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NASCLA Contractors Guide to Business,
Law, and Project Management Latest
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Elements of a Business Plan
Cover Page, Executive Summary, Company Summary, Products & Services, Market Analysis, Marketing Strategy, and Financial Plan
Sole Proprietorships
Adv: Min legal restrictions, simple ownership form, low startup costs, sole ownership of profits, freedom in decision making process. Disadv: Unlimited personal liability, less available capital, possible difficulty in obtaining long- term financing, dissolution of the business in the event of the owner's death. *SOLE PROPRIETORSHIP THE EASIEST TO SET UP
Things to Look Out for When Buying a Used Caravan
Partnerships
- Can be formed through an oral agreement.
- General Partners own the assets of the company.
- Limited partnership consists of one or more general partners and one or more limited partners.
- Limited partners have limited liability in the company.
- If a general partner leaves the company, the partnership dissolves
- All owners in a general partnership have personal and unlimited liability for all actions undertaken in the name of the business, including all debts
- Limited Partners have no personal liability for the business. *GENERAL PARNERSHIPS EXIST AS LONG AS PARTNERS REMAIN *EACH PARTNER IS TOTALLY LIABLE FOR ACTS IN THE PARTNERSHIP
C Corporations
- Incorporation gives your business a legal existence that goes beyond the life of its shareholders die.
- The owners of the corp - known as stockholders - are not personally liable for the losses of the business.
S Corporations
- Can avoid double federal taxation by electing to be treated as an S Corp
- S Corp passes its items of income, loss, deduction, and credits through to its shareholders to be included on their separate returns.
Limited Liability Corporation (LLC)
- Shares characteristics of both sole proprietorship and corporate identities
- Ownership in the LLC is invested in memberships rather than shares of stock
- Offers some protection from liability for actions taken by your company, but does not protect from liability for personal actions.
- Like an S Corp, federal income taxes are paid only on income distributed to members as ordinary income. An LLC with more than 1 owner may elect to be taxed as a partnership or as a corporate entity.
NC Licensing Board for General Contractors
A surety bond is a risk transfer mechanism between a surety, the contractor, and the project owner. The agreement binds the contractor to comply with the terms and conditions of a contract. If the contractor cannot perform the task, the surety assumes the contractor's responsibilities and ensures that the project is completed.
BOND TYPES
Performance Bond - guarantees that the contractor will complete a contract within its time frame and conditions
Payment Bond - guarantees subs and suppliers that they will be paid for work if they perform properly
Maintenance Bond - guarantees that for a stated period, no defective workmanship will appear in the completed projected
Completion Bond - provides assurance to the financial backers that project will be completed on time
Fidelity Bond - covers business owners for losses due to dishonest acts by their employees
Lien Bond - guarantees that liens cannot be placed against the owner's property by contractors for payment of services.
Miller Act
Law governing bonding of federal construction projects. The Miller Act - as as result of the high failure rate for completion of publics construction projects, the Heard Act was enacted in 1894, allowing the use of surety bonds for federally funded projects. In 1935, the Miller Act replaced
the Heard Act. The Miller Act is the current law requiring performance and payment bonds on all federal construction projects valued at greater than $100K.
GOOD LOGO DESIGN
- Simple and easy to remember
- Attractive in color and black and white
- limited to one or two colors
- representative of your company identity
- scalable up or down and attractive in any size
ITEMS TO CONSIDER BEFORE BIDDING A PROJECT
- Does our company have the resources and is this project consistent with type of work we do?
- Are there any special site considerations that we need to consider?
- How can we do the work efficiently and in the most cost effective manner?
- What are the risks and how will we manage them?
- What is our profit margin on this work?
Ethics in Bidding - Bid Rigging
Bid rigging is a form of collusion where contractors coordinate their bids to fix the award outcome of a project.
FORMULA USED TO DETERMINE LABOR COST
Required Labor Hours per Task x Labor Rate = Labor Cost per Task. Labor Burden (i.e. taxes, insurance) add approximately 30% to labor cost and must be factored into your total labor cost.
EQUIPMENT IS A DIRECT COST
What are the required elements of a contract?
(1) Offer and Acceptance (2) Consideration - both parties must give up something of value to have consideration. (3) Competent Parties - the parties in agreement should have legal capacity to enter into a contract (4) Legal Purpose - contracts must be possible to perform, not intended to harm anyone, and cannot require any illegal activity
Offer Checklist
Your offer should contain certain components because if accepted, you are contractually bound to it:
- Date of Offer
- Names/contact info
- Name of project/location
- Description of the work
- contract time or start and completion date
- Payment Terms
- Conditions for schedule days
- List of contract documents
- Contract Sum
- Expiration date of offer
RETAINAGE
Used by the owner to ensure completion of the construction project and provide protection against liens, claims, and defaults. It is calculated as a percentage (generally 10%) withheld from each progress payment.
