Know what it takes to run a commercial concern
There
is a great deal of theory, and even more practice, involved
in running a commercial concern, and the newcomer to this area
will need help, advice and a slice of luck if he has to succeed.
In recent years, there has been an increase in the number of
trading entities, with the majority of the growth being in micro
and small firms, where the survival rate for new businesses has
improved with more start-ups and higher levels of self-employment.
But it
has also been noticed that over 40 per cent of all businesses
fail in their first three years, with the major reason
being poor preparation and planning. If you’re planning to
start a new business it very important to establish a business
mission, and to carry out a personal analysis or audit to see
if you’ve the qualities to make it a success. Following on
from the mission, comes a business plan which may be as short
as six
months or may look 10 years ahead. Most consider the period up
to three to five years, but concentrate on the specifics of the
next 12 months or so. The best thing to do before starting your
own business is to work in the similar field for a couple of
years and know industry inside-out.
To start with, keep things as simple as possible. It is important
to keep business and private matters separate, and to keep and
produce the proper records when required to do so. However, here
are various types of business options you can go for: Sole traders are entitled to all profits and are responsible
for all losses. They operate under their own name or a business
name. A proper business records and accounts are mandatory,
but they need not submit them for scrutiny to anyone, except
the
tax and legal authorities.
A partnership is an arrangement whereby a number of people effectively
agree to operate as a sole trader. They may have a formal deed
of partnership, or simply split the profits or losses equally.
Income is often divided according to investment made by individuals.
A limited liability partnership has to disclose annual accounts
and returns. Members have limited liability in the event of a
loss (although the partnership will be fully liable), but they
will be taxed as if it was an ordinary partnership. A limited company simply
means that the members of the company (the shareholders)
are only liable for the debts of the company
up to the amount unpaid on any share(s) they have bought.
There are a number of rules and regulations the limited company
has
to obey, and it also has to disclose financial and some business
information to Companies House. The members cannot be held
responsible for its debts unless a court decides there has
been negligence
or malpractice.
It
is also possible to have private unlimited companies (very
rare) and private limited companies limited
by guarantee (usually
charities), where members’ liability is limited to the
amount they have agreed to contribute to the company’s
assets if it is wound up. Public limited companies have the
designation plc (or PLC) after their names; this means that
shares can be
sold to members of the general public. A
franchise is now a common way of starting a business, and is
basically one person copying another’s
proven business and receiving support from them, in exchange
for an up-front
payment (the franchise fee) and ongoing fees (royalties).
It is an option for those who have some money to invest and
who
want the independence of self-employment coupled with the
support of the franchisor. Franchising is more likely to succeed
than
other forms of business start-up. |
