Legal Definitions - G & A

G & A stands for General and Administrative. This term refers to the operating expenses of a business that are not directly tied to the production of goods or services, nor to the direct costs of selling those goods or services. Instead, G&A expenses encompass the overhead costs associated with the overall management and operation of a company. These are essential costs for running the business but are not directly attributable to creating revenue-generating products or services.

Here are some examples to illustrate:

• Imagine a large technology company that develops and sells software. The rent for its corporate headquarters, where the executive team, human resources department, and legal counsel work, would be considered a G&A expense. Similarly, the salaries of these administrative staff members, along with the cost of their office supplies, fall into this category.

  Explanation: These costs are necessary for the company's overall operation and management but are not directly involved in the process of writing code (production) or marketing and selling the software to customers.

• Consider a furniture manufacturing company. While it has significant costs related to raw materials and factory labor (production costs), it also employs a team of accountants, IT support staff, and a facilities management team for its main office building. The salaries for these employees, the cost of their office supplies, and the utilities for the administrative building are all G&A expenses.

  Explanation: These staff and associated costs support the entire organization's operations rather than directly contributing to the manufacturing process of the furniture or the efforts to sell it.

• A financial consulting firm incurs various costs that are not directly billable to clients. For instance, the annual audit conducted by an external accounting firm, the general liability insurance policy that covers the entire business, and the subscription fees for company-wide project management software are all examples of G&A expenses.

  Explanation: These expenditures benefit the entire firm's operations and compliance, rather than being specific to delivering a particular client project (service production) or acquiring new clients (sales).