MANAGEMENT & ORGANIZATIONA

L PLAN EMMANUEL OJWANG

LYNDA ATIENO

MANAGEMENT AND ORGANIZATIONAL PLAN This is a segment that identifies the key

personnel, their positions and responsibilities and the career experiences that qualify for those particular roles.

The entrepreneur’s role in the venture is also clearly outlined.

It also identifies Board of directors, Advisors, Consultants etc

CONTIt explains: The organizational structure Management team and critical

personnel Experiences and technical capability Ownership structure and compensation

agreements Board of directors, outside consultants

and advisors. The total number of employees

ORGANIZATIONAL CHART An organization chart is always a diagram that

illustrates the relations between people within the business enterprise. The following is an example of an organization chart.

Chief Executive

Officer

Human Resource Manager

ReceptionistPublic

Relations Officer

Financial manager

Accountant

CHIEF EXECUTIVE OFFICER The experience of the CEO that makes

him/her suitable for the business is described

The academic qualifications The roles the CEO will play i.e.. his/her

job description The salary of the CEO

HUMAN RESOURCE MANAGER AND FINANCIAL MANAGER Specifies the person/individual the

human resource and financial manager will be reporting to.

The experience and qualifications are also described

The job description The salaries the individuals will be

earning

OTHER STAFF MEMBERS Their experiences and qualifications for

the positions they hold. The tasks they will perform in the

organization Their salary specification i.e. fixed

monthly salary or commissions

BOARD OF DIRECTORS Describes the number of board

members The chairman of the board The description of their occupations and

contributions in the business. Their degree of control in the business.

PROFESSIONAL SUPPORT These are individuals who will provide

professional assistance. They include; lawyers, consultants,

insurance agents and Auditors Their role in the business is specified Their background information is outlined

FORMS OF BUSINESS

OWNERSHIP

FORMS OF BUSINESS OWNERSHIP Sole Proprietorship Partnership Corporations

SOLE PROPRIETORSHIP

This is a business that is owned and operated by one person. The enterprise has no existence apart from its owner who has a right to all of the profits and bears all of the liability for the debts and obligations of the business.

The entrepreneur also has unlimited liability in the sense that If the business cannot meet its financial obligations the owner can be forced to sell his personal assets that would satisfy the creditors.

It is easy to form in that a person will only need to obtain the necessary licenses and start operation.

ADVANTAGES Decision making and control vested in the owner-The entrepreneur has total

control and decision making power over the business. The sale or transfer of the business can take place at the discretion of the

sole proprietor-this is because the entrepreneur can sell the business when he/she sees it fit.

Ease of formation - Few formal business requirements and restrictions are involved. It is less expensive because the legal costs associated with its formation are minimal.

Low start-up costs since the business ranges from having no employees up to a number of employees which is easier to deal with in terms of expenses, taxes and compensations.

Sole ownership of profits - The owner can keep all the profit to himself and not share with anyone.

Flexibility – Management is able to respond quickly to business needs in the form of day to day management decisions as governed by various laws and good sense.

Relative freedom from governmental control- Except for requiring the necessary operating licenses, very little governmental interference occurs in the operation.

Freedom from corporate business taxes- sole proprietors are taxed as individual taxpayers and not as businesses.

DISADVANTAGES Unlimited Liability - The entrepreneur can be held personally

liable for the debts and obligations of the business. The liability extends to all of the proprietors assets.

Lack of continuity – The enterprise may be closed if the owner becomes ill or dies.

All responsibilities and business decisions fall on the shoulder of the sole proprietor.

Less available capital- The sole proprietor cannot easily come up with a large amount of capital to start and sustain the business. It is also difficult for a sole proprietor to obtain long term financing because the enterprise rests exclusively on one person.

Relatively limited viewpoint and experience – The operation depends on one person, i.e.., the individual’s ability, training and expertise will limit its direction and scope.

Limited decisions mostly if the problems encountered are complex that it requires like-minded people to brainstorm. The entrepreneur cannot be able to have different views

PARTNERSHIPS This is an association of two or more persons

acting as co-owners of a business for profit. Each partner contributes money, property, skills and each share in the profits and losses of the business in their ratio of contribution.

