Project 4: Structuring A New Business Venture see attached docs Creating and Managing a New Business There are many things to consider when creating and m

Project 4: Structuring A New Business Venture see attached docs Creating and Managing a New Business

There are many things to consider when creating and m

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Project 4: Structuring A New Business Venture see attached docs 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.

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 a business is and what it does.


· Vision

· Values of Organizations and Leadership

· In:  Encyclopedia of Health Care Management

· Edited by: Michael J. Stahl

· Subject:Health Care Management, Health Care Management & Administration

The vision for an organization is generally reflected in a statement of direction and future for the organization. The vision statement reflects organizational aspiration, whereas the organization’s mission statement reflects the organization’s purpose. The gap between the mission statement (what we are) and the vision statement (what do we aspire to be) provides the basis for the setting of goals and objectives to move the organization from the mission to its vision.

The vision statement, in its best form, provides an energizing force around which the organization’s executives, employees, stakeholders, and financial analysts rally.

The statement typically is brief, consisting of one or two sentences. A well-conceived, effective vision statement will

· Convey a broad sense of direction that unifies organizational direction

· Aid in changing organizational direction and the rationale for redirection when internal resistance exists

· Provide all levels within the organization a clear understanding of where the organization’s future lies

· Provide executives with an opportunity for a clear, consistent compass for resource justification and allocation

· Rally and energize employees and stakeholders

· Set an expectation of energy and action

· Provide confidence in the organizational leaders to set direction

When the organizational leader communicates the organization’s vision, it sends a signal throughout the organization that change is happening. The vision may serve as a catalyst for new thinking and at the same time may ferret out internal resistance to change. The vision for the organization’s future, by definition, will necessitate the rethinking of resource alignment to accomplish the vision.

The vision statement is frequently considered the “drumbeat” of the organization. It is clear, consistent, resonant, and often repeated. The vision statement frequently is written as a logo or catchy phrase that captures the internal and external public. It is the “march” of the organization providing a cadence and direction for the organization’s future purpose. The vision often sets a tone for organizational pride, thus stimulating ideas and a new work ethic. The drumbeat must be repeated often and reinforced at every opportunity to ensure organizational acceptance and commitment.

Developing and Communicating the Vision Statement

A vision statement is not just plucked from the air. Rather, it is the result of thoughtful analysis and assessment of the environment in which the organization exists. Technology, regulation, economics, competition, politics, demographics, and the social environment are just a few of the factors that mold and change the dynamics in which an organization operates (the external environment). Some of these factors will provide opportunities for the organization; others pose threats to the organization’s viability. The tone and direction of the vision statement is developed by the analysis of the industry’s driving forces and the possible directions available to the organization as a result of this analysis.

A vision statement must be perceived as achievable. It is not essential that all strategies be known when the vision statement is developed; however, the vision must be viewed as possible. Slogans and platitudes without substance will not engender the outcomes sought through an appropriate vision statement. Over time the articulated vision would be viewed as a dream rather than a potential reality. The organization will become disenfranchised to future change. Thus it is important to frequently communicate successful progression toward accomplishing the vision.

Finding the most effective means of communicating the vision statement is as critical as its development. The statement should create a visual image that evokes excitement and pride. Ideally it should be simple enough to be remembered yet complex enough to establish commitment. The vision should be transmitted through media that gets the attention of the organization. Most important, the highest-ranking executive must consistently and clearly articulate the vision in every forum in which he or she participates. The vision must always be recognized as coming from the top of the organization.

Vision Statements and Strategic Planning

Unlike mission statements, which are frequently developed down to the department level, vision statements are generally developed for the organization as a whole. The exception to this is for those very large multinational conglomerates that have unrelated business units. The multinationals may have a strategic vision for the corporation as a whole and one for each of the strategic business units, depending on the level of diversity among the units.

As the vision directionally sets the purpose for change and the mission statement focuses on the existing purpose, the gap between these two statements necessitates goals, objectives, and strategies to move the organization from its mission to its vision. The external environmental analysis used to develop the vision and the internal assessment of the organization’s strengths and weaknesses supporting its mission must converge. This convergence effectively links internal resources with external factors essential to accomplish the vision and is reflected through the strategic plan at the corporate level.

The vision statement, broadly defined, sets the direction, whereas the strategic plan charts the course. As an example, if a local hospital sets a vision to become a regional hub, the strategic plan will articulate the steps (both short term and long term) to accomplish the vision.

