Foundations of

Entrepreneurship
Building a Balanced Team
Legal Forms of Business

Building a Balanced Team

In todays world of virtually unlimited
access to capital teams are a startup's *only* true differentiator
providing unique sustainable
competitive advantage.

https://medium.com/the-art-of-the-tech-startup/building-abalanced-startup-team-f963692a474a

Life as a CEO Can Be Very Lonely

Whether you are taking on incumbents orinventing a
new market,as a founder you are embarking on a
journey that is going to prove harder than your planned
worse-case scenarios.
Life as a Sole-Founder-CEO is akin to that of a ship captain
without a crew.
Odds are against you and you got very little in your favor
other than your hard skills, resilience, vision, passion and
courage. While all these attributes are a pre-requisite to embark
on your start-up journey, they can only take you so far if you
havent assembled a strong team of fellow travellers who share
your passion and are determined to see the vision through.
On the flip side, youd better be without co-founders than start
with the wrong set up.
Steve Jobs, Larry Page and Elon Muskwould have not
achieved greatness had they not invested in building well
balanced teams early on and sustained this along the way.

Importance of a Balanced Team for

Success Can Never be
Overemphasized
You may have
a great business idea, solid financial

backing, and optimistic market research, but if your

founding team doesnt have the right balance of
personalities, you could soon be closing up shop
"Having the right team determines the path and
outcome of a new venture more than any
decision in the lifecycle of a company,"Bernd
Schoner, the author of The Tech Entrepreneurs
Survival Guide (McGraw-Hill, May 2014). (MIT
graduate)
"The founding team cannot be changed, and no
one can speak to investors or customers with
authority like a founder," he says. "Its a great asset
to have at the beginning and hard to add later."

Larry Page
Lawrence "Larry" Page(born March 26,
1973) is an American computer scientistand
internet entrepreneur who is the CEO and
co-founder of Google, alongside Sergey
Brin.
Page is the inventor of PageRank, the
foundation of Google's search ranking
algorithm.
He is a board member of the Xprize
Larry
Page and Sergey Brin jointly authored a paper titled "The
Foundation.
Anatomy of a Large-Scale HypertextualWeb Search Engine,
Computer Networks, 2012", which became one of the most
downloaded scientific documents in the history of the internet at
the time Citation as of date is 14176

Google
199
5
1996
1997
1998

Larry Page and Sergey Brin meet at

Stanford. Larry, 22, a U Michigan grad, is
considering the school; Sergey, 21, is
assigned to show him around.
Larry and Sergey begin collaborating on a
search engine called BackRub. BackRub
operates on Stanford servers for more than
a yeareventually taking up too much
bandwidth.
Google.com is registered as a domain on
September 15. The namea play on the
word "googol," a mathematical term for the
number represented by the numeral 1

Elon Musk
Elon Musk is a South Africa-born, CanadianAmerican engineer, entrepreneur, and inventor.
He is the CEO and CTO of SpaceX, CEO and
product architect of Tesla Motors, and chairman
of SolarCity.
He is the founder of SpaceX and a cofounder of
PayPal, Tesla Motors, Zip2, and SolarCity.
He has also envisioned a conceptual high-speed
transportation system known as the Hyperloop.
Elon Musk joined Tesla Motors that was originally
promoted by Martin Eberhard and Marc
Tarpenning

A Team Member may Bring the Following Values

Drive
Entrepreneurial instincts
Domain knowledge
Intelligence / Creativity
Track record / Credentials
Past collaboration
Shared vision and values

Issues to Consider for Building a Team

1. Team Size: A team of two to three founders seems ideal.
2. A leader to break deadlock among parties:
3. History of founder working in stressful situation:
4. Founders Goals: All founders need to be on the same page as regards
future goals financially, career wise, socially and geographically with
timeframes? (e.g. exit scenarios)
5. CEO: General roles of the other co-founders need to be clear including
CEO.
6. Equity Philosophy: Initial allocation and future accretion.
7. Shared Vision: Is there a core vision drawing the team together?
8. Shared Values: Common core values make the team a strong unit?
9. Commitment: Commitment levels of each founder should be very clear?
10. Mix of Skills: Do you have a diverse set of skills on your team ideally
including product/technology, customer/sales skills, people management
skills, entrepreneurial spirit (i.e., fearless & able to operate in ambiguity),
general problem solver, business skills (especially from an entrepreneurial
environment)?
11. Trust and Confidence: Do you have trust and confidence in your cofounders?
12. Likability: Can you see working with your co-founders for the next five
years? Do they give you energy or not?

