Introduction

Structuring a Business Transcript

[MUSIC PLAYING]
It has always been your dream to have your own business. You and your childhood friend Ravi
have developed a product called Sunburst that could be used by the growing solar energy
industry Tanya, a friend you met through an alumni group, has experience in marketing. The
three of you agreed to form the startup team for Sunburst and you gather together one weekday
morning to discuss the legal form and organizational structure your business should take.
We're going to need additional investors and expertise to get this business off the ground, Ravi
says. We should develop a business plan that will be attractive to potential investors and
partners. They're going to have concerns about joining a new startup, Tanya says. We should
work to address these from the start.
Ravi looks to you. Can you prepare a PowerPoint presentation for potential investors? Let them
know what legal form the business is going to take and explain why it works for our company.
You should include your analysis on personal liability, taxes, interests of contributing parties,
and management of the business. We want them to know we've done our homework.
Tanya interrupts, the other thing is we have to decide what organization structure would best
serve our goals. That's right, Ravi says. We've already identified innovation and timely customer
service as our top priorities for Sunburst. We know we need staff to handle product development,
production, finance and accounting, and marketing and sales.
We're definitely going to need human resources functions, Tanya says. Outsourcing is one option
we should look into. We need to do some research before we make a decision. Ravi looks to you
again. I think we need to develop a clear mission statement and an organization chart and explain
the rationale for our decisions in a short paper. You're the most detail-oriented. You think you
can handle it?

In this project, you are determining the best legal form and organizational
structure for your new business. The nature of the organization's
business and the environment the business operates in are factors you
must consider. Initially, Sunburst will operate locally, but within five
years operations will go national (or international). Read about how you
might plan these stages in Creating and Managing a New Business.

In the first part of this project, you will create a narrated PowerPoint
presentation for potential investors and partners in your new company.
In this presentation, you will analyze the pros and cons of various forms
 of business and recommend the best legal form of business to achieve
your organization's goals.

In the second part of this project you will design an effective

organizational structure for the business at its inception and in its next
phase of growth. To achieve this, you'll need to create one short paper
with three sections: (1) a brief mission statement reflecting the primary
goals of the business, (2) a detailed organization chart, and (3) a rationale
statement that explains and supports, thoroughly but succinctly, the
mission statement and structural decisions reflected in the organization
chart.

When you submit your project, your work will be evaluated using the
competencies listed below. You can use the list below to self-check your
work before submission.

 1.7: Create neat and professional looking documents appropriate for the
project or presentation.
 1.8: Create clear oral messages.
 2.5: Develop well-reasoned ideas, conclusions or decisions, checking them
against relevant criteria and benchmarks.
 7.1: Analyze the legal forms of business organization and make
recommendations to support business decisions.
 9.1: Design organizational structure, systems and processes that support
the strategic goals of the organization.
 10.4: Make strategic managerial decisions for obtaining capital required
for achieving organizational goals.
 13.2: Create and implement new initiative or enterprise.
 13.3: Create and manage a new enterprise.
 Creating and Managing a New
Business
There are many things to consider when creating and managing a new business. Planning a
business involves many considerations, including:

 choosing a business entity type

 registering with required government agencies
 acquiring licenses and permits
 opening bank and credit accounts
 adopting management agreements
 adopting a business plan and organizational structure
 adopting a marketing plan
 developing a mission statement
 developing a code of conduct or ethics code
 joining relevant professional organizations
 choosing a stakeholder set of employees, customers, suppliers, advisors, and investors

All of these actions should be researched and achieved in the 12 months or so before starting a
new business.

One common reason small businesses fail is because of inadequate preparation and planning
before beginning a new business. The reality of business practice is that no one can predict every
potential issue or dilemma. Nevertheless, the resolution of unknown issues will be expedited and
a process will be in place to address them through instruments such as management agreements,
mission statements, business plans, and codes of conduct.

Moving a business from local to national or even international involves many additional
considerations of management, structure, tax, law, culture, and strategy. Preparing in advance for
such an expansion is a key element of successfully expanding to other markets. Those who treat
international expansion as an afterthought frequently face a more difficult time when trying to
transition to other markets. Moreover, many companies have blundered by not considering the
cultural norms of targeted markets when attempting to expand beyond local distribution.
 Step 1: Determine the Legal
Structure of Your Business: Gather
and Analyze Information
You go to your office to begin the task at hand—the preparation of a
narrated PowerPoint presentation to potential investors that will address
all of the issues involved in making this decision. For critical background
information, see Creating Sunburst: Legal and Organizational
Considerations. You will need this information to make the best legal and
organizational decisions for your business.

