Company Formation

Few Words About Company Formation…

A company is an entity (other than a sole proprietor) or any other legal entity which is created by registration in the commercial register for the purpose of carrying on a commercial activity.

The company is created on the day of its registration by registration in the business register and is dissolved when it is deleted from the company register.

The company, under the company name, has legal capacity. It consists of a slogan, a reference to the activity, and a corporate form. The company name is the name under which the merchant operates its business and uses it as a signature.

Previously, he was required to use the merchant’s civil name and at least his last name. “Gold star” or “black dog” were not allowed. If the merchant was doing business alone, he/she could not attach an attachment to its company that indicated a social relationship, e.g. “Paul and his partner” or “Paul brothers”, “Paul and Son” etc. but could use a suffix that more closely identifies the person or business. The trader’s name could not normally be used as a company name, but if its acquired an existing commercial business by contract or inheritance, then it did. In this case, he/she could continue with or without successive extensions during the previous company, provided, of course, that the former owner or its legal successors agreed.

The original company could also be used if there was a change in the members of the trading company, e.g. someone entered or exited as a new member. However, in the event that a member whose name was included in the company quit, he/she would need the consent of the member who had resigned before using the company. Also, if the company consisted of only two persons and one of them left. Thus, there were cases in which a merchant who conducted his business alone could also be the owner of a social company. Although the names of all fellow members could be included in the company of general partnerships, they did not have to. However, it was absolutely necessary for the company to include the name of at least one of its associates with an extension of the existence of a corporate relationship. This rule also applied properly to partnerships. However, it may have happened that a trading company was doing business under a self employed, which is the opposite of the former case, and it may have occurred in the case of acquiring a commercial business under a self employed by a trading company.

Thus, the principle of the existence or non-existence of a corporate relationship does not stand in the case of legal succession, because the new owner of the commercial business could not be deprived of the value that the “business name” had previously represented. Joint-stock companies and cooperatives were explicitly designated as such. When choosing the company, it was also important to note that according to the contemporary commercial law, every new company had to be clearly different from a company already listed and listed in the same place or village, so it was obliged to carry the same name. use it as a company so that it is clearly distinguishable from a company already registered. This also applied to the branch.

 

The history of the development of corporate enterprises

When it comes to corporate ventures, we can go back to antiquity looking for more rudimentary forms. Where state ownership played a decisive role, for example, some of the maritime trade activities were already organized into guilds. As a ship carried goods from several merchants, the risk was spread. Following the cessation of state ownership, the need for private ownership of activities in maritime trade first emerged. In feudal Europe, the demand for consumption was growing, and this meant an increasing volume of products for producers and traders, for which individuals could no longer provide the necessary capital. Because of the high risk, the shipowners (investor, trader, captain, crew) shared the burden and the risk and distributed the profit (or loss). Often the merchant no longer traveled with the consignment, sending an agent instead. This is what developed the “commenda” institution in medieval Italy, the initial form of today’s partnership.

The capitalist provided ship, money, cargo to the carrier, and did not personally take part in the trip. The benefits were shared by the parties involved. The capitalist made high profits for itself, but its risk was limited to the value of the invested wealth, and its name often remained a mystery.

It was first used in Mediterranean travel, and then in land transport. These initial forms of social enterprise often came about only one way, and did not represent a lasting relationship. XIV. In the 20th century, as a result of increasing capital requirements, families engaged in economic activity were increasingly forced to attract external capital. Thus, family assets had to be separated from business assets. The initial form of double-entry bookkeeping has evolved to record this.

“Bottom-up” business forms

The guilds of the Middle Ages represented another form of corporate enterprise. While the aforementioned commercial partnerships were created as a result of a reduction in state involvement, the guilds were known as the so- “Bottom-up”, that is to say, a voluntary enterprise formed by the members and covering most of their production activities. They were primarily organizations established to protect the interests of the craft industry (the oldest memories of this form were found by fishermen in Ravenna).

