Santiago, a bright high school student in Mexico, hailed from a loving family. Despite their economic struggles, they made the courageous decision to seek a better future by crossing over to the United States. The long-awaited day arrived, and they packed their essentials for the life-altering journey. Santiago recalls vividly the night they were pursued by police cars—a moment of unparalleled fear for him and his family.
For days thereafter, they sought refuge in a relative's home. As weeks passed, their savings dwindled, compelling his father to seek employment. Fortunately, he secured work at a nearby tomato farm, where Santiago soon joined him, enduring grueling 10-hour shifts under the scorching Californian sun.
A stroke of luck came their way when a new government policy allowed asylum seekers to enter a lottery for US citizenship. Their application was accepted, much to their disbelief and joy. Life took an unexpected turn for the better.
Santiago wanted to pursue his studies, but family circumstances compelled him to continue working. One day his uncle, who worked in a factory in a nearby town, visited them. He proposed to take Santiago with him. He mentioned that the working conditions and the salary were much better in the factory. With a heavy heart Santiago’s mother let him go. Santiago promised her that he will work hard and will not let her down.
This new town was incredibly large. It had massive factories and Santiago observed many Mexicans working hard and making good money. Unfortunately, Santiago’s troubles were far from over as the factory he was soon to join caught fire, resulting in severe injury to his uncle. Despite contemplating a return home, he decided to stay, believing he could forge a brighter future in this new place.
Santiago soon found a job as a server in a Mexican restaurant. He quickly won over everyone with his good nature and work ethic. While the salary was modest, the generous tips, complimentary meals, and free lodging, made up for it. Santiago, at last, found a sense of stability in his life.
At the restaurant, Santiago met Maria, a skilled cook who learned her craft from her Mexican mother. Santiago and Maria felt an instant connection, bonded by their shared experiences as struggling immigrants. After work, they would engage in deep conversations about their families and aspirations for a better tomorrow. In each other, they discovered a source of comfort and support.
One day, after serving a wealthy customer, Santiago mustered the courage to ask him about the secrets to wealth and success. This man, Antonio, encouraged Santiago to start his own business. Initially skeptical, Santiago couldn't fathom how someone with no capital or experience could start a business. However, as Antonio recounted his journey from a humble fisherman to a prosperous businessman, Santiago's heart was filled with hope.
Antonio told Santiago that a business is a for-profit venture. He shared his three point C-P-S mantra:
C is for Customer. Clearly understand who your customer is.
P is for Problem. What job does the customer want done? What pain point / problems does he have for which he currently has either no solution or a sub-par solution.
S is for Solution. How does your product / service solve this customer’s problem? What benefits does your product or service provides to the customer, for which he will pay you. Antonio introduced the concept of value, emphasizing, "Your product's benefit is its 'Value,' which translates into dollars during exchange." He also stressed the importance of understanding the uniqueness of one's product: "What sets it apart? Why should customers choose you over competitors?"
Antonio suggested that if Santiago could effectively manage cash flows while executing the C-P-S equation, he would succeed in business
Santiago was inspired. This resonated with a quote by Richard Branson - “ A business is simply an idea to make other people's lives better”.
That evening, Santiago shared the idea with Maria. Excitedly, she proposed the idea of starting a small restaurant together. With her exceptional cooking skills, Maria would manage the kitchen, while Santiago, who was good with people, could handle the front. Their faces lit up with anticipation as they made a pact to one day open their own business, which they would call "San-Maria's Restaurant”.
They realized that they had the essential ingredients for starting a business:
Be good at something
Have an idea (solve a problem with what you are good at)
Have a co-founder
Now, all they needed was to experiment with the recipe, swiftly adapt and refine their approach to ensure success.
After work they both started researching more about starting a business. They found out that the first step was to incorporate the business
Incorporation
A friend introduced them to a lawyer who could register their company with the government. The $1000 fee discouraged them and therefore Maria decided to check if she could incorporate online. A quick search revealed that they could do this online in 20 minutes by paying a mere $200 government fee. It was a simple task.
What they couldn’t understand was how they should structure their company. They learnt that there were three legal structure possible:
Sole proprietorship
Partnership
Corporation.
The first option was the easiest to implement but came with higher taxes and unlimited personal liability for business failure.
The second option of Partnership seemed obvious. But it was similar to the first except that they both would be liable individually and together.
Corporation meant that the business will be a legal entity separate from the owners. The tax would be lower and incorporation provided liability protection.
Santiago and Maria went for the third option. They had to choose a name for their business that was unique and was not already taken. Luckily their first name search for - Sabores de México (Flavors of Mexico) - was accepted.
