When establishing and growing a business or organisation there are a number of business structure options. There are many ways of defining an organsation but deciding the format or Business Structure is one of the most important decisions that an individual or group can make.
At the most basic level Business Start up stage you can just ‘set up in business’. You are defined as a Sole Trader. Sole Traders just have to notify HM Revenue & Customs within 3 months that they have started trading, (doing business). There is no registration required at Companies House. The downside is you are totally liable for any debts and if the worst happens all that you own personally is at risk.
You might decide to conduct business together with other sole traders. However as a group you may decide to become a Partnership. Again as a partnership you do not need to notify Companies House, but you should all get advice about drawing up a partnership agreement. One problem with partnerships is that all partners are totally liable for any debts run up by any of the partners and if the worst happens all that they own individually personally is at risk.
Establishing a Limited Company is another option and is easy to do and to some degree limits the liability of all of the individuals. A limited is a separate legal entity and its the company that is liable for debts. The only liability for the directors is up to the value of their shareholding. However this changes the moment a director signs a guarantee for instance as security for borrowing money or taking out a lease.
There are some other more unusual Business Structures explained on this web site.
Charities are a familiar organisation to most of us, the problem faced by many is there are limits and rules when it comes to commercial activities. A common solution to this is to form a Social Enterprise which enables them to act commercially and enter contracts whilst maintaining their community mind set and ethos. A much older form is the Co-operative where a group of like minded individuals work and operate in a collective way. Sometimes this can even mean that job roles rotate and everyone with appropriate skills takes a turn to in board or supervisory roles.
Businesses are also usually defined by their stage of development. Business Start Up is self explanatory, and is followed by the Survival stage both of these present challenges such as having enough money to exist whilst sales are generated.
The next stage Existing Buisnesses face these and other problems such as the need for additional staff, management time and skills, coordination and systems. All of these challenges increase as the business grows. Of course the need for more money to cash flow all of expansion costs as well as for increased stock and materials increases quickly. This means higher risk of running out of money, growth is a double edged sword and should therefore be carefully managed, planned and controlled.
The good news is there is help available and I have developed the Evolve Business Development Programme to assist existing businesses to develop and grow. For High Growth Businesses I have developed the Excite High Growth BusinessProgramme to ensure that fast growing businesses and organisations create and manage fast growth in a most effective but sensible way.
Contact us today to obtain help, advice and guidance for any of the issues highlighted here.