CHAPTER 7
PREPARING A PROPER
ETHICAL AND LEGAL
FOUNDATION
MEMBER
01 Nguyen Le Ngoc Khanh
02 Tran Huynh Phuong Nghi
03 Nguyen Thi Kim Dung
04 Le Ngoc Kha Thy
05 Huynh Nghien Bich
06 Nguyen Thi Thuy Linh
01 INTRODUCTION
• Purpose of the Report
• Learning Objectives
TABLE OF
02 MAIN CONTENT
CONTENTS
• Establishing a Strong Ethical Culture
for a Firm
• Dealing Effectively with Legal Issues
• Obtaining Business Licenses and
Permits
03 CONCLUSION
• Choosing a Form of Business
Organization
PURPOSE OF
THE REPORT
Billy Goat Ice Cream is moving
forward on a firm legal foundation.
They’re now in over 100 stores,
including a small number of Whole
Foods Markets. . They just inked
an agreement with Walmart to be
in 67 Walmart stores in Oklahoma
and parts of Missouri and Kansas.
If they are fortunate enough to go
nationwide with Walmart, their
business will progress to an
LEAD BY EXAMPLE
• Discuss the actions founders can take to establish a
strong ethical culture in their entrepreneurial ventures.
• Describe actions taken in new firms to effectively deal
with legal issues.
• Provide an overview of the business licenses and
permits that a start-up must obtain before it begins
operating.
• Identify and describe the different forms of
LEAD BY EXAMPLE
Leading by example is the most
important thing that any entrepreneur, Employees also have responsibilities.
manager, or supervisor can do to build The most important things that
a strong ethical culture in their employees can do to support a
organization. In strong ethical strong ethical culture in an
cultures, entrepreneurs, managers, organization are to:
and supervisors: • Consider ethics in making
• Communicate ethics as a priority decisions
• Set a good example of ethical • Talk about ethics in the work
conduct
(they) do
• Keep commitments
• Set a good example of ethical
• Provide information about what is
conduct
going on
ESTABLISH A CODE OF CONDUCT
A code of conduct (or code of ethics) is a formal statement of an
organization's values on certain ethical and social issues. The advantage of
having a code of conduct is that it provides specific guidance to
entrepreneurs, managers, and employees regarding expectations of them in
terms of ethical behavior. In practice, some code of conduct are very
specific, like Google's. Other codes of conduct set out more general
principles about an organization's beliefs on issues such as product quality,
respect for customers and employees, and social responsibility. In all cases
though, codes of conduct are intended to influence people to behave in ways
The Company
that must ensure
are consistent that hiring,
with a firm's ethical promotion
[Link] compensation is based
on merit and performance, not on the gender or race of an individual.
IMPLEMENT AN ETHICS TRAINING
PROGRAM
Firms also use ethics training programs to promote ethical behavior. Ethics
training programs teach business ethics to help employees deal with ethical
dilemmas and improve their overall ethical conduct. An ethical dilemma is a
situation that involves doing something that is beneficial to oneself or the
organization but may be unethical. Most employees confront ethical
dilemmas at some point during their careers. Ethics training programs can
be provided by outside vendors or can be developed in-house.
In summary, ethical cultures are built through both strong ethical leadership
and administrative tools that reinforce and govern ethical behavior in
organizations. Building an ethical culture motivates employees to behave
ethically and responsibly from the inside and out, rather than relying strictly
on laws that motivate behavior from the outside in.
DEALING 01 Choosing an Attorney for a Firm.
EFFECTIVELY WITH We don't just create campaigns; we craft
LEGAL ISSUES strategies. Our team conducts in-depth
• Those leading entrepreneurial market research to understand your industry,
ventures can also expect to identify opportunities, and develop a
encounter a number of important customized roadmap.
legal issues when launching and 02 Drafting a Founders’ Agreement.
then, at least initially, operating
their firm.
From social media and content marketing to
SEO and paid advertising, we leverage a
• A financial institution ensures that diverse set of channels to maximize your
all customer transactions are brand's visibility.
recorded in accordance with legal 03 Avoiding Legal Disputes
regulations Including careful
checking of large transactions To
Our campaigns are backed by analytics and
prevent money laundering. data-driven insights. By constantly
monitoring performance metrics, we fine-tune
• The ethical and legal foundation
strategies in real-time, ensuring optimal
here helps to ensure the
OBJECTIVES
Drafting a
Choosing an Avoiding Legal
Founders’
Attorney for a Firm Disputes
• Agreement
Founders' agreement:
• Select an attorney defines the equity split,
• Meet All Contractual
compensation for
early: contributions, and the Obligations
• Start-up experience required time founders must • Avoid
• Intellectual property stay for their shares to vest.
Undercapitalization
• Buyback clause: legally
expertise • Get Everything in
obligates departing founders
• Field-specific to sell to the remaining Writing
expertise founders their interest in the • Set Standards
firm if the remaining
founders are interested.
OBTAINING Federal Licenses and Permits
BUSINESS • Most businesses don't need a federal license, though some
do. Surprisingly, even simple businesses may need more
LICENSES AND licenses and permits than expected.
PERMITS • For example, drug manufacturers must obtain a license from
Depending on the nature of the FDA to ensure product safety and effectiveness, which
the business, licenses and involves filing paperwork and facility inspections.
