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Based on the Perspective of Pakistan
Y a s i r Hussain T u r i
N a s i r Hussain
S S Sh a h i d
M Kashif Jan
An list for an organization.
Organizational Plan is basically a “to do”
It lists out the plan of work, programs, and organizational growth over a period of time - six months, a year or five. The tasks involved, who is responsible for them, and when they’ll be done.
An Organizational Plan
• • • • • • •
Set priorities for work Make sure tasks get done on time Focus on one thing at a time Share work among staff, board members & volunteers Make goals clear to investors Get a handle on big projects by breaking them down See the big picture of what organization is doing
•Management’s ability and commitment to the new venture are significant to investors. •Investors demand that the management team not operate the business as part time venture. •management team to operate the business full time at a modest salary •Drawing out large salaries for the management team is unacceptable to an Entrepreneur and considered to be a lack of psychological commitment to the business
Legal forms of
Proprietorship form of
legal forms are
business with single owner; unlimited liability; control over all decisions; receives all profits
Partnership form of business
with 2 or more individual with unlimited liability, pooling resources to own a business.
Corporation form of
business with separate legal entity, run by stockholders having limited liability & regulated by statute
Factors of the three forms of Business Formation
Factors Proprietorship Partnership Corporation No Limitation on number of stockholders No Limitation on Number of partners In general partnership, individuals are liable for business liabilities. In Limited Partnership partners are liable for capital contribution
Liability of Owners
Individual Liable for business Liability
Amount of capital contribution is limit of shareholder’s liability
Costs of Starting Business
Partnership Created only by agreement, legal statute, Articles of cost, and minor incorporation, filing fees for trade filing fees, taxes, Only Filing Fees name. Limited and fees for states for trade name partnership in which requires more corporation is comprehensive registers to do agreement, hence business higher cost
Partnership Death or withdrawal of one partner terminates partnership unless partnership agreement stipulates otherwise. In limited partnership death or withdrawal of one partner has no effect on continuity. Limited partners can withdraw capital six months after notice is provided
Continuity of Business
Death dissolves the business
Greatest form of continuity. Death or withdrawal of owner(s) will not affect legal existence of business
Transferability of interest
General Partner Stockholders can can transfer sell or buy stock at his/her interest will. Stocks’ Complete only with consent transfer may be freedom to sell of all other general restricted by or transfer any partners. Limited agreement. In S part of business partner can sell corporation, stock interest without may be transferred consent of general only to an partners. individual New Capital raised by sale of stock or bonds or by borrowing in name of Corp. In S Corp. only one class of stock & limited to 75 shareholders
Capital Requiremen ts
Capital raised only by loan or increased contribution by proprietor.
Loans or new contributions by partners require a change in partnership agreement
Partnership All partners have equal control and majority rules. In limited partnership, only the general partners control the business. Depends on partnership agreement and investment by partners. Depends on capability of partners and success of business
Corporation Majority stockholder(s) have most control from legal point of view. Day-to-day control in hands of management who may not be major stockholders. Shareholders can share in profits by receipt of dividends With limited liability for owners, more attractive as an investment opportunity
Proprietor makes all decision and can act immediately
Distribution of profits and losses
Proprietor responsible and receives all profits and losses Depends on capability of proprietor and success of business
Attractiveness for raising capital
Tax Attributes of Forms of Business
Attributes Proprietorship Partnership Usually calendar year but other day may be used Partnership agreement may have special allocation of income. Pardoners pay tax on their pro rata shares income on individual return even if income not immediately distributed Corporation Any year can be used at beginning. Any changes in incorporation Taxable year Usually a calendar year
Distribution of profits to owners
All income appears on owner’s return
No income is allocated to stockholders
Attributes Organization costs
Proprietorship Not amortizable $100 dividend exclusion for single return and $200 on joint return Taxed at individual level. A deduction is allowed for long term capital gains
Partnership Amortizable over 60 months Dividend exclusion of partnership passes to partner Capital gain to partner will be taxed as a capital gain to the partner Capital losses can be used to offset other income. Carried forward indefinitely
Corporation Amortizable over 60 months 80% of more of dividend received may be deducted (after 12/31/86) Taxed at corporation level. After July 1, 1987 the maximum rate will be 34%. Carry back three years and carry over five years as shore, term capital loss offsetting only capital gains.
Carried forward indefinitely
Corporation Acquisition of stock for cash entails no immediate taxes. Transfer if stock value greater than contributed property
Commencement of business results in no additional tax for individuals
Contribution of property to a partnership not taxed
Limitations on losses deductible for real estate activities
Amount of risk may be deducted except for real estate activities
Partnership investment plus share of resources liability if any. At risk rules may apply except for real estate partnership
No losses allowed except on sale of stock or liquidation of corporation.
Itemized deduction for medical expense in excess of adjusted gross income on individual’s return. No deduction for insurance premium
Cost of partner’s benefit is not deductible to business as an expense. Possible deduction at partner level
Cost of employee shareholder coverage deductible as business expense if designed for benefits of employee.
Corporation Limitations on benefits on benefits from defined planslesser of $ 90,000 or 100% of corporation. Limitation on contribution to defined contribution plans-lesser of $ 30,000 or 25% of compensation ( 15% of aggregate for profit-sharing plans)
Limitation and restrictions basically same as regular corporation
Same as for corporations
•Execute the business plan The team must be able to
•Identify fundamental changes in the business as they occur •Make adjustments to the plan based on changes in the environment and market that will maintain profitability
building a successful
form of organization is
determined, the entrepreneur will need to
job description and job analysis.
The job analysis will be serving as a guide in determining hiring procedures, training, performance appraisal, compensation program, and job description and specification.
building a successful
Job description Specify
the details of the work that is to be performed and any special conditions or skill involved in performing the job. Job description should contain a job summary, skills or experience required, a summary of the responsibilities and duties the authority of the individual and standards of performance.
Job specification outlines
the skills and abilities needed to perform the job including prior experience. Outlining the job specification for a trained employee is easier than for the untrained people who will be trained on the job. So the entrepreneur should focus on specific qualities that will be required, such as personality, physical traits, interest, or sensory skill.
role of the
Board of Directors
•Reviewing operating and capital budgets •Developing long-term strategic plans for growth and expansion
•Supporting day to day activities •Resolving conflicts among owners or shareholders •Ensuring the proper use of assets or •Developing a network of information sources for the entrepreneurs
The member of
• Select individuals who can work with a diverse group and will commit to the venture mission • Select candidates who understand the market environment or can contribute important skills to the new venture’s achievement of planning goals • Select candidates who will show good judgment in business decision making
members should be
carefully selected considering the following
• Loosely tied to the organizations • Serve the venture in an advisory capacity • Has no legal status • Meet less frequently; depending on the important venture decision • Useful in a family business • Selection process similar to the BOD • Compensated per meeting basis or with stock • Provide reality check
Uses of Board of Advisors
• Formal part of a venture • Outside advisors, such as lawyers, accountants, ad agencies, etc.