Entrepreneurship 5 Marks Question

1. Concept identified-Business plan:
   Meaning: It is a comprehensive project report which not only encompasses the entire range of activities which are being planned in the business.

Lines: She thought of starting a small enterprise will require 10–15 trained workers and an investment of rupees two lakhs. This will give 40% annual return on investment.

2. Elements of Business Plan:

1. Business venture: This section of the business plan generally begins with the "mission statement" by the entrepreneur describing the size, scope and nature of the enterprise.
2. Organisational plan: The organizational plan is that part of the business plan that describes the proposed venture's form of ownership.
3. Production plan: A production plan helps to plan the work in such a manner that one can clearlyform an idea about:

• Prduction schedule and/ or budget.
• Machinery, equipment requirement.
• Manufacturing method and process involved.
• Plant layout.

4. Operational plan: Operational plan is a system whereby there is achieved a smooth and coordinated flow of work within the factory so that, by planning and control of all the productive operations in all the stages of manufacture, the final product is completed in accordance with the plans.
5. Human resource plan: HR planning is a process by which an entrepreneur ensures that he/she has the right number of people, and the right kind of people with appropriate skills, at the right place and the right time to do work for which they are economically most suitable.
6. Marketing plan: This valuable document is a guideline regarding the marketing objectives, strategies and activities to be followed by the new enterprise.
7. Financial plan: Financial plan is a projection of key financial data about:

• The potential investment commitment needed for the new venture, and.
• Economic feasibility of the enterprise.

Step 1: Every enterprise has different guidelines and rules and regulations. It is based on the business charateristics, decides on the frequency and period (day, week or month) as well as horizon (month, 13 weeks or 6 months).
Step 2: Develop the format, with items appropriate for your business, which will be used for developing the projection. You may take help from the formats attached here as sample.
Step 3: A projected cash flow begins with the existing cash balance for the business. It then lists the sources of inflow and the anticipated payment dates.
Step 4: For example, if you supply goods on credit, you will know at the start of February that you will receive a certain amount during the month covering sales from January–based on credit terms. You may have other inflows interest on your deposits, sale of scrap, rent from space sub-let etc. In this manner, you add up all your inflows.
Step 5: The statement then looks at forthcoming expenditure. Some of this will be a fixed, regular sum such as staff costs. Other expenses will be known but only payable at certain times, such as taxes. There will also be costs such as buying stock or materials.
Step 6: Where payment dates are variable, it is usually safest to work on the basis that you will pay suppliers as soon as possible but not receive payment from customers until the last possible date.
Step 7: In short, be conservative in assumptions.

• Adding all outflows enables you arrive at the surplus or deficit for the period.
• Combined with the opening balance, leads to deriving the closing balance.
• It becomes opening balance for the next period.

Six major objectives of preparing the project report:

1. Identifying the requirement of resources (technical, financial, commercial, managerial and operational).
2. To assess the scope and range of the success of the enterprise before its actual commencement.
3. To obtain the opinions of experts from various fields, viz. technical, financial, marketing, etc.
4. To enable the licensing of the enterprise.
5. For financial appraisal of the project.
6. To find the critical component of the project idea.

Features of a feasibility plan:

1. Executive summary.
2. Objectives of the business.
3. Attributes of the product of service.
4. Market survey and analysis.
5. Operational plan.
6. Marketing strategy.

Six objectives of preparing the Project Report are:

1. Identifying the requirement of the resources.
2. To assess the scope and range of the success of the enterprise before its actual commencement.
3. To obtain the opinions of experts from various fields.
4. To enable the licensing of the enterprise by the concerned authorities and Seeking registration for various utilities like water, land, electricity etc.
5. For Financial appraisal of the project by financial institutions, banks, financial companies etc.
6. To find the critical components of the project report.

“Uses of the project report"

1. For the Entrepreneur - It helps the entrepreneur in the process of evolving Strategies. It is a blueprint that explains to him the idea of the project in Factual terms. It can be interpreted in the form of SWOT analysis.
2. For the Financial Institution - The Banks and financial’ Institutions before extending financial assistance would like to evaluate the feasibility and profitability of the enterprise. They would like to know whether the entrepreneur would be able to generate the necessary funds periodically to repay the premium along with the interest. The appraisal of the project becomes important and the project report facilitates the above.
3. For the Government - Many statutory and legal requirements can be Executed based only on the project report. Land Tax, Sales tax, pollution, Control Certificate are to be obtained based on the project report only.

The local Municipal Authorities also require the project report to give Clearance.

1. Permanent Account Number (PAN): Is a ten-digit alphanumeric number, issued by the Income Tax Department. PANe nables the department to link all transactions of the-personl with the department. These transactions include tax payments, TDS/ TCS credits, returns of income/ wealth/ gift/ FBT, specified transactions, correspondence, and so on. PAN, thus acts as an identifier for the-personl with the tax department. It is mandatory to quote PAN in all documents pertaining to financial transactions.
2. Who must have PAN?

• All existing assesses or taxpayers or persons who are required to furnish a return of income, even on behalf of others,must obtain PAN.
• Any person carrying on any business or profession whose total sales, turnover or gross receipts are or is likely to exceed five lakh rupees in any previous year.
• Any person, who intends to enter into financial transaction where quoting PAN is mandatory, must also obtain PAN.
• The Assessing Officer may allot PAN to any person either on his/her own or on a specific request from such person.

