Owning and running a business requires a lot of work. It is not an easy task, but it is achievable. Compiling a business plan is a good first step towards actualising our business idea and goals. A business plan includes a business profile, goals and objectives of the business, market analysis, and financial projections among others. A business profile presents details of the business such as the business name, company registration details if applicable, details of the shareholders and details of individuals employed by the business. The following section presents the mission or purpose of the business, the vision or long-term goals of the business, the objectives or short-term goals to achieve the vision of the business, as well as monitoring systems to track the progress of the business. A market analysis involves an in-depth investigation of the characteristics of our target market, how our business idea may be received by our target market, any competitors in our market segment, the effects our business idea may have on other markets and the economy, and any sustainable or development activities associated with corporate social responsibility. The financial projections section presents how our business plans to make a profit to keep operating, as well as the calculation of anticipated profits, usually done over a period of the first five years. Once again, a business plan is good first step towards achieving our business goals and increasing our probability of having a successful business. The consideration of adding entrepreneurship to our personal financial planning is a creative way of acquiring additional income with or without going down the traditional route of saving and investing. Therefore, we still have to be mindful that we are at the centre of our now identified corporate financial planning aspirations. We must remember that we will run our business and without us, our business may cease to exist.
Our financial planning topic for this week is THE CORPORATE PROCESS. There are two ways in which we can own a business entity. It includes building a new start-up business entity or buying an already existing business entity. Buying an already existing business entity has some of the work done for us and building up a new start-up business entity involves a lot more work.
Should we decide to embark on running a business entity that is governed by the Botswana Companies Act, we must legally register our company. We must register our business with the Botswana Companies and Intellectual Property Authority (CIPA). Other than contacting their phone lines, directly accessing their services online (exempting social media platforms) have deemed troublesome. Therefore, we can either physically visit their offices, visit the online Government Portal to know the requirements for company registrations or make use of the services provided by industry consultants to assist us with the start-up process.
CIPA is currently undergoing a transition to reduce physical visits to their offices. They will be soon launching an Online Business Registration System (OBRS) that requires existing businesses to re-register online. Though currently unclear, this transition may affect the change in the ownership process required from undertaking an existing business entity. If you are already the owner of a business, it may bring up emotions of frustration to re-register online when CIPA already has physical copies of your original business application and registration. However, CIPA has confirmed their good news that indeed any business that re-registers online from the 3rd of June 2019 until the end of the transitionary period will not be required to pay their current outstanding annual levy and penalties (usually referred to as annual returns).
Also, there used to be a convenient online platform to check the availability of company names without paying the company name reservation fee submitted along with our company registration forms. We can only hope that the launch of the OBRS may bring it back up into operation in the future.
Upon the successful registration of our business, we can now register with the Botswana Unified Revenue Services (BURS) to comply with our corporate tax laws. We can find out more information by visiting their very informative website. BURS also has a convenient online E-services platform that can save us time when submitting and paying our corporate related taxes. We can register for these services online and then visit their offices for approval. Be mindful that we can personally register for these services as well to improve the tax efficiency process in our personal financial planning.
With our business registration, corporate tax registration and obtaining the necessary trading licenses, we can explore business insurance. Every business heavily relies on someone or a group of individuals for its success. This may be us (the owners), directors, sales staff or technical professionals. Therefore, it is important to undertake a risk management strategy such as a key person insurance cover to protect our business.
Key person insurance
Key person insurance is a special business insurance cover that a business can take out on behalf of its most valued employees.
Benefits of having a key person insurance cover include:
· To cover death, severe illness and disability – as a way to acquire a replacement in the event of the death of a valued employee, with consideration to experience, skills, recruitment and training
· To secure a business banking account overdraft – as the insurance part of the loan repayment agreement
· Act as a personal guarantee – beneficial to a business that has a business loan. The insurance will pay-out for the business to acquire the deceased key director’s shares instead of them being taken over by the bank.
· To cover a shareholder’s loan account – in the event of a business having a liquidity problem, the insurance monthly payments can be deducted from the shareholder’s loan account. A shareholder’s loan account is the funds they have invested in the business.
· To cover a mortgage bond – a business entity with legal identity can own its own assets thus can take out a mortgage loan for business premises in which it operates. Thus, upon the death of a managing director, the insurance will be paid out to cover the property debt.
· To provide a cash reserve or business emergency fund – some insurers provide a premium payback or avail certain amounts of funds at a later date as part of value addition to their clients. This does not affect the pay-out amount to satisfy the main purpose of taking out the insurance cover.
Other risk management and investment strategies a business can undertake for improved success rates include having a pure business risk insurance policy, a business savings account, the purchase of shares in the stock market and the purchase of an investment portfolio.
We must keep the aspects of our personal financial planning and corporate financial planning separate but considerate of each other. Such as keeping track and noting down how much of our personal funds we use for our business. This is very important because any personal funds we use for our business can be recorded as a donation, business loan or investment in our personal and business records. Know that the concepts of donations, loans and investments have various benefits in personal and corporate taxation planning. All the best with exploring the initial corporate process involved in corporate financial planning.