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Company formation is not an easy task as many see it, it is composed of an extensive process. When directors are ready to build a company, there is a couple of factors they need to consider.

Company formation is a broad field that involves a lot of things. For directors forming a company, they need to know what type of company they are developing and come up with a good company name. Limited companies are expensive to start as compared to enterprise companies.

These are the fundamental factors, but there exist many factors they ought to consider before getting into company formation. The following factors are worth considering;

1. Company Name and Products Offered

When planning to start a good company, you need to have a good name that can market the company. The name of the company will help you in registering the company. The company should also have a logo; it is essential that it quickly identified with the company name. A good name is a name that is related to the products you offer, and it necessitates considerable thought.

Also, you should have the products the company will be offering; this should be the first thing you should think of as directors. The nature of the products and services that a company offers will name the company. For instance, if it is a technology firm the name should define the firm I relation to technology. A good name gives ease during marketing and launching, and it can also attract many customers to the company.

2. Location

Location is the most crucial factor in the formation of a company. A company should have a strategic location; it will give easy access to customers. As directors, you can choose an area that has excellent infrastructure to provide you with ease in transporting the products.

A good location should be secure, that way your customers won’t feel like they have anything to worry about. After getting the location, you should look for the required money and register the name of the company.

3. Capital

Capital is the most important thing after having a strong company name and choosing a convenient location. For you to start a company, you need to know how much it will cost to start and run. As directors, the main question is whether the company will give a return on investment capital. Capital will allow you to know how big or small you can start your company.

It will also help you in predicting the number of employees you will need for you to form a company. In many cases when the directors lack enough capital, they call investors to provide a certain percentage for a given equity share. If the directors are well prepared with the money, they will have an easy time as they will not be looking for investors.

4. Management and Employees

When it comes to controlling, you should be extra careful as this is where most of the companies fail. A good company should have a well-written memorandum of association and articles of association which should explain everything about the company. The directors should explicit everything about the companies, defining the role of every employee in the firm.

The structure starting from the Chief Executive Officer to the technical and social workers should be well organized and also the position of every manager at a given department. The employee’s salary must be well defined to enable you to have the best employees. When starting the company, the salary scales should not be too high as they will bring you down. It should instead be increasing as you progress.

5. Product Branding and Pricing

Marketing directors play a vital role in product branding. They should conduct research that will enable them to brand their products. When banding your products, you need to consider the nature of the products. The products the company offers will determine how the directors will have them branded.

The kind of market will determine the price of the products; the products will be expensive in urban areas as compared to the rural regions due to the cost of operation. The products’ price should be able to pay for all the expenses and give the company the profit. The cost of production is inclusive of all the fees until the product or services arrive at the required destination.

6. Marketing and Advertising

The directors should determine the company’s market first before doing advertisements. It is crucial to segment the market such that you can be able to establish potential markets. It is also vital to know the markets that require certain products or services as it will help you to avoid overlap during supplies.

The nature of the market determines the advertising methods to use, for example, the rural areas will much need personal selling as a method of advertising your brand. It will help you in reducing the expenses required in advertising as the regions that require personal selling will not need much capital.

7. SWOT Analysis

Addressing strengths, weakness, opportunities, and threats are critical to company success. The company’s directors have to do this analysis to enable them to determine the viability of the company.


They should identify the advantages of the company they are forming; the strengths will help them know how to deal with competitors in the market


No company will ever miss weaknesses. The directors forming a company must define the shortcomings of the company they are trying to develop. Gaps will help the company on how to deal with complex situations that arise.


Every company has openings; they are the one that leads to the formation of the company. The directors should determine the available opportunities in the market so that the company will fill the necessary gaps that exist.


Threats exist in any market as sometimes there exist the monopolistic businesses in the market. They are the critical factors of consideration before starting a company. The directors must define the ways to deal with those firms for the company to exist.

The SWOT analysis is the crucial component of establishing the viability of a company before its formation. It should be analyzed well to avoid realizing opportunities or threats later.

In a nutshell, directors play a dynamic role in company formation. As directors, you should follow the due process and factors to form a company. The company formed should be able to fill or solve the existing challenges in the market.

The company should implement the current trends in business, and this will help the company stand out from the competition. For instance, the present technology in business should be incorporated into the company and the legal process.


Written By
Flonja Flavia is a freelance writer, available for content creation, editing, and proofreading. She advises and helps implement social media strategy for green and sustainability businesses, and she enjoys the conversational nature of engagement with readers and customers

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