Make The Right Moves At The Right Time

MAKE THE RIGHT MOVES AT THE RIGHT TIME A PRACTICAL GUIDE ON HOW TO START A START-UP!

CURATED AND WRITTEN BY KAGO KHACHANA

PUBLISHED BY SOCIALWEB

Š The Editor(s) (if applicable) and The Author(s) 2017. This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication.

Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations Printed in Botswana Edited by Kutlo Balefi Book Covers Designed by Kago Khachana For more information email me: khachanakago@gmail.com or call +267-74885707/ +267-75951310 ISBN No. 978-99968-0-585-1

ACKNOWLEDGEMENTS

First and foremost I would like to give thanks to the God for giving the strength and the drive to write and complete this book and finally share it with world.

A big shout-out to my little sister, my family, friends and strangers who believed in me and gave me encouraging words and support throughout the process of putting this book together.

A big thank you to my editors Brains Bond and the ever awesome Kutlo Balefi.

Thank you to all the contributors in this book, this book couldn’t exist without you guys and your great content. The world is a better place to live in because of you guys.

“Thanks to all the hustlers. And most importantly you, the customer” Jay Z

Dedicated to My grandma Basiti Khachana and my nephew Lethabo Khachana

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CHAPTER 1: SETTING UP YOUR COMPANY

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SETTING UP YOUR COMPANY Things You Need To Know Before Starting Your Own Business Do something you like. Don't start something you won't want to do in five years. Because if you are successful, you'll still be doing this in five years.

Finish what you start. Nearly every entrepreneur I know suffers from the same curse: we like to start things more than we like to finish them. In other words, if you are a good entrepreneur, you'll have a lot of great ideas. Most of them would probably work out well and make you a lot of money.

However, that doesn't mean you should pursue them. Pick one and go with it until it dies or it makes you rich enough to buy a private island.

Don’t dive in without a plan. Just like the business plan, it’s critical to think through any initiative you wish to launch. When you’re in the midst of startup fever, it’s easy to get wrapped up with every new idea. However, be careful of losing focus. Moving forward is critical for any startup, and constantly switching directions can impede this forward progress. With each new idea, step back and think how it fits into your company’s overall goal and vision, then create a plan for how to make it happen.

How much do you need to live? When working on your business plan, do not forget about the most important factor: YOU. You need to take into account your living costs. Rent, mortgages, and health insurance -- these are all things that don’t pay for themselves. You will most likely need to cut out all the unnecessary extras you can live without. Make sure you account for unforeseen or unexpected expenses by factoring a little flexibility into your budget for those “just-in-case” moments. You might even consider taking a part-time job until things pick up with your new venture and speak to a financial planner to help you budget yourself properly.

Where are you in your life? Starting a new business takes brains, bravery, and what will seem to be endless hours of hard work. When you own your own company, there is always something that has to get done. You will most likely find yourself working at least 60-80 hours a week for the first two years. With that said, I’ll ask you one very important question: Are you ready to give up your personal life for the next three years?

Time. Having sufficient time is one of the biggest stumbling blocks for many people who want to start their own business. Develop good time management skills. Learning to prioritize tasks is difficult, but if you fail to do so, you may end up alienating customers and vendors that you need to work with. Learn to take care of jobs that must be done immediately as soon as possible, and delay doing the projects that you know can wait.

Prioritizing business tasks is key, but it doesn’t stop there. Prioritize personal tasks as well to make sure you can carve out sufficient time in your busy day to devote to your startup.

Money is important but not enough. A lot of entrepreneurs manage to raise capital early in the game, but money is just not enough. A sound business model that generates consistent cash flows is important. Besides, you need people to implement your systems. So don't worry about raising money.

Focus on building a business so incredible people throw money at you.

Page |3 Focus on people and their needs. Business is all about people. You can’t do it all by yourself. Focus on people, understand their needs, compensate them adequately, and invest in their training. They may or may not stay with you, but it’s important to continually train them.

The owner is separate from his business. It’s important to separate yourself from your business, and look at yourself as an employee and shareholder in your business. I’ve seen that many people struggle to differentiate their personal finances from that of their business.

Choose the right business for you. Sometimes, the difference between success and failure can be just choosing the right business for you. There are times when no matter how much you try, things just won’t work out because market conditions are not in your favor.

Maintain a strong work-life balance. I see a lot of entrepreneurs spend 12 to 13 hours a day in their business. And they’ve been doing it for over 10 years. This eventually causes them to burn out and become unproductive. The moment you start working lesser hours, you find ways to streamline your operations and get things done faster. Nowadays, there are a lot of apps that can help you become more productive.

Get in with the law. Understand what regulations, licenses and taxes you will need to follow, obtain and pay for your new business. After doing some initial research on your own, consult with a lawyer and accountant to confirm your understanding and to help structure your business to be in compliance with the law. Generally speaking, you will need to need to (i) ensure you are charging the correct amount of tax your service or product that your business is promoting, if applicable and (ii) obtain all of the proper licenses needed to run your new business, at a minimum. Establishing a successful business is hard enough. The last thing you need is some technical legality or administrative detail to stand in the way of your success.

Start Saving Early. If you start saving early, you can use your savings to invest in your business.

Savings give you options.

Learn to manage debt better or stay out of it. Some entrepreneurs use debt to start a business, this can be very dangerous especially if you are a first time entrepreneur. A start-up is inherently very risky, especially if the business model is untested.

If the business fails, the business owner still needs to pay back debt because most debts are personally guaranteed by the business owner.

Some entrepreneurs use home loans, and personal loans to start a business because interest rates on these type of loans are low. However, be very careful, less optimistic, and make sure your debt is within manageable limits.

Find a good mentor. Having a good mentor is like parental guidance. You want someone to hold you accountable for your actions, and provide guidance through your journey.

But choose your mentor wisely. It should ideally be someone who has a strong track record of success in business, believes in your idea, and is willing to give you honest feedback without worrying about protecting your feelings.

Page |4 Don’t Expect to Turn a Profit Immediately. Many people get discouraged when they end each day with less money than they started with, even if they made sales. It takes time and a certain volume of sales to see forward progress, and there will always be days that are slow. Be aware of your monthly “nut” – i.e., the amount you need to clear in order to break even – and make that your goal, not cash in your pocket at the end of every day. When a business is getting off the ground, it can take a while before the profit reaches or exceeds the fixed monthly costs you incur to run it.

Expect Mistakes. I’m still kicking myself for things I did wrong in the early days of my first business.

But while those mistakes cost me money, I learned from them, and I have used that knowledge to prevent similar events from occurring again. Mistakes can be valuable experiences.

Realize That You Can’t Make Everyone Happy. Unfortunately, the customer is not always right, but you can’t let it get you down. For example, if you let one credit card chargeback ruin your day, you may lose other sales because you can’t focus on your job or provide good customer service.

Research your industry and market to get a sense of what the customer expects and what types of issues you may run into. When you encounter difficult customers, learn from the experience, and don’t take it personally.

Network. The first thing to do when contemplating starting a business is to understand the commitment required. You will need to talk with many entrepreneurs, ideally those who have succeeded and those who have failed. Their experience needs to be recent to be useful, as it will provide valuable context for your endeavour. The most helpful advice to capture is the impact on their lifestyle, such as finances, personal relationships, health, emotional stability, and self-esteem.

Some Tasks Are Monotonous. Patience is key even for people who get into a business based on a hobby they love. Many people who turn a hobby into a business really enjoy the day-to-day work, but despise the rest of the work that running a business entails, such as accounting, doing taxes, advertising, and managing staff. You don’t have to enjoy filing quarterly taxes, but you do have to accept that doing the unglamorous and boring tasks is what makes running the business possible.

Don’t over -- or under -- spend. Starting a business can be incredibly financially taxing on you and your family. You will need to learn where and when to spend. It’s important not to waste those precious seed dollars but it’s equally important to spend where necessary. In any business, you often have to spend money to make money. Don’t skimp out on things your company needs.

Don’t fall into a discount trap. At the beginning, too many young companies feel the pressure to heavily discount their prices in order to win business. While customer acquisition is important, attracting customers at unsustainable price levels will just result in a race to the bottom. After all, raising your prices on goods and certain services can be a tricky proposition. I’ve learned that you’re better off in the long run focusing on how to bring more value to customers, rather than simply slashing your prices.

Never partner with someone because it's convenient. Partner with someone because it makes you stronger. The wrong partner will drive you crazy, make you hate your work and end up causing more problems than they solve.

Page |5 Don't listen to statistics. People love to throw around the statistic that 95 percent of business fail.

Don't listen to that -- it's an excuse to make you feel comfortable about giving up. If that number is even correct, it's because most people don't commit, they don't follow through to the end or they are stupid in how they manage their money.

