Chapter 5 Organizing Center Structure and Working with a Board

Chapter Objectives Describe the types of business organizations Explain the advantages and disadvantages of each type of business organization Identify circumstances under which a business must have a board. List the responsibilities of a center’s board.

Types of Business Organizations Sole proprietorship Partnership Franchise Corporation

Sole Proprietorship Individuals who create centers and maintain ownership are sole proprietors –They make all the decisions –They bear all the responsibility

Partnership Two or more individuals enter into a partnership and share responsibilities and finances –Percentage of ownership between the two people is decided at onset of the partnership –Profits are usually allocated according to percentage of investment –Liability issues are based on what in which partnership is configured Silent partner occurs when one contributes financially but is not involved in decision making

Franchise Developed by a person or a group who then decides to sell the right to use the model, its name, logos, and so forth to others –Franchisees continue paying a percentage of their gross income from center to franchisor –Think of the McDonald’s model –Consistency between centers and their programs

Corporation Corporation is owned by one or more shareholders Forming a corporation requires: –Articles of incorporation filed with state –Bylaws (regulations or a constitution) –Governing body (board of trustees) Examples include Knowledge Learning Corporation and Bright Horizons

Corporation Setting up corporation is more complex and costly than setting up proprietorship or partnership Advantages of corporation –Limitation on financial responsibility –Liability of corporation is limited to its assets –Individuals are protected from personal liability for acts or debts of the corporation

Profit/Not-for-Profit Corporations No shareholders in NFP companies NFP does not automatically mean tax exempt NFP can obtain grants easier than FP Both are complex and require consultation with attorneys and tax advisers

Board of Directors Board is the policy maker Director is authorized by the board to carry out the functions of the center program

Board of Directors Board membership –10-20 members who are either elected or appointed –Tenure for board members is specified in bylaws –Requirements for board membership are based on program philosophy and needs, state laws, and sponsorship agency mandate

Board Responsibilities Writing bylaws Making policy Operating the center

Bylaws 1.Name and purpose of organization 2.Composition of the board, including information about when and by whom its members are elected or appointed 3.Officers to be elected, their duties and terms of office, and description of the procedures for election 4.Method of replacing board member when necessary

Bylaws (Continued) 5.Frequency of meetings or minimum number of meetings to be held annually 6.Standing committees and their composition and duties 7.Relationship of staff to board 8.Rules governing the conduct of meetings 9.Provisions for an annual meeting 10.Procedures for amending the bylaws 11.Procedures for dissolution of the corporation

Center Operations 1.Selecting a director 2.Providing for appropriate staff members and for in-service training opportunities 3.Providing facilities and equipment 4.Preparing or approving the budget and overseeing the center’s finances 5.Writing proposals and obtaining funding, including setting rates of tuition 6.Complying with local, state, and federal laws

Center Operations (Continued) 7.Evaluating the operation of the program and the work of the director and assisting the director in the evaluation of other staff 8.Arranging for an annual audit of financial records 9.Arbitrating problems between staff and director that cannot be resolved by director 10.Replacing the director, as needed, and dismissing the director as the situation warrants

Board Committees Executive Committee Personnel Committee Finance Committee Building Committee Program Committee Nominating Committee

Board Communication Board serves as the communications liaison between the center program and sponsoring agency Director keeps board informed about center’s functioning Board communicates to sponsoring agency by reporting regularly to the agency board

Chapter Summary Key decisions to be made when new centers are planned include types of operational structures –Proprietorship –Partnership –Franchise –Corporation Key decisions should be made about financial structure –Profit –Not-for-Profit

Chapter Summary (continued) Board of directors must exist for an incorporated center Board –Operates with committee members –Writes bylaws –Creates policies –Makes provisions for center operations