The Human Resources Plan Managers Owners Allies and

The Human Resources Plan: Managers, Owners, Allies, and Directors PART 3 Developing the New Venture Business Plan Power. Point Presentation by Charlie Cook, The University of West Alabama © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Building a Management Team • Management Team Ø Managers and other key persons who give a company its general direction • Characteristics of a Strong Management Team Ø Capable of securing the resources needed to make business a success Ø Reassures investors about their investment and the continuity of business Ø Diversity of talent makes the team stronger than an individual entrepreneur 8– 2 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Building a Management Team (cont’d) • Team Building and Structure Ø The required combination of education and experience depends on the type of business and the nature of its operations Ø The key: achieving a balance of skills and competencies in functional areas Ø Designing an internal management structure that defines relationships and responsibilities v v Outside professional support can supplement the skills of a management team An active board of directors can provide counsel and guidance. 8– 3 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Exhibit 8. 1 Forms of Legal Organization for Small Businesses 8– 4 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Exhibit 8. 2 Percentage of Small Businesses by Legal Form of Organization 15 Sources: Table 1 A, Internal Revenue Service, http: //www. irs. gov/pub/irs-soi/d 6187. pdf, accessed December 5, 2008; and Table 1, Internal Revenue Service, http: //www. irs. gov/pub/irs-soi/d 6292. pdf, accessed January 13, 2009. 8– 5 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

The Sole Proprietorship Option • Sole Proprietorship Ø A business owned by one person, who bears unlimited liability for the enterprise. • Advantages Ø Receives all of the firm’s profits. Ø Holds title to all of the firm’s assets. Ø Can easily sell or transfer ownership of the company name and assets. Ø Requires no registration or filing fee. Ø Has absolute freedom from interference by other stakeholders. 8– 6 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

The Sole Proprietorship Option (cont’d) • Disadvantages Ø Bears all business risk. Ø Is subject to all claims of creditors. Ø Has unlimited personal liability for business. Ø Receives no tax free benefits as an employee. Ø Death/incapacity of owner terminates business. Ø Is limited to the proprietor’s personal capital. Ø Is taxed on business income as personal income. 8– 7 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

The Partnership Option • Partnership Ø A legal entity formed by two or more co-owners to carry on a business for profit. • Partner Qualifications Ø Required: of legal age to contract Ø Desired: Honest, healthy, capable, and compatible • Questions about Partnership Formation Ø What is our business concept? Ø How are we going to structure ownership? Ø Why do we need each other? Ø How do our lifestyles differ? 8– 8 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Partnership Insights • Choose your partner carefully. • Be open, but cautious, about partnerships with friends. • Test-drive the relationship, if possible. • Create a combined vision for the business. • Prepare for the worst. 8– 9 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Exhibit 8. 3 The Advantages and Disadvantages of Partnerships 8– 10 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Rights and Duties of Partners • Partnership Agreement Ø A document that states explicitly the rights and duties of partners. • Joint and Several Liability Ø The liability of each partner resulting from any one partner’s ability to legally bind the other partners. • Termination of a Partnership Ø Provisions for rapidly responding to death or departure of a partner. 8– 11 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

The C Corporation Option • Corporation Ø A business organization that exists as a legal entity and provides limited liability for its owners. • Legal Entity Ø A business organization recognized by the law as having a separate legal existence (“artificial being”); can be sued, hold property, and incur debt. • The C Corporation Ø An ordinary, or regular, corporation chartered by the state and taxed by the federal government as a separate legal entity. 8– 12 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Choosing an Organizational Form Initial Costs Continuity of the Business Liability of Owners Factors Affecting the Choice of a Firm’s Structure Income Taxes Attraction of Capital Transfer of Ownership Management Control 8– 13 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Specialized Forms… (cont’d) • The Limited Liability Company Ø Stockholders have limited liability but pay personal income taxes on the business profits. v v v Easier to set up More flexible Tax advantages • The Professional Corporation Ø Protects licensed professionals from liability of partners but not their personal liability. • The Nonprofit Corporation Ø Serves civic, educational, charitable, or religious purposes but not for generation of profits. 8– 14 © 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.