Lastly but not least, Read -- a lot. If you don't have time, listen to audiobooks. And not just business books. Read motivational books, self-help books, success books, fiction books, biographies -whatever.

The Best Time To Start Your Own Business

SOURCE: http://fundersandfounders.com/finding-your-window-of-opportunity/

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NAMING YOUR COMPANY Name selection is often an overwhelming, frustrating, and exhausting experience. The following OMC rule, which stands for "Obviously Meaningful to Customers." can make the name selection process easy; "Obviously" A company name should not require a customer, investor, or employee to expend mental effort deciphering its meaning. If a company name requires an explanation, it's not following this part of the rule. Examples:  

Poiuyt Inc. ("It's the top of the left hand side of the QWERTY keyboard and it means that we think differently.")

Calibrex5D ("We help companies work through the '5 Ds' of the engineering process; here's a 12 page presentation that explains this.")

"Meaningful" There's a huge difference between being meaningful and just having a meaning. Anything can have a meaning, in the sense of a definition. For example, the word "ommatophor" has a meaning.

However, it's only meaningful to a biologist. Or a snail, if it could talk.

For a company name to be meaningful, in addition to having a meaning, it must create a positive emotion. Here are some examples of company names that have meaning but are not meaningful (i.e., evoke no emotion):  

Market Consulting Inc. (OK, yeah, we know from the name kinda what you're all about but ... meh.)

Analog Widget Corp. (Yes, yes, you make widgets. Thanks for telling me. But why should I care?)

"to Customers" It's not enough to just be meaningful, though. To be effective the name must be meaningful to potential customers and, by extension, to potential investors and potential employees, too.

Here are some examples of names that would be meaningful to the people inside a company, but carry no emotional weight with outsiders:  

Optimal Associates. (Yes, you're an association that wants to optimal, but what does that mean to me?)

The Smithson Group. (Yup, somebody named Smithson founded the company. Why should I care?)

Now that I've provided some bad examples, here are some examples of great startup names that ended up as huge companies. To make this easy, I'll put those names into three generic types:

Page |7 Retro-Ironic Descriptors These are longish names that describe the product or service but with an old-timey feel and a slightly ironic edge. Examples:   

The Cheesecake Factory Urban Outfitters Great American Cookies

Traditionally, it's been consumer companies that have used retro-ironic descriptors. Most B2B firms would probably consider them a bit too frivolous.

Emotion-Laden Actual Words These are real words or combinations of real words that communicate meaning and also carry emotional overtones (i.e., are meaningful). Examples:   

Uber Life Is Good Oracle

Unfortunately, it's become almost impossible nowadays to find usable real words to name your company. By now they've mostly been snatched up, either as trademarks, URLs, or both. Never hurts to look, though.

Suggestive Neologisms These are made-up words that attempt to capture both the meaning and meaningfulness of real words.

Examples:   

Lyft Activa Integra

Unlike actual words, neologisms can usually be trademarked and have an available URL. However, neologisms have become so common that they can seem a bit bland.

By the way, once a firm has established itself, these rules don't apply. Apple, for example, was a bit of a head-scratcher when it first appeared. However, the Apple name acquired meaning (and meaningful emotion) after people used the products.

In other words, while Apple is today a fabulously valuable brand, if you're starting a new company, naming your firm "Avocado" or "Cashew" isn't going to be much help. If you follow the OMC rule, though, your company name can be a real asset.

If your startup name isn't OMC, don't despair. Eventually, your success (or lack of it) will create both meaning and meaningfulness to your customers, investors and employees. Whether you become a "Cisco" or an "Enron" is entirely up to you.

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Why Bad Company Names Hurt You Almost every bad naming decision can be traced back to one or more of the following attitudes. You must learn to recognize them: 

Mobile: “It’s a mobile app. Who cares what the name is. If people recognize the icon on their dashboard, then that’s all the brand recognition we need. It’s the mobile Web, baby! Get ready for the revolution.”



Settling: “There’s a shortage of good names. Consequently, consumers are getting used to silly ‘Web 2.0 names. They only care about the product.”



Politics: “I won’t spend more than the cost of a domain’s registration fees. Domain squatters are pirates, and I would never pay their inflated prices with my hard-earned money.”



Tired: “To be completely honest, I’m just short on ideas. I think I’ll stick with the one I like best so far and just prefix ‘get’ or ‘try’ to my domain name. Later, when we’re big, we’ll buy the official domain.” (On the surface, this is one of the better excuses, but we’ll deconstruct this approach at the end of this section.)



Short-Sighted: “What are you talking about? Our name is loaded with meaning. It has a very rich and personal history amongst the team. It represents us.”



Deprioritizing: “I’m building a business with many more important tasks that need my attention. I refuse to spend more than two meetings talking about our naming options.”



Naïve: “Pff! I’m a pretty creative person. I can easily come up with something hip and original. I see companies with decent names like Zobonko and Furtzii – I can do even better than that!”



Stuck: “Honestly, we brainstormed for ages. We couldn’t find anything we loved

All these excuses are valid to varying degrees, but they’re ultimately just that – excuses.

Entrepreneurs who use them are in danger of signalling the following to investors and early adopters: 

A lack of self-awareness: The Company didn’t realize that their name was too lousy to settle on. They didn’t have the self-awareness to thoroughly gather and assess feedback about their naming decision. (What else will they not bother gathering feedback on?)



A lack of attention to detail: They didn’t take the company naming process seriously. (Can they be expected to take the naming of their individual products or services seriously? Can they be expected to pay attention to the very fine details of their brand, marketing, and design strategies?)



A lack of diligence: They didn’t have the sustained drive to find a good name at a good price.

They failed to navigate the (admittedly) rigorous process of naming. (Will they fail to thoroughly execute on other arduous necessities?)

Page |9 Avoid the above mistakes and follow this quick steps to name your start-up!        

Brainstorm a list of names Compile a list of keywords Plug your keywords into generators Narrow it down to a few decent names Find out which is perfect.

Ask the audience Pay close attention to the emotional responses that your name provoke.

Make sure that your employees and other stakeholders are supportive of the name you choose

Great Companies With Brilliant Name And How They Got Them Apple Challenging Perceptions When Steve Jobs wanted to create a new line of personal computers in the 70s, computers were considered foreign and inaccessible. So when it came to the company name, Jobs searched for a friendly, inviting name to attract everyday people.

Co-founder Steve Wozniak supposes the name Apple was inspired by Jobs's stay at an Oregon commune, which was completely surrounded by apple trees.

But however the inspiration came to him, Jobs made Apple into a leader in consumer electronics innovations, with the iPod, iPhone, and iPad devices attracting computer and non-computer types alike.

Google Mistakes Aren't Mistakes Google was originally a misspelling of a word that already exists in the dictionary: "Googol." A googol is defined as a very large number, specifically 10 to the 100th power.

Googol was supposed to be a name that would be indicative of the titanic amount of information on the Internet that the company sought to organize. The misspelled domain name "google.com" was still available, so the company settled on "google.". Now, both words are in the dictionary, but most consumers only ever use one.

Virgin Calling It Like It Is Before earning his billions, 20-year-old entrepreneur Richard Branson was preparing to launch a mail order record retailer. According to Branson's biography, one of his workers suggested, "What about Virgin? We're complete virgins at business."

Branson loved the idea. It embraced who they were, rather than trying to conceal it. In 1970, Branson's mail order business took off. Two short years later came the record shop and then the recording studio.

P a g e | 10 Nike Just Outsource It In 1971, Bill Bowerman and Philip Knight, the founders of Blue Ribbon Sports, were set to launch a new line of soccer shoes branded with a design by Carolyn Davidson, called the swoosh.

The new shoe line would embrace the spirit of victory, so the marketing minds behind BRS consulted Greek mythology to find their muse: Nike, the Winged Goddess of Victory.

The name was so good that in 1978, Blue Ribbon Sports officially changed its name to Nike, Inc

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NAMING TOOLS NAMINUM Naminum is the leading Start-up, company and website name generator on the web.

NAMEMESH NameMesh helps you in finding a perfect name for your Start-up or business using an intelligent ranking and classification program.

NAMECHK Check the availability of your username across dozens of the most popular social network websites with NameChk. KNOWEM KnowEm allows you to check for the use of your brand, product and username instantly on over 500 social media websites.

DOCK NAME Dock Name is a crowdsourced service that helps Start-ups find a domain name.

NAMEROBOT NameRobot offers everything you need to create suitable naming ideas in a short time PANABEE Panabee is a simple way to search for domain names, app and company names.

BRANDBUCKET Explore premium, quality, hand-picked, unique and brandable business names available for sale for your business venture.

TRADEMARKIA Trademarkia is one of the largest trademark search engines in the world. Search Millions of Trademarks Filed Since 1870 For Free.

