Setting up a New Business Entrepreneurs Planning

Question: Describe about the Setting up a New Business for Entrepreneurs Planning. Answer: In todays world, all the aiming entrepreneurs are planning their way to start a business as no business can be planned to get started without an idea in mind. It is a journey that needs a lot of hard work as many people fail starting up a business of their own[1]. In order to set up a business a person may face various challenges that would not have been otherwise faced if a person works for someone else. It includes finance management, hiring of staff and doing research of the relevant market[2]. One day I got a chance to meet a lady, after conversing with whom I got to know that she is a bit confused related to starting up a business. As she was running a business of providing aloevera products to people which she started as a result of an incident which happened 2 years back I her house only. Her mother-in-law was bedridden and had a knee problem because of which she was not able to move although she went through a operation but no result came. One day somebody told her to apply aloevera which gave positive result in some months as a result of which she started walking in few months from one place to another in her house. So the lady thought to help others so that they can also get benefit of a natural medicine. Finally she started selling aloevera made products which are now helping people drastically. Part- 1 (Questions with Clients Answer) 1: What business you want to invest your money into. You will continue to work as a sole trader or you want to go for opening up of a company? As from last two years I have been working as a sole trader and doing this business from home. I would like to set up a company of my own. Which I am planning to widen by opening a company and stop doing the work from home as it is now impossible for me to take care of home and business solely as my family is expanding. But I am a little confused as to how to give it a start. 2: Do you think your business will survive in the market where there are already so many ayurvedic or such type of items being sold your business will survive? Yes, because my business is not like other businesses. I am not advertising my products to be sold or hiring celebrities to advertise my products. My products are being sold by mouth to mouth advertising as a result of which it bear less cost on advertisement. I only want to open a company my work is already earning well from home I only am expanding the same. My old customers are my celebrities who are getting me more people not by simply telling people to buy but doing that because they used my products and have seen results of the same. 3: As per your consideration or knowledge what do you understand by forming a company? Do you think it is easy to enter into formation of a company when you are a sole trader? Yes, and I know it is not easy to own a company when you have been working as a sole trader as different regulation will apply if a sole trader wants to go for formation of a company. 4: Apart from companies dont you want to invest your company in any other structure of business which prevails in industry? I am aware that there are four structures basically that should be kept in mind. Therefore, I have a scope and option as to which form to adopt in order to set up a business. As my past experience with trusts have been bad so I would not go for trusts anymore and as I have been doing my business solely as a sole trader so now I want to invest my money and want to expand my business by opening up a company. 5: Do you know what is the legal process to be followed in order to formation of a company and get a company registered? As per the Australian Securities Investments Commission there is a INFO 61 i.e. the information sheet which sets out different steps which are to be followed in order to form a company. 6: In which type of company would you plan to invest? Either in a Public Company or a Private Company? I would like to invest in a Public Company. There are major differences which are seen in both the companies. 7:What about going for a Partnership or Joint Venture. Why dont you go for any of these? There is nothing like why. I know that Partnership as I told you earlier is a good form of business where you can form a arrangement between other person and work in order to earn profit and also it might be possible that the other person have a expertise knowledge about anything which can help you building up your business or can take your work to different level on which you spare less time and energy and earn more in less time. 8: As you know so much about what is a company and Partnership and Joint Venture. So now do you think to change your mind and go for a partnership or a Joint Venture. Yes, I will think about it. Therefore, I will give it a thought and have a stdy as to what type will suit my requirements to form a business. 9: Now are you satisfied with whatever we discussed in regard to setting up a business? Yes, to some extent as by discussing the things look different and in books they are different. So I will surely read all the regulations properly and then make my decision as to what type of business I will enter into. 10: Do you know that before entering into business with anyone you should have a legal contract? Yes and there are some specific points which should be kept in mind before doing or entering into contract with other person. Part II (Relevant Law) As per the discussion with the client, certain observations were made and also a brief comparison between three business structures have been discussed in order to make client understand that what suits the client better. The business idea of the client have been understood with the current market scenario and development in market. It was clearly seen and observed that: Client has Clear thinking as to the business idea which she wants to pursue. She hasLimited funds to invest with the view to earn more profits. She is to some extent ready to take risk but is adamoned in payment of debts from her persona; eanings. she is interested in going for company but wants to think again by studying deeply the regulations in regard to partnership and joint venture. The best business structure according to client is to form a company under Corporation Act, 2001.A company is described as an organization of people who work for earning profit and achieving the desired goal under law and also have a separate legal entity from the people who are working inside it or who put their money in it. Investors invest huge amounts in companies for which they earn dividends. There are four types of business structures which are sole trader, partnership, company and joint venture[3]. As per the Australian Securities Investments Commission there is a INFO 61 i.e. the information sheet which sets out different steps which are to be followed in order to form a company which are as follows: Deciding if the company structure which you thinking to establish