Business entity selection factors and structures

Ethical Leadership in Organizations and Society

(Maximum Limit: 1500 words total for all parts)

Your Response

1A (200-word limit) - What several factors must business professionals consider when choosing what form of entity is best?

There are different forms of business organization including sole proprietorships, partnerships, and corporations. One of the most important decisions business professionals must consider is an appropriate form of entity for their business. This is attributable to the existence of different legal forms of business organization. When making such decision, there are several factors that they need to consider. First, these professionals should consider the complexities of the entity and compliance with relevant laws and regulations. Secondly, they should consider the number of owners and their level of engagement in business operations. The third factor is the capital structure of the business and capability to generate necessary capital. Fourth, business professionals should consider the industry the business will operate it and liability to different stakeholders. Fifth, tax consideration is an important factor given its impact on business operations.

1B - What are the advantages and disadvantages of each form?

Each form of business entity has advantages and disadvantages. The advantages of sole proprietorship include ease of organizing and operating the business, minimal government regulations, and less operational complexities. It disadvantages include exposure of the owner\'s personal assets to business risks and increased personal liability for debts. The advantages of partnerships include easy and inexpensive, shared financial commitment, partnership benefits for workers, and complementary skills (U.S. Small Business Administration, n.d.). In contrast the demerits are disagreements among partners, joint and individual liability, and shared profits. Corporations are advantageous on the premise that there no limitations to ownership, use of multiple kinds of stocks, and ease to offset income with losses. The disadvantages are ineffectiveness to small and medium businesses and lack of low of corporate losses to shareholders. The advantages of S. corporations include no subjection to double taxation and earnings are not subjected to the taxes of self-employment. The disadvantages are limited number of shareholders, limited class of stock, and likelihood of entity-level taxation. The merits of LLC\'s include no subjection to double taxation, sharing income and losses, and distribution of assets without tax implications. The disadvantages are limitations on the kinds of assets and taxation debts despite whether distributions are made to members.

1C - Which one form would you choose and why (in terms of your specific constraints and objectives)? Which form would be your \"second-best\" recommendation and why? You must address at least two specific individual constraints and objectives that apply to your real life and how they impact your business selection.

Given my limited knowledge in hyperloop technology and business, the form of business entity I would choose is Limited Partnership. In this case I would engage a partner with more understanding of the business while still reserving a significant portion of management decisions. The objectives of choosing Limited Partnership include having more time to learn and understand the business and maintaining managerial control over major business decisions.

My second-best option would be General Partnership since it will also give an opportunity to incorporate experts in this technology while managing other aspects of the business. This option would also be ideal given my limited knowledge about this technology and business. The objectives would be to maintain some aspects of management duties and share profits and liability.

1D - What is your focus when you start a new business venture and why is it important to gain a basic understanding of the available choices of business forms at the outset?

My focus when starting a business venture such as the hyperloop business is to increase revenue while lessening operational costs in order to maximize profit (Lau & Johnson, 2012). While a business is usually formulated to provide products and/or services that meet customers\' needs, the end goal for the business owner is making profits. Therefore, my focus in starting a new business venture is to maximize profits through increasing revenue.

To achieve this goal, it\'s important to have basic understanding of the available options of business forms. An understanding of the available options helps in focusing on business fundamentals in order to maximize profits while meeting customers\' needs and demands (Lau & Johnson, 2012). In addition, such an understanding helps in choosing a suitable form for the business in its respective industry. One of the most important factors for business success is a suitable business form, which is identified through an understanding of the available options.

Question II Section

(Maximum Limit: 1000 words total for all parts)

Your Response

2A - (100-word limit) What are the duties and obligations of a corporate officer in general and did Martin Shkreli conform to those duties and obligations?

Corporate officers are crucial towards effective functioning on a business organization. The duties and obligations of a corporate officer include managing daily operations of the business, administrative duties, ensuring business decisions are made in consideration of its stakeholders. While Martin Shkreli acted in the best interest to enhance the company\'s bottom line, he did not conform to the duties and obligations of a corporate officer. This is primarily because his decision to increase the price of the drug was not in consideration of one of its major stakeholders i.e. customers.

