Setting up as a business with purpose
Choosing the right business structure will set you up for future success. Choosing the right structure will depend hugely on your business idea, team, vision, goals and activities. Below are five administrative structures that are worth exploring for your sustainable fashion business.
Depending on your geographical location and local/national laws, there may be several options for setting yourself up and registering as a small business. You may choose the most basic form, which should be some version of Sole Ownership. Or you may choose to register as a Limited Company (yourself or in partnership with a few others), which is the most common form of small business. Either way you (and any other owners) will be afforded a lot of flexibility but you also assume a lot of the business risk, liabilities and responsibilities. Limited Companies (LCs) typically benefit from some sort of tax incentives. Most countries should have some version of these two small business types and often there are many variations of LCs.
A corporation is more complex and generally suggested for larger, established companies with multiple employees. If you are a bit further into your fashion business journey and ready to expand your team, you may think about becoming a corporation. Your sustainability efforts would be part of your corporate responsibility programme.
In some countries, you can officially register as a social enterprise, an organisation that applies commercial strategies to maximise improvements in human and environmental well-being - this may include maximising social impact rather than profits for external shareholders. It’s a “more than profit” approach to doing business. Social enterprises can be for-profit or non-profit and take many different forms depending on the country you are based, such as: benefit corporation, mutual organisation, community interest company and social purpose business. Social enterprise structures have become popular over the last few years and are well aligned to the aims of a sustainable fashion business.
Co-operative / Mutuals
Co-operatives and Mutuals are democratically-owned businesses which give employees, customers or members a direct stake in the business. Co-operatives frequently have social goals but not always. It is mainly about mutual benefit amongst stakeholders. The principles of cooperatives often encompass democracy, equality and solidarity. You may think about a cooperative structure for your sustainable fashion business if you care about these principles and want to have your community invested in what you do. Did you know that British retailer John Lewis, American sporting goods retailer R.E.I. and Whole Foods are all co-operatives or mutuals? Co-operative structures tend to run for a very long time, but they are not very nimble nor flexible. The more people you have involved in decision making, the harder it is to move quickly.
Non-profit / Charity
Again, depending on your geographical location, there should be a form or many forms of non-profit or charitable status that your business could register for. This could also be in the form of a trust or foundation. Non profits and charities are essentially service organisations and benefit from the most significant tax incentives but are typically more complicated to administer. Your business must exist for a purpose other than making profits. You should consult business or legal guidance about which of these options, if any, are best for you.
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