COMPANY NAME AVAILABILITY CHECK WEBSITES Botswana: http://www.mtinamesearch.gov.bw/search/ South Africa: www.cipro.gov.za/products_services/search.asp UK: https://www.businessnamechecker.co.uk/business-names/available-company-names/ USA: https://www.sec.gov/edgar/searchedgar/companysearch.html

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COMPANY REGISTRATION There are various ways your business can be structured and your choice will define your legal responsibilities and tax payable.

The most common are:    

Sole Trader Limited company Partnership Limited liability partnership (LLP)

Once you have started in business and chosen your preferred business structure, there is nothing to stop you from changing to another type when circumstances change.

The basic steps of company registration in Botswana In local context (Botswana) the following documents should be submitted:           

Form 2 and Form 3 for a company limited by shares; Form 2A and Form 3 for a closed company; Form 2B and Form 3 for a company limited by guarantee; Form 3 (declaration) to be filled by a qualified Company Secretary recognized by the Act or a Director/member of a company; The person presenting the application should provide their address, telephone or mobile numbers in the spaces provided; The person presenting the application should attach certified copies of their identity card or passport Certified copies of identity documents for the proposed directors and shareholders and a practising certificate for the Company Secretary; Share capital (maximum issued) Two (2) original bound sets of all documents are required P360.00/ $36 registration fee of payable upon submission and acceptance of registration documents In case of a business, name registration form RBN 2 should be completed and submitted with a copy of the applicant’s identity document and P150.00/ $15 registration fee

It should be noted that reservations business/company names are only valid for 30 days and only valid reservations are accepted for business/company registrations. If more than 30 days have elapsed, the business/company must be reserved again through the process listed above. The process is more or less similar in most countries across the world.

The basic steps of company registration in UK To incorporate your company you must file the following documents: 1. Application to register a company (form IN01) and the fee 2. Memorandum of association

P a g e | 13 3. Articles of association (unless you adopt model articles in their entirety) 4. Additional information if your application includes a sensitive word or expression The application to register a company (form IN01) This form requires: 1. the proposed company name 2. the situation of the company’s registered office (RO) i.e. whether it is in England and Wales, Wales, Scotland or Northern Ireland 3. the address of the RO (which must be the same as the situation of the RO) 4. whether the company will be private, public or unlimited 5. details of the company’s intended business activities by reference to a standard industrial classification code (SIC) 6. choice of articles of association 7. details of the proposed director(s), and the secretary if it has one 8. details of People with Significant Control (PSC), or other legally required statements such as a statement that the company doesn’t have any PSC (further guidance) 9. directors’ service and residential addresses 10. a statement of capital and initial shareholdings or a statement of guarantee 11. whether a company limited by guarantee wishes to apply to be exempt from needing to use ‘limited’ or ‘cyfyngedig’ in its name 12. if the proposed name contains a sensitive word and a section requiring confirmation that you have requested the views of a government department or other body.

13. a statement of compliance or guarantee

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DIFFERENT TYPES OF BUSINESS OWNERSHIPS SOLE PROPRIETORSHIP A sole proprietorship is owned and run by one individual who receives all profits and has unlimited responsibility for all losses and debts.   

In a sole proprietorship, there is no legal distinction between the individual and the business.

Thus, every asset is owned by the proprietor, and they have unlimited liability.

Examples include writers and consultants, local restaurants and shops, and home-based businesses.

A sole proprietor may use a trade name or business name other than his or her legal name.

Advantages Of Sole Proprietorship Quicker Tax Preparation As a sole proprietor, filing your taxes is generally easier than a corporation. Simply file an individual income tax return including your business losses and profits. Your individual and business income are considered the same and self-employed tax implications will apply.

Lower Start-up Costs Limited capital is a reality for many start-ups and small businesses. The costs of setting up and operating a corporation involves higher set-up fees and special forms. It's also not uncommon for a lawyer to be involved in forming a corporation.

Ease of Money Handling Handling money for the business is easier than other legal business structures. No payroll set-up is required to pay yourself. To make it even easier, set up a separate bank account to keep your business funds separate and avoid co-mingling personal and business activities.

Government Regulation Sole proprietorships also have the least government rules and regulations affecting it. They do need to comply with licensing requirements within the states in which they do business and they do need to pay attention to local regulations. However, the paperwork required is much less than large corporations. Thus, they can operate quite easily. Sole proprietorships also do not pay corporate taxes.

Sale and Inheritance The sole proprietor can own the business for as long as he or she decides, and can cash in and sell the business when they decide to get out. The sole proprietor can even pass the business down to their heir, a common practice.

P a g e | 15 Disadvantages Of Sole Proprietorship Lack of financial controls The looser structure of a proprietorship won't require financial statements and maintaining company minutes as a corporation. The lack of accounting controls can result in the owner being lax about financial matters, perhaps falling behind in payments or not getting paid on time. It can be a serious issue if financial controls are not strictly managed.

Difficulty in raising capital Imagine your business in five years. Will it still be a business of one? Growing your small business will require cash to take advantage of new markets and more opportunities. An unrelated investor has less peace of mind concerning the use and security of his or her investment, and the investment is more difficult to formalize; other types of business entities have more documentation. Outside investors will take your company more serious if you are a corporation.

Unlimited liability Your small business, in the form of a sole proprietorship, is personally liable for all debts and actions of the company. Unlike a corporation or an LLC, your business doesn't exist as a separate legal entity.

Therefore, all of your personal wealth and assets are linked to the business. For instance, if you go bankrupt and owe your debtors P100,000, then that money will have to come out of your own wallet even if there is no money left in the business. If you operate in a higher risk business, such as manufacturing or consumables, the cost to benefit ratio is favourable toward a corporate structure

PARTNERSHIPS     

Starting an unincorporated organization, complete with one or more partners, is generally referred to as a partnership. Balancing the risks and returns of this relationship is accomplished through types of partnerships.

Common types of partnerships include general partnerships, limited partnerships, joint liability partnerships, several liability partnerships, and limited liability partnerships.

The primary points of differentiation between all of these models revolves around liability, and how it is distributed among partners.

Having limited liability in a given partnership agreement offers protection from legal and financial claims, while simultaneously resulting in some loss of control and potential returns.

Coming to complete agreement regarding the type of partnership, and the division of liability and profit, is the first step to building an organization from the ownership point of view.

Types of Partnerships For the purpose of this discussion, the most important types of partnerships to consider are general partnerships, limited partnerships, joint liability partnerships, several liability partnerships, and limited liability partnerships.

P a g e | 16 General Partnerships (GP) This represents a default version of a partnership, which governs the relationships between the individual partners as well as between the partnership and the outside world. Each partner in the organization is considered an agent of the partnership, which means each partner represents the organization when dealing with external parties. Similarly, each partner has equal right to participate in the management, decision-making, and control (unless otherwise stated). Under most formats, adding a new partner requires the complete support and consent of all existing partners.

In terms of risks and returns (or liabilities and profits), the default assumption is that profits are distributed equally, and that liability is shared jointly and severally. Any debt or liability impacting the organization can be distributed equally (or via allocated responsibility) across the partners' personal assets.

Limited Partnerships (LP) In a limited partnership, a general partner may collaborate with a limited partner. A limited partner has no managerial authority, nor in most situations would they earn equal returns. However, the limited partner is protected by limited liability in legal situations regarding debt or other costs that may impact the general partner's personal assets. Along similar lines, limited partners are not considered agents of the organization from a legal perspective. It is also important to understand that this is not the same as a limited liability partnership (LLP), in which all partners have limited liability.

Joint Liability Partnerships Exactly as it sounds, a joint liability partnerships holds all partners equally liable for any financial and legal issues. As opposed to a several liability concept, in which liability may be distributed based on certain proportionate responsibility, joint liability partnerships are equal across the board. Picture a married couple purchasing a home. A joint liability on that loan would stipulate that both parties are equally responsible for repayment as well as equally in possession of the asset (i.e. the home).

Several Liability Partnerships Several liability is the converse to joint liability, in which the involved parties will settle liability disputes based on respective obligations. This is easiest to demonstrate via an example. Assume two partners create a business, let's say exporting wine. Partner A is in charge of sourcing, getting great wine from around the world. Partner B is responsible for the buyer side, and ensuring legality with the countries they are selling too. While selling to a more conservative country, it turns out Partner B accidentally overlooked some legal steps in the importing process.

As alcohol can be legally complex with costly mistakes, and it was partner B's responsibility, it could be argued in a several liability case that partner B owes 80% of the cost for that mistake. To say 100% would likely be a little unfair, considering Partner A should be aware of the full channel. But how much liability does each party deserve? These are difficult questions, making this type of partnership slightly more complex.

