BUSINESS ORGANISATION:SETTING UP
The first and the foremost question for you as a prospective exporter has to decide is about the kind of business organisation needed for the purpose. You have to take an important decision as to whether the business is to be run as a sole proprietary concern or a partnership firm or a company. This selection of organisation depends on (I) your ability to raise resources (ii) your risk bearing capacity (iii) your ability and desire to exercise control over the business and (iv) nature of regulatory framework you would like to apply.
PROPRIETORYSHIP CONCERN:
For a small business, it would be advantageous to form a sole proprietory business organisation. It can be set up easily without much expenses and legal formalities and subject to only a few government regulations. However, the biggest disadvantage of sole proprietorship business is limited ability to raise funds, which restricts its growth and also a single person has to look after all the aspects for which he has to manage his supervision properly, even though the proprietor has freedom, free from conflicts and unlimited personal liability to run the show.
PARTNERSHIP CONCERN:
In order to avoid this disadvantage, set up a partnership concern with ease and economy. Business can take benefit of the varied experiences and expertise of the partners. The liability of the partners though joint and several, is practically distributed amongst the various partners, despite the fact that the personal liability of the partner is unlimited. The major disadvantage of partnership firm of business organisation is that conflict amongst the partners is a potential threat to the business. Partnership firms are governed by the Indian Partnership Act, 1932 and, therefore they should be formed within the parameters laid down by the Act. For details as to these parameters viz, essential ingredients for the formation of partnership firm, maximum number of partners, types of partners, registration under the Partnership Act, 1932 are to be taken into account.
SETTING UP A COMPANY:
Company is another form of business organisation, which has the advantage of distinct legal identity and limited liability to the shareholders. It can be a private limited company or a public limited company.
A private limited company can be formed by just two persons subscribing to its share capital. However, the number of its shareholders cannot exceed fifty, public cannot be invited to subscribe to its capital and the members’ right to transfer their shares is restricted.
PUBLIC LIMITED COMPANY:
Public limited company has a minimum of seven members. There is no limit on the maximum number of its members. It can invite the public to subscribe to its capital and permit the transfer of shares. A public limited company offers enormous potential for growth because of access to substantial funds. The liquidity of investment is high because of easiness of transfer of shares. However, its formation can be recommended only, when the size of the business is large.
In case it is decided to incorporate a company, the same is to be registered with the Registrar of Companies.
SELECTION OF NAME OF THE FOREIGN TRADE ENTITY:
Selection of name of the foreign trade entity is very important as the name always has to be very attractive and it should indicate what your concern is. For example, being in foreign trade, one has to take into account the word International, Overseas, etc. to immediate convey as to what we are doing. Even the name should be very selective and appealing.
LOCATION OF FOREIGN TRADE ENTITY:
Your foreign trade entity must be located at a place which is easily accessible and is in the central place. As you are likely to be visited by foreign customers, its set up should be according to the trends of time.
CHOOSING APPROPRIATE MODE OF OPERATIONS:
You can choose any of the following modes of operations :
(i) Merchant Exporter i.e. buying the goods from the market or from a manufacturer and then selling them to foreign buyers.
(ii) Manufacturer Exporter i.e. manufacturing the goods yourself for export.
(iii) Sales Agent/Commission Agent/Indenting Agent i.e. acting on behalf of the seller and charging commission.
(4) Buying House i.e. acting on behalf of the buyer and charging commission.
TYPES OF EXPORT:
Exports are of two types:
Physical exports: It means when the goods are sent out physically from India
Deemed Exports: When the goods are supplied within India
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