Since one of the investors will not be able to attend a presentation in

person, you need to prepare and record a narrated PowerPoint, so she
can listen at her convenience. In order to complete this task, you realize
that you must do some research to address the legal and strategic
implications if your business is to get off the ground.

 What types of business organizations are available to entrepreneurs?

 What are the advantages and disadvantages of each alternative?
 What are the two best choices and why?
 How would you explain your choices to your investors?

Be sure to discuss the following information in your plan (refer to Legal

Forms of Business before you begin writing):

 What are the different legal forms of business that you might consider?
You remember that there are at least six factors that will influence your
choice:

o creation and maintenance

o continuity
o ownership and control
o personal liability
o compensation and division of profits
o taxation

 What is your proposed choice for the legal form of business? Include your
reasoning based on the preceding six factors and any other relevant
factors.

When your research is complete, continue to the next step, in which you
will create the Powerpoint presentation for your investors.

Creating Sunburst: Legal and

Organizational Considerations
Ravi, who has a degree from State University in mechanical engineering, was
previously employed by a start-up firm in New York City. He worked long hours
for little pay, but when the business sold, his stock options paid off. As a result, he
now has some time and $100,000 to invest in Sunburst. More importantly, Ravi
has the knowledge and know-how to setup and manage production. Tanya, a friend
you met through your alumni association, has a degree in marketing and has a few
years of experience working in marketing roles. The three of you agree to form the
start-up team for Sunburst.
The team estimates that it will take approximately two years to develop Sunburst
into a marketable product, but that once the product is on the market, there is
excellent growth potential. You know that you will need additional investors and
expertise to get the business off the ground. You need to develop a plan for a
business form that will be attractive to potential investors and partners, and will
address their concerns.
Finance and politics are not your strong suits, and you aren't very interested in the
day-to-day business operations of Sunburst—you'd rather spend most of your time
inventing new products. The start-up team believes that the business will need
someone with finance skills. You also need a visionary CEO. Ideally, this person
should have connections and experience in the solar industry. You have asked Elon
Helios, a forward-thinking figure in the solar energy field, who is known for being
a rainmaker. Helios has expressed some interest, but it will take significant
incentives to get him on board.
 Although Tanya has little money to invest, she has excellent networking skills, and
she has found a potential investor, Carmen Santiago, who thinks that the product
may have potential. Santiago does not want to be involved in running the business.
Ravi has identified a good candidate with finance experience. This individual does
not want to invest in the company, but he would expect a good salary and benefits.
The team has created a tentative business plan, which has two target stages: The
first stage involves local (geographical region) manufacturing with a focus on local
solar energy providers; the second stage will begin five years from start-up, at
which point the business will expand nationally (or possibly internationally)
targeting the market of all potential solar energy customers.
The potential investors and participants want to know what legal form the business
will take before they agree to participate. Your task is to prepare a presentation for
the potential investors.

Legal Forms of Business

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 & maintenance—the effort associated with forming and maintaining the entity
 continuity—the continuity or stability of the organization upon given occurrences
 ownership & 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, management, and finance.

Resources
https://content.umuc.edu/file/6aa8bfb8-7053-4fed-94f6-
2547e454c501/1/web/viewer.html?file=https://content.umuc.edu/file/b8e7260e-292d-4939-b7c6-
56cc17b93369/1/BusinessEntities.pdf

https://www.youtube.com/watch?v=AOWqk3DNFAU

https://www.youtube.com/watch?v=4KTjsreKrwU&t=27s

Factors for Choosing a Business Entity

Video Transcript
So what are the factors or considerations that come into play when selecting a business
entity? Well, generally, they're broken down into the costs or effort required for
creation of the entity and maintenance of that entity going forward so that's the first
consideration.
Second, would be the issues of continuity and how the business lasts and is able to be
transferred from individual to individual or generation to generation.
Third would be the control of the individual decision makers in the entity, or who are
the individual decision makers and who has the capability or possibility of having
control in the entity?
Next is ownership in the organization. How is the ownership structured and who can be
owners? Next is the potential personal liability of the owners for actions of individuals
working for or on behalf of the entity that would entail agency, liability or basically at
what risk are your personal assets for the activity of the business?
Okay, next would be how would the individuals who work in or on behalf of the
business compensated? And lastly, what are the tax repercussions of being
compensated through the business? So each of these there's -- these individual eight
factors we'll visit them individually for each particular entity type and discuss them in
detail okay.