Human resources of an enterprise include the managerial and the non-managerial, skilled, semi-skilled and unskilled labour force, marketing and other field personnel.Steps needed to develop good human resource are:

1. Recruitment of competent personnel.
2. Training of the personnel.
3. Motivation for performance.
4. Providing appropriate organisational climate.
5. Scope for performance.
6. Feedback appraisal.
7. Scope for development for the aspirants.
8. Rewards for performance.
9. Retraining.
10. Providing scope for participation in the management.

Any enterprise needs basically three types of resources.

1. Men: In a small scale unit the entrepreneurs himself becomes very important human resources as he is both an employer and an employee. Human resources include skilled, unskilled and administrative staff.
2. Material: Material resources are under operation and management whether a business enterprise markets a products or a services, Certain operation are necessarily carried out combining raw materials, processing and assembling, using workers, machines, tools and power.
3. Finance: Finance is regarded as the life blood of interprise every enterprise aims at earning a profit have this aim. besides other things proper financial crucial. as money is required for inputs, technical.

Elements of project report:

1. Description of the promoters of the enterprise.
2. Description of the enterprise.
3. Economic viability and marketability.
4. Technical feasibility.
5. Financial projections.
6. Profitability analysis.
7. Relevant documents.

1. Business plan.
2. Business plans are decision-making tools:

• Describing all necessary inputs for the enterprise.
• Explaining the mode of utilization of the resources.
• Detailing the strategies for the execution of the project.
• Outlining the desired goals.
• Assessing market sensitivity and the profitability of the venture.

3. Operational plan.
4. Importance:

• Ensuing orderly flow of materials in the manufacturing process from the beginning (Raw state) to the end (the finished products).
• Facilitating continuous production, lesser work-in-progress, minimization of wastage.
• Co-ordinating the work of engineering, purchasing, production, selling and inventory management.
• Describing the flow of goods/ services from production point to the consumers.
• Introducing a proper system of quality control.
• Undertaking the best and most economic production policies and methods.

Operation plan is a system whereby there is achieved a smooth and coordinated flow of work within the factory so that, by planning and control of all the productive operations in all the stages of manufacture, the final product is completed in accordance with the plans. Following are the elements of operation plan:

1. Routing: It is a process which determines the exact path a product has to follow right from raw material till its transformation into finished product.
2. Scheduling: It means fixation of time, day, date when each operation is to be commenced and completed.
3. Dispatching: It is the process of initiating production according to pre-conceived production plan. It involves issuing necessary orders instructions, guidelines, etc.
4. Follow-up: It relates to evaluation and appraisal of work performed. A properly planned follow-up procedure is helpful in finding errors and defects in the work.
5. Inspection: Inspection is the art of comparing materials, product or performance with established standards. This helps to set up laboratories or evolve methods to ensure predetermined quality of product.
6. Shipping: It describes the flow of goods/ services from production to the consumers. It is a detailed presentation by the entrepreneur explaining the chronological steps in completing a business transaction efficiently and profitably.

Following are the amazing similarities:

1. Quest for excellence.
2. Drive for independence.
3. Tendency to be project champion.
4. Strong desire to succeed and earn profit.
5. Creative and innovative nature.
6. "Must be own boss”, attitude.
7. Love for being a 'Leader' in the field.
8. Zeal to capture major market share.

A financial plan gives a clear picture of following to the investors and the entrepreneur:

1. How much funds are required?
2. Where funds come from?
3. How they are disbursed?
4. The amount of cash available.
5. General financial well-being of the new venture i.e. probable revenue forecast.

The organizational plan helps the entrepreneur to carefully evaluate and decide that legal structure for his organization that could affect:

1. Long term effectiveness of the enterprise, and.
2. Profitability.
3. Specifying the types of skills needed and the roles that must be filled by the members.
4. The enterprise's formal organisation.
5. The attitudes, behaviours, dress, communication styles, etc., thus chalking out informal organisation or culture.

A business plan is a comprehensively written down document prepared by the entrepreneur describing formally all the relevant external and internal elements involved in starting a new venture. The business plan:

1. Viability: It helps in finding the viability of the venture in a designated market.
2. Guidance: It helps in providing guidance to the entrepreneur in organizing, planning activities as such:

• identifying the resources required.
• enabling obtaining of licenses if required, etc.
• working out with legal requirements.

3. Queries: It helps in satisfying the queries, and issues of each group of people interested in the venture.
4. Evaluation: It provides room for self assessment and self-evaluation.
5. Planning: It helps entrepreneur to plan ways to avoid obstacles.
6. Obstacles: It helps to realize the obstacles which cannot be avoided or overcome, suggesting to stop the venture while still on paper without investing further time and money.
7. Credit history: It reflects the entrepreneur’s credit history, the ability to meet debt and interest payments, and the amount of personal equity invested.

Finance is one of the most important pre-requisites to establish an enterprise. Availability of finance facilities the entrepreneur to bring together men, material, machines and methods to produce goods/services.
As timely availability of funds in right volume is key to entrepreneurial success, the entrepreneur should develop a sound financial plan discussing:

1. Financial requirements
2. Sources of raising funds
3. Exact assessment of the revenue, cost, profits, cash flow dynamics, stock of inventory loans etc.

Objectives of Financial plan:

1. To assess the amount of finance needed by enterprise.
2. To develop suitable capital structure for the enterprise.
3. To make the policies related with the finance for the enterprise.
4. To safeguard the enterprise for financial risk.

