Getting Started                      An Introduction to the                      Nuances of Business                      ...
Drinking It From A Fire Hosewww.ncdcs   NCDCS, Inc. Copy right
Agenda Overview Attributes of the Serial Entrepreneur Organizations: Living Entities Business Structures Napkin Busin...
Overview 7% of the Adult Population Starts a  Business Every Year As many as 60% of New Business Fail  Within Three Year...
Attributes of the Serial Entrepreneur Absolute Support of          Visionary  Spouse & Family              Self-confide...
Support of Family Emotional support Future proofing Disaster avoidance Who are you doing it forwww.ncdcs    NCDCS, Inc...
Tenacity Not thick headed or stubborn Hangs on like a bull dog Focused on valued ideas with passion Pursued with reaso...
Visionary   A Critical trait   Streams ideas   Not always an operational executer   Knows when other talent is needed...
Commitment 200% + in! Time is constricted - Not your own Responsibility                 Responsibility                 ...
Self-confidence Not arrogant Built on experience Develops trust with others Humilitywww.ncdcs   NCDCS, Inc. Copy right
Good Judgment Result of Life Experiences Common Sense - not so common Solid decision making Virtue Results based lear...
Creative Able to improvise Imaginative Needs balancing Operationally inventive and adaptivewww.ncdcs   NCDCS, Inc. Cop...
Adaptive Functional shifts - spinning hats Quick responsiveness Get out of the comfort zonewww.ncdcs   NCDCS, Inc. Copy...
Overcomer Execute no matter what the circumstances No excuses Always a result Ascend Prevail Surmount To gain super...
Optimistic Positive perspective of the Future Forward Faith Knowledgeable Confidencewww.ncdcs   NCDCS, Inc. Copy right
Risk Taker Bed to bathroom Business is risk Understanding the affects Poke it here and what happens all over Watch ou...
Financial Understanding Capital                  Cash Flow  – Capitalization         COGS  – Working                Bu...
Organizational Personal                Business  – Time management          – Structure  – Filing                   – Do...
Good Governance Usually a public company issue Being pushed down by the Feds Basic Principles:  – Processes  – Customs ...
Responsibility An active moral consciousness A state of accountability Actions independently executedwww.ncdcs   NCDCS,...
Organizations A Living Entity Whole-istic view of a business  – a comprehension of the parts of the business    entity as...
Key Business Components   Management                Sales   Product                   Finance   Markets              ...
Give Them A Poke                            Mktg.                       .              D                    Ops           ...
Origins Of A Business Conceived as an idea Developed in a vision Has the genetics of the founder Birthed as a legal en...
Interesting 2008 U.S. Census data indicates about 196  million adults over age 25 SBA Report to the President indicates ...
More Interesting Deals that get venture funded per year  – 6 out of 1,000  – Between 3% to 5% of the submitted business  ...
Beginning the Process Stop and breath Make choices with knowledge Ask the questions you know you have Take your time w...
Choosing A Structure The structure sets the fundamentals for  building a legacy Stepping out of the skin  – Outsider loo...
The Initial Questions  – Is there a plan to develop this personality so that it matures    according to the goals being es...
The First Step of Structure            Choosing Name search  – State Attorney General web site     • Ensure you do this f...
Napkin Check Listwww.ncdcs    NCDCS, Inc. Copy right
Entity Comparison                         Sole                 General                   Limited              Limited Liab...
Sole Proprietorship Expedience or Life Style business First brush points   – The business is a ‘one-person’ operation,  ...
My Life Style Business                Analysis Desire to make money from a hobby Loss of a job and came up with an idea ...
Sole Proprietor Legal Definition A business structure in which, an individual and  his or her company are considered a si...
Napkin Sole Proprietorshipwww.ncdcs   NCDCS, Inc. Copy right
Simple Execution Mechanics COGS - the Cost of Goods Sold - A costly  error!    – Pricing model         • Hard cost vs. Pr...
Simple Execution Mechanics Vendor Selection Marketing Taxes - everywhere!!!   – Federal       • Social Security       •...
Simple Disaster & Exit Planning1. Know that you need a plan and   develop one. Plan for how you want   to leave the busine...
Simple Disaster & Exit Planning2. As well as planning for the downside:  –   Personal injury  –   Financial downturn  –   ...
Simple Disaster & Exit Planning5. Get a good handle on your financial   model and know everything about it,   especially y...
Simple Disaster & Exit Planning8. Vendor management and strategy9. Ensure all taxes are accounted for and the    cash is r...
Simple Disaster & Exit Planning11. All documentation, processes,    procedures, financial data, personnel    data, custome...
Partnerships History - First recorded in Rome 3rd century BC Definition:  A type of unincorporated business organization...
Partnership Influencers A well-defined organizational structure Job description definitions Information and communicati...
Key Partnership Consideration EACH participant is EQUALLY RESPONSIBLE  for the liabilities If one general partner gets a...
Partnerships with Limited              Partners Depends on the legal construct   – General Partnership (GP)   – Limited P...
Summary of Partnerships                                                  General                           Limited        ...
Corporations Latin word corpus means body or body of people Rome and India had entities that engaged in commerce  and ha...
Definition of Corporation   The most common form of business organization, and one that   is chartered by a state and give...
The Corporate Veil Protects shareholder and executives from  personal liability Caution to new corporations - banks, cre...
Corporate Summaries                                                Limited Liability                      S corporation   ...
Limited Liability Company LLC Each state is unique in its requirements to form  an LLC there are requirements in the ena...
