Legal Procedures to Follow Before Starting a Business
After conducting research and planning to start a business you should also observe legal procedures required when starting a business. If you are starting a small business you should start operate as a sole proprietor. The advantage of starting and operating as a sole proprietor; it is easy to run the businesses, it is convenient and easy to make decisions because you do not requires the consent of another person before making a decision, small amount of capital needed due to the lower cost of operating a small business, the business can be operated with the help of family members such as wife, husband, children and relatives. The family resources such as buildings and furniture can be used for office uses. The disadvantages of operating business as a sole proprietor are: - When you start a business as a sole trader you will not be free as you will be self employed, working for yourself, this can be time consuming and if you become sick or go on leave the business will be closed, failure to expand your business due to limitations of capital, unlimited liability, in case of bankruptcy there is no limited liability, this means liability of the business can extend to your personal property not related to the business.
To avoid the problems I mentioned above you can connect with other people to do business in partnership. Benefits of doing business in partnership are: Getting the opportunity to raise capital other entrepreneurs willing to provide capital into the business, increased knowledge due to introduction of partners with new ideas and professional expertise where needed. Disadvantages of conducting business through the partnership are:- Unlimited liability whereby in case of liquidation the liabilities goes beyond your business up to your personal assets; Any partners misappropriation may can bring in a liability to all partners. It is important to check the background of the partners before starting a partnership business in order to satisfy yourself if they are honest. Also there must be a written partnership deed witnessed by a lawyer in order to protect yourself in case of any disputes, one partners death may cause a dissolution of a partnership, Also misunderstanding of the partners may result into dissolution of the partnership.
As the business start to grow to medium size you should register your business into a limited liability company. When you Operate as a company you have the following advantages; it separates the responsibilities of owners and the company, when the company is registered it becomes a separate legal entity, This system separates responsibilities between management and owners of the company, the company's has a limited liability clause which means incase of liquidation the liability is limited to the extent of shares invested into the business, the company offers the opportunity to increase capital whereby they can invite people to acquire shares on the stock markets. This system is suitable for a large business because it provides opportunity for business expansion and continuation of business even if some of the owners die or abandon the company.
The legal procedures to be observed before establishing a business are: -
To establish an office.
Obtaining a business license
Registering with Tax authority as a Tax payer and obtain a TIN taxpayer identification number.
To fulfill other legal condition for example if you want to start a building contractor business you must be registered by a Contractors registration Board.
If you start a medium or large business you should observe the laws of the country where you operating. It is not advisable to run a business without following the laws of the country.
To avoid the problems I mentioned above you can connect with other people to do business in partnership. Benefits of doing business in partnership are: Getting the opportunity to raise capital other entrepreneurs willing to provide capital into the business, increased knowledge due to introduction of partners with new ideas and professional expertise where needed. Disadvantages of conducting business through the partnership are:- Unlimited liability whereby in case of liquidation the liabilities goes beyond your business up to your personal assets; Any partners misappropriation may can bring in a liability to all partners. It is important to check the background of the partners before starting a partnership business in order to satisfy yourself if they are honest. Also there must be a written partnership deed witnessed by a lawyer in order to protect yourself in case of any disputes, one partners death may cause a dissolution of a partnership, Also misunderstanding of the partners may result into dissolution of the partnership.
As the business start to grow to medium size you should register your business into a limited liability company. When you Operate as a company you have the following advantages; it separates the responsibilities of owners and the company, when the company is registered it becomes a separate legal entity, This system separates responsibilities between management and owners of the company, the company's has a limited liability clause which means incase of liquidation the liability is limited to the extent of shares invested into the business, the company offers the opportunity to increase capital whereby they can invite people to acquire shares on the stock markets. This system is suitable for a large business because it provides opportunity for business expansion and continuation of business even if some of the owners die or abandon the company.
The legal procedures to be observed before establishing a business are: -
To establish an office.
Obtaining a business license
Registering with Tax authority as a Tax payer and obtain a TIN taxpayer identification number.
To fulfill other legal condition for example if you want to start a building contractor business you must be registered by a Contractors registration Board.
If you start a medium or large business you should observe the laws of the country where you operating. It is not advisable to run a business without following the laws of the country.