A production plan helps to plan the work in such a manner that one can clearly form an idea about:

1. Production schedule and/ or Budget.
2. Machinery, equipment requirement.
3. Manufacturing method and process involved.
4. Plant layout.
5. Time, motion and work study.
6. Manpower requirement.
7. Inventory requirement.

1. VAT is a multi-point destination based system of taxation, where levied on value addition at each stage DESENE of transaction in the production/ distribution chain.
2. 'Value addition is the increase in value of goods and services at each stage of production or transfer of goods and services.
3. VAT is a tax on the final consumption of goods or services and is ultimately the borne by the consumer.
4. The State Governments, through BRETERESTING Taxation Departments, are carrying E t out the responsibility of levying and BIOS collecting VAT in the respective States.
5. The Central Government is playing the role of a facilitator for the successful implementation of VAT.

The number of people required for various positions throughout the enterprise gets affected by:

1. Finding out the total work to be done.
2. How much work can the average person do in a specified period of time.
3. Level of absenteeism expected.
4. Rate of labour turnover.
5. The present number of employees.
6. The future plans for expansions and diversifications.

Following are the choices available to a businessman:

1. Sole proprietorship: Sole proprietorship is a business unit whose ownership and management are vested in one person. The individual assumes all risks of loss or failure of the enterprise and receives all profits from its successful operations.
2. Partnership: A partnership is an association of two or more persons to carry on, as co-owners, a business and to share its profits and losses.
3. Joint Hindu family: Joint Hindu family or Hindu Undivided Family Business is a unique form of business organisation prevailing only in India. The HUFs have been defined under the Hindu law “As a family, which consists of male lineally descended from a common ancestor and included their wives and unmarried daughters.”
4. Co-operative organisations: "Co-operation is a form of organisation where in persons voluntarily associate together as human beings on the basis of equality for the promotion of the economic interest of themselves.” Its main motive is mutual help and works with the principle of ‘Each for all’ and ‘All for each’.
5. Corporation/ Joint Stock Company: A joint stock company is a voluntary association of individuals for profit, having a capital divided into transferable shares, the ownership of which is the condition of membership.

Each type of business differs significantly in terms of:

1. Commencement procedures.
2. Legal constraints.
3. Financial requirement.
4. Accounting methods.
5. Marketing and promotional strategies.
6. Risk and liability.

1. Sales tax is levied on the sale of a commodity, which is produced or imported and sold for the first time.
2. If the product is sold subsequently without being processed further, it is exempt from sales taxE.
3. It is levied under the authority of both Central Legislation (Central Sales Tax) and State Governments Legislations (Sales Tax).
4. The government levies Sales Tax principally on intra-state sale of goods.
5. States also levy tax on transactions which are "deemed sales" like works contracts and leases. In addition to Sales Tax, some states also levy additional tax, surcharge, turnover tax, etc.
6. Sales tax is recovered from the buyer as a part of consideration for sale of goods.

Entrepreneur does not find desirable due to his/ her:

1. Quest for excellence.
2. Drive for independence.
3. Tendency to be a project champion.
4. Strong desire to succeed and earn profit.
5. Creative and innovative nature.
6. Love for being a leader in the field.

Financial plan deals with the deciding in advance about the future spending. The formulation of plan is affected by following factors:

1. Clarity of Objectives: Agood financial plan has clearly defined objectives. The objectives are expressed in terms of money or quality of products, objects. Objectives are presented in simple words.
2. Simple: A good financial plan is simple to understand and implement. It is made simple by considering various factors related with the enterprise.
3. Flexibility: A good financial plan has a scope for making changes in the future. The plan is made flexible considering future obligations and future plans of the enterprise.
4. Risk: A good financial plan keeps sufficient scope for the calculated risk rather to say it is made by keeping the level of risk of the enterprise.

1. Private enterprise.
2. Suitability to entrepreneur:

1. Control is in single/ few hands.
2. Profit is not shared among large number of owners, so profit is high.

3. An entrepreneur enjoys the following privileges:

1. It has a minimum of 2 and a maximum of 50 members present excluding its past and present employees.
2. It restricts the right of its members to transfer shares.
3. It prohibits an invitation to the public to subscribe for any shares in or debentures of the company, or accept any deposits from persons other than its directors, members or relatives.
4. Has a minimum paid up capital of one lakh rupees (subject to change).

1. Any person competent to contract and satisfactorily introduced to the Bank may open an account in his/ her own name. He/ She may not open more than one such account. Accounts may be opened in the names of two or more persons and may be made payable to.
2. Accounts can be opened for sole proprietorship firms, partnership firms, private limited and public limited companies, Joint Hindu families, trusts, clubs, associates etc. satisfactorily introduced to the Bank and on fulfilling laid down procedures and tendering required credentials.
3. Accounts can be opened by minors of 14 years and above, if able to read and write, in their sole names.

1. Any person competent to contract and satisfactorily introduced to the Bank may open an account in his/ her own name. He/She may not open more than one such account. Accounts may be opened in the names of two or more persons and may be made payable to.
2. Accounts can be opened for sole proprietorship firms, partnership firms, private limited and public limited companies, Joint Hindu families, trusts, clubs, associates etc. satisfactorily introduced to the Bank and on fulfilling laid down procedures and tendering required credentials.
3. Accounts can be opened by minors of 14 years and above, if able to read and write, in their sole names.