Vision Statements in Health Care

The health care industry has, over the past decade and into the foreseeable future, been highly affected by government regulation, population demographics, and political legislation. These factors have required health care providers to reassess who they are and the services they will deliver. Some organizations have narrowed their scope of operations in favor of specialized services, while others have expanded their scope of operations through acquisition and other strategies to large and specialized population segments. Each strategy, whether product based or customer based, requires changes in operations. It is critical, especially in times of dynamic environmental shifts, to develop and articulate a new strategic vision. By communicating the vision, confidence is gained that senior management is willing and ready to meet new challenges, that employees do not have to be worried about changes ahead, and that stakeholders (the community, the customers, the stockholders) are assured that the organization understands its industry and can provide and deliver the services or product to meet these challenges.

Rebecca I. Porterfield

Values of Organizations and Leadership

· In:  Encyclopedia of Educational Leadership and Administration

· Edited by: Fenwick W. English

Values are defined as beliefs and attitudes held by individual persons or collectivities. Values are also viewed as the principles that guide behavior. The values held within a group or an organization are the values shared by the group’s members, which go beyond individual values.

An organization’s or group’s beliefs, desires, behavior, accountability, initiatives, innovation, integrity, and flexibility reveal its core values, which influence organizational perceptions and decisions. Core values are timeless, guiding principles that require no external justification. Such principles have intrinsic value and importance to those inside the organization. An organization’s culture is made up of core values that unify the social dimensions of organizations. Core values become the foundation and conscience of the organization, which distinguish successful organizations from the unsuccessful.

Within enduring organizations, values became the organizations’ essential and enduring tenets. Values cannot be instilled into people; people must already have a predisposition to holding them. However, it is acknowledged that a clear and well-articulated ideology will attract people to the enterprise whose personal values are compatible with the organization’s core values, and conversely, may repel those whose personal values are not similar. The task for executives is to find and retain people who have a disposition to share the organization’s core values.

Values inform leadership practices. Prominent leadership researchers recognize the significant correlation among attitudes, values, beliefs, leadership, and organizations. In their 2002 Synergistic Leadership Theory (SLT), Beverly Irby and Genevieve Brown stressed the interconnectedness of four particular factors: (a) beliefs and values, and attitudes; (b) leadership behavior; (c) external factors; and (d) organizational structure. The SLT theory proposes that an alignment between the leader’s attitudes, values, and beliefs and those of the organization are important to the success of the leader and the organization. Without this alignment, those who do not share the similar attitudes, values, and beliefs may counter changes necessary for reform with resistance.

Sometimes value conflict occurs within organizations when the interest of one group indicates one course of action, while the other group’s welfare demands another. Many scholars and researchers on value conflict resolution stress the “person-situation fit” in organizational settings, which is generally defined as the congruence between norms and values of organizations and the values of persons. Thus, leaders have two responsibilities: (a) to articulate, model, and emphasize the core values of the organization so that all members work together toward meeting organizational goals and (b) to make the effort to incorporate employees’ values so that there is a congruity between an organization’s values and the values of its members.

Beverly Irby, , Genevieve Brown & , and Ling Ling Yang

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 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, management, and finance.

Business entities are legal organizations that exist by virtue of state law. One way to view a business entity is as a separate person. The business entity carries on business activity on its own behalf. The owners of the business entity are representatives of the entity. Business entities benefit society by allowing individuals to aggregate their resources and efforts in furtherance of a business activity. The legal entity is essentially a bundle of contracts that provides for the rights and duties of the owners and employees of the business entity. Each individual state passes its own substantive and procedural laws regarding business entities. A business must choose its state of formation or organization. The home state may be the location where the business is headquartered or it may be any other state where the business organizes and establishes a registered agent. If the business wishes to carry on business outside of its home state, it must qualify to do business and register as a foreign entity doing business in the other state. Carrying on business is generally defined pretty broadly to include marketing or sales activity. A business may carry on the majority or all of its business in a state or states where it is registered as a foreign entity. The business entity must comply with the laws of any state in which it does business.

For example, I want to form a business entity in my home state of New York. The rules prescribed by New York will govern the formation process. I want to also carry on business in Pennsylvania. To do so, I will register my business in New York and then register as a foreign entity doing business in Pennsylvania.


