Steps to establish a company with a sole proprietorship structure
An individual should be prepared to devote time along with using the right methods that will ensure the business is making profits as required. Depending on the geographic area of the sole proprietorship, there are steps that are important in the establishment of a sole proprietorship. The first step regards the deciding of the business name for the sole proprietorship. The name of the business should give a description of the activity of the business or the products or services that the business provides. The name should be distinctive to aid in the differentiation of the business. It should be noted that business names are valuable assets. It is because they can help in the creation of awareness and recognition of the business. It can also spearhead customer loyalty. There should be a consideration of the creation of a domain name to ensure that the business is modern (Spadaccini, 2011).
The second step entails the determination of the legal right in the utilization of the name created. It is possible through a name search. Information from public sources should be utilized to search for the similarity of the name chosen. Yellow pages could also provide essential information regarding the chosen business name. Determining the legal right of the name ensures that a potential conflict is disclosed before the owner of the business can retain the professional services that it provides. The third step is on the registration of the business name. The business venture will be registered with the right authorities in the location of the business. The business name must be registered because in the opening of a business account there must be the need of the proof of a business name. It is essential to make sure that the business is recognized, therefore, enhancing the goodwill (Spadaccini, 2011). The requirements for the registration of the business name are the filling out a registration form and the payment of a small fee.
The fourth step is the registering for permits, licenses, and taxes. This will ensure the fulfillment of the statutory obligation of the business. It is through this that the business will pay the appropriate taxes as required by the local authorities. An inquiry is essential about the bylaws. Bylaws may have several effects on the operations of the business. It is important, therefore, to seek legal advice for the purpose of acquiring the essential and necessary permits and licenses. After the fulfillment of the legal and the statutory obligations, the business will be ready to operate. Registration with the right authorities ensures that the owner will receive important information regarding any new legislation that may cover the requirements of the business and any changes in tax rates (Spadaccini, 2011).
Funding sources for the sole proprietorship
Even though the sole proprietorship may have limited sources of capital, there are available funding sources for the business. These include credit cards, personal funds, bank loans and grants from government. Credit cards give credit advances to the owner. They can provide the cost of expenditures. It is an easy source of income for a sole proprietorship. The credit card does not require collateral. There is no a stringent repayment schedule that is required for the credit card. The disadvantage with this is that the interest rate on the credit cards is higher thus it is expensive than any other source of funds. Bank loans, on the other hand, are a source of funds from financial institutions. The personal assets of the sole proprietorship are used as a basis for determining the credit worthiness of the business. The disadvantage with this source of fund is that the business will require giving collateral for pledging a guarantee for the loan. Bank loans, therefore, have more stringent criteria for their funding. Grants from governments are another source of capital. There must be a certain criteria met so that a sole proprietorship can qualify for the grants. There is a required size and standards regarding income that must be met. The business must engage in activities that stimulate the economy. Finally it’s on personal funds. Personal funds are derived from previous savings. Personal income can be used as the initial capital of the business (Romano, Tanewski, & Smyrnios, 2011).
The best financial resource for the sole proprietorship is personal funds. It is intimately tied to the owner. The owner has the supreme individual and pecuniary stake in the business. It is very obvious and natural to use personal funds. The owner will take the risk for the business. The owner will also have unlimited freedom on the utilization and the repayment of the investment.
Form(s) of intellectual property needed to protect and the plan for protection
Intellectual properties are the creations or products of the human intellect which are protected from unauthorized users. A business is given an exclusive right to the intangible assets. This is essential as business owners gain the confidence to invest in their operations. They are also allowed to maximize the value of their intellectual property (Cornish, Llewelyn, & Aplin, 2013). Examples of forms of intellectual property are the trade marks and trade secrets that are exclusive for an organization.
A trade mark is used to distinguish the products and services of a business for the competitors. A business is supposed to register the trade mark and ensure that there is no any organization that has a similar trade mark. The exclusive rights on trade marks are acquired through the use and thus are registered. There must be a clear demonstration of the trade mark. This should be identified along with the class of the products and services that applies on them. An individual can submit an online application. There are also fees that are required. A trade secret, on the other hand, entails business information that does not need to be disclosed so that organizations can gain advantage over their competitors (Cornish, Llewelyn, & Aplin, 2013). It is a source of competitive advantage of the business. The protection of trade secrets is possible as long as the business information to be protected is kept out of disclosure and its use. There are non disclosure agreements that ensure restricted access to confidential information.
A protection plan for the intellectual properties
A protection plan is essential to protect the rights so that a business cannot be put to risk. A protection plan will avoid replication of the ideas of the business and make them exclusive for the business. The valuable assets will be protected thus safeguard the products and services. This is where the profits of the business come from thus should be protected (Cornish, Llewelyn, & Aplin, 2013).
The first step in the protection plan entails the registration of the intellectual property. The management of the business should keep it safe and secret as a way of demonstrating ownership. The management should only seek advice from the individuals who can help in the development of the products and services. At the same tie, while discussing the business innovative idea with any one, the business must have signed a confidentiality agreement. It is also a non disclosure agreement. The non disclosure agreement must be signed with the presence of witnesses and dated. The essence of the date is to establish moment, engagement and the place of disclosure as a resource for future reference. There should be a written description that demonstrates that the idea belongs to the business. The original documents containing the information must be sealed. It is clear in the establishment of the time and date of when the original thought came about (Cornish, Llewelyn, & Aplin, 2013).
Ways to alter the funding sources
The products and services can be completely online. There are varieties of sources that can be introduced for the purpose of online business. Information must be provided on the time required for financing, the types of security that is preferred. A consideration of whether the management will be willing to give up some of the business ownership for the sake of investment will be outlined. The information is essential to show investors that the business is serious.
The business can utilize network funding as a source of income. This is a fund raising tool. Individuals are invited so that they can view the information in a private setting. Investment capital can be raised from friends and family. It is usually done in a private and secure set up. Since it is an essential financial management tool, the business must remain engaged with the investors. The investors must be updated on the progress of the business. Crowd funding is another source of capital. This is where there are available sites that allow businesses to showcase their projects online. Interested sponsors help in the pooling of funds that help the business meet their financial goals. Large amounts of money can be raised through the pooling of funds. The only disadvantage with this is that the individuals who contribute for the business expect a little reward for the type of investment that they contribute for the business (Romano, Tanewski, & Smyrnios, 2011).
The additional intellectual property is the domain name of the business. This is a trade mark for the business and need to be protected.
The appropriate sources of capital for a business that has operated for five years
business that has been in operation for five years is already an established
business. The available sources of funds include debt capital. Debt capital
would be preferred for the business. Debt capital aids in the reduction of the
total financing cost. Debt capital aids in the keeping of business profits in
the business organization. The return on equity for the business will be increased
and allow the business to have tax savings. There is also less risk since the
business is contractually liable for the interest payments. There is less cost compensation
that will be required in debt financing. Using debt financing also aids in the
establishment of the financial leverage for the business. There are also
allowable interest deductions on the taxes of the business. Since the
organization has to meet the interest payment obligations, it must ensure that
profits are retained (Pride, Hughes, & Kapoor, 2010).
Cornish, W., Llewelyn, G. I. D., & Aplin, T. (2013). Intellectual property: patents, copyright, trade marks & allied rights.
Pride, W. M., Hughes, R. J., & Kapoor, J. R. (2010). Business. Australia: South-Western/Cengage Learning.
Romano, C. A., Tanewski, G. A., & Smyrnios, K. X. (2011). Capital structure decision making: A model for family business. Journal of Business Venturing.
Spadaccini, M. (2011). Business structures. Irvine, CA: Entrepreneur Press.