Breathing Life to the LLC Has members at the core of its being Through an operating agreement, the  members begin to inf...
LLC Operating Agreement Several key components of this agreement   – Who the members are and how they will be elected int...
LLC Summary   Like the Sole Proprietorship and Partnership, the individual humans involved    in conjunction with the fou...
“S” Corporation Came into existence as part of the Technical  Amendments Act of 1958 Developed as a way to boost the eco...
“S” Corp Limitations Must be a domestic corporation. Must not have more than 100 shareholders. Allowed to own subsidiar...
Plusses of A “S” Corps Compliance & Governance requirements apply Requires more significant thought and planning Flexib...
www.ncdcs   NCDCS, Inc. Copy right
“C” Corporation Basic Definition:A corporation in the United States that, for Federal  income tax purposes, is taxed unde...
Key Pointers on “C” Corps Taxed directly since it is a legal Living  Entity The profits are taxed when earned The profi...
Corporate Personality Influencers Board of Advisors   – Don’t need to go it alone and you shouldn’t   – Good counsel adds...
The Advisory Board Constructing a dynamic Advisory Board  – What is the purpose of the board?     • The first Advisory Bo...
The Effective Advisory Board Executive responsibilities to the Board   – Time management   – 360˚ Communications   – Resp...
Corporate Personality Influencers Board of DirectorsThe BOD is comprised of individuals elected by the  shareholders to o...
The Conscience A BOD as the conscience soul of the  corporation Sets the ethic standards of operation Is the life force...
Board Empowerment Set the companys strategy that includes – ethics, policy,  objectives, and overall direction Full fina...
Functional BOD The entire Board is held liable -under the doctrine of  collective responsibility A mix in membership   –...
Functional BOD Find missing expertise with the industry experience, funding, finance  and marketing. Independent minded ...
Perception Is Reality About the             BODwww.ncdcs   NCDCS, Inc. Copy right
The Personality Influencers               Summarized The executive team - the mind and heart of the  corporation   – The ...
Outside Influencers Customers Vendors Media The Stock Market (for public companies) Political Socialwww.ncdcs     NC...
The Napkin Business Planwww.ncdcs   NCDCS, Inc. Copy right
The Business Plan Formula           BP = MP + SP + FM + ESBusiness Plan = Marketing Plan + Strategic    Plan + Financial M...
Reasons for a Business Plan Getting Funded or Financed A higher probability to succeed Identify what the executives don...
12 Step BP Summary1.   Grab their attention fast. The first few sentences must tell the     reader what you do; why you ar...
12 Step BP Summary5.   Competitor analysis with the SWOT analysis compared to     SWOT analysis of each competitor6.   Sal...
12 Step BP Summary9.   Believable and Captivating Financials from the in-depth     financial model.10. Overcome Barriers t...
Exit Strategy Reasons Plan the Exit before you begin For the Investor - simple but complex  – Want their money back with...
Exit Strategywww.ncdcs   NCDCS, Inc. Copy right
Intro to Strategic Planning Strategies are different from tactics in that:   – They are proactive and not re-active as ta...
Why the Strategic Plan The heart and soul of a sounding board Can validate what it is doing now and set  goals and objec...
Napkin Strategic Planwww.ncdcs   NCDCS, Inc. Copy right
Implementation1. Developing the plan2. Commitment to the plan3. Knowing all the resources are available4. Understanding yo...
Why Do Any of This Statistically Those that don’t either fail or  never reach their fullest potential Acting on one area...
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Bus 101 from a fire hose

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For new Entrepreneurs looking to start a new organization or for those looking for a refresher in all that it takes to make a small business get off to a good start and grow.

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  • 7% is about between 12 to 16 million people. The statistic show that 50% to 60% of new businesses fail in the first three years. There is a plethora of data on the Internet regarding Entrepreneurship and Starting or Managing a business. Who has the time to research when in the midst of doing something.
  • Holos is a word that means ‘all’ or ‘entire’.
