CHAPTER 7
Essential Legal To-Do List
Choosing a Company Name
Choosing a name for your company may seem an easy task, but note that it becomes an integral part of the company’s identity and therefore should portray your intentions to, among others, customers, staff, and investors. For instance, it would make no sense to call a financial services company “Fish and Chips Ltd.”
Consider the following:
• The company name that you choose must be different from that of companies who have already legally registered. This includes the use of signs and symbols.
• Offensive words in a company name will always be disallowed.
• Names that suggest an association to legal bodies or government links will not be accepted.
• Your company name should be linked to the product or service that you are offering.
• Your company name should be easy to pronounce and remember.
• Having a location in a name could limit future growth or confuse buyers.
Choosing an Address
• A registered office address is the official address of the company where all legal, contractual, and statutory mail will be sent to.
• The address should appear on your letterhead, business cards, and e-mails.
• Remember that the public have access to these details, so it is preferred that you separate your personal contacts, address, and e-mails from your business.
Here are some guidelines.
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Issues |
Note |
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Location |
Your office should never be located in any of the following: • A basement. • A cul-de-sac. Assess the following: • Who your other tenants are. This could impact your business directly or indirectly. • Whether higher rents indicate high foot traffic. • Whether your clients or customers would be comfortable coming to your office. • Whether there is enough parking for clients, customers, funders, etc. |
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Pricing |
Note: • Never compete on price; everyone loses in a price war. • Instead of using price to attract customers, offer extra services to entice customers. • Be different from your competitors. • Gauge the difference between markup percentage and gross profit margin percentage. These will influence your ability to manage price and discount strategies and still make a profit. |
Licenses, Insurance, and Taxes
The types of licenses that you will require will depend on the legal structure that you choose for your business, which includes sole proprietorship, corporation, partnership, or limited liability company.
• Obtain the proper licenses that apply to your choice of business structure.
• Approach insurance and assurance companies, and get quotes for worker compensation, keyman insurance, and property and movable assets protection.
• If your company has a unique logo, it is recommended that you apply for a trademark.
• Appoint qualified lawyers, bookkeepers, and tax experts.
• Different countries have various value-added tax (VAT) legislation, so obtain the correct limits and obligations. Remember that the VAT records that you keep must be detailed and include all business transactions, bills, and receipts.
• Many countries have different forms of corporate structures, so I have outlined those that are common around the world. These are formally regulated and governed by the respective countries’ varying companies acts, and relate to how a new company can be formed, how such a company conducts business, and when a company can be liquidated.
• Companies may be either private or public, as set out in the following table.
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Type |
Details |
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Nonprofit |
• Formerly called Section 21 Companies, this form is established to be of benefit to the general public, such as religious or charity-type organizations. • All income and assets can only be used for the promotion of the organization’s nonprofit objectives. |
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Profit |
• Public company: the name ends in “Ltd.” • Private company: the name ends in “Pty Ltd.” • Personal liability company: the name ends in “Inc.” • Partnership. • Business trust. • Sole proprietorship. • External company (branch of a foreign company). |
The most used corporate structure is the private company, as it is one that is perceived to have serious legal structures for the long term. It is, in fact, the correct structure for most entrepreneurs who wish both to have a legal entity that holds all business risk and to be taken seriously.
Directors, Shareholders, and Other Details
To set up a limited company, you will need to be able to provide information on the following:
• Directors’ details: Generally, most countries will state that you must have at least one registered director, who is at least 16 years old and who cannot have been declared bankrupt or banned from being a company director.
You will need the following information:
Their full names.
Date of birth.
Nationality.
Occupation.
Country of residence and residential address.
Note that some countries permit a company to act as a director.
• Shareholders’ details: The norm is that there should be at least one shareholder. While some shareholders are also directors, this is not always a requirement.
You will need the following information:
Their full names.
Residential address.
Number of shares and value per share.
Shareholders are entitled to the following:
Dividends, if paid.
To vote at annual general meetings.
• Key personnel and stakeholders: They can include investors, employees, customers, and suppliers. In recent years, stakeholders have been expanded to include communities, government, and trade unions.
• Customers: They are simply defined as individuals, groups of people, or organizations that buy goods or services from you. As customers are generally influenced by price and quality, an entrepreneur should always take these variables into consideration prior to launching any new product or service.
• Suppliers: Also called vendors, they are universally defined as anyone who supplies goods or services. However, suppliers must be distinguished from contractors or subcontractors, who sell a value-added service or product.
Significance of suppliers:
Entrepreneurs, together with key staff, must make critical decisions when buying raw materials. A wrong decision could significantly impact profits, so suppliers are selected based on price, quality, and what added services they offer.
While price is often a major consideration, always look at the relationship that you may have with the supplier. This is as important as price. If a crisis happens, the business may be able to call for assistance from its supplier.
• Business identity: In ensuring that a company has a reputable identity, entrepreneurs need to check that corporate social responsibility and its following three basic disciplines are in place:
Compliance to ensure that they currently have complied and will comply in the future with all necessary corporate regulatory requirements and legislation.
Reputation enhancement to always deliver on its promises to all stakeholders to uphold its reputation as being efficient and professional.
Value add refers to the additional services that a supplier offers. These features provide entrepreneurs with a competitive edge over other companies with otherwise more expensive products.
The Rainmaker tends to look at the inner circle of the entrepreneur, the financial director, and key shareholders as an indicator of the competence of the company to achieve sound profits. However, global stockbroking corporate advisors are increasingly assessing the outer circle to determine how the environment will influence management in their decisions related to products and services.
Compliance Is Not Pandering
Businesses are not expected to pander to staff.
At times, The Rainmaker is called into a company to resolve staff disputes. This is not the task of The Rainmaker, but what can be said is that entrepreneurs must find a balance between staff, directors, and managers and the realities of the business itself. This means considering issues that affect both staff and the business. There should be strategies in place to hire the correct staff and plans to deal with dissatisfaction among staff.
Rainmaker Observation: There needs to be both pre- and after-sales strategies. Clients should be happy to buy the product and even happier to recommend it to friends and families.