Ravi, who has a degree from State University in mechanical engineering, was previously employed by a start-up firm in New York City. He worked long hours for little pay, but when the business sold, his stock options paid off. As a result, he now has some time and $100,000 to invest in Sunburst. More importantly, Ravi has the knowledge and know-how to setup and manage production. Tanya, a friend you met through your alumni association, has a degree in marketing and has a few years of experience working in marketing roles. The three of you agree to form the start-up team for Sunburst.
The team estimates that it will take approximately two years to develop Sunburst into a marketable product, but that once the product is on the market, there is excellent growth potential. You know that you will need additional investors and expertise to get the business off the ground. You need to develop a plan for a business form that will be attractive to potential investors and partners, and will address their concerns.
Finance and politics are not your strong suits, and you aren’t very interested in the day-to-day business operations of Sunburst—you’d rather spend most of your time inventing new products. The start-up team believes that the business will need someone with finance skills. You also need a visionary CEO. Ideally, this person should have connections and experience in the solar industry. You have asked Elon Helios, a forward-thinking figure in the solar energy field, who is known for being a rainmaker. Helios has expressed some interest, but it will take significant incentives to get him on board.
Although Tanya has little money to invest, she has excellent networking skills, and she has found a potential investor, Carmen Santiago, who thinks that the product may have potential. Santiago does not want to be involved in running the business.
Ravi has identified a good candidate with finance experience. This individual does not want to invest in the company, but he would expect a good salary and benefits.
The team has created a tentative business plan, which has two target stages: The first stage involves local (geographical region) manufacturing with a focus on local solar energy providers; the second stage will begin five years from start-up, at which point the business will expand nationally (or possibly internationally) targeting the market of all potential solar energy customers. The potential investors and participants want to know what legal form the business will take before they agree to participate.
The questions that I need advice on:
- What types of business organizations are available to entrepreneurs?
- What are the advantages and disadvantages of each alternative?
- What are the two best choices and why?
- How would you explain the choices to your investors?
- What are the different legal forms of business to might consider? There are at least six factors that will influence your choice:
- creation and maintenance
- ownership and control
- personal liability
- compensation and division of profits
- What is the proposed choice for the legal form of business? Include the reasoning based on the preceding six factors and any other relevant factors.
- Sunburst’s primary goals are innovation and customer responsiveness. How should the mission statement articulate these goals? How can this statement be drafted so that it is clear, concise, and meaningful to organization stakeholders?
- What key tasks must be accomplished in order to meet the organization’s goals? What individuals or groups will have responsibility for delivering these processes or items?
- Will individuals have titles and, if so, which individuals? What will those titles be?
- To whom will individuals report? Why?
- What are the possible impacts of outsourcing the HR function? What are the pros and cons of doing so? Make a recommendation in your paper. If you decide to keep HR in house, make sure its place in your business structure is reflected in your organization chart.
- Consider all other relevant factors (for example, will your business structure be functional, centralized, or decentralized, etc.).