Chapter 01 The Plan - 1-1 Being an Entrepreneur - Understanding Entrepreneurship: As a business owner, you may be referred to as an entrepreneur. There are many definitions of "entrepreneur." For our purposes, an entrepreneur is a person engaged in strategic activities that involve the initiation and development of a new business, created to build long-term value and steady cash flow streams.

Chapter 01 The Plan - 1-2 The Benefits of a Business Plan - Key Functions: A business plan serves three key functions: Planning Tool, Loan or Investor Document, Benchmarking Tool.

Chapter 01 The Plan - 1-2 Elements of a Business Plan - The following are the typical elements found in a business plan: Cover Page, Executive Summary, Company Summary, Products and Services, Market Analysis, Marketing Strategy, Financial Plan.

Chapter 01 The Plan - 1-3 Business Plan Pitfalls - As you start creating your business plan, there are guidelines you should follow to make sure you are giving investors an accurate and honest picture of your business: Make sure your assumptions are realistic, Keep the language simple. Don't use technical terminology or jargon, Cover the risks as well as the opportunities, Analyze your competition thoroughly.

Chapter 2 Choosing Your Business Structure - 2-1 Sole Proprietorships - Key Characteristics of Sole Proprietorships: Taxes: Your net income from the business is reported as ordinary income. Sole proprietors do not pay corporate income taxes.

Chapter 2 Choosing Your Business Structure - 2-2 Partnerships - Disadvantages of a General Partnership: Unlimited personal liability of general partners, Multiple decision makers, Limited life of the business, Changes of partners or partnership agreement may be difficult, Partnership dissolves in the event of the death of a general partner.

Chapter 2 Choosing Your Business Structure - 2-3 C Corporations - Advantages of a C Corporation: Separate legal entity, Limited liability for stockholders, Unlimited life of the business, Availability of capital resources, Transfer of ownership through sale of stock.

Chapter 2 Choosing Your Business Structure - 2-4 S Corporations - Requirements for an S Corporation: Domestic corporation with one class of stock, No more than 75 shareholders who are citizens or legal residents of the U.S., All shareholders must consent to S corporation status, Use of a permitted tax year, Filing of IRS Form 2553

Chapter 2 Choosing Your Business Structure - 2-4 Limited Liability Company (LLC) - Like an S corporation, federal income taxes are paid only on income distributed to members as ordinary income.

Chapter 2 Choosing Your Business Structure - 2-6 Joint Ventures - Complement Your Strengths: A joint venture is a special business arrangement that exists when two or more companies join to undertake a specific project. The management brings together companies with complementary resources and strengths. When forming this type of venture, it is important to consult an attorney to ensure that all aspects of risk are covered. Individual state contractor licensing agencies may have specific laws regarding joint ventures. Obtain proper licensing prior to beginning applicable contracting work.

Chapter 2 Choosing Your Business Structure - 2-6 Naming Your Business - Do your homework before you decide on a business anme for your company. A search can be conducted using the following sources: U.S. Patent and Trademark Office, local Secretary of State Office, Internet search engines.

Chapter 3 Managing Risk - 3 -1 Risk Management Benefits - Unmanaged risk can harm your business, resulting in financial loss, lower profit margins, and unnecessary liabilities. Risk management involves assessing all areas of your business from operations to administrative functions.

Chapter 3 Managing Risk - 3 -2 Insurance - Insurance Defined: Insurance is a protective measure in which coverage is obtained for a specific risk (or set of risks) through a contract. In this contract or policy, one party indemnifies another against specified loss in return for premiums paid. Indemnity is a way to transfer risk and exemption from loss incurred by any course of actions. Sometimes an insurance payout is called an indemnity.

Chapter 3 Managing Risk - 3 - 3 Property Insurance - In considering property insurance, evaluate your physical location and the region in which you do business to determine which risks are likely to occur, such as hurricanes or floods.

Chapter 3 Managing Risk - 3 - 3 All-Risk Builders' Risk Insurance - All-risk builders' risk insurance is a form of property insurance that covers property owners and builders for buildings under construction. This type of insurance typicallly covers machinery, equipment, materials, supplies, and fixtures that are part of the structure or will become part of the structure.

Chapter 3 Managing Risk - 3 - 4 Liability Insurance - Liability insurance is designed to protect against third-party claims that arise from alleged negligence resulting in bodily injury or property damage. Payment Is not typically made to the insured but rather to someone suffering loss who is not a party to the insurance contract.

