Business Organization and Operations Flashcards

Which business structure allows profits and losses to pass directly to the owners' personal tax returns without being taxed at the business level?

Answer: S-Corporation or LLC (with pass-through election)

S-Corporations and LLCs with pass-through taxation allow income to flow directly to owners' personal tax returns, avoiding the double taxation that applies to C-Corporations.

What is a 'buy-sell agreement' important for construction business partners?

Answer: A legal agreement that governs how ownership interests are transferred if a partner dies, becomes disabled, or leaves

A buy-sell agreement pre-establishes the terms and valuation method for transferring ownership interests when a partner exits due to death, disability, retirement, or voluntary departure.

What is 'workers' misclassification' in construction employment?

Answer: Improperly classifying employees as independent contractors to avoid payroll taxes and benefits obligations

Worker misclassification occurs when employers label employees as independent contractors to avoid paying payroll taxes, workers' compensation, unemployment insurance, and benefits — a major compliance risk.

Which federal tax form must employers use to report annual wages paid to employees?

Answer: W-2

Employers must issue W-2 forms to each employee annually, reporting wages paid and taxes withheld for federal income tax, Social Security, and Medicare.

What is the role of OSHA (Occupational Safety and Health Administration) for construction contractors?

Answer: To set and enforce federal workplace safety and health standards for construction workers

OSHA establishes and enforces safety and health regulations for construction under 29 CFR 1926, protecting workers from recognized hazards on construction job sites.

What is an 'employee handbook' important for a construction company?

Answer: A document outlining company policies, expectations, benefits, and procedures for employees

An employee handbook communicates company policies, workplace expectations, benefits, disciplinary procedures, and legal disclosures, reducing misunderstandings and legal exposure.