THE ORGANIZATIONAL

PLAN
ENTREPRENEURSHIP
MANAGEMENT

THE ORGANIZATIONAL PLAN

Assessing the below factors by entrepreneur when deciding on
Organization plan

Developing the Management team

Legal forms of business
Ownership
Liability of owners
Cost of starting business
Continuity of business
Transferability of interest.
Capital Requirements
Management Control
Distribution of profits and losses
Attractiveness for raising capital

THE ORGANIZATIONAL PLAN

Developing the Management Team
entrepreneur should understand the
importance of employees and their
loyalty and commitment to the
organization.
It is expected that the management
team be prepared to operate the
business full time at the modest salary .

Legal forms of business

Three basic legal forms of business
formation and one new form that is
gaining acceptance .
Proprietorship
Partnerships
Corporation
Limited Liability Company (LLC)newest form is also known as C
corporation.

Legal forms of business

Proprietorship form of business with
single owner who has unlimited liability
, controls all decisions and receives all
profits.
Partnership Two or more individuals
having unlimited liability who have
pooled resources to own a business .

Legal forms of business

Corporation Separate legal entity that
is run by stockholders having limited
liability.
C Corporation Most common form of
corporation , regulated by statute and
treated as a separate legal entity for
liability and tax purposes.

Legal forms of business

Ownership In the proprietorship, the
owner is the individual who starts the
business , he or she is full responsibility for
the operations
In the partnership , there may be some
general limited partnership owners .
In the corporation ownership is reflected by
ownership of shares of stock.

Legal forms of business

Liability of Owners Liability is one of
the most critical reasons for
establishing a corporation rather than
any other form of business.
The proprietor and general partners are
liable for all aspects of the business.

Legal forms of business

Liability of Owners the corporation is an
entity or legal person, which is taxable and
absorbs liability , the owners are liable only
for the amount of their investment .
In the case of a proprietorship or regular
partnership , no distinction is made between
the business entity and the owners to satisfy
any outstanding debts of the business ,
creditors may seize any assets the owners
have outside the business.

Legal forms of business

Liability of Owners In partnership , the
general partners usually share the amount of
personal liability equally , regardless of their
capital contributions, unless there is a
specific agreement to the contrary.
In a limited partnership , the limited partners
are liable only for the amount of their capital
contributions . This amount , by law must be
registered at a local courthouse , thus
making this information public.

Costs of Starting Business

The more complex the organization , the more
expensive it is to start .
The least expensive is the proprietorship , where the
only costs incurred may be for filing for a business
or trade name.
In a partnership, in addition to filing a trade name , a
partnership agreement is needed. This agreement
requires legal advice and should explicitly convey all
the responsibilities , rights and duties of the parties
involved.

Costs of Starting Business

A limited partnership may be somewhat more complex than a
general partnership because it must comply strictly with
statutory requirements.
The corporation can be created only by statute . This generally
means that before the corporation may be legally formed , the
owners are required to
1)Register the name and articles of incorporation and
2) Meet the state statutory requirements .
The corporation will likely incur filing fees , an organization tax ,
and fees for doing business in each state , legal advice is
necessary to meet all the statutory requirements.

Continuity of Business
One of the main concerns of a new venture is what
happens if one of the entrepreneurs (or the only
entrepreneur ) dies or withdraws from the business .
Continuity differs significantly for each of the forms
of business .
In sole proprietorship , the death of owner results in
the termination of business . Sole proprietorships
are thus not perpetual , and there is no time limit on
how long they may exist.

Continuity of Business
The partnership varies , depending on whether it is a
limited of a limited partner (who can withdraw capital
six months after giving notice to other partners) has
no effect on the existence of the partnership . A
limited partner may be replaced , depending on the
partnership agreement .
If a general partner in the limited partnership dies or
withdraws , the limited partnership is terminated
unless the partnership agreement specifies
otherwise or all partners agree to continue.

Continuity of Business
In a partnership , the death or withdrawal of the one of the
partners results in termination of the partnership. However this
rule can be overcome by the partnership agreement.
Usually the partnership will buy out the deceased or withdrawn
partners share at a predetermined price based on some
appraised value .
Another option is that a member of the deceased s family may
take over as a partner and share in profits accordingly .

Life insurance owned by the partnership is a good solution for

protecting the interests of the partnership, along with carefully
outlining contingencies in the partnership agreement.

Continuity of Business
The corporation has the most continuity of all forms
of business . Death or withdrawal has no impact on
the continuation of the business .
Only in a closely held corporation , where all the
shares are held by a few people , may there be some
problems trying to find a market for the shares.
The corporate charter requires that the corporation
or the remaining shareholders purchase the shares ,
In a public corporation this , of course , would not be
an issue.

Transferability of interest
There can be mixed feelings as to whether the
transfer of interest in a business is desirable.
In some cases the entrepreneur(s) may prefer to
evaluate and assess any new owners before giving
them a share of the business.
On the other hand , it is also desirable to be able to
sell ones interest whenever one wishes . Each of the
forms of business offers different advantages as to
the transferability of interest.

