Marketing bán hàng - Chapter 7: Ownership questions

Copyright 2015 Jack M. Kaplan &Anthony C WarrenPatterns of Entrepreneurship Management 5th Edition, Chapter 7 Setting up the CompanyChapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisonsCopyright 2015 Jack M. Kaplan &Anthony C WarrenPresentation OutlineWhat form of Ownership is Best?Forms of Doing BusinessSetting Up a ProprietorshipSetting Up a “C” CorporationSetting Up a Sub. SPartnershipsSetting Up a Limited Liability Company (LLC)Legal IssuesComparison Organization ChartsChapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisonsCopyright 2015 Jack M. Kaplan &Anthony C WarrenWhat Form of Ownership is Best?1. How big can the business potentially become?2. How much control do you need in the decision-making process of the company? 3. How much capital is needed to start the business?4. What tax considerations are important? 5. In case of failure, to what extent are you willing to be personally responsible for debts created by the business?6. Is it important that the business continue in case of the owner’s incapacity or death?  Chapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisonsAsk yourself these questions: Copyright 2015 Jack M. Kaplan &Anthony C WarrenForms of Doing BusinessThe legal form of the business is selected from: Sole Proprietorship, C-Corporation,S-Corporation,Partnership,Limited Liability Corporation (LLC) The form should be determined in light of the business’ short- and long-term needs’ Chapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisonsCopyright 2015 Jack M. Kaplan &Anthony C WarrenSole ProprietorshipOverview:A Sole Proprietorship has a single owner and only requires local business licenses to open. Pros:Simple to createLow start up feesNo special legal restrictionsCons:Unlimited personal liabilityLimited access to capitalLack of Continuity for the BusinessChapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisonsCopyright 2015 Jack M. Kaplan &Anthony C WarrenOverview: Separate legal and tax entity from owners.Shareholder liability limited to invested capital.Existence continues after shareholder’s death.Best form for raising external capital.Pros:Limited liability.Most appropriate structure for an IPO.Certain tax benefits and easy to provide stock option plans.Ease of transferability of interests.Structure that a venture capitalist requires.Cons:Double taxation at the personal and corporate level once profitable.High administration compliance costs.Directors are held personally accountable.Well defined corporate governance rules and laws to follow.“C” CorporationChapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisonsCopyright 2015 Jack M. Kaplan &Anthony C WarrenRegistering a “C” CorporationYou must: Register the name with a state.Decide on the location of the company’s principal office.Obtain a federal employer ID number SS-4.Establish the capital structure of the company.Open a bank account with the ID number and acquire a corporation seal.Chapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisonsCopyright 2015 Jack M. Kaplan &Anthony C WarrenSmall Business Corporation (Subchapter-S)Overview:A corporation, but with “flow through” tax benefits to owners.As a corporation, Sub-S is a separate entity and therefore has limited liability for owners and stockholders.Limited to 75 owners, only one class of stock allowed, and no foreign shareholders.Pros:Liability protection.Enjoy corporation status, but owners pay the taxes.Cons:Stringent rules necessary to maintain Sub-S status.Qualification requirements bring administrative and cost burdens.Failure to comply with Sub-S rules, may have major tax consequences.Not eligible for qualified employee stock options.Investors cannot receive preferred shares as in a C-Corporation.Chapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisonsCopyright 2015 Jack M. Kaplan &Anthony C WarrenPartnerships Overview:A partnership is usually defined as an association of two or more people carrying on as co-owners of a business for profit.Pros:Easy to EstablishDivision of ProfitsAbility to attract partnersLittle Government Regulation Cons:Unlimited Liability of at least one PartnerCapital Accumulation not possibleRestrictions of Eliminating General partnerPotential for Personality and Authority ConflictChapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisonsCopyright 2015 Jack M. Kaplan &Anthony C WarrenLimited Liability Company(LLC)Overview: Owned by “members”, not shareholders.A combination of the best characteristics of corporations, partnerships, and sole proprietorships.Pros:Liability protection (a separate