BUSINESS
Once the feasibility of a proposed business project is
determined by experts, the proponent may proceed to
assemble the needed resources. This is made prior to
the start of business operations. The resources needed
may contain of the following: (1) initial capital required;
(2) the essential properties; (3) processes; and (4)
personnel.
Initial Capital Required. A new business project
requires initial capital to take care of the following:
1. cost of organization;
2. working capital;
3. acquisition of fixed assets; and
4. reserves.
Sources of Initial Capital. A new business project may
initially be financed by using any or a combination of
various sources. The management of the firm about to
start operations will have to use time and expertise to
avail of credit facilities offered by suppliers and
financing institutions.
Sources of Initial Capital.
A new firm may be financed by one or a combination of
the two main sources of capital: (1) the owners; and (2)
the creditors.
In single proprietorships and partnerships, the owners
may use their savings or sell some of their properties to
provide the initial capital. The initial fund requirements
for the new corporation are raised through the sale of
common stock to the founder of the firm and a small
group of intimates. Creditors consist of friends and
relatives, the government, financing institutions, and
suppliers.
Retention of Control. There is a possibility that at the
promotion stage, outsiders may deprive the promoter
and the founders of control over the new business idea. It
is, therefore, important that certain control measures be
instituted to protect the interests of the promoter and the
founders. These can be attained by using any or a
combination of the following: (1) leases; (2) options and
contracts; (3) franchises and concessions; and (4) patents
and copyrights.
A lease involves an agreement over the use of real property
for a period of time. Leases are used to obtain initial control
of the land and buildings required. The conditions imposed
in lease agreements vary. Some leases require a fixed rental,
while some require other considerations.
An option is an agreement whereby one person grants
another the right to buy a certain property at an
agreed price, at or within a stated future time. Certain
sums of money are required for options, which may or
may not be credited as part of the purchase price.
The retention of required skills and properties can be
achieved with the use of contracts. The fulfillment of such
contracts, however, may be jeopardized by some events
like the death of the person possessing the required skill,
the destruction of the property stipulated in the contract,
and adverse effects of legal claims to the title of the
property by other parties. These risks can be partly taken
care of by life insurance, title insurance, accident
insurance, and property insurance.
A franchise is an exclusive right granted by the franchisee to the
franchisor for the operation of a public utility service, or the selling
or distribution of a product in a specified area. Public utility
franchises are those granted by the government, like those for
electricity and water services. The other type of franchise is the
business format franchise which involves the exploitation of goods
and services, identified by a trademark or a tradename. It includes
the preparation of the blue print of a successful way of carrying on
a business in all its aspects.
A concession is the right granted by the
government to a concessionaire for the
exploitation of natural resources placed at his
disposal for a sum consisting of a minimal
periodic payment plus a percentage of the
income from sales.
A patent gives the holder the sole right to make, use, or
sell his invention during the period the patent remains in
force. Patent rights can be obtained for new products, a
new substitute for existing products, as well as new
production or marketing techniques. The patent holder
may license others to make use of his invention in return
for payment of royalties.
A copyright gives the holder the monopoly on the
exploitation of a literary or artistic work for a certain
period subject to renewal. A variety of rights are protected
by a copyright. For instance, copyright in relation to a
musical composition gives the holder the exclusive right
to:
1. Print, reprint, publish, copy, distribute, and sell a work;
2. Make any translation or other version or extracts or
arrangements or adaptations of work;
3. Dramatize a work if it be a non-dramatic work; to
convert a work into a non-dramatic work if it be a drama;
4. Publicly perform or represent a work in any manner or
by any method whatever for profit or otherwise;
5. Produce or reproduce a work in any manner or by any
method whatever for profit or otherwise. If not
reproduced in copies for sale, to sell manuscripts or any
records whatever of a work; and
6. Make any other use or disposition of the work
consistent with the laws of the land.
A copyright holder may license others to make use of his
rights in return for payment of royalties. Copyright laws
protect the holder for a certain period. The term of
protection for copyright in a musical work, for instance,
shall be the lifetime of the creator and fifty (50) years after
his death. Royalty payments for patents and copyrights
are no longer required when they have expired and have
been reverted to public domain.
