Chapter 1 Business Planning and Organization

1. Chapter 1 Business Planning and Organization BCN 4753 Fall 2008

2. Business Planning • Idea • Feasibility Research • Strategic Plan • Decide on Business Type • Business Plan • Revisit Strategic Plan (continuous over the life of the company)

3. Feasibility Research • Can we do what we want to do? • Are there any laws against it? • Are there huge costs associated with doing it? • What other barriers to entry are there? • Is there a real future in what we want to do? • What other risks are associated with it? • Is there someone already doing what we want to do?

4. Strategic Plan • Serve as a framework for decisions or for securing support/approval. • Provide a basis for more detailed planning. • Explain the business to others in order to inform, motivate & involve. • Assist benchmarking & performance monitoring. • Stimulate change and become building block for next plan.

5. Strategic Plan • Mission Statement • Long term i.e. 5 years + • Owners/directors (need all EEs) • Matters of strategic importance • Separated from day-to-day work • Realistic, detached and critical • Review periodically • Written down.

6. Strategic Plan • Vision • Mission • Values • Objectives • Strategies • Goals • Programs

7. Decide on Business Type • Sole Proprietorship • Partnership • General Vs Limited • Joint Ventures • Corporation • S-Corporation aka Subchapter S

8. Sole Proprietorship • Simplest form of Business organization • Owner is manager and makes all decisions • Compliance with state and local business licensing requirements only • Advantages: easy to create, total control by owner, transferable, and liquidity • Disadvantages: personal liability, death of owner, must use property to secure loans, taxes and benefits not tax deductible.

9. Partnership • Two or more persons in an agreement • Co-owners • liability • Partnership agreement (like a Business Plan) • General Partnership • Pooled resources • Limited Partnership • At least one general partner and one or more limited partners • Limited partner Capital for Return on capital • Limited say limited liability

10. Partnership • Advantages: increased ability to raise capital, pooling of resources, pooling of talents, shared responsibility and minimal administration costs. • Disadvantages: General partners have unlimited liability, termination upon death, bankruptcy or withdrawal, non-transferable, benefits not tax-deductible

11. Joint Ventures • Special combination of two or more persons or entities. • Specific Venture • No designation as a partnership or corporation • Same rules as partnership • Usually limited to single transactions

12. Corporation • Creations of statutes • Separate legal entity under the laws of state • Same rights as individuals have • Most costly to form • Issues Stock

13. Corporation • Advantages: Exemption of liability, continuity of existence, death has no effect, high level of management, transferable ownership, fringe benefits are tax deductible, and able to raise capital. • Disadvantages: Lack of centralized control, closely regulated, expensive, record keeping, and double taxation.

14. S-Corporation • Shareholders absorb all corp. income or losses; report as individual taxpayers. • Eliminates the problem of double taxation. • IRS regulations • Has most of the same advantages and disadvantages.

15. S-Corporation • Must be domestic • One class of stock • Only individuals and estates can be shareholders • Cannot be part of another organization • Max number of shareholders • No non-resident alien shareholders • 20% of revenue must be from domestic sources • Dividends, interest, royalties, rents, annuities, and securities transactions < 20% of total revenue

16. LLC • Owners will be the same from the beginning to the end.  • There is no stock in an LLC.  • The ownership is represented by 100% membership interest.  • Typically used when you have investment in real estate or a rental property, • The tenants should have no doubt that the owner is not you, it is a company.  • An LLC is treated like a corporation for tax purposes.  • It can have the same flow through attribute an S corporation is allowed.  • It can also have a closed status, like a C corporation.  • There is no record keeping requirements with an LLC.  • There is no board of directors.  • No requirement to hold board of directors or shareholders meetings.  • Therefore there are no corporate minutes. 