Chapter 3 Managing Risk - 3 - 5 Business Owner's Policies (BOPs) - Business owner's policies (BOP's) bundle property and liability coverage together.

Chapter 3 Managing Risk - 3 - 5 Automobile Insurance - If you have a company vehicle or a fleet of vehicles, auto insurance provides coverage for liability and physical damage associated with vehicles owned by your company. All states require vehicle owners to carry some level of liability insurance covering bodily injury and property damage incurred in a vehicle accident. Physical damage coverage pays for the damage to the insured vehicle. Different types of automobile insurnace are available. Various options include coverage for only vehicles owned; vehicles owned, leased or hired; and for all automobiles, including those not owned, leased, or hired.

Chapter 3 Managing Risk - 3 - 6 Burglary and Theft Insurance - Burglary and theft insurance covers loss or damage by burglary, theft, larceny, robbery, forgery, fraud, and vandalism. However, this type of insurance generally does not cover employee acts.

Chapter 3 Managing Risk - 3 - 6 Key Man Life Insurance - This type of coverage is beneficial if your company depends on specific individuals for continuting success of your business. For example, if your legal structure is a partnership, the success or ongoing existence of the company would not continue if one of the partners died or became incapacitated. Key man insurance is available as life insurance, disability insurance, or both.

Chapter 3 Managing Risk - 3 - 6 Coverage Gaps and Overlaps - To minimize these conflicts, you may want one insurer for all policies.

Chapter 3 Managing Risk - 3 - 6 Employment-Related Insurance - Workers' Compensation Insurance, Unemployment Insurance, Social Security Insurance

Chapter 3 Managing Risk - 3 - 7 Insurance Coverage for Subcontractors - Indemnification absolves your company or holds your company free from liability from any losses or damages incurred by the subcontractor.

Chapter 3 Managing Risk - 3 - 7 What is a Bond? - Statutory and Common-Law Bonds: The federal government uses surety bonds on construction projects as a way to pre-qualify prospective construction firms. A surety bond is often required by law for public projects. It is referred to as a statutory bond.

Chapter 3 Managing Risk - 3 - 8 Bond Language - Bonds generally contain four basic requirements: total dollar amount required for the bond, length of the bond, requirements for notice of defect or lack of maintenance, bond enforcement.

Chapter 3 Managing Risk - 3 - 8 Types of Bonds - A bid bond guarantees that the contractor, if awarded the job, will do work at the submitted bid price, enter into a contract with the owner, and furnish the required performance and payment bonds.

Chapter 3 Managing Risk - 3 - 9 Qualifying for a Bond - Bonds are priced on the basis of a percentage of the contract amount. Market conditions and prevailing industry practices set the percentage. Bond premiums vary among surety companies, but typically range from a half percent to two percent of the contract amount.

Chapter 3 Managing Risk - 3 - 9 Bond Claims - Filing Process: Construction law and contractual relationships govern the bond claims process. The filing process is outlined in the bond language for common-law bonds.

Chapter 3 Managing Risk - 3 - 9 Laws Governing Bonding of Federal Construction Projects - Miller Act: The Miller Act is the current law requiring performance and payment bonds on all federal construction projects valued at greater than $100,000.

Chapter 4 Your Business Toolbox - 4 - 1 Time Management - Four Time Management Tips: These habits will help you organize and manage your time. Prioritize tasks daily; Delegate effectively when possible; Use checklists and calendars (find a time management system that works for you); Do not procrastinate.

Chapter 4 Your Business Toolbox - 4 - 2 Delegation - Preparing to Delegate: Learning to delegate is often difficult because you are giving up control of certain tasks. You may feel that a task won't be done correctly or that it takes longer to explain a task than just doing it yourself. Delegation is a way of developing your employees and building a solid team. Giving your employees increased responsibility builds their self-confidence, provides motivation, and makes them more productive and loyal. Delegation gives you the chance to concentrate strategically on running your business.

Chapter 4 Your Business Toolbox - 4 - 2 Business Ethics - Establishing a code of conduct is the first step to ensuring that good ethics are practiced throughout your company. A code of conduct is a documented way that an organiation should operate. You may want to provide your customers with your code of conduct. It will reinforce your commitment to good ethics and demonstrate professionalism.

Chapter 6 Bidding and Estimating - 6 - 1 Bid Documents - In a competitive bid situation, a bid package is often put together that includes: an invitation to bid, bid instructions, bid forms, supplements.