More about balance team

To suceed, the team should have all the required talents, knowledge,
organizational clout, experiences, and technical know-how needed to get the
job done. An effective team is composed of people who collectively bring all such
critical competencies to the effort. Any weak or missing competencies jeopardize the
team goal. The key action is to understand the missing competency and identify
talent and induct in the team so as to fill that gap.
Shared vision - Common goal - without common goal it is quite like different
persons trying to drive a vehicle in different directions. A connected team is a
motivated team where everyone feels valued and is a recepie for success. The team
synch is reflected in the services they provide.
Communication - A study by MIT Human Dynamics Laboratory reveals research
outcomes suggesting that communication during informal (non-work) meetings
among members is very critical in building successful team.
Team benefits from having an analytical thinker who is detailed-oriented, process
focused, identify and focuses on the sub-tasks needed to achieve the goal. Such
persons are different from broad thinkers who concentrate on executing overall
strategy.
Sharing knowledge and skills - proactively sharingown knowledge and skill with
others in the team is a good leadership quality that greatly benefits the team and the
venture.
A good test of goal alignment is to let each team member pitch before an
independent person. If all the members articulate the same business model the team
is synchronized to a common goal. If they are different, it may indicate need to fine
tune the opportunity or need to let some members quit.
The goal is not mere vision or mission but required strict adherence to performance
metrics.
A shared understanding of the goal is extremely important, but commitment to the

Example of Shared
Commitment
Every member understand the goal - to follow the Missouri River
to its source and then to find a route to the Pacific Ocean.
Understanding that goal was the easy part. The hard part was the
poling and rowing a heavy barge against the Missouri's powerful
current for days on end, dealing with cloud of hungry mosquitoes
in summer and sub-zero temperatures in winter, trekking over an
unanticipated range of steep mountains, facing hostile natives
and near-starvation and finding the will to continue day after day.
Most people would have turned back after the first month. Giving
up would have been easy-even natural. But the members of the
Corps of Discovery Pressed on because they were committed to
their goal, which they understood to be important to their leaders,
to the president, and to the young nation that stood behind them.
A deep commitment to the goal provided the energy and courage
they needed to stay the course and to keep moving forward.

A Balanced Team to have the Following 4

Roles:
Marketer: seeks and tests problem /solution and product / market fit
with a combination of qualitative and quantitative metrics (qualitative is
more important early days).
Product Manager:defines roadmap, translates customer problem into
productionizable solution. It is often the case that a marketer and
product manager merge into the role of the Growth Hacker
Developer: establish the early architecture, codes the product, iterates
Designer:defines UX paths and UI, conducts usability testing and
constantly iterates on the user experience and aligns with the value
proposition
A developer and designers job is to turn problem and customer
knowledge into a workable prototype and later on do things that scale
You are not only competing with the incumbents but with a number of
fierce start-ups that are trying to go after the same problem-customer
as efficiently as they can. Your best chances are to have individual
contributors who can focus on the problem at hand and complement
your skills so that 1 + 1 + 1 BECOMES = 5.
In commerce, time to market (TTM) is the length of time it takes from a
product being conceived until its being available for sale.

Saying differently, a Balanced Team to

have the Following Roles:
A product expert (Prima Donna and Superstar)
Leader who has sway on everybody and
mitigates interpersonal crisis.
The industry expert with deep experience
The marketing expert who knows the mantra
to sell whatever you make
The financial expert ensures need and source
of money in time proactively.
A person with a fat purse who is ready with
fund as and when necessary.

Experience of Bad Team

Member
Schoner cofounded theradio frequency identification technologycompany
ThingMagicwith four fellowMedia Labgraduates at the
Massachusetts Institute of Technology , and experienced a year of "extreme
turmoil."
"We had worked together before and were convinced we knew each other
well," he says. "But once you start a company, outside pressure causes
people to act differently. That was for me one of the most traumatic
experiences in my early years. A fundamentally different environment
changes people, and how they react."
The skills and traits of a companys founders are irreplaceable, making it
important to get it right at the onset, says Schoner, who led his startup
through its ups and downs, ultimately selling to Trimble Navigation.
"The founding team cannot be changed, and no one can speak to investors
or customers with authority like a founder," he says. "Its a great asset to
have at the beginning and hard to add later."
Start-up needs six personalities to be successful. While one person might
have more than one of these traits, these six need to exist:

Forms of legal entities

Companies Act:
Legislative Bill to Act of Parliament
The Companies Act, 2013 passed by the
Parliament has received the assent of the
President of India on 29th August, 2013.
The Companies Act, 2013 has been notified
in the Official Gazette on 30th August, 2013.
Some of the provisions of the Act have been
implemented by a notification published on
12th September, 2013.
The provisions of Companies Act, 1956 is
still in force.

