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Business form
When you want to start a business, you must consider the form of business enterprise to be operated. The form of business choice will automatically influence the kind of returns to be filed in terms of income tax. Some of the forms of business include partnerships, corporations, sole proprietorships and Limited Liability Companies (LLC). There is need to adhere to both taxation and law requirements that stipulate the kind of business structure to be adopted. The process of decision making should also be undertaken with caution since it may translate into either failure or success of a business (Grassl, 2011).
The use of logical decision making is integral when choosing the form of business to start. For instance, Mathematical constructs can be made from the available microeconomic data. The latter can be used to determine customers preference for a particular commodity. If a company sells 100,000 items at a given cost, the same company may decide to produce 100,000 items in order to make profit especially if all the economic factors remain constant.
It is also vital to assess the nature of the market in terms of competition. This requires thorough analysis on how similar businesses are performing. It is important to examine how different businesses are affecting each other. Hence, in the event of weak competition, a business organization ought to optimize its operations. As such, an organization may opt to lower the price of a certain commodity which has several substitutes in the market. This may eventually increase demand of that particular product. In addition, raising advertising budget could increase sales and consequently win a larger market share.
It is equally important to consider the accounting concerns and opportunity costs. Both variable and fixed costs may be used for effecting external monetary payments. On the same note, analysis of information using formulae and microeconomic data usually enables the choice of the best option.
A professional business plan
A professional business plan of a company is important for successful operation. It should bear a broad description of an executive summary clearly indicating the mission and vision of the business organization (Nunn & McGuire, 2010). Such a statement is important in spelling out the goals of a company, functions and the form adopted by the business. The process of decision making is greatly enhanced when a professional business plan is used.
A business requires some significant existing market for its services and products. It must also possess significant potential for growth. The two aforementioned factors indicate the potentiality of the opportunities that can be enjoyed by a business unit. If there is no available market and the growth of the business is not promising, the management may be required to make some drastic changes. This step helps in determining the viability of the business in future.
Therefore, the company must have certain marketing solutions that will meet various tastes and preferences of consumers. The products or services must be unique. This will improve the defensibility position of the market share which is being controlled by a business establishment.
The main dynamics of a business must be strong when preparing a business plan. In order to achieve the most appropriate business dynamics, the demand for products and services must be improved. In addition, revamping the management team is necessary. Besides, a business plan must demonstrate unique solutions that are superior to those of the competitors. In order to obtain funding for the business, the business plan must demonstrate that the management can deliver the best products and services according to the needs of consumers. A comprehensive business plan can also be instrumental in providing the much needed information on the type of management system to be adopted by the business.
SOX Act of 2002
The Sarbanes-Oxley Act aims at protecting investors by improving reliability and accuracy. The Act ensures that corporate disclosures are made with regard to securities laws. This Act was created with the objective of enhancing accountability as well as imposing new penalties for any mistakes made by the corporate. It outlines how the executive and corporate boards should relate with each another. Moreover, there are new financial reporting systems and responsibilities that have been stipulated in the SOX Act (Alexander & Jamal, 2005).
This Act strengthens, formalizes and checks powers that are exercised by the corporate. For instance, there are newly established systems of control as well as sign-off measures that are being used to assess financial records. It requires transparency and accountability when carrying out transactions as well as managing corporate bodies.
Non-compliance with the set rules and regulations may lead to penalties. Such a step of action may not auger well with an organization since it may end up losing out in the exchange listing. Besides, individuals who contravene the laws may be imprisoned or hefty fines imposed against them. A CEO who submits a wrong certification may be fined and imprisoned for a period of up to five years (Alexander & Jamal, 2005).
This Act has been deemed to be relatively good since it boosts the confidence of investors bearing in mind that the transparency, accuracy and reliability of financial statements are clear indicators of an effective and profitable business environment. Such a high level of accountability and efficiency also provides a smooth process of mitigation in case any anomalies are noted.
The Act has increased management responsibility by establishing clear guidelines and control measures to be followed. However, there are some disadvantages of Sarbanes Oxley Act. By requiring companies to observe many internal controls, the preparation of financial statement period is lengthened leading to delays (Alexander & Jamal, 2005).
References
Alexander, F. C. & Jamal, D.Q. (2005). The US sarbanes-oxley act of 2002: Summary and update for non-US issuers. International Journal of Disclosure and Governance, 2(1), 81-106.
Grassl, W. (2011). Hybrid forms of business: The logic of gift in the commercial world. Journal of Business Ethics, 100, 109-123.
Nunn, L., & McGuire, B. (2010). The importance of A good business plan. Journal of Business & Economics Research, 8(2), 95-105.
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