Project 4: Structuring a New Business Venture

Learning Topic

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 a business is

and what it does.

Vision

(http://sk.sagepub.com.ezproxy.umgc.edu/reference/healthcareman

agement/n837.xml)

Values of Organizations and Leadership

(http://sk.sagepub.com.ezproxy.umgc.edu/reference/edleadership/n

587.xml)

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All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or integrity

of information located at external sites.

Resources

Learning Topic

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.

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All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or integrity

of information located at external sites.

Learning Topic

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.

What Is Human Resources?

(https://leocontent.umgc.edu/content/scor/uncurated/mba/2218-

mba630/learning-resourcelist1/what-is-human-resources.html?

ou=770958)

The Changing Role of Strategic Human Resources

(https://leocontent.umgc.edu/content/scor/uncurated/mba/2218-

mba630/learning-resourcelist1/the-changing-

roleofstrategichumanresources.html?ou=770958)

Risks Associated With Outsourcing

(https://leocontent.umgc.edu/content/scor/uncurated/mba/2218-

mba630/learning-resourcelist1/risks-

associatedwithoutsourcing.html?ou=770958)

© 2023 University of Maryland Global Campus

All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or integrity

of information located at external sites.

Resources

Learning Topic

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.

Choose the best answer to each question:

Question 1

Which of the following business entities imposes unlimited liability on all

of the owners?

limited partnership

general partnership

limited liability partnership

S corporation

Question 2

Which of the following is a characteristic of a sole proprietorship?

A sole proprietorship is subject to double taxation.

A sole proprietorship has perpetual life, beyond that of the owner.

A sole proprietorship is formed simply by someone carrying on an

activity seeking a profit.

A sole proprietorship provides limited liability to its owner.

Question 3

What are the owners of a limited liability company (LLC) called?

stakeholders

partners

Check Your Knowledge

shareholders

members

Question 4

Which of the following is the greatest disadvantage of a C corporation?

The C corporation is subject to double taxation.

The C corporation allows for limited liability.

The C corporation requires a board of directors.

The C corporation provides a means of seeking investment through

issuing equity and debt securities.

Question 5

Which entity allows for the owners to elect whether they manage the

business or they appoint managers?

limited partnership

limited liability company

general partnership

C corporation

Resources

Business Entities

(https://leocontent.umgc.edu/content/scor/uncurated/mba/2218-

mba630/learning-resourcelist1/business-entities.html?ou=770958)

© 2023 University of Maryland Global Campus

All links to external sites were verified at the time of publication. UMGC is not responsible for the validity or integrity

of information located at external sites.