State Licenses and Permits
permits may be required at
the federal, state and/or • In most states, there are three different categories of
local levels. licenses and permits that you may need to operate a
business: Business Registration Requirements, Sales
Tax Permits, Professional and Occupational Licenses and
Business leaders can
Permits
determine necessary Local Licenses and Permits
licenses and permits by:
• Permits to operate a certain type of business: child
• asking someone running a
care, barber shops and salons, automotive repair, and
similar business hotels and motels.
• contacting the secretary • Permits for engaging in certain types of activities:
CHOOSING A FORM OF BUSINESS
ORGANIZATION
There are factors critical in
Choose a form of
selecting a form of business
legal entity:
organization:
• Sole proprietorships • The cost of setting up and
• Partnerships maintaining the legal form
• The extent to which personal
• Corporations
assets can be shielded from the
• Limited liability
liabilities of the business
companies • Tax considerations
• The number and types of
investors involved
SOLE PROPRIETORSHIP
ADVANTAGES OF A DISADVANTAGE OF
SOLE A SOLE PROPRIETORSHIP
PROPRIETORSHIP
• Creating one is easy and
• Liability on the owner's part is
inexpensive.
unlimited.
• The owner maintains
• The business relies on the skills
complete control of the
and abilities of a single owner to
business and retains all the
be successful.
profits.
• Raising capital can be difficult.
• Business losses can be
• The business ends at the
deducted against the sole
owner's death or loss of interest
proprietor's other sources of
in the business.
GENERAL PARTNERSHIP
ADVANTAGES OF A DISADVANTAGES OF A
GENERAL GENERAL PARTNERSHIP
• PARTNERSHIP
Creating one is relatively easy • Liability on the part of each general
and inexpensive compared to a partner is unlimited.
corporation or limited liability • The business relies on the skills and
company. abilities of a fixed number of
• The skills and abilities of more partners.
than one individual are available • Raising capital can be difficult.
to the firm. • Because decision making among the
• Having more than one owner may partners is shared, disagreements
make it easier to raise funds. can occur.
• The business ends at the death or
• Business losses can be deducted
withdrawal of one partner unless
against the partner's other
LIMITED PARTNERSHIP
A limited partnership is a modified
form of a general partnership. A
Two friends decide to open a
limited partnership includes two
coffee shop together, and
classes of owners:
they can sign a partnership
• general partners
agreement to divide profits
• limited partners
and responsibilities, as well
as stipulate how decisions are
A limited partnership is usually
made in the business.
formed to raise money or to spread
out the risk of a venture without
forming a corporation.
C CORPORATIONS
Advantages of a C Disadvantages of a C
• Owners are
Corporation
liable only for the debts corporation
and obligations of the corporation • Setting up and maintaining one is
up to the amount of their more difficult than for a sole
investment. proprietorship or a partnership.
• The mechanics of raising capital is • Business losses cannot be
easier. deducted against the
• No restrictions exist on the number shareholders' other sources of
of shareholders, which differs from income.
subchapter S corporations. • Income subject to double taxation,
• Stock is liquid if traded on a major meaning that it is taxed at the
stock exchange. corporate and the shareholder
• The ability to share stock with levels.
employees trough stock option or • Small shareholders typically have
other incentive plans can be a little voice in the management of
There are strict standards that a business must
SUBCHAPTER meet to qualify for status as a subchapter S
S CORPORATION corporation:
• The business cannot be a subsidiary of
another corporation.
• A subchapter S corporation
• The shareholders must be U.S. citizens.
combines the advantages of
• It can have only one class of stock issued and
a partnership and a C
outstanding (either preferred stock or common
corporation.
• It is similar to a partnership stock).
in that the profits and • It can have no more than 100 members.
losses of the business are •The primary disadvantages
All shareholders of ato
must agree subchapter
have the S
not subject to double corporation as
corporation arearestrictions
subchapterinSqualifying,
corporation.
taxation. expenses involved with setting up and
• The subchapter S maintaining the subchapter S status. If a
corporation does not pay subchapter S corporation wants to include more
taxes; instead, the profits than 100 shareholders, it must convert to a C
LIMITED LIABILITY COMPANY
Advantages of a Limited Liability Disadvantage of a Limited Liability
Company Company
• Members are liable for the debts • Setting up and maintaining one is
and obligations of the business more difficult and expensive.
only up to the amount of their • Tax accounting can be complicated.
investment. • Some of the regulations governing
• The number of shareholders is LLCs vary by state.
• Because LLCs are a relatively new type
unlimited.
of business entity, there is not as
• An LLC can elect to be taxed as a
much legal precedent available for
sole proprietor, partnership, S
owners to anticipate how legal
corporation, or corporation, disputes might affect their businesses.
providing much flexibility. • Some states levy a franchise tax on
CONCLUSION
Establishing a strong ethical culture
To successfully lead by example
is the most important action that
and build an ethical culture.
founders of entrepreneurial ventures
can take.
Three critical ways to achieve Key steps include:
this are: • Leaders making ethics a part
• Leading by example of daily conversations and
• Establishing a code of decisions.
conduct • Supervisors emphasizing
(or code of ethics) integrity in interactions with
• Implementing an ethics employees.
THANK YOU