A. Form a private limited company
Though you can find number of advantage and disadvantage of sole proprietorship or partnership business vs. trust vs. LLP or companies but In general Private limited Companies are much better choice in long run than opening a standalone/partnership business as;
They have limited liability
What it means is the director of companies are not personally liable for act of companies and shareholder responsibility is limited to paid up capital of company.
In layman language say if you are selling food, and someone get food poisoning by your food, in case of business, you can get sued upto your personal assets while in case of company, the company liability is limited to paid up capital which in many cases can be even just $1 or say more appropriate $10,000 or $100,000 as the case maybe.
Easier to transfer or sell shareholding
When you expand your shareholding, either by expansion or by needs, it is quite simple to add new shareholder or director
or even sell one‘s shareholding to others.
Easy to get financed
Banks and financial institutions prefer companies to fund for trade lines and relevant credit limits as compared to sole proprietorship or partnership business.
Tax benefits
It may vary significantly from country to country and need to analyze carefully.
In some countries income tax rate for personal may be lower so company may be subject to higher tax or even double tax but in many countries it may be lower for companies.
B. Setup official email/mobile/visiting card/letter head/Mobile number
Try to get an official email than yahoo/hotmail mails which looks more professional and organized.
A good visiting card can be of help as that gives 1st impression to your prospective customer or supplier or even staff.
Get letter heads or just soft copy format of them to send official letter.
Easy to remember number can be a good in long run. Sometime you may have to pay a premium to get it but it is worth. Not necessarily you always can have 00 or 000 or 888 in end but any easy to remember sequence will be good for your customers say 4747 or 4748 or 4455 and much cheaper than those high premium numbers
C. Form a website
It can give consolidated information to your prospective buyer supplier and staff even.
Get a suitable domain name registered. If possible ,easy to remember one. Remember to get it registered in your name and not by developer else you may get tough time later on changing its ownership.
People run behind .com name which may not be available. Any other country specific domain can be good enough to get it going.
Get your website developed, even few pages will be good enough for people to see what you intend to do or sell or service. Rest of pages you can create or update later on.
D. Open A bank account
Analyze few of choices to open it.
Some indicators are
Top 2 local banks in region-why? because most of such banks will have large number of accounts so if your customer has account in same bank, being account in same bank you will get your money faster than if they have account in other bank which can improve your cash flow significantly especially in beginning when you are cash tight. Similarly your staff will get salaries faster. If your fund flow is large, it may be better to have more than one account even.
Like in Hong Kong one of most preferred choice will be HSBC or in Singapore DBS/OCBC/UOB or in India
They have larger network so you or your customer can deposit money or cheque from any branch.
Foreign banks though may look rosy in terms of service or presentation or product but they may be quite expensive to keep and operate. Compare their minimum amount required, TT remittance charges, and other regular charges you may have to pay.
Though it looks quite a small matter but a real life example can be good example to understand- in days we use to sell CPUS in retail, we use to sell to many people. On each CPU profit was just 50 cents to 1 dollar while it was about $80-$120 in value. Being Indian, we also opened an account in Indian bank namely UCO bank, One fine day I noticed there are so many $5 deductions in bank. I asked why? We seldom buy anything of $5.we could find any such cheque issued by us.
We asked bank and were told-there is a $5 charge on each cheque.
Damn!!! We made profit of $1 or less in selling CPU and pay $5 as bank charge when getting paid in cheque.
What to do?
Some of us may stop selling the product.
Others may increase price to cover cost?
I explored further
And what I did was - Close bank account as the local banks don’t charge anything for such transactions.
Or you can use other banks for such transactions if you have to use it for some reason say credit lines
.
Other example
When we do high volume trade especially being in import n export- to save exchange gain or loss we use to sell and buy in same currency. If customer issue cheque-then it takes 3 working days to clear. Many times to save time, if we may decide to take cash. Many of us wont know that in Singapore if we deposit U$, there is a charge of 1% and even if we withdraw so if we deposit and withdraw 100 one time-it will become 98 as we pay 2 commission to bank.
Many times we don’t know it or don’t realize it as bank just deducts it directly and we assume everything shall be ok. Surprising in high rolling business/items the profit may be only 1% or even less than 1% so bank may make more than we doing the whole up n down to run the business.
Some people will try to buy & sell in Singapore
What it means is- suppose you have S$150 and exchange rate is for buying 1.49 and for selling 1.5. When we buy we will get U$100 but when we sell the same it will get only 149 so 1 is loss in just one conversion. 150 become 149 in just 2 minutes without doing anything.
Don’t forget to take internet banking and learn and use it to save your time and more important cash flow
E. Apply for relevant tax registration (if applicable)
Say
(i) Import Export Number (if you do import/export)
You may need it if you intend to import & export
(ii) Say GST/VAT (if expecting sales over 1 million)
Study carefully if you really need it.
Thumb rule is don’t take it unless it is statutory.
Say for example in Singapore
So suppose you expect to sell 800k per annum in your food outlet or saloon, then by law you are not needed to have it. Why because if you take it, it will add your cost by almost 7% which may make you expensive as compare to your competitors.
There is a provision that GST registered company can claim Tax paid on the rents etc as input tax. Sometimes in order to get this money you may think it is better to become GST registered but in fact it won’t. As then you will have to pay GST on gross sales which means even on your profit and salaries and all other operating overheads.
But suppose in other business, say where you sell the goods to tourists say camera or hand phone –it may be advantages to take it-even if your overall sales is less than 1 million. Why?
Because tourist can claim back 7% GST when going out of the country which will make you competitive than your customers.
And you need not to wait until you hit one million sales to get GST number- you can get it on day 1st when you start business-it is termed as voluntary registration by declaring that you expect your sales to be over 1 million. That’s it. And even if you don’t hit it-you are not doing anything wrong. You are just paying more taxes.
So the pro and cons has to be analyze and it may vary on nature of business you do.
(iii) Relevant License to do Biz
Say IDA if doing telecom business or NEA if doing food one.
This may be necessary to run as per business you wish to work and in some cases can be quite troublesome too.
Take note, many of business closes at this stage.
How,Let us explore some examples
Say, If you have to run a food outlet
You have taken a shop on rent
Then you will apply license to run it
Officer will ask you to fill up form and provide relevant info.
And you will decorate it to your choice and style and wish to start running the business.
But hang on
Licensing officer will visit and say
Your floor is not right
Or your ceiling is not right
Or your kitchen size is small than needed
Or so on and so forth
So they can’t issue the Licence to operate
You have to redo this and that
You do it
Again wait/chase for them to inspect
And may end up in doing it again may be one more round
Till they are fully satisfied
Then somehow you get the license to operate
Remember your rental meter is still running all across.
(iv)Any other license you may need as per country you are in
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