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THE ORGANIZATIONAL PLAN:DEVELOPING THE MANAGEMENT TEAM, LEGAL FORMS OF BUSINESS

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Entrepreneurship ­ MGT602
VU
Lesson 27
THE ORGANIZATIONAL PLAN
LEARNING OBJECTIVES
1. To understand the importance of the management team in launching a new venture.
2. To understand the advantages and disadvantages of the alternative legal forms of incorporation.
3. To explain the S Corporation and limited liability company as alternative forms of incorporation.
4. To learn how to prepare a job analysis, job description, and job specification.
5. To illustrate how the board of directors or board of advisors can be used to support the management
of a new venture.
DEVELOPING THE MANAGEMENT TEAM
Potential investors are interested in the management team and its ability and commitment to the new
venture.
Investors usually demand that the management team not operate the business part-time while employed
full time elsewhere. It is also unacceptable for the entrepreneurs to draw a large salary. The entrepreneur
should consider the role of the board of directors and/or a board of advisors in supporting the man-
agement of the new venture.
LEGAL FORMS OF BUSINESS
There are three basic legal forms and one new form of businesses.
The three basic forms are:
a.
Proprietorship.
b. Partnership.
c.
Corporation
A new form is the limited liability company, which is now possible in most states.
The entrepreneur should evaluate the pros and cons of each of the legal forms prior to submitting a
business plan. He should determine the priority of several factors discussed below. It is also necessary to
consider intangibles such as image to suppliers, existing clients, and prospective customers.
Ownership
In the proprietorship, the owner has full responsibility for operations.
In a partnership, there may be owners with general or with limited ownership.
In the corporation, ownership is reflected by ownership of shares of stock.
Liability of Owners
The proprietor and general partners are liable for all aspects of the business.
Since the corporation is a legal entity that is taxable and absorbs liability, the owners are liable
only for the amount of their investment.
To satisfy any outstanding debts of the business, creditors may seize personal assets of the
owners in proprietorships or regular partnerships.
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Entrepreneurship ­ MGT602
VU
In a partnership the general partners share the amount of personal liability equally, regardless of
their capital contribution.
In a limited partnership, the limited partners are liable only for their capital contributions.
Costs of Starting a Business
The more complex the organization, the more expensive it is to start.
The least expensive is the proprietorship, where the only costs may be for filing for a business
name.
In a partnership a partnership agreement is needed, in addition this requires legal advice and
should explicitly convey all parties' responsibilities, rights and duties.
A limited partnership may be more complex to form because it must comply strictly with statu-
tory requirements.
The corporation can be created only by statute.
The owners are required to register the name and articles of incorporation and meet state
statutory requirements.
Filing fees and an organization tax may be incurred.
Legal advice is necessary to meet the statutory requirements.
Continuity of Business
In a sole proprietorship, the death of the owner results in the termination of the business.
In a limited partnership, the death of a limited partner 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 a limited partnership dies or withdraws, the limited partnership is
terminated unless the partnership agreement specifies otherwise.
In a partnership, the death or withdrawal of one of the partners results in termination of the
partnership, but this can be overcome by the partnership agreement.
a. Usually the partnership will buy out the withdrawn partner's share at a predetermined
price.
Another option is to have a member of the withdrawn partner's family take over as
b.
partner.
The corporation has the most continuity, as the owner's death or withdrawal has no impact on
continuity of the business, unless it is a closely held corporation.