Ask Yourself

· Think about major businesses within the United States. Can you identify five major businesses (Fortune 100 Businesses) within the United States and the state in which they are formed? Where is the headquarters located for each of these businesses?

· Martin is from Mississippi. He forms a business entity and begins providing chartered fishing services. He wants to expand his operations to Louisiana. Can you do that given that he is organized in Mississippi? How or why not?

Why Is Studying Business Entities Important?

Owners and managers of a business seek to organize their resources to maximize productivity and opportunities. These individuals must understand the important characteristics of the business entity to take advantage of all of the benefits associated with carrying on a business activity as a legal entity.

Taking advantage of a business entity status means choosing an entity form for your business, operating within your chosen entity form, and undertaking business transactions with various entity types.

Understanding business entity characteristics includes familiarizing oneself with the ownership structure, organizational structure, potential liability, compensation methods, and tax laws applicable to the business entity. Lastly, the owners and managers of a business must comply with the procedural and substantive laws applicable to that business entity. This is generally known as business governance.

Numerous other requirements may exist before a business entity may carry on business in a jurisdiction. For example, she will likely have to obtain a business license from the local government before undertaking business. She will have to do a fictitious name filing if she operates under a name other than her own name. Further, she will need to set up an employer identification number (EIN) if she plans to have employees for her business. All of this is distinct from the nature and characteristics of the business entity.

Ask Yourself

· Try to outline the procedural steps necessary to form a business entity within a state. This will likely require you to go to the Secretary of State’s website for your particular state. The process and rules for form any business entity type will be explained there. The process may vary slightly, for each state.

“Closely Held” and “Publicly Held” Companies

Business entities are often categorized as either closely held or publicly held. These designations are not separate types of business entity; rather, they are classifications or defining characteristics of a given business. Generally, the distinction between the two classifications concerns the number of business owners and whether the equity ownership is sold on a public exchange.

A closely held business, as the name implies, is held by a smaller or more closely related group of individuals. It is often thought of as a smaller business, such as a mom- and-pop or family business. In truth, however, the closely held status has little to do with the size or revenue of the business; rather, it simply means that the business is not widely owned by numerous, unrelated people. Another characteristic of the closely  held entity is that it is not traded on a public market,

For example, my wife, three friends, and I own a business that specializes in dog training and boarding. We are a closely held business because all of the ownership is held by a small group of closely connect individuals.

A publicly traded business is any business that is traded on a public exchange. This means that the company has gone through an initial public offering in which its shares were registered with the Securities and Exchange Commission and subsequently listed for sale to the public at large. A publicly held or publicly traded company is generally held, or capable of being held, by a large number of unrelated people.

For example, Elton’s business is growing rapidly. He needs to bring in additional capital to expand operations. He decides to undertake a public offering and list shares of his company for sale on a public exchange. Once listed for sale to the public, Elton’s business is now a publicly traded company.

A closely held business is a private business. It is unlikely that a business could or would undertake a public offering and remain closely held. The inverse, however, is not necessarily true. Private business entities are not necessarily closely held. Some private businesses are widely held by a large number of shareholders.

Ask Yourself

· Some companies choose to remain closely held instead of seeking a large and diverse set of owners. Other companies prefer to be widely held and often undertake a public offering as part of that effort. Can you think of reasons why a company would prefer to remain a closely held private company versus a widely held public company?

· Can you identify a very large closely held company that does business across the United States? Can you identify why the company is considered, “closely held.”

Main Types of Business Entities

The main types of business entity discussed here are as follows:

· sole proprietorships—The sole proprietorship is not considered a separate business entity, but it is the basis from which business entities are defined.

· general partnerships—The general partnership is the most basic type of business entity. While the general partnership is commonly understood to be a legal business entity, some legal theorists do not regard the partnership as a formal legal entity.

· limited partnerships—This is a hybrid form of partnership that allows for a class of partner known as a “limited partner.”

· limited liability limited partnership—This is a hybrid form of partnership that allows professional practitioners to organize as partners with limited personal liability.

· limited liability companies—This is the most common form of business entity in the United States. The reason for this fact is based upon the blend of informal and protective characteristics of the LLC.

· corporations—The corporations is the oldest form of business entity. The corporation is generally divided based upon its tax status as C-Corporation, S-Corporation, and non-profit Corporation.

