Entrep 5 Ems Sheryl

7/17/2019 Entrep 5 Ems Sheryl

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The organizational planThe organizational plan


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Learning Goal 1Learning Goal 1

WhatWhatare the three main forms of businessare the three main forms of businessorganization, and hat fa!tors shou"d a !om#an$%sorganization, and hat fa!tors shou"d a !om#an$%soners !onsider hen se"e!ting a form&oners !onsider hen se"e!ting a form&

So"e #ro#rietor ' Partnershi# ' Cor#orationSo"e #ro#rietor ' Partnershi# ' Cor#oration

' Choose a form of organization b$ e(a"uating)Choose a form of organization b$ e(a"uating) Oner%s "iabi"it$ for firm%s debtsOner%s "iabi"it$ for firm%s debts *he ease and !ost of forming the business*he ease and !ost of forming the business

*he abi"it$ to raise funds*he abi"it$ to raise funds *he ta+es*he ta+es *he degree of o#erating !ontro" the o#erator !an retain*he degree of o#erating !ontro" the o#erator !an retain *he abi"it$ to attra!t em#"o$ees*he abi"it$ to attra!t em#"o$ees


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Ad(antagesAd(antages' Ease and "o !ost ofEase and "o !ost of

formationformation

' Oner%s rights to a""Oner%s rights to a""

#rofits#rofits

' Oner%s !ontro" of theOner%s !ontro" of the

businessbusiness' e"ati(e freedom frome"ati(e freedom from

go(ernment regu"ationgo(ernment regu"ation

' Absen!e of s#e!ia" ta+esAbsen!e of s#e!ia" ta+es

' Ease of disso"utionEase of disso"ution

-isad(antages-isad(antages' Un"imited "iabi"it$ of theUn"imited "iabi"it$ of the

oner for debtsoner for debts' -iffi!u"t$ in raising !a#ita"-iffi!u"t$ in raising !a#ita"' imited manageria"imited manageria"

e+#ertisee+#ertise' arge #ersona" timearge #ersona" time

!ommitment!ommitment' Unstab"e business "ifeUnstab"e business "ife' -iffi!u"t$ in attra!ting-iffi!u"t$ in attra!ting

/ua"ified em#"o$ees/ua"ified em#"o$ees' Oner%s #ersona"Oner%s #ersona"

absor#tion of a"" "ossesabsor#tion of a"" "osses

What are the advantages and disadvantages

of sole proprietorships?


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Comparisons of Forms of BusinessComparisons of Forms of Business

OrganizationOrganization

ole proprietorships

!artnerships

Corporations


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Learning Goal "Learning Goal "

Genera" Partnershi#sGenera" Partnershi#s

' Partners !o0on assetsPartners !o0on assets

and share #rofitsand share #rofits

' Ea!h #artner isEa!h #artner isindi(idua""$ "iab"e for a""indi(idua""$ "iab"e for a""

debts and !ontra!ts ofdebts and !ontra!ts of

the #artnershi#the #artnershi#

imited Partnershi#simited Partnershi#s

' Contro""ed b$ one or moreContro""ed b$ one or moregenera" #artners ho ha(egenera" #artners ho ha(eun"imited "iabi"it$un"imited "iabi"it$

' Partners% "iabi"it$ is isPartners% "iabi"it$ is is"imited to their in(estment"imited to their in(estment

' -o not #arti!i#ate in the-o not #arti!i#ate in thefirm%s o#erationsfirm%s o#erations

Wh# $ould a ne$ %usiness venture &hoose to

operate as a partnership' and $hat do$nside

$ould the partners fa&e?


