Chapter 9 - The Organizational Plan
Transcript of Chapter 9 - The Organizational Plan
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ChapterChapter99
The Organizational PlanThe Organizational Plan
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Organizational IssuesOrganizational Issues
Developing Management Developing Management TeamTeam
Legal Form of BusinessLegal Form of Business
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Legal FormsLegal Forms
Sole ProprietorshipSole Proprietorship
PartnershipPartnership
CorporationCorporation
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OwnershipOwnership
Sole ProprietorshipSole Proprietorship IndividualIndividual
PartnershipPartnership No Limit On Number No Limit On Number Of PartnersOf Partners
CorporationCorporation No Limit On Number No Limit On Number Of ShareholdersOf Shareholders
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Liability of OwnersLiability of Owners
Sole ProprietorshipSole ProprietorshipIndividual Liable For Individual Liable For Business LiabilitiesBusiness Liabilities
Partnership- GeneralPartnership- General
Partnership- LimitedPartnership- Limited
All Individuals Liable For All All Individuals Liable For All Business LiabilitiesBusiness Liabilities
Limited Partners Liable For Limited Partners Liable For Amount of Capital Amount of Capital
ContributionContribution
CorporationCorporationShareholders Liable For Shareholders Liable For
Amount Of Capital Amount Of Capital ContributionContribution
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Cost To StartCost To Start
Sole ProprietorshipSole Proprietorship Trade Name Filing Trade Name Filing FeesFees
Partnership- GeneralPartnership- General
Partnership- LimitedPartnership- Limited
Partnership Agreement, Partnership Agreement, Legal Costs, Trade Name Legal Costs, Trade Name
Filing FeesFiling Fees
More Comprehensive More Comprehensive Partnership AgreementPartnership Agreement
CorporationCorporation
Created By Statute, Articles Of Created By Statute, Articles Of Incorporation, Filing Fees, Taxes, Incorporation, Filing Fees, Taxes,
Fees for States In Which Fees for States In Which Corporation Registers To Do Corporation Registers To Do
BusinessBusiness
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Continuity Of BusinessContinuity Of Business
Sole ProprietorshipSole ProprietorshipDeath Dissolves Death Dissolves
BusinessBusiness
Partnership- GeneralPartnership- General
Partnership- LimitedPartnership- Limited
Death/Withdrawal Of 1 Partner Death/Withdrawal Of 1 Partner Terminates Business Unless Terminates Business Unless
Agreement Stipulates OtherwiseAgreement Stipulates Otherwise
Death/Withdrawal Has No Death/Withdrawal Has No
Effect On ContinuityEffect On Continuity
CorporationCorporationDeath/Withdrawal Of Owner Death/Withdrawal Of Owner Has No Effect On ContinuityHas No Effect On Continuity
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Transferability Of InterestTransferability Of Interest
Sole ProprietorshipSole ProprietorshipComplete Freedom To Complete Freedom To
Sell/TransferSell/Transfer
Partnership- GeneralPartnership- General
Partnership- LimitedPartnership- Limited
General Partners Can Transfer General Partners Can Transfer Only with Consent Of All Other Only with Consent Of All Other
General PartnersGeneral Partners
Limited Partners Can Sell Interest Limited Partners Can Sell Interest Without Consent of General Without Consent of General
PartnersPartners
Corporation- RegularCorporation- Regular
Corporation- SCorporation- S
Shareholders Can Sell/Buy Stock Shareholders Can Sell/Buy Stock At Will. Some Transfers Might Be At Will. Some Transfers Might Be
Restricted.Restricted.
Shareholder Can Only Sell Stock Shareholder Can Only Sell Stock To An Individual.To An Individual.