Step 2: Prepare Your Presentation

 Using the information you gathered in the previous step, prepare a
narrated PowerPoint. Because you will not deliver this presentation in
person, it should follow the form of asynchronous presentations. Be sure
to meet the following requirements:

 Include a title slide, with your name on it, introducing the presentation.
 On the presentation slides, include only the major bullet points for each
issue.
 Include no more than 10 slides (not counting title page or references list).
 Cover all the elements of your plan as outlined in Step 1.
 Use your narration to provide the supporting rationale for each major
bullet point.
 Include a script of your narration in the notes section of PowerPoint.
 The final slide must present a clear summary of your major conclusions
and any recommendations.
 Include a reference page in APA format citing any sources you used to
develop your presentation.
 Title your files using this protocol: yourlastname_Business Form_date.

When your presentation is complete, continue to the next step, in which

you will gather information about the potential organization structure
for your business.

Asynchronous Presentations
An asynchronous presentation is a pre-recorded presentation for a specific
audience to whom you would ideally present in person or online in real time, but
cannot for practical reasons. While MS PowerPoint is considered the default
presentation tool for presentations, you may consider using other presentation
platforms or tools. Be sure the tool supports pre-recorded narration. Dedicate
enough time to the narrated presentation to get the timing for transitions right, and
 ensure that the sound is clear and the narration at the right volume. A good
asynchronous presentation shares most of the same traits as a good live
presentation. Your presentation should not be your academic paper cut into text-
filled slides. Rather, consider how you might identify themes to discuss that are
supported by pertinent facts from your paper. You are giving a talk to an audience,
so your narrative should provide most of your ideas and argumentation. Be sure the
themes either flow or transition appropriately from slide to slide. Use images and
data visualization (tables, charts, or graphs, for example) where possible.

Step 3: Determine Your

Organization's Structure: Gather
and Analyze Information
Now that you have decided on a legal organization form for your
business, which currently has a single location, you need to decide on an
organization structure. Organization structure determines such things as
what departments the organization will need, who will report to whom,
how many levels you will have in your organization's hierarchy, and how
many individuals will report to each manager (span of control). An
effective structure should promote communication and coordination of
efforts across the entire organization. See: Organization Structure and
Design.

You begin your research by formulating a number of questions, the

answers to which will be reflected in a short paper that includes your
mission statement, organization chart, and your rationale for
these recommendations.

1. Sunburst's primary goals are innovation and customer responsiveness.

How should your mission statement articulate these goals? How can this
statement be drafted so that it is clear, concise, and meaningful to
organization stakeholders?
2. What key tasks must be accomplished in order to meet the organization's
goals? What individuals or groups will have responsibility for delivering
these processes or items?

3. Will individuals have titles and, if so, which individuals? What will those
titles be?

4. To whom will individuals report? Why?

5. What are the possible impacts of outsourcing the HR function? What are
the pros and cons of doing so? Make a recommendation in your paper. If
you decide to keep HR in house, make sure its place in your business
structure is reflected in your organization chart.

6. Consider all other relevant factors (for example, will your business
structure be functional, centralized, or decentralized, etc.).

When you have formulated your preliminary thoughts and questions,

begin your research. The resources below are a good start, but you should
also conduct your own research to enhance your knowledge and the final
product.

When your research is complete, continue to the next step, in which you
will write your short paper, which will include a mission statement,
organization chart, and summary of the rationale behind your decisions.

Resources
Organization Structure and Design
The structure of an organization plays a pivotal role in how everyday tasks are
handled, in how resources are allocated, in employee supervision and reporting,
and in coordination amongst employees. It impacts employee behavior, demeanor,
and psyche in ways that are still being studied by theorists today. Organizational
structure may play a role in employee motivation and even productivity.
 A primary factor in creating and managing a new business involves choosing the
best organizational structure for it. Some types of business are better suited for a
clear hierarchical structure, while others are more apt to work within a flatter
organizational structure, with fewer or even no levels of authority. From time to
time, a business may reorganize, as online shoe retailer Zappos did when moving
from a hierarchy to a flatter "holacracy.” There were reportedly mixed results
spurring from this major shift in business structure.

As the Zappos case and others reveal, business structure plays an integral role in
organizational success. Thus, one should clearly define the initial organizational
structure at the outset of starting a new business and monitor it through the
business life cycle, tweaking it and shifting it as necessary.