P a g e | 17 Limited Liability Partnerships Finally, there are limited liability partnerships (LLPs). In this situation, some or all partners have limited liability, which grants it some similarity with a corporation. LLPs do not hold each partner responsible for the financial and legal mistakes of the other partners. In some countries, LLPs must have a central GP with unlimited liability to put this risk somewhere (see limited partnerships). This format is quite popular among certain high-end services, such as law and accounting. It allows collaborative work while maintaining independence in regards to liability.

Like most legally complex concepts, in the United States in particular, LLP rulings can vary significantly from area to area. Understanding which liabilities are limited and which are not is important information to have before entering into a partnership.

Lastly, when considering the appropriate type of partnership, liability is the key word. Prior to any formalized arrangement, each party should put forward their expectations concerning profit sharing and liability in clear terms. Aligning on the risk and return is the first step to moving forward in any professional business relationships at the ownership level.

PARTNERSHIP AGREEMENTS Partnership agreements govern the relationship between the various individuals who are collaborating on a given venture.

Why Create An Agreement?

Similar to a sole proprietor, a partnership shoulders the majority of the risk when opening a new venture (unlike limited liability models). As a result of this, partners entering an agreement will want to consider creating a partnership agreement, which governs the nature of their relationship relative to the venture they are collaborating on.

For example, let's assume that a startup company decides to formulate their business as a partnership between four people. They estimate that P100,000 will be required to get the business off the ground over the next two years. They agree to invest equally, and write in the contract that each individual will contribute P25,000. However, after the first two years, one member fails to contribute. This voids the contract with that partner, and the overall ownership of the business now rests with the individuals who fulfilled the contract.

Common Partnership Agreement Components The above example is fairly simple. However, businesses encounter a wide variety of challenges in which contractual agreements can be useful. Here are a few common components of partnership agreements: 

Majority Management - This indicates that business decisions will be made through the authorization of the majority of partners, protecting partners from one individual partner controlling the entire organization.

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Annual Account - This obligates each partner to collaboratively settle organizational accounts and debts each year.

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Consistent Interest - As partnerships are often side projects, this obligates each partner to a certain amount of interest and/or time commitment in the venture.

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Resolution of Dispute - It is often a good idea to anticipate which types of disputes may arise, and denote standard practices for how these disagreements will be handled.

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Causes Income Losses - If the company is not achieving the expected profitability, this will scale down the compensation received by each partner relative to the business's overall success.

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Misconduct Expulsion - At times, it may be necessary to remove one partner due to poor behavior. An example of this may be one partner spending far too much on business expenses, such as flying first class and abusing shared resources.

While there may be many more aspects of a partnership agreement depending on the specific type of business, and the needs of each partner, this list is a good tool in understanding the general logic behind such agreements. When entering a collaboration, it is important to consider what could go wrong before it goes wrong, and plan for how to handle that contractually.

Advantages of Partnerships Capital Due to the nature of the business, the partners will fund the business with start-up capital. This means that the more partners there are, the more money they can put into the business, which will allow better flexibility and more potential for growth. It also means more potential profit, which will be equally shared between the partners.

Flexibility A partnership is generally easier to form, manage and run. They are less strictly regulated than companies, in terms of the laws governing the formation and because the partners have the only say in the way the business is run (without interference by shareholders) they are far more flexible in terms of management, as long as all the partners can agree.

Shared Responsibility Partners can share the responsibility of the running of the business. This will allow them to make the most of their abilities. Rather than splitting the management and taking an equal share of each business task, they might well split the work according to their skills. So if one partner is good with figures, they might deal with the book keeping and accounts, while the other partner might have a flare for sales and therefore be the main sales person for the business.

P a g e | 19 Decision Making Partners share the decision making and can help each other out when they need to. More partners means more brains that can be picked for business ideas and for the solving of problems that the business encounters Disadvantages of Partnership Disagreements One of the most obvious disadvantages of partnership is the danger of disagreements between the partners. Obviously people are likely to have different ideas on how the business should be run, who should be doing what and what the best interests of the business are. This can lead to disagreements and disputes which might not only harm the business, but also the relationship of those involved. This is why it is always advisable to draft a deed of partnership during the formation period to ensure that everyone is aware of what procedures will be in place in case of disagreement and what will happen if the partnership is dissolved.

Agreement Because the partnership is jointly run, it is necessary that all the partners agree with things that are being done. This means that in some circumstances there are less freedoms with regards to the management of the business. Especially compared to sole traders. However, there is still more flexibility than with limited companies where the directors must bow to the will of the members (shareholders).

Liability Ordinary Partnerships are subject to unlimited liability, which means that each of the partners shares the liability and financial risks of the business. Which can be off putting for some people. This can be countered by the formation of a limited liability partnership, which benefits from the advantages of limited liability granted to limited companies, while still taking advantage of the flexibility of the partnership model.

Taxation One of the major disadvantages of partnership, taxation laws mean that partners must pay tax in the same way as sole traders, each submitting a Self-Assessment tax return each year. The current laws mean that if the partnership (and the partners) bring in more than a certain level, then they are subject to greater levels of personal taxation than they would be in a limited company. This means that in most cases setting up a limited company would be more beneficial as the taxation laws are more favourable (see our article on the Advantages and Disadvantages of a Limited Company).

Profit Sharing Partners share the profits equally. This can lead to inconsistency where one or more partners aren’t putting a fair share of effort into the running or management of the business, but still reaping the rewards.

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CORPORATIONS A corporation is an institution that is recognized as a separate legal entity with detached accountability. It has its own rights, privileges, and liabilities distinct from those of its members or individual owners. There are different types of corporations, most of which are used to conduct business.

Different Types Of Corporations Publicly Held Corporation The establishment most often referred by the word corporation is a publicly held corporation. A publicly held corporation is a publicly traded corporation. The shares of such corporations are traded on a public stock exchange (e.g., Botswana Stock Exchange, Johannesburg Stock Exchange, the New York Stock Exchange or NASDAQ in the United States).

Closely Held Corporation A closely held corporation is a corporation that has only a small number of stockholders with no public market for its stock.

Limited Liability Company Unlike a corporation, an LLC is a pass-through type of business. Pass-through businesses are those in which the profits and losses of the business pass through to the owners. In other words, the business income is considered as the owner’s income, and the owner pays the tax on his or her personal tax return.

C Corporation A “C Corporation” is a business entity that can have an unlimited number of shareholders, which may include shareholders who are foreign citizens. Shareholders are protected from the corporation’s liabilities. The corporation is taxed on its profits, and shareholders are also taxed on the distributions they receive, such as profit sharing payments or dividends.

Professional Corporation A professional corporation is a corporation consisting of professionals who are licensed to practice a particular profession such as accountants, lawyers and doctors. These professionals can form a corporation and take advantage of the various benefits of the corporate structure such as limited liability of shareholders, continuity of life and centralized management. However, shares in a professional corporation can only be transferred to other individuals licensed to practice in the same profession.

P a g e | 21 Non Profit Corporation A non-profit corporation is an organization formed for serving a purpose of public other than for accumulation of profits. These corporations enjoy tax-exempt status; however, specific requirements and limitations are imposed on their activities. Non Profit corporations are generally those that serve a scientific, literary, education, artistic or charitable purpose that benefits the public.

The Process of Incorporation Incorporation is the formation of a new corporation. The corporation may be a business, a non-profit organization, a sports club, or a government of a new city or town. Even though corporations are not people, they are recognized by the law to have rights and responsibilities like natural persons under the law. The articles of incorporation (also called a charter, certificate of incorporation or letters patent) are filed with the appropriate state office, listing the purpose of the corporation, its principal place of business and the number and type of shares of stock Usually, there are also corporate bylaws which must be filed with the state. Bylaws outline a number of important administrative details such as when annual shareholder meetings will be held, who can vote, and the manner in which shareholders will be notified if there is a need for an additional "special" meeting.

Legal Benefits Protection of personal assets One of the most important legal benefits is the safeguarding of personal assets against the claims of creditors and lawsuits. Sole proprietors and general partners in a partnership are personally and jointly responsible for all the liabilities of a business such as loans, accounts payable, and legal judgments. In a corporation, however, stockholders, directors and officers typically are not liable for the company's debts and obligations. They are limited in liability to the amount they have invested in the corporation. For example, if a shareholder purchased P100 in stock, no more than P100 can be lost. Corporations and limited liability companies (LLCs) may hold assets such as real estate, cars or boats. If a shareholder of a corporation is personally involved in a lawsuit or bankruptcy, these assets may be protected. A creditor of a shareholder of a corporation or LLC cannot seize the assets of the company. However, the creditor can seize ownership shares in the corporation, as they are considered a personal asset.

Transferable ownership Ownership in a corporation or LLC is easily transferable to others, either in whole or in part. Some state laws are particularly corporate-friendly. For example, the transfer of ownership in a corporation incorporated in Delaware is not required to be filed or recorded.

