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OUGD502 - Life's A Pitch - Financial Considerations

In a hope to figure out what kind of business we would be starting up, I researched into the different kinds of businesses that you can have and we discovered that we would be a Private Limited Company.

Company – the correct name for this is a joint stock company and it’s made up of a number of people who put their money together to form a ‘joint stock’ of capital. These people are more commonly known as shareholders and, as the name suggests, they each own a share of the business and each expect a share of the profits too.
Each shareholder puts money into the company and receives a portion of the company – shares – equivalent to what they put in.
Despite each shareholder owning a piece of the company, in law it is seen as a legal entity – the same as an individual – that is entirely separate from the shareholders or members, as they are sometimes known. It can be sued, make a profit or loss, be held responsible for its employees’ actions and go into liquidation – the term used for companies that go bankrupt.
Private Limited Companies – Most small businesses are private limited companies with the shares only available privately, for example, to family members. The shares are not available to buy publically so they cannot be traded on the stock market.
Accountant - I found through a business forum site that the going rate for an accountant is £500-£1000 per year so we decided to go for a mid-range priced accountant at around £750 a year. This would help us organise taxation documents and the best ways of organising our finances in the eyes of the government.
Location - We all decided that Leeds was the place we all liked as a location and could see a future for a design studio. For a start up company we wanted a creative space to work where we could develop contacts with people in other disciplines as well as get work done with good facilities and a friendly and hard-working atmosphere. We discovered a space called Duke Studios where all of this is what they are about.
We sent them an email asking if we could go and visit them and explained to them that it was for a university brief. Their pricing worked out at £425 a month for the space and facilities that we would need for our business, this worked out to be quite a cheap alternative to renting an ordinary office space and then having to buy equipment too. This would also protect cash-flow in the first months of business as we'd be paying for what we were using by month rather than at once.

Website - for our studio's website, we looked at a few different places to gather information and it looked like it would cost us between £100-300 a year to host a website along with all the other aspects necessary like a domain name. We decided we would pay for the top amount for website service because of how digitally orientated the world is. A good website makes a good first impression to potential clients and gives them a better feel of who we are and what we do.

All of the above rounds up to £6240 a year in reflection to expenses, and this doesn't include materials and other forms of expense that the business would be liable to such as promotional materials, advertisements, etc.

John said that on average we'd be expecting roughly £65 an hour as a start up studio but of course this does depend on the work being done and how long it takes, what it is for, what the design entails, etc.

We all agreed that the business needed to earn its own money to expand and grow as a company so we would be able to upgrade our location, promotional materials and service as a whole, at the same time as us getting paid the right amount to keep us alive and happy to work. So we agreed to split up the finances as following for each job:

17% cut for each job for us. 15% cut for the studio.

With earning estimates of £65 an hour for the studio with assumptions of constant work to do.

The studio will earn - £9.75 an hour / £390 a week / £1560 a month / £18,720 a year

Each individual will earn - £11.05 an hour / £442 a week / £1768 a month / £21,216 a year 

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