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Learning Goal "Learning Goal " (&ont)d*+(&ont)d*+

Ad(antages ofAd(antages ofPartnershi#sPartnershi#s' Ease of formationEase of formation' A(ai"abi"it$ of !a#ita"A(ai"abi"it$ of !a#ita"

' -i(ersit$ of manageria"-i(ersit$ of manageria"e+#ertisee+#ertise' 1"e+ibi"it$ to res#ond to1"e+ibi"it$ to res#ond to

!hanging business!hanging business!onditions!onditions

' e"ati(e freedom frome"ati(e freedom fromgo(ernment !ontro"go(ernment !ontro"

-isad(antages of-isad(antages ofPartnershi#sPartnershi#s' Un"imited "iabi"it$ for genera"Un"imited "iabi"it$ for genera"

#artners#artners

' Potentia" for !onf"i!t beteenPotentia" for !onf"i!t beteen#artners#artners

' imited "ifeimited "ife

' Sharing of #rofitsSharing of #rofits

' -iffi!u"t$ in "ea(ing a-iffi!u"t$ in "ea(ing a#artnershi##artnershi#

Wh# $ould a ne$ %usiness venture &hoose to

operate as a partnership' and $hat do$nside

$ould the partners fa&e?


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!artnerships!artnerships

AdvantagesAdvantages eas$ andeas$ and

ine+#ensi(e to formine+#ensi(e to form di(erse s2i""s anddi(erse s2i""s and

e+#ertisee+#ertise f"e+ibi"it$f"e+ibi"it$ re"ati(e freedomre"ati(e freedom

from go(ernmentfrom go(ernmentregu"ationsregu"ations no s#e!ia" ta+ationno s#e!ia" ta+ation

DisadvantagesDisadvantages #otentia" !onf"i!ts#otentia" !onf"i!ts

beteen #artnersbeteen #artners

un"imited "iabi"it$ 3un"imited "iabi"it$ 3#otentia" "oss#otentia" "oss

sharing #rofitssharing #rofits

hard to "ea(e or endhard to "ea(e or end

#artnershi##artnershi#


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Topi&s to CoverTopi&s to Cover

in a !artnership ,greementin a !artnership ,greement

Pur#ose 3 duration of #artnershi#Pur#ose 3 duration of #artnershi# o"es, res#onsibi"ities, !om#ensationo"es, res#onsibi"ities, !om#ensation ContributionsContributions

Pro!edures for adding4remo(ingPro!edures for adding4remo(ing#artners#artners Bu$0out #ro!eduresBu$0out #ro!edures -is#ute reso"ution-is#ute reso"ution 1inan!ia" arrangements1inan!ia" arrangements -isso"(ing the #artnershi#-isso"(ing the #artnershi# 5a"uation5a"uation

Source:,meri&an -.press mall Business -.&hange'

home"*ameri&ane.press*&om/small%usiness


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Ad(antages ofAd(antages of

Cor#orationsCor#orations' imited "iabi"it$imited "iabi"it$

' Ease of transferringEase of transferring

onershi#onershi#' Stab"e business "ifeStab"e business "ife

' Abi"it$ to attra!tAbi"it$ to attra!t

finan!ingfinan!ing

-isad(antages of-isad(antages of

Cor#orationsCor#orations' -oub"e ta+ation of #rofits-oub"e ta+ation of #rofits

' Cost of !om#"e+it$ ofCost of !om#"e+it$ of

formationformation' Go(ernment restri!tionsGo(ernment restri!tions

Wh# does the &orporate stru&ture provide advantages

and disadvantages to a &ompan#' and $hat are the

maor t#pes of &orporations?


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Learning Goal 0Learning Goal 0 (&ont)d*+(&ont)d*+

6o does the !or#orate stru!ture #ro(ide6o does the !or#orate stru!ture #ro(idead(antages and disad(antages to aad(antages and disad(antages to a!om#an$, and hat are the ma7or t$#es of!om#an$, and hat are the ma7or t$#es of

!or#orations&!or#orations&' Sto!2ho"dersSto!2ho"ders On the !or#orationOn the !or#oration Can se"" or transfer shares at an$ timeCan se"" or transfer shares at an$ time Entit"ed to re!ei(e #rofits in the form of di(idendsEntit"ed to re!ei(e #rofits in the form of di(idends

