The
American Dream is, and always will be, to come up with an
idea,
start a business and become rich from your own efforts.
Based
upon this motivation, thousands of businesses fail each
year,
due primarily to not being familiar with the basics
involved
in running a business.
This
report will enlighten you, and give you a number of
suggestions
you can use to better guarantee your chances for
success. This report is written with the warning that
any and
every
business venture contains certain inherent risks, and any
number
of alternatives. We do not espouse that
any one way is
the
right way or that our suggestions are the only way. On the
contrary,
we advise that before investing any money in a business
venture,
you seek counselling and help from a qualified
accountant
and/or attorney.
Just
about the first thing you should consider before deciding to
start
or purchase a business is the legal form you'll be
operating
under. There are basically four choices:
sole
proprietorship,
partnership, limited partnership, and/or
corporation.
Each
has a number of advantages and disadvantages.
We'll try to
enumerate
some of them for you.
As
much as anything else, for many people starting a business is
a
form of ego-gratification, and they form a corporation for some
sort
of prestige gain - just to say, "I own a corporation."
With
just a little bit of observation, you'll find that one of
the
major causes of business failures is due to the founder
wasting
start-up capital on frills, such as an impressive
store-front
office, expensive furnishings, and corporate legal
costs.
One
of the basic traits you must develop it you're going to be
successful
in business, is a tight hold on your expenditures. In
fact,
a good rule of thumb is that anything that does not make
money
for yo or protect your investment, should not be purchased
at
this time. Very definitely, this applies
to the expense of
setting
up your own corporation.
Unless
you have a partnership and start your business as such,
the
only real advantage to forming a corporation would appear to
be
that a corporate structure will semi-protect the property you
personally
own.
As
an example, you own a home and car. You
form a corporation to
protect
these possessions from business losses.
Yet, if you can
be
found guilty of misusing corporate funds, your business
creditors
can pierce the corporate shield and come after your
possessions.
Basically,
if you invest everything you have in your business, as
most
newcomers do, you don't usually need a corporation because
you
have nothing to protect. Your household
possessions,
personal
belongings, generally your car, and even a portion of
the
equity in your home is protected by the homestead provision
of
the Federal Bankruptcy Act, and cannot be taken away from you.
As
a sole proprietor or partner of a business you'll be paying
taxes
on your overall earnings, much the same as if you were
holding
down a salaried or hourly paid job.
Whether you do or
don't
take out money as a salary will have no bearing on the
earnings
of your business and tax return.
The
often advertised advantage of incorporating, that you can
manipulate
your salary in order to save on tax dollars, is real
because
of corporation laws. However, the IRS
frowns on this
practice. When your business is successful and making a
lot of
money,
definitely check with your accountant on the advantages of
incorporating.
As
a corporation, you'll be subject to a number of other
drawbacks
as well: generally higher state taxes,
stricter laws
concerning
the operation of your business, more elaborate
accounting
procedures, and legal papers that are required just
about
every time you make a major move or sign almost any
contract. Thus, your legal and accounting fees will be
much
higher
as a corporation than will those required for a sole
proprietorship
type of business.
As
a sole proprietor or partnership, you'll find many areas
require
the registration of your business name.
The cost
however,
is minimal, ranging from $5 to $100.
About the best way
to
find out what laws apply in your area, is to call your bank
and
ask if they need a fictitious name registration card or
certificate
in order for you to open a business account.
Selecting
a name for your business is quite important to you and
particularly
relative to advertising. Your business
name should
describe
the product or services you offer. Fancy
names such as,
Linda's
Clipping Service will lose potential "walk-in and
passing"
customers to the beauty shop across the street that
calls
itself, Patti's Beauty Salon or Jane's Hair Styling Shop.
The
advantage of using your full name in the title of your
business,
such as Johnny Jones' Meat Lockers, has the advantage
of
making credit somewhat easier to come by - provided you pay
your
bills on time - but it also includes the disadvantage of
confining
your services to a local or at most, a regional area.
Should
you buy, lease, or rent a space for your business? think
twice
before you make any decision along these lines.
Most
businesses
tend to grow quickly or they never get off the ground.
There
are a few exceptions, but only a very few, that tend to
grow
at a modified rate.
So,
buying a piece of property and setting up your business on or
within
that property, obligates you to ownership regardless of
what
happens to your business.
Leases
are almost always very strong contracts written by
attorneys
to the advantage of the property-owner.
When you sign
an
agreement to pay someone for the use of their space over any
length
of time, you're "nailed in" to paying for that space
regardless
of what happens to your business.
In
the beginning, it's wise to either get the shortest-term lease
possible,
or arrange to rent with an option to lease at a later
date. This does not apply to a retail business,
unless your
particular
business happens to be an untried one.
Definitely,
you should open a business bank account.