17. Control of Business • Sole Proprietorship – absolute power over all decisions. • Partnership – Control is shared between partners as per the agreement • Corporation- depends on stock ownership, exercised through regular board meetings by the board of directors

18. Business Plan • Purpose is to provide a written summary of the contractors goals and objectives • Defines how plans are to be carried out • Gives a plan for implementing the business Strategy • Detailed business operation plans • Needed to acquire capital

19. Business Plan • Nature of Business • Markets • Competition • Expense of Start-up • Projecting Income and Expenses • Employment Needs • Taxes • Regulations • Financing • Site Location • Expansion • Insurance • Record Keeping Standards • Advertising Needs

20. Business Plan • Good plan should answer: • Type of constructing contracting • Type of experience needed • What is the nature of the business environment • Capital Requirements • Benchmarking pricing structure in the market • Costs of your service offering • Profit margin • First year expenses, Volume needs, Breakeven point • Foreseen liabilities and risks and plan

21. Business Plan • Nature of your Business • Define your exact business • What does your business do for its customers? • What doesn’t it do for customers? • What distinguishes you from competition? • What do you want it to do in the future?

22. Business Plan • Markets • What is it that you sell? • Is there a need for your product? • What is included in the market? • Competition • Who is that competition and where are they? • Benchmarking • What sets you apart?

23. Business Plan • Expense of start-up • Initial Capital • Purchase or lease Equipment • Deposits and installation fees • Taxes, Permits, insurance, and licenses • Professional Services • Advertising • Employees

24. Business Plan • Projecting Income and expenses (Working Capital) • Determine prices • Monthly targeted sales, profits, variable costs • Expected rate of growth • Basic costs: Labor, Materials, Equipment • Fixed costs • Lines of credit • Your rate of pay • Basis for projections • Plan for covering cash flow problems • Add in a margin of error

25. Business Plan • Employment • Hire other people or not • Where to find employees • Duties and responsibilities of employees • Skills, experience, training and other characteristics needed • Wage rate • Training plan • Rules and regulation for employees • Governmental regulations • Other requirements • Employee regulation laws

26. Business Plan • Taxes • Federal and State • Investment tax credit • When do you file taxes • Employment taxes • Unemployment taxes • Other taxes • Impact fees

27. Business Plan • Regulations • What federal regulations apply? • Filling Requirements • Licenses • Zoning laws, building codes, health , fire, and police standards • Norms of community • Special corporate requirements

28. Business Plan • Financing • Net income projections • Reinvestment requirements • What additional capital requirements are there? • Where to get a business loan? • Are government loans available? • If A/R are late how will the cash flow problem be handled? • System for withholding taxes to ensure prompt payment

29. Business Plan • Site locations • Specific location requirements • Proximity to suppliers or customers • Resource considerations • Traffic, Parking , and other businesses • Expansion • Capital requirements • Restrictions

30. Business Plan • Leasing Arrangements • Lease or buy • How is rent determined? • Rent comparison • Improvements • Insurance needs • Renewal issues • Sublet rules and regulations • Expansion options • Restrictions • Terms of lease • Zoning

31. Business Plan • Insurance Coverage • Property Insurance • Casualty Insurance • Life Insurance • Fidelity or Surety Bonding • Employee Insurance

32. Business Plan • Record Keeping • What records do you need? • Financial Statements • Statement use • Record-keeping system • Record keeping services

33. Business Plan • Advertising and Marketing • Visibility • Image of Company • Identify business site • Identify Market how to reach them • Frequency and allocation • Message to potential customers • Trade associations and other groups

34. Business Management • Planning • Organizing • Directing • Controlling • Standardizing • Assigning • Communicating

35. Guidelines to Organizing • State • Corporate Filling fees • Articles of incorporation • Compliance with “Florida General Corporation Act” • County • Fictitious Names Registration • Fulfill requirements to operate under fictitious name

36. Other Considerations • Solid & Hazardous Waste Laws & Regulations • Florida Department of Environmental Protection Division of Waste Management • Permit to Discharge into Navigable Waters • Permit for Construction over Navigable Waters • U.S. Army Corps of Engineers Regulatory Division

37. Other Considerations • Qualifying Agents • Obtain all Required Licenses and Permits • IRS Registration • State Tax Fillings • Occupational Licenses • Certificate of Occupancy • Zoning Permits

38. Sources of Information and Assistance • The Florida Department of Commerce • Division of Economic Development • Minority Business Development Center • The Florida Small Business Development • Small Business Administration • SCORE- Service Corps of Retired Executives

39. Dissolving or Terminating of Business Organization • Consideration of all consequences • Sole Proprietorship • Partnership • 1 Dissolution • 2 Winding up • 3 Termination • Corporation • Voluntary • Involuntary