Following are the elements of operation plan:

1. Routing: It is a process which determines the exact path a product has to follow right from raw material till its transformation into finished product.
2. Scheduling: It means fixation of time, day, date when each operation is to be commenced and completed.
3. Dispatching: It is the process of initiating production according to pre-conceived production plan. It involves issuing necessary orders instructions, guidelines, etc.
4. Follow-up: It relates to evaluation and appraisal of work performed. A properly planned follow-up procedure is helpful in finding errors and defects in the work.
5. Inspection: Inspection is the art of comparing materials, product or performance with established standards. This helps to setup laboratories or evolve methods to ensure predetermined quality of product.
6. Shipping: It describes the flow of goods/ services from production to the consumers. It is a detailed presentation by the entrepreneur explaining the chronological steps in completing a business transaction efficiently and profitably.

1. The type of enterprise is HUF/ Joint Hindu Family.
2. Daughter could not regain the same control in the business as the daughter after her marriage becomes the member of her husband's HUF.
3. Steps involved in creation of HUFs:

1. Capital and members: For an HUF to be created the major requirements is the capital and persons. Capital can be in the form of ancestral property, assets gifted by relatives and friends, or received by the HUF through a will. The minimum no. of members required is two.
2. Select a suitable name: The HUF to be created should have proper name. Entrepreneur should select a proper name for the HUF, ensuring it does not violate the laws or have any negative impact.
3. Form a Deed: Formation of HUF should be embodied in a deed which provides that a proper legal deed or agreement is required before creating a HUF, disclosing the name of Karta, coparceners, address and source of funds in the corpus.
4. Apply of PAN: Application of PAN (Permanent Account Number) is also an important step to be undertaken while forming a HUF. After executing the deed, the Karta is required to obtain a permanent account number PAN for the HUF. Obtaining PAN is a mandatory requirement as all financial transactions shall carry PAN.
5. Open a Bank Account: After PAN has been allotted, the Karta is required to open a Bank A/C in the name of the HUF. It is also advisable to get some stationery printed for official communication. The HUF is now ready to function. The Karta will have to invest in tax saving instruments and file tax returns on behalf of the HUF. Only the money related to the business of HUF shall be invested in such bank accounts.

In the following situations, the receiver of the services is responsible for the payment of service tax:

1. Where taxable services are provided hulle by Foreign Service providers with no Een establishment in India, the recipient of such services in India is liable to Pa p ay Service Tax.
2. For the services in relation to Insurance Auxiliary Service by an Insurance Agent, the Service Tax is to be paid by the Insurance Company.
3. For the taxable services provided by a Goods Transport Agency for transport of goods by road, the person who pays or is liable to pay freight is liable to pay Service Tax, if the consignor or consignee falls under any of the seven categories viz. a factory, a company, a corporation, a society, a co-operative society, a registered dealer of excisable goods, a body corporate or a partnership firm.
4. For the taxable services provided by Mutual Fund Distributors in relation to distribution of Mutual Fund the Service Tax is to be paid by the Mutual Fund or the Asset Management Company receiving such service.

Operation plan includes:

1. Flow of material: It ensure orderly flow of materials in the manufacturing process from the beginning to the end.
2. Continuity: Facilitating continuous production, lesser work-in-progress and minimization of wastage.
3. Coordination: Coordinating the work of engineering, purchasing, production, selling and inventory management.
4. Flow of goods: Describing the flow of goods/services from production point to the consumers.
5. System: Introducing a proper system of quality control
6. Economic production policy: Undertaking the best and most economic production policies and methods. Thus, the operation plan organizes for the movement of material, performance of machines and operations of labour, however sub-divided, into a defined direction.

Salient features of Limited Liability Partnership Act, 2008 are as follows:

1. Separate legal entity.
2. Perpetual succession entity survives if the partners die (or unable to continue).
3. Provides flexibility in devising partnership agreement. The duties and obligations of Designated Partners shall be as provided in the Limited Liabilities Partnership Act, 2008.
4. Partners not accountable for actions of other partners. Liability is limited to their contribution in the LLP.
5. Share transfer restricted.
6. At least 2 partners needed to form a LLP, with a maximum of 50.
7. Obligation to maintain annual accounts.
8. Central government has investigative powers.
9. Afirm, private company or an unlisted public company is allowed to convert into a LLP.
10. Provisions of The Companies Act, 1956 may also be included.
11. Indian Partnership Act, 1932 shall not be applicable.

1. Registration is not required for sole proprietorship. An entrepreneur requires certain industry specific licences. Following factors are taken into consideration.
2. Business Name: Sole proprietors can select the business name and they are free to do so.
3. Service tax registration: In case the taxable services are more than 10 lakhs then form ST-1 is to be filled by sole proprietor for registration.
4. VAT/ CST registration: VAT is applicable for tangible goods within the state and CST is for inter-state.
5. Payment of taxes: Sole proprietor has to honour the state and federal taxation requirement. Sole trader has to bear taxes of the business.
6. Others: If applicable to the proprietor, the following have to be complied with PAN card number, bank account number, shops and establishment licence, EPF Registration, etc.

The business plan:

1. Helps in finding the viability of the venture in a designated market.
2. Helps in providing guidance to the entrepreneur in organizing, planning activities as such:
   1. Identifying the resources required.
   2. Enabling obtaining of licenses if required, etc.
   3. Working out with legal requirements.
3. Helps in satisfying the queries, and issues of each group of people interested in the venture.
4. Provides room for self assessment and self evaluation.
5. Helps entrepreneur to plan ways to avoid obstacles.
6. Helps to realize the obstacles which cannot be avoided or overcome, suggesting to stop the venture while still on paper without investing further time and money.
7. It reflects the entrepreneur's credit history, the ability to meet debt and interest payments, and the amount of personal equity invested.