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Capital RequirementsCapital Requirements
Sole ProprietorshipSole Proprietorship Raised By Loan Or Raised By Loan Or Increased Contribution By Increased Contribution By
IndividualIndividual
PartnershipPartnershipLoans/New Contributions Loans/New Contributions
Require Change In Require Change In AgreementAgreement
Corporation- RegularCorporation- Regular
Corporation- SCorporation- S
Raised By Sale of Raised By Sale of Stock/Bonds/BorrowingStock/Bonds/Borrowing
One Class Of Stock Limited One Class Of Stock Limited to 75 Stockholdersto 75 Stockholders
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Management ControlManagement Control
Sole ProprietorshipSole ProprietorshipOwner Makes All Owner Makes All
DecisionsDecisions
Partnership- GeneralPartnership- General
Partnership- LimitedPartnership- Limited
All Partners Have Equal All Partners Have Equal Control, Majority RulesControl, Majority Rules
Only General Partners Have Only General Partners Have Control Of BusinessControl Of Business
CorporationCorporationMajority Shareholders Have Majority Shareholders Have
Control. Day-To-Day Control. Day-To-Day Control With ManagementControl With Management
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Distribution Of ProfitsDistribution Of Profits
Sole ProprietorshipSole Proprietorship Owner Receives All Owner Receives All Profits/LossesProfits/Losses
PartnershipPartnershipDistributed According Distributed According
To Agreement & Capital To Agreement & Capital ContributionContribution
CorporationCorporationShareholders Received Shareholders Received
Profits Through Profits Through DividendsDividends
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Ability To Raise CapitalAbility To Raise Capital
Sole ProprietorshipSole ProprietorshipLimited to Capability Of Limited to Capability Of
Owner & Success Of Owner & Success Of BusinessBusiness
PartnershipPartnershipDepends On Capability Depends On Capability of Partners & Success of Partners & Success
Of BusinessOf Business
CorporationCorporationLimited Owner Liability Limited Owner Liability
Is Attractive To Is Attractive To InvestorsInvestors
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Tax Attributes Of Legal FormTax Attributes Of Legal Form
Sole Proprietorship = OwnerSole Proprietorship = Owner No Double TaxNo Double Tax No Capital Stock/Retained Earnings No Capital Stock/Retained Earnings
PenaltyPenaltyPartnershipPartnership
Limited Partners = Share Of Profits But No Limited Partners = Share Of Profits But No LiabilityLiability
Income Distributed Based On AgreementIncome Distributed Based On AgreementCorporation = Separate EntityCorporation = Separate Entity
More Deductions/Expenses AvailableMore Deductions/Expenses Available Double Taxation Of DividendsDouble Taxation Of Dividends
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S Corporation- AdvantagesS Corporation- Advantages
Gains/Losses = Personal Income/LossGains/Losses = Personal Income/LossLimited Liability ProtectionLimited Liability ProtectionNo Minimum TaxNo Minimum TaxStock TransferableStock TransferableStock = Voting Or Non-VotingStock = Voting Or Non-VotingCash Method Of AccountingCash Method Of AccountingLong-Term Capital Gains/Losses Long-Term Capital Gains/Losses
Deductible To ShareholdersDeductible To Shareholders
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S Corporation- DisadvantagesS Corporation- Disadvantages
Some Restrictions For QualificationSome Restrictions For QualificationPotential Tax DisadvantagesPotential Tax DisadvantagesMost Fringe Benefits Not Deductible For Most Fringe Benefits Not Deductible For
ShareholdersShareholdersMust Have Calendar Tax YearMust Have Calendar Tax Year1 Class Of Stock1 Class Of StockNet Loss Limited to Shareholder’s Stock Net Loss Limited to Shareholder’s Stock
Plus Loans To BusinessPlus Loans To BusinessNo More Than 75 ShareholdersNo More Than 75 Shareholders
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Limited Liability CompanyLimited Liability Company
Partnership/Corporation Hybrid, Laws Partnership/Corporation Hybrid, Laws Differ From State To StateDiffer From State To State
Has MembersHas MembersNo Shares Issued, Each Member Owns No Shares Issued, Each Member Owns
According to Articles of IncorporationAccording to Articles of IncorporationLiability = Member’s Capital ContributionLiability = Member’s Capital ContributionTransfer Requires Unanimous ConsentTransfer Requires Unanimous ConsentTaxed As PartnershipTaxed As PartnershipStandard Term = 30 Years, Continuity Standard Term = 30 Years, Continuity
RestrictedRestricted
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Advantages of LLCAdvantages of LLC
LLC Liabilities Added To LLC Liabilities Added To Partnership InterestPartnership Interest
Most States Do Not Tax LLCsMost States Do Not Tax LLCsOwnership Not Limited To Ownership Not Limited To IndividualsIndividuals
Members Share Income, Profit, Members Share Income, Profit, Expense, Etc., Among Expense, Etc., Among ThemselvesThemselves
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Organizational DesignOrganizational Design
StructureStructurePlanning, Measurement, Planning, Measurement, Evaluation SchemesEvaluation Schemes
RewardsRewardsSelection CriteriaSelection CriteriaTrainingTrainingManagement TeamManagement TeamBoard Of DirectorsBoard Of DirectorsBoard Of AdvisorsBoard Of Advisors
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Effective TeamEffective Team1)1) Clear PurposeClear Purpose
2)2) InformalInformal
3)3) ParticipationParticipation
4)4) ListenListen
5)5) Civilized Civilized DisagreementDisagreement
6)6) Consensus Consensus DecisionsDecisions
7)7) Open Open CommunicationCommunication
8)8) Clear Roles/Work Clear Roles/Work AssignmentsAssignments
9)9) Shared Shared LeadershipLeadership
10)10)External External RelationsRelations
11)11)Style DiversityStyle Diversity12)12)Self-AssessmentSelf-Assessment