' Board of -ire!torsBoard of -ire!tors E"e!ted b$ sto!2ho"dersE"e!ted b$ sto!2ho"ders

Go(ern the firmGo(ern the firm

' Offi!ersOffi!ers Carr$ out the goa"s and #o"i!ies set b$ the boardCarr$ out the goa"s and #o"i!ies set b$ the board

' C Cor#orations, S Cor#orations 3 imited iabi"it$C Cor#orations, S Cor#orations 3 imited iabi"it$Com#aniesCom#anies Ma7or t$#es of !or#orationsMa7or t$#es of !or#orations


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CorporationsCorporations

AdvantagesAdvantages "imited "iabi"it$"imited "iabi"it$

eas$ to get finan!ingeas$ to get finan!ing

eas$ to transfereas$ to transferonershi#onershi#

un"imited "ife0s#anun"imited "ife0s#an

ta+ dedu!tionsta+ dedu!tions

DisadvantagesDisadvantages doub"e ta+ation ofdoub"e ta+ation of

#rofits#rofits

!ost"$ 3 !om#"e+ to!ost"$ 3 !om#"e+ toformform

go(ernmentgo(ernment

restri!tionsrestri!tions


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teps of Forming a Corporationteps of Forming a Corporation

8.8.Se"e!t !om#an$%s nameSe"e!t !om#an$%s name

9.9. Write and fi"eWrite and fi"eArticles ofArticles of

IncorporationIncorporation#a#eror2#a#eror2:.:. Pa$ fees and ta+esPa$ fees and ta+es

;.;. 6o"d organizationa" meeting6o"d organizationa" meeting


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Organizationa" Stru!ture ofOrganizationa" Stru!ture of

Cor#orationsCor#orations

to&holders

3ire&tors

Offi&ers (Top

4anagement+

!resident 5i&e Treasurer e&retar# !resident

ele&t

ele&t


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T#pes ofT#pes of 6#%rid6#%ridCorporationsCorporations

8.8.S corporationsS corporations

organized "i2e a !or#oration, but a(oidsorganized "i2e a !or#oration, but a(oids

doub"e ta+ation of #rofits b$ routing in!omedoub"e ta+ation of #rofits b$ routing in!ome

and "osses through sto!2ho"dersand "osses through sto!2ho"ders

9.9.Limited liability companies (LLC)Limited liability companies (LLC)

offers same "imited "iabi"it$ as a !or#oration,offers same "imited "iabi"it$ as a !or#oration,

but ma$ be ta+ed as either a #artnershi# orbut ma$ be ta+ed as either a #artnershi# or

!or#oration!or#oration


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ome !ros and Cons of LLC)some !ros and Cons of LLC)s

ProsPros Prote!tion ofProte!tion of

#ersona" assets#ersona" assets

A(oid doub"e0A(oid doub"e0ta+ation of #rofitsta+ation of #rofits

1"e+ib"e1"e+ib"emanagement 3management 3

organizationorganization Good for foreignGood for foreign

in(estorsin(estors

ConsCons

Often re7uired to

have a limited life

(8 "9 #ears+

:ot &orporations'

so &an not issue

sto&Source:The Compan# Corporation'

$$$*in&orporate*&om


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Learning Goal ;Learning Goal ;

-oes a !om#an$ ha(e an$ business organization-oes a !om#an$ ha(e an$ business organizationo#tions besides so"e #ro#rietorshi#, #artnershi#,o#tions besides so"e #ro#rietorshi#, #artnershi#,and !or#oration&and !or#oration&

' imited iabi"it$ Com#an$imited iabi"it$ Com#an$ Pro(ides "imited "iabi"it$ for its onersPro(ides "imited "iabi"it$ for its oners *a+es "i2e a #artnershi#*a+es "i2e a #artnershi#

' Coo#erati(esCoo#erati(es Co""e!ti(e"$ oned b$ indi(idua"s or businesses ith simi"ar interestsCo""e!ti(e"$ oned b$ indi(idua"s or businesses ith simi"ar interests Combine to a!hie(e more e!onomi! #oerCombine to a!hie(e more e!onomi! #oer