is right for you or not. As there are certain legal obligations for the officers of the office. To make choice of what the name of the company will be. To decide the operation of the company. To get approval of the other person involved in formation of a company. Get your company registered. To know and acquire the Australian Company Number(ACN ) and Australian Business Number (ABN )[4]. Once a company is being registered, As per Corporations Act 2001, ASIC gives a unique 9 digit no. i.e. Australian Company Number( ACN) which msut be there on all the documents of the company in order to identify the company when doing transactions[5]. There are two types of companies under the corporation act, 2001 and they hae differences as stated below: Private company Have minimum atleast 1 member and maximum upto 50 whereas public company have minimum of 1 member and maximum no limit. Private company is not listed on stock exchanges whereas public company can be unlisted or listed. Private company can hold shares in listed companies whereas public company can own Pty Ltd companies. Private companies can make an offer of shares to existing shareholders or employees or subsidiary of companies whereas Public listed or unlisted companies can raise fund by way of prospectus. ASIC regulates private companies and public companies irrespective of their listing on stock exchange. If public companies are listed then they are regulated by ASIC and APRA but if unlisted then they are also be regulated by ASX. In private company, majority are registered as ASIC says that there were 2,223,022 private companies out of which 99% are registered whereas in Public Company majority are registered as ASIC says that there were 22,342 public companies of which 1% of all are registered companies[6]. Partnership Act Section 1 of the Act states that in order to form a partnership it should contain three elements that are: To carry a business Commonly To earn profit If anyone of the following elements are missing then partnership will not take place. Partnerships are non- registered but their business name must be registered if business partners decide not the do business in their own name. The liability of partners is unlimited. Agreements between the partners will protect their relationship with one another and will not put any impact on third party[7]. Whereas a Joint Venture is established between 2 or more person and organizations for completing a specific project by entering into a legally binding agreement which is enforced like a contract[8]. They may be incorporated or corporate. But are not recognized as separate legal entity. As Contract is a agreement which can be either verbal or written. Although, if a contract is written it will be relied and taken into consideration in a better manner and low risk involved as it is taken on paper and is not dependent upon the words spoken by other person. There may be a different and customized contract being created by the owner of a business with simple and legal language which is understood by other. There are many clauses which are to be included in a contract some of which are: Names, signatures and other business or the parties Mode of payments Confidential information Procedure for dispute settlement etc so it should be read carefully[9]. Also as per section 6 of the act, some rules are to be referred by a individual in order to get involved as a partner in a firm[10]. Duties and responsibilities have been covered under some rules which are set out in state based laws. They include a rule generally applicable that all the partners share profits and capital money of the business and contribute losses also in the same manner[11] Part III (Recommendations) Therefore it is highly recommended that as she was engaged in sole properitorship business which she was doing at home and now she wants to expand her business outside for which she wants to go for opening up of a company as she had less funds to invest and more to get in future. As companies are regulated by ASIC and this is how the rules are being implemented in the right manner to get the companies established by obtaining a no. which every company have its own. So it is upto the client what she wishes to obtain but there is an option which can be adopted either to go for partnership or Joint venture as less finances are there with you and you have to establish your business outside in market where already so many competitors are prevailing. So you can go for a partner who have the knowledge of the market and he will guide you and help you in a better manner as he knows the in and out. You should have a research over the market and see who can be a partner to your business But it is suggested that she can go for a partnership business so that her burden of work can be divided and more people are engaged in order to help her by which more people get connected to her business. A valid and enforceable contract should be done between the two on which both the parties are agreed and it is upto you that what all conditions you put and what al are accepted by the other party. So it is not compulsory that the said contract be done only. And the contract should be made in writing and within which the clauses can be mentioned carefully by taking into consideration the view points of both parties. References: (Corporation Act, 2001) AustLII, Commonwealth Consolidated Act, (n.d.), https://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s1.5.3.html. Australian Capital Territory, Partnership Act, (1963), 2015sydney.edu.au/lec/subjects/associations/notes/Summer%202010-11/Topic%203%20-%20Partnership.doc partnership act in aus. Australian Government Business, Business structures and types, 2016https://www.business.gov.au/Info/Plan-and-Start/Start-your-business/Business-structure/Business-structures-and-types. Australian Government, What do I include in a contract?, (2016),https://www.business.gov.au/info/plan-and-start/start-your-business/independent-contractors/understanding-contracts/what-do-i-include-in-a-contract. Australian Securities Investments Commission, Starting a company - How to start a company (27th July 2016) https://asic.gov.au/for-business/starting-a-company/how-to-start-a-company/. Governance Institute of Australia Governance Foundation, Difference between private and public company structure under Corporations Act, (n.d.)https://www.governanceinstitute.com.au/media/839958/difference-between-private-and-public-company-structure-under-the-corporations-act_2015.pdf Not-For-Profit Law, Joint Ventures and Partnerships, (n.d.) https://www.nfplaw.org.au/partnerships. Studential Ltd, Why start a business (2016),https://www.studential.com/enterprise/business-start-ups/why-start-a-business. SWAAB, Business essentials, (2014) https://www.swaab.com.au/expertise/corporate/starting-up-a-business/. Taylor, N.F, How to Start a Business: A Step-by-Step Guide, Business News Daily Small Business Solutions inspiration(2016) https://www.businessnewsdaily.com/4686-how-to-start-a-business.html.