A partnership Act which among other things clearly outline the financial and managerial contribution of the partners must be read through and the partnership contract signed by the partners.

Different partnership agreements must also be considered by the entrepreneurs before getting into a partnership arrangement.

ADVANTAGES Direct rewards – Partners are motivated

to put forth their best efforts by direct sharing of profits

Growth and performance facilitated - it is often possible to obtain more capital and a better range of skills.

Possible tax advantage – Most partners pay taxes as individuals, thus escaping the higher rate assessed against limited companies.

DISADVANTAGES Unlimited liability of at least one partner- one partner who is

general partner in most cases assumes unlimited liability Lack of continuity – If any partner dies, withdraws from the

business or is adjudged insane, the partnership arrangement ceases.

Relative difficulty in obtaining large sums of capital – this is especially when long term financing is involved. Usually the collective wealth of the partners dictates the amount of total capital the partnership can raise, especially when starting out.

Bound by the acts of just one partner- a general partner can commit the enterprise to contracts and obligations that may prove disastrous to the enterprise in general and other partners in particular.

Difficulty of disposing of partnership interest - The buying out of a partner may be difficult unless specifically arranged for in the written agreement.

LIMITED PARTNERSHIPS There are two classes of partnerships:

general partnerships (discussed above) and limited partnerships.

In a general partnership, all partners are equal. Each partner has equal power to incur obligations on behalf of the partnership, and each partner has unlimited liability for the debts of that partnership.

In a limited partnership, there is usually only one general partner (although there could be more). The other partners are called limited partners, hence the name limited partnership

CONT In a limited partnership, the general partner or

partners have full management responsibility and control of the partnership business on a day-to-day basis

A limited partner cannot incur obligations on behalf of the partnership and does not participate in the daily operations and management of the partnership.

A limited partner is essentially a passive investor.

A limited partner’s liability is capped at the amount of his or her financial contribution to the partnership

CORPORATIONS Types of corporations include Limited liability companies Closely held corporations Professional corporations S & C corporations

LIMITED LIABILITY CORPORATIONS Limited liability companies (or LLCs) combine

many of the advantages of a corporation and a partnership without the disadvantages.

LLC provides limited personal liability, along with being a separate legal entity that can sue and be sued as well as buy and own property.

Like a partnership, shares in the LLC cannot be transferred without the approval of all other members of the LLC.

The death, retirement, expulsion, or bankruptcy of one member does not end the LLC.

CLOSELY HELD CORPORATIONS a close corporation is one whose shares

are owned by only a few shareholders. The purpose of a close corporation is to

keep ownership and control within a small group of shareholders who have the same goals.

Unlike publicly held corporations, a closely held corporation’s shares are not traded on the open market.

PROFESSIONAL CORPORATIONS This is a certain type of corporation that

is designed for professionally licensed entrepreneurs only, and that professional can be the only shareholder

Examples includes doctors, lawyers, dentists, psychologists, and accountants.

Note though that a corporation cannot normally shield you from a malpractice award.

S AND C CORPORATIONS S corporations are intended for smaller

enterprises. Like an LLC, S corporations are informal enough to allow you to run your business like a sole proprietorship or partnership, while giving you the protection of the corporate shield; that is, limited personal liability.

S corporations do not pay a corporate tax at all. Instead, their shareholders report profits and losses on their personal tax returns.

A C corporation is your basic, standard variety, large corporation. Airtel and Safaricom are examples of C corporations.

ADVANTAGES The corporation limits one’s personal liability. The corporation is a separate legal entity. It has its own tax identification

number and is its own legal entity, separate and apart from the owners. Sole proprietorships and partnerships normally end upon death,

disability, bankruptcy, or retirement of the proprietor or a partner. Corporations, being a separate legal entity, do not cease to exist when one of the founding members leaves.

As the corporation grows, management and ownership can be separated so that the business can continue and the owners can still reap benefits. However, they may choose not to run the corporation.

An important corporate characteristic is the ability to consolidate, merge, or buy other corporations.

You may be taken more seriously by others if you have a corporation. • Corporate stock may be freely transferred by sale or gift.