Retirement funds Retirement funds and qualified retirements plans, may be established more easily.

P a g e | 22 Taxation Corporations are taxed at a lower rate than individuals are. Also, they can own shares in other corporations and receive corporate. There are no limits on the amount of losses a corporation may carry forward to subsequent tax years.

Raising funds through sale of stock A corporation can easily raise capital from investors through the sale of stock.

Durability A corporation is capable of continuing indefinitely. Its existence is not affected by the death of shareholders, directors, or officers of the corporation.

Credit rating Regardless of an owner's personal credit scores, a corporation can acquire its own credit rating, and build a separate credit history by applying for and using corporate credit.

Ownership of Corporations A corporation is typically owned and controlled by its shareholders.   

In a joint-stock company the members are known as shareholders and their share in the ownership, control, and profits of the corporation is determined by their portion of shares.

In some corporations, the legal document establishing the corporation or containing its rules determines the corporation's membership.

The day-to-day activities of a corporation are typically controlled by individuals appointed by the members.

For example, a person can decide to become an owner in a company by investing in the company's stock. For example, someone might choose to buy shares of Apple stock in the stock market. If that person bought a majority of shares in Apple (a company worth billions of dollars), he/she could even influence Apple's business by voting in annual general meetings or becoming a board member. By acquiring a controlling interest in the company, a person could suggest product changes in board of directors’ committee meetings, and the company's executives could choose to make those changes.

If they did not, they could be fired by board members with the majority of votes.

Advantages Of Corporations Shareholders of a modern business corporation have limited liability for the corporation's debts and obligations.  

Unlike a partnership or sole proprietorship, shareholders of a modern business corporation have limited liability for the corporation's debts and obligations.

Limited liability reduces the amount that a shareholder can lose in a company so it allows corporations to raise large amounts of finance for their enterprises by combining funds from many owners of stock.

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Another advantage is that the assets and structure of the corporation may continue beyond the lifetimes of its shareholders and bondholders.

For example, when a person owns shares in a corporation, the losses cannot exceed the amount invested in the shares, which is called limited liability. For example, if you decide to invest P100,000 in a tech start up, but it goes bankrupt in a year and has debts of P1,000,000, you will only lose your P100,000 and the creditors cannot sue you for the P900,000 that they have lost.

Also if there are other major shareholders in the company, and one of them dies, the business will still continue. The shares are likely to be inherited by relatives or other persons (according to the dead person's will) and the company will continue its business.

Disadvantages Of Corporations In many countries, corporate profits are taxed at a corporate tax rate, and dividends paid to shareholders are taxed at a separate rate -- double taxation.

Double taxation is the levying of tax by two or more jurisdictions on the same declared income (in the case of income taxes), asset (in the case of capital taxes), or financial transaction (in the case of sales taxes). This double liability is often mitigated by tax treaties between countries.   

In other systems, dividends are taxed at a lower rate than other income (for example, in the US) or shareholders are taxed directly on the corporation's profits and dividends are not taxed.

Another disadvantage of corporations is that, when ownership is separated from management, the latter will inevitably begin to neglect the interests of the former, creating dysfunction within the company.

The fees and legal costs required to form a corporation may be substantial, especially if the business is just being started and the corporation is low on financial resources.

For example, you decide to set up a corporation and have a profit of P1,000,000 in the first year.

Suppose the government taxes corporate profits at 30%, then the corporation has to pay P300,000 in taxes. It is decided that P500,000 will be distributed as dividends and the dividend tax is 10%, so you will lose a further P50,000 to the government when you file your personal taxes. This is the concept of double taxation: first the company was taxed for its profits, and later shareholders were taxed for their dividends.

Also when you hire managers to run your company, they might decide to give themselves bonuses of P200,000 supposedly to increase performance. It will be very hard for you to determine if these bonuses were justified or not and if it was in the best interests of the company. This is the disadvantage of separated ownership.

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FRANCHISING Franchisor: a company or person that authorizes another to sell or distribute its goods or services in a certain area Franchise: a holder of a franchise; a person who is granted a franchise. Or the individual who is granted a franchise and opens the new branch of a company in a local area.

Types Of Franchises While there are many ways to differentiate between different types of franchises (size, geographic location, etc), we will be looking at how different franchisors allow franchisees to use their name. On this basis, there are three different types of franchise:   

Business format franchises Product franchises Manufacturing franchises

Business Format Franchises In business format franchises (which are the most common type), a company expands by supplying independent business owners with an established business, including its name and trademark.

The franchiser company generally assists the independent owners considerably in launching and running their businesses. In return, the business owners pay fees and royalties. In most cases, the franchisee also buys supplies from the franchiser. Fast food restaurants are good examples of this type of franchise. Prominent examples include KFC, Debonairs, Nandos, McDonalds, Burger King, and Pizza Hut. Product Franchises With product franchises, manufactures control how retail stores distribute their products. Through this kind of agreement, manufacturers allow retailers to distribute their products and to use their names and trademarks. To obtain these rights, store owners must pay fees or buy a minimum amount of products. Tire stores, for example, operate under this kind of franchise agreement.

Manufacturing Franchises Through manufacturing franchises, a franchiser grants a manufacturer the right to produce and sell goods using its name and trademark. This type of franchise is common among food and beverage companies. For example, soft drink bottlers often obtain franchise rights from soft drink companies to produce, bottle, and distribute soft drinks. The major soft drink companies also sell the supplies to the regional manufacturing franchises. In the case of Coca Cola, for example, Coca Cola sells the syrup concentrate to a bottling company, who mixes these ingredients with water and bottles the product, and sells it on.

P a g e | 25 Advantages Of Franchising Benefits for the Franchisor Franchisors benefit from franchise agreements because they allow companies to expand much more quickly than they could otherwise. A lack of funds and workers can cause a company to grow slowly.

Through franchising, a company invests very little capital or labour because the franchisee supplies both. The parent company experiences rapid growth with little financial risk.

A company can also ensure it has competent and highly motivated owners and managers at each outlet through franchising. Since the owners are largely responsible for the success of their outlets, they will put in a strong and constant effort to make sure their businesses run smoothly and prosper.

In addition, companies are able to provide franchising rights to only qualified people.

Other benefits include: 

Franchising allows a business to have an international presence.

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Franchisors can experience economies of scale.

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Franchisors can benefit from growth without worrying about running costs.

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Franchisors receive royalty payments that are set as a percentage of profits.

Benefits for the Franchisee The franchisee also has numerous advantages that come from entering a franchising agreement, including: 

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There is a low risk due to the tried and tested formula. Buying a franchise business provides a higher chance for success. They get the benefit of owning a proven business formula that has been tested and shown to work well in other locations. In addition, they receive the support from the main company toward establishing the business, and the training to operate it successfully.

There are lower start-up costs since the business idea was already developed.

They are buying a name and brand that is recognized by the public. So they have a big advantage over starting a business from scratch, as they already have an established customer base.

A franchise gives more security from the beginning. New independent businesses are known to have as high as a 90% failure rate, often causing the business owner heavy losses and at times bankruptcy.

When you start a business from scratch, you spend huge amounts of time trying to operate the business without being successful because you may not have the necessary skills for that particular area. When you purchase a franchise, all the necessary groundwork has been done already. In addition, the franchisee gets training and head office support from the franchisor; this may be essential if the franchisee is new to running a business and has no experience or business knowledge.

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The franchisee gets the support of national marketing which a small business would not normally be able to afford. In some cases of larger brands, they may have customers waiting for their doors to open (for example in a new McDonalds).

Since all the product selection and the marketing have been already developed, you simply have to take care of the daily operations of the business. Your goal will be to grow from an established foundation and expand from there.

The new franchise owner gains many benefits from the association with the main franchise company. The franchisor offers a great deal of business experience that would take years for the average business person to acquire.

There are a lot of part-time franchising opportunities, which are perfect if someone has a small amount to invest and wants to support themselves and maintain their investment. They may be able to sell the franchise to someone else once they no longer wish to run it.

Disadvantages Of Franchising Disadvantages to the Franchisor: Of course, no business arrangement is without potential risks and disadvantages. While there are many advantages for the franchisor in entering a franchising agreement, some of the potential risks are:  

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Difficult to control activities of franchisees: In any franchise agreement (particularly when there is geographical separation between the franchisor and the franchisee), it can be difficult to control the activities of the franchisee and ensure that their activities are up to standard.

Huge risk in reputation by allowing other businesses to use their names: if a franchisee does not live up to the quality standards of the franchisor (cleanliness, customer service, pricing, quality of product, etc.), this can have a negative reputational effect not just on the franchisee, but on the broader reputation of the franchisor as well. Thus, there is a risk in allowing others not directly connected to the business to use the business name and trademark.

