Entrepreneurs Brief Guides

“How to Form a Business”

Dr Jim Porter

Having made your decision to start a business, you must look into some legal requirements for the start up, such as the kind of ownership you are looking for, the name/title of the business organization and your relationship with your partners.

In 30 minutes, learn how to:

Choose the right business legal form

Maintain working relationships

Select a name for your business

How to Form a Business

Dr Jim Porter

Revision: SW1.001.001

Copyright © 2011 – All Rights Reserved.

Smashwords Edition

This ebook is licensed for your personal enjoyment only. This ebook may not be re-sold or given away to other people. If you would like to share this book with another person, please purchase an additional copy for each recipient. If you’re reading this book and did not purchase it, or it was not purchased for your use only, then please return to Smashwords.com and purchase your own copy.

Thank you for respecting the hard work of this author.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means without the written permission of the author.

ISBN: 978-1-4661-5900-6:
Publisher: Smashwords, Inc.

Deciding on the most appropriate legal structure for your start up business is critical step, as it could impact the degree of financial risk you are exposed to, the control you maintain over your business and the level of expected daily administration activities.

Having made your decision to start a business, you must look into some legal requirements for the start up, such as the kind of ownership you are looking for, the name/title of the business organisation and your relationship with your partners.

The Legal Form to Be Adopted

The following are the main choices you can consider for the legal form that can be adopted for your business.

If you are the sole proprietor of your business, you are self-employed and have no legal structure to adhere to.

In the case of a partnership, two or more business partners will work with you and will share the profits and losses equally.

There is also a limited company type, in which the business is a separate legal entity. In this, the business is distinct from its directors, shareholders and employees. Unlike the other two, in this type the business can sue or be sued separately from its owners.

A limited partnership liability could be said to be a mixture of a partnership and a limited company. In this type, the partners have a limited liability and the business can run even with the resignation or death of its partners.

These days, other forms of business such as Co-operative Societies and Company Interest Societies have also become quite widespread. However, once you have adapted a certain legal form, it is still possible to change it although it will require a lot of investment in terms of time and finance. If your business has re-registered with VAT, you must inform your local VAT office within a 30 day time period. The other legal requirement for the change can be checked with your legal and accounting departments.

Sole Proprietorship

A sole proprietorship is when the business is owned and managed by a single person. Many new start-ups prefer to have a sole proprietorship as it comes across as the best and most feasible option.

The advantages of a sole proprietorship are as follows:

Setting up the business is very simple and can be quickly done by just registering your business with the VAT, tax and other concerned authorities.