicated to form: need a lawyer to draw up formal articles and file with state office

- own corporation through shares
- earn dividends
- taxed on dividends separately from Corporation taxes
- only liable for money invested (personal assets not at risk if company is sued)
- elect directors

- responsible for broad policy decision
- act in best interest of shareholders
- Elect officers

- carry out day-to-day management


S Corporation

A firm structure in which:
- type of corporation
- does not retain profits and pay out dividends in usual manner
- allocates income and losses directly to shareholders in proportion to holders = avoids tax on corporate income
- advantageous when business loses money
- offers all advantages of a standard corporation
- limited to small, domestic business corporation with < 100 shareholders

- report their shares of income and losses on personal federal tax returns
- taxed at individual rates
- advantageous when tax rates favor individual over corporation


Professional Corporation

A firm structure in which:
- type of corporation
- allowed by many states for professionals (architects, lawyers, doctors, etc)
- main difference = liability for malpractice limited to the person responsible for the act (aka licensed architect)


Limited Liability Companies (LLCs) & Limited Liability Partnerships (LLPs)

A firm structure in which:
- Combine advantages of a partnership/sole proprietorship + limited liability of a corporation
- not separate entity from members = business itself is not taxed (except by some states)
- LLC certificate or other business license may be required

- no personal liability
- reports profits and losses on personal federal tax returns
- considered self employed = pay tax for social security and Medicare


Joint Ventures

A firm structure in which:
- temporary association of 2 or more persons/firms
- treated like partnership = not legal entity separate from members
- cannot be sued
- taxed as partnership where members are taxed separately
- purpose = complete specific project or goal
- dissolved when project/goal is completed/reached
- Teaming Agreement (or Memorandum of Understanding) forms basis of Joint Venture


Teaming Agreement (or Memorandum of Understanding)

- Formal, written agreement that forms basis of a Joint Venture
- outlines duties/responsibilities, division of profits/losses, completion of work
- not a formal business organization
- Can be used to form a prime-consultant agreement


Standard of Care
* need more on this, check other NCARB resources

Legal concept, defined as the level of skill and diligence that a reasonably prudent architect would exercise in:
- same community (ex. hurricane detailing in Florida)
- same time frame (aka at time project was designed/built, not at time of dispute)
- given same or similar facts and circumstances (aka: information known at time of decision)

Requires architect to practice with reasonable care, not perfection


What is a result of raising the standard of care? What language should be avoided?

- raises architect's liability
- makes architects work uninsurable

- "with the highest standards"
- promising or guaranteeing results


AIA Document A201-2017

General Conditions of the Contract for Construction

- When to Use: Umbrella document for design-bid-build
- Various design-bid-build contracts refer to and incorporate by reference

In case of hazardous materials and substances:
- contract must stop work and notify O/A
- Owner must obtain services of a licensed lab to verify presence material
- Architect's responsibility = reply in writing if have reasonable objection to entity proposed by owner. If so, propose different entity.
- Once hazardous material has been rendered harmless, architect to issue change order for increased contract time and sum
- Architect's Standard of Care = to make reasonable effort to determine if testing and remediation entries proposed by the owner are adequate, and later determine if terms of change order are fair



Standard Form of Agreement Between Architect and Consultant


What are 3 important aspects to be considered in the organization of an architectural office?

1. Work organization (how a firm's staff is organized)
2. Support staff
3. Regulations governing architectural practice


What is 'work organization'? What are 3 types?

- how a firm's staff is organized

1. Departmental organization / horizontal organization / flat organization
2. Studio organization / vertical organization / tall organization
3. Outsourcing


Departmental Organization / Horizontal Organization / Flat Organization

- type of work organization aka staff organization
- staff organized into departments
- each department specialized in different function/phase

- efficient
- allows for standardization

- Inflexible and resistant to change
- Difficult for employees to gain breadth of experience
- Communication is difficult


Studio Organization / Vertical Organization / Tall Organization

- type of work organization aka staff organization
- groups of employees called studios
- each studio responsible for a completing an entire project from beginning to end
- can be created/dissolved as needs arise

- close and immediate communication between members
- works well with project manager system



- type of work organization aka staff organization
- contracting with another company to do work for a project
- ex. CD sets or renderings

- good way to manage workload

- requires careful management and coordination


Support Staff

- part of office organization
- includes employees other than professional staff or seniors
- ex. administrative, receptionists, marketing, model builders, etc


What are 3 regulations governing architectural practice?

1. Business Licenses
2. Taxes
3. Professional Licensing and Regulation


Business licenses

- allows business to practice
- serves as basis for taxation
- for corporations, it must be registered in state where a business practices


Certificate of Authorization (COA)

- required in some states by the state registration board in order to provide services to the public
- in addition to a business license


What form must a company provide to the IRS?
What tax forms must a company provide to and collect from employees?

Provide to IRS:
IRS Form SS-4, Application for Employer Identification Number (EIN)

Collect from employees:
Form W-4, Employee's Withholding Certificate
Form I-9, Employment Eligibility Verification

Provide to employees:
Form W-2, Wage and Tax Statement


Form W-2

Wage and Tax Statement:
- company supplies to each employee by Jan. 31 for personal taxes
- shows all wages paid to employee over calendar year
- shows all taxes withheld over calendar year


Form W-4

Employee's Withholding Certificate:
- company collects from employee
- documents employee deductions


IRS Form SS-4

Application for Employer Identification Number (EIN):
- company files with the IRS
- used in tax filings and other correspondence with IRS


Other than income tax, what are taxes that a company may need to pay?

- goods purchased from out of state (by the business or for resale)
- personal property tax on furniture and equipment used by business (by state)
- city taxes
- property taxes (if owning property)


After becoming licensed in one state, how can an architect apply for reciprocal licensure in other states?

- Providing documentation of education, experience, and exam status
- Meet state's continuing education requirements
- Meeting any additional state requirements