Following facts are needed for market planning:

1. Users: Who are the users, where are they located, how much do they buy, from whom do they buy, and why?
2. Promotion: How have promotion and advertising been employed and which approach has been most effective?
3. Pricing changes: What are the pricing changes in the market, who has initiated these changes and why
4. Market attitude: What are the market's attitudes concerning competitive products?
5. Channels of distribution: What channels of distribution supply consumers, and how do they function
6. Competitors: Who are the competitors where are they located, and what advantages/ disadvantages do they have?
7. Marketing technique: What marketing techniques are used by the most successful competitors? By the least successful?
8. Objectives of the firm: What are the overall objectives of the company for the next year and five years hence?
9. Strengths and weaknesses: What are the company's strengths) weaknesses?
10. Production capabilities: What are one's production capabilities by product?

Following are the major financial items that should be included in the financial plan:

1. Proforma investment decisions: This part of financial plan relates to how the enterprise's funds are invested in different assets so that the enterprise is able to earn the highest possible returns on investment. An estimate of various components of capital nature i.e. fixed assets and of working capital should be clearly mentioned in this part of business plan.

Carefully, clearly and sequentially the entrepreneur should mention investment required in for:

1. Land and building
2. Machinery and plant
3. Installation cost
4. Preliminary expenses
5. Margin for working capital
6. Expenses on research and development
7. Investment in short-term assets viz. raw material, level of cash, etc.

This part helps to understand the total amount of finance required by the entrepreneur. Inadequate funds or excess funds, both have the capacity to severely damage the financial fortune of a business. Therefore, these decisions must be taken with utmost care.

2. Proforma financing decisions: This section summarizes all the projected sources of funds available to the venture to raise finance from, which you have already studied in previous class.

Typically, sources of funds are:

1. Owners i.e. Owner's funds
2. Outsiders i.e. Borrowed funds

The entrepreneur's job is to ensure the selection of the best overall mix of financing for the enterprise so that:

1. The cost of capital and the financial risk stands minimized,
2. Return on investment and profitability stands maximized.

3. Proforma income statement: The proforma income statement is the projected net profit calculated from projected revenue minus projected costs and expenses. Basically, it summarizes all the profit data during the first year of operations of the new enterprises.

In preparing the proforma income statement, 'sales by month' must be calculated first, making use of forecasting techniques as the basis. Following are the most commonly adopted techniques for forecasting:

1. Marketing research
2. Industry sales
3. Survey of buyers' intentions
4. Expert opinions
5. Financial data on similar start-ups
6. Some trial experience of self or others.

While calculating the projected sales and expenses, it is not important to be conservative for initial planning purposes. A reasonable profit that is earned with conservative estimates lends credibility to the potential success of the new venture.

4. Proforma cash flow: Profit and cash flow are not the same, when from sales we subtract expenses, the result is profit and when from cash receipts we subtract cash payments, the resultant figure is the cash flow. Proforma cash flow reflects the projected cash available with the enterprise as a result of subtracting projected cash disbursements from projected cash accumulations.

Cash flows only when actual payments are received or made. Mere sale which might be on credit, will not generate cash. Similarly, all bills are not paid immediately by the enterprises.

For simplification and internal monitoring of cash flow purposes, many new entrepreneurs prefer a simple determination of "Cash in LESS cash out", giving them a fast indication of cash position. The entrepreneurs find it difficult to project cash flows as determining the exact monthly receipts and disbursement is not so easy. Thus, while working out the cash flows, an entrepreneur normally follows a conservative approach, making some necessary assumptions so that enough funds could be maintained to cover the negative cash months.

5. Proforma balance sheet: This document helps the enterprise to reflect the position of the business at the end of its first year. A summary of the projected assets, liabilities and net worth of the entrepreneur is depicted through proforma balance sheet.
6. Break–even point: Every firm wants to maximise its profits. The Breakeven point is that level of volume of production at which firm neither makes a profit nor a loss. Here, the total revenue is equal to the total cost of a firm, at the given level of capacity.Thus, calculation of BEP is quite useful for the entrepreneur as it helps in assessing:

• The minimum level of output to be produced.
• The effect of change in quantity of output upon the profits.
• The selling price of the product.
• The profitable options in line of production.

Thus, the break-even analysis is a useful technique for determining how many units must be sold or how much sales volume must be achieved in order to break–even. It helps to indicate the volume of sales needed to cover total variable and fixed expenses by the new enterprise.

7. Economic and social variables: In view of the social responsibility of business, the abatement costs, i.e. the cost of controlling the environmental damage should also be stated in the plan. It's always advisable to mention in the business plan, the socio-economic benefits expected to acquire from the proposed investment like:

1. Employment generation
2. Import substitution
3. Ancillarisation
4. Export promotion
5. Local resource utilization
6. Development of the area

Wherever, it is not possible to quantify the expected benefits, they should be analyzed and their importance emphasized.

Various formalities for starting a business in India include the following :

1. Obtain PAN Number from Income Tax Department:

1. Permanent Account Number (PAN) a ten-digit alphanumeric number, issued by the Income Tax Department enables the department to link all transactions of the person with the department.
2. These transactions include tax payments, TDS/ TCS credits, returns of income/ wealth/ gift/ FBT, specified transactions, etc.
3. It is mandatory to quote PAN in all documents related to financial transactions like sale or purchase of any immovable property valued at five lakh rupees or more, sale or purchase of a motor vehicle or vehicle, a time deposit, exceeding fifty thousand rupees, with a banking company, a deposit, exceeding fifty thousand rupees, in any account with Post Office Savings Bank, a contract of a value exceeding one lakh rupees for sale or purchase of securities, etc.

