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How
To Set Up Business | