1. Organizing the Venture
International Business - Chapter 2
Organizing the Venture
Prepared by: Professor M. Banton, Florida International University

2. International Business - Chapter 2
Learning Objectives
List the three basic ways to organize a business
Explain the benefits and drawbacks of each of the six forms of business organization
Describe what a trademark does
Contrast the three types of patents
Describe other legal issues that entrepreneurs face
Explain the importance of choosing an appropriate organizational structure
Describe the six decisions in organizational design
Discuss the characteristics of each of the two broad types of organizational structure and when each might be appropriate
Describe virtual and boundaryless organizations
Prepared by: Professor M. Banton, Florida International University

3. Legal Forms of Business Organization
Three Basic Ways to Organize an Entrepreneurial Venture
Sole Proprietorship
Partnership
Corporation

4. Legal Forms of Business Organization
Variation of Basic Organizational Alternatives
Sole Proprietorship
General Partnership
Limited Liability Partnership
C Corporation
S Corporation
Limited Liability Company

5. 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

6. 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

7. 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

8. 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

9. 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
Naming a board of directors
Adopting bylaws
Electing corporate officers
Issuing stock

10. 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
Must be a domestic corporation
Cannot have a nonresident alien as a shareholder
Can issue only one class of common stock

11. 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

12. 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
Thomson & Thomson (thomson-thomson.com)
CCH Trademark Research Corporation (corsearch.com)

13. Patents Three Different Types of Patents Utility Patent Design Patent
Covers inventions that work uniquely to perform a function or use
Design Patent
Covers existing objects that have a unique or new form, shape, or design
Plant Patent
Covers new strains of living plants such as flowers, trees, or vegetables

14. 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
Novelty
Nonobviousness
Usefulness

15. Contracts
A contract is an agreement that creates legal obligations and is enforceable in a court of law
Four essentials of a contract
Mutual assent
Consideration
Legality of object
Capacity of the parties

16. 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

17. What is Organizing? Organizational Structure Organizational Chart
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

18. Organizational Design Decisions
Organizational design involves decisions about six key elements
How much work specialization is needed?
Do we need specific departments?
Who’s in charge, and who reports to whom?
How many employees will supervisors manage?
Who’s going to make organizational decisions?
How much formalization is necessary?

19. 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

20. Advantages and Drawbacks of Work Specialization

21. 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

22. 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

23. Mechanistic and Organic Organization Structures

24. 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