Org Plan Full

7/29/2019 Org Plan Full

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ENTREPRENEURSHIP

ORGANISATIONALPLAN


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THE ORGANIZATIONALPLAN


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DEVELOPING THEMANAGEMENT TEAM

1. Investors demand full time commitment from themanagement team

2. Investors usually demand that the management teamnot operate the business part-time while employed full

time elsewhere.3. It is also unacceptable for the entrepreneurs to draw a

large salary.

4. The entrepreneur should consider the role of the board

of directors and/or a board of advisors in supportingthe management of the new venture.

5. The financers want that the management team shouldbe highly devoted in terms of time and effort.


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LEGAL FORMS OF BUSINESS

There are three basic legal forms of businesses.The three basic forms are:

1. Sole Proprietorship.

2. Partnership.

3. Corporation


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LEGAL FORMS OF BUSINESS(Contd)

Ownership

In the proprietorship, the owner has fullresponsibility for business operations.

In a partnership, there may be owners withgeneral or with limited ownership. Theminimum number are 2 and maximum 20. Incase of banks the maximum number is 10.

In the corporation, ownership is reflected byownership of shares of stock. There are bigand small scale investors.


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Liability of Owners

1. The proprietor and general partners are liable for all aspects ofthe business.

2. To satisfy any outstanding debts of the business, creditors may

seize personal assets of the owners in proprietorships or inregular partnerships.3. In a partnership the general partners share the amount of

personal liability equally and wholly, regardless of their capitalcontribution.

4. In a limited partnership, the limited partners are liable only to the

extent of their capital contributions.5. Since the corporation is a legal entity that is taxable , the owners

are liable only for the amount of their investment.


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Costs of Starting a Business1. The more complex the organization and ownership, the more

expensive it is to start.2. The least expensive is the proprietorship, where the only costs

may be for filing for a business name.

3. In a partnership a partnership agreement is needed, whichdefinitely requires legal advice and which should explicitly conveyall partners responsibilities, rights and duties.

4. The corporation can be created only by meeting statuterequirements.

5. The owners are required to register the name with the registrar

of companies and submit important documents likememorandum, prospectus ,certificate of registration andcertificate of commencement to meet state statutoryrequirements.

6. Filing fees have to be paid and organization tax have to beincurred.

7. Legal advice is necessary to meet the statutory requirements.


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Continuity of Business1. In a sole proprietorship, the death of the owner results in the

termination of the business.2. In a limited partnership, the death of a limited partner has no

effect on the existence of the partnership.

3. In a partnership, the death or withdrawal of one of the partnersresults in termination of the partnership, but this can beovercome by making new partnership agreement.

4. Usually the partners will buy out the withdrawn partners share ata predetermined price.

5. Another option is to have a member of the withdrawn partners

family take over as partner.6. The corporation has the most continuity, as the owners death or

withdrawal has no impact on continuity of the business, unless itis a closely held corporation.


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Transferability of Interest

Each of the forms of business offers differentadvantages as to the transferability of interest.

1. In a proprietorship, the entrepreneur has the right tosell any assets.

2. In the limited partnership, the limited partners can selltheir interests ,without consent of the generalpartners. A general partner cannot sell any interestunless specified in the partnership agreement.

3. In a corporation shareholders may transfer theirshares at any time.


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Capital Requirements

For a proprietorship, any new capital can only comefrom loans or by additional personal contributions.Often an entrepreneur will take a mortgage as asource of capital.

In the partnership, loans may be obtained from banksor additional funds may be contributed by eachpartner, but both methods require change in thepartnership agreement.

In the corporation, new capital can be raised by: Stock may be sold Bonds may be sold.

Money may also be borrowed in the name of the

corporation.


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Management Control

1. In the proprietorship, the entrepreneur has the mostcontrol and flexibility in making business decisions.

2. In a partnership the majority usually rules unless thepartnership agreement states otherwise.

3. In a limited partnership the limited partners havelimited control over business decision. Control of day-to-day business is in the hands of management.

4. As the corporation increases in size, the separation ofmanagement and control is probable, and becomesmore difficult.

5. Stockholders can indirectly affect the operation byelecting someone to the board of director


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Distribution of Profits andLosses

o Proprietors receive all profits from thebusiness.

o In the partnership, the distribution ofprofits and losses depends on thepartnership agreement.

o Corporations distribute profits throughdividends to stockholders.


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Attractiveness for RaisingCapital

In both the proprietorship and partnership, theability to raise capital depends on the successof the business and personal capability of theentrepreneur.

Because of its limitations on personal liability,the corporation is the most attractive form forraising capital.

Documents

Org Plan Full