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AN ALTERNATIVE AN ADVISORY COUNCIL
In recent years, increased attention has been directed to the legal responsibilities of directors. Because outside directors may be held responsible for illegal company actions, even though they are not directly involved in wrongdoing, some individuals are reluctant to accept directorships. Thus, some small companies use an advisory council as an alternative to a board of directors. Qualified outsiders are asked to serve on a council as advisors to the company. This group then functions in much the same way as a board of directors does, except that its actions are only advisory in nature.
The legal liability of members of an advisory council is not completely clear. However, limiting their compensation and power is thought to lighten, if not eliminate, the personal liability of members. Since its role is advisory in nature, the council also may pose less of a threat to the owner and possibly work more cooperatively than a conventional board.
Without a doubt, a well-selected board of directors or advisory council can do a great deal for a small company, but bear in mind that this is only one part of an effective organizational plan. The success of any business depends on the quality of its people, who must also be well organized and skillfully led. That’s why having a balanced management team, selecting an organizational from that makes sense form that makes sense for the enterprise and its circumstances, and joining advantageous strategic alliances are all so important. This chapter has touched on each of these topics to help you think through key factors involved in developing a solid organizational plan that will give your business a good running start and help to ensure its long-term success.
1. Describe the characteristics and value of a strong management team.
- A strong management team nurtures a good business idea and helps provide the necessary resource to make it succeed.
- The skills of management team members should complement each other, forming an optimal combination of education and experience.
- A small firm can enhance its management by drawing on the expertise of competent and outside specialists.
- Social media tools can be very helpful in attracting customers, connecting with peers, and sharing advice about common problems.
- Building social capital through networking and goodwill is extremely helpful in developing a small business.
2. Explain the common legal forms of organization used by small business.
- The most basic legal forms of organization used by small businesses are the sole proprietorship, partnership, and C corporation.
-In a sole proprietorship, the owner receives all profits and bears all losses. The principal disadvantage of this form is the owner’s unlimited liability.
- In a partnership, which should be established on the basis of written partnership agreement, success depends on the partner’s ability to build and maintain an effective working relationship.
- C corporations are particularly attractive because of their limited liability feature. The fact that ownership is easily transferable makes them well suited for combining the capital of numerous owners.