Starting a new business in the current pandemic situation for a proper plan will correct knowledge and power about how to deal with this situation. Study says that about 80% of small businesses fall within four-five years. Are you thinking of starting a new business to make some profit? Many key factors play a great part in the decision, so it can be quite difficult to decide whether or not starting a new business is the right decision for you.
Almost every person dreams about starting his own business. They have no idea about the money that is needed to start one, the knowledge and the experience that they have to gain, the hard work that they have to put in, and the kind of patients they need to have until their business reaches up to a certain level for them to make profits or break even. Let’s look at Some of the factors you must consider while starting a new business:
From the liability aspect, that form of business is perfect in which the liability of owners is limited. From this viewpoint, the company is the best form in which the liability of members is limited. Insole partnership and proprietorships, the liability of owners is unlimited.
From the financial aspect, sole proprietorship has limited finances, and is because of the limited finances which a person can afford to provide.
In a partnership more finances could be arranged than sole proprietorship; because the number of partners may reach up to 20, in case of ordinary business. From the financial aspect, a company is the best choice; because in a company huge finances can be raised through the issue of shares, debentures to the public. Further companies may be able to get patronage from financial organizations, banks, etc.
As per consideration, the sole proprietorship is the easiest to form. Formation of partnership is also quite easy, as there is a need to enter into a partnership agreement with no requirement for registration etc. However, forming a company is not easy; because it is a time-consuming and expensive process. Several procedural and legal formalities have to be complied with for the formation of a company.
4. Stability of Business Life:
From this point of view, sole proprietorship form of organization is least stable, and this is because any major happening e.g. accident, death, etc. may lead to instability of business operations and may even lead to the closure of the business. Partnership firms are more stable than a sole proprietorship. The company, from the aspect of stability, is the best form of business organization because it enjoys perpetual succession or permanent life.
5. The flexibility of Operations:
From the viewpoint of the flexibility of operations, that form of business organization is best, in which there is great scope for introducing flexibility in business life. A sole-proprietorship enjoys maximum operational flexibility, because of one person’s total control over the business and simple business technology. In companies, however, the flexibility of operations is not much possible to be introduced into corporate business life, because of serious legal and constitutional problems.
6. Governmental Control and Regulation:
From this viewpoint, that form of business organization is best, which faces minimum governmental control and regulation. From this viewpoint, there is no Governmental regulation and control. However, companies are subject to make the Governmental regulation maximum and control through numerous provisions of the Companies Act, applicable at various stages in the running of the business life of the company.
7. Managerial Efficiency:
Form of business organization is best from the viewpoint of managerial efficiency, in which management of the business is most efficient. In a sole proprietorship, managerial efficiency is not much; because one man’s capacity and abilities to manage are limited. In companies, management is said to be most effective and efficient because they are managed by Boards of Directors consisting of highly qualified and professional people.
8. Business Secrecy:
From the viewpoint of the business secrecy aspect, that form of business organization is best, in which it is possible to retain business secrets. In a sole proprietorship, managing absolute secrecy of business affairs is possible because of one man’s control and ownership. In partnership, partners may retain secrets of business given the common interest in profits. However, in a company, it is not possible to retain secrets, because company affairs are exposed to the public through distribution of the company’s final accounts and publication, as a matter of legal necessity.
9. Profits Sharing:
From the viewpoint of profit sharing, that form of business organization is best; in which there is no profit sharing. In partnership, it is common that profits are shared among all partners. In the case of a company, profits are distributed among members of the company as dividends.
10. Customer Service:
In particular, it refers to personal attention to be paid to customers, which much depends on the nature of business. For businesses, where it is necessary to pay good attention to customers, a sole proprietorship is the best form of business organization.