Not as quick a method of growth as mergers or acquisitions: M&A allows companies to expand very rapidly, whereas entering into franchising agreements means that the franchisor enters agreements with numerous individuals over time, and has to wait for them to start up and begin operations (instead of taking over existing operations). This method of expansion can be slow.

Disadvantages to the Franchisee 

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High entry and ongoing cost: It can be more expensive to start a franchise than an independent business. You can open your own burger bar for the fraction of the cost of buying the rights to a McDonald's franchise. Thus, franchising is often an option open only to already wealthy businessmen.

Franchisees have to pay a significant percentage of their revenues to the franchisor: On top of the upfront money needed to start a franchise, the franchisee must pay fees and royalties to the franchisor. The franchise fee may range anywhere from P5,000 to over P1 million and hence can be a major expenditure for the franchisee. Royalties are paid periodically during

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the life of the franchise agreement. They are either a percentage of an outlet's gross income— usually under 10 percent of an outlet's gross income—or a fixed fee.

Other franchise costs: In addition to royalties and payments, the franchisee may be required to buy certain items from the franchisor like computer systems and software.

Uninterested franchisors: Some franchisors may have little interest in their franchisee's success and may be more interested in just collecting the fees associated with the franchise.

Thus, support and marketing may not be adequately provided.

Strict product rules: Franchisees experience less flexibility to use their own initiative due to restraints from the franchisor. Franchisees can only sell the products of the franchise, and they may be tied into a national brand with a strict set of instructions about how they should trade.

Start-up challenges: The franchisee may have to find or build the right location, hire and train staff and install equipment. This may be difficult for someone with limited business skills just starting out.

Franchise costs vary to some extent because of costs associated with different kinds of businesses and with different locations.

Franchising Agreement Always ensure that you sign a franchising agreement which is enforceable by franchising agreement.

A Franchise Agreement is a legal, binding contract between a franchisor and franchisee, enforced by the law in any country.

The content of a franchise agreement can vary depending on the franchise system, the state jurisdiction of the franchisor, franchisee, and arbitrator.

A typical franchise agreement contains:         

Disclosures required by the laws Parties defined in the agreement Recitals, such as Ownership of System, and Objectives of Parties Definitions, such as: Agreement, Territory Area, Area Licensee, Authorized deductions, Gross Receipts, License Network, The System Manual, Trademarks, Start Date, Trade name, Termination, Transfer of license.

Licensed Rights, such as: Territory, Rights Reserved, Term and Renewal, minimum Performance Standard Franchisors Services, such as: Administration, Collections and Billing, Consultation, Marketing, Manual, Training Franchisee Payments, such as: Initial License Fee, Training Fees, Marketing Fund, Royalties, Renewal fee, and Transfer fee Franchisee Obligations, such as: Use of Trademarks, Financial Information, Insurance, Financial and Legal responsibility Relationship of Parties, such as: Confidentiality, Indemnification, Non-Compete

P a g e | 28       

Transfer of License, such as: Consent of franchisor, Termination of license, Termination by licensee, Termination by licensee Other provisions Governing law Amendments Waivers Arbitration Severability

COOPERATIVES Cooperatives (often referred to as coops) are loosely defined as an independent group of individuals voluntarily collaborating in pursuit of social, cultural and/or economic objectives. A cooperative is owned and operated by all members equally, and control is created democratically (everyone has a voice in organizational decisions). While it is a business model, it can be applied to a wide variety of other circumstances such as consumer cooperatives, housing cooperatives, credit unions, worker cooperatives, and various non-profit formats.

Why Choose A Coop?

At the core of a coop is the concept of equality. There is no real room for hierarchy in a coop, nor is it built to differentiate between different levels of ownership, contribution, or partnership. Coops are intrinsically democratic, and rely heavily on the assumption that everyone involved has equal stake.

This balanced organizational model (flat organizations) can come with both challenges and advantages.

For example, cooperatives are quite resistant to external factors. 80% of coops survive their first five years (compared to 41% of businesses with other ownership types). Another benefit is that cooperatives are often invested in solving social issues and providing value in their communities.

Coops can be highly ethical and unifying forces in industries and communities, and demonstrate a commitment to valuing everybody involved.

How To Build A Coop While there are many perspectives on what makes a coop, the seven Rochdale Principles are a useful starting point when it comes to setting the ideological boundaries of your coop: 1.

2.

3.

4.

5.

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Voluntary and open membership Democratic member control Economic participation by members Autonomy and independence Education, training, and information Cooperation among cooperatives Concern for community

P a g e | 29 From a legal standpoint, coops are quite simple. It is registered under the stipulation that all members are equal democratic contributors, and that joining it is open and non-discriminatory as long as the approved requirements for participation are met. No individual owner can derive profit exceeding the fixed interest, nor gain greater control over the operations of the cooperative.

In conclusion, coops are a good option depending on what it is an organization is trying to accomplish.

Considering the specificity of this model in terms of structure and decision-making, owners must be comfortable being merely one member among many and being generally oriented towards beneficial objectives for the community.

Joint Venture (JV) A joint venture (JV) is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses, and assets. With individuals, when two or more persons come together to form a temporary partnership for the purpose of carrying out a particular project, such partnership can also be called a joint venture where the parties are "co-ventures. " Joint Venture Basics and Benefits A joint venture takes place when two parties come together to take on one project. In a joint venture, both parties are equally invested in the project in terms of money, time, and effort to build on the original concept. While joint ventures are generally small projects, major corporations also use this method in order to diversify. A joint venture can ensure the success of smaller projects for those that are just starting in the business world or for established corporations. Since the cost of starting new projects is generally high, a joint venture allows both parties to share the burden of the project, as well as the resulting profits.

The venture can be for one specific project only or for a continuing business relationship which is known as a "consortium JV.” A consortium JV is formed where one party seeks technological expertise or technical service arrangements, franchise and brand use agreements, management contracts, or rental agreements, for one-time contracts. The JV is dissolved when that goal is reached.

By its formation the JV becomes a new entity with the following implications: 

It is officially separate from its founders, who might otherwise be giant corporations, even amongst the emerging countries

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The JV can contract in its own name, acquire rights (such as the right to buy new companies)

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It has a separate liability from that of its founders, except for invested capital

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It can sue (and be sued) in courts in defense or its pursuance of its objectives

Since money is involved in a joint venture, it is necessary to have a strategic plan in place. In short, both parties must be committed to focusing on the future of the partnership, rather than just the

P a g e | 30 immediate returns. Ultimately, short-term and long-term successes are both important. In order to achieve this success, honesty, integrity, and communication within the joint venture are necessary.

Domestic and Foreign Firm JVs A joint venture is sometimes a partnership between a domestic firm and a foreign firm. Both partners invest money and share ownership and control of partnership. Joint ventures require a greater commitment from firms than licensing or the various other exporting methods. They have more risk and less flexibility.

A domestic firm may wish to engage in a joint venture for a variety of reasons; for example, General Motors and Toyota have agreed to make a subcompact car to be sold through GM dealers using the idle GM plant in California. Toyota's motivation was to avoid U.S. import quotas and taxes on cars without any U.S.-made parts.

Many countries limit foreign ownership of assets and legally force foreign companies into a joint venture with a local partner in order to do business there. Poland, for example, limits foreign ownership of farmland and will continue to do so for another decade under agreements with the EU. Dissolution The JV is not a permanent structure. It can be dissolved when:       

Aims of original venture are not met Either or both parties develop new goals Either or both parties no longer agree with joint venture aims Time agreed for the joint venture has expired Legal or financial issues Evolving market conditions mean that the joint venture is no longer appropriate or relevant One party acquires the other

Examples Of Joint Ventures 

Microsoft and GE Joint Venture. In December, 2011, Microsoft Corporation and General Electric formed a joint venture which is a health IT Company of its own kind. Their common objective was to improve patient experience and the economics of health and wellness through providing the health systems with required system wide data and intelligence. The joint venture, known as Caradigm, aims at combining technology and clinical applications to transform it into intelligence which is usable by care providers. The name Caradigm evolved from ‘care’ and ‘paradigm,’ because Microsoft and GE intended a paradigm shift in the care delivery system.

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The Hisun-Pfizer Joint Venture; The world’s largest drug company, Pfizer, and a Chinese pharmaceutical company, Zhejiang Hisun, formed a joint company in the Chinese city of Hang Zhou. The company, known as the Hisun-Pfizer joint venture, has a registered capital of U.S. P250 million. Hisun and Pfizer own 51% and 49% of the stake respectively. Factories

P a g e | 31 of the joint venture are located in Fuyang, while its operations are based in Shanghai and Hang Zhou. The emergence of the joint venture has been prompted by the decline in sales of Pfizer due to the expiration of its many products, including the cholesterol lowering drug Lipitor. 