2. Open a Current Account in any Commercial Bank:

1. Any person competent to contract and satisfactorily introduced to the Bank may open an account in his/her own name.
2. Accounts can be opened for sole proprietorship firms, partnership firms, private limited and public limited companies, Joint Hindu families, trusts, clubs, associates, etc.
3. Accounts can be opened by minors of 14 years and above, if able to read and write various documents related to firm are also to be provided.

3. Register a Limited Liability Partnership (LLP): Limited Liability Partnership (LLP),

1. The Limited Liability Partnership (LLP) is an alternative corporate business vehicle which provides the benefits of limited liability but allows its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement.
2. The LLP form enable entrepreneurs, professionals and enterprises providing services of any kind or engaged in scientific and technical disciplines, to form commercially efficient vehicles suited to their requirements.
3. It is governed by the provisions of the Limited Liability Partnership Act, 2008.
4. To register an Indian LLP, firstly apply for a Designated Partner Identification Number (DPIN), which can be done by filing e-Form.
5. Acquire the Digital Signature Certificate (DSC) and register the same on the portal. This is the only secure and authentic way that a document can be submitted electronically.
6. All filings done by the LLP are required to be filed with the use of Digital Signatures by the person authorised to sign the documents.
7. Thereafter, entrepreneur need to get the LLP name approved by the Ministry.
8. Once the LLP name is approved, entrepreneur can register the LLP by filing the incorporation form.

4. Register Company (Pvt. Ltd/ Public Limited Company): The following steps are involved in incorporating a private or public company in India:

1. Name of the Business Entity.
2. Register for e-filing at MCA (Ministry of Corporate Affairs) portal.
3. Apply for Director Identification Number (DIN).
4. Obtain Digital Signature Certificate (DSC).
5. Register DSC at MCA website.
6. Apply for approval of the name of the company.
7. Formulate Memorandum of Association.
8. Formulate Articles of Association.
9. Verify, Stamp & Sign Articles of Association.
10. Verify the various forms required for incorporation of company.

5. Register for Service Tax:

1. Service tax, an indirect tax, which normally the service provider pays the tax and recovers the amount from the recipient of taxable service.
2. Normally, the person who provides the taxable service on receipt of service charges is responsible for paying the Service Tax to the Government.
3. In the following situations, the receiver of the services is responsible for the payment of Service tax:

• Where taxable services are provided by Foreign Service providers with no establishment in India, the recipient of such services in India is liable to pay Service Tax.
• For the services in relation to Insurance Auxiliary Service by an Insurance Agent, the Service Tax is to be paid by the Insurance Company.
• For the taxable services provided by a Goods Transport Agency for transport of goods by road, the person who pays or is liable to pay freight is liable to pay Service Tax, if the consignor or consignee falls under any of the seven categories viz. a factory, a company, a corporation, a society, a co-operative society, a registered dealer of excisable goods, a body corporate or a partnership firm.
• For the taxable services provided by Mutual Fund Distributors in relation to distribution of Mutual Fund the Service Tax is to be paid by the Mutual Fund or the Asset Management Company receiving such service.

6. Register for VAT/Sales Tax:

• VAT

1. VAT is a tax on the final consumption of goods or services and is ultimately borne by the consumer.
2. The State Governments, through Taxation Departments, are carrying out the responsibility of levying and collecting VAT in the respective States.
3. The Central Government is playing the role of a facilitator for the successful implementation of VAT.
4. The entire design of VAT with input tax credit is crucially based on documentation of tax invoice, cash memo or bill.
5. Every registered dealer, having turnover of sales above an amount specified, needs to issue to the purchaser serially numbered tax invoice with the prescribed particulars.
6. This tax invoice is to be signed and dated by the dealer or his regular employee, showing the required particulars.
7. For identification/ registration of dealers under VAT, the Tax Payer’s Identification Number (TIN) is used.

• Sales tax

1. Sales tax is levied on the sale of a commodity, which is produced or imported and sold for the first time.
2. If the product is sold subsequently without being processed further, it is exempt from sales tax.
3. It is levied under the authority of both Central Legislation (Central Sales Tax) and State Governments Legislations (Sales Tax).
4. Some states also levy additional tax, surcharge, turnover tax, etc.
5. Sales tax is recovered from the buyer as a part of consideration for sale of goods.
6. Under state Sales Tax ID number entrepreneurs collect and pay tax for any service or product sold, which, qualifies for taxation in the state.

7. Excise Duty (If Applicable): Excise duty is a tax on manufacture or production of goods. “State Excise” duty and “Central Excise” duty are the two type of excise duty which are to be paid to state government and central government respectively.

Subject to specified conditions, generally the following categories of persons are required to get themselves registered with the Central Excise department.
Subject to specified conditions, the various categories of persons need not obtain Central Excise registration.

Apply to the nearest Central Excise Division Office in Form A.1 along with a self-attested copy of the PAN issued by the Income Tax Department. After post verification, a regular Registration certificate in form RC is normally issued immediately.

8. Shop and Establishment Act: Shop and Establishment Act is to provide statutory obligation and rights to employees and employers in the unorganised sector of employment, i.e., shops and establishments. Shops and Establishment Act is a State Act and therefore State specific Shops and Establishment Rules should be followed for getting knowledge on registration and maintenance of different registers.

