Presented to: Sir. Ghulam Abbas Presented by:

2. Presented to: Sir. Ghulam Abbas Presented by: Muhammad Faisal Rao Rana Yasir Malik Shahbaz Department Of Information Technology B.Z.U

3. The organizational plan Chapter 9 Entrepreneurship 8th editionAuthor:Robert D Hisrich,Micheal P. PetersDean a Shepherd

4. Learning Goal 1 Whatare the three main forms of business organization, and what factors should a company’s owners consider when selecting a form? Sole proprietor • Partnership • Corporation Choose a form of organization by evaluating: Owner’s liability for firm’s debts The ease and cost of forming the business The ability to raise funds The taxes The degree of operating control the operator can retain The ability to attract employees

5. Learning Goal 2 Advantages Ease and low cost of formation Owner’s rights to all profits Owner’s control of the business Relative freedom from government regulation Absence of special taxes Ease of dissolution Disadvantages Unlimited liability of the owner for debts Difficulty in raising capital Limited managerial expertise Large personal time commitment Unstable business life Difficulty in attracting qualified employees Owner’s personal absorption of all losses • What are the advantages and disadvantages • of sole proprietorships?

6. Comparisons of Forms of Business Organization Sole proprietorshipsPartnershipsCorporations

7. Learning Goal 3 General Partnerships Partners co-own assets and share profits Each partner is individually liable for all debts and contracts of the partnership Limited Partnerships Controlled by one or more general partners who have unlimited liability Partners’ liability is is limited to their investment Do not participate in the firm’s operations • Why would a new business venture choose to • operate as a partnership, and what downside • would the partners face?

8. Learning Goal 3 (cont’d.) Advantages of Partnerships Ease of formation Availability of capital Diversity of managerial expertise Flexibility to respond to changing business conditions Relative freedom from government control Disadvantages of Partnerships Unlimited liability for general partners Potential for conflict between partners Limited life Sharing of profits Difficulty in leaving a partnership • Why would a new business venture choose to • operate as a partnership, and what downside • would the partners face?

9. Partnerships Advantages easy and inexpensive to form diverse skills and expertise flexibility relative freedom from government regulations no special taxation Disadvantages potential conflicts between partners unlimited liability & potential loss sharing profits hard to leave or end partnership

10. Topics to Coverin a Partnership Agreement Purpose & duration of partnership Roles, responsibilities, compensation Contributions Procedures for adding/removing partners Buy-out procedures Dispute resolution Financial arrangements Dissolving the partnership Valuation Source: American Express Small Business Exchange, home3.americanexpress.com/smallbusiness

11. Learning Goal 4 Advantages of Corporations Limited liability Ease of transferring ownership Stable business life Ability to attract financing Disadvantages of Corporations Double taxation of profits Cost of complexity of formation Government restrictions • Why does the corporate structure provide advantages • and disadvantages to a company, and what are the • major types of corporations?

12. Learning Goal 4 (cont’d.) How does the corporate structure provide advantages and disadvantages to a company, and what are the major types of corporations? Stockholders Own the corporation Can sell or transfer shares at any time Entitled to receive profits in the form of dividends Board of Directors Elected by stockholders Govern the firm Officers Carry out the goals and policies set by the board C Corporations, S Corporations & Limited Liability Companies Major types of corporations

13. Corporations Advantages limited liability easy to get financing easy to transfer ownership unlimited life-span tax deductions Disadvantages double taxation of profits costly & complex to form government restrictions

14. Steps of Forming a Corporation 1. Select company’s name 2. Write and file Articles of Incorporation paperwork 3. Pay fees and taxes 4. Hold organizational meeting 5. Adopt bylaws, elect directors, pass operating resolutions

15. Organizational Structure of Corporations Stockholders elect Directors elect Officers (Top Management) President Vice Treasurer Secretary President

16. Types of Hybrid Corporations 1.S corporations organized like a corporation, but avoids double taxation of profits by routing income and losses through stockholders 2.Limited liability companies (LLC) offers same limited liability as a corporation, but may be taxed as either a partnership or corporation

17. Some Pros and Cons of LLC’s Pros Protection of personal assets Avoid double-taxation of profits Flexible management & organization Good for foreign investors • Cons • Often required to have a limited life (< 30 years) • Not corporations, so can not issue stock Source: The Company Corporation, www.incorporate.com

18. Learning Goal 5 Does a company have any business organization options besides sole proprietorship, partnership, and corporation? Limited Liability Company Provides limited liability for its owners Taxes like a partnership Cooperatives Collectively owned by individuals or businesses with similar interests Combine to achieve more economic power Joint venture An alliance of two or more companies Formed to undertake a special project Franchises Business arrangement between a franchisor and franchisee Franchisee uses business name and logo of franchisor

19. Specialized Formsof Business Organization 1. Cooperatives 2. Joint ventures 3. Franchises

20. Cooperatives Formed by people with similar interests, such as customers and suppliers lower costs increased economic power share in profits Members/owners pay annual fees Common in: agriculture hardware/lumber grocery

21. Joint Venture: 2 or more companies form an alliance to pursue a specific project, usually for a specific time period

22. Learning Goal 6 Why is franchising growing in importance? Business owner does not have to start from scratch Buys a business concept with a proven product and operating methods Franchisor provides: Management training and assistance Use of a recognized brand name, product, and operating concept Financial assistance

23. Franchising: business organization in which a franchisor supplies the product concept to the franchisee, who sells the goods or services

24. Franchises Advantages increased opportunity to expand (franchisor) recognized name, product, and operating concept (franchisee) management training and assistance (franchisee) financial assistance (franchisee) Disadvantages loss of control (franchisor) costs of franchising restricted operating freedom (franchisee)

26. Presentation onDesigning the Organization

27. Expected Functions of Formal Organization • organization structure • Planning, Measurement and evolution Scheme • Rewards • Selection criteria • Training

28. Stages in Organization Design

29. Primary concern of entrepreneur is to change the environment and seek new ideas. Another role for entrepreneur is that of allocation of resources .

30. Buliding the management Team and Successful Organization Culture There are some issues to address before assembling and building the management team. A team must be able to accomplish three functions • Execute the business plans • Identify functional changes in the business as the occurs • Make adjustments to the plans based on changes in the environment in the market that will maintain profitability.

31. Enterpnuere will also need to consider the personality and character of each individuales to creat a successful orangization culture . Organiztion will be a blend of attitudes, behaviours, dress, comuunications style that make one business different from others.

32. Successful Organization culture • Desired culture must match the business strategies outline in the business plans • Leader must create a workplace where employees are rewarded for good works. • Entrepreneur should be flexible enough to try different things • It is necessary to spend extra time to hiring process • The entrepreneur needs to understand significance of the leadership in the organization. Provide the appropriate tools to the employees

33. Roles of Boards of Directors The purpose of Boards of Directors is to provide important leadership and direction for the new venture. The function of the Boards of Directors Functions : • Reviewing operating and capital budgets • Developing long term strategies plans for growth and expansion • Supporting day-to-day activities • Ensure the proper use of assets

34. Criteria to chose the Boards of directors • Select individuals who can work with a diverse group and will commit to the ventures mission • Select candidates who understand the market environment or can contribute important skills to achieve planning goals • Select candidates who will show good judgments in business decision making

35. Boards of Advisor A board of advisor would be more loosely tied to the organization and would serve the venture only an advisory capacity for some of the function. It has no legal status Effect in family business

36. Organization and use of Advisor Entrepreneur will use outside advisors such as accountant, bankers, lawyers, advertising agencies

37. Thanks….