Three Steps to Start a New Business - Term Paper Example

? Three Steps to Start a New Business THREE STEPS TO START A NEW BUSINESS Introduction Most entrepreneurs will agree that startingup a business is tricky at any time, whether in a recession or during economic growth. However, even when there is a recession, the most serious entrepreneurs will shake off the poor forecasts and focus on their business ideas. One good reason for beginning a business during a recession is that things will only get better with an improvement in economic conditions (Bradberry, 2011). In addition, the entrepreneur will learn a lot, which he/she can use during the good times. At the current time, most people getting into business have no idea how an economic boom feels like. During times such as this, small starts up businesses are advantaged because the opportunities in a recession are numerous (Bradberry, 2011). However, first step entrepreneurs should follow three steps. These are creating the business identity, registering the business, and funding the enterprise. The first step involves refining the business idea. While most entrepreneurs are stuck in wondering how to begin, simply thinking of opening a business is the beginning. What entrepreneurs must contend with is that there will always be challenges in starting a business (Ready, 2011). In order to be successful at this point, the entrepreneur must define the concept of their business. The entrepreneur will have to make a decision on the form of business they will create. This can be a limited company, a partnership, or a sole-proprietorship, the simplest of which is sole-proprietorship. At this point, do what you know. Think about your past actions in terms of the way you can transform them into products and services. There are three main aspects here. One should emulate what others have done, do what feels best for one’s situation, and aim to solve a common problem. In addition, the business plan needs to be worked on in its entirety at this point. This will help the entrepreneur in gaining confidence, focus, and clarity (Butler, 2008). In a sole entrepreneurship, the entrepreneur will have personal liability for the business’ debt, although he/she will earn all the profit. Sole proprietorship is relatively inexpensive with low formation costs, as well as not having to file accounts or have them audited by government-accredited agencies (Butler, 2008). If an individual is in business with another entrepreneur, then the individuals can form a partnership. In this case, both will be jointly liable for debts accrued as partners. Taxation is done separately for each partner; while this form of business owners can have limited liability for the purpose of debts. Partnerships also have more formal structures as compared to a sole proprietorship. These must be registered with the relevant government agency. They could also decide to form an LLC, in which case their liability is limited to how many shares the individual entrepreneur has bought. This is the most expensive with registration and account costs, taxable profits, and separate taxation for each of the entrepreneur’s dividends and salary (Butler, 2008). After giving an identity to the business, he/she wants to start, the entrepreneur should then move on to the regulatory and legal requirements that they require to fulfill. First, they must register with a government agency for the purposes of the national insurance, tax, and their PAYE payments (Broad, 2012). In addition, the entrepreneur will need to get a VAT registration PIN. With regards to VAT, the government has various schemes for different entrepreneurs. If one chooses to be part of a partnership, then he or she will have to outsource to an accounting organization. This is important for protection of each partner in case of liability claims. These accountants are trained and certified with professional qualifications in public accounts. The choice of accounting firm will be important in relation to the nature of the business since every accounting firm has a unique way of member supervision, as well handling accounting complaints (Broad, 2012). In limited liability companies, as well as some partnerships, the business has to retain a lawyer (Broad, 2012). This process is akin to that of finding an accountant. Before choosing a lawyer or law firm, it is important to consult first directories to find the best fit for the business. The chosen lawyer or law firm must have experience in the jurisdiction the business is in. The business could also choose to source a lawyer from their country’s law society, especially lawyers who have expertise in their area of the business’ competence. Finally, the entrepreneur(s) will have to source funds for their business. To begin with, a business account for the business is opened. The documentation that is used in opening the account is different for different types of business (Landstrom, 2009). Sole proprietorship has different identity requirements to those required in partnerships or limited liability companies. Funding can come from several sources, including government-sourced grants. The government also lends help to those needing loans. Investing the funds into a business will be a great idea because the entrepreneur will now be under a different and friendlier tax regime. For instance, their national insurance and tax will not be deducted from the source, but rather by arrears, as is the case with VAT (Landstrom, 2009). In a case like this, the entrepreneur will be able to take their pending VAT and bank it in a savings account with high interest. This will also help the business to have all the pending VAT in the bank when payment is due. This last step, however, is the most challenging and entrepreneurs are advised to seek financial advice (Landstrom, 2009). Starting a business may mean that one leaves employment, which will result in loss of pensions and health care benefits. At this point, the entrepreneur will have to provide these funds for him/herself. For this reason, funding must also include insurance provisions for critical illness cover, income protection insurance, life insurance, as well as keyman insurance in the case of partnerships and limited liability companies (Landstrom, 2009). This particular insurance will be important if one of the partners dies and the entrepreneur would want to buy out their share. Conclusion After the potential entrepreneur makes the decision to begin an enterprise, they must follow three major steps before they actually set up a business. These are refining their business idea, beginning the initial action on the business plan, and overcoming their personal fears and anxieties with regards to starting their own business. Since the majority of initial entrepreneurial activity ends in failure, these steps can help an entrepreneur to navigate various issues such as improving the odds and wasting time. All businesses are unique and possess their own sets of opportunities, threats, and problems. However, these basic steps, such as writing of the business plan and refining the business structure will help to navigate the problems and take advantage of the opportunities. When the entrepreneur has successfully navigated these three steps, then they can get to the actual starting of their business by registering it before finally opening their doors for business. References Bradberry, John. (2011). 6 secrets to startup success how to turn your entrepreneurial passion into a thriving business. New York, American Management Association Broad, Eli. (2012). The art of being unreasonable lessons in unconventional thinking. Hoboken, Wiley & Sons Butler, Eamonn. (2008). The best book on the market how to stop worrying and love the free economy. Chichester, Capstone Landstrom, Hans. (2009). Pioneers in entrepreneurship and small business research. New York, Springer Ready, Kevin. (2011). Startup an insider's guide to launching and running a business. New York, Apress Read More