Chapter 6 Bidding and Estimating - 6 - 2 Estimate Planning - Project Documents - A complete set of project documents is required to prepare an accurate cost estimate.

Chapter 6 Bidding and Estimating - 6 - 4 Determining Estimated Costs - Add Labor Burden - As an employer, you incur costs such as employment taxes and insurance. These obligations add approximately 30 percent to your labor cost.

Chapter 7 Contract Management - 7 - 1 Required Contract Elements - Make it Binding; You may have reached an agreement to do work for a customer, but that does not mean that you have a contract. There are four key elements that must be in effect to make a contract bindingto . Offer and Acceptance; Consideration; Competent Parties; Legal Purpose.

Chapter 7 Contract Management - 7 - 10 Contract Documents and Project Manual - The project manual is a central location for bid documents, contract provisions, technical specifications, and addenda.

Chapter 7 Contract Management - 7 - 11 Are Oral Agreements Legally Binding? - Under most circumstances, oral agreements are just as binding as written agreements with a few exceptions.

Chapter 7 Contract Management - 7 - 11 Legal Interpretation - The use of plain language is important when establishing intent in a contract.

Chapter 7 Contract Management - 7 - 11 Subcontracting - Subcontractors contract with the general contractor or other subcontractors to complete a portion of a larger project.

Chapter 7 Contract Management - 7 - 2 Consideration - An Exchange: Both parties must give up something of value to have consideration. Most likely this will be money, but it could be anything of value. Payment terms should be clearly outlines in the contract. Typically, the contractor provides services and in exchange, the owner provides monetary compensation.

Chapter 7 Contract Management - 7 - 2 Contract Provisions - Key Contract Provisions: Contracts are full of provisions, but a few key ones you will want to include: Contract Price and Payment Terms; Obligation of the Parties; Supplemental Conditions; Breach of Contract

Chapter 7 Contract Management - 7 - 3 Contract Price and Payment Terms - Retainage: The architect or engineer certifies when the project is complete and the work meets the conditions of the contract documents.

Chapter 7 Contract Management - 7 - 4 Obligations of the Parties - Contract Conditions: The obligations of the parties should be specifically outlined in the contract and include both the contractor's obligations and the owner's obligations. The obligations of the parties are the contract conditions.

Chapter 7 Contract Management - 7 - 4 Breach of Contract - A breach of contract occurs when one of the parties involved fails to perform in accordance with any of the terms and conditions of the contract.

Chapter 7 Contract Management - 7 - 5 Boilerplate Provisions - Standard Language: The term "boilerplate" refers to standard language or clauses used in a legal contract.

Chapter 7 Contract Management - 7 - 5 Provisions to Limit Risk - Allocating Risk: As mentioned at the beginning of the chapter, one of the purposes of a contract is to limit the liabilities of the parties involved. Your contract should address the allocations of risk among parties.

Chapter 7 Contract Management - 7 - 6 What are Recitals? Background Information: Recitals are language at the beginning of the contract that provide background to the contract, such as the parties entering into the contract, the contract contents, and reasons for the parties' entering into the contract. Recitals cannot always be enforced by law, so it is important to provide specific terms throughout the contract.

Chapter 7 Contract Management - 7 - 6 Types of Construction Contracts - Lump-sum Contract; Unit-price Contract; Cost-plus Contract

Chapter 7 Contract Management - 7 - 7 Contracting Methods - Single Prime; Design/Build; Turnkey

Chapter 7 Contract Management - 7 - 8 Sources of Contracts - Always make sure you keep a signed copy of every contract you sign, in case you need to refer to it in the future.

Chapter 7 Contract Management - 7 - 8 Making Changes to the Contract - Changes prior to the contract award are called addenda.

Chapter 7 Contract Management - 7 - 8 Resolving Claims - As discussed in the previous section, the purpose of written change orders is to avoid disputes.

Chapter 7 Contract Management - 7 - 9 Alternative Dispute Resolution - Alternative dispute resolution (ADR) involves settling legal disputes by avoiding the often costly and time intensive process of a government judicial trial. The most common forms of ADR are: negotiation, mediation, collaborative law, and arbitration.

Chapter 7 Contract Management - 7 - 9 Making Substitutions - Substitution Specifications: If there is a basis for the substitution, the next requirement is that the item or product must be equal to that which was specified.

Chapter 8 Scheduling and Project Management - 8 - 1 Scheduling Process - Activity Duration: When creating your estimate, you determined the number of labor hours it takes to complete each task on the project. Using this estimate, you need to determine the duration of the task.