References

Reingold, J. (2016, March 4). How a Radical Shift Left Zappos Reeling. Retrieved
February 07, 2017, from http://fortune.com/zappos-tony-hsieh-holacracy/

https://lti.umuc.edu/contentadaptor/topics/byid/44445837-9a07-4133-b7ab-ded42ce76f30

https://lti.umuc.edu/contentadaptor/topics/byid/cad5e0df-301e-4f69-96c7-c356c06d5aef

https://lti.umuc.edu/contentadaptor/topics/byid/08cd7be6-382d-4085-9963-5a49605c38e1

Mission Statement
In the contemporary economic environment, businesses must often take on roles
beyond those of mere profit centers. A well-crafted mission statement assists in
defining the role of a company by succinctly outlining its core purpose and values.
All other organizational documents, such as codes of conduct, should be created to
support the mission statement of the organization. Once crafted, a mission
statement should play a role in employee training, advertising, and management. It
is the core principle that states who (as a business) we are, and what (as a business)
we do.

Resources
See PDF Files attached

Outsourcing the HR Function

Outsourcing is a technique used by some companies in which they transfer or contract out certain
work to external companies, typically in an effort to save costs. Outsourcing the human resources
("HR") function involves the transfer of the tasks usually performed internally by human
resources employees to external companies. Depending on the structure of the organization, the
human resources office often handles such matters as managing employee compensation and
benefits, recruiting new employees, ensuring compliance with employee rights and safety laws,
overseeing employee relations, and often the provision of certain employee training.

There are advantages and disadvantages associated with outsourcing the HR function. In addition
to the potential cost savings, outsourcing the HR function provides companies with a means of
garnering expertise in the growingly complex areas of employee rights and employment
compliance without hiring additional staff. Outsourcing the HR function may also give
companies, whether large or small, a layer of protection from some lawsuits. By outsourcing, a
company can more readily focus on its primary purpose and avoid potential distractions.

Outsourcing the HR function, like any outsourcing, creates distance between the employees of a
company and the outside contractors. This distance may lead to a culture mismatch between the
company and its contractor, delays in processing, and reliance on another company to manage a
critical function (i.e., loss of control). The best HR managers align their actions with the
organization's strategic goals. HR managers typically have organizational and financial
knowledge that comes from being a part of the company. Can the outside contractor provide the
necessary alignment with the company's strategic interests? This outside contractor may or may
not be as dedicated to making process improvements as your own company is, and so,
particularly when in a long-term contract, may not expend resources to improve the quality of
service.

For multinational organizations, there are special challenges. Best HR practices may not transfer
effectively between countries due to cultural and institutional differences. Can the outside
contractor adapt to local practices and customs while standardizing the best HR practices across
country borders?
 These, and other, advantages and disadvantages of outsourcing the HR function should be
weighed carefully and discussed prior to action.

Step 4: Integrate Your Thoughts and

Material
You've formulated your key questions; you've done your research; you've
analyzed and refined your information and thoughts. Now it's time to put
it all together and start drafting your deliverable.

 Assemble a short paper that contains the following:

o your mission statement of no more than one paragraph
o your organization chart
o your rationale, no more than five pages (12 point type, double-spaced),
for your chosen mission statement and organization structure as
displayed in your chart
 Be sure to attribute any sources you use in the creation of any of the
documents you submit.
 Include a reference page in APA format citing any sources you used in
your short paper.
 Use the following file naming protocol: yourlastname_organization
_date

When your mission statement, organization chart, and rationale

statement are complete, continue to the next step, and submit your work.

Step 5: Submit Your Materials

By the end of Week 7, submit the following files to the Structuring a
Business folder.
 narrated PowerPoint with recommended legal form of business
 short paper including mission statement, organization chart, and
rationale

Before you submit your assignment, review the competencies below,

which your instructor will use to evaluate your work. A good practice
would be to use each competency as a self-check to confirm you have
incorporated all of them in your work.

 1.7: Create neat and professional looking documents appropriate for the
project or presentation.
 1.8: Create clear oral messages.
 2.5: Develop well-reasoned ideas, conclusions or decisions, checking them
against relevant criteria and benchmarks.
 7.1: Analyze the legal forms of business organization and make
recommendations to support business decisions.
 9.1: Design organizational structure, systems and processes that support
the strategic goals of the organization.
 10.4: Make strategic managerial decisions for obtaining capital required
for achieving organizational goals.
 13.2: Create and implement new initiative or enterprise.
 13.3: Create and manage a new enterprise.