ARE 5.0 Practice Management Exam With Verified Solutions Graded A+

5 types of firms - 1. Sole Proprietorship 2. General/Limited Partnership 3. Corporation 4. LLC/LLP 5. Joint Venture Sole Proprietorship - Key Features - 1. One owner 2. Requires only name/location and logo/license 3. Formation: Easy to set up 4. Tax advantage: business expense/loos deducted from gross business income 5. Disadvantage: Owner personally liable for company debts/losses. Personal credit to establish credit/raise capitol 6. Longevity: when owner retires firms closes. General Partnership - Key Features - 1. Two or more people "partners", each partner brings different talent (managers must be "member") 2. Share management/risk/profit 3. Formation: partnership agreement. 4. Tax: income shared by partners and reported on personal tax (disadvantage). 5. Disadvantage: Each partner personally liable and liable for actions of others. Personal assets are vulnerable. 6. Longevity: Typically partnership dissolved when one leaves. Limited Partnership - Key Features - 1. 1+ general partner, 1+ limited partner 2. Share risk/profit, but limited receive portion of profit but no say in management 3. Similar to general otherwise C Cooperation - Key Features - 1. Association of individuals as legal entity 2. 3 levels of people: Stockholder (owner with shared), Director (elected by SH and act in their financial interest, responsible for policy decisions), Officer (elected by D, manage day to day) 3. Created in accordance with statutory requirement: Articles of incorporation by lawyer and filed 4. Benefit: Legally independent from shareholders. Each person only liable for $ invested. If sued personal assets not at risk. Easier to raise capitol through stock sale. 5. Tax advantage : Generallytaxed at lower rate than individuals, can be savings over SP or Partnership. 6. Disadvantage: corp v shareholders taxed separately, can be taxed twice. Initial cost to establish. 7. Advantage: reduced liability and tax benefit. 8. Longevity: Likely to survive founders. S Corporation - Key Features - 1. Similar to C corp but allocates income and losses directly to shareholders in proportion to % owned 2. tax: Shareholders report gain/loss on individual tax return at individual rates. Avoids tax on corporate income. 3. S corp status limited to small business "domestic company with no more than 100 shareholders". Professional Corporation - Key Features - 1. Similar to other corporations. Common to architects, lawyers, doctors, etc. 2. Liability for malpractice gen limited to person responsible for the act. Limited Liability Corporation/Partnership - Key Features - 1. Investors = Members. Managers = those who manage. Non-member can be manager. 2. Formed like a partnership. 3. Advantage: Liability limited to a member's investment (no personal liability). 4. Tax: Not separate entity so business itself not taxed. Gain/loss on member personal tax return. 5. LLC members considered "self-employed" so must pay self-employment tax/SS and Medicare. 6. Combine advantage of partnership/SP with LLC limited liability. Joint Venture - Key Features - 1. Temporary association of two+ persons/firms for specific project/goal. 2. Typically dissolved when project/goal completed. 3. Based on formal, written agreement: duties, responsibilities, division of profits/losses, how work completed, etc. 4. "Teaming Agreement": definition of roles etc to be used if contractual relationship will be established. 5. Like partnership, not legal entity separate from members. 6. Tax: can be taxed as partnership or individual members separately.Standard of Care - define - 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. Standard of Care - Level of Skill - Perfection not required. Design to same standard as other reasonably sensible architect would. Architect should be careful about "promising' or "guaranteeing" as increases standard of care. Standard of Care - Time frame - Time the project is designed/built (not duration). Ex: available materials/programs at time project occurring. Standard of Care - Facts and Circumstances - Budget, scheduling, and complexity of the project. Office Organization - List 3 Areas/aspects - 1. Work Organization 2. Support Staff 3. Regulations governing architectural practice. Office Work Organization - List 2 forms (and 1 alternate) - 1. Departmental organization (horizontal, flat) 2. Studio organization (vertical, tall) 3. Alt: Outsourcing Office Organization Form - Departmental/Horizontal - Staff organized into diff departments