In
selecting
a bank for your business, scout around and look for one
that
can, and will help you. Determine what
your banking needs
will
be, and then via telephone, interview the managers of the
banks
in your area. The important convenient
bank to your
business
location.
A
point to remember: the closer you can
make the relationship
between
you and the bank manager, the better your chances are
going
to be for approval on loans and/or special favors you may
need
at a later date.
Try
to become acquainted with as many of the bank employees as
possible. The better you know them, the more courtesies
they'll
be
extending especially to you in the course of your association.
Just
as a doctor is a specialist in his field, and you go to him
for
medical problems, your banker is a specialist in his field
and
you should go to him for your money problems.
In business,
you'll
have to learn that everyone is an expert in his own line
of
work, and in your associations with other business people,
refrain
from acting like a "sharpie" and/or pretending that you
know
exactly how everything works in someone else's specialty.
You'll
find that very often, different banks specialize in
different
types of businesses. As an example,
you're sure to
find
banks that specialize in real estate transactions,
export-import
businesses, and even manufacturing operations only.
What
I'm saying here is that if you're planning to sella fairly
expensive
item, your customers will probably need and/or want
financing. It will behoove you to select a bank familiar
with
your
type of product that will afford your customers, through
you,
contract financing.
Some
of the questions you should ask of your banker include the
following:
Is
it necessary to maintain a certain balance in your account
before
the bank will approve a loan for you?
What
qualifications must you have in order to obtain a line of
credit
with the bank?
Does
the bank limit the number of loans, or types of loans it
will
approve for small businesses?
What
is the bank's policy regarding the size of a check you might
deposit
that requires holding for collection?
And
what about checks less than that amount - will they be
immediately
credited to your account?
In
almost all types of businesses, it will be to your benefit to
set
up with your bank, a method of handling VISA, Master Charge,
and
regional credit cards. The important
thing here is to
ultimately
set up your account in the bank that will service all
of
these credit transactions for you - one stop for all your
banking
needs. In most instances, you'll find
that having the
capability
to fill orders/make sales via credit card
transactions,
will increase your volume of sales appreciatively.
Once
you've made the decision as to which bank is going to handle
your
account, you'll need your Social Security Number or your
Federal
Employer's Identification Number, your driver's license,
the
fictitious name certificate, and if you're requesting a VISA
or
Master Charge franchise, you'll also need a financial
statement.
For
corporations, you'll also need a corporate resolution
approving
of the opening of your business account.
There
are different policies exercised in just about every state
regarding
installation/hook-up charges by the telephone and
utility
companies. Some require a deposit, and
some don't.
You'll
find that a great number of city business license
departments
are there solely for the purpose of collecting
another
tax. Depending on the type of business
you're asking a
license
for, the building and zoning people may inspect your
premises
for soundness of structure and safety.
Generally, you
won't
encounter any difficulties - you simply pay your fee to
operate
your business in that city, and the clerk types your name
onto
a city license certificate.
Relative
to sales tax permits and licenses, each state's rules
and
regulations very widely. The best thing
to do is call your
state
offices and ask for information concerning registry and
collection
procedures. Many states require an
advance deposit or
bond,
and you'll find that some wholesalers or manufacturers will
not
sell to you at wholesale prices until you can show them your
sales
tax permit or number.
Should
your business entail selling your products or services
across
state lines, in another state, you're not required to
collect
taxes except in those where you have offices or stores.
You
may find also that your particular business requires the
collection
of Federal Excise Taxes. For information
along these
lines,
check in with your local office of the Internal Revenue
Service.
Some
states also require certain businesses to hold state
licenses,
such as those required in many states for TV Repairmen.
These
are known as "occupational permits" and are most often
required
of barbers, hair stylists, real estate people and a
number
of other consumer oriented businesses.
If you have any
doubts,
check with your state offices for a list of those
occupations
that require licensing.
Any
business doing business in any type of interstate commerce is
subject
to federal regulations, usually through the Federal Trade
Commission. This means that any business that shops,
sells or
advertises
in more than one state is subject to such regulation,
and
this includes even the smallest of mail order operations.
Normally,
very few business people ever have and contact with the
federal
regulatory agencies. The only exceptions
being when
there
is a question of your operating your business unethically
or
illegally.
Any
business that sells or distributes food in any manner almost
always
requires a county health department permit.
If your
business
falls into this category, simply call the county health
department
and invite them out to your place of business for an
inspection. The fees generally range from about $25,
depending
on
the size of your business when they first inspect it for
permit
approval.
There
are also a number of businesses that require inspection by
a
fire marshall, and fire department approval.
Generally, these
are
those that handle flammable materials or attract large
numbers
of people, such as a theater. Overall,
the local fire
department
has to be allowed to inspect your premises whenever
they
desire to do so.