' =oint (enture=oint (enture An a""ian!e of to or more !om#aniesAn a""ian!e of to or more !om#anies 1ormed to underta2e a s#e!ia" #ro7e!t1ormed to underta2e a s#e!ia" #ro7e!t

' 1ran!hises1ran!hises Business arrangement beteen a fran!hisor and fran!hiseeBusiness arrangement beteen a fran!hisor and fran!hisee 1ran!hisee uses business name and "ogo of fran!hisor1ran!hisee uses business name and "ogo of fran!hisor


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pe&ialized Formspe&ialized Forms

of Business Organizationof Business Organization

8.8. Coo#erati(esCoo#erati(es

9.9. =oint (entures=oint (entures

:.:. 1ran!hises1ran!hises


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CooperativesCooperatives

1ormed b$ #eo#"e ith simi"ar interests,1ormed b$ #eo#"e ith simi"ar interests,su!h as !ustomers and su##"ierssu!h as !ustomers and su##"iers"oer !osts"oer !osts

in!reased e!onomi! #oerin!reased e!onomi! #oer

share in #rofitsshare in #rofits

Members4oners #a$ annua" feesMembers4oners #a$ annua" fees

Common in)Common in)

' agri!u"tureagri!u"ture' hardare4"umberhardare4"umber

' gro!er$gro!er$


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Joint VentureJoint Venture

9 or more !om#anies form an9 or more !om#anies form ana""ian!e to #ursue a s#e!ifi!a""ian!e to #ursue a s#e!ifi!#ro7e!t, usua""$ for a s#e!ifi!#ro7e!t, usua""$ for a s#e!ifi!

time #eriodtime #eriod


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Learning Goal


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!ranc"ising!ranc"ising

business organization in hi!hbusiness organization in hi!ha fran!hisor su##"ies thea fran!hisor su##"ies the#rodu!t !on!e#t to the#rodu!t !on!e#t to the

fran!hisee, ho se""s the goodsfran!hisee, ho se""s the goodsor ser(i!esor ser(i!es


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Fran&hisesFran&hises

AdvantagesAdvantages in!reased o##ortunit$ toin!reased o##ortunit$ to

e+#and >fran!hisor?e+#and >fran!hisor?

re!ognized name,re!ognized name,

#rodu!t, and o#erating#rodu!t, and o#erating!on!e#t >fran!hisee?!on!e#t >fran!hisee?

management trainingmanagement training

and assistan!eand assistan!e

>fran!hisee?>fran!hisee? finan!ia" assistan!efinan!ia" assistan!e

>fran!hisee?>fran!hisee?

DisadvantagesDisadvantages "oss of !ontro""oss of !ontro"

>fran!hisor?>fran!hisor?

!osts of fran!hising!osts of fran!hising

restri!ted o#eratingrestri!ted o#erating

freedom >fran!hisee?freedom >fran!hisee?


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FactorsFactors ProprietorshipProprietorship PartnershipPartnership CorporationCorporation

OwnershipOwnership @ndi(idua"@ndi(idua" o "imitation on numbero "imitation on number

of #artnersof #artners

o "imitation on numberso "imitation on numbers

of sto!2ho"dersof sto!2ho"ders

Liability of ownersLiability of owners @ndi(idua" "iab"e for@ndi(idua" "iab"e for

buisness "iabi"itiesbuisness "iabi"ities

@n genera" #artner shi#@n genera" #artner shi#

a"" indi(idua" "iab"e fora"" indi(idua" "iab"e for

"iabi"ities, "imited #artner"iabi"ities, "imited #artner

are "iab"e for amount ofare "iab"e for amount of

!a#ita".!a#ita".

Amount of !a#ita"Amount of !a#ita"

!ontribution is "imit of!ontribution is "imit of

shareho"der "iabi"it$shareho"der "iabi"it$

Costs of startingCosts of starting

buisnessbuisness

one, other than fi""ingone, other than fi""ing

fees for trade namefees for trade name

Partnershi# agreement,Partnershi# agreement,

"ega" !osts, and minor"ega" !osts, and minor

fi""ing fees for tradefi""ing fees for trade

name.name.