2B - For the directors of a company, what are their obligations? To whom are they loyal? Is a director an agent of any entity? Have the Directors of Valeant Pharmaceuticals carried out their obligations appropriately regarding forcing former CEO Michael Pearson to resign? Why or why not? Under the business judgment rule are the Directors of Valeant immune from legal action? Why or why not?

Company directors are loyal to the business entity since they act as its agent. Some of the obligations of directors include acting in a manner that\'s beneficial to members, make decisions for the good of the firm, ensuring compliance with company rules and legal requirements, and foster relationships with all stakeholders including customers. By forcing former CEO Michael Pearson to resign, the Directors of Valeant Pharmaceuticals carried out their obligations since his decisions did not contribute to good relations with customers and breached legal requirements. Under the business judgment rule, these directors are immune to legal action because they made their decision in good faith and reasonable competence and wisdom. By exercising informed judgment, the directors dealt with inherent uncertainties in an effective manner by forcing the CEO to resign (Bagley, 2008).

2C - What you think of the leadership and management skills of George Scott, the founder and former president of Educational Housing Services\' board of directors? Did he serve the nonprofit well (as per best practices and business theory), or not?

Support your response with an explanation of the decision -making process that you would personally apply if you were an officer or board of director of a non-profit. How would your decision-making process differ from that of a for profit officer and/or director? Search from the U.S. Small Business Administration ( provided link https://www.sba.gov/content/partnership), what content to you find related to Non-Profit Success?

George Scott did not have good leadership and management skills because he was seemingly driven by selfish interests. He did not serve the nonprofit well because he was interested in his own personal benefit rather than the good of the organization. As a board of director of a nonprofit, I would make decisions based on whether it helps achieve organizational goals and serve the community. Unlike a for-profit, business decisions in nonprofit do not focus on profits but achievement of organizational goals/objectives. The decision-making process would entail incorporating other members of the board and strictly focusing on organizational goals (U.S. Small Business Administration, n.d.).

2D - You start to wonder, is this emissions example a \"right v. right\" type of dilemma as described by Week 3 Required Reading and Multimedia Badaracco (2002)? Why or why not? Explain.

Required Multimedia:

Badaracco, J.L., Jr. (2002). Defining moments: A framework for moral decisions. Faculty Seminar Series. Harvard Business School. (B) PURL: http://ezproxy.umuc.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=fsv&AN=2861c&loginpage=login.asp&site=ehost-live&scope=sitehttp://ezproxy.umuc.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=fsv&AN=2861c&loginpage=login.asp&site=ehost-live&scope=site (Scan to video number 36)

Note: alternative Badaracco link:

http://ezproxy.umuc.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=fsv&AN=2861c&site=ehost-live&scope=site (Scan to video number 36).

This emission is a right v. right kind of dilemma, which is common in today\'s businesses. This is primarily because Volkswagen \"got their hands dirty\" by faking diesel emission tests in order to maximize profits from sales of its vehicles. Badaracco (2002) states that right v. right dilemmas occur when managers have to make tough decisions regarding important business virtues like responsibility, fairness, honesty, and objectivity. The company was faced with a tough decision and acted in dishonesty by faking diesel emission tests.

2E - You determine that you are proud to be earning your MBA! You want to be able to persuade the general public that businesses (and their leaders) are a positive socially responsible part of modern society. So, you assume the role of the head of Volkswagen. Analyze the emissions issues using Badaracco\'s \"right v. right\" framework from his Defining Moments video (2002). Be sure to support your views with ethical theory and principles, and include all steps and tests in your response.

Despite some illegal business practices and incidents that have occurred in the recent past, businesses and their leaders are still a positive socially-responsible part of today\'s society. In its emissions dilemma, Volkswagen failed in some aspects of the right v. right framework. The firm did not make a decision for the most good and least harm by faking its emissions tests. In this case, the company failed to act based on the Utilitarian Ethical Theory, which stipulates that decisions should be make for the greater good of all (Hunt & Hansen, 2007). Secondly, the management did not examine the best alternative that serves the rights of others (Christensen, 2010) including customers because faking the tests endangered the lives of customers. Additionally, the decision was not consistent with basic values and commitments of Volkswagen. The other way with which the company failed was by adopting a course of action that was not practical in today\'s world that is characterized by concerns regarding greenhouse gases emissions.

