Organizational-plan-

DISCUSSION ON Based on the Perspective of Pakistan

PLAN

ORGANIZATIONAL

Y a s i r Hussain T u r i MBA 1431-209002

N a s i r Hussain MBA 1431-209001

S S Sh a h i d MBA 1431-2090

M Kashif Jan MBA 1431-2090

Organizational Plan is basically a “to do”

An list for an organization.

It lists out the plan of work, programs, and organizational growth over a period of time - six months, a year or five. The tasks involved, who is responsible for them, and when they’ll be done.

An Organizational Plan • • • • • • •

Helps To:

Set priorities for work Make sure tasks get done on time Focus on one thing at a time Share work among staff, board members & volunteers Make goals clear to investors Get a handle on big projects by breaking them down See the big picture of what organization is doing

developing the

management team •Management’s ability and commitment to the new venture are significant to investors. •Investors demand that the management team not operate the business as part time venture.

•management team to operate the business full time at a modest salary •Drawing out large salaries for the management team is unacceptable to an Entrepreneur and considered to be a lack of psychological commitment to the business

Legal forms of

Business Proprietorship form of

legal forms are

basic

business with single owner; unlimited liability; control over all decisions; receives all profits

Partnership form of business with 2 or more individual with unlimited liability, pooling resources to own a business.

Corporation form of business with separate legal entity, run by stockholders having limited liability & regulated by statute

Factors of the three forms of Business Formation Factors

Ownership

Liability of Owners

Proprietorship

Partnership

Corporation

Individual

No Limitation on Number of partners

No Limitation on number of stockholders

Individual Liable for business Liability

In general partnership, individuals are liable for business liabilities. In Limited Partnership partners are liable for capital contribution

Amount of capital contribution is limit of shareholder’s liability

Factors

Costs of Starting Business

Proprietorship

Partnership

Corporation

Partnership Created only by agreement, legal statute, Articles of cost, and minor incorporation, filing fees for trade filing fees, taxes, Only Filing Fees name. Limited and fees for states for trade name partnership in which requires more corporation is comprehensive registers to do agreement, hence business higher cost

Factors

Continuity of Business

Proprietorship

Partnership

Corporation

Death dissolves the business

Death or withdrawal of one partner terminates partnership unless partnership agreement stipulates otherwise. In limited partnership death or withdrawal of one partner has no effect on continuity. Limited partners can withdraw capital six months after notice is provided

Greatest form of continuity. Death or withdrawal of owner(s) will not affect legal existence of business

Factors

Transferability of interest

Capital Requiremen ts

Proprietorship

Partnership

Corporation

General Partner Stockholders can can transfer sell or buy stock at his/her interest will. Stocks’ Complete only with consent transfer may be freedom to sell of all other general restricted by or transfer any partners. Limited agreement. In S part of business partner can sell corporation, stock interest without may be transferred consent of general only to an partners. individual

Capital raised only by loan or increased contribution by proprietor.

Loans or new contributions by partners require a change in partnership agreement

New Capital raised by sale of stock or bonds or by borrowing in name of Corp. In S Corp. only one class of stock & limited to 75 shareholders

Factors

Proprietorship

Partnership

Corporation

Management Control

Proprietor makes all decision and can act immediately

All partners have equal control and majority rules. In limited partnership, only the general partners control the business.

Majority stockholder(s) have most control from legal point of view. Day-to-day control in hands of management who may not be major stockholders.

Distribution of profits and losses

Proprietor responsible and receives all profits and losses

Depends on partnership agreement and investment by partners.