legal entity as in a C Corporation).LLC is not a tax paying entity (tax benefits to members).Statute meetings and minutes are not required.Cons:Unlikely that a venture capitalist would invest.Cannot take the company public.Different shareholder interests result in complex operating agreements.All members must consent to transfer ownership.Some states have different management and member rules.Often used initially before converting to a C Corporation, which incurs costs.Chapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisonsCopyright 2015 Jack M. Kaplan &Anthony C WarrenChoosing Legal CounselLaw firms handle a variety of legal matters, including corporate, intellectual property, and tax and employment issues.Attorneys often specialize in one of these areas.Look for firms that are experienced with start- ups from early stage to IPO.Avoid firms that deal primarily with large companies.Avoid attorneys that do more work with venture capitalists than start-ups.Seek recommendations and references.Chapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisonsCopyright 20152 Jack M. Kaplan &Anthony C WarrenSetting Up the Board of Directors - 1Set the number of directors.Designate the initial board of directors.Determine whether the directors will be elected by a plurality of the vote or cumulative voting. Cumulative voting entitles each stockholder to cast the total number of votes multiplied by the total number of directors to be elected and insures the minority has representation of the board.Chapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisonsCopyright 2015 Jack M. Kaplan &Anthony C WarrenEstablish a procedure to fill vacancies on the board.Designate the executive officers of the company.Determine whether the officers should be elected by the stockholders or appointed by the board. Determine each officer’s title and responsibilities.Setting Up the Board of Directors -2Chapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisonsCopyright 2015 Jack M. Kaplan &Anthony C WarrenSubscription AgreementsUsed for initial and subsequent capital contributions.Purchase and Sale AgreementsUsed for purchase of operating assets.Employment AgreementsGiven to senior executives.Confidentiality AgreementsUsed to protect existing and in-process intellectual property – for employees, and third parties.License AgreementsCovers any intellectual property that you use or license.Customer AgreementsBasis for delivery of services (service companies only).Some Legal Agreements You May RequireChapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisonsCopyright 20152 Jack M. Kaplan &Anthony C WarrenEmployer –Employee AgreementsThe employee cannot disclose any confidential information about the company either during or subsequent to employment.They must return all materials that belong to the company at the time of termination of employment.They cannot engage in a new business during the period of employment without the consent of the employer.They will not compete with the company for a period of time subsequent to employment.Any new ideas they have must be assigned to the employer.       Chapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisonsCopyright 2015 Jack M. Kaplan &Anthony C WarrenBusiness Organizational Structure Comparison Chart -1CharacteristicC-Corp.S-Corp.LLCLimited liability for all ownersYesYesYesOwners can participate in management without losing liability protectionYesYesYesEasy to form and without maintaining extensive record keepingYesYesNoNumber of owners2 or more1-752 or moreRestrictions on ownershipNoYesNoDouble taxYesNoNoChapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisonsCopyright 2015 Jack M. Kaplan &Anthony C WarrenBusiness Organizational Structure Comparison Chart -2CharacteristicC-Corp.S-Corp.LLCAble to deduct business loss on individual returnNoYesYesYesBasis for loss includes owner’s share of company debt in owner’s tax returnNoYesCan increase basis by “step-up” electionYesYesYesCan specially allocate items of income and expenseYesYesYesContribute and distribute appreciated property tax freeNoYesYesChapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisonsCopyright 2015 Jack M. Kaplan &Anthony C WarrenSummary GuidelinesThe key issues to consider are liability, taxation, and corporate governance.The structure should be based on your goals and objectives.You should consider an LLC or a Sub S for a lifestyle/family business.If you plan to go public or raise venture capital, consider a C Corporation.Consider the advantages in registering a C Corporation in Delaware.Chapter 7Ownership QuestionsForms of OwnershipLegal IssuesComparisons