You have a brilliant new business idea. But what is keeping you from executing it? Maybe you are wondering what steps for company formation to take to form a viable business and ensure it abides by all laws. Also, you want a protected business to ensure growth and dominance in your industry.
This article covers five things that will help you in company formation. Every step has significance, and you cannot ignore any of them. You want to spend the least amount and shortest time to get your company up and running. That allows you to begin operations sooner and gain a competitive edge for growth.
Below are five things to make your company formation journey a breeze.
1. Have a Plan
You have many steps to follow to get your plan into an establishment. A business plan ensures you do not overlook any crucial step and helps you stay organized. Understand what you intend to achieve and what you need to make the journey feasible. Can you do without some steps, or are there things you can postpone or do earlier?
Company formation involves various steps, like appointing directors, drafting the company laws, raising capital through shares, setting up an office, and registering the business. All these steps will take some time. For instance, you cannot incorporate the company without meeting and signing all the required documents. Also, all the members and shareholders must submit photocopies of their IDs and signatures.
Another area you must consider is how you intend to be tax compliant and make the best of your finances. Factor in the accounting software, inventory systems, and payment method you will use for the business. All these systems and steps involve money and time. Employees also need training, and you must have a plan for that too.
2. Understand All Legal Requirements
Are your plans within the state’s laws or of the country you intend to set up the business? For instance, you might be starting a new business in a foreign country as a non-resident. You must understand the regulations and restrictions of that country, such as the minimum capital you need to raise from shareholders.
Also, every business model has unique regulations to govern their operations. A retail shop does not need everything you would have in a manufacturing industry or a financial services company. Limits apply to the number of employees you can hire and how much revenue you need before paying taxes.
Employment laws and labor regulations are also part of company formation. If you plan to hire employees, you must understand their rights and the laws that govern them. Your workers have a right to join associations and unions. The law dictates that you allow them to do that. Picketing is also an inalienable right. Ensure the company adheres to such regulations.
Compensation and benefits are other areas of the law that you must understand. You must know what is acceptable and when to offer them to employees. Also, tax laws, such as deductions, do not have standard rules. Every country sets its regulations and has specific areas you must note.
3. Have a Realistic Budget
It is easy to get carried away by the enthusiasm of starting a business. But the amount you need for company formation should be realistic, depending on the nature of your business. MSMEs may have fewer regulations, but they need some capital to operate. Do you intend to import goods for resale? Estimate how much it would cost to fill a container, transportation costs, levies and taxes, and storage services.
Also, the cost of office space depends on the country you are setting up the business. It is easy to get a decent office space in some countries at low rates, while they are expensive in other nations. Using a virtual office is acceptable in many countries. But your business activities will determine if that option is viable. For instance, a manufacturing industry will require a physical location for production.
Your budget must also include employee salaries for at least six months. Other expenses, like uniforms, allowance, and benefits, should appear in the budget. Getting an insurance policy is also mandatory in various jurisdictions. Get one for your business and employees if you sell expensive items and your employees get exposed to dangers.
4. Choose a Structure
Not all businesses are the same. Various business structures help the government and the public understand what type of business operates in their jurisdiction. Examples include limited liability companies, sole proprietorships, partnerships, and cooperatives. You must identify the type of formation you need as a new investor. Subclasses of companies include LLCs, PLCs, and S-corps.
Your preferred structure will affect your operations, responsibilities, and the level of taxation you must pay. Also, that determines if you need a partner or several directors to run the business. Professional advice is essential in understanding the business structures available.
5. Acquire the Required Documents
You cannot set up a business without registering it. A company must have a certificate of incorporation, articles of association, and a memorandum of understanding. These documents are essential to open a corporate bank account. Also, all operations must happen under the registered name. The appointed company secretary and directors must sign everything before being established.
A registered company must not have a name similar to another firm. Business name registration is mandatory before you file your company registration request. Use your country’s website to check if the name is available or already taken. A company can also register a trademark to protect its products or services from its business to prevent illegal duplication or counterfeiting.
Finally, you must obtain the necessary permits to operate in your jurisdiction. Do not open the business until you have the licenses or permits. Also, depending on the business model, you may require more certification. For instance, food industries must get all health certifications before they commence operations. Get the environmental protection and other licenses necessary to keep your business running.
Summing Up Company Formation
Setting up a new company is a milestone that can bring joy to investors. But it requires that you prepare adequately to avoid costly mistakes. Also, research more about the laws regulating your operations in your jurisdiction. Engage a professional to help you understand the process better. Also, obtain all the documents necessary for your company’s operations and permits before opening the business.