Transferability of interest
In the sole proprietorship , the entrepreneur has the right to sell
or transfer any assets in the business.
In the limited partnership , the limited partners can sell their
interests at any time without consent of the general partners.
A General partner in either a limited partnership or a
partnership cannot sell any interest in the business unless
there is some provision for doing so in the partnership
agreement.

The remaining partners will have the right of refusal of any new
partner , even if the partnership agreement allows for the
transfer of interest.

Transferability of interest
The corporation has the most freedom
in terms of selling ones interest in the
business . Shareholders may transfer
their shares at any time without
consent from the other shareholders.
In S corporation , the transfer of
interest can occur only as long as the
buyer is an individual.

Capital Requirements
The need for capital during the early of the venture can become
one of the most critical factors in keeping the new venture alive
. The opportunities and ability of the new venture to raise
capital will vary , depending on the form of business.
In proprietorship , any new capital can come only from loans by
any number of sources or by additional personal contributions
by the entrepreneur .
In partnership , loans may be obtained from banks but will
likely require a change in the partnership agreement. additional
funds contributed by each of the partners will also require a
new partnership agreement.

Capital Requirements
In the corporation , new capital can be raised
in a number of ways . The alternatives are
greater than in any of the other legal forms of
business . Stock may be sold as either voting
or nonvoting .
Nonvoting stock will be of course protect the
power of the existing major stockholders.
Bond may also be sold by the corporation.

Management Control
In any new venture , the entrepreneur(s) will want to retain as
much as possible over the business . Each of the forms of
business offers different opportunities and problems as to
control and responsibility for making business decisions .
In the proprietorship , the entrepreneur has got the most
control and flexibility in making business decisions , he is
owner of the venture , and have sole responsibility for and have
sole authority over all business decisions.
partnership can present problems over control of business
decisions if the partnership agreement is not concise regarding
this issue. It is quite important that the partners be friendly
toward one another and delicate or sensitive decision areas of
the business spelled out in the partnership agreement.

Management Control
The limited partnership offers comprise between the
partnership and the corporation . Where we can see the
separation of ownership and control.
In limited partnership in the venture have no control over
business decisions . As soon as the limited partner is
given some control over business decisions assumes
personal liability.
Control of day to day business in a corporation is in the
hands of management , who may or may not be major
stockholders . Control over major long-term decisions ,
however may require a vote of the major stockholders.

Distribution of Profits and

Losses
Proprietors receive all distributions of profits
from the business and also responsible for
all losses.

In the partnership , the distribution of profits

depends on partnership agreement.
Corporations distribute profits thru
dividends to stockholders.

Attractiveness for Raising

Capital
In both the proprietorship and partnership , the
ability of the entrepreneur to raise capital depends
on the success of the business and the personal
capability of the entrepreneur .

The corporation because of its advantages regarding

personal liability , is the most attractive form of
business for raising capital .
Shares of stock , bonds and /or debt are all
opportunities for raising capital with limited liability.

DESIGNING THE ORGANIZATION

The design of the initial organization will be simple

. The entrepreneur may find that he or she
performs all the functions of the organization alone
.

The design of the organizations can be grouped in

the following five areas
Organization structure
Planning , measurement and evaluation schemes
Rewards
Selection criteria
Training

1.
2.
3.
4.
5.

DESIGNING THE ORGANIZATION

Organization structure this defines members jobs and the
communication and relationship these jobs have with each
other .
Planning , measurement and evaluation schemes All
organization activities should reflect the goals and objectives
that underlie the venture existence. The entrepreneur must
spell out how these goals will be achieved (plans) , how they
will be measured and how they will be evaluated .
Rewards Members of an organization will require rewards in
the form of promotions , bonuses , praise and so on . The
entrepreneur or other key managers will need to be responsible
for these rewards.

DESIGNING THE ORGANIZATION

Selection criteria The entrepreneur will need to
determine a set of guidelines for selecting
individuals for each position .
Training on or off the job must be specified . This
training may be in the form of formal education or
learning skills.
The organizations design can be very simple that
is , one in which the entrepreneur performs all the
tasks ( usually indicative of a start-up) or more
complex ,in which other employees are hired to
perform specific tasks .

Building the Management Team and

a successful organization culture
In conjunction with the design of the organization
the entrepreneur will need to assemble the right mix
of people to assume the responsibilities . In essence
the team must be able to accomplish three functions

Execute the business plan

Identify fundamental changes in the business as
they occur
Make adjustments to the plan based on the changes
in the environment and market that will maintain
profitability.

THE ROLE OF A BOARD OF

DIRECTORS
An entrepreneur may find it necessary in his or her
plan to establish a board of directors or board of
advisors . The board of directors may serve number
of functions
Reviewing operating and capital budgets .
Developing longer term strategic plans for growth
and expansion
Supporting day-to-day activities
Resolving conflicts among owners or shareholders
Ensuring the proper use of assets
Developing a network of information sources for the
entrepreneurs.

The BOARD OF ADVISORS

A board of advisors would be more loosely
tied to the organization and would serve the
venture only in the advisory capacity for
some of the functions or activities that are
mentioned in board of directors .
Board of advisors can provide an important
reality check for the entrepreneur or owner
of any non-corporate type of business.

THANK YOU