This was a special day for both and that night they celebrated it with the traditional Pulque drink. Maria made some special - Tacos al Pastor - for dinner.
The next day they learnt that they needed to create a ‘Minute Book’ which is a collection of all corporate records. These documents formalize several business aspects. They found a government website which helped them create various documents that go in the minute book. They learnt about:
Shareholding - They learnt that ‘Shareholder’s Agreement’ describes the ownership details of the company. Owners are issued shares of the company and that there are different class of shares, with different voting rights. Keeping things simple, they went for Class A shares with voting right and agreed for 50% shares each.
They also learnt that at a minimum there should be an annual shareholder’s meeting to review the financial performance of the company and to take other important decisions for the company .
Directors - The shareholders of a company appoint (or remove) directors through a resolution or a vote in a shareholder meeting. Together, these director’s constitute the Board of Directors. The boards is responsible for overseeing the company's activities and making high-level decisions. Through regular meetings, the board takes decisions to ensure that the company operates in the best interests of its shareholders. Directors can arrange for borrowing money for the company. They don’t need shareholder approval to do this. Santiago and Maria came to the realization that they were the sole shareholders, serving as the initial two directors and thereby comprising the entire board. This they knew will change as the company grows.
Officers - Titles like CEO’s, CFO’s etc. are the officers and constitute the management who actively run the company. They are appointed (or removed) by the directors. At this stage of the company Maria and Santiago will be the only officers and they simply chose the title of President and Vice-President between them.
Now, the structure of the organization was clear to them. Shareholder choose directors, who appoint officers who run the company. This is the chain of command as well. The Board is made up of Directors and together they give strategic direction to the company by passing Resolutions (which are recorded and signed). While the officer are the executives who carry out day-to-day business functions. They learnt that usually a corporation protects it’s directors and shareholders against claims by entering into an indemnity agreement.
For their company Santiago and Maria were the two shareholders, the two directors and the two officers.
Bye-Laws - Is the rule book of the company. It is a signed document detailing the procedures and guidelines for the operation of the company.
Initial & Annual return - To maintain good standing, each corporation is required to file first an initial return and then annually a report with the government, on it’s anniversary date. Details of the report vary and the report can be filed online.
The initial documentation proved overwhelming for Santiago and Maria, leading them to question their decision to start a company. They wondered if it was truly worth it. They felt swamped with the documentation and the real work had not even begun. Everything seemed unfamiliar and risky, especially since they were uncertain about securing the funds necessary to launch their business.
Capital
Hesitantly, they asked their friends and family and realized that they could not raise enough money. People who they thought will support them, actually didn’t.
Through a combination of their personal savings and assistance from family, they managed to gather the seed capital required to get started. This was enough to lease a place for a couple of months and buy some equipment.
However, they needed more money to start their operations. So they went to the banks and asked for a loan. With no collateral, zero revenue and zero experience banks refused to give any money.
This setback was highly discouraging, leading them to consider shelving their idea altogether. After enduring exhausting 10-hour shifts, they found themselves both physically and mentally drained. Facing rejection after rejection for their business proposal only added to their heartbreak. At that moment, they felt as though it was the end of the road.
Antonio, the fisherman turned businessman, happened to be in town and came over for lunch that afternoon. He was happy to see Santiago and inquired about his progress. Santiago explained the situation to Antonio.
Seeing potential in the venture, Antonio agreed to extend a small loan to them which was just enough to start their operations. This solved their money problem and they knew they had two months to make things work.
However, they also felt nervous. The idea of leaving behind the security of a steady paycheck to embark on a business venture sent shivers down their spines.
Good business person have a bias for action. They don’t overthink.
Next day they both quit their job, paid the advance rent and started setting up their place.
They also went to the bank to open a simple checking account.
They got their tax account number from the government and learnt that they need to file their annual tax return. For now, they decided to maintain the accounts themselves till they got some traction.
Right now they were excited and fearful at the same time. It was a nervous anticipation of the possibilities and opportunities that lie ahead, coupled with anxiety about the challenges, risks, and uncertainties involved in starting and running a business.
Their big opening was just a week away, and they had so much to get done before then.
to be continued…
This story motivates and is quick guide of explaining what is business, corporate set up and how to just start the process in a very easy simple way.
All businesses start just like this some spend time in planning, learning and by getting guided by paying big fees, while other do it this way. Very well explained by Vimal how to start your own set up.
Simply amazing! Such a beautifully written article. The story was intriguing and i couldn’t wait to find out what happens next. It was easy to digest and learn the ins and outs of a business. Thanks 😊