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Table of Contents:
  1. THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP:DEFINITION OF ENTREPRENEUR
  2. THE NATURE AND IMPORTANCE OF ENTREPRENEURSHIP:Possibility of New Venture Formation
  3. ENTREPRENEURIAL PROCESS/START UPS:GOVERNMENT AS AN INNOVATOR
  4. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND:ENTREPRENEURIAL PROCESS
  5. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…)
  6. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…):CLIMATE FOR ENTREPRENEURSHIP
  7. THE ENTREPRENEURIAL AND ENTREPRENEURIAL MIND (continued…):PROBLEMS AND SUCCESSFUL EFFORTS
  8. THE INDIVIDUAL ENTREPRENEUR:ENTREPRENEURIAL BACKGROUND AND CHARACTERISTICS
  9. THE INDIVIDUAL ENTREPRENEUR (continued…):Personal Values, Work History, MOTIVATION
  10. THE INDIVIDUAL ENTREPRENEUR (continued…):ROLE MODELS AND SUPPORT SYSTEMS
  11. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES:INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES, Minority interests
  12. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):DIRECT FOREIGN INVESTMENT
  13. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):BARRIERS TO INTERNATIONAL TRADE
  14. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):ENTREPRENEURIAL PARTNERING
  15. INTERNATIONAL ENTREPRENEURIAL OPPORTUNITIES (continued…):SOURCES OF NEW IDEAS
  16. CREATIVITY AND THE BUSINESS IDEA:METHODS OF GENERATING NEW IDEAS, CREATIVE PROBLEM SOLVING
  17. CREATIVITY AND THE BUSINESS IDEA:PRODUCT PLANNING AND DEVELOPMENT PROCESS
  18. LEGAL ISSUES FOR THE ENTREPRENEUR:NEED FOR A LAWYER, PATENTS
  19. LEGAL ISSUES FOR THE ENTREPRENEUR:TRADEMARKS, LICENSING
  20. LEGAL ISSUES FOR THE ENTREPRENEURS:PRODUCT SAFETY AND LIABILITY, INSURANCE
  21. CREATING AND STARTING THE VENTURE:WHAT IS THE BUSINESS PLAN, PRESENTING THE PLAN
  22. CREATING AND STARTING THE VENTURE (Continued….):WRITING THE BUSINESS PLAN
  23. CREATING AND STARTING THE VENTURE (Continued….):
  24. CREATING AND STARTING THE VENTURE (Continued….):WHY SOME BUSINESS PLANS FAIL, MARKETING PLAN
  25. THE MARKETING PLAN:MARKET RESEARCH FOR THE NEW VENTURE
  26. THE MARKETING MIX:STEPS IN PREPARING THE MARKETING PLAN
  27. THE ORGANIZATIONAL PLAN:DEVELOPING THE MANAGEMENT TEAM, LEGAL FORMS OF BUSINESS
  28. THE ORGANIZATIONAL PLAN (Continued….)
  29. THE ORGANIZATIONAL PLAN (Continued….):THE LIMITED LIABILITY COMPANY
  30. THE FINANCIAL PLAN:OPERATING AND CAPITAL BUDGETS
  31. THE FINANCIAL PLAN (Continued….):PRO FORMA INCOME STATEMENTS, PRO FORMA CASH FLOW
  32. PRO FORMA SOURCES AND USES OF FUNDS:PERSONAL FUNDS, FAMILY AND FRIENDS
  33. PRO FORMA SOURCES AND USES OF FUNDS:COMMERCIAL BANKS
  34. BANK LENDING DECISIONS:SMALL BUSINESS ADMINISTRATION LOANS
  35. SOURCES OF CAPITAL:GOVERNMENT GRANTS
  36. SOURCES OF CAPITAL:PRIVATE PLACEMENT, BOOTSTRAP FINANCING
  37. CAPITAL SOURCES IN PAKISTAN:PROVINCIAL LEVEL INSTITUTIONS, FINANCIAL INSTITUTIONS
  38. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  39. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  40. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  41. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  42. PREPARING FOR THE NEW VENTURE LAUNCH: EARLY MANAGEMENT DECISIONS (Continued….)
  43. NEW VENTURE EXPANSION STRATEGIES AND ISSUES:JOINT VENTURES, ACQUISITIONS
  44. NEW VENTURE EXPANSION STRATEGIES AND ISSUES (Continued….):DETERMINING THE PRICE FOR AN ACQUISITION
  45. ENTREPRENEURSHIP & PAKISTAN:GENDER DEVELOPMENT STATUS WOMAN AS AN ENTREPRENEUR IN PAKISTAN