The Dow Corning Joint Venture; The Dow Chemical Company is one of the top three chemical manufacturers in the world, while Corning, Incorporated is a famous American manufacturer of glass. In 1942, a problem faced by the airlines brought them closer in an effort to solve the problem. The presence of moisture and the Corona discharge was an obstacle for the aircraft to fly at higher altitudes. The corona discharge also caused the production of hazardous products like ozone. In 1943, both companies formed an equally owned joint venture named Dow Corning. The joint venture company is headquartered in Midland, Michigan, USA. The Dow Corning product line includes: sealants, adhesives, and rubber for mold manufacturing, lubricants, release agents, liquid silicone, and many other products. The company has over 10,000 employees.

MANAGEMENT TEAM Management team are the backbone of every successful company. Building and managing a team is a challenge for all entrepreneurs, but particularly for the first-time business owner who is in many cases. These are the key hires that every management team should have; Chief Executive Officer (CEO). Chief Operating Officer (COO). President. Chief Financial Officer (CFO). Chief Marketing Officer (CMO). Chief Technology Officer (CTO).

Benefits Of Great Management Team         

A good management team gives a business credibility and good corporate reputation.

A strong business management team helps a company attain market dominance and holds that position.

A great management team helps develop a company’s strategic plan, goals, and vision and tactically executes such plan.

Organization problems and challenges are easily handled and resolved when you have a strong business management team. With a team, you can weather any internal crisis and external challenge.

A high calibre management team attract talented employees and inspire greatness within the workplace. A strong management team keeps the team running smoothly and morale high A strong management teams are the drivers of creativity and innovation Raising funds or capital for a business is easier if you have a team on ground. Business teams inspire confidence and therefore can access bank loans, grants and equity financing with ease than businesses without a core team.

A strong management give business sustainability and longevity.

Diversification and exploitation of opportunities is easier and faster if you have a great management team

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Building The Management Team You might like to consider the following stages in developing your management team:       

Review your business' progress to date and decide what direction you want it to go in.

Measure your performance in the market against your competitors. Analyse any strengths, weaknesses, opportunities or threats - commonly known as a SWOT analysis - to identify what gaps there are between where the business is and where you would like it to go.

Analyse what skills the business requires and consider what strengths and weaknesses you offer personally.

Learn the skills, potential and ambitions of your existing staff and consider less-defined skills such as leadership qualities.

Analyse the fit of existing skills to business requirements and establish priorities for the acquisition of missing skills.

Establish where staff development could fill skills needs and consider reallocation of responsibilities to create a genuine team, rather than a group of individual managers.

Re-examine any skills gaps.

How Do I Hire Great People Without Money To Pay Them?

Since you will not likely have much money to pay management team members prior to funding, you and your co-founders must rely on the following to recruit key members of the management team:   

your passion for your new business the potential appeal of being in on the ground floor of a new opportunity your personal network(s)

This may provide a significant challenge for a team that is comprised solely of academic, research or other largely technically-oriented teams. If you cannot attract a business resource to join your venture, you likely do not have a solid business model for your technology.

Who Fits Well With Your Venture?

Bear in mind that the well-known industry veteran might not prove the best fit for your management team or your business if they have spent their career with a larger organization. Large organization skills do not always translate effectively into start-ups.

During the interview process, make sure to communicate how working at your company may differ from the candidate’s current work environment. You want to avoid recruiting a resource that may not stay in the role once they experience your environment first-hand. The “big company” candidate may also not be capable of delivering the results required without the benefit of a larger organization behind them.

You can augment young and inexperienced management teams with one or more seasoned part-time executives, directors or advisors who can help add credibility to your startup with customers and partners.

P a g e | 33 This dynamic will also demonstrate to potential investors that you, the founder, are a strong evangelist with a compelling, innovative product or service, as these resources joined the team prior to the raising of significant capital.

Many individuals and organizations provide executive-level services (CEO, COO, CIO) to earlystage businesses. Entrepreneurs should use similar recruiting and interview process with these organizations as with other candidates to find the best match of skills and experience for the position.

A number of these resources are willing to work for a combination of cash compensation and equity.

Super Successful Cofounders And Why Their Partnerships Worked Steve Jobs and Steve Wozniak Company: Apple Inc. Year Founded:1976 How their partnership was formed: The two Steves became friends at a summer job in 1970. Woz was busy building a computer, and Steve Jobs saw the potential to sell it. In a 2006 interview with the Seattle Times, Woz explained, "I was just doing something I was very good at, and the thing that I was good at turned out to be the thing that was going to change the world...Steve [Jobs] was much more further thinking. When I designed good things, sometimes he'd say, "We can sell this." And we did. He was thinking about how you build a company, maybe even then he was thinking, "How do you change the world?"

Why their partnership works: A master of analytics, Woz admits that he never once thought to sell his original computer model. That was all Jobs. Woz's technical skills paired with Jobs' business foresight makes the two an ultimate business match. And it is a relationship that has withstood decades, fame and fortune. According to Woz, the two were friends till the passing of Steve Jobs in 0ctober 2011. They used "talk every once in a while, and they have never had a real argument."

Bill Gates and Paul Allen Company: Microsoft Year Founded: 1975 How their partnership was formed: Bill Gates and Paul Allen were childhood friends from Lakeside private school. They shared a love of computers and were hacker partners in crime during high school.

Why their partnership works: Although it can be dangerous to mix friendship and business, the two pulled it off thanks to a shared obsession with computers and a passion for entrepreneurship.

Once Gates left for Harvard, Allen followed him to the Boston area and they began plotting business ideas. With Allen's encouragement, Gates took the plunge, dropped out of college, and created Microsoft. Their billion dollar company spun out of a nerdy passion and a lifelong friendship.

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Larry Page and Sergey Brin Company: Google Year Founded:1998 How their partnership was formed: Larry and Sergey met at Stanford’s PhD program in 1995, but they did not instantly become friends. During a campus tour for doctoral students, Brin was Page’s guide and they bickered the entire time. Despite their quarrel, the two found themselves working on a research project together. Their paper, “The Anatomy of a Large-Scale Hypertextual Web Search Engine,” became the basis for Google.

Why their partnership works: Sergey and Larry have similar technology backgrounds; they fell in love with computers at an early age and had university professors for parents. They bonded over their passion for data mining and grew to have similar visions for their company. Page and Brin made the joint decision to bring Eric Schmidt on board, and to instil a laidback atmosphere at the Googleplex.

They may have been born on opposite sides of the world (Brin from Russia and Page from Michigan), but Sergey and Larry are cut from the same cloth.

Evan Williams and Biz Stone Company: Twitter Year Founded: 2006 How their partnership was formed: Evan Williams had been working at Blogger when it was sold to Google. Under Google's new reign, Williams hired Stone. "We started out as rivals but became great friends," Stone explained to AllThingsD. "We really respected each other. When Evan left [Google for Odeo.com] I was like, 'What?? You're Leaving me?' So I followed him." The pair was approached by Jack Dorsey, an Odeo engineer with an idea. This discussion developed into Twitter.

Why their partnership works: Having both spent a decade in the blogging business, Stone and Williams are equally knowledgeable about the platform. Williams realized Twitter's potential and entrusted Biz with the microblogging site as a side project. Mutual respect, camaraderie and ambition have encouraged the two to ick together and achieve business success.

DO I NEED A BOARD OF DIRECTORS AND ADVISORS AT THIS STAGE? Entrepreneurs may believe that they should wait until they have raised significant capital before forming a board of directors and advisors, but in reality good guidance always proves valuable at every stage of a company’s development.

Like management team candidates, keep in mind that board members from large organizations may not best suit a start-up’s needs. The presence of a board may also signal to potential investors your willingness as a founder to take and act upon the advice of others in your business.

Depending on the financial stability of your business, these senior resources may prefer to serve on an advisory board rather than in a formal director’s role with your venture.

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The Advisory Board Unlike a formal board of directors -- whose primary function is representing the interests of shareholders -- an advisory board is designed to provide independent advice and counsel to the owner/CEO/management team. Directors are elected, charged with fiduciary responsibilities and must be covered by the business with some form of liability insurance. Advisers don't come burdened with such risks and responsibilities.

Advisory boards vary in size from as few as two or three members to up to forty. The right size depends on your company's stage of development, complexity of business and other factors.

Before creating an advisory board, however, an owner/CEO must be very clear about what is expected from it. Ask yourself: Do you want these advisers to give you objective guidance or just blindly endorse your decisions? Everyone's happy when the board agrees with your actions. What happens if and when their advice conflicts with what you want to do?

Creating The Board In today's fast-changing times, corporate leaders and CEOs are certainly in need of helpful guidance.

