One of the most important decisions the entrepreneur(s) must make in the business plan is the legal form of business. The three major legal forms of business are the proprietorship, partnership, and corporation. Each differs significantly and should be evaluated carefully before a decision is made. This chapter provides considerable insight and comparisons regarding these forms of business to assist the entrepreneur in this decision.

The S corporation and the limited liability company are alternative forms of business that are gaining popularity. Each of these allows the entrepreneur to retain the protection from personal liability provided by a corporation as well as the tax advantages provided by a partnership. There are important advantages as well as disadvantages to these forms of business, and entrepreneurs should carefully weigh both before deciding.

The organization plan for the entrepreneur also requires some major decisions that could affect long-term effectiveness and profitability. It is important to begin the new venture with a strong management team that is committed to the goals of the new venture. The management team must be able to work together effectively toward these ends.

The design of the organization requires the entrepreneur to specify the types of skills needed and the roles that must be filled. These would be considered part of the formal organization. In addition to the formal organization the entrepreneur must consider the informal organization or culture that is desired to match the strategy stipulated in the business plan. This organization culture represents the attitudes, behaviors, dress, and communication styles that can differentiate one company from another. Both of these are important in establishing an effective and profitable organization.

A board of directors or board of advisors can provide important management support for an entrepreneur starting and managing a new venture. Boards of directors are now governed by the Sarbanes-Oxley Act, which was passed because of a rash of illegal and unethical behaviors that were newsworthy. The intent of this new law is to make the board of directors more independent and to make its members accountable to the shareholders. The law is particularly relevant to public companies and has less impact on privately held companies. The board of advisors is a good alternative to a board of directors when the stock is held privately or in a family business.

In spite of the new regulations, a board of directors or advisors can still provide excellent support for an organization. Either one can be formed in the initial business planning phase or after the business has been formed and financed. In either case the selection of board members should be made carefully, so that members will take their roles seriously and will be committed to their roles and responsibilities.

Advisors will also be necessary in the new venture. Outside advisors should be evaluated as if they were being hired as permanent members of the organization. Information on their fees and referrals can help determine the best choices.