For some enterprising individuals, the thought of building a successful business from the ground up is a challenge they relish. For others, the thought of establishing a business this way may be confusing due to lack of experience and business acumen.
Fortunately, these persons do not have to abandon their dreams of entrepreneurship; there’s the option of purchasing an existing business which helps the would-be entrepreneur avoid much of the costs and mistakes associated with starting a new enterprise.
The confusion over the steps necessary to set up a legal business causes many to either set up their operations in a way that is not fully compliant with legal or industry standards or walk away from their dream of being an entrepreneur.
For those of you who like the challenge, here are some steps that the budding entrepreneur can take to develop his or her idea into a legal and successful structure:
Get an advisor
The entrepreneur may feel the need to do this alone or may be relying on a partnership with others who also lack experience and acumen to make sound decisions. It is advisable that all new entrepreneurs get an advisor who can act as a sounding board to help evaluate ideas especially as there is no “boss” present to turn to for approval. Having access to the advisor’s wisdom developed over years of experience can be invaluable to a young company’s survival.
Deciding on a structure determines several factors of the business. For example registering the business, taxation and other legal requirements are all determined by the type of structure you choose for the company.
There are three legal structures of business that can be entered into in Barbados. These are a sole proprietorship, which is a business owned and operated by a single person: a partnership, in which case, two or more persons collaborate to run the business for profit; a corporation, which is an independently operated legal unit, owned by shareholders rather than a single person.
Fulfill the legal requirements to operate your business
In order for businesses operating within Barbados to be considered legal structures they should be registered with several Governmental departments for respective licenses.
Register with Corporate Affairs
Register your company with the Corporate Affairs and Intellectual Property Office to protect your product, company and brand names, logos and avoid infringing on others’ trademarks.
Register with NIS
When an entrepreneur registers with the NIS, he/she will be assigned an employer’s national insurance number to enable him/her to pay the contributions for self and employees.
Register with Inland Revenue
Business owners are responsible for deducting tax at source and paying into Inland Revenue. All employees who are paid in excess of $481.00 per week or $2,083.00 per month are required to pay income tax.
Register with VAT Division
Varying categories of business in Barbados have to pay Value Added Tax (VAT). Therefore, one should contact the VAT Division to determine whether one’s company falls within one of these categories and the process of registration for VAT.
Obtain Respective Sectoral Licensing
Different sectors may require different licenses and one should contact the respective authorities for the respective sector to determine whether you need a license especially if you will be selling liquor, working with children or food, in the medical profession or finance.
Contact Customs Department
If there is the need to import any equipment or products for the company, contact the Customs Department to get any duty concessions or import licenses.
Contact Government and Private Sector Agencies
There are several government and private sector agencies that can provide useful information for business owners. It is worthwhile to consider joining the Barbados Chamber of Commerce and Industry, the Barbados Manufacturers’ Association (if you are producing a product) as well as researching services offered by Invest Barbados and the Ministry of Economic Development, Innovation, Trade Industry and Business
Cash flow is a need for all companies, especially new firms that lack financial backing to steady the young venture. Therefore, investigate all available sources for financial investment in the new company such as grants, loans, venture capital and even private funding and choose those that best suit organisational requirements.
Buying a Business
There are several considerations one needs to consider when purchasing a business.
Research – Conduct research on businesses within the industry that you want to enter and determine which suits your purpose the best.
Investigate – At this point investigate the business as much as possible from the outside – its finances, operations, staff and customers, suppliers and purchasers, contracts, sales records, and marketing documents that may be available to determine the soundness of the business. Some important documents may be hidden until the production of a letter of intent at which point you would be given the opportunity to have a more detailed investigation.
Valuation – Get an independent valuation of the worth of the business.
Professional Assistance – Get the help of an accountant and a lawyer to help investigate the legal and financial documents of the company.
Letter of Intent – This will set out the proposed terms and conditions of the purchase including price and is not legally binding.
MOU with each strategic partner – This will describe the proposed agreement between all parties and outline the actions expected of all parties.
Due Diligence – Each investor needs to ensure that he/she is making a sound investment. The best way to do that is a detailed investigation of the internal operations and business documents of a company that would not have been available prior to the delivery of the letter of intent. These include legal and financial documents and depending on the industry they may also show safety and other standard certifications.
Purchase agreement – This is a legal requirement to set out the terms of purchase or lease and show that both parties agreed to the transaction. This will show that the ownership of the business is transferred to the purchaser along with all equipment and possessions of the business.
Buying a business may appear to be the easier way to achieve your entrepreneurial dreams however, there are additional considerations that can be more costly than starting your business from scratch.
Ultimately, the process of starting or buying a business is not as complicated as one would think as long as one does not attempt to complete the process alone. There are organisations such as the Barbados Investment and Development Corporation (BIDC) and the Barbados Small Business Association (SBA) to help advise and train young entrepreneurs, traditional and new ways of gaining funding such as Barbados Entrepreneurs Venture Capital Fund and various legal, marketing and accounting services to help with the process of establishing a company.