The guilds were able to monopolize the production of a commodity with this organization. The guilds were led by the guild master (s). The guild master represented the guild externally and was responsible to the authorities for the guild’s operation. It was the duty of the guild masters to call the guild members from time to time to discuss the matters of the guild. Going into the guild was subject to strict rules and operation was also subject to strict professional and moral standards. “Quality production” was in the common interest of the guild members, as in the event of a problem not only one member but the entire guild could be criticized. Guilds were often given exclusive rights by the state in a particular area, but as a result, the public authorities often intervened in their internal affairs and, at times, used their capacities for state purposes. “Such was the case with the Merchant Adventurers in England, a community of guilds exporting woolen mail, which in 1564 obtained a legal monopoly on the export of mail to Germany and the Netherlands by means of a royal patent. Such privileged guilds can be considered as a precedent for later companies. ”

Predecessors of joint stock companies

The first major companies, known as the forerunners of the limited liability company form, were established in the early 1600s for commercial purposes. The British East India Society was founded in London in 1600, with state approval, and its main purpose was to trade in tea and spices. In 1601, the first expedition of the English East India Society began, led by Sir James Lancaster. Initially, it did not have any permanent capital, and investors were recruited separately for each road. He was headed by the board of directors. Initially, the members of the company were self-employed, but since the company enjoyed the privilege of trading in the Asian area, anyone who wanted to trade in the area had to become a member. From 1692, members were forbidden to trade for themselves. In 1708, the Company merged with smaller companies with similar functions, thus monopolizing the market. In addition to the board of directors, the company was managed by a supervisory board and had to report directly to Parliament on its activities. As a result of their involvement in the opium trade, they became increasingly tense until the company was officially dissolved in 1857.

The Dutch East India Society was established in 1602 in Amsterdam. With its help, Asia formed a major Dutch colonial empire. The main purpose of the operation was primarily the spice trade. However, they were unable to keep up with the English company, which eventually ended in 1789, and the colonies and debts were taken over by the state. Another means of achieving greater commercial goals was the joint venture with the city. XIV-XV. In the twentieth century, the cities that carried out the trade themselves could involve the population in the production of the necessary capital. Members’ participation rights were not transferable. There was always state control over these companies, so the state was able to intervene in the operations, often with state-dominated activities. Thus, the creation of joint ventures was often initiated or approved by the State. In the next step, the state will determine in a normative manner the conditions under which a company may be formed.

“In England, for example, a law of 1844 introduced a system for companies to acquire their legal personality by mere registration and abolished the requirement that the ruler or legislature be required to obtain a statute or law establishing a company. In France, the system of state licensing of founding companies ceased to exist in 1867. ‘Lastly, unlike a public limited company or a public limited company, a limited liability company is no longer a self-organizing body but a legislative initiative. Originally Danish but first spread in Germany.

Thus, by the end of the 1800s, company formation was completely cut off from state licensing. The state regulates the frameworks of establishment and operation, but it is based on the voluntary decision of the members to set up a business and create the operating conditions. At the same time, regulation of operational frameworks is increasingly in place, mainly to enhance the security of economic relations.

Compared to international developments, for example, guilds in central Europe were based on the pattern of Italian and German guilds, but in a legally specific way. Their primary purpose was to protect the interests of the craft, but they rarely used their activities for city or castle protection purposes. Religious central thinking was important to them. The guild also monitored the members’ privacy and, if necessary, gave its consent. The Commercial Law of 1875 already names the general partnership, the limited partnership, the public limited company and the cooperative. From this point on, a clear distinction can be made between civil law (formerly: private law) companies and commercial (commercial) companies.

 

The main motives for becoming an entrepreneur

What is Motivation?

The word comes from the Latin word “movere”, which means to move, to move.

Motivation is any internal and external stimulus that induces an individual to act. In our case, we look for incentives that motivate individuals to start their own businesses.

 

Intrinsic motivation stems from the individual’s inner qualities, will, personality, and attitude. Such motivations may include:


1. Earning income

Earning income as a motivator can take many forms. It is often the case that an employee is dissatisfied with its workplace income, so he / she starts a business as a full-time or part-time employee in the hope that he or she can earn a higher income. For this motivational goal, the entrepreneur primarily plans and weighs the available profit target.

 

2. Utilization of existing knowledge

In this case, the individual feels that he/she has knowledge (eg nail construction), ability (eg journalism) or competence (eg expert) that is not or inadequately utilized in the given situation. The purpose of starting a business is to utilize knowledge and apply professionalism to the fullest extent possible.

 

3. The need for autonomous decision and responsibility

As an employee, the employee is forced to accept its superiors’ decisions and implement them accordingly, often with or without consent. Disagreements often cause internal tensions that can be handled by the worker for longer or shorter periods, depending on the individual. When you reach the limit of tolerance, you have to make a choice, solve the situation or leave your current job there. Those who feel that in a given decision-making situation they would lead a stressful activity in a better way, start to prove it (to themselves or to others) in their own business. The main goal is to achieve and declare success.

 

4. Realizing a new idea, innovation

This motivation occurs when an individual has a new idea for a product or service or business method that has not been in the market before, or at least in the market available to the individual. For example, a business can be set up to patent a patented innovation that has a high degree of innovation.

A good example of this is glass concrete. (Your multi bicycle broke into the glass concrete)

The main goal in realizing this new idea is to produce and market the product. Of course, you should also think about patenting.

 

External motivations

External motivations are motivational forces that come from the environment and are independent of the individual’s personality. Examples include:

 

5. Utilization of existing infrastructure

An entrepreneurial idea is often born from the fact that the individual owns a property (garage – 24/7) or a tool (truck – furniture delivery) that you want to use. Because they provide a base for starting up, and because they already require less capital to start up, this often results in a business.

 

6.  Meeting recognized market demand

An entrepreneur sets up its own company because they thinks that they has recognized a need in a given consumer circle for which there is no or only a limited number of available solutions in the relevant region and which they can satisfy with its product or service. The goal is to gain a foothold in the market.

 

7. Forced enterprise

The most common reason for starting a forced enterprise is that the employee loses its job and / or does not find itself suitable for a long time. Therefore, in order to earn income, he/she wishes to engage in productive or service activities. The goal is self-sustaining, self-financing.

 

The process of becoming an entrepreneur

The process of becoming an entrepreneur covers all the activities of an entrepreneur from the moment an idea is created to running the business. The emergence of the idea

The entrepreneurial process begins when the idea of ​​starting a business comes up. At this stage, the individual assesses whether the idea formed by the motivation has a relavance, that is, whether it is at all worth exploring the idea in depth. If it considers this option to be feasible at first sight, it will consider additional considerations. Evaluates whether you have the appropriate abilities, qualifications, competences, or are able to obtain them in an acceptable way (eg a course) to implement the idea. In addition, it examines the various environmental elements (eg social, economic, social, etc.) to see if its activities can be adapted to the particular environmental conditions (eg composting plant in a resort, luxury hotel in a poor neighborhood, etc.).

It is important to first conduct a generous assessment of whether or not there is consumer demand for the proposed activity, that is, whether the product or service will be available for sale at a volume that can generate profit for the business.

If the conditions seem to make the idea feasible, then an assessment of the specific factors needed to realize it begins. These include, for example, the resources needed to start and carry out an activity (eg real estate, assets, machinery, human resources, cash, natural resources, etc.).

When starting a business, there are a number of costs that a prospective entrepreneur will have to face, which are not optional but are “mandatory”. While in the case of a real estate or a machine, you can decide on the type, price, type of equipment you are buying, for example, the cost of establishing a business is largely out of control. A company contract (or articles of association, articles of association) is required to start a company, and a lawyer (or notary public) may register. In addition, certain activities require regulatory approvals, which are time and expense-sensitive.

When assessing the required resources, the prospective entrepreneur compares the resources needed to perform the activity and the available resources. It determines what conditions are necessary and feasible beyond what already exists. In such cases, it is also necessary to consider whether the cost of generating resources is expected to be recouped as a result of the activities.

 

Starting a business

If, based on the preparation phase, the entrepreneur considers the opportunity to be favorable, the concrete steps that the company can actually start can begin.

Starting a business starts with a concrete assessment of consumer needs. This can be done on the basis of secondary (existing) statistics, surveys or own research (questionnaire survey).

The necessary resources to start a business must be obtained and made available. These include real estate (eg, office or office buildings), equipment, machinery (eg truck, lathe), staff (eg carpenter, driver, cleaning, accountant) and cash (eg for the purchase of raw materials). You will hear more about the resources of the business later.

Strategic planning is an important step in carrying out the activity. In doing so, we identify the main goals of establishing a business and the activities and tools needed to achieve those goals. The main parts of the strategic plan are: Executive Summary, Company Presentation, Industry Analysis, Products, Services, Activities, Human Resources Plan, Marketing Plan, Financial Plan, Risk Assessment, Corporate Social Responsibility, Environmental Protection.

The point of planning is not to specify in advance all the steps that cannot be deviated from, since environmental factors are constantly changing and the business has to adapt as well. The purpose of planning is to assess the capabilities, opportunities and risks that need to be monitored and intervened in the event of deviations from the plan.

Planning is followed by obtaining the necessary permits for operation. Certain activities may only be carried out with the appropriate regulatory approvals and are required by law. For example, the operation of a grocery store requires the permission of the National Public Health and Medical Officer Service, while, for example, a permit from the National Environment, Nature Conservation and Water Inspectorate is required to carry out activities involving the discharge of sewage.

The next step is to start a company. The conditions for this are set out in Gt. (Act IV of 2006 on Business Associations); (Act V of 2013 on the Civil Code) and the Act on the Self-Employed and the Self-Employed (Act CXV of 2009). Other conditions are required for starting a self employed or partnership. This is discussed in detail for each company type.

The precondition for the commencement of the activity is the registration of the company, ie in the case of partnerships, the company must be disclosed in the court of registration, or in the case of self employed, in the documentary office of the competent local government. Once registration is complete, the activity can begin.

 

Getting Started with Activity

To get started, you need to set up an organizational system that can handle all the processes of your business. Here, in addition to the basic activities, additional tasks must also be considered (eg, when starting a pizzeria, besides using a baker, an accountant and a cleaner are also needed). It is necessary to determine who can perform what activities, who can be instructed and who is accountable. The blurring of competences and the crumbling of responsibilities in the course of operations may impair efficiency.

Another important condition for success is the definition and coordination of sub-activities. For example, in order for our former pizzeria to serve hot pizzas in 20 minutes, it is necessary, among other things, that the ingredients are available in time, quantity and quality, there is a specialist to prepare it, a functional oven, a plate to serve, etc. .

These subprocesses must be carefully and precisely planned individually and relative to one another.

If the business has started operations or even before, it must be made known to the public concerned. As part of a marketing course, you learn the tools to help the consumer learn about your business, the products, services, prices, and terms and conditions available. Effective promotion contributes significantly to the success of your business.

Long-term opportunities need to be assessed once the activity is launched. It is important to set realistic goals for what the entrepreneur wants to achieve during the operation. Goals can include continuous growth, transformation (eg from self employed to business), expansion of activities or even higher value sales and exit). There may also be cases where a company is set up to accomplish only a particular goal (a so-called project company), and after that, the business is wound up (eg construction of metro line 4).

In order to stimulate the above processes, several initiatives and strategies have been developed both at the domestic and the European Union level, and the related support system has been developed and is constantly evolving.

 

The birth of a business

When the idea of ​​starting a business is born, it usually takes a long time to get started. This period is the period of preparation. During this period, many decisions have to be made. For example, you need to decide on:

  1. What kind of activity do you want to do in your business?
  2. What kind of consumer needs do you want to meet with the activity you are doing?
  3. What kind of real estate, equipment, supplies, manpower are needed to carry out the activity?
  4. Which resources are available and what should be obtained?
  5. How much capital is needed to start production?
  6. How much start-up capital is currently available and how much should be financed from other sources?
  7. How do we fund the missing capital? (partner involvement, borrowing, venture capital, etc.)
  8. To what extent is the entrepreneur liable?

After answering the above questions, should you make the first decision: Do you operate as a self employed or as a company?

 

Self employed vs. Corporate business.

If you decide to start an independent business, you need to decide how you want to start your business. You can get started alone or with your partners. As a self-employed, you are self-employed and, of course, you can employ an employee. In this case, you are taxed according to the personal income tax rules and your business results are included in your personal income tax return.

If the prospective entrepreneur feels that he / she needs the involvement of partners to carry out its plans, it is worth starting a social enterprise. In this case, at least 2 volunteers can join together after the registration with the Commercial Court. Taxation is separate from own assets and is subject to the rules of the Corporation Tax Act.