Factors Determining Forms of

Businesses
The nature and size of business.
The degree of control desired by the
owner(s). A company involves separation
of ownership and management.
Amount of capital required for the
establishment and operation.
The volume of risks and liabilities as well
as the willingness of the owners to bear it.
Comparative tax liability.

Forms of Legal Entity

Proprietorship
Partnership
Private limited company
Public limited company
Limited liability partnership
Co-operative

Proprietorship
No agreement or registration.
Required to obtain a license specific to the line of
business from the local administration.
The capital required by the organisation is supplied
wholly by the owner and from the profits of the business.
Owner has a complete control over all the aspects of the
business. Professional can be engaged to manage the
activities.
Owner alone enjoys the benefits or profits of the
business and bears the losses.
The firm has no legal existence separate from its owner.
The liability of the proprietor is unlimited.
Lack of continuity i.e. the existence of a sole
proprietorship business is dependent on the life and
death of the proprietor.

Proprietorship
Advantages
Ease of formation trade license
address of business
Maximum incentive for work
Secrecy of business
Quick decisions and flexibility of
operations

Proprietorship
Disadvantages
Limited capital
Limited managerial ability
Limited life
Unlimited liability
Clubbing of income may
lead to higher income tax.

Partnership

# A partnership is formed by an agreement either written or

oral.
# When the written agreement is duly stamped and registered,
it is known as "Partnership Deed".
# Ordinarily, the rights, duties and liabilities of partners are laid
down in the deed. But in the case where the deed does not
specify the rights and obligations, the provisions of theTHE
INDIAN PARTNERSHIP ACT, 1932 apply.
The deed, generally contains the following particulars:

Name of the firm.

Nature of the business to be carried out.
Names of the partners.
The town and the place where business will be carried on.
The amount of capital to be contributed by each partner.
Loans and advances by partners and the interest payable on
them.
The amount of drawings by each partner and the rate of interest
allowed thereon.
Duties and powers of each partner.

Partnership
Advantages
# Ease of formation
# Greater capital and credit resources
# Better judgement and more managerial
abilities
Partnership is an appropriate
form of ownership for
Disadvantages
medium sized business
involving limited capital. This
# Absence of ultimate authority
may include small scale
wholesale and
# Liability for the actions of industries,
other partners
retail trade; small service
# Limited life
concerns like transport
agencies, real estate brokers;
# Unlimited liability
professional firms like
charted accountants, doctors'
clinic, attorney or law firms

Private Limited Company

A private limited company is a voluntary
association of not less than two and not
more than two hundred members (earlier
50), whose liability is limited, the transfer
of whose shares is limited to its members
and who is not allowed to invite the
general public to subscribe to its shares
or debentures.

Private Limited Company

Advantages
Continuity of existence.
Liabilities of its members are limited to their
contributions to equity.
Less legal restrictions, need not hold
statutory general meeting or file statutory
report.
Disadvantages
Shares are not freely transferable.
Not allowed to invite public to subscribe to
its shares.
Scope for promotional frauds.

Steps to Incorporate a Private Limited

Company

1. Get Director Identification Number (DIN) ID Proof, Address proof,

Photograph and Fee of Rs.100 .
2. Obtain Digital Signature of any one director paying Rs. 1000/-, valid for 2
years.
3. Apply for company name in form 1A paying Rs.1000/4. Once you get the name approved, print Memorandum of Association
(MoA) and Articles of Association (AoA).
5. Scan the MoA and AoA
6. Fill in form 18 & 32.
7. FIll in form 1 and attach scanned copies of MoA & AoA. Once Form 1 is
saved you will be directed to fill in form 18 & 32. Do so.
8. Pay the fees of Rs.4800 for form 1,18 & 32 & Rs.1300 as stamp duty.

Hence, a private company is preferred by

those who wish to take the advantage of
limited liability but at the same time desire
to keep control over the business within a
limited circle and maintain the privacy of
their business.

