ARE 5.0 PCM

Sole Proprietorship

The business is owned by an individual

General Partnership

Two or more people (general partners) share in the management, profits and risk of the business

Limited Partnership

Has at least one general partner (invests in the business, manages it and are financially responsible for it) and at least one limited partner (investor who receives a portion of the profits but has no say in the management of the company)

C Corporation

An association of individuals (stockholders, directors and officers) that exists as a legal entity apart from its members

Stockholders

Owners of the corporation in proportion to the number of shares they own

Directors

Have the fiduciary duty to act in the best interest of the stockholders and are responsible for broad policy decisions

Officers

Carry out the day-to-day management of the corporation

S Corporation

A corporation that chooses to allocate it's income and losses directly to shareholders in proportion to their holdings. Limited to small business corporations with less than 100 shareholders.

Professional Corporation

Similar to other corporations except that liability for malpractice is limited to the person responsible for the act.

Limited Liability Company (LLC)

Business structure that combines the advantages of a partnership or sole proprietorship with the limited liability of a corporation. (Aka LLP Limited Liability Partnership)

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

Teaming Agreement

Defines the roles, responsibilities and contractual relationships that will be established if the firms are awarded the project and the joint venture is formed. (Aka Memorandum of Understanding)

Memorandum of Understanding

Defines the roles, responsibilities and contractual relationships that will be established if the firms are awarded the project and the joint venture is formed (Aka Teaming Agreement)

Standard of Care

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

Departmental Organization

Staff is organized into departments, each of which specializes in a different function. A project moves from one department to another in its route from start to finish (Horizontal Organization or Flat Organization)

Studio Organization

Staff is organized in groups called studios. Each studio is responsible for completing an entire project (Vertical Organization or Tall Organization)

Outsourcing

Contracting with another company to do some of the work needed for a project

Support Staff

Employees other than the professional staff and senior management

Business License

Allows the business to practice and usually serves as a basis for taxation

Certificate of Authorization (COA)

Some states require a firm to obtain this in order to offer services to the public

Human Resources Management

Involves the entire range of hiring, compensating, managing and terminating employees, along with the legal responsibilities of having employees (personnel management)

Formal Employee Contract

Spells out the employee's responsibilities, work duties and compensation, as well as the firms benefits, work conditions, termination procedures and policies

Independent Contractor

Person hired for a specific project. They control where and how they perform their work and provide their own supplies and equipment

Job Description

Defines the duties and responsibilities of the person holding a specific job title

Personnel Policy Manuel

A positive statement of the firms commitment to employees, clients and the public at large

Compensation

Any kind of payment made to employees for work - a base salary + benefits

Flexible Benefit Package

Required statuary benefits are provided, and employees can choose their additional benefits from a menu of options

Performance Evaluation

A formal review performed by a manager to assess each employees performance

National Labor Relations Act

Allows private sector employees to organize into trade unions and protects union employees from unfair labor practices (Wagner Act)

Equal Pay Act

Requires equal pay for employees with the same work duties, responsibilities and experience

Employee Eligibility Verification

Requires employers to verify the employee's right to work in the United States

Wages and Fair Labor Standards Act (FLSA)

Establishes min wage, overtime, record keeping and child labor standards in both the private sector and in the government employment

Occupational Safety and Health Act of 1970 (OSHA)

Requires employers to provide a safe work environment

Health Insurance Portability and Accountability Act of 1996 (HIPPA)

Protects the privacy of health information

Employee Retirement Income Security Act (ERISA)

Sets min standards for pension plans in the private sector for employers who have a pension plan program

Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA)

Requires employers with 20 or more employees to continue group medical coverage if employment is terminated, hours are reduced, employment is changed, or in the event of death, divorce or other significant life events

Civil Rights Act of 1991

Prohibits discrimination on the basis of sex, race, color, religion or national origin

Age Discrimination in Employment Act of 1967 (ADEA)

Prohibits age discrimination in employment for for persons age 40 or over

Family and Medical Leave Act (FMLA)

Requires that companies give an employee up to 12 weeks of unpaid leave for child, spousal, or parental care

General Ledger Accounting

Keeping track of money flowing into and out of the business and is needed for day-to-day operations, banking, taxes and auditing

Project Cost Accounting

Tracks revenue, expenses and profit by individual projects

Accounts Payable

Amounts owed to the suppliers of goods or services that have not been paid

Accounts Receivable

Money that others owe to the business through invoices for services

Assets

Any type of tangible or intangible resource that can be measured in monetary terms, including current, fixed and other assets

Chart of Accounts

A list of the various accounts a business uses to keep track of money, along with corresponding account numbers used for data processing

Current Assets

Resources of a business that are converted into cash within one year

Direct Labor

All labor of technical staff, principals and support staff that is directly chargeable to projects

Direct Personnel Expense

The expense of employee salaries plus the cost of mandatory and discretionary expenses and benefits such as payroll taxes and health insurance

Discretionary Distribution

Voluntary distrubution of profits to owners and nonowners, such as performance bonuses, profit sharing and incentive compensation

Fixed Assets

Resources that the firm uses and retains for a long period of time, such as equipment and property

