Frequently Asked Questions

 Q.

Who is the first to benefit from a business plan?

A.

The entrepreneur!

The entrepreneur needs a business plan as an indispensable tool for preparing and planning his venture. It should answer fundamental questions, such as:

• Did the plan take everything into account?

• Is the plan consistent with present and future market situations and objectives?

• Does the venture have the right resources (people, money, equipment, market information, intellectual property protection, outside network, etc.) to succeed and convince possible investors or partners?

 Q.

What kind of company structure should I use?

A.

The most important business structures are: 

• sole proprietorship

• limited company

• stock corporation

There are significant differences with regard to cost, risk, flexibility and liability. A legal advisor should help you identify the most suitable for your project. (More details in the following question).

 Q.

Which business form is the best one for me?

A.

There is not one best solution, but different situations require different structures. Here is an overview indicating some key advantages of each structure:

Sole Proprietorship

When you start a business alone and under your own name, it implies that your business

is a Sole Proprietorship.

Advantages :

• no lower requirement on equity

• ease of formation

• no legal formalities

• low costs to create and operate

• the net profit of the company is taxed as income of the owner

Disadvantages:

• only 1 owner

• unlimited personal liability (the business = the owner)

• risk of personal bankruptcy

• the name of the company has to include name of the owner

Limited Liability Company

A Limited Liability Company offers better protection (less liability) than a Sole Proprietorship or a Partnership.

It also implies a higher cost than a Sole Proprietorship. The company starts to exist when it is registered with the Secretary of State.

Advantages : 

the company is a legal entity on its own

the company can relatively easily be transformed at a later stage into a Corporation

relatively simple legal formalities

no audit is required by law

Disadvantages: 

• transfer of ownership is cumbersome

• number of partners is limited by law

Corporation

A corporation offers the best protection and the easiest transfer of ownership but includes high costs and strict legal formalities.

Advantages :  

• personal liability is restricted to the capital investment or commitment

• shares can easily be transferred 

• tit is easier to find investors

• the corporation is a legal entity (person) on its own

Disadvantages:

• higher costs to incorporate and operate the corporation

 Q.

Does my company have to pay taxes?

A.

Any company that generates profits pays taxes. Corporations and limited companies pay taxes on their net profit and on their capital. The dividends paid to shareholders are taxed again as personal income.

Your share of the net profit of a (limited or unlimited) partnership or of a sole proprietorship is

added to your taxable income. It will be taxed as such, i.e. only once (the business and the owner are one and the same person).

 Q.

How can I protect my ideas?

A.

There are different methods to protect your intellectual property (=IP). Non-disclosure is the simplest and most secure one. Unfortunately it is difficult to implement and does not provide any legal tool to defend your IP. Legal IP protection only provides the tools to fight infringements, which usually is very expensive and time-consuming. Consulting with an IP expert is a must to set up the most effective strategy to your situation.

As a brief summary, IP protection is available as follows :

Patents

Patents provide protection for inventions. These can include products, processes or sometimes services. The novelty, usefulness and feasibility must usually be demonstrated when applying for a patent . The protection is limited to a certain region (a country or a

group of countries) but can be extended within one year from application. Patents are valid for a maximum of 20 years. Patents are not renewable. 

Trademarks

Trademarks protect a distinguishing name or logo in relation to a product or service. The protection is limited to a certain region (a country or a group of countries) but can be extended to other regions on a first-come first-serve basis. Trademarks can be obtained through an application and are renewable. When a trademark becomes generic, the owner loses the right for protection.

Copyright

Copyright offers protection for artistic creation (text, music, graphic design, 3-dimensional objects and even computer code). All creation are automatically protected without the need to submit an application. The copyright on employee creation normally belongs to the employer

if the work was done within the framework of the employee's job.

 Q.

Where can I find the money for my start-up?

A.

Money is needed to pay for equipment, computers, furniture, cars, operational costs including personnel, telecommunications, marketing, insurance, Research and Development, trials, tests and intellectual property protection, to mention only a few.

Various sources of fund are available depending not only on the advancement status of your start-up (see timeline below), but also on what kind of money you are looking for.

Equity 

Possible sources are:

• Entrepreneur, core team, friends and family

• Industrial and strategic investors

• Suppliers and customers

• Business angels

• Venture capitalists (V.C.)

• Investment bankers

• IPO (Initial Public Offering) 

While some only offer money, others can also provide support, coaching, network or even technical knowledge. A venture capitalist may have deeper pockets but is also

more demanding in terms of management skills and return on investment.

Loans

Possible sources are:

• Suppliers (trade credit or straight loans)

• Customers

• Banks

• Finance companies

• Friends and Family

• Professional investors (venture capitalists, business angels, etc.)

Loans require a repayment schedule and interest charges. They can sometimes be convertible into equity (at the lender's option) or associated with warrants.

Organizations or Institutional Support

Possible sources are:

• Grants (R&D, Marketing, Equipment, etc.)

• Contests Finding money is not difficult. What is difficult is to get that money. This requires a detailed preparation. An extremely solid business plan with an experienced management team are indispensable.

 Q.

What's the best strategy between outsourcing and in-house production for a company?

A.

Keep "in-house" what the company does best ("CORE BUSINESS") and subcontract

 Q.

What is a SWOT Analysis ?

A.

SWOT Analysis is an effective method for identifying the company Strengths and Weaknesses as well as the external Opportunities and Threats. SWOT is used to

make strategic decisions and to correctly position a company on the market.

must therefore be reinforced and exploited. The Weaknesses may prevent the company from achieving its goals. They must be elimininated or reduced. The Opportunities represent what the company must focus on. 

Useful opportunities can come from :

• Unsatisfied market needs

• Trends

• Changes in technology and markets

• Changes in government policies related to the field of the company

• Changes in social patterns, population profiles, lifestyle changes, etc. 

The Threats are obstacles ( i.e. the competition, alternate technology, non availability of money or resources, etc.). Threats cannot be eliminated. The company must try to avoid them or at least limit their impact.  

Please see Entrepreneur Skills and Start Up Tools and Entrepreneurship Courses.