It has an independent legal existence.

http://www.caclubindia.com/
http://www.mca.gov.in/

Public Limited Company

Public Limited Company

The company has a separate legal existence apart from its members who
compose it.
Its formation, working and its winding up, in fact, all its activities are strictly
governed by laws, rules and regulations.The Indian Companies Act, 1956
/2013 contains the provisions regarding the legal formalities for setting up of a
public limited company. Registrars of Companies (ROC) appointed under the
Companies Act covering the various States and Union Territories are vested with
the primary duty of registering companies floated in the respective states and
the Union Territories.
A company must have a minimum of seven members but there is no
limit as regards the maximum number.
The company collects its capital by the sale of its shares and those who buy the
shares are called the members. The amount so collected is called the share
capital.
The shares of a company are freely transferable and that too without the
prior consent of other shareholders or without subsequent notice to the
company.
The liability of a member of a company is limited to the face value of
the shares he owns. Once he has paid the whole of the face value, he has no
obligation to contribute anything to pay off the creditors of the company.
The shareholders of a company do not have the right to participate in
the day-to-day management of the business of a company. This ensures
separation of ownership from management. The power of decision making in a
company is vested in the Board of Directors, and all policy decisions are taken

Public Limited Company

Advantages
Continuity of existence
Larger amount of capital
Unity of direction
Efficient management
Limited liability of its shareholders

Disadvantages
Scope for promotional frauds

Limited Liability Partnership (LLP)

Limited Liability Partnership Act 2008
LLPis a new corporate structure that combines the
flexibility of a partnership and the advantages of
limited liability of owners at a low compliance cost. In
other words, it is an alternative corporate business vehicle
that provides the benefits of limited liability of a company,
but allows its members the flexibility of organising their
internal management on the basis of a mutually arrived
agreement, as is the case in a partnership firm.
Owing to flexibility in its structure and operation, it would be
useful for small and medium enterprises, in general, and for
the enterprises in services sector, in particular.
Internationally, LLPs are the preferred vehicle of business,
particularly for service industry or for activities involving
professionals

Partnership Firm

LLP
LLP

Liability of the partners unlimited

Limited to the extent of her/his

capital contribution

No

Perpetual existence

Not a separate legal entity

Separate legal entity, can own

properties, can sue and be sued
in its own name.

Minimum owners 2

Maximum owners 10 in case

banking, 20 in case of others

No maximum number of partners

Partnership deed

LLP Agreement or Schedule 1 of

the Act

Partner can transfer his

membership with consent of
other partners

Transfer allowed. Transferee does

become partner authomatically.

Firm can be converted into LLP or

company

Can not be converted into

company under LLP Act. A new
company has to be registered
after dissolving the LLP.

Private Ltd. Company vs. LLP

Private Limited Company

LLP

Liability of shareholders limited to

the extent of subscription to equity

Limited to the extent of her/his

capital contribution

Perpetual existence

Perpetual existence

Separate legal entity, can own

Separate legal entity, can own
properties, can sue and be sued in its properties, can sue and be sued in its
own name.
own name.
Minimum share holders: 2
Minimum directors: 2

Minimum partners: 2
2 designated pertners

Maximum shareholders: 200 (Act

2013)

No maximum number of partners

Memorandum of Association defines

the activities.

LLP Agreement or Schedule 1 of the

Act

Articles of association: procedure to

follow

LLP Agreement or Schedule 1 of the

Act

Transfer of shares restricted.

Transfer allowed. Transferee does

become partner automatically.

Management by Board of Directors

Two partners authorized in

agreement

Company can be converted into LLP

Can be converted into company

LLP is governed by the provisions of the

Limited Liability Partnership Act 2008, the
salient features of which are as follows: The LLP shall be a body corporate and a legal entity separate from its partners.
Any two or more persons, associated for carrying on a lawful business with a view
to profit, may by subscribing their names to an incorporation document and filing
the same with the Registrar, form a Limited Liability Partnership.
The LLP will have perpetual succession.
The LLP will be a separate legal entity, liable to the full extent of its assets, with
the liability of the partners being limited to their agreed contribution in the LLP .
The liabilities of the LLP and partners who are found to have acted with intent to
defraud creditors or for any fraudulent purpose shall be unlimited for all or any of
the debts or other liabilities of the LLP.
Every LLP shall have at least two partners and shall also have at least two
individuals as Designated Partners, of whom at least one shall be resident in India.
A statement of accounts and solvency shall be filed by every LLP with the
Registrar every year.
A firm, private company or an unlisted public company is allowed to be converted
into LLP.
The Indian Partnership Act, 1932 shall not be applicable to Limited Liability
Partnerships.

