FUNDAMENTALS OF BUSINESS FORMATION: HOW TO KNOW THE RIGHT STRUCTURE FOR YOUR BUSINES

The formation of a business is no mean feat. It involves rigorous procedures and comprises different stages ranging from the planning stage to the final start-up stage.
Whether it is a sole proprietorship or a company, the process of business registration requires a great deal of planning and creativity to ensure its stability and longevity.

No business that lacks adequate planning or foundation will be able to stand the test of time, it will only be a matter of time until it fails. Hence it is important to engage in adequate and thorough planning before launching into any business.

What Does the Formation of a Business Entail?

The formation of a business has to do with the creation of a business from just an idea into an enterprise. It involves different processes and stages. These processes are:

1. Ascertain Your Business Idea:

Determine the idea of your proposed business, and finesse it based on your strengths, what you love to do and what is obtainable in the market you intend to venture into.

2. Conduct a Thorough Market Research:

Get to know the market you wish to venture into, how much chances you have of succeeding in the industry. You also need to conduct a thorough study of how competitive the industry is and who your competitors are. This will make you prepared and give you a head-start and an insight into the dynamics of the market.

3. Draft Your Business Plan:

A business plan serves as a road map for the establishment and running of a business. It contains a comprehensive list of all the essential particulars of a business such as the financial plan, marketing plan, business structure, finances, etc. 

4. Determine the Appropriate Business Structure:

It is essential to determine the structure of the proposed business as this will influence how it will function, the impact of liability on the owners, and the registration process.

5. Select a Business Name:

Choosing a business name helps preserve your brand identity and differentiate you from competitors. The goal is choose a name that is simple enough to be remembered by prospects and unique enough to stand out.

6. Determine the Location of Your Business:

Whether you choose to run a brick and mortar business or a virtual one, your location is very essential and has a lot of impact on your business. Choose the most strategic and convenient location where you will be well positioned to achieve your business goals.

7. organise Your Finances:

Determine the total start-up cost required to kick-start and run the business, including the cost of getting assets, labour and other resources. Where the finances are not currently available, stipulate the method through which the initial capital can be obtained.

8. Register Your Business and obtain the Requisite Licenses and Permits:

Every business needs to be registered to ensure compliance with the relevant legal requirements and give it a good standing in the eyes of the law. Registering a business and obtaining the required permits gives it the legal backing to function properly without unnecessary obstructions.

9. Create a Business Account:

opening a separate account for the financial resources of the business helps in the effective allocation of funds and also fosters accountability.

How to Know the Right Structure for Your Business

There are different kinds of business organisations, and they include:

1.Corporation:

This form of business organization gives the business a legal personality distinct from its shareholders Where it is a limited liability corporation, the shareholders are absolved of any liability beyond their shares or investments. This form of business structure encourages investments, risk taking and current business trends.

2. Partnership:

This is a form of business that is run by two or more persons working together to achieve a common goal. Partnerships are usually co-owned by two or more persons having equal or unequal investments in the business.

3. Sole Proprietorship:

This can also be known as a one-man business enterprise. In this form of business structure, the sole proprietor is the sole risk bearer and financier of the business, hence liabilities incurred by the business are usually attached to their personal assets.

To determine the right structure for any business, the following factors must be considered:

1. The nature of the business

2. The mode of financing the business or the available capital

3. The number of owners or investors

4. The business plan and model.

6. The purpose of the business.

The best way to ascertain the right structure for a business is to conduct a thorough study of the different business structures and forms. It also helps, to seek the assistance of a business consultant to guide you through the business structure that best suits the plan for your proposed business.

Conclusion

Knowing the right business structure is one of the fundamentals of business formation. The structure chosen for a business affects the overall performance of a business. Seeking the assistance of a business consultant will make your business formation journey an easy ride.

At In-Charge Solutions Limited, we pride ourselves in our ability to provide solutions to diverse business needs. our team of consultants is ever ready to assist you to create that business of your dreams. Contact us today and watch your idea morph into a formidable reality.