Chapter 9

The Organizational Plan

9-1
 Organizational Issues
Developing Management
Team

Legal Form of Business

9-2
C
o
p
y
ENTREPRENEURSHIP IS A
r
i
g
TEAM SPORT
h
t • Grow beyond self-employment with the support of a team
©
2
0 • Team can include partners, employees, advisors, family,
1 vendors, investors
4
J
o • Do more with others than you can alone
h
n
W
i • At initial stage, focus on revenue generating employees.
l
e
y
& 9-3

S
C
o
p
THE ADVANTAGES OF
y
r
i
A TEAM
g
h Feedback
t
©
2 Higher
Increased
social level
0 skill set
of support
1
4
J
o
h
n Extended Moral
W network support
i
l
Capacity
e
innovation
y
& 9-4

S
 Legal Forms

Sole Proprietorship

Partnership

Corporation
9-5
 Ownership

Sole Proprietorship Individual

Partnership No Limit On Number

Of Partners
Corporation No Limit On Number
Of Shareholders

9-6
 Liability of Owners
Individual Liable For
Sole Proprietorship
Business Liabilities
All Individuals Liable For All
Partnership- General Business Liabilities

Limited Partners Liable For

Partnership- Limited Amount of Capital
Contribution
Shareholders Liable For
Corporation Amount Of Capital
Contribution
9-7
 Cost To Start
Sole Proprietorship Trade Name Filing
Fees
Partnership Agreement,
Partnership- General Legal Costs, Trade Name
Filing Fees
More Comprehensive
Partnership- Limited Partnership Agreement
Created By Statute, Articles Of
Incorporation, Filing Fees, Taxes,
Corporation Fees for States In Which
Corporation Registers To Do
Business
9-8
 Continuity Of Business
Death Dissolves
Sole Proprietorship
Business
Death/Withdrawal Of 1 Partner
Partnership- General Terminates Business Unless
Agreement Stipulates Otherwise

Death/Withdrawal Has No
Partnership- Limited
Effect On Continuity

Death/Withdrawal Of Owner
Corporation Has No Effect On Continuity

9-9
 Transferability Of Interest
Complete Freedom To
Sole Proprietorship
Sell/Transfer
General Partners Can Transfer
Partnership- General Only with Consent Of All Other
General Partners

Limited Partners Can Sell Interest

Partnership- Limited Without Consent of General
Partners

Shareholders Can Sell/Buy Stock

Corporation- Regular At Will. Some Transfers Might Be
Restricted.
Shareholder Can Only Sell Stock
Corporation- S To An Individual. 9-10
Capital Requirements
Sole Proprietorship Raised By Loan Or
Increased Contribution By
Individual
Loans/New Contributions
Partnership Require Change In
Agreement
Raised By Sale of
Corporation- Regular Stock/Bonds/Borrowing
One Class Of Stock Limited
Corporation- S to 75 Stockholders
9-11
 Management Control
Owner Makes All
Sole Proprietorship
Decisions
All Partners Have Equal
Partnership- General Control, Majority Rules

Partnership- Limited Only General Partners Have

Control Of Business

Majority Shareholders Have

Corporation Control. Day-To-Day
Control With Management
9-12
Distribution Of Profits

Sole Proprietorship Owner Receives All

Profits/Losses
Distributed According
Partnership To Agreement & Capital
Contribution
Shareholders Received
Corporation Profits Through
Dividends

9-13
Ability To Raise Capital

Limited to Capability Of
Sole Proprietorship Owner & Success Of
Business
Depends On Capability
Partnership of Partners & Success
Of Business
Limited Owner Liability
Corporation Is Attractive To
Investors

9-14
Tax Attributes Of Legal Form
Sole Proprietorship = Owner
 No Double Tax
 No Capital Stock/Retained Earnings
Penalty
Partnership
 Limited Partners = Share Of Profits But No
Liability
 Income Distributed Based On Agreement
Corporation = Separate Entity
 More Deductions/Expenses Available
 Double Taxation Of Dividends 9-15
S Corporation- Advantages
Gains/Losses = Personal Income/Loss
Limited Liability Protection
No Minimum Tax
Stock Transferable

9-16
 Limited Liability Company
Partnership/Corporation Hybrid, Laws
Differ From State To State
Has Members
No Shares Issued, Each Member Owns
According to Articles of Incorporation
Liability = Member’s Capital Contribution
Transfer Requires Unanimous Consent
Taxed As Partnership
Standard Term = 30 Years, Continuity
Restricted
9-17
 Advantages of LLC
LLC Liabilities Added To
Partnership Interest
Most States Do Not Tax LLCs
Ownership Not Limited To
Individuals
Members Share Income, Profit,
Expense, Etc., Among
Themselves
9-18
 Organizational Design
Structure
Planning, Measurement,
Evaluation Schemes
Rewards
Selection Criteria
Training
Management Team
Board Of Directors
Board Of Advisors
9-19
 Important topics
• Organizational Structure
• Job Description
• Responsibilities
• Qualification
• Recruitment process
• Training and development
• Induction
• Orientation
• Job shadowing
• Training method
• Motivating employees
• Recognition and reward

Copyright © 2014 John Wiley & Sons, Inc. 9-20

 Effective Team
1) Clear Purpose 7) Open
Communication
2) Informal
8) Clear Roles/Work
3) Participation Assignments
4) Listen 9) Shared
Leadership
5) Civilized
10)External
Disagreement Relations
6) Consensus 11)Style Diversity
Decisions 12)Self-Assessment
9-21