Slide 1

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FastTrac® | Planning the Entrepreneurial Ve

ORGANIZATION PLANNING

6

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Factors

 Control

 Taxes

 Liability

 Ownership

 Longevity of the business

 Raising capital

 Ease of set-up

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6_B

Legal Forms of Organization

 Sole proprietorship

 General partnership

 Limited partnership

 Corporation

– S corporation

 Limited liability company

 Nonprofit corporation

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6_C

Sole Proprietorship

 Advantages

– Easy to form

– No legal documents required

– Income tax on individual return schedule C – Profits/losses pass directly to owner

– Entrepreneur is the boss

 Disadvantages

– Unlimited liability

– Death terminates business – Limits ability to raise capital – Limits business deductions

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6_D

General Partnership

Issues to consider:

 Money contributions

 Money distributions

 Business liabilities

 Experience, skills of partners

 Exit, buy-sell agreements

 Disagreements

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6_E

Limited Partnership

 General partner(s) and limited partner(s)

 General partner(s) have full liability

 Limited partners

– Liability debts limited to investment – Limited financial obligations

– Limited say in management

– May receive favorable tax treatment

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6_F

Corporation

 Advantages

– Limited liability – Creates stock – Increases ability

to raise capital

– Creates retained earnings – Enjoys continual existence – Is easier to sell

– Allows business

expenses deductions

 Disadvantages

– Double taxation

– Corporate formation fees – Regulations

– Paperwork

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6_G

S Corporation

 Federal tax provision for a corporation

 Taxed as partnership

 Eliminates double taxation

 Issues only common stock

– voting and nonvoting

 Requires eligibility

– irs.gov

– Limit of 100 stockholders, U.S. citizens, no ineligible corporations

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6_H

Limited Liability Company

 IRS treats like partnership

 Income is passed from LLC to members

 Liability debts limited to investment

 More flexibility than a corporation

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6_I

Nonprofit Corporation

 Exempt from federal income tax

 Prohibited from distributing net income to members, directors, or officers

 Required to file for status with IRS

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6_J

Organizational Management

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6_K

New CEO Driving force exits Human Resources Director

Chief Financial Officer

Marketing Director

Manufacturing Director Sales Manager

Chief Executive Officer R&D Director

Creator

Driving force Sales agents/distributors

Design companies/

engineers/subcontractors Advertising consultants/PR firms/

market research firms/college interns Accounting firms/CPAs HR consultants/employment agencies

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6_L

Board of Directors

 Serves the shareholders.

 Sets company policy.

 Elects officers.

 Has personal liability.

 Provides significant experience.

 Acts as a sounding board.

 Attracts money sources.

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6_M

Advisory Board

 Provides special knowledge/skills that entrepreneurs lack.

 Brings influence in industry and community.

 Incurs no personal legal liability.

 Has no voting rights or legal power.

 Serves at discretion of business.

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6_N

Employees

 Use standardized employment application forms.

 Screen applications before interviewing.

 Check all references.

 Develop and use job descriptions.

 Comply with workplace laws: safety, insurance, discrimination, overtime, and more.

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6_O

Reward Systems

 Effective rewards are perceived by the

recipient as a positive.

 Effective rewards

actually encourage the desired behavior.

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6_P

Creating Clarity

 Purpose

 Direction

 Structure

 Measurement

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6_Q

Outside Resources

 Attorneys

 Accountants

 Bankers

 Business consultants

 Marketing consultants

– Advertising/public relations agencies

 Risk management advisors

 Governmental agencies

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6_R

Outside Resources

 Manufacturers’ representatives

 Manufacturing subcontractors

 Engineering or design firms

 Distributors

 Human resource consultants

 Lobbyists

 Import/export brokers

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6_S

Management and Organization Plan

 Legal Form of Business

 Management Team

 Board of Directors/Advisory Board

 Recruitment and Selection of Employees

 Compensation and Ownership

 Employee Reward and Incentive Plan

 Communication

 Infrastructure

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Run KC

 Responsibilities of the owner/manager.

 Which aspects of Tim’s background/experience qualify him to manage this business?

 What types of experience/qualifications should he look for in future management candidates?

6_T