In the previous article of Young Money we started exploring the four kinds of enterprise models basically: sole proprietorship, partnership, limited partnership, and/or corporation. With each having a number of advantages and disadvantages; thus we shall continue on the subject as bellow:
As a corporation, you’ll be subject to a number of other drawbacks as well: generally higher state taxes, stricter laws concerning the operation of your business, more elaborate accounting procedures, and legal papers that are required just about every time you make a major move or sign almost any contract. Thus, your legal and accounting fees will be much higher as a corporation than will those required for a sole proprietorship type of business.
As a sole proprietor or partnership, you’ll find many areas require the registration of your business name. The cost however, is minimal, ranging from R200 to R4000. Selecting a name for your business is quite important to you and particularly relative to advertising. Your business name should describe the product or services you offer. Fancy names such as, Linda’s Clipping Service will lose potential “walk-in and passing” customers to the beauty shop across the street that calls itself, Patti’s Beauty Salon or Jane’s Hair Styling Shop.
The advantage of using your full name in the title of your business, such as Johnny Jones’ Meat Lockers, has the advantage of making credit somewhat easier to come by – provided you pay your bills on time – but it also includes the disadvantage of confining your services to a local or at most, a regional area.
Should you buy, lease, or rent a space for your business? Think twice before you make any decision along these lines. Most businesses tend to grow quickly or they never get off the ground. There are a few exceptions, but only a very few, that tend to grow at a modified rate.
So, buying a piece of property and setting up your business on or within that property obligates you to ownership regardless of what happens to your business. Leases are almost always very strong contracts written by attorneys to the advantage of the property-owner. When you sign an agreement to pay someone for the use of their space over any length of time, you’re “nailed in” to paying for that space regardless of what happens to your business.
In the beginning, it’s wise to either get the shortest-term lease possible, or arrange to rent with an option to lease at a later date. This does not apply to a retail business, unless your particular business happens to be an untried one.
Definitely, you should open a business bank account. In selecting a bank for your business, scout around and look for one that can, and will help you. Determine what your banking needs will be, and then via telephone, interview the managers
of the banks in your area that might serve as the important convenient bank to your business location.
A point to remember: the closer you can make the relationship between you and the bank manager, the better your chances are going to be for approval on loans and/or special favors you may need at a later date.
Try to become acquainted with as many of the bank employees as possible. The better you know them, the more courtesies they’ll be extending especially to you in the course of your association. Just as a doctor is a specialist in his field, and you go to him for medical problems, your banker is a specialist in his field and you should go to him for your money problems. In business, you’ll have to learn that everyone is an expert in his own line of work, and in your associations with other business people, refrain from acting like a “sharpie” and/or pretending that you know exactly how everything works in someone else’s specialty.
You’ll find that very often, different banks specialize in different types of businesses. As an example, you’re sure to find banks that specialize in real estate transactions, export-import businesses, and even manufacturing operations only.
What I’m saying here is that if you’re planning to sell a fairly expensive item, your customers will probably need and/or want financing. It will behoove you to select a bank familiar with your type of product that will afford your customers, through you, contract financing.
Some of the questions you should ask of your banker include the following: Is it necessary to maintain a certain balance in your account before the bank will approve a loan for you? What qualifications must you have in order to obtain a line of credit with the bank?
Does the bank limit the number of loans, or types of loans it will approve for small businesses?
What is the bank’s policy regarding the size of a check you might deposit that requires holding for collection?
And what about checks less than that amount – will they be immediately credited to your account?
In almost all types of businesses, it will be to your benefit to set up with your bank, a method of handling VISA, Master Charge, and regional credit cards. The important thing here is to ultimately set up your account in the bank that will service all of these credit transactions for you – one stop for all your banking needs. In most instances, you’ll find that having the capability to fill orders/make sales via credit card transactions; will increase your volume of sales appreciatively.
Once you’ve made the decision as to which bank is going to handle your account, you’ll need your Identity (ID) Number or your Driver’s license or any other prove of identity indicating you ID Number i.e. passport, the certificate to commence business, proof of residence etc. registration forms and if you’re requesting a VISA or Master Charge franchise, you’ll also need a financial statement.
For corporations, you’ll also need a corporate resolution approving of the opening of your business account.
There are different policies exercised in just about every state regarding installation/hook-up charges by the telephone and utility companies. Some require a deposit, and some don’t, hence you should do your homework or rather field work for such offers.
Continuous research and development [R&D] are vital for any business; if you are not growing you are dying, because business is a doing subject rather than studying subject. I hope I am not misunderstood: Yes, school is good, but the streets are a better teacher, because when it comes to business you need to study, practice and teach. Let us stop here for now we shall continue on this topic in the following articles. As you can see; I can only touch upon these business aspects, because certain things can be taught, but certain things need to be learnt!