  • Poking in on place has multi-directional effects and results
  • Bus 101 from a fire hose

    1. 1. Getting Started An Introduction to the Nuances of Business Tom Niewulis CEO www.ncdcs.com 360-666-3443NCDCS, Inc. copy right 2009
    2. 2. Drinking It From A Fire Hosewww.ncdcs NCDCS, Inc. Copy right
    3. 3. Agenda Overview Attributes of the Serial Entrepreneur Organizations: Living Entities Business Structures Napkin Business Plan Introduction to Business Strategic Planningwww.ncdcs NCDCS, Inc. Copy right
    4. 4. Overview 7% of the Adult Population Starts a Business Every Year As many as 60% of New Business Fail Within Three Years Statistics Show the Majority of Failures Do Not Have a Business Plan Plethora of Information on the Internet Who Has the Time in the Middle of the Fraywww.ncdcs NCDCS, Inc. Copy right
    5. 5. Attributes of the Serial Entrepreneur Absolute Support of  Visionary Spouse & Family  Self-confident Tenacity  Communicator Commitment  Creative - Able to Good Judgment Improvise Adaptive  Overcomer Optimistic  Risk Taker Financial Understanding  Organizational Responsibility  Understands Good Governancewww.ncdcs NCDCS, Inc. Copy right
    6. 6. Support of Family Emotional support Future proofing Disaster avoidance Who are you doing it forwww.ncdcs NCDCS, Inc. Copy right
    7. 7. Tenacity Not thick headed or stubborn Hangs on like a bull dog Focused on valued ideas with passion Pursued with reason and good judgment Knowledge and beliefs Get’r done Know when to punch outwww.ncdcs NCDCS, Inc. Copy right
    8. 8. Visionary A Critical trait Streams ideas Not always an operational executer Knows when other talent is needed Should learn excellent communication skills Understands leadership – Responsibility – Authority – Accountability Can believe in otherswww.ncdcs NCDCS, Inc. Copy right
    9. 9. Commitment 200% + in! Time is constricted - Not your own Responsibility Responsibility A c c Accountability o u n t a b i l i t y Personal Timewww.ncdcs NCDCS, Inc. Copy right
    10. 10. Self-confidence Not arrogant Built on experience Develops trust with others Humilitywww.ncdcs NCDCS, Inc. Copy right
    11. 11. Good Judgment Result of Life Experiences Common Sense - not so common Solid decision making Virtue Results based learning Hands on learning Mentoringwww.ncdcs NCDCS, Inc. Copy right
    12. 12. Creative Able to improvise Imaginative Needs balancing Operationally inventive and adaptivewww.ncdcs NCDCS, Inc. Copy right
    13. 13. Adaptive Functional shifts - spinning hats Quick responsiveness Get out of the comfort zonewww.ncdcs NCDCS, Inc. Copy right
    14. 14. Overcomer Execute no matter what the circumstances No excuses Always a result Ascend Prevail Surmount To gain superioritywww.ncdcs NCDCS, Inc. Copy right
    15. 15. Optimistic Positive perspective of the Future Forward Faith Knowledgeable Confidencewww.ncdcs NCDCS, Inc. Copy right
    16. 16. Risk Taker Bed to bathroom Business is risk Understanding the affects Poke it here and what happens all over Watch out for paralysis Calculatewww.ncdcs NCDCS, Inc. Copy right
    17. 17. Financial Understanding Capital  Cash Flow – Capitalization  COGS – Working  Business Ratios – Margin highlights Revenue – Growth rate Expenses – Capital return Balance Sheet – Employee efficiencies  Dash Boardswww.ncdcs NCDCS, Inc. Copy right
    18. 18. Organizational Personal  Business – Time management – Structure – Filing – Documentation – Email – Processes – Appearance – Procedures – IT – Communicationswww.ncdcs NCDCS, Inc. Copy right
    19. 19. Good Governance Usually a public company issue Being pushed down by the Feds Basic Principles: – Processes – Customs – Policies – Laws – Accountabilitywww.ncdcs NCDCS, Inc. Copy right
    20. 20. Responsibility An active moral consciousness A state of accountability Actions independently executedwww.ncdcs NCDCS, Inc. Copy right
    21. 21. Organizations A Living Entity Whole-istic view of a business – a comprehension of the parts of the business entity as intimately interconnected and explicable only by reference to the whole of business entity Interconnection of key business components Maturation to a sustainable legacywww.ncdcs NCDCS, Inc. Copy right
    22. 22. Key Business Components Management  Sales Product  Finance Markets  Accounting Marketing - Branding  Customer Service Advertising  Distribution Production  IT - Data Communication Managementwww.ncdcs NCDCS, Inc. Copy right
    23. 23. Give Them A Poke Mktg. . D Ops is t. e c n a , in T , I F One New Decision Cu ts st uc .S d vc ro . P Ex. Mgt.www.ncdcs NCDCS, Inc. Copy right
    24. 24. Origins Of A Business Conceived as an idea Developed in a vision Has the genetics of the founder Birthed as a legal entity Develops a personality Matures through growth Builds a legacy Hopes to be sustainablewww.ncdcs NCDCS, Inc. Copy right
    25. 25. Interesting 2008 U.S. Census data indicates about 196 million adults over age 25 SBA Report to the President indicates about 7% of adult population begins a business every year – 13,720,000 business starts per year Close to 60% of businesses started will fail in the first two years – 4.5 million will advance – Another 50% may not succeed over the first 5 yearswww.ncdcs NCDCS, Inc. Copy right
    26. 26. More Interesting Deals that get venture funded per year – 6 out of 1,000 – Between 3% to 5% of the submitted business plans are read beyond the executive summary – Only about 10% then get though to the screening process – Then, only about 10% make it past due diligence and get any fundingwww.ncdcs NCDCS, Inc. Copy right
    27. 27. Beginning the Process Stop and breath Make choices with knowledge Ask the questions you know you have Take your time when selecting a business entity Remember: that every business should be looked at as its own entitywww.ncdcs NCDCS, Inc. Copy right
    28. 28. Choosing A Structure The structure sets the fundamentals for building a legacy Stepping out of the skin – Outsider looking in – Influencer Review who and what you are compared to who and what the business entity is expected to bewww.ncdcs NCDCS, Inc. Copy right
    29. 29. The Initial Questions – Is there a plan to develop this personality so that it matures according to the goals being established for it? – What are the interdependencies that produce functional relationships? – What is natural for this entity to do in accomplishing its plan? – What is the entity doing that is un-natural to accomplishing its plan? – Who or what are the influencers that contribute to the entity moving forward or what is inhibiting it? – What legacy should this Living Entity have?www.ncdcs NCDCS, Inc. Copy right