Chapter 8 Scheduling and Project Management - 8 - 2 Scheduling Methods - Calendar Scheduling; Bar Chart Scheduling; Critical Path Method

Chapter 8 Scheduling and Project Management - 8 - 6 Scheduling and Cash Management - Balancing incoming progress payments and outgoing expenditures is important to manage the project effectively and should be a consideraton when preparing your schedule.

Chapter 8 Scheduling and Project Management - 8 - 8 Project Life Cycle - Using the customer relations category as an example, the following illustrates various management aspects in the project life cycle.

Chapter 8 Scheduling and Project Management - 8 - 9 Tracking the Progress of the Project - Daily Reports; Status Reports

Chapter 8 Scheduling and Project Management - 8 - 9 Budget and Cost Controls - Project management involves working with budget constraints. A good project manager will control costs and make sure that the project comes in on budget.

Chapter 9 Customer Relations - 9 - 1 Communication with Customers - Communication Opportunities: contract negotiations; contract acceptance; weekly meetings; punch list and final walkthrough; post-job follow-up

Chapter 9 Customer Relations - 9 - 2 Handling Customer Change Orders - You should always apply a few general rules when change orders arise: always obtain a signed change order for significant amounts of change work; small changes done with verbal approval should be followed up with a written and signed change order; Invoice for change order work promptly; include any complementary work done without charge on the invoice; show labor and quantity details when pricing change orders as you would when creating your initial estimate.

Chapter 10 Employee Management - 10 - 1 Interviewing and Hiring Employees - Some questions could lead to legal action and are strictly off-limits, especially the following: How old are you?; Do you have any disabilities?; Are you pregnant?; Are you married?; Do you have children?; What is your religious affiliation?; What is your sexual orientation?; What ethnic background are you?

Chapter 10 Employee Management - 10 - 11 The Value of Job Descriptions - Job descriptions give employees a guideline for the responsibilities of their job. Job descriptions benefit employees because they understand your expectation for their performance.

Chapter 10 Employee Management - 10 - 12 Providing Benefits - Worker's Compensation Laws; Unemployment Compensation

Chapter 10 Employee Management - 10 - 14 Disciplining Employees - Progressive Discipline: The employee manual is a good place to have written disciplinary policies and a comprehensive list of offenses that lead to immediate dismissal.

Chapter 10 Employee Management - 10 - 14 Terminating Employees - Employment relationships are either contractual or at-will; the definition of the relationship influences the procedures for termination.

Chapter 10 Employee Management - 10 - 2 New Hire Reporting - Purpose of New Hire Reporting: The purpose of new hire reporting is to aid in child support enforcement. It is also a good tool in preventing fraudulent unemployment and welfare benefit payments.

Chapter 10 Employee Management - 10 - 2 Hiring Minors for Construction Work - Working Hours: Federal restrictions on working hours or number of hours do not exist for minors 16 or 17 years of age.

Chapter 10 Employee Management - 10 - 3 Employee Documentation - These items should be included in your employee files: Form I-9, IRS Form W-4; State Tax Form; Employment Application; Policy Signoffs; Emergency Notification Form

Chapter 10 Employee Management - 10 - 4 Key Employment Laws - There are several key laws governing equal employment opportunities and prohibiting discrimination in employment.

Chapter 11 Jobsite Safety and Environmental Factors - 11 - 2 Safety Standards - OSHA Construction Safety Act: The Contract Work Hours and Safety Standards Act, commonly known as the Construction Safety Act, sets safety standards for construction contracts on federal project.

Chapter 11 Jobsite Safety and Environmental Factors - 11 - 2 Safe Hiring and Training - Hire Safe: The first step to improving safety in the workplace is to hire employees who have a good safety track record. It is important to do thorough applicant screening and check all employment references.

Chapter 11 Jobsite Safety and Environmental Factors - 11 - 4 OSHA Recordkeeping - For the Record: Every employer covered by OSHA who has more than 10 employees, except for employers in certain low-hazard industries in the retail, finance, insurance, realestate, and service sectors, must

Chapter 12 Working with Subcontractors - 12 - 2 Sources for Finding the Right Subcontractor - Once you come up with credible referrals, you want to make sure that you take extra steps to organize the process.

Chapter 12 Working with Subcontractors - 12 - 2 Site Rules for Contractors - As part of an orientation with your subcontractors, you may want to review your site rules.