 

 

Starting a business in an individual or corporate form depends on several factors, perhaps the most important:

– what type of activity do you intend to undertake (trade, service, production, etc.)

– the contractor has all the competences required to carry out the activity,

– have sufficient capital to start a business,

– knows or wants to take responsibility for the activity or its results,

– the extent to which it is likely to produce results during the various stages of its operation (eg a marketing year).

 

 

Start-up and characteristics of a self employed

‘In the territory of England, a natural person… may carry on business as a self-employed on a regular basis, in the normal course of a business, for profit and gain.

Self-employed can be:

– natural person,

– of sufficient nationality,

– capable of acting,

– is not punishable,

– fills in the notification form correctly

You can start a self employment after you submit your application. The notification can be made electronically via the so-called. Through the customer gate or in person at the competent office.

 

The notification shall include the following information:

 

– the applicant’s forename and surname, forename and surname at birth, forename and surname of his/her mother, place and date of birth, address for service, address for notification, nationality,

– the principal activity and any other activity which it intends to pursue,

– the address of the head office and, where appropriate, of the establishment (s) and branch (s).

Contrary to the above, it is no longer compulsory to have an entrepreneurial certificate to continue the business. The certificate received after notification is sufficient.

If the contractor wishes to carry out an activity which is subject to official authorization, it may his/her commence its activity until the authorization has been obtained.

The self employed shall calculate and declare the results of its activities for each financial year, on the basis of appropriate accounting records, in accordance with the personal income tax rules and thereafter (by country). The declaration can also be submitted electronically.

Any change, suspension or cessation of activities of any of the undertakings notified shall be notified to the registration authority, but shall only be made by electronic means. He/she is solely responsible for the activities of the sole trader.

Common characteristics of corporate enterprises

Let’s first introduce the concept of a “legal entity” to introduce a corporate business. The self-employed described in the previous chapter is a natural person who by birth has certain rights, for example, to commit itself, contract, etc. This right exists until death, unless for any reason it is necessary to limit or exclude its capacity to act (eg a mental disorder).

A legal person is a right that is obtained from the state and is created on request. In this case, an organization has rights and assets separate from the founders, and may incur liability, contract, etc. on behalf of and under the responsibility of the organization.

 

The establishment of partnerships requires a memorandum of association (or articles of association). The contract shall include:

– the name of the business;

– its headquarters;

– the purpose or principal activity of the undertaking;

– the name, home or headquarter of the founders;

– the amount of the registered capital

– the financial contributions to be made to the undertaking, their value and the method and time at which the assets were made available; and

– details of the first manager of an undertaking,

– the duration of the business (if not indicated, it will be of indefinite duration).

To the extent that the company has a Supervisory Board and / or an auditor, these should be specified in the articles of association.

Establish a mandatory supervisory board if the company has more than two hundred full-time employees on an annual average. The Supervisory Board shall consist of three members.

The business is created with the registration of the Court of Registration.

The highest decision-making body of a company is the law in every country. As a general rule, it shall meet at least once a year where the annual accounts are approved. In addition, it is the supreme body that makes decisions on major issues and strategic decisions.

The operations of the company are managed by the management and are responsible for making decisions regarding the operation of the company that are not within the authority of the supreme body.

 

Here’s how your organization can change:

– Transformation: the company will be a different type of company (eg from a limited liability company to a public limited company), in which case its predecessor will cease and its rights and obligations will be exercised by the successor organization

– By merger: two or more companies merge into one organization, a new business is created (the company being acquired ceases to exist)

– By division: separation (the legal entity is dissolved and its assets are transferred to more than one legal successor as a result of the legal separation) or divorce (the legal entity survives and part of its assets is transferred to the legal entity which is the legal successor.)

– With termination without legal successor (eg at the end of the term specified in the articles of association, the number of members has decreased and there are no new members, etc.)

– Group of companies: Recognized group of companies is a partnership policy based on a single business policy, as defined in a domicile agreement concluded by at least one dominant member and at least three members controlled by the dominant member. Members of the group of companies may include joint stock companies, limited liability companies, mergers and cooperatives.

 

Based on the above we offer our company formation services in 7 continents of the world.

 

Best regards:

Symfalogic Corporation

Management