I decided to approach this problem from a Finnish point of
view. As it is most likely, that one of us will create a business in Finland,
under Finnish laws. Therefore, my apologies in advance, some of the sources are
in Finnish.
- Legal Requirement for a start-up
As one can imagine, the laws vary a lot, depending on what
kind of a start-up you are creating, Sole proprietor, partnership, LLC, S-corp
or C-corp.
In Finland, the company forms are: 1.Sole proprietor (where
you are personally responsible for the company, 2. Osakeyhtiö (LLC, with a
capital stock of min. 2500 euro, you are responsible through your investment, board
position, and possible security guarantee). These two options are suitable for
those who create their startup alone. For those that create their startup with
partners, there are a few options: 3. Avoin yhtiö (Partnership, at least two
partners with joint responsibility), 4. Kommandiittiyhtiö (Limited partnership,
at least one responsible partner and one silent partner), 5. Osuuskunta
(Co-operative, with at least three partners)
Per the
Finnish Business and Corporate Law, 1§-22§, the main legal stages of creating a
business are as follows:
- Choosing a company form
- Is your business subject to notification or licensing? Apply for those if necessary
- Make a notion of the start up to the YTJ Business Information System
- Register as VAT-obligated,
- Register to the Trade Register
- Register to the Prepayment register
- Register to the Employer register
- Organize mandatory business Accounting and relevant insurances.
2. Basic of Business Accounting
Accounting is often seen as
difficult, due to the many complicated terms used for the systems. In this link
you will find the terms listed and explained: http://www.rasmussen.edu/degrees/business/blog/basic-accounting-terms-acronyms-and-abbreviations-students-should/
The ABC of accounting can be found
here in Finnish: https://taloushallintoliitto.fi/kirjanpidon-abc
Assets= liabilities + equity
Assets= cash, accounts receivable,
inventory, property or equipment
Liabilities= loans, accounts payable
Equity= own investments
Total Debits= Total Credits
By using the Double Entry System, you will keep the Debits
and Credits equal.
Accounting systems:
Account charts à
Journals à
General Ledgers à
Trial Balances à
Balance Sheet (Financial Statement)
Account charts: Charts of all existing Debit and Credit
accounts
Journals: All transactions (debit and credit) are entered as
Journal entries, where equal amounts of credit and debt are aggregated within
different accounts, for ex. A Business trip costing 800 Euros, is a debit
transaction of 800 euros from the Travel Expenses account, into an 800 euro
credit transaction in the accounts payable account. Journal entries always have
a description ie. Business trip to New York.
General Ledgers: All transactions posted into a particular account
get added up in a General Ledger
Trial Balance: Listing of all balances in each of the
General Ledgers, their total sum should be equal (Total Debits = Total Credits)
Balance Sheet: From the Trial Balance, the accounts are
sorted into Assets, Liabilities and Equities.
3.Financial planning for startups
Financial plans should be completed at least once a year,
and updated monthly. It gives you (and potential investors) a clear idea on short
and long term prospects of your business, profit potential, SWOT, amount of
financing needed to succeed.
There are a few key elements to Financial Planning:
- Estimate your costs, have at least 6 months in advance.
- One time costs vs. ongoing costs
- Essential vs. optional costs
- Fixed vs. variable costs
- Project your cashflow
- Figure out financing methods
Creating the Killer Business Plan:
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