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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$ees
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Learning Goal 2Learning Goal 2
Ad(antagesAd(antages' Ease and "o !ost ofEase and "o !ost of
formationformation
' Oner%s rights to a""Oner%s rights to a""
#rofits#rofits
' Oner%s !ontro" of theOner%s !ontro" of the
businessbusiness' e"ati(e freedom frome"ati(e freedom from
go(ernment regu"ationgo(ernment regu"ation
' Absen!e of s#e!ia" ta+esAbsen!e of s#e!ia" ta+es
' Ease of disso"utionEase of disso"ution
-isad(antages-isad(antages' Un"imited "iabi"it$ 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$0out #ro!edures -is#ute reso"ution-is#ute reso"ution 1inan!ia" arrangements1inan!ia" arrangements -isso"(ing the #artnershi#-isso"(ing the #artnershi# 5a"uation5a"uation
Source:,meri&an -.press mall Business -.&hange'
home"*ameri&ane.press*&om/small%usiness
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Learning Goal 0Learning Goal 0
Ad(antages ofAd(antages of
Cor#orationsCor#orations' imited "iabi"it$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
7/17/2019 Entrep 5 Ems Sheryl
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BZUPAGES COM
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
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