Business Formation Basics: Getting It Right from the Start
As the world around us gradually transforms, an increasing number of entrepreneurs are introducing new solutions that shape the world of tomorrow. Behind the inspiring success stories, lies a set of basic steps that almost all innovative business owners follow to set up their enterprise.
Here are 10 business formation basics that will help you build and run your business smoothly:
1. Develop a business idea
This step might sound like a no-brainer for many, but it's actually a bit more difficult than it sounds. Going from dreaming of owning your business to developing a viable business idea could be quite challenging as it requires extensive market research (analysing the relevant markets and target audiences) and a great deal of brainstorming (writing down and elaborating your ideas) to define your business proposition.
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2. Write a business plan
Once your business idea is locked, draft a proper business plan. This is a fundamental step, as it will constitute the first-ever comprehensive piece of literature about your company. The business plan details what your company is, your mission, vision, values, services, products, business functions, customer service standards, expected revenue sources, and other key points.
If the task of writing a business plan seems daunting, then use tools such as Live Plan to help speed up your workflow, while you get a system that will help with your forecasting and pitching to investors.
3. Find financing options
Part of the business plan is to lay out your financing options, as this will determine your way forward. Start by making a comprehensive list of all the financing sources you have access to. If you conclude that your initial capital or personal funds are insufficient, you should look into alternative ways to finance your project including special funds, banks, financing institutions, partnerships and other sources.
4. Create a basic marketing plan
At this stage, you're not required to hire a communications agency or a social media expert. However, you need to start thinking about your marketing plan. Define your target audiences (gender, age, educational level, income level, etc.) and analyse their profile: Who are they? What are their needs and aspirations? What are their consumption habits? What communication means do they use the most?
Decide on which communication platforms and channels are most relevant to your services or products, and look into their details and potential costs.
5. Decide on a legal business structure
The Limited Liability Company (LLC) is the most commonly adopted legal business structure by small businesses and entrepreneurs when setting up their companies in Dubai as it offers operational flexibility.
LLC companies can trade across the UAE and the GCC. They also benefit from several advantages, including no minimum capital and no restrictions on real estate ownership.
Other adopted legal business structures in the UAE include: Sole Proprietorships, Civil Companies, Private Shareholder Companies, Public Shareholding Companies, Branch & Representative Offices, and Free Zone Companies.
6. Select a business name and register it legally
This is your company's first official step. In Dubai, you are required to choose a name that contains no offensive language or religious, political, and criminal references. Additionally, your business name must be relevant to your type of activity and available for use. Once you pick the name, you are required to register it at the Department of Economic Development (DED). This preserves your ownership rights and constitutes a necessary step for incorporating your company.
7. Gather the pre- and post-company incorporation paperwork
There are never too many documents in a company formation file. Making sure you've included everything in one deck is better than having an incomplete file that might delay your business setup process.
Here are some of the key documents that you will be requested to submit: the name registration certificate, copies of your passport and UAE residency, copies of any partnership or sponsorship agreements with a local agent or partner, and your company incorporation certificate, among others.
Remember that having a business setup consultant by your side can help you organise your paperwork and fast-track all formal procedures.
8. Find a business location
Anchoring your business in the right location is as important as finding a business name. Not only does it represent your brand, but it also defines your company's accessibility, connectivity, reach and activities. In Dubai, you will never fall short on finding the perfect location.
However, before you make up your mind, you must know that although companies established in free zones benefit from several tax exemptions, they are not allowed to trade elsewhere in the UAE.
Mainland companies, on the other hand, can trade anywhere, whether locally or regionally, in addition to benefiting from more flexible visa terms. Look up the exact advantages and restrictions of each location and study your business model well before picking a location.
9. Obtain a business licence
If you're setting up a business in mainland Dubai, you need to seek a business licence from the Department of Economic Development (DED). For Free Zone businesses, your reference point will be the Free Zone Authority responsible for the zone you're setting up your business in. The business licence is your official business permit. From the moment you obtain it, your business becomes legal.
10. Set up books for tax reporting
Having an experienced accountant on board is definitely a must for start-ups. However, your accountant will need to rely on specific software to manage your entire bookkeeping activities. Such accounting programmes include QuickBooks, Quicken, and others.
Once you have picked a software, hand over all the bank statements, credit card statements, loan documents, lease contract, receipts, and other financial papers to your accountant to make sure your figures are accurate from the get-go.
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