Chapter 12 Working with Subcontractors - 12 - 3 Employee or Independent Contractor: IRS Guidelines: Independent contractors ordinarily use their own methods for performing a given job; an independent contractor is free to manage multiple contracts; the relationship with an independent contractor should be for a specific period of time, rather than indefinitely.

Chapter 13 Financial Management - 13 - 1 Bookkeeping - Bookkeeping involves the accurate recording of all financial transactions that occur in the business. Financial statements are derived from this information.

Chapter 13 Financial Management - 13 - 11 Cash Management - Cash Flow - Two important aspects of maintaining a positive cash flow are collecting accounts receivable (money that is owed to your business ) and billing and collecting for current projects.

Chapter 13 Financial Management - 13 - 13 Equipment Records and Accounting - Depreciation Methods - Straight line depreciation; Accelerated depreciation.

Chapter 13 Financial Management - 13 - 14 Accounting Process for Materials - Shipping and Delivery Expenses: In addition to the actual material costs, shipping and delivery expenses are factored into the final cost.

Chapter 13 Financial Management - 13 - 15 Payroll Accounting - Calculate Gross Pay - Gross pay is determined either by a salary that you set for the employee or based on an hourly wage multiplied by the number of hours worked.

Chapter 13 Financial Management - 13 - 9 Methods of Accounting - Cash method; Accrual method

Chapter 13 Financial Management - 13 - 9 Contract Accounting - A long-term contract is defined as any contract that is not completed in the same year it was started.

Chapter 14 Tax Basics - 14 - 1 Employer Identification Number - The only entities that do not need an EIN are: Sole proprietorships that have no employees and file no excise or pension tax returns; LLC's with a single owner (where the owner will file employment tax returns).

Chapter 14 Tax Basics - 14 - 1 Federal Business Taxes - The form of business you operate determines what taxes you must pay and how you pay them. The following are three general types of business taxes that you may be responsible for: income tax; self-employment tax; employment taxes

Chapter 14 Tax Basics - 14 - 3 Income Tax - All businesses except partnerships must file an annual income tax return. Partnerships file an information return.

Chapter 14 Tax Basics - 14 - 3 Self-Employment Tax - Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Your payments of SE tax contributes to your coverage under the social security system.

Chapter 14 Tax Basics - 14 - 3 Federal Employment Taxes - Most employers must withhold (except FUTA), deposit, report and pay the following taxes: social security and Medicare taxes (FICA), federal income tax withholding; federal unemployment (FUTA) tax

Chapter 14 Tax Basics - 14 - 5 Penalties - Accurate and prompt deposits are required to avoid penalties which can range from 2 percent to 100 percent of your tax liability.

Chapter 14 Tax Basics - 14 - 6 Information Returns - 1099-MISC - You may be required to file information returns to report certain types of payments made during the year to persons not treated as employees. Form 1099-MISC, Miscellaneous Income may be used to report payments of $600 or more to independent contractors.

Chapter 14 Tax Basics - 14 - 7 Tax Calendar - Listed below are key employment tax deadlines as outlined in the IRS Publication Circular E: On February 16 Exempt W-4 Forms Expire

Appendix A: Glossary - A - Acceptance (Legal): An agreement to an offer made and generally is done by signing the offer. In some cases, a counteroffer is made. A counteroffer is not considered acceptance.

Appendix A: Glossary - D - Davis-Bacon Act: The federal law that requires payment of prevailing wage rates and fringe benefits on federally-financed or assisted construction.

Appendix A: Glossary - E - Employee Polygraph Protection Act: A federal law that prohibits most private employers from using any type of lie detector test, either for pre-employment screening of job applicants or for testing current employees during the course of employment.

Appendix A: Glossary - M - Miller Act: The Miller Act requires performance and payment bonds on all federal construction projects valued at greater than $100,000.

Appendix A: Glossary - S - Social Security Tax: Social Security and Medicare taxes pay for benefits that workers and families receive under the Federal Insurance Contributions Act (FICA). Social Security tax pays for benefits under the old-age, survivors, and disability insurance part of FICA.

Appendix A: Glossary - W - Wage Garnishment Law: A federal law that limits the amount an individual's income may be legally garnished and prohibits firing an employee whose pay is garnished for payment of a single debt.

Appendix A: Glossary - W - Walsh-Healey Public Contracts Act: A federal law that requires payment of minimum wage rates and overtime pay on contracts that provide goods to the federal government.