Forming An Organization

     After traveling to many communities around the country and working with boards of organizations as well as meeting many college students, I have noticed a positive trend.  While this conclusion isn’t backed by research, rather by observation, it seems that many start their own businesses and organizations. I have seen a variety of different approaches such as those who start their modest clothing lines. sell products on Amazon, provide coaching services, establish organic markets, develop mobile apps for the medical industry, offer wedding planning services, and many more Halal business ventures. This spirit of ethical and socially conscious entrepreneurship is a positive sign of leadership. 

There are many reasons as to why some people attempt to start their own businesses. Some do so for the following reasons:

  • To emulate and follow role models who were successful businessmen and women. 
  • To repel poverty. 
  • Turn an idea they are passionate about into reality.
  • To support their families and pay off their debts.
  • To enjoy a certain quality of life and gain financial freedom.
  • To be able to spend more family time due to their stability.
  • To spend more time in volunteering and giving back to the community.
  • To have autonomy and flexibility in managing their own schedules.
  • To provide better alternatives to what exists in the market.
  • To become producers and not just consumers.

I constantly get bombarded by many questions, and some revolve around identifying a business model and others revolved around the differences amongst forms of organizations.  As for the business model, several years ago I learned about developing one which helped me in my own HR consulting business. This model enables you to brainstorm and to have a broader picture of the internal and external elements of your business operation.  We have to do our part and ultimately as Allah says:  “In the heaven is your provision and whatever you are promised.” (51:22)

  • Business Model
    • Value proposition
      • What value (products and services) are you offering?
      • What problem are you eliminating or reducing for your customers?
      • What is unique about your products and services?
    • Customer segment
      • Who are your target customers?
    • Channels
      • How do your competitors reach your customers?
      • What are the most efficient and cost efficient ways to reach your customers?
    • Customer relationships
      • What is your customer acquisition price?
      • How do you attract and retain your customers?
    • Revenue streams
      • What is your pricing strategy?
    • Key resources
      • What and how much resources do you need to fulfill your value proposition, distribution channels, customer relationships, and revenue streams?
    • Key activities
      • What do you have to do in order to fulfill your value proposition, distribution channels, customer relationships, and revenue streams?
    • Key partners
      • Who are your partners and suppliers?
      • Which resources and activities are you receiving from your partners?
    • Cost structure
      • What are the costs associated with your business model?
      • What are the most expensive key resources and activities?

I wish you the best of success in building your business.

Best regards,
Mohammed Almathil

Different Forms of Organizations

     While many aspire to start their own businesses, most are confused about the legal entity of their business.  For those who have asked me about the differences between various forms of businesses, here is a quick, basic, and high level breakdown of the most common legal forms. Please note that in this blog, I avoided listing another form which is non-profit organizations since it is not tied to the previous blog in terms of increasing your personal revenue.

  • Sole Proprietorship: This form of business is owned by a single  person.  
    • Advantages:
      • Very easy to form.
      • It is the least regulated legally.
      • Revenue is taxed only once as personal income.
      • All profits gained are kept by a single owner.
    • Disadvantages:
      • The business is limited to the life of the owner. So if he/she dies, the business dissolves.
      • The owner has unlimited liability which means creditors can go after his/her personal assets.  
      • It is limited in capital as the owner can use mainly his/her personal wealth or borrow money, which limits many business opportunities due to insufficient funds.
  • Partnership: This form of business is owned by two or more individuals or even entities.
    • Advantages:
      • Relatively easy to form.  
      • Risk is minimized and shared between multiple individuals.
      • More capital can be raised since there is two or more owners.
      • Revenue is taxed only once as personal income.
    • Disadvantages:
      • The partnership ends when a partner dies.  
      • Relatively more difficult to transfer the ownership of the business.   
  • Corporation: Intends to make an impact and maximize profits for the owner, whether it be one or more individuals or entities.
    • Advantages:
      • There is limited liability in the sense that creditors cannot necessarily go after the personal assets of the owners.
      • A corporation has an unlimited lifespan and transferring ownership is relatively easy.
      • In general, there is a separation of ownership and management. Owners are usually members of the boards, and if feasible, they hire a CEO and a management staff. Startups are different in the sense that the role of the owners is to manage the organization until it becomes financially feasible for them to hire and recruit a management team.
      • It is easier to raise capital.
    • Disadvantages:  
      • There is an agency problem from separation of ownership and management.
      • Double taxation. Income is taxed at the corporate rate and then dividends are taxed at the personal rate.

There are more but decide between the above as you see fit and depending on your situation. You might also want to consider delegating this task and spending money in order to save yourself valuable time. While this is not meant as an endorsement, but rather to give you a sense of direction, there are many companies that offer online services to register and form your business. One such service that I have used to register two of my businesses is: LegalZoom.com

Best Regards, 

Mohammed Almathil