Legal & Financial

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