how to set up and run your own business

8/8/2019 How to Set Up and Run Your Own Business

http://slidepdf.com/reader/full/how-to-set-up-and-run-your-own-business 1/8

How to Set Up and Run Your Own Business

1. Selection of type of the company.

2. Selection of name for the proposed company.

3. Apply for Directors Identification Number and Digital Signatures.

4. Drafting of Memorandum and Articles of Association.

5. Stamping, digitally signing and e-filing of various documents with the

Registrar.

6. Payment of Fees.

7. Obtaining Certificate of Incorporation.

8. Preparation and filing of Prospectus/Statement in lieu of Prospectus and

e-Form

19/20 (in case of public companies) for obtaining the certificate of

commencement of

Business.

9. Obtaining Certificate of Commencement of business (in case of public

limited

Companies).



Things to remember:

y The first myth to explode about running your own business is the notion that to start

any business requires a lot of money. This idea is believed by almost everyone, strange

as it may seem. Whilst it is true that some types of business require an enormous initial

outlay, most only require a very modest initial investment, and some require virtually no

money at all to start them off!

y The essence of running your own business with success is a matter of good planning. It

is a strategic planning philosophy which works best, as seen in the Direct Drive idea. You

plan what you're going to do, work out what kinds of things might go wrong, and test

the ideas out to see what's practical. If you play chess, apply that chess-playing logic to

life and money, and you are likely to be a success.

y Determination is important. It's best to have an attitude of being persistent in working

on your business. You have to keep on at it even though it's hard work and doesn't have

any immediate reward.

y Avoid PARTNERSHIPS. Especially with your friends! If you decide you must have a

business relationship with someone, make sure it's all written down and everyone

knows exactly what they are supposed to do.

y Your own website. Whether you're an Internet business or not, it's good to have your

own website! This does not have to be expensive. However, having a website is good for

business. Customers are often impressed to see "www." on the company's "premises".



Business Methodology

Doing Business records all procedures that are officially required for an

entrepreneur to start up and formally operate an industrial or commercial

business. These include obtaining all necessary licenses and permits and

completing any required notifications, verifications or inscriptions for the

company and employees with relevant authorities.

After a study of laws, regulations and publicly available information on business

entry, a detailed list of procedures is developed, along with the time and cost of

complying with each procedure under normal circumstances and the paid-in

minimum capital requirements. Subsequently, local incorporation lawyers and

government officials complete and verify the data.

Information is also collected on the sequence in which procedures are to be

completed and whether procedures may be carried out simultaneously. It is

assumed that any required information is readily available and that all agencies

involved in the start-up process function without corruption. If answers by local

experts differ, inquiries continue until the data are reconciled.

To make the data comparable across countries, several assumptions about the

business and the procedures are used.

Assumptions about the business

The business:

y Is a limited liability company. If there is more than one type of limited

liability company in the country, the limited liability form most popular

among domestic firms is chosen. Information on the most popular form is

obtained from incorporation lawyers or the statistical office.

y Operates in the countrys most populous city.

y Is 100% domestically owned and has 5 owners, none of whom is a legal

entity.

y Has start-up capital of 10 times income per capita at the end of 2008, paid

in cash.

y Performs general industrial or commercial activities, such as the production

or sale of products or services to the public. The business does not perform



foreign trade activities and does not handle products subject to a special

tax regime, for example, liquor or tobacco. It is not using heavily polluting

production processes.

y Leases the commercial plant and offices and is not a proprietor of real

estate.y Does not qualify for investment incentives or any special benefits.

y Has at least 10 and up to 50 employees 1 month after the commencement

of operations, all of them nationals.

y Has a turnover of at least 100 times income per capita.

y Has a company deed 10 pages long.

Procedures

A procedure is defined as any interaction of the company founder with external

parties (for example, government agencies, lawyers, auditors or notaries).

Interactions between company founders or company officers and employees are

not counted as procedures. Procedures that must be completed in the same

building but in different offices are counted as separate procedures. If founders

have to visit the same office several times for different sequential procedures,

each is counted separately. The founders are assumed to complete all procedures

themselves, without middlemen, facilitators, accountants or lawyers, unless the

use of such a third party is mandated by law. If the services of professionals are

required, procedures conducted by such professionals on behalf of the company

are counted separately.

Both pre- and post incorporation procedures that are officially required for an

entrepreneur to formally operate a business are recorded

Procedures required for official correspondence or transactions with public

agencies are also included. For example, if a company seal or stamp is required on

official documents, such as tax declarations, obtaining the seal or stamp iscounted. Similarly, if a company must open a bank account before registering for

sales tax or value added tax, this transaction is included as a procedure. Shortcuts

are counted only if they fulfill 4 criteria: they are legal, they are available to the

general public, they are used by the majority of companies, and avoiding them

causes substantial delays.