9. Customs Duty: Customs Duty is levied on goods imported into India as well as on goods exported from India. Taxable event is import into or export from India.

10. File Entrepreneurship Memorandum at DIC (Optional): Entrepreneur may File Part I of Entrepreneurs Memorandum to the District Industries Centre. This may be necessary for claiming certain incentives/ subsidies and for certain formalities at the state level.

11. Apply for TAN: All persons who are required to deduct tax at source or collect tax at source on behalf of Income Tax Department are required to apply for and obtain TAN.

12. Permissions required at the Construction Stage: Following permissions are required to be obtained from the government:

• Application for plot/ shed, offer letter etc.
• Allotment of plot/ shed.
• Payment of balance occupancy price.
• Taking over possession thereof.
• Application for issuance of NOC/ SSI registration.
• Execution of Lease Agreement.
• Application for grant of connection for construction water.
• Application for grant of connection for construction power.
• Post Construction Clearances: It includes building completion/ drainage completion/tree plantation certificate, Permission for mortgage, NOC from Pollution Control Board, Final Fire clearance, NOC from Environment department, Industrial safety permit, Sanction of permanent power, Sanction of permanent water and sewerage connection.

13. Employee’s Provident Fund: Applicable for establishments employing 20 or more persons and engaged in industry.

14. Employee’s State Insurance (ESI) Scheme: The Act is applicable to non-seasonal factories employing 10 or more persons and is extended to shops, hotels, restaurants, cinemas including preview theatres, road- motor transport undertakings and newspaper establishments employing 20 or more persons.

Alternate Answer
Formalities for starting a business:

• Obtain a PAN Number from Income Tax Department.
• Open a current account in any commercial bank.
• Register your company (Pvt. Ltd/ Public Limited Company)
• Register for Service Tax.
• Register for VAT/ Sales Tax.
• Excise Duty (Check Applicability)
• Customs Duty.
• File Entrepreneurship Memorandum at DIC (Optional)
• Apply for TAN.
• Employees State Insurance (ESI) Scheme.

The marketing plan is a significant element in the business plan of a new venture, as it highlights how a business plan is to make place for itself in a competitive market by providing answers to three basic questions:

1. Where have we been?
2. Where do we want to go?
3. How do we get there?

A good marketing plan helps a business to reach its target audience, boost its customer base and helps its customers to understand why its product/ service is better than its competitors.A marketing plan is required by a business as:

1. It helps the business to identify its target market and understand how its product or service meets the consumer's needs.
2. It helps the business to identify its competitor and assess what its target customers think about competitor's strengths and weaknesses.
3. It helps the business to position its brand, products or services so that its target customers visualise its business as better than or different from its competitors.
4. It sets specific, measurable goals and timeframes for its marketing activities.
5. It helps the business to map out a strategy to reach its target audience, including the messages, channels and tools it will use.

Following are the contents of a Business Plan:

1. General Introduction:

1. Name and address of business.
2. Name and address of entrepreneur(s).
3. Stakeholders of business.
4. Nature of business that.
5. Types and nature of customers.

2. Business Venture:

1. Product(s) to be offered.
2. Service(s) to be offered.
3. Scale of business operations.
4. Type of technology used.
5. Types of skilled personnel required.
6. Location of production facilities.

3. Organisational Plan:

1. Form of ownership: sole proprietorship, partnership, or joint stock company.
2. Identification of business associates/ partners/ members etc.
3. Administrative structure.
4. Identification of management team.

4. Production plan:

1. Details of manufacturing process.
2. Physical infrastructure required.
3. Types of plant and machinery.
4. Raw materials to be used.
5. Requirements of power, etc.

5. Operations plan:

1. Description of company's operation.
2. Flow of orders of goods and services.
3. Technology utilization.

6. Human Resource Plan:

1. Categories of human resources or staff required.
2. Human resources already identified.
3. Human resources required to be procured.
4. Time frame of procurement of human resources.

7. Marketing plan:

1. Products and services offered.
2. Pricing policies.
3. Promotional strategies.
4. Logistics for distribution.
5. Channels of distribution.

8. Financial Plan:

1. Break-even analysis.
2. Fixed capital requirements.
3. Working capital requirements.
4. Sources of capital.
5. Schedule for procurement of capital.
6. Schedule for procurement of assets.
7. Cash flow projections.

9. Miscellaneous/Appendix:

1. Market research report.
2. Contracts with vendors.
3. Contracts with financial institution.
4. Types of business risks.
5. Contingency Plans.

Business activities constitute following major activities:

1. Manufacturing: When the goods are produced with the use of labour, machines, tools, chemical and biological processing, it is known as manufacturing. It is basically the change of raw material into finished product.

Manufacturing can be for capital goods and consumer goods. Capital goods are those which are used in manufacturing of other goods. e.g. producing of machines, installations, tools and supplies. Consumer goods are those which are directly used by the consumer. e.g. refrigerator, toothpaste, shampoo, etc.

2. Service: These are the economic activities which are intangible and they cannot be stored and does not result in transfer of ownership. e.g. banking services, transportation services, insurance services, etc. They are instrumental in the flow of business activities as they remove the hindrances of place, time, risk, etc.
3. Trading: Buying goods and services for the purpose of selling it to others is called trading.

No, this approach of the entrepreneur is incorrect. This is because:

1. In such situation he will not be utilising the resources fully and this will mean more likely wastage of the resources.
2. Entrepreneur will be not fulfilling his responsibility of doing social service.
3. He will not be doing social justice as he will be exploiting the people for his selfish motive.
4. He is also not following self control. Self control is a essential trait for the long term success of the enterprise.

