PLANNING

 According to Peter Drucker:
Planning is continuous process of making present entrepreneurial decision (risk taking) systematically and with best possible knowledge of their futurity, organizing systematically the efforts needed to carry out these decisions and measuring the result of these decisions against the expectation through an organized systematic feedback.

 According to Koontz o’ Donnell:
Planning is an intellectual process, the conscious determination of course of action, the basing of decisions on purpose, facts and considered estimates.

 According to David Ewing:
Planning is to a large extent the job of making things happen that would not otherwise occur.

Features of planning :
 Planning is an intellectual activity
 Planning is an primary function of management
 Planning involves futurism
 Planning involves decision – making
 Planning is goal – oriented process
 Planning is continuous process
 Plan is all Pervasive

Need for planning :
 The increasing time span between present decisions and future results.
 Increasing organizational complexity
 Increased external change
 Planning and other management functions

Importance of planning :
 Planning determines the future destination of an organization
 Planning makes activities of employees meaningful
 Planning economizes operations
 Planning helps in reducing the risk of uncertainties
 Planning leads to discovery of new ideas and opportunities
 Planning facilitates co-ordination

Types of plans :
 Purposes or missions
 Objectives or goals
 Strategies
 Policies
 Procedures
 Rules
 Programs
 Budgets

Steps in planning :
1. Being aware of opportunities
2. Setting objectives and goals
3. Considering planning premises
4.Identifying alternatives
5.Comparing alternatives in light goals of sought
6.Choosing an alternative
7.Formulating supporting plans
8.Number zing plans by making budgets

Advantages of planning :
 Competitive spirit
 Conducive to systematic and Methodical work
 Minimizes irrelevant wastes
 Better and more constructive use of facilities
 Provides an overall picture of the operation of an enterprise
 Ensures co – ordination

Limitations of planning :
 Limitation of information
 Time limit
 Administrative limitation
 Action delay limit
 Psychological barrier

TYPES OF BUSINESS ORGANISATION

TYPES OF BUSINESS ORGANIZATIONS
When organizing a new business, one of the most important decisions to be made is choosing the structure of a business.

Forms of Business Ownership
This decision will have long-term implications, so consult with an accountant and attorney to help you select the form of ownership that is right for you. Your choice will be based on:
1. Your vision regarding the size and nature of your business.
2. The level of control you wish to have.
3. The level of "structure" you are willing to deal with.
4. The business's vulnerability to lawsuits.
5. Tax implications of the different ownership structures.
6. Expected profit (or loss) of the business.
7. Whether or not you need to re-invest earnings into the business.
8. Your need for access to cash out of the business for yourself.
9. The risks of your personal assets from business liabilities.
10. Are their partners and/or investors that will be part of the business.

Sole Proprietorships
The vast majority of small business start out as sole proprietorships . . . very dangerous. These firms are owned by one person, usually the individual who has day-to-day responsibility for running the business. Sole proprietors own all the assets of the business and the profits generated by it. They also assume "complete personal" responsibility for all of its liabilities or debts. In the eyes of the law, you are one in the same with the business.

Advantages of a Sole Proprietorship
1. Easiest and least expensive form of ownership to organize.
2. Sole proprietors are in complete control, within the law, to make all decisions.
3. Sole proprietors receive all income generated by the business to keep or reinvest.
4. Profits from the business flow-through directly to the owner's personal tax return.
5. The business is easy to dissolve, if desired.

Disadvantages of a Sole Proprietorship
1. Unlimited liability and are legally responsible for all debts against the business.
2. Their business and personal assets are 100% at risk.
3. Have almost be ability to raise investment funds.
4. Are limited to using funds from personal savings or consumer loans.
5. Have a hard time attracting high-caliber employees, or those that are motivated by the opportunity to own a part of the business.
6. Employee benefits such as owner's medical insurance premiums are not directly deductible from business income (partially deductible as an adjustment to income).

PARTERNERSHIP :
In a Partnership, two or more people share ownership of a single business. Like proprietorships, the law does not distinguish between the business and its owners. The Partners should have a legal agreement that sets forth how decisions will be made, profits will be shared, disputes will be resolved, how future partners will be admitted to the partnership, how partners can be bought out, or what steps will be taken to dissolve the partnership when needed. Yes, its hard to think about a "break-up" when the business is just getting started, but many partnerships split up at crisis times and unless there is a defined process, there will be even greater problems. They also must decide up front how much time and capital each will contribute, etc.

Advantages of a Partnership
1. Partnerships are relatively easy to establish; however time should be invested in developing the partnership agreement.
2. With more than one owner, the ability to raise funds may be increased.
3. The profits from the business flow directly through to the partners' personal taxes.
4. Prospective employees may be attracted to the business if given the incentive to become a partner.

Disadvantages of a Partnership
1. Partners are jointly and individually liable for the actions of the other partners.
2. Profits must be shared with others.
3. Since decisions are shared, disagreements can occur.
4. Some employee benefits are not deductible from business income on tax returns.
5. The partnership have a limited life; it may end upon a partner withdrawal or death.

Types of Partnerships that should be considered:

General Partnership
Partners divide responsibility for management and liability, as well as the shares of profit or loss according to their internal agreement. Equal shares are assumed unless there is a written agreement that states differently.

Limited Partnership and Partnership with limited liability
"Limited" means that most of the partners have limited liability (to the extent of their investment) as well as limited input regarding management decisions, which generally encourages investors for short term projects, or for investing in capital assets. This form of ownership is not often used for operating retail or service businesses. Forming a limited partnership is more complex and formal than that of a general partnership.

Joint Venture
Acts like a general partnership, but is clearly for a limited period of time or a single project. If the partners in a joint venture repeat the activity, they will be recognized as an ongoing partnership and will have to file as such, and distribute accumulated partnership assets upon dissolution of the entity.

Corporations
A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique "entity", separate and apart from those who own it. A corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.

Advantages of a Corporation
1. Shareholders have limited liability for the corporation's debts or judgments against the corporations.
2. Generally, shareholders can only be held accountable for their investment in stock of the company. (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.)
3. Corporations can raise additional funds through the sale of stock.
4. A corporation may deduct the cost of benefits it provides to officers and employees.
5. Can elect S corporation status if certain requirements are met. This election enables company to be taxed similar to a partnership.

Disadvantages of a Corporation
1. The process of incorporation requires more time and money than other forms of organization.
2. Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.
3. Incorporating may result in higher overall taxes. Dividends paid to shareholders are not deductible form business income, thus this income can be taxed twice.

Subchapter S Corporations
A tax election only; this election enables the shareholder to treat the earnings and profits as distributions, and have them pass thru directly to their personal tax return. The catch here is that the shareholder, if working for the company, and if there is a profit, must pay herself wages, and it must meet standards of "reasonable compensation". This can vary by geographical region as well as occupation, but the basic rule is to pay yourself what you would have to pay someone to do your job, as long as there is enough profit. If you do not do this, the IRS can reclassify all of the earnings and profit as wages, and you will be liable for all of the payroll taxes on the total amount.

Limited Liability Company (LLC)
The LLC is a relatively new type of hybrid business structure that is now permissible in most states. It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued if desired by a vote of the members at the time of expiration. LLC's must not have more than two of the four characteristics that define corporations: Limited liability to the extent of assets; continuity of life; centralization of management; and free transferability of ownership interests.