Shareholders can share in profits by receipt of dividends

Attractiveness for raising capital

Depends on capability of proprietor and success of business

Depends on capability of partners and success of business

With limited liability for owners, more attractive as an investment opportunity

Tax Attributes of Forms of Business Attributes

Taxable year

Distribution of profits to owners

Proprietorship

Partnership

Corporation

Usually a calendar year

Usually calendar year but other day may be used

Any year can be used at beginning. Any changes in incorporation

All income appears on owner’s return

Partnership agreement may have special allocation of income. Pardoners pay tax on their pro rata shares income on individual return even if income not immediately distributed

No income is allocated to stockholders

Attributes

Proprietorship

Partnership

Corporation

Organization costs

Not amortizable

Amortizable over 60 months

Amortizable over 60 months

Dividend received

$100 dividend exclusion for single return and $200 on joint return

Dividend exclusion of partnership passes to partner

80% of more of dividend received may be deducted (after 12/31/86)

Capital gain

Taxed at individual level. A deduction is allowed for long term capital gains

Capital gain to partner will be taxed as a capital gain to the partner

Taxed at corporation level. After July 1, 1987 the maximum rate will be 34%.

Capital losses can be used to offset other income. Carried forward indefinitely

Carry back three years and carry over five years as shore, term capital loss offsetting only capital gains.

Capital losses

Carried forward indefinitely

Attributes

Initial organization

Limitations on losses deductible for real estate activities

Proprietorship

Partnership

Corporation

Commencement of business results in no additional tax for individuals

Contribution of property to a partnership not taxed

Acquisition of stock for cash entails no immediate taxes. Transfer if stock value greater than contributed property

Amount of risk may be deducted except for real estate activities

Partnership investment plus share of resources liability if any. At risk rules may apply except for real estate partnership

No losses allowed except on sale of stock or liquidation of corporation.

Attributes

Proprietorship

Partnership

Corporation

Medical Benefit

Itemized deduction for medical expense in excess of adjusted gross income on individual’s return. No deduction for insurance premium

Cost of partner’s benefit is not deductible to business as an expense. Possible deduction at partner level

Cost of employee shareholder coverage deductible as business expense if designed for benefits of employee.

Attributes

Retirement benefits

Proprietorship

Limitation and restrictions basically same as regular corporation

Partnership

Corporation

Same as for corporations

Limitations on benefits on benefits from defined planslesser of $ 90,000 or 100% of corporation. Limitation on contribution to defined contribution plans-lesser of $ 30,000 or 25% of compensation ( 15% of aggregate for profit-sharing plans)

building the

management team •Execute the business plan The team must be able to

three functions: accomplish

•Identify fundamental changes in the business as they occur •Make adjustments to the plan based on changes in the environment and market that will maintain profitability

building a successful

organizational culture Once legal

form of organization is determined, the entrepreneur will need to

job description and job analysis. prepare a

The job analysis will be serving as a guide in determining hiring procedures, training, performance appraisal, compensation program, and job description and specification.

building a successful

organizational culture Job description Specify the details of the work that is to be performed and any special conditions or skill involved in performing the job. Job description should contain a job summary, skills or experience required, a summary of the responsibilities and duties the authority of the individual and standards of performance.

Job specification outlines the skills and abilities needed to perform the job including prior experience. Outlining the job specification for a trained employee is easier than for the untrained people who will be trained on the job. So the entrepreneur should focus on specific qualities that will be required, such as personality, physical traits, interest, or sensory skill.

Board of Directors

role of the

•Reviewing operating and capital budgets •Developing long-term strategic plans for growth and expansion

•Supporting day to day activities •Resolving conflicts among owners or shareholders •Ensuring the proper use of assets or •Developing a network of information sources for the entrepreneurs

Board members

selecting

The member of

board

members should be carefully selected considering the following

criteria

• Select individuals who can work with a diverse group and will commit to the venture mission • Select candidates who understand the market environment or can contribute important skills to the new venture’s achievement of planning goals • Select candidates who will show good judgment in business decision making

Board of

Advisors • Loosely tied to the organizations

Uses of Board of Advisors • Formal part of a venture • Outside advisors, such as lawyers, accountants, ad agencies, etc.

• Serve the venture in an advisory capacity • Has no legal status • Meet less frequently; depending on the important venture decision • Useful in a family business • Selection process similar to the BOD • Compensated per meeting basis or with stock • Provide reality check

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