    30. 30. The First Step of Structure Choosing Name search – State Attorney General web site • Ensure you do this for each state you will do business in Review the Initial Questions Build an Advisory Board as soon as possible Legal or other professional assistance as neededwww.ncdcs NCDCS, Inc. Copy right
    31. 31. Napkin Check Listwww.ncdcs NCDCS, Inc. Copy right
    32. 32. Entity Comparison Sole General Limited Limited Liability Limited Liability S corporation C corporation Proprietorship Partnership Partnership Partnership Company (LP) (LLP) (LLC) Ownership Single Person 2 or More Persons 2 or More Persons or 2 or More Persons or 1 or More Persons or No More Than Unlimited Number of or Entities Entities Entities 100 Shareholders Shareholders Entities (Spouses Are Considered One Shareholder) Formation No state filing Agreement Certificate of Limited State filing required. State filing required. Articles of Articles of required. However, between two or Partnership State In California, the use Articles/Certificate of incorporation with incorporation with If more parties. filing required. of LLP is limited to Formation/Organizatio State filing required. State filing required. Public Notice of No state filing accountants & n Trade Name is required. lawyers. Desired, You Must File a DBA (Doing Business As) or Fictitious Name Duration of Dissolved if entity Dissolves upon Perpetual Dependent on Dependent on the Perpetual Perpetual existence ceases doing death or withdrawal the requirements requirements imposed business or upon of a partner, unless imposed by the state of by the state of death of the sole safeguards are formation. formation. proprietor. specified in a partnership agreement. Liability Sole proprietor has Partners have At least one general Partners are not Members are not Shareholders are Shareholders are unlimited liability. unlimited liability. partner has unlimited typically responsible typically responsible typically not typically not liability. for the debts for the debts of the responsible for the responsible for the of the LLP. LLC. debts of the debts of the corporation. corporation. Operational Relatively few Relatively few Some formal Delaware, Georgia, Some formal Board of directors, Board of directors, Requirements legal requirements. legal requirements. requirements, but less Pennsylvania, Texas, requirements, but less annual meetings, and annual meetings, formal than and Virginia require an formal than annual reporting. and annual corporations. Need LLP to carry insurance corporations. Need to Need To reporting. Need To to Draft and maintain or escrow account to Draft and Maintain an Maintain Minutes of Maintain Minutes of "Partnership cover liabilities. "Operating Meetings and By - Meetings and By - Agreement" Agreement" Laws Laws Management Sole proprietor has Typically each Limited partners are All partners have the Members have an Managed by directors Managed by full control of partner has an excluded from right to manage the operating agreement who are elected by directors who are management and equal voice, unless management unless business directly. that outlines shareholders. elected by operations. otherwise they serve on the management. shareholders. arranged. board of directors. Taxation Not a taxable Not a taxable entity. Files taxes as a Files taxes as a If properly structured, No tax at the entity Taxed at the entity entity. Each partner pays separate entity, must separate entity, must there is no tax at the level. Income/loss level. If dividends Sole proprietor tax on his/her share meet certain criteria meet certain criteria to entity level. passed through are distributed to pays all taxes. of income and can to avoid being taxed avoid being taxed as a Income/loss is passed shareholders. shareholders, deduct losses as a corporation. corporation. through to members. dividends are also against other taxed at the sources of income. individual level. Pass-through Yes Yes Yes, if requirements Yes, if requirements Yes Yes No Income/loss are fulfilled. are fulfilled. Double No No No No No No Yes, if income taxation distributed to shareholders as dividends. Cost of Depending on State Depending on State State filing fee State filing fee State filing fee State filing fee State filing fee creation License Fees License Fees required. required. required. required. required. Raising Often difficult Contributions can Contributions can be Contributions can be Possible to sell Shares of stock are Shares of stock are Capital unless individual be made from made from partners, made from partners, interests, though sold to raise capital. sold to raise capital. contributes funds. partners, and more and more partners and more partners can subject to operating partners can be can be added. be added. agreement restrictions.www.ncdcs NCDCS, Inc. Copy right
    33. 33. Sole Proprietorship Expedience or Life Style business First brush points – The business is a ‘one-person’ operation, – They don’t believe they will have, need or want a partner, – They see that it has the easiest forms to fill out on the states’ Department of Licensing or Attorney General web site, – They don’t care that the taxable income shows up on their personal tax return, – They don’t understand the other forms of business entitieswww.ncdcs NCDCS, Inc. Copy right
    34. 34. My Life Style Business Analysis Desire to make money from a hobby Loss of a job and came up with an idea for a product More time with the family and can be self-motivated Desires to sustain a static level of income - does not envision having a large market impact Desire a family owned business that is more regional Wants to enjoy what they do and doesn’t care about the rest of the world going crazy Demands high quality of their service or product and will not compromise for the sake of investors or greater incomewww.ncdcs NCDCS, Inc. Copy right
    35. 35. Sole Proprietor Legal Definition A business structure in which, an individual and his or her company are considered a single entity for tax and liability purposes. A sole proprietorship is a company, which is not registered with the state as a limited liability company or corporation. The owner does not pay income tax separately for the company, but he or she reports business income or losses on his or her individual income tax return. The owner is inseparable from the sole proprietorship, so he or she is liable for any business debts. The entity is also called proprietorship.www.ncdcs NCDCS, Inc. Copy right
    36. 36. Napkin Sole Proprietorshipwww.ncdcs NCDCS, Inc. Copy right