Only procedures required of all businesses are covered. Industry-specific

procedures are excluded. For example, procedures to comply with environmental

regulations are included only when they apply to all businesses conducting

general commercial or industrial activities. Procedures that the company

undergoes to connect to electricity, water, gas and waste disposal services are notincluded.

Time

Time is recorded in calendar days. The measure captures the median duration

that incorporation lawyers indicate is necessary to complete a procedure with

minimum follow-up with government agencies and no extra payments. It is as-

sumed that the minimum time required for each procedure is 1 day. Although

procedures may take place simultaneously, they cannot start on the same day

(that is, simultaneous procedures start on consecutive days). A procedure is

considered completed once the company has received the final document, such

as the company registration certificate or tax number. If a procedure can be

accelerated for an additional cost, the fastest procedure is chosen. It is assumed

that the entrepreneur does not waste time and commits to completing each

remaining procedure without delay. The time that the entrepreneur spends on

gathering information is ignored. It is assumed that the entrepreneur is aware of

all entry regulations and their sequence from the beginning but has had no prior

contact with any of the officials.

Cost

Cost is recorded as a percentage of the economy's income per capita. It includes

all official fees and fees for legal or professional services if such services are

required by law. Fees for purchasing and legalizing company books are included if

these transactions are required by law. The company law, the commercial code

and specific regulations and fee schedules are used as sources for calculatingcosts. In the absence of fee schedules, a government officers estimate is taken as

an official source. In the absence of a government officers estimate, estimates of

incorporation lawyers are used. If several incorporation lawyers provide different

estimates, the median reported value is applied. In all cases the cost excludes

bribes.



Business Objectives

Objectives give the business a clearly defined target. Plans can then be made to

achieve these targets. This can motivate the employees. It also enables the

business to measure the progress towards to its stated aims.

The most effective business objectives meet the following criteria:

S Specific objectives are aimed at what the business does, e.g. a hotel might

have an objective of filling 60% of its beds a night during October, an objective

specific to that business.

M - Measurable the business can put a value to the objective, e.g. 10,000 in

sales in the next half year of trading.

A - Agreed by all those concerned in trying to achieve the objective.

R - Realistic the objective should be challenging, but it should also be able to be

achieved by the resources available.

T- Time specific they have a time limit of when the objective should be

achieved, e.g. by the end of the year.

The main objectives that a business might have are:

Survival a short term objective, probably for small business just starting out, or

when a new firm enters the market or at a time of crisis.

Profit maximisation try to make the most profit possible most like to be the

aim of the owners and shareholders.

Profit satisficing try to make enough profit to keep the owners comfortable

probably the aim of smaller businesses whose owners do not want to work longer

hours.

Sales growth where the business tries to make as many sales as possible. This

may be because the managers believe that the survival of the business depends

on being large. Large businesses can also benefit from economies of scale.



A business may find that some of their objectives conflict with one and other:

Growth versus profit: for example, achieving higher sales in the short term (e.g. by

cutting prices) will reduce short-term profit.

Short-term versus long-term: for example, a business may decide to accept lower cash flows in the short-term whilst it invests heavily in new products or plant and

equipment.

Large investors in the Stock Exchange are often accused of looking too much at

short-term objectives and company performance rather than investing in a business

for the long-term.

Alternative Aims and Objectives

Not all businesses seek profit or growth. Some organisations have alternative

objectives.

Examples of other objectives:

Ethical and socially responsible objectives ± organisations like the Co-op or the

Body Shop have objectives which are based on their beliefs on how one should

treat the environment and people who are less fortunate.

Public sector corporations are run to not only generate a profit but provide a

service to the public. This service will need to meet the needs of the less well off in

society or help improve the ability of the economy to function: e.g. cheap and

accessible transport service.

Public sector organisations that monitor or control private sector activities have

objectives that are to ensure that the business they are monitoring comply with the

laws laid down.

Health care and education establishments ± their objectives are to provide a

service ± most private schools for instance have charitable status. Their aim is theenhancement of their pupils through education.

Charities and voluntary organisations ± their aims and objectives are led by the

beliefs they stand for.



Changing Objectives

A business may change its objectives over time due to the following reasons:

A business may achieve an objective and will need to move onto another one (e.g.

survival in the first year may lead to an objective of increasing profit in the secondyear).

The competitive environment might change, with the launch of new products from

competitors.

Technology might change product designs, so sales and production targets might

need to change.

how to set up and run your own business

Documents