Legal & Financial
Financial – Raising
money to start a Business
Before starting your
business you have to make sure that you've done your market research,
which if done improperly
can greatly affect your business start up.
If you are looking into
bank loans you have to present your business plan to your bank
and prove to them that
you'll be able to pay back the loan with interest.
You can get support from
government schemes including:
- grants
- finance and loans
- business support e.g. mentoring, consultancy
- funding for small and medium-sized businesses and start-ups
Third option would be
private/crowd fundraising.
There are number of
websites that allow you to raise money for your business idea
or anything really that
people would like and contribute to it. The idea behind
crowd fundraising is for
you to propose your idea to the wider public and if they
like it, they will
contribute by giving you a small (or in some cases big) amount
of money for your business
idea. Now, people don't usually give out money just like that.
They have to have interest
in your product and they expect something in return. For example
if you are making a
technological product like e.g. a new fitness band, your supporters
will
expect for you to ship
them the final product if they have pledged more that the products
value.
These are some of the
website that do croud fundraising:
- Kickstarter - https://www.kickstarter.com/
- IndieGoGo - www.indiegogo.com/
- Crowdfunder - www.crowdfunder.co.uk/
The forth and the final
option is selling shares.
You can fund your business
by selling shares in your company.
How does it work?
Selling shares is
basically selling the percentage of you company to the investor that
is
investing in your
business. They would give you a certain amount of money in exchange
for
a percentage of your
company. There are multiple types of investors when it comes to
shares:
- ‘business angels’ (wealthy individuals who invest in start-up businesses)
- ‘venture capital’ from companies who invest large sums of money in businesses that they think will grow quickly (known as ‘private equity’ companies)
- Crowdfunding (where a large group of people invest money in a business idea, usually via the internet)
Sole trader, Partnership
and Limited Companies.
Sole trader is a exclusive
owner of a business, and entitled to keep all profits after the tax
has been paid. Sole trader
is also responsible for all losses.
Business Partnership – A
company that has two or more individuals that mange and operate
the business. They're
equally and personally liable for all debts and profit of the
business.
Limited Companies - A
limited company is an organization that you can set up to run your
business. It’s responsible in its own right for everything it does
and its finances are separate to your personal finances. All the
profit the company makes is owned by the company after it pays Taxes.
Pros and Cons.
Of being a Sole Trader:
Pros:
- You get to keep all the profits
- You don't have to report to anyone, you are your own boss
- You have the full control of your business
- If you feel like taking a day off, you can
Cons:
- You are responsible for all losses
- If you don't work, you don't get paid
- You must be a self-starter
Of business partnership:
Pros:
- You split costs and share risks with your partner
- Bigger network
- Sector knowledge
- One can take a time off while the other partner works.
Cons:
- Conflict over being the leader
- Hard to find the right person for a partner.
- Less independence
Of
Limited Company:
Pros:
- Lower personal financial risk
- Credibility
- Better tax rates
Cons:
- Accountancy fees are generally more expensive
- There is less privacy than a sole trader.
- More costly starting up as you will have to pay to form a Limited Company
