Lena Gaede

3 mistakes to avoid, when starting a business as a corporation

Imagine you are in the following position: You want to build a startup and funding solutions, capital and an idea for a fresh business are given. Sounds like a dream come true but also a bit unrealistic? Not necessarily, since that’s exactly your starting point when in the shoes of a corporation who is now planning on building a startup. It might seem easy as an established business to enter into the race from the comfortable position of an experienced company but don’t be misled there. Often, the easiest tasks reveal themselves as the toughest ones. In order for you to be prepared we’d now like to share 3 mistakes to avoid when starting a business -not as an individual but as a corporation.

#1: Risk minimization

Whenever you are trying to build a business it’s a matter of course that you want to keep the risk as low as possible. When practicing risk management, it all starts with the question of which enterprise to choose for your business. Actually, of all the choices you make when starting a business, one of the most important is the type of legal structure you select for your company. It will not only have an impact on how much there’s to pay in taxes and how much time to spend in paperwork, but also on the financial risks for founders. In this context, you might want to take into consideration whether you want your corporation to play a key role in your new business or not. The type of enterprise defines decision-making powers and therefore should be chosen wisely.

#2: Starting a business without a real demand

One thing needs to be clear when building a startup as a corporation: It can’t be a better version of your original company. Actually, it can’t be any kind of version of it but needs to occupy a completely new idea and focus. It simply must fulfill a purpose which could not be fulfilled by the corporation itself. Otherwise, asking the question as to why building a startup is actually necessary would be more than justified, right? Make sure there’s a real demand for a new company and that both business models can be clearly separated from each other.

#3: Conflict of interest

Now that you have chosen the right type of enterprise and that you have made sure there’s a real demand for a new business, you also want to make sure there’s no conflict of interest given. Because let us tell you one thing: there’s nothing worse than pursuing different goals when it comes to both business decisions and company performance. In order to minimize the risk, it’s important to previously check on each party’s goals and visions for the company. In addition to that, it’s mandatory to keep in mind that startup and corporation goals cannot be clashing. We don’t need to tell you that there’s no winner of an internal battle, right?

 

So, still in the mood to found your own business? You’ve tasted blood? Browse around and find some more tips, tricks and insights on founding on our CODE_n Blog.

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