Week 2: Business Entities
Week 2: Business EntitiesAmong the many decisions that must be considered when launching a new business, probably few have the potential for greater impact than the selection of the type of business entity to establish. Each entity has its own benefits, pitfalls, and legal requirements. A variety of factors may contribute to the selection process. The aspiring businessperson needs to be protected from future liability. Different tax structures and the ability to transfer ownership might also influence the decision. Future aspirations for the business should also be considered. The owner of a small "mom and pop" store may or may not need to form a corporation.This week you will explore the most common forms of business entities and compare the characteristics of each. You will examine what types of entities may be most beneficial for beginning entrepreneurs and perhaps determine when a partnership would be more appropriate than a sole proprietorship. Lastly, you will focus on the corporation as a business entity and the attributes that distinguish it from other forms.Learning ObjectivesStudents will:Compare and contrast the common forms of business entitiesEvaluate the different roles, rights, and duties of owners and managers in each type of business entityAssess the role of the board of directorsLearning ResourcesThis page contains the Learning Resources for this week. Be sure to scroll down the page to see all of this week's assigned Learning Resources. To access select media resources, please use the media players below and/or the course DVD (as applicable).Required ReadingsMiller, R. (2014). Business law today: The essentials (10th ed.). Mason, OH: Cengage Learning.
Chapter 19, "The Entrepreneur's Options"Chapter 20, "Corporations"In Chapter 19, you are introduced to the major types of business entities, including such types as sole proprietorships, partnerships, and corporations. You will also explore when special business forms are needed, as well as specific rules governing franchising. Chapter 20 focuses specifically on corporations and the statutory requirements that make them legal entities. You will also explore how corporations are formed, financed, and managed.Required MediaWeek 2 OverviewNote: The approximate length of this media piece is 13 minutes.
Accessible player --Downloads--Download Video w/CCDownload AudioDownload Transcript1)Discussion 1: Business EntitiesAmong the many decisions that come with beginning a new business venture is the selection of exactly what kind of business entity would be the best fit for the circumstances. There are a wide variety of different forms to choose between when establishing a new business, each with distinct characteristics and uses. By creating such legal structures, it requires a certain level of responsibility from business owners, but also provides limited liability protection.As you consider the selection of appropriate business entities, respond to the following:Should business owners be able to use business entities in order to shield themselves from personal liability for business obligations and debts? If this is acceptable, to what extent should it be acceptable?How might owners of businesses abuse the ability to limit their personal liability? ("Piercing the corporate veil")Which is more advantageous to protect- the business or the consumer? Find one example where you believe the business should be protected and one example where the consumer deserves protection.With these thoughts in mind:By Day 3Post an initial statement that expresses your thoughts on business entities and liabilities. The length of your response(s) should be a minimum of 150 words.2)Discussion 2: CorporationsOne common form of business entity is the corporation, which is organized under specific legal guidelines or rules of incorporation and is legally recognized by the state. Corporations also have distinctive methods of financing such as stocks or bonds, which are not permissible for other business entities. One other unique characteristic of a corporation is the fact that it is managed by a board of directors, elected by the shareholders.Often a board of directors is composed of individuals that are not involved with the daily operations of the organization. Consider who should be on a board of directors and when it may be appropriate for the composition of the board be mandated as it often is in large corporations. Select a major corporation and research the board of directors.Based on your readings and what you learn about your selected corporation's board of directors, respond to the following:Who should be on a board of directors and who should have the power to select those board members?What do you think should be the proper role of a board of directors?How accountable should the board members be held?With these thoughts in mind:By Day 5Post an initial statement that expresses your thoughts on the role of board of directors. The length of your response(s) should be a minimum of 150 words.3)Assignment: Establishing a New BusinessIn the Resources for this week you have been introduced to a number of different business entities, each with specific characteristics that make them more appropriate for some types of ventures than others. Consider the following scenario:You are a business consultant. A new client, Pat, recently received a bachelor's degree in nutrition sciences with a business minor. He has plans for a new business in which he will provide home-delivered food and formula for infants and young children. Pat initially contacted you for help in writing his business plan. You have just received the following from Pat:I got the idea for this business while studying at CU. In my nutrition studies at CU, I have been amazed to learn how many babies don't get the food that they should, even in today's world. There seem to be many reasons for this. The top reasons seem to be simple lack of nutritional knowledge of the parents, laziness of the parents, and the parents being too busy to buy and prepare proper food for their young children in addition to preparing food for the older members of the household. In addition, I am the youngest of four children; my three older sisters have each had at least one child in the last 5 years, and I have seen them, all good intentioned, simply get overwhelmed with all that there is to do. Two of them work full time. One of my sisters is a nurse, and said that she sees lots of parents of young kids who would "do anything" to be able to more easily make sure their kids get a good balance of really nutritious food.So here is the idea that I alluded to on the phone: My business will work with the parent(s), the child's doctor, and a nutritionist to plan out a child's food requirements. Then, we will prepare all the food needed by the child. We will deliver this at regular intervals, in most cases every 2 or 3 days, but always often enough that the food is always fresh when consumed. We will be able to handle special dietary needs (such as allergies or other food intolerance) and preferences (such as vegetarian diets and religious-based restrictions). My company will deliver the food in "heat and eat" containers that are reused. The client does not even need to wash the containers; we will wash them all in special high-temperature equipment regardless of whether or not it appears that the client has already washed them.Because you are an established consultant and know about business, what are your thoughts on how I should set up this business? For example, what are my options for different types of entities and their pros and cons? Like, do I need to incorporate it? Is there anything big that I haven't thought of? I know that we have talked about some of these in our prior meetings, but here are some other thoughts and ideas that I have:I want to be in charge of running the business, but I know that others will have more expertise in certain areas.My sister (the one who is a nurse) is going to be involved in the business, but she can be a little pushy and bossy.My parents are putting up about $100,000 to help me get the business going.I don't want to have to mess with paperwork of the business itself because there will be enough of that with the clients.I plan to run this out of my home, at least at the beginning.Also, I will be using my own vehicle for deliveries, at least at the beginning.I plan to have different programs for nursing moms vs. those who are not nursing.I plan to include healthy herbal supplements as part of the programs.I realize that as the business grows, I might have to put a more formal management structure in place.I know this is an issue for later, but I am thinking that if it is successful, I would like to look into franchising it.After reviewing both this scenario and the Resources for this week, respond to the following:In a 1- to 2-page paper, outline your response to Pat. What would you recommend to Pat, taking into account the above, and any other important considerations not mentioned for this business?Your written assignments must follow APA guidelines. Be sure to support your work with specific citations from this week's Learning Resources and additional scholarly sources as appropriate.
Europe(Continental)