Recruitment process and entities to use

I am trying create a recruitment process using CRM Online.  I have a few questions surrounding this.

1.  I will have entities like Prospective Candidate -> Candidate -> Employee.  This is like the sales process.  Should I use (customize) any of the entities that come in CRM or should I create these entities from scratch?
2. What is the easiest way to convert one entity to another, sort of like a workflow process.

Thanks.