Too often, they're isolated in their decision-making process and suffer from a lack of seasoned advice.

The choices -- an advisory board or a board of directors -- depend on each company's individual situation. A formal board of directors has legally defined responsibilities, foremost among them representing a corporation's shareholders. A board of advisers can have a more flexible mandate, offering assistance and management advice to the owner/CEO without any binding legal authority.

Use these action steps for constructing a board: 1. Admit you don't know everything. "You're an expert when it comes to your own business," but sooner or later you see there's a great deal you don't know about trends and market forces in the larger business world. That's where other people come in, men and women whose skills and talents complement your own.

2. Develop a candidate profile. Create a profile of the individual you're looking for, particularly the expertise and knowledge base you feel are needed to address your company's challenges in coming years.

3. Ask for help. Solicit names from your attorney, accountant or other professional advisers.

4. Look for a good mix. A healthy board of directors/advisors often includes a legal expert, an accountant, a marketing professional and financial advisor. Other good candidates are successful entrepreneurs from industries completely different from your own who have "been through the mill" and can look at your business with a fresh eye.

5. Be clear about what you want. Take time to talk with prospective advisers. Let them know what your goals are. Make clear that you don't want people to rubber-stamp your decisions. You're looking for individuals who can challenge you and help your business grow.

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Board Benefits The benefits of having a board of advisors/directors are so clear-cut, there's little reason not to have one. A board offers:     

In-house experience and expertise Enhanced corporate self-discipline and accountability Objective opinions Strategic planning and counsel Honesty is another virtue offered by independent advisers. Unlike family members or management insiders who often comprise membership on family-owned business boards, outsiders come without any agenda or prejudice linked to the company's family origins.

Tips for effective CEO-board communication include:     

Keep the board informed. Even when the board isn't scheduled to meet, send them information relating to industry issues and specific company matters.

Give the board time to prepare. By providing material ahead of the meeting, you enable board members to move through the agenda more efficiently and make the meeting itself more meaningful.

Sharing significant information builds trust. Directors who receive significant company data on a regular basis learn to trust the CEO/owner. When information is withheld -- or board members are constantly required to obtain it themselves -- trust gets eroded.

Set the long-range agenda. Identify the company's goals. Clarify and define challenges and situations. Focus on priorities and articulate your course of action.

Motivate members. In your leadership role, you can inspire advisory members, stimulate their desire to give all they can and bring a shared sense of purpose to the group.

Board meetings Before the meeting Each meeting must have a special focus -- strategy, financials, human resources, etc. -- with presentations made by different members of the management team. Be sure that board members are prepared in advance by distributing relevant information for them to study prior to the meeting.

Here are few other suggestions for preparing members ahead of time:   

Mark the envelope "Board Meeting Notice." A good way to get your board member's attention: place a red stamp reading "Board Meeting Notice" on the outside of the mailing envelope. Send this material two weeks ahead of the scheduled meeting.

Just the facts, please. The board meeting notice should list times, dates, location and specific details about the upcoming meeting's goals and objectives. Leave out "fluff" materials or highly detailed page-after-page of numbers.

Make a reminder call. A week before the meeting, the CEO or a fellow board member should call each member and, if possible, speak directly with him or her. It's a good

P a g e | 37 opportunity to generate enthusiasm for the upcoming meeting -- and in the process build stronger rapport between members.

In the meeting In the meetings, do everything possible to schedule vital matters first, some items inevitably get pushed back to the end, and they're always the first to get lost when members have to rush to catch a plane or make another appointment."

Here are few these guidelines to make the most of precious boardroom time: 

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Use a "consent calendar." Often, any number of items requires formal board "approval," but do not in themselves merit much discussion. One technique for handling these items involves bundling them into a "consent calendar." Send them to board members ahead of time, then have them approved all at once at the meeting, thus saving time for more important topics.

Reasonable limits on discussion. The board Chair or CEO may find it helpful to set time parameters for individual topics under review. This doesn't necessarily mean fiercely restricting each discussion. Simply make clear to members that the board needs to complete all items by a specified time.

No dog and pony shows! Your advisers/directors are serious, thoughtful individuals -- unlikely to be swayed by glitzy power-point presentations or colorful audio-visual displays. Give them the information they need to prepare themselves beforehand; anything presented at the meeting itself should supplement this material in a concise, efficient manner.

After the meeting Send every attendee a thank you note together with meeting summary and any other deliverables.

Duties and Functions In general, board functions include:       

Establish corporate objectives and policies Enhance CEO and senior management effectiveness Act as arbitrator between major stockholders (board of directors) or during family control issues (board of advisors) Act during a crisis, such as the death or departure of a CEO Lend credibility to investors, customers and vendors Plan strategy development Make key introductions

All boards share certain responsibilities that should be clear to each member when they agree to serve.

These include: 

Attendance. At its most basic, members must agree to attend board meetings and agree to take part in some committee work.

P a g e | 38   

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Planning and support. Board members should be involved in reviewing the company's fundamental purpose, priorities and goals. From there, members should oversee and evaluate strategic business plans, and support management in carrying out these plans.

CEO monitoring. In publicly held companies, the board of directors is legally responsible for selecting the CEO, approving executive compensation and, if necessary, dismissing this individual. Regular assessment of CEO performance is another key function.

Finances. A formal board of directors approves a company's annual budget and ensures that the company adheres to it. The board can also contract for an independent audit; review financial performance against budget, prior years and competition; control investment policies; and manage capital or reserve funds.

Board effectiveness. Board members should be able and willing to assess their own performance. They must effectively monitor themselves for results, practices and organization. A board must govern itself.

Compensating Board Members Board members deserve to be paid but compensation should be linked to the company's performance.

This demonstrates that both sides have made a commitment to the value and seriousness of the relationship.

It is also recommended that members purchase some form of equity participation, so that -particularly in public companies -- board members are involved in the same way as shareholders are.

Consider deferring the issue of compensation until after you've selected a member. Individuals shouldn’t join boards simply for the pay. You want to see in that person's face that serving this company is something they'll find fun and exciting to do. You don't want to sell someone on joining your board. Share your business goals and objectives and see if the person responds enthusiastically.

Many companies determine appropriate compensation after they form an advisory board.

Stock options are acceptable, if the company has a lot of stock options to offer. Board members can buy a specified number of shares for a specified number of years.

Limits to Board Effectiveness In general, the primary reasons for a board's lack of effectiveness include:  

Incompatible or disruptive personalities. Board members are human like the rest of us.

They don't always get along. Even a board made up of skilled, experienced individuals is of little value if members can't work together for the good of the business.

"Too many cooks." When a board has too many members, some of them inevitably "take over" by virtue of their strong personalities, and seek to dominate the others. In these cases, the business loses the benefit of what the more passive individuals might have to offer.

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Insufficient compensation. It's proper and necessary to compensate advisors/directors for their contributions to the board. Make sure fees for board members are appropriate, or you may find yourself with a board of less-than-dynamic quality.

Lack of communication. Board members can't provide value to the business if the information they receive from the CEO/owner isn't timely, honest or broad enough

Recruiting Candidates The best candidates combine solid business thinking, personal integrity, and an ability to analyse problems and who also want to work with others. They should be able to speak for your customers so the focus stays on doing everything possible to give people what they want now and in the future."

Other advice:  

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  

Look for a track record. Broaden your candidate search to include at least one CEO or senior executive who have expanded their own business by at least two or three times.

Appeal to a candidate's sense of challenge. The challenge of serving on a board and helping a business grow isn't so very different from building your own business. Seek out people who respond enthusiastically to the intellectual challenge of bringing a company to a higher level of achievement and success.

Choose someone who's confidential by profession. Attorneys, accountants and recruiters are frequently a wise choice as advisory board candidates -- both because of their experience and knowledge, and because they're bound by their positions to confidentiality.

Match strategic goals with strategic individuals. Are your expansion plans likely to involve new initiatives in human resources, technology issues, raising capital, etc.?

Knowing your long-range goals helps guide you toward the type of people with experience and knowledge in these areas.

Don't be afraid to ask for help. If your own search doesn't prove fruitful, consider going to a professional recruiter. They'll conduct an assessment of your company and suggest candidates who will likely make a good match.

Good talent doesn't come cheap. You don't want to choose someone who's in it just for the money, but remember that men and women with proven experience and skills expect to be reasonably compensated for their time and efforts on your behalf.

One director can lead to another. So you've landed an outstanding individual to serve on your board. The next logical step is asking this person for other recommendations. A valuable board member brings his or her own network of contacts and is likely to know others who specialize in areas you're interested in.

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Advice To First Time Founders

SOURCE: http://www.hongkiat.com/blog/cheatsheet-startup-entrepreneurs/

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SOURCE: http://www.hongkiat.com/blog/cheatsheet -startup-entrepreneurs/

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