Created on"$ b$Created on"$ b$

statue.arti!"es ofstatue.arti!"es of

in!or#oration,fi"ing fees,in!or#oration,fi"ing fees,

ta+es and fees forta+es and fees for

statesin hi!h !or#orationstatesin hi!h !or#oration

register to do buisness.register to do buisness.

Continuity of buisnessContinuity of buisness -eath disso"(e the-eath disso"(e the

buisnessbuisness

-eath or ithdra" of one-eath or ithdra" of one

#artner terminates#artner terminates

#artnershi# un"ess#artnershi# un"ess

#artnershi# agreement#artnershi# agreement

sti#u"ates otherise,sti#u"ates otherise,death or ithdra" ofdeath or ithdra" of

one of "imited #artner hasone of "imited #artner has

no effe!t on !ontiniut$no effe!t on !ontiniut$

Greatest form ofGreatest form of

!ontinut$. -eath or!ontinut$. -eath or

ithdra" i"" not effe!t.ithdra" i"" not effe!t.

Transferability ofTransferability of

interestinterest

Com#"ete freedom to se""Com#"ete freedom to se""

or transfer an$ #art ofor transfer an$ #art of

buisnessbuisness

Genera" #artner !anGenera" #artner !an

transfer his interest on"$transfer his interest on"$

ith !onsent of a"" otherith !onsent of a"" other

genera" #artners.genera" #artners.

Most f"e+ib"e. Sto!2ho"derMost f"e+ib"e. Sto!2ho"der

!an se"" or sto!2 at i"".!an se"" or sto!2 at i"".

Some sto!2 tranfers ma$Some sto!2 tranfers ma$

be restri!ted b$be restri!ted b$

agreement. @n s !o# ma$agreement. @n s !o# ma$

be transferred.be transferred.

Capital requirmentCapital requirment Ca#ita" raised on"$ b$Ca#ita" raised on"$ b$

"oan or in!reased"oan or in!reased!ontribution b$!ontribution b$

#ro#rietror#ro#rietror

oan or ne !ontributionoan or ne !ontribution

b$ #artner re/uire ab$ #artner re/uire a!hange in agreement.!hange in agreement.

e !a#ita" raised b$ sa"ee !a#ita" raised b$ sa"e

of sto!2s or bonds or b$of sto!2s or bonds or b$borroing in name ofborroing in name of

!or#oration.!or#oration.

Management controlManagement control Pro#rietror ma2es a""Pro#rietror ma2es a""

de!ision and a!tde!ision and a!t

immediate"$immediate"$

A"" genera" #artners ha(eA"" genera" #artners ha(e

e/ua" !ontro"e/ua" !ontro"

Ma7orit$ sto!2ho"dersMa7orit$ sto!2ho"ders

ha(e most !ontro"s fromha(e most !ontro"s from

"ega" #oint of (ie."ega" #oint of (ie.

Distribution of profitDistribution of profit

and lossesand losses

es#onsib"e and re!i!e a""es#onsib"e and re!i!e a""

#rofits and "osses#rofits and "osses

-e#end on #artnershi#-e#end on #artnershi#

agreement andagreement and

in(estment b$ #artnersin(estment b$ #artners

Shareho"der !an shareShareho"der !an share


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!resentation on!resentation on

3esigning the Organization3esigning the Organization


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-.pe&ted Fun&tions of Formal-.pe&ted Fun&tions of Formal

OrganizationOrganization

organization stru!tureorganization stru!ture

P"anning, Measurement andP"anning, Measurement and

e(o"ution S!hemee(o"ution S!heme

eardseards

Se"e!tion !riteriaSe"e!tion !riteria

*raining*raining


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tages in Organization 3esigntages in Organization 3esign


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Primar$ !on!ern of entre#reneur is toPrimar$ !on!ern of entre#reneur is to

!hange the en(ironment and see2!hange the en(ironment and see2

ne ideas.ne ideas.

