Whether through over-familiarity or lack of awareness, there’s a risk a key ingredient in the formula for success is being overlooked – the legal form through which businesses operate.
The report calls on government to put legal structures in place, so that all businesses can thrive and benefit from the support mechanisms available. It explores the following four key elements entrepreneurs and policymakers must consider:
- Realising the returns: Success can mean different things to different businesses. The founder’s goals can range from financial security to ‘giving something back’, and increasingly entrepreneurs are looking to be measured on social and environmental goals alongside the monetary returns.
- Investing into the business: regardless of the owners’ final aims, every business needs investment, and most will need more than the founders have saved. How that money is raised, and who from, will have wider implications for the rest of society. As technology changes the ways that can happen, regulators must adapt to new structures.
- Legal characteristics and regulation: The defining legal characteristic of a business form will be whether the business has a separate legal identity from its owner. Who makes the business decisions, who will be liable if things go wrong, and for how much, are vital considerations for those in the business and anyone who might buy from, sell to or be employed by it. The frameworks need to be effective, efficient and trusted.
- Administrative requirements: Aspiring entrepreneurs are often most concerned about the ease of starting up and the burdens of registration and the like. Advisers and existing business owners tend to be more concerned about the long term running costs of annual filings and reporting requirements. Policymakers though must address both, striking a balance between rigour and efficiency.
Lloyd Powell, head of ACCA Cymru, says: “Small businesses are the lifeblood of society, creating and sharing wealth at a local level. It is vital the health and sustainability of all that the right legal frameworks exist to enable every business to flourish. Building trust and managing risk are key elements in enforcing a secure environment for entrepreneurs, investors and customers alike.
“Lawmakers must ensure the legal forms available reflect the needs of a modern economy. The roots of existing forms can be traced back hundreds of years, and while the concepts of trust and economic growth haven’t changed, the way we do it has changed beyond all recognition, and the pace of that change is accelerating. Having the right businesses operating helps governments in two ways: by deepening the pool of talent for procurement purposes and by providing social support and social benefits that the state might otherwise have to fund directly.
“It is vital that government can encourage, protect and regulate effectively the talents as well as resources needed by businesses.”
The report can be found on ACCA’s website here.