    37. 37. Simple Execution Mechanics COGS - the Cost of Goods Sold - A costly error! – Pricing model • Hard cost vs. Product or Service specific cost – Hard Cost = Location + Phone + Lights + Office help + Other Similar – Product or Service Cost = Raw materials + Labor + Shipping + Everything specific to the product or service Margin - Calculated by deducting operating expenses (e.g. cost of goods and services, sales and marketing, general and administrative, and depreciation and amortization) from total revenues and dividing the result by total revenues.www.ncdcs NCDCS, Inc. Copy right
    38. 38. Simple Execution Mechanics Vendor Selection Marketing Taxes - everywhere!!! – Federal • Social Security • Unemployment • Income – State • Income - Depending on the state • Unemployment • Labor & Industries - Industrial Insurance – County – Citywww.ncdcs NCDCS, Inc. Copy right
    39. 39. Simple Disaster & Exit Planning1. Know that you need a plan and develop one. Plan for how you want to leave the business on the upside: – An income level that you personally would want to attain – A revenue or customer base the business will attain that could be valuable in the sale of the business – An age that you want attain so you can go do something else – Develop some set of other goals that will allow you to leave having met these planned goalswww.ncdcs NCDCS, Inc. Copy right
    40. 40. Simple Disaster & Exit Planning2. As well as planning for the downside: – Personal injury – Financial downturn – Not meeting your financial and customer objectives or – Just plain running out of money in the startup phase (know when to pull the ripcord on the parachute)3. Develop an Advisory Board4. Know your Business Plan inside and out. Plan the plan and execute knowing that you have to be dynamic and flexible to market changes.www.ncdcs NCDCS, Inc. Copy right
    41. 41. Simple Disaster & Exit Planning5. Get a good handle on your financial model and know everything about it, especially your cash flow.6. Train and communicate - processes • Choose a trusted person OR • cross train several trusted employees7. Ensure your spouse has some understanding of everything going onwww.ncdcs NCDCS, Inc. Copy right
    42. 42. Simple Disaster & Exit Planning8. Vendor management and strategy9. Ensure all taxes are accounted for and the cash is reserved to pay any monthly or quarterly amounts. Never, Ever use the tax monies for anything other than taxes10. Business Plan or Strategy checklistwww.ncdcs NCDCS, Inc. Copy right
    43. 43. Simple Disaster & Exit Planning11. All documentation, processes, procedures, financial data, personnel data, customer information, vendor information and other info well organized and accessible12. Plan the Plan then work the Planwww.ncdcs NCDCS, Inc. Copy right
    44. 44. Partnerships History - First recorded in Rome 3rd century BC Definition: A type of unincorporated business organization in which multiple individuals, called general partners, manage the business and are equally liable for its debts; other individuals called limited partners may invest but not be directly involved in management and are liable only to the extent of their investments. Legal liability includes all of the general partners being bound by the actions of a single general partner. Unlike a limited liability company or a corporation, in a partnership the partners share equal responsibility for the companys profits and losses, and its debts and liabilities. The partnership itself does not pay income taxes, but each partner has to report their share of business profits or losses on their individual tax return. Estimated tax payments are also necessary for each of the partners for the year in progress. Partnerships must file a return on Form 1065 showing income and deductions. Estimated tax payments are also required if they expect their income to be greater than $1,000.www.ncdcs NCDCS, Inc. Copy right
    45. 45. Partnership Influencers A well-defined organizational structure Job description definitions Information and communications processes Generalized processes and common procedures A dynamic business plan Strategic plans and a financial modelwww.ncdcs NCDCS, Inc. Copy right
    46. 46. Key Partnership Consideration EACH participant is EQUALLY RESPONSIBLE for the liabilities If one general partner gets a wild hair and makes a commitment without the say of the other general partners then all the general partners are liable for that commitment Must have clarity of roles and responsibilities, clarity of vision and a well defined plan to executewww.ncdcs NCDCS, Inc. Copy right
    47. 47. Partnerships with Limited Partners Depends on the legal construct – General Partnership (GP) – Limited Partnership (LP) – Limited Liability Partnership (LLP) Limited partners may be: – The financiers – The investors – Junior members of the organization The entity needs explicit agreementswww.ncdcs NCDCS, Inc. Copy right
    48. 48. Summary of Partnerships General Limited Limited Liability Partnership Partnership Partnership (LP) (LLP) Ownership 2 or More Persons or 2 or More Persons or 2 or More Persons or Entities Entities Entities Formation Agreement between two or Certificate of Limited State filing required. more parties. Partnership State filing In California, the use of LLP No state filing required. required. is limited to accountants & lawyers. Duration of existence Dissolves upon death or Perpetual Dependent on withdrawal of a partner, unless the requirements imposed by safeguards are specified in a the state of formation. partnership agreement. Liability Partners have unlimited At least one general partner Partners are not typically liability. has unlimited liability. responsible for the debts of the LLP. Operational Requirements Relatively few legal Some formal requirements, Delaware, Georgia, requirements. but less formal than Pennsylvania, Texas, and corporations. Need to Draft Virginia require an LLP to carry and maintain insurance or escrow account to "Partnership Agreement" cover liabilities. Management Typically each partner has an Limited partners are excluded All partners have the right to equal voice, unless otherwise from management unless they manage the business directly. arranged. serve on the board of directors. Taxation Not a taxable entity. Files taxes as a separate entity, Files taxes as a separate entity, Each partner pays tax on his/her must meet certain criteria to must meet certain criteria to share of income and can deduct avoid being taxed as a avoid being taxed as a losses against other sources of corporation. corporation. income. Pass-through Income/loss Yes Yes, if requirements are Yes, if requirements are fulfilled. fulfilled. Double taxation No No No Cost of creation Depending on State License State filing fee required. State filing fee required. Fees Raising Capital Contributions can be made Contributions can be made Contributions can be made from partners, and more from partners, and more from partners, and more partners can be added. partners can be added. partners can be added. Transferability of interest No Yes, pending approval of other Possible, dependent on limited partners and the general operating agreement partners. restrictions. Advantages Division of responsibilities Limited personal liability for limited partners Easier to raise capital No corporate income Disadvantages Impermanence of existence Difficult to find compatible partners Annual reporting requirementwww.ncdcs NCDCS, Inc. Copy right