MATERIAL BREACH OF CONTRACT
...a serious violation of the contract. (refuses to perform the contract, performs an act prohibited by the contract, prevents the other party from performing its obligations)
Contract Provisions - Supplemental Conditions
The supplemental conditions modify the general conditions of the contract and are often prepared in a separate document. They are tailored specifically to each project. They may outline items such as specific insurance requirements, project procedures, and local law requirements.
Provisions to Limit Risk
Indemnification - absolves the indemnified party from any payment for losses and damages incurred by a third party. Simply put, it is a way to shift payment or lability for any loss for damage that has occurred. Warranties - define the contractor's responsibility for the repair of defects to the construction project after the completion of work. Warranties are often set forth for a defined period of time.
Alternative Dispute Resolution (ADR)
Negotiation Mediation Collaborative Law Arbitration
Main weakness of this and calendar scheduling is that they do not show the interdependencies of activities. Critical Path Method - illustrates the interdependent relationship of tasks
Daily Reports
Personal comments should not be made in the daily report, only factual information.
Just-In-Time
Just-In-Time deliveries will keep your inventory cost low. The process allows you to time deliveries to arrive as you need the materials in the construction process.
Fair Labor Standards Act
*Prescribes standards for the basic minimum wage and overtime pay, affects most private and public employment. It applies to employers who have one or more employees. *Restricts the hours that children under age 16 can work *Some employees are exempt from OT provisions and min wage under FLSA (i.e. executives, professionals) *A workweek is a period of 168 hours during 7 consecutive 24 hour periods *FLSA does not require vacation, holiday, severance or sick pay, meal, premium pay for weekend work, pay raises, or reason for discharge
FLSA Penalties
$1,000 FINE FOR VIOLATING FLSA OVERTIME REQUIREMENT
Immigration and Nationality Act
The employment and eligibility provisions of the immigration and nationality act require employers to verify the employment eligibility of all individuals hired. Immigration and Naturalization Service Forms (I-9) must be kept on file for at lest 3 years after the date of hire or for one year after the date employment ends, whichever is later. I-9 Forms must be completed with required documentation within 3 days of hire. The law does not require businesses to obtain I-9 documentation for independent contracts and their employees.
Americans with Disabilities Act (ADA)
- Equal opportunity in hiring qualified applicants
- Job accommodation for workers with disabilities when such accommodations would not impose "undue hardship"
- Equal opportunity in promotions and benefits
Family Medical Leave Act (FMLA)
entitles eligible employees to take up to 12 weeks of unpaid job-protected leave each year for the birth of a child or care of a sick parent
OSHA Recordkeeping
Exposure records must be maintained for 30 years and medical records for the duration of employment + 30 years If a death occurs within 30 days of an incident, employers must report it within 8 hours
National Pollutant Discharge Elimination System (NPDES)
The EPA issued regulations authorizing the creation of a NPDES permitting system for stormwater discharges from a select group, including construction activities disturbing 5 or more
Sources for referrals include:
- subs in a different field who have worked with other subs
- other contractors in your field
- members of your local trade association
- suppliers
- architects and engineers.
Source Documents
Cash Receipts, credit card receipts, customer invoices, purchase orders, material invoices, deposit slips, and time cards.
OPERATING ACTIVITIES ARE PART OF CASH FLOW
QUICK RATIO
(Current Assets - Inventory) / Current Liabilities
COMPLETED CONTRACT METHOD
Income or loss is reported in the year the contract is completed. Adv - achieves max deferral of taxes
Percentage of Completion Method
Recognizes income as it earned during the construction project avd - does a better job of matching matching rev to expenses. Disadv - relies on estimates
Depreciation Methods
Straight line, accelerated, MACRS
Payment Terms
Net 30: Payment is due 30 days after receiving the invoice
Medicare Tax
calculated at the rate of 1.45 percent of gross pay. Employers must pay in an equal amount of Medicare tax but cannot deduct that amount from the employee's payroll.
Employer Identification Number (EIN)
USE IRS FORM SS4 TO APPLY FOR FEDERAL ID, EIN 9 DIGIT NUMBER
Tax Recordkeeping
Keep all records of employment taxes for at least 4 years
SOCIAL SECURITY RATE - 6.2%, MEDICARE RATE 1.45%, DURING FIRST YEAR MAKE MONTHLY S/S PAYMENTS
Form 940
Report FUTA taxes on Form 940
Form 941
If you report less than $2500 tax liability for the quarter, you can use IRS Form 941
Tax Penalties