The following steps are involved in incorporating a private or public company in India:

1. Name of the Business Entity.
2. Register for e-filing at MCA (Ministry of Corporate Affairs) portal.
3. Apply for Director Identification Number (DIN).
4. Obtain Digital Signature Certificate (DSC).
5. Register DSC at MCA website.
6. Apply for approval of the name of the company.
7. Formulate Memorandum of Association.
8. Formulate Articles of Association.
9. Verify, Stamp & Sign Articles of Association.
10. Verify the various forms required for incorporation of company.

Entrepreneur(s) have to file an application with the Registrar of firms of the area of the firm. This registration can be at the time of formation or subsequently. Following are the two steps

1. Step-1:Application for Registration It should have the following as content:

1. Name of the firm.
2. Name of the place(s) where business is carried on.
3. Date of partners joining the firm.
4. Full name and permanent address of partners.
5. Duration of the firm.

2. Step-2: Following documents along with prescribed fees and signature of every partner is to the enclosed along with registration application.

1. Form-I Application for registration.
2. Duly filled specimen of affidavit.
3. Certified copy of partnership deed.
4. Proof of ownership of the place of business or rental/ lease agreement.

Entrepreneurs prefer to form a private company because of following reasons:

1. Two members: Only two members are required to form a private company.
2. Two directors: Only two directors are required to constitute the quorum to validate the proceedings of the meetings.
3. No file prospectus: Such company is not required to file prospectus or a statement in lieu of prospectus with the Registrar of Companies.
4. Start: It can commence its business immediately after incorporation.
5. Statutory status: Holding of statutory meeting nor filing of a statutory report is required by a private company.
6. Inspection: A non-member cannot inspect the copies of the Profit and Loss A/c filed with the Registrar.
7. No maximum remuneration: Limit on payment of maximum managerial remuneration does not apply to a private company.
8. Managing director: Restrictions on appointment and reappointment of managing director does not apply.
9. Index of members: Maintaining of Index of Members is not required.
10. Qualification shares: Directors of the private company need not have qualification shares.

Proprietorship form is suitable as a business when:

1. Capital requirement is low.
2. Confidentiality is important.
3. Market is local.
4. Goods are of artistic nature or demands customized approach.
5. Quick decision-making is required.
6. Size of venture is small.

Following are the features of Partnership:

1. Association: It is an association of two or more persons.
2. Coowners: Members are coowners.
3. Sharing: Partners share profits and losses related to business.
4. Agreement: A written or oral agreement is made by the owners.
5. Members: The minimum number remains at 2 members, the maximum number of members is restricted 10 in case of banking and 20 in case of other business.

Different forms of organisations have to comply with different formalities to establish a business. The various formalities to be fulfilled for starting a business under company form of organisation are given below:

1. Obtain Director Identification Number (DIN) online from the Ministry of Corporate Affairs (MCA) portal.
2. Obtain Digital Signature Certificate (DSC) online from private agency authorised by the Ministry of Corporate Affairs.
3. Reserve the company name online with the Registrar of Companies (ROC).
4. Stamp the company documents at the state treasury of authorised bank.
5. Get the certificate of incorporation from the Registrar of Companies, Ministry of Corporate Affairs.
6. Make a seal.
7. Obtain a Permanent Account Number (PAN) from an authorised franchise or agent appointed by the National Securities Depository Limited (NSDL) or the Unit Trust of India (UTI) Investors Services Ltd as outsourced Income Tax Department.
8. Obtain a Tax Account Number (TAN) for income taxes deducted at source from the concerned city's assessing offices of the Income Tax Department.
9. Register with the office of inspector, shops and Establishment Act.
10. Register for Value Added Tax at the Commercial Tax Office.
11. Register for profession tax at the Profession Tax Office.
12. Register with Employees Provident Fund Organisation.
13. Register for medical insurance at the regional office of the Employees State Insurance Corporation.

Formalities for starting a business in India are as follows:

1. Obtain PAN Number from Income Tax Department.
2. Open a Current Account.
3. Register a Limited Liability Partnership (LLP).
4. Register Your Company (Pvt. Ltd/ Public Limited Company).
5. Register For Service Tax.
6. Register for VAT/ Sales Tax.
7. Excise Duty (Check Applicability).
8. Shop and Establishment Act.
9. Customs Duty.
10. File Entrepreneurship Memorandum at DIC (Optional).
11. Apply for TAN.
12. Find State Specific Guidelines and Procedures.
13. Permissions Required at the Construction Stage Employee's Provident Fund.
14. Employees State Insurance (ESI) Scheme.

From the viewpoint of ownership and management, business enterprises can be broadly classified under three categories:

1. Private sector enterprises: These enterprises are owned, controlled and managed by private individual with the main objective of earning profit.

Private individuals can establish their business as:

1. Sole proprietorship.
2. Partnership.
3. Joint Hindu family business.
4. Cooperative societies.
5. Joint stock companies.

2. Public sector enterprises: These enterprises are owned and controlled by public authorities (government) for the purpose of welfare as the primary goal and profit earning as the secondary goal.

These can be formed as:

1. Departmental undertakings.
2. Public corporations.
3. Government companies.

3. Joint sector enterprises: As the name suggests, it is a partnership between the private sector and the government. The management is in the hands of private people but government also has enough representation on the Board of Directors.