    49. 49. Corporations Latin word corpus means body or body of people Rome and India had entities that engaged in commerce and had legal standing The oldest is the Stora Enso with a charter of 1347 for a copper mine On 31 December 1600, a date as ominous as any in history, the East India Company was given its charter 1886 The Supreme Court case - Santa Clara County v. Southern Pacific Railroad set a precedent, a corporation was a "natural person”, not through the court ruling on "corporate personhood," but by the misleading notes of a clerk.www.ncdcs NCDCS, Inc. Copy right
    50. 50. Definition of Corporation The most common form of business organization, and one that is chartered by a state and given many legal rights as an entity separate from its owners. This form of business is characterized by the limited liability of its owners, the issuance of shares of easily transferable stock, and existence as a going concern. The process of becoming a corporation, called incorporation, gives the company separate legal standing from its owners and protects those owners from being personally liable in the event that the company is sued (a condition known as limited liability). Incorporation also provides companies with a more flexible way to manage their ownership structure. In addition, there are different tax implications for corporations, although these can be both advantageous and disadvantageous. In these respects, corporations differ from sole proprietorships and limited partnerships.www.ncdcs NCDCS, Inc. Copy right
    51. 51. The Corporate Veil Protects shareholder and executives from personal liability Caution to new corporations - banks, credit card companies and other financial facilities will want personal guarantees. DON’T Do It! Very few understand what it means to fulfill the corporate “duty of care” as part of the fiduciary responsibilities in corporate governance Executives have a responsibility to another entity, the corporationwww.ncdcs NCDCS, Inc. Copy right
    52. 52. Corporate Summaries Limited Liability S corporation C corporation Company (LLC) Ownership 1 or More Persons or No More Than Unlimited Number of Entities 100 Shareholders Shareholders (Spouses Are Considered One Shareholder) Formation State filing required. Articles of incorporation with Articles of incorporation with Articles/Certificate of State filing required. State filing required. Formation/Organization Duration of existence Dependent on the requirements Perpetual Perpetual imposed by the state of formation. Liability Members are not typically Shareholders are typically not Shareholders are typically not responsible for the debts of the responsible for the debts of the responsible for the debts of the LLC. corporation. corporation. Operational Requirements Some formal requirements, but Board of directors, annual Board of directors, annual less formal than corporations. meetings, and annual reporting. meetings, and annual reporting. Need to Draft and Maintain an Need To Need To "Operating Agreement" Maintain Minutes of Maintain Minutes of Meetings and By - Laws Meetings and By - Laws Management Members have an operating Managed by directors who are Managed by directors who are agreement that outlines elected by shareholders. elected by shareholders. management. Taxation If properly structured, there is No tax at the entity level. Taxed at the entity level. If no tax at the entity level. Income/loss passed through dividends are distributed to Income/loss is passed through shareholders. shareholders, dividends are also to members. taxed at the individual level. Pass-through Income/loss Yes Yes No Double taxation No No Yes, if income distributed to shareholders as dividends. Cost of creation State filing fee required. State filing fee required. State filing fee required. Raising Capital Possible to sell interests, though Shares of stock are sold to raise Shares of stock are sold to raise subject to operating agreement capital. capital. restrictions. Transferability of interest Possible, dependent on operating Yes, observing IRS regulations Shares of stock are easily agreement restrictions. on who can own stock. transferred. Advantages Legal entity separate from Legal entity separate from Legal entity separate from individuals individuals individuals Limited personal liability Limited personal liability Limited personal liability Continuity of existence Continuity of existence Continuity of existence Continuity of management Continuity of management Continuity of management Easier to raise capital Easier to raise capital Easier to raise capital No corporate income tax Readily transferable interests Readily transferable interests Net operating loss is deductible No corporate income tax by shareholders Net operating loss is deductible Less "Formal" record – keeping by shareholders requirements Disadvantages Subject to government May have only one class of stock Subject to government regulations regulations Subject to government Annual reporting requirements regulations Annual reporting requirements Cannot raise capital through Annual reporting requirements Possible double taxation by issuance of stock paying both corporate andwww.ncdcs NCDCS, Inc. Copy right
    53. 53. Limited Liability Company LLC Each state is unique in its requirements to form an LLC there are requirements in the enabling statutes/formation laws requires you to conform to and declare certain criteria or else you will find you’re not really an LLC understand the intrastate laws regarding the LLC formed in your state doing business in another state or countrywww.ncdcs NCDCS, Inc. Copy right
