This section of the business plan is essential information for investors and financial institutions – it gives information about how your company is organized and who is in charge. This section is useful for relaying who accomplishes what tasks for the business, the business knowledge of the management team and the qualifications of the board (if you have an advisory board). If you are putting together a business plan for a small business, this step may seem unnecessary, but it’s important to show that you’ve carefully thought out the business and know who’s in charge.
One of the best ways to demonstrate your company’s structure is by selecting a business structure, and creating an organization chart to accompany it. The chart should be accompanied with a narrative describing the chart’s structure, the responsibility of each person, and their qualifications.
Businesses are usually structured on one of three basic business structures: Sole Proprietorship, Partnership or a Corporation.
A sole proprietorship is an unincorporated business owned only by one person. It’s the most simple and basic form of business organization. Without you, the owner, the business wouldn’t exist. As the sole business owner, you take on all the responsibility, the liabilities and the risks. Of course, you also completely benefit from the profits.
A partnership is a business established by two or more people. Each person contributes something to the business – whether it’s money, labor, skill, or property. In turn, the partners share the profits along the lines of the investment input.
Corporations are businesses where the shareholders transfer money and/or property for the company’s capital stock. Profits of the corporation are distributed according to investment in the capital stock. A corporation can take some of the same deductions as a sole proprietorship, and also offers special tax deductions that make corporations attractive.
Usually you define your business structure in the executive summary. Your organizational summary includes an organizational chart. You’ll show each person in the organization, the reporting structure of each person in the company. In the narrative you detail the responsibilities of each person. You should include:
- names of the owners
- percentage of ownership
- extent of involvement in the company
If any of these individuals are involved in the management of the company, also include their resumes that list:
- Company responsibilities
- Experience and skills
- Qualified achievements
- Prior employment
List all the other employees of the company, the positions they hold and their responsibility.
If you have multiple locations, show the structure. Where is the corporate office located? Are there satellite locations, do you plan to expand within the city, state, nation or internationally?
The business structure section of the business plan gives basic information about your company and the management staff. It’s an essential part of the plan, because it shows the care and thought you’ve put into your business and how it is structured.