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Project 4: Structuring a New Business Venture
Step 1: Research the Steps to Create and Manage a Small Business

You decided to take a week of vacation time from Colossal to devote yourself entirely to developing your new business venture. The new business is a solar energy–fueled charger that charges a variety of products on the go, including cell phones and other electronic devices. You begin by going into your home office to work on the task at hand—the preparation of a narrated PowerPoint to practice your presentation to potential investors. The presentation will address all of the key issues related to the legal form and organizational structure of your business. Specifically, you will include the following in your narrated PowerPoint:

  • A name for your business, a brief mission statement reflecting the primary goals of the business, and an explanation for why you chose this name and mission statement. You will explain how this mission statement is drafted so that it is clear, concise, and meaningful to your business’s stakeholders.
  • An examination of the three most appropriate legal forms of business for your venture. Include a detailed examination of the advantages and disadvantages of these three forms and an evaluation of these six factors:
    • creation and maintenance
    • continuity
    • ownership and control
    • personal liability
    • compensation and division of profits
    • taxation
  • A choice of the best legal form of business for your new company
    from the three you considered and a full explanation of your choice.
  • A detailed diagram of your organization chart and a rationale explaining structural decisions reflected in your organization chart, including:
    • the titles of the different individuals and why you chose those titles
    • the tasks the different individuals and groups will have for contributing to the aims of the company
    • the reporting structure (who will report to whom and why)
    • a choice regarding outsourcing the human resources function, including a detailed analysis of the pros and cons of outsourcing the human resources function
    • all other relevant factors (for example, will your business structure be functional, centralized, decentralized, etc.), including how your chosen structure will contribute to your long-term aims of going national and international, or how it will need to be modified to achieve these aims

After reviewing the above outline of your presentation, you recall the recent conference call with your potential business partners, Roza and Gary. You realize that you will need this information to make the best legal and organizational decisions for your business. You’re asked by one of your collaborators to examine some resources on creating and managing a new business and on drafting a mission statement.

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In order to complete this task, you realize that you must do some additional research to address the legal and strategic implications of your decisions if your business is to get off the ground.

 

Project 4: Structuring a New Business Venture
Step 2: Determine the Legal Structure of Your Business: Gather and Analyze Information

Now that you have read a broad overview of new business creation and management, you recognize that the next step in creating your new business is to decide on one of the many legal forms of business you will use to form your new company. You want to show the investors that you really know your stuff, so you decide to select three forms of business to analyze and you’ll explain in your presentation why the option you chose is the best for your new venture.

 

Legal Forms of Business

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Business entities are an integral part of business practice and economic productivity. An effective business practitioner must understand the characteristics of the major types of business entities, as these attributes can dramatically affect the nature of the business’s relationships. Before beginning to conduct business, one should always weigh the benefits and burdens of the different types of business entities and make a conscious decision about which type of entity to form to conduct one’s business.

Depending on the type of business, the people involved, and the goals of the business, some entities may be more appropriate than others for a particular business. To make the decision about the appropriate type of entity to form, one should consider factors including the following:

  • creation and maintenance—the effort associated with forming and maintaining the entity
  • continuity—the continuity or stability of the organization upon given occurrences
  • ownership and control—the ownership rights and control of those involved with the business
  • personal liability—the potential for personal liability of those involved with the business
  • compensation—the compensation and division of profits among business owners
  • taxation—the taxation of the organization’s earnings and its distributions of profits to the owners

Weighing these and related factors, which vary in consequence depending on the entity, informs the choice of the type of business entity best suited to one’s business. Examination of these characteristics will make obvious the effect of these attributes on stakeholders of the business entity. The decision of which entity is right for a particular business impacts many facets of a business’s operation, including accounting, man

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