    54. 54. Breathing Life to the LLC Has members at the core of its being Through an operating agreement, the members begin to influence the personality of this organizationwww.ncdcs NCDCS, Inc. Copy right
    55. 55. LLC Operating Agreement Several key components of this agreement – Who the members are and how they will be elected into the charter in the future. – How managers will be selected and what their duties, salaries, and grounds for dismissal will be. – How major decisions will be made. Which decisions will require unanimous approval of the members and which require a simple majority vote? Which decisions can be delegated to the manager in charge of daily affairs? – How compensation (salary) for actively participating members will be determined. – How new capital should be acquired should the company need it. – What procedures must be followed to transfer interests in the company? – Penalties, if any, if members or managers fail to act in accordance with the operating agreement.www.ncdcs NCDCS, Inc. Copy right
    56. 56. LLC Summary Like the Sole Proprietorship and Partnership, the individual humans involved in conjunction with the foundational documents will develop the initial personality of the business. This contractual combination will continue to influence the LLC persona throughout the limited life of the entity. That is correct, an LLC does not live forever. You have to reconstitute them when they reach their termination dates, some default to 30 years. An LLC does not necessarily have to comply with corporate governance rules as noted by the Delaware court. Be prudent and check your state regulations to make sure. Also, the Revised Limited Liability Company Act suggests to states that they review LLC’s for conformance to good governance. Consider how the sum of all the individuals in the LLC will be the influencers regarding how this entity establishes its legacy. Individual members participating in the LLC will leave a legacy, but what should the entity look like beyond the members’ participation.www.ncdcs NCDCS, Inc. Copy right
    57. 57. “S” Corporation Came into existence as part of the Technical Amendments Act of 1958 Developed as a way to boost the economy at the time Greatest advantages: – A unique blend of a true corporation – While retaining the taxing properties of a Partnership. For most small businesses an “S” Corp is an optimum entity typewww.ncdcs NCDCS, Inc. Copy right
    58. 58. “S” Corp Limitations Must be a domestic corporation. Must not have more than 100 shareholders. Allowed to own subsidiaries. Allowed to create an employee stock ownership plan. Exempt from the unified audit and litigation procedures. Must include only eligible shareholders. Must have only one class of stock. Taxes distributed to shareholders as regular incomewww.ncdcs NCDCS, Inc. Copy right
    59. 59. Plusses of A “S” Corps Compliance & Governance requirements apply Requires more significant thought and planning Flexibility Tax treatment as a partnership Always check with your attorney as you work through the process As with an LLC, Exec’s, don’t sign any loan papers…the corporate veil will be pierced.www.ncdcs NCDCS, Inc. Copy right
    60. 60. www.ncdcs NCDCS, Inc. Copy right
    61. 61. “C” Corporation Basic Definition:A corporation in the United States that, for Federal income tax purposes, is taxed under 26 U.S.C. § 11 and Subchapter “C” (26 U.S.C. § 301 et seq.) of Chapter 1 of the Internal Revenue Code. A Corporation must file under Subchapter “C” if it fails to meet even one requirement to qualify as an “S” Corporation.www.ncdcs NCDCS, Inc. Copy right
    62. 62. Key Pointers on “C” Corps Taxed directly since it is a legal Living Entity The profits are taxed when earned The profit is taxed to the shareholders when distributed as dividends Tax rate varies from 15% up to 38% of profits that include dividend distribution Advantage to consider - if a future consideration is a public offeringwww.ncdcs NCDCS, Inc. Copy right
    63. 63. Corporate Personality Influencers Board of Advisors – Don’t need to go it alone and you shouldn’t – Good counsel adds value of the Living Entity What is it?The advisory boards are group of individuals that can be developed for technical or specific business areas such as sales and marketing, information technologies or manufacturing processes.www.ncdcs NCDCS, Inc. Copy right
    64. 64. The Advisory Board Constructing a dynamic Advisory Board – What is the purpose of the board? • The first Advisory Board be focused on your product or service – Look for trusted experienced people; a mix of talent that contributes directly to the purpose and broadly to the business • don’t look to these people as surrogate executiveswww.ncdcs NCDCS, Inc. Copy right
    65. 65. The Effective Advisory Board Executive responsibilities to the Board – Time management – 360˚ Communications – Respect your board members – Get rid of dweebs – Compensate Board Size – Startups: three to five – Mature: Depends on purpose; may even have more than one Boardwww.ncdcs NCDCS, Inc. Copy right
    66. 66. Corporate Personality Influencers Board of DirectorsThe BOD is comprised of individuals elected by the shareholders to oversee the management of the corporation for the purpose of protecting the interest of the shareholders. The Board legally assumes responsibility for all corporate activities and is critical to maturing a functional corporationwww.ncdcs NCDCS, Inc. Copy right
    67. 67. The Conscience A BOD as the conscience soul of the corporation Sets the ethic standards of operation Is the life force for strategic development and financial accountability Hierarchical structure of the corporation is: The Shareholders, The Board of Directors, then the Executive Management Team and the employee basewww.ncdcs NCDCS, Inc. Copy right
    68. 68. Board Empowerment Set the companys strategy that includes – ethics, policy, objectives, and overall direction Full financial fiduciary responsibilities Oversight in holding accountable the CEO and Executive Management Team Modify and adopt bylaws Within the board; name members of the advisory, executive, finance, compensation and other committees Hire, monitor, evaluate, and fire the Chief Executive Officer and senior executives Determine and pay the dividend Issue additional shareswww.ncdcs NCDCS, Inc. Copy right
    69. 69. Functional BOD The entire Board is held liable -under the doctrine of collective responsibility A mix in membership – the top executives (inside directors or executive directors) – industry experts or respected individuals, (outside directors or non-executive directors) Must be educated in: – Good Governance – nuances of financial management Must be free to offer unbiased advice in all areas of the corporation as well as insisting on oversight and auditswww.ncdcs NCDCS, Inc. Copy right
