Professional Documents
Culture Documents
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Legal Forms of Business
Organization
Three Basic Ways to Organize an
Entrepreneurial Venture
1. Sole Proprietorship
2. Partnership
3. Corporation
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Legal Forms of Business
Organization
Variation of Basic Organizational
Alternatives
1. Sole Proprietorship
2. General Partnership
3. Limited Liability Partnership
4. C Corporation
5. S Corporation
6. Limited Liability Company
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Legal Forms of Business
Organization
Sole Proprietorship
– The owner maintains sole and complete control
over the business and is personally liable for
business debts
– Advantage
• Ease of formation and freedom to operate
business at will
– Disadvantage
• Unlimited liability or the obligation to personally
repay all debts incurred by the business
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Legal Forms of Business
Organization
General Partnership
– Two or more business owners share the
management and risk of the business
– Advantage
• Relatively easy to form
– Disadvantage
• Unlimited personal liability
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Legal Forms of Business
Organization
Limited Liability Partnership (LLP)
– General partners and limited partners exist in the
venture
– Advantage
• Good way for an entrepreneur to raise capital
– Disadvantage
• High cost and complex to form an LLP
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Legal Forms of Business
Organization
C Corporation
– A legal business entity that is separate from its
owners and managers
– Advantage
• Limited Liability
– Disadvantage
• Double-taxation
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Articles of Incorporation
Articles of Incorporation
– A document that describes the business and is
filed with the state in which the corporation is
formed
– Main tasks involved in writing the articles
of incorporation
1. Naming a board of directors
2. Adopting bylaws
3. Electing corporate officers
4. Issuing stock
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Legal Forms of Business
Organization
S Corporation
– Has the regular characteristic of a C corporation,
but the owners are taxed as a partnership as
long as certain criteria are met
– Legal criteria for being an S corporation
1. Must be a domestic corporation
2. Cannot have a nonresident alien as a
shareholder
3. Can issue only one class of common stock
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Legal Forms of Business
Organization
Limited Liability-Company (LLC)
– Offers the liability protection, tax benefits, and no
restrictions such as those on an S corporation
– Advantage
• Gives flexibility to the owners
– Disadvantage
• Complex and expensive to set up
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Choosing a Business Name,
Slogan, or Design
Trademark
– A form of legal protection for a distinctive word,
name, phrase, logo, symbol, design, or slogan
– Two of the biggest trademark Internet
search companies
1. Thomson & Thomson (thomson-
thomson.com)
2. CCH Trademark Research Corporation
(corsearch.com)
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Patents
Three Different Types of Patents
1. Utility Patent
• Covers inventions that work uniquely to
perform a function or use
2. Design Patent
• Covers existing objects that have a unique or
new form, shape, or design
3. Plant Patent
• Covers new strains of living plants such as
flowers, trees, or vegetables
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Patent Requirements
To be patentable
– An invention must be a process, a machine, a
manufacture, a composition, or an improvement
of these
– Additionally, an invention must also
satisfy the following three requirements
1. Novelty
2. Nonobviousness
3. Usefulness
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Contracts
A contract is an agreement that creates
legal obligations and is enforceable in a
court of law
– Four essentials of a contract
1. Mutual assent
2. Consideration
3. Legality of object
4. Capacity of the parties
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What is Organizing?
Organizing
– The process of deciding how best
to get the venture’s work done by
grouping organizational activities
and resources within some type of
organizational structure
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What is Organizing?
Organizational Structure
– The formal framework within which work is
divided, grouped, and coordinated
Organizational Chart
– A visual representation of an organization’s
structure
Organizational Design
– The process of developing or changing the
organizational structure
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Organizational Design Decisions
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Organizational Design Decisions
Work Specialization
– Describes the degree to which work tasks are
divided into separate jobs
• Also known as “division of labor”
Departmentalization
– Describes the basis by which specialized work
tasks (jobs) are grouped
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Advantages and Drawbacks of
Work Specialization
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Organizational Design Decisions
Chain of Command
– Empowerment is increasing the decision-making discretion
of individuals
Span of Control
– Determines how many supervisors an organization will need
Centralization-decentralization
– The degree to which decision-making is made by few people
or delegated to other organizational members
Formalization
– The degree to which jobs are standardized and employee
behavior is dictated by rules and procedures
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Types of Organizational
Structures
Mechanistic Organization
– A rigid and tightly controlled structure which
tends to be focused on efficiency and cost
minimization
Organic Organization
– A structure that’s highly adaptive and
flexible, with little work specialization, and
minimal formalization
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Mechanistic and Organic
Organization Structures
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Types of Organizational
Structures
Virtual Organization
– A network of independent people linked by
common goals and information technology
Boundaryless Organization
– Design is not defined by, or limited to,
horizontal, vertical, or external boundaries
imposed by a predefined structure
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