 Audit accounts need not be submitted annually by LLPs if the

annual sales is less than Rs.40 lakhs and total capital is less than
Rs.25 lakhs. Whereas, for a Private Limited Company, it is
mandatory irrespective of sales turnover or capital.
No dividend distribution tax is to be paid by LLP. Dividend payment
is taxed at 15% in case of Pvt. Ltd. companies.
No Board Meetings or Annual General Meetings. So annual
compliance is comparatively less compared to Private Limited.
The fees for incorporation of LLP is less compared to that is case of
Private Limited Company.
The process for incorporation of LLP is simple requiring less
documentation.

Once any LLP exceeds sales of Rs. 40 lakh or the

capital crosses Rs. 25 lakh, the list of compliances
and costs are almost similar to that of Private Ltd.
companies. If you foresee raising capital from angel
or VC even in the long term horizon it is better to

Process of Registering a
Company 1

Trade license
Digital signature of one person
DIN Directors Identification No.
Search for name and apply to ROC for name approval (e-Form 1A).
Draft Memorandum of Association (Objectives, activities and
authorized capital) and Articles of Association (Selection of directors
and procedure to be followed) get them vetted by ROC.
Get MA & AA appropriately stamped.
Get the MA & AA signed by at least two subscribers. The subscribers
should write their personal information, including number of shares
subscribed, by their own hand and get it witnessed.
Print copies.
Pay filing and registration fees (depending on amount of authorized
capital)
E-forms (1, 18, 32) are to be filed within 6 months of name approval.

Process of Registering a Company 2

Memorandum of Association and Articles of Association (duly stamped)
and a duplicate thereof.
A copy of the letter of the Registrar of Companies intimating the
availability of the name.
e-Form No. 1 (with prescribed stamps) for incorporation of a Company.
e-Form No. 18, intimating address of registered office.
e-Form No. 32 and e-Form 32 Addendum, advising appointment of
managing director, directors, manager and secretary and the changes
among them or consent of candidate to act as a managing director or
director or manager or secretary of a company .
Document evidencing payment of prescribed registration and filing fee.
The promoters, as being the subscribers to the Memorandum and
Articles should be the same person whose names are appearing in the
original application for availability of name (e-Form 1A).
Obtain Certificate of Incorporation from ROC.
The date mentioned by ROC in the certificate is the date of
incorporation of the company.
A private company can commence business right from the date of its
incorporation.

 A company is an artificial juridical

person

Co-operatives
Co-operative organisation is a society which has
as its objectives the promotion of the interests of
its members in accordance with the principles of
cooperation.
It is a voluntary association of ten or more
members residing or working in the same locality,
who join together on the basis of equality for the
fulfilment of their economic or business interest.
The basic feature which differentiates the cooperatives from other forms of business
ownership is that its primary motive is service to
the members rather than making profits.

There are different types of cooperatives like consumer cooperatives, producer's co-operatives, marketing co-operatives,
housing co-operatives, credit co-operatives, farming cooperatives etc. The aim of all such co-operatives is to promote
the welfare of their members. Its main features are:-

It is a voluntary organisation as a member is free to leave the society and

withdraw his capital at any time, after giving a notice.
The minimum number of members is 10, but there is no limit to the maximum
number of members. However, the members must be residing or working in
the same locality.
Registration of a co-operative enterprise is compulsory. A co-operative
society may be registered with the Registrar of Co-operatives Societies.
After registration a co-operative enterprise becomes a body corporate
independent of its members i.e. a separate legal entity.
It is subject to the provisions of theCo-operative Societies Act, 1912 or
State Co-operative Societies Acts.
It has to submit annual reports and accounts to the Registrar of Societies.
The liability of every member is limited to the extent of his capital
contribution.
The shares of co-operative society cannot be transferred but can be returned
to the society in case a member wants to withdraw his membership.
Being a separate legal entity a co-operative enjoys continuity of existence
which is not affected by death, insolvency, retirement, etc. of the members.

Co-operative
Advantages
Greater amount of capital
Reasonable price, good quality or better service
Better conditions of service to employees
Continuity of existence
Limited liability
Disadvantages
Inability to collect sufficient capital

Inability to provide efficient managerial services

Organisational limitation

Reference
www.mca.gov.in/Ministry/pdf/
CompaniesAct2013.pdf

Transfer Price
In managerial accounting, when different divisions
of a multi-entity company are in charge of their own
profits, they are also responsible for their own
"Return on Invested Capital". Therefore, when
divisions are required to transact with each other, a
transfer price is used to determine costs. Transfer
prices tend not to differ much from the price in the
market because one of the entities in such a
transaction will lose out: they will either be buying
for more than the prevailing market price or selling
below the market price, and this will affect their
performance.