Some of the less-common types of business entity are the limited liability limited partnership (LLLP) and the professional corporation (PC). The LLLP is a special purpose entity generally used as part of special project, such as a real estate project. A professional corporation is a corporate form for small practitioner firms that is rarely used because of the unfavorable 25 percent flat corporate tax rate.


Characteristics of Business Entities

There are numerous characteristics that make a business entity unique. The major characteristics of a business entity are as follows:

· 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; and

· taxation—The taxation of the organization’s earnings and its distributions of profits to the owners.

This list is certainly not exhaustive; however, these primary characteristics provide a great deal of necessary insight for understanding and choosing a business entity.


Ask Yourself

· Why do you think these are the primary characteristics of a business entity? Can you think of any other characteristics of the business entity that would be important to understand when selecting and forming a business entity.

Creation of a Business Entity

Creation of a business entity is the legal or procedural steps that one must undertake to bring the business entity into existence. There is a general dichotomy in the process or steps required to form a business entity.

Default Entity Status 

Some business entities may arise by default without any formal procedural undertaking by the founder. That is, the business entity may arise simply by the parties undertaking some business activity with the intention of generating revenue or making a profit.

To form a general partnership, the only requirement beyond the physical activity of the founders is the subjective intent of the partners with regard to the responsibilities of each party and the allocation of proceeds (or losses) as they arise. Generally, in the event of dispute, a court will be charged with determining whether individuals carrying on commercial activity are a default general partnership. Notably, the sharing of losses is the greatest indicator of co- ownership of a business, as opposed to an employer-employee or contractor relationship.

In some cases, a court may determine that a business entity exists pursuant to the conduct or actions of the parties. Further, a court may recognize a partnership to avoid an inequitable result if an entity does not exist. This is known as “estoppel.”

Filing for Entity Status 

Some business entities require a formal filing process through the state secretary of state’s office. This requires the filing of documents of organization in accordance with the procedural rules adopted by the state of organization. The amount of information and type of documents required will vary between states and depend on the type of entity. The general requirements for each business entity type are discussed along with that business entity.

For example, Eric wants to form an LLC. He goes to the website for the Nebraska Secretary of State’s Office and downloads the necessary forms. He files the information sheet and articles of organization and pays the applicable fee. Seven days later he receives a Nebraska state certificate of organization for his LLC.

Ask Yourself

· Most people do not realize the commercial activity by two or more individuals defaults to a business entity status under certain conditions. Can you think of any consequences that this may have for the partners and business activity? Hint: think about the characteristics of a business entity discussed above. These will help give you an idea of the potential consequences of being deemed a legal business entity.

· Eric is thinking about forming a business entity for his personal consulting practice. He has been consulting for several months and is bringing in Audrey, also a consultant, as a co-owner of the business activity. He and Audrey begin operating their consulting practice before filing the applicable business organization documents. What should Eric and Audrey known about their current business entity status?

Maintenance Requirements for a Business Entity

Maintenance of a business entity is summarized as the administrative steps associated with starting and carrying on business as a given entity form. It entails the process of filing documents, holding meetings, maintaining records, observing formalities, and reporting necessary information to regulators. The requirements for starting a business vary considerably between entity types. Businesses entities that require formal procedures to organize also require formalized maintenance procedures. At the most basic level, these entities require the owners to file statements each year (along with annual fees) with the Secretary of State’s office, to hold business meetings, to maintain records, and to report information to regulatory authorities. The state may require that an entity maintain certain records, such as meeting minutes and resolutions, ownership logs, capital accounts, financial statements, etc. The federal government may require that business entities file specific information related to taxation or securities issuances. State and federal reporting requirements can also be industry specific or based upon the company’s size or status as privately or publicly held.

For example, A group of friends and I form a corporation. We all vote and elect each of us as directors. We then appoint me as CEO. Our creation and maintenance requirements mean following the state-required duties for filing annual information and paying fees to the state. This could include voting as directors to approve our corporate documents. As CEO, I will be charged will filing those documents with the state.

Generally, default business entities require little or no maintenance to continue on as a business entity. These businesses arise simply through the conduct of those involved and do not involve the formalized procedure for maintaining their operating status. While there are few formal maintenance requirements for default entities, there are still numerous tax formalities to follow. The lack of formal maintenance requirements associated with default entities often causes the owners to fail to follow other business formalities.

Ask Yourself

· Why do you think the government requires business entities to undertake these maintenance formalities? Why do you think it is important internally for businesses undertake formal maintenance? …

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