Another ro"e for entre#reneur is that ofAnother ro"e for entre#reneur is that of

a""o!ation of resour!es .a""o!ation of resour!es .


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Buliding the management Team andBuliding the management Team and

u&&essful Organization Cultureu&&essful Organization Culture

*here are some issues to address before*here are some issues to address before

assemb"ing and bui"ding the managementassemb"ing and bui"ding the management

team. A team must be ab"e to a!!om#"ishteam. A team must be ab"e to a!!om#"ish

three fun!tionsthree fun!tions E+e!ute the business #"ansE+e!ute the business #"ans

@dentif$ fun!tiona" !hanges in the business@dentif$ fun!tiona" !hanges in the business

as the o!!ursas the o!!urs

Ma2e ad7ustments to the #"ans based onMa2e ad7ustments to the #"ans based on

!hanges in the en(ironment in the mar2et!hanges in the en(ironment in the mar2et

that i"" maintain #rofitabi"it$.that i"" maintain #rofitabi"it$.


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Enter#nuere i"" a"so need to !onsiderEnter#nuere i"" a"so need to !onsider

the #ersona"it$ and !hara!ter of ea!hthe #ersona"it$ and !hara!ter of ea!h

indi(idua"es to !reat a su!!essfu"indi(idua"es to !reat a su!!essfu"

orangization !u"ture .orangization !u"ture . Organiztion i"" be a b"end ofOrganiztion i"" be a b"end of

attitudes, beha(iours, dress,attitudes, beha(iours, dress,

!omuuni!ations st$"e that ma2e one!omuuni!ations st$"e that ma2e onebusiness different from others.business different from others.


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=oles of Boards of 3ire&tors=oles of Boards of 3ire&tors

*he #ur#ose of Boards of -ire!tors is to*he #ur#ose of Boards of -ire!tors is to

#ro(ide im#ortant "eadershi# and dire!tion#ro(ide im#ortant "eadershi# and dire!tion

for the ne (enture. *he fun!tion of thefor the ne (enture. *he fun!tion of the

Boards of -ire!torsBoards of -ire!tors

1un!tions )1un!tions )

e(ieing o#erating and !a#ita" budgetse(ieing o#erating and !a#ita" budgets

-e(e"o#ing "ong term strategies #"ans for-e(e"o#ing "ong term strategies #"ans for

groth and e+#ansiongroth and e+#ansion Su##orting da$0to0da$ a!ti(itiesSu##orting da$0to0da$ a!ti(ities

Ensure the #ro#er use of assetsEnsure the #ro#er use of assets


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Criteria to chose the Boards ofCriteria to chose the Boards of

directorsdirectors Select individuals who can work with aSelect individuals who can work with a

diverse group and will commit to the venturesdiverse group and will commit to the ventures

missionmission

Select candidates who understand the marketSelect candidates who understand the market

environment or can contribute important skillsenvironment or can contribute important skills

to achieve planning goalsto achieve planning goals

Select candidates who will show goodSelect candidates who will show good

judgments in business decision makingjudgments in business decision making


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Boards of AdvisorBoards of Advisor

A board of ad(isor ou"d be moreA board of ad(isor ou"d be more

"oose"$ tied to the organization and"oose"$ tied to the organization and

ou"d ser(e the (enture on"$ anou"d ser(e the (enture on"$ an

ad(isor$ !a#a!it$ for some of thead(isor$ !a#a!it$ for some of thefun!tion.fun!tion.

@t has no "ega" status@t has no "ega" status

Effe!t in fami"$ businessEffe!t in fami"$ business


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Organization and use of AdvisorOrganization and use of Advisor

Entrepreneur will use outside advisors suchEntrepreneur will use outside advisors such

as accountant, bankers, lawyers, advertisingas accountant, bankers, lawyers, advertising

agenciesagencies

Entrep 5 Ems Sheryl

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