2F - Was the behavior of Turing Pharmaceuticals, Valeant Pharmaceuticals or Educational Housing Services (including that of their former CEOs and Directors) ethical? Analyze this question for one company using Bagley\'s Ethical Leader\'s Decision Tree (https://hbr.org/2003/02/the-ethical-leaders-decision-tree) (Bagley, 2003)

The behaviors of these for-profit and nonprofit organizations and their decisions of their former CEOs and Directors were not ethical. According to Bagley (2003), a decision or behavior is considered ethical if it contributes to the greater good and least harm on all shareholders. While these organizations focused on maximizing shareholder value and profits, they adopted practices that harmed their customers, which implies that their behaviors were unethical.

Question III Section

(Maximum Limit: 750 words total for all parts)

Your Response

3A - What is globalization? You worry about what you should do to protect yourself from risks in the event of a dispute in regards to the Cuban hyperloop business venture(s). What do you advise yourself in the context of globalization? (100-word limit)

Globalization is generally defined as increased interaction and integration of people, businesses, and governments of different countries across the globe. From a business perspective, it\'s the shift towards an integrated global economy through emergence of business opportunities brought by increased interaction of people from different countries (Carpenter & Dunung, 2012). To protect myself from risks in the Cuban hyperloop business venture(s), I will examine the various challenges in this environment, identify probable business partners, examine market potential for the firm, and implement suitable business practices.

3B - What are location advantages? You have been \"visualizing success,\" yet, you are uneasy about the political situation in Cuba (based on simply your \"feelings\" and no specific facts). You are concerned that your hyperloop business assets could be the subject of expropriation or losses due to any future civil unrest. What advice do you give yourself to address this possibility while maintaining any location advantages? (100-word limit)

Despite the political situation in Cuba and its probable impacts on business operations and profitability, there are some location advantages of doing business there. These location advantages include relatively cheap labor, improved access to raw materials, huge market potential, and huge supplier and customer base. To maintain location advantages and protect the business against impacts of any civil unrest, I will examine Cuba\'s political and legal framework, take a calculated strategy for entering the country, and buy political risk insurance for the company\'s operations.

3C - What is a multidomestic view? How does it relate to what specific types of provisions do you recommend should be written into the Cuban hyperloop business contracts to limit any legal disputes that might arise between your U.S. based company and any local vendors, banks and clients in Cuba?

A multidomestic view is a business strategy in which decision-making authority is decentralized to local business units in every country in order to them to generate products/services that suit the local markets (Carpenter & Dunung, 2012). For the Cuban hyperloop business contracts, I would recommend that provisions on the legal requirements of the country, market conditions, and economic factors are included in the contracts.

3D - How would these provisions favor the interests of your company?

The provisions will favor the interests of the company by ensuring products and/or services are customized to the local markets to maximize profits. Additionally, the provisions will help protect the company from any legal disputes or failure of compliance with local laws.

3E - If you include the provisions you recommend in part (C) in the contracts, does that mean your company will never have to go to court in another country or become familiar with any foreign laws in connection with the business deals in Cuba?

The inclusion of recommended provisions in the business contracts does not imply that the business will never have to go to court in another country. This is primarily because every country has a different legal framework and system, which may not be similar to Cuba. Secondly, the company will still need to become familiar with foreign laws in connection with the business deals in Cuba to avoid any legal dispute and enhance customization of products and/or services.

3F - What could happen if the provisions you specified in part (C) were not part of the contract?

If these provisions were not part of the contract, the company is likely to experience numerous legal disputes and unprecedented challenges in conducting its operations in an effective manner.

3G - What do you do to protect your interests (to avoid the risk of paying upfront and then the office furnishings never being delivered to your Cuban office)? What about ensuring that the delivered items are properly installed in the Cuban location?

To protect my interests, I would first ensure that I pay no deposit because reputable businesses don\'t usually ask for upfront payments. Secondly, I will seek to sign a complete contract with the company based on legal requirements. Third, I will insist to meet a representative of the company who will also conduct a review of the needed furnishings for my Cuban office and provide recommendations. The other measure I would undertake is to obtain quotations/estimates from other companies and compare prices as I do a background check on this individual. Finally, I will commit to make payments only after the furniture is picked up and installed in the Cuban office.