Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Financial and Legal Requirements When Launching a Company: 4 Facts to Know
Aug 10, 2022
Image/Unsplash
When you are just launching your business and bringing that amazing idea to life, you will be focusing on the creative side of the business. Things like how you are going to produce the product, how you are going to market it, how you can make it better suited to customer needs, or even how you are going to hire the best people for the job. Many people don't realize that the kind of decisions you make during this stage of the business has a big impact on how the organization develops moving forward.
For instance, where you decide to manufacture your products is a big decision and you don’t realize that when your production increases, you could save quite a bit by having a production facility in an area that is subsidized for manufacturing. However, when you reach that size, it becomes very challenging to relocate. With that in mind, let's look at a few important legal and financial considerations that you need to evaluate relatively early on to ensure that your business can grow and scale optimally.
1. Licensing
Whether you are producing tangible or intangible goods, you might need licensing for your product. In fact, many service providers are even required to have licenses before they can sell their services to customers. One industry that pays a lot of attention to licensing is the medical industry.
Whether you are making medical equipment, software for medical devices, or digital solutions for medical professionals to use, you need to be licensed to do this legally. Finding the right kind of license can be confusing because there are lots of different kinds of licenses available and the requirements also vary from place to place. There are federal licenses, state licenses, and even city licenses. Certain licenses are only issued to companies of a specific size, while others are available even for individuals to use.
Without the right license, you won't be able to sell your product and your business could face legal consequences if you attempt to do so. If you aren't clear on what licenses you need and how you can get them, consult an expert in your industry to find out what you need. Also, learn about whether you need to renew these licenses or whether they are one-time investments. You may also need licenses for employees so make sure you get your team members certified as well.
2. Structure
In the early stages, most businesses start off just with a single person, the entrepreneur. Federal law and even local law grant such small enterprises a lot of freedom. You don't need to register your business formally, you don't have to have a tax number, you can operate out of nearly anywhere and there is a lot more flexibility. However, this will quickly change as you start to grow. Later you will need a clear structure that will inform the relevant authorities about how the business works.
This includes things like who the owner is, what kind of taxes you are obligated to pay, and how your business is impacting society. Ideally, you should have an idea of the structure when you are starting a business so that you can grow in that direction. Generally, businesses can either be proprietorships, partnerships, or private companies. Once you've established yourself, you can even consider launching as a public company. The important thing is that while this has no impact on your specific work, it has a huge impact on how your business is seen by other stakeholders. For instance, the ownership of a company is very different in a proprietorship as compared to a private limited company.
3. Taxes
The kinds of taxes that you pay for your business not only depend on the size of your business but also on who you are selling to, where you are based, where your products are coming from and the industry that you are in. For instance, different states have different tax mechanisms but there are some basic tax structures that are defined by the federal government. Similarly, a business in digital marketing will be taxed very differently from a business in petroleum exploration and production.
The kind of tax you pay will impact your operations and will have a direct impact on your profitability. Understanding tax structure can be confusing. Hiring a tax consultant will be helpful. If you are selling overseas, ensure you also understand the tax system in that country since you are a legal business in both your home country and where you sell your products.
4. Accounting
On the subject of taxes, you also need to understand how you will handle accounting operations for the business. Without the right accounting solution, you will have no idea where the money is coming from or where it is going. This makes it very difficult to fuel future growth because you don't have a clear picture of your own revenue and expenses.
See: Bringing Good Ideas to Life: 13 Modern Ways to Innovate
In the early stages, you will be able to handle accounting on your own, but this will get increasingly complicated as you start to scale. This is not only important for the legal side of things but good accounting is essential if you want to secure funding later on. You have the option of either hiring a full-time in-house accountant or outsourcing this task to a service provider. Having a close eye on cash inflow and outflow will be very important if you want to properly scale your operations and also optimize your business to meet growing demand.
Image/Unsplash
Financial and legal services in a business often don't get the attention that they deserve, but these are some of the most important operations within your business. Look around to see what your competition is doing and try to follow in those footsteps or even outdo them. You can learn a lot about these things just through a quick Google search.
However, if you have some time and you want to get to the best start possible, talk to a professional to understand what you should do. In any case, you should be documenting the life of your business in some way or another. This will make it easier to make decisions later on and will give you clear history of where you have come from. In this digital era, it is very easy to be reminded of things thanks to technology. Keep your business digital as that will help tremendously with management.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
 |  |  |
Support NCFA by Following us on Twitter!Follow @NCFACanada  |
Related Posts
Mogo to enter $4+ trillion Canadian Wealth Management Industry with acquisition of Leading Saving and Investing App, Moka Financial Technologies Inc.- Ethereum’s Merge (move to PoS) No Longer Expected in June
- Canadian adventurer crowdfunding manhunt to find Joseph Kony
- Experiment.com Gains Big Venture Backers To Bring Crowdfunding To Science Research
- British Treasury Plans to Implement EU-Wide Cryptocurrency Regulation by Late 2018
- The Funding Roadshow Webinars (Apr 15 and 17, 2014): Crowdfund Your Business – Raise Money for Your Startup
Leave a Reply