Wednesday, February 9, 2011

Creating Successful Business Plans (Pre Business Plans Questions)

1(d)Pre Business Plan Questions

What structure will the business idea take ? In other words what legal vehicle will you choose to run the affairs of your business idea.

These are several I have listed some are American and some are those we use in African Countries ( the Law is more or less the same wherever you are ,regardless of different names or titles) :-

- Sole Proprieter :-here you are personally liable for all the companies assets and debts ( liabilites ) What this means is you're exposed if the business fails you must personally pay back every cent or penny .

-General Partnership (USA format) :- you partner with some one to run the business . Here you and your partner are responsible for all assets and liabilities . Should you go bank rupt you creditors will sue you and your partner to recover thier money.If you make profits you equally share them .

-Partnership ( African Format -Roman Dutch law ) :-This is the same as the one mentioned above and shares the same characteristics as in General Partnership. Most Law firms ,Accounting Firms and Medical Practices are structured in this format.

-Limited Partnership(USA format): -here you partner with several partners but the other partnesr have limited liability and interest ( right to profits ),At least one Generel Partner must exist within such a company .

-Limited Liabilty Company(USA format) :- Here the company is structured in such a way that th members have limited (or reduced exposure to) liabilty.This futher branches out into two formats that is -'C' Class Corporation -this is a corporation that affords you limited (or less exposure to) personal liabilty and in some instances no personal liabilty. However ,the company is required to pay Corporate tax and members arealso taxed personally.'S' Class Corporation -this is corporation is the same as a 'C' class the only difference is that S class are taxed at a persoal level .

Private Limited Company

According to Zimbabwe Company law ( Based on Roman-Dutch Law) -which I'm fimiliar with, a
when you apply for registration of a company the first stage is to involves ensuring that the chosen name for the company does not sound or appear like another as this may affect already registered entities . This means that the first stage involves a name search.
Upon satisfying the Registrar of Companies that your chosen company names( you will provide 5 options ) are unique, the Registrar will select one as the acceptable name .
The second stage involves submitting a Memorandum of Association this is a legal document which explains what your company sets out to doand an Articles of Association which spells out that the who members of the named company are ,when they met to form a company and what levels of exposure they have based on the shares they hold in the Private Company. In simplified terms the extent of members liabilty is limited by the shares they hold . The best arragement in this case is for members to hold one paid up share as the least of their exposure to liabilty.

Thereby,qualifying the term Limited Liabilty . The comlexity of such matters is best left to Corporate Legal experts .In that country that is how a company is incorporated and upon satisfying all the Registrar of Companies ' requirements ( and some that I've left out here ). The Company is brought to life when a Certificte of Incorporation is issued . It is supported by a Stamped Memorandum & Articles of Association, a Company Registration form 14 ( CR14)which lists the Names of the Directors& their Physical Addresses ,and a Company Registration form 6 ( CR6) which states the companies registered domicile .

Why a Company?Why not just do your thing and carry on with the business of making money? The truth is once your payments, for whatever business idea you have ,start to flow ,the tax authorities will pick them up unless you not using a bank acount and store all your revenue in a safe( only drug dealers and other illegals hide money from the authorities).If you are going to succeed financially then all routes for cashflow will have to be utilised and that includes using a Bank accounts . Remember ,bank notes belong to the Central Bank (their state Property ) and the State is obligated to charge us something for using their Bank Notes its called tax .It is wiser to have the company pay your taxes instead of you paying .
A registered comapny is the best way to do business for the entreprenuer because it becomes a representative of the entreprenuer ,actually his double ( and it takes almost all the risk ) while at the same time being a custodian of the business idea . If anything goes wrong,it is considered as the company failed not the entreprenuer . This means the entreprenuer can keep his house his furniture and his life even if the business idea (now the company) fails . He is only obligated to pay up to the extent of his liabilty -where the company is a Limited liabilty Company Structure.
A company is a legal person who acts on behalf of the entreprenuer while being controlled by the entreprenuer (whose exposure to the company's liabilites is at a minimal ) while controlling the company and earning profits or interest from it .
( Roman Dutch Law) or Private Company (UK format):-is similar to the Limited liabilty Company (USA format)of course without the 'C' &'S' class Corporations structures.The major similarity is that the members have limited liability (or exposure to liability) and no liabilty feature does not exist with Private Limited. On the tax matters ,the company is required to pay Corporate Tax.

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