How to organise a company

From Virbus

How to organise a company

[edit] 1 Summary

[edit] 2 Why should you use it?

The purpose of a company is to provide value for its stakeholders. This requires that the company is well organised operationally and financially.

[edit] 3 Why has it been developed and who developed it?

[edit] 4 When should you use it?

When an individual or a group has a business idea, it is often beneficial to organise the idea around a business entity.

[edit] 5 How does it work?

One of the initial tasks of organising a company is deciding which company type is best suited to providing value for its stakeholders. The basic stakeholders of a company are the owners/investors, the customers and the staff. Thus, we need to consider how the owners can get the best value for their investment, how the customers can get the best value for goods or services, and how the staff can get the best value out of working for the organisation.

The main company types are: • limited company (private or public) • partnership (general or limited) • sole proprietorship (trading name) • co-operative

The limited company is a company type where the financial liabilities are generally limited by shares (or alternatively by a guarantee in some countries). The partnership is a business entity where the partners share the profits and losses of the business they have all invested in. Partnership can be either general or limited. A sole proprietor is as the name suggests an individual doing business in his or her own name. This is the simplest company type and basically involves only registering a trade name. However, the drawback of this type of company is that there is no separation or limitation of debts; instead, all debts of the business are debts of the owner. A cooperative on the other hand is a business owned and controlled by its customers on a one vote per member principle (regardless of how much you buy). NOTE: THE STATEMENT IN PARENTHESIS IS AMBIGUOUS. DOES IT REFER TO HOW MANY GOODS YOU BUY FROM THE CO-OP OR HOW MANY SHARES IN THE CO-OP YOU BUY?

Once the owners have decided on a company type, they then need to found and register the company. For a limited company, owners must draw up a founding document as well as conduct a general meeting and board meeting before lodging the registration papers with the relevant authorities. Owners of a limited company are also required to invest a minimum amount of share capital in the company. A partnership requires a partnership agreement, where the partners agree on the aims of the business as well as the duties and responsibilities of each partner. A sole proprietor only needs to register for the trade name. A cooperative requires a founding document.

Before the company can open bank accounts, post office boxes, deal with the tax office, take relevant insurances, or indeed conduct any business in its own name, the business entity must officially exist. Generally, this means that the business needs to be registered by the relevant authority, but the practical order of specific tasks involved in registration varies from country to country.

After the company has been founded and registered, it needs a proper business plan. Even before the official registration of the company, entrepreneurs starting up a company need some form of business plan in order to attract potential investors or partners. The business plan at this later stage, however, should concentrate on more practical issues, which should facilitate decision making in the company. It should state the goals of the new organisation, the reasoning behind the goals, and the actual plan for reaching the goals. There is no standard content for business plans, but rather a business plan should be seen as a collection of plans from various areas, such as finance, marketing, human resources and operations management. The main reason for drawing up a business plan is to give structure to the business, and to state the aims of the company to its various stakeholders.

There are specific rules and regulations for starting and operating a hospitality business in some countries. For example, in Finland and other Northern European countries there are very specific regulations for selling alcohol. The entrepreneur needs to apply for a specific permit to sell alcohol that can only to be consumed on the company premises. In many countries, there are also strict safety regulations. In Finland, for example, a rescue plan needs to be written for hotels with more than 10 beds or for restaurants with a capacity of more than 50 people. Fire exits need to be clearly marked and remain unblocked at all times. In addition, the company must comply with occupational safety regulations and European-wide regulations for handling food. Each of these rules and regulations is a potential minefield for a new entrepreneur in the hospitality industry.

Finally, perhaps the most important factor of a successful service enterprise is its people. Therefore, it is worthwhile investing significant time and effort in defining the staffing needs: a thorough job analysis should be carried out for each position, suitable personnel should be recruited and trained, and key personnel should be well compensated. There are many potential ways for a company to fail in its people management. One of the most common problems in small and medium size businesses is not to properly train the employees for the tasks for which they are responsible. Another potential trap is to recruit the wrong people, or in recruiting the right people, not appreciating their contributions. One of the worst mistakes is to treat the employees as if they were easily replaceable. This is not only bad people management, but also simply false business thinking because training a new employee consumes a significant amount of a company’s resources. Another problem can be caused by not recognising the employees’ accomplishments or not respecting the value of employees' time. A good atmosphere in a company requires asking for and respecting the employees' opinions. Finally, the employees need to be provided with reasonable benefits.

[edit] 6 Related topics/tools

Stakeholders Business plan