    70. 70. Functional BOD Find missing expertise with the industry experience, funding, finance and marketing. Independent minded - will speak truthful, qualified opinions. A broader candidate base - look at senior executives in addition to CEO types. A manageable size – Always have an odd number. Have ready and willing participants Have specific committees Communicate, communicate…communicate! CEO’s and Executive Management LISTEN Fire bad Board members - Get rid of them.www.ncdcs NCDCS, Inc. Copy right
    71. 71. Perception Is Reality About the BODwww.ncdcs NCDCS, Inc. Copy right
    72. 72. The Personality Influencers Summarized The executive team - the mind and heart of the corporation – The embodiment of the consciousness transferred from the BOD – Establishes the essential character of the personality for the Living Entity The Board being the conscience and soul of the corporation The employees are the spirit of the Living Entitywww.ncdcs NCDCS, Inc. Copy right
    73. 73. Outside Influencers Customers Vendors Media The Stock Market (for public companies) Political Socialwww.ncdcs NCDCS, Inc. Copy right
    74. 74. The Napkin Business Planwww.ncdcs NCDCS, Inc. Copy right
    75. 75. The Business Plan Formula BP = MP + SP + FM + ESBusiness Plan = Marketing Plan + Strategic Plan + Financial Model + Exit Strategy The Marketing Plan is one of the most critical first steps that should be accomplished - SWOT analysis The Strategic Plan using the Political, Economic, Social, and Technological analysis with the Risk analysis The Financial Model is complex tool that takes into account all the monetary nuances of business Exit Strategy is the way out for Exec’s and Investorswww.ncdcs NCDCS, Inc. Copy right
    76. 76. Reasons for a Business Plan Getting Funded or Financed A higher probability to succeed Identify what the executives don’t know Understand resource requirements and when you will need them Stipulate actions for problem solving Knowing when set goals are attained A Communication tool to otherswww.ncdcs NCDCS, Inc. Copy right
    77. 77. 12 Step BP Summary1. Grab their attention fast. The first few sentences must tell the reader what you do; why you are unique; what size market you serve; what share of market you expect to capture; and when you intend to accomplish that.2. Analyze your existing customers. Define them by customer type, values and products/services including major accounts. Remember that the 80:20 rule often applies here, 80% of your business comes from 20% of your customers)3. Explain your products and services - refer to the strategic propositions, what these propositions will do for your customers.4. Detail solid distribution methods. The routes to market, gatekeepers, influencers and strategic partners; the other organizations and individuals you will work with to develop your market, including, commissions,endorsements, accreditations, approvals, licenses, etc.www.ncdcs NCDCS, Inc. Copy right
    78. 78. 12 Step BP Summary5. Competitor analysis with the SWOT analysis compared to SWOT analysis of each competitor6. Sales plan (1 year min) showing sales and margins by product or service stream, mix, values, segment, distributor, etc, whatever is relevant, phased monthly, in as much detail as you need.7. List the executable actions (marketing campaigns, sales activities, advertising, other) that will deliver the above, with costs and returns.8. Solid Management expertise is absolutely critical to both your success and your ability to raise venture and angel financing.www.ncdcs NCDCS, Inc. Copy right
    79. 79. 12 Step BP Summary9. Believable and Captivating Financials from the in-depth financial model.10. Overcome Barriers to entry. Need to show a sustainable competitive advantage. Are there patents, copyrights, a proprietary process or technology, exclusive licenses or agreements? Is the business the first to market? How long can the lead be protected if a big company enters the market?11. Pay attention to details and ensure that the numbers are used consistently, the document is concise - from five to thirty pages depending on the audience, easy to read – don’t use technical jargon – keep it simple and an appropriate business style12. Make sure all the company data; logo and contact information is on the cover page.www.ncdcs NCDCS, Inc. Copy right
    80. 80. Exit Strategy Reasons Plan the Exit before you begin For the Investor - simple but complex – Want their money back with high returns – Depending on stage from 5x to 12x – Most common exits are IPO, merger or acquisition For the Executive – Disability, Death, Divorce and Departurewww.ncdcs NCDCS, Inc. Copy right
    81. 81. Exit Strategywww.ncdcs NCDCS, Inc. Copy right
    82. 82. Intro to Strategic Planning Strategies are different from tactics in that: – They are proactive and not re-active as tactics are – They are internal in source and the business venture has absolute control over its application – A strategic plan is used as guidance to define functional and divisional plans, including technology, marketing, etc. Deals with one of three key questions: – What do we do? – For whom do we do it? – How do we excel? Or How to bear or avoid competition?www.ncdcs NCDCS, Inc. Copy right
    83. 83. Why the Strategic Plan The heart and soul of a sounding board Can validate what it is doing now and set goals and objectives to move to the next level of opportunity Write it down or draw a picture, record it so it can be listened to or etch it in a rock so it has to be picked up to reviewwww.ncdcs NCDCS, Inc. Copy right
    84. 84. Napkin Strategic Planwww.ncdcs NCDCS, Inc. Copy right
    85. 85. Implementation1. Developing the plan2. Commitment to the plan3. Knowing all the resources are available4. Understanding your reality a) Your internal reality: qualified employees, processes, finances and so on b) Your external reality: customers, suppliers and other stake holders5. Have a Communications plan6. 6. Plan for Murphywww.ncdcs NCDCS, Inc. Copy right
    86. 86. Why Do Any of This Statistically Those that don’t either fail or never reach their fullest potential Acting on one area of the business causes reactions everywhere Every business is a Living Entity that needs maturation to develop a legacy Ensuring the vision comes to reality Success is defined by executing the planwww.ncdcs NCDCS, Inc. Copy right

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