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THE ORGANIZATIONAL PLAN (Continued ….)

Transferability of Interest

• Each of the forms of business offers different advantages as to the transferability of interest.
• In a proprietorship, the entrepreneur has the right to sell any assets.
• In the limited partnership, the limited partners can sell their interests at any time without consent of the general partners. A general partner cannot sell any interest unless specified in the partnership agreement.
• In a corporation shareholders may transfer their shares at any time.
• In the S Corporation, the transfer of interest can occur only as long as the buyer is an individual.

Capital Requirements

The need for capital during the early months can become one of the most critical factors in keeping a new venture alive.

• For a proprietorship, any new capital can only come from loans or by additional personal contributions. Often an entrepreneur will take a second mortgage as a source of capital. Any borrowing from an outside investor may require giving up some equity. Failure to make payments can result in foreclosure and liquidation of the business.
• In the partnership, loans may be obtained from banks or additional funds may be contributed by each partner, but both methods require change in the partnership agreement.
• In the corporation, new capital can be raised by:
  • Stock may be sold as either voting or nonvoting.
  • Bonds may be sold.
  • Money may also be borrowed in the name of the corporation.
  
  

  Read more: MGT602 - Entrepreneurship - Lecture Handout 28

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Related Content: MGT604 - VU Lectures, Handouts, PPT Slides, Assignments, Quizzes, Papers & Books of Management of Financial Institutions

Financial Crimes

What is Money Laundering?

Defined in non-technical terms, money laundering is the conversion of 'dirty' money into - seemingly - 'clean' money. Dirty money is money that meets the following conditions: (1) it has been derived by illegal means and (2) for an outside observer it is possible to identify that condition (1) applies. Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source, and/or destination of money, and is a main operation of the underground economy. In the past, the term "money laundering" was applied only to financial transactions related to organized crime. Today its definition is often expanded by government regulators to encompass any financial transaction which generates an asset or a value as the result of an illegal act, which may involve actions such as tax evasion or false accounting. As a result, the illegal activity of money laundering is now recognized as potentially practiced by individuals, small and large businesses, corrupt officials, members of organized crime (such as drug dealers or the Mafia) or of cults, and even corrupt states, through a complex network of shell companies and trusts based in offshore tax havens. The increasing complexity of financial crime, the increasing recognized value of so-called "financial intelligence" in combating transnational crime and terrorism, and the speculated impact of capital extracted from the legitimate economy has led to an increased prominence of money laundering in political, economic, and legal
debate.

Process of Money Laundering

Money laundering is often described as occurring in three stages: placement, layering, and integration.

• Placement: refers to the initial point of entry for funds derived from criminal activities.
• Layering: refers to the creation of complex networks of transactions which attempt to obscure the link between the initial entry point, and the end of the laundering cycle.
• Integration: refers to the return of funds to the legitimate economy for later extraction.



Read more: MGT604 - Management of Financial Institutions - Lecture Handout 40