A corporation can buy and sell property in the corporate name. A corporation can contract with the government, whereas most other

business entities cannot. A corporation has numerous tax advantages, including pension and

profit-sharing options.

DISADVANTAGES It is expensive to create and to maintain

depending on the type and complexity. Majority shareholders can overpower

minority shareholders. The shareholders, as owners, have little

say in day-to-day operations. A corporation is subject to greater

governmental regulation and control than other types of business entities.

Limited LiabilityPerpetual Existence

Easy Transferability of ownership

Separate Legal Entity cost

Sole Proprietorship No No No No LowGeneral Partnership No No No No Low

Limited Partnership Limited

partners only LLC Yes Yes Yes Yes MediumClose Corporation Yes Yes No Yes HighS Corporation Yes Yes Yes Yes HighProfessional Corporation Yes Yes No Yes HighC Corporation Yes Yes Yes Yes High

Summary – comparing business entities

DEFINATION OF MSME (MICRO, SMALL & MEDIUM ENTERPRISES) Defined based on the degree of legal

formality. It can be used between formal and

informal sectors Here MSME’s are considered enterprises

that are not registered and do not comply with legal obligations concerning safety, taxes and labour laws.

Can also defined based on the limited amounts of capital and skilled workers

Also based on number of employees & turnover

MICRO ENTERPRISES Employs less than 10 workers With an annual turnover less

that Kshs 500,000 A capital of less than 5 million

for services or Less than 10 million for

enterprises doing manufacturing

SMALL ENTERPRISES Employs between 10 and 50

workers With an annual turnover

between Kshs 500,000 and 5 million shillings

Capital formation between 5 million and 20 million and

Between 5 million and 50 million for enterprises doing manufacturing

MSMESource - GOK

ENTITY

NUMBER OF EMPLOYEES

ANNUAL TURNOVER

INVESTMENT IN PLANT & MACHINERY +REG CAPITAL

EQUIPMENTINVESTMENT + REG CAPITAL

MICRO Ent

<10 <Kshs 500,000

< Kshs 10 million

< Kshs 5 million

Small Ent

>10<50

>Kshs 500,000< Ksh5 million

>Kshs 10 million

< Ksh50 million

>Kshs 5 million

< Kshs 20 million

PUBLIC LISTED COMPANIES

Source - NSE

Main Market segment The issuer shall have a

minimum authorized issued and fully paid up share capital of Kshs. 50 million.

Net assets immediately before the public offering of shares should not be less than Kshs. 100 million.

Alternative Market Segment The issuer shall have a

minimum authorized issued and fully paid up share capital of Kshs. 20 million.

Net assets immediately before the public offering of shares should not be less than Kshs. 20 million.

BUSINES BTW 1000 - 5000 Selling vegetables Hawking Selling Mitumba clothes Car wash business in small towns Shoe shining business Photography Rearing kienyeji Chicken Mobile manicure

BUSINESS BETWEEN 10,000 – 100,000 Kinyozi Salon Grocery Boutique in small towns Selling women’s hand bags Selling women's clothes Farming tomatoes, onions, pineapples,

water melons, maize & beans Photocopying, scanning and printing

business Investing in shares and bonds

BUSINESS BETWEEN 200,000 – 500,000 Fast food restaurants Small pub Hotel Classic kinyozi Salon in posh estates General shop Laundry business Car wash business in nairobi Starting an mpesa shop Starting a banking agency business Starting a motor cycle spare parts business Starting a cosmetic shop Starting an audit firm

BUSINESS BETWEEN 1MILLION – 10 MILLION Electronic shop Pub business in major cities A restaurant or fast food in Nairobi CBD A jewellery shop Furniture making business Large scale farming A school A SACCO Wines & spirit wholesale shop Starting a bookshop Starting a matatu business Motor vehicle spare parts business Starting a chemist Starting a security firm Starting a recording studio

BUSINESS OF OVER 10 MILLION Building rental houses Real estate firm Starting business of letting out earth

movers Starting a stock brokerage Starting a radio or TV station Starting a supermarket Starting a manufacturing industry Starting a 5 star hotel Starting an ATM machine business

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