# Unit 28-LO4 Suggest an appropriate legal form and compile a budget for launch

Legal form: Limited Liability Company (LLC)

The budget breakdown for startup costs and assets at the time of launch:

Funding = \$5,000.

Website domain registration and hosting fees = \$240.

First three marketing emails to clients/contacts = \$750.

Monthly website maintenance fee after six months on the site to cover updates, backups, security systems etc…= \$500.

Additional funding of \$5,000 will be targeted to development expenses such as graphic design work; logo design strategies; web management tools; upgrading or purchasing more products, etc.

This project has an operational budget funded for the first year with a projected revenue goal at 36-months postlaunch around a 25% profit margin (4 weeks from start-up).

## Budgeting:

### What scenario analysis on the budget.

X Company has an FTT rate of 25%

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1. If the company pays 25% tax on profit and invests 10% in stocks, how much is there left for maintaining its operations?

2. What if it invests 20% in stocks? How would you calculate the balance here? What about 30% or 40% for taxes on profit and investing profits?

3. How do taxes affect a corporation’s decision to invest in physical or financial assets considering depreciation rates are different from tax rates per sector investment made by an individual investor.

### Calculation of break-even point

The break-even point is the point at which you can start profiting from an investment. It is also called the reversion or return threshold and means that all your variable costs have been covered (amortized) on a certain item.

This calculation varies depending on the type of cost, but it generally relates to sales volumes in relation to price. The break-even point has to do with cents per unit – in other words how much does it cost you for each unit sold? This is usually calculated by dividing total fixed costs by units sold plus variable expenses per unit:

Break-even Point = Fixed Costs / Units Sold + Variable Cost Per Unit

Increasing volume without considering higher pricing can only increase relative waste caused by the waste of overhead and is called “the curse of the broken table” in The Lean Startup.

There are many different types of businesses, but for starters, a sole trader is where an individual makes all the decisions with no need for formal agreements.

A limited company on the other hand restricts who can be responsible for business decisions to those that have accountability rights.

Partnerships are where two or more people work together with joint ownership and share in responsibility and decision making.

A social enterprise is different from a charity in that it has more focus on generating income to reinvest so as to minimize reliance on government grants.

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There are various types of legal forms available depending on the size and structure of the business, all with their own specific pros and cons.

In this task, you will choose a suitable legal form for your new enterprise and prepare a budget setting out how you intend to raise funds.

### Franchising as a start-up opportunity.

Franchising as a start-up opportunity is an excellent way to grow your business and provide the best service possible to customers.

The franchisor will handle all of the initial costs, like research, development, manufacturing, and marketing. They will also provide ongoing support to help you succeed in this new venture.

You are not alone in starting a franchise; there’s plenty of guidance from experts who have been through it before! There are many benefits associated with franchising that make it well worth considering for anyone looking at starting their own business.

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