Gross Revenue

All the revenue generated by a business during a stated period of time

Indirect Labor

All labor not charged to a specific project or revenue-producing account such as administration, general office time and marketing

Liabilities

Claims by people outside the business and claims by the owners of the business against the total assets of the business

Net Operating Revenue (Net Revenue)

The money that remains from billing after deducting fees and expenses, reimbursable expenses and non-reimbursable project-related expenses

Other Assets

Misc resources such as securities and copyrights

Overhead

Expenses incurred to keep a business operating whether or not any revenue is being generated, such as rent, software leases and fees for power and phone

Cash Accounting

Revenue and expenses are recognized at the time the business receives the cash or pays a bill

Accrual Accounting

Revenue and expenses are recognized at the time they are earned or incurred, whether or not cash changes hands

Modified Accrual Basis Method

Records fee revenue, expenses billed to the client and invoices to the firm by outside consultants - does NOT include the amounts of fees that have been earned but not yet billed to the client

Double Entry Bookkeeping

All transactions are listed chronologically in a journal - they are then posted to a ledger where transactions are grouped into individual accounts

Accounting Reports

Generated from the basic info entered in journals and ledgers

Balance Sheet

Summarizes all assets and liabilities and shows the financial position of a business

Net Worth

The total assets less the total liabilities

Owners Equity

The money invested in a business by the owners or stockholders

Profit and Loss Statement

Lists all the income and expenses of a business for a certain period of time (Income Statement)

Cash Flow Statement

Shows actual inflows and outflows of cash or cash equivalents

Cash Equivalents

Short term investments that can be quickly converted into cash, such as short-term certificates of deposit

Financial Management

Includes active planning, monitoring and controlling of financial information as well as acting on that information

Profit + Expenses \= Revenue

Equation for financial planning in profit-oriented business

Project Progress Report

Shows the hours and labor costs for each phase of a project, both for the current reporting period and the total to date, and compares these numbers with the estimated hours and costs

Office Earnings Report

Summarizes each of the firms projects in terms of the amount of revenue it has generated, the expenses it has incurred, unbilled services, percentage of completion and profit or loss to date

Aged Accounts Receivable Report

Shows the status of all invoices for all projects, whether or not they have been paid, and the "age" of each invoice, which is the time from the invoice date to the payment date or to the current date if still unpaid

Time Analysis Report

Lists each employee along with the number of hours he or she has spent on direct labor, indirect labor, vacation time, sick leave and holidays

Chargeable Ratio

\= the time spent on direct labor / total time
(Utilization Rate)

Current Ratio

Total current assets / total current liabilities

Net Profit Before Tax

The percentage of profit based on net revenue minus total annual revenue minus consultants fees and reimbursable expenses

Overhead Rate

Total office overhead / total direct labor

Quick Ratio

A refinement of the current ratio including only cash and cash equivalents plus accounts receivable plus revenue earned but not billed divided by total current liabilities

Revenue per Technical Staff

The amount of net revenue produced per technical staff member, or those staff members most directly involved with charging direct time and producing jobs

Revenue per Total Staff

Amount of net revenue produced per staff member per year, including principals and part-time employees
Annual net operating revenue / total number of employees

Billing Rate

An hourly rate per staff member working on a project

Net Multiplier

Net revenue of the firm /Cost of direct labor

Break-Even Rate

Total cost of operations / Total money spent on direct labor

Direct Personnel Expense (DPE)

Costs of providing taxes, benefits and the like and are included with the employee's base salary

Liability

The legal responsibility for injury to another person or damage to property

Negligence

The failure to use due care to avoid harming another person or damaging property

Statute of Repose

Sets a time limit within which a claim can be made. Usually starts at the time of substantial completion.

Statute of Limitations

Similar to statute of repose, except that, the time limit is usually much shorter and does not begin until the problem is first discovered.

Privity

Architects are, in theory, protected from claims by parties with whom they have no direct contractual relationship

Indemnification Clause

Holds harmless both owners and architects for any damages, claims or losses resulting from the performance of any work on the project with whom the architects have no contractual relationship

Professional Liability Insurance

Protects architects in case one of their actions causes bodily injury, property damage, or other damage. Covers problems resulting from things such as incorrect specs, mistakes on drawings and negligence

General Liability Insurance

Protects against claims of property damage, liability and personal injury caused by architects or their employees

Property Insurance

Protects the architect's buildings contents against natural disasters such as fire, theft and flood

Personal Injury Protection

Protects architects against charges of slander, libel, defamation of character, misrepresentation and other torts

Tort

A civil wrong, as contrasted with a criminal act, which causes injury to another person

Auto Insurance

Covers liability and property damage to vehicles owned by the business

Workers Compensation

Protects employees in the event of injuries caused by work related activities

Project Delivery

The entire sequence of events that is needed to provide an owner with a completed building

Design Bid Build

The owner has two separate contracts with an architect and contractor. Architect designs the project, project is sent to bid, and then the contractor who wins the bid constructs the project

Design Build

The owner contracts with one entity (a person or firm) to provide both design and construction services, that entity then subcontracts portions of the work to others as needed