You
may also run into a requirement for an air and/or water
pollution
control permit. These specifically apply
to any
business
that burns anything, discharges anything into the sewers
or
waterways, or use any gas-producing product, such as a paint
sprayer.
Without
a doubt, you'll need to check on local regulations
relating
to advertising display signs. Each city
or township
makes
its own
rules
and then enforces those rules according to its own thinking
-check
before you contract to have a sign made for your business.
The
design and placement of your sign is very important to your
business
- specifically to retail establishments - but let me
remind
you that your business sign is usually the first thing a
potential
customer sees and as such, it should catch his eye and
leave
an impression that lasts. It would be a
good idea to ride
around
your town and take a look at the signs that catch your
eye,
and try to determine the impression of the business that
sign
leaves on you. This is a basic learning
formula for
determining
the design, size and placement of your business sign.
Some
of the other things to consider before opening for business
-
If you intend to employ one or more employees, you'll be
required
to deduct Federal Income Taxes, and Social Security
payments
from their checks. This will involve
your filing for a
Federal
Tax Number and necessitates contact with your local IRS
Office.
Most
states have "unemployment taxes" which will have to be
deducted
from the paychecks of any employees you hire.
And there
are
a number of states that have income taxes - disability
insurance
- and any number of other taxes. Again,
the best thing
to
do is check with your local office of the IRS.
And above all
else,
don't forget to ask for the rules of the minimum wage law,
and
comply.
When
your business grows to the point of needing additional help,
don't
be afraid to look for and hire the help you need. when
you're
ready to hire someone, simply run an ad in your local
paper
and/or register your needs with the local office of your
state's
employment service. Businesses either
grow or die, and
those
that grow eventually need more people in order to continue
growing.
When
that time comes, hire the additional people you need, and
your
business will continue growing. If you
don't, for whatever
reason,
you'll find yourself married to your business and your
business
growth stymied.
Regardless
of how small your business is when you begin, never
walk
in with the thought in mind that it's something to keep you
busy.
Anyone with an attitude of that kind is a fool.
You begin
and
make a business successful in order to realize financial
freedom. Establish your business. Put it on its feet, and then
hire
other people to do the work for you. And
those businesses
that
require an operations manager, or someone to run a phase of
the
business you're too busy to handle, hire the person needed or
the
business will surely suffer.
To
protect the investment of your business, you need business
insurance. If you've never had any experience with
business
insurance,
simply look under the heading of "business insurance"
in
your phone directory. Ask for bids from
several different
companies
or agents...Primarily, you should have a policy that
gives
you general liability, fire, workmen's compensation,
business
interruption, and vehicle coverage. You
amy also want
coverage
against possible losses related to burglary, robbery,
Life
& Accident, Key Man, and Fidelity Bonds.
As
the sole proprietor of a business, you won't be paid as an
employee,
so there will be no income tax deducted from whatever
you
withdraw
from the company's earnings. What you'll
have to do is
a
gain check with the IRS Office for a Tax Guide For Small
Businesses
Handbook, and probably end up filing an estimated tax
return
on a quarterly basis.
The
minute you open your doors for business, you'll have to spend
some
time engaged in the work of bookkeeping.
Exactly how, and
using
what forms, you keep books, should be on the
recommendations
of a good tax counselor...The same holds true for
your
overall business and/or payroll accounting system. Look for
an
experienced CPA that knows the accounting problems to your
particular
kind of business, and solicit his advise/counseling.
If
your business is going to involve the possible purchase or
lease
of operating equipment, again seek the help of your tax
counselor
for the most advantageous method of obtaining the
needed
equipment.
Basically,
arranging for your suppliers to give you materials on
credit
will depend upon your honesty and personal financial
statement. The best way is usually a personal visit to
the
person
with the power to approve or disapprove of credit at the
company
where you want to set up a credit account.
Show him your
financial
statement, and explain your prospects for success.
Then
assure him that you've always honored all of your
obligations,
and that if ever there's a question or problem,
you'd
like for him to call you at home. And of
course, give him
your
home phone number.
We
won't go into the exigencies of advertising your products,
services
or business here, but there is something along these
lines
you should always keep in mind. The best
kind of
advertising
your business can receive is that you don't really
pay
for - publicity.
When
something unusual happens to you, your business, or your
employees
- that's news, so be sure to tell the news media in
your
area about it.
In
closing, let me say that the most important ingredient of your
eventual
success will be the soundness of the planning you did
before
you started your business. Any number of
bad things can
really
throw your business into a tailspin, but it you've done
your
homework well - really set up a detailed business plan
before
starting - your losses or setbacks will be minimal.
Success
takes planning, and within this report, you've got a
basic
checklist...The rest is up to you...Good luck, and may your
life
overflow with success in all that you undertake from this
moment
forward.
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