Your Friend Jason, a medical student has been grappling with a business idea of

Question

Your Friend Jason, a medical student has been grappling with a business idea of making incubators that are solar operated for low resource countries in sub-Saharan Africa. However, Jason has not taken an Entrepreneurship class and is not any closer to starting his business, so, he reached out to his friend –you, because you currently taking this course Advise your friend Jason about taking his business idea from mere idea to actually starting the business. Your response should include, but not limited to, • Informing him of the necessary steps he needs to take to avoid wasting his time and money. • Educating him about the importance of knowing what legal forms his business should have. • If you had the resources, what would make you invest in Jason’s business?

Explanation / Answer

1 Necessary steps he needs to take to avoid wasting his time and money The first and foremost step to be taken is to chose the type of entity based on the Pros on cons of each type of the business entity structure. Type of entities which can be considered are: Sole proprietor, S-Corp , LLC etc. Things to remember while considering the entity structure are: Personal tax , tax benefits by choosing the right entity type, maintenance of the firm etc. Protecting the product which Jason want to sell: To take the intellectual property right is one of the main thing which should be considered if the product is new to the entire market. This will help reducing the competitor and try to build up the monopoly in the market. To take the early entry in the market and to earn high profits at the initiation of the business. Sign the necessary agreement with the vendors: The agreement in this case may include the name of the party, type of services being offered by the firm, payment terms, mode of the payments, protection of Intellectual property rights etc. This is though important to it makes the obligation more clear and helps in smooth running of the business. This also helps in building good relations with the concerned parties and create a goodwill in the market. Conduct necessary research for the business with the proper utilization of available resources. Becoming multitasking can help in reducing cost and effectiveness of the business. 2 The importance of knowing what legal forms his business should have This is again necessary based on the type of business entity structure Jason is choosing. This can avoid legal conflicts the firm may have to face if the proper form are not submitted with the regulatory authority. Even the tax authority can put the claim on business if the proper filing is not done and on timely basis. In order to avoid such circumstances it is necessary to get the complete legal knowledge about the business. 3 What would make you invest in Jason’s business? The type of opportunities which can generate if the resources are employed in the firm. Understand the legal structure of the firm is essential to make decision to invest in business. It is also important to know the number of years without return. Since a startup can take many years to get the breakeven. Even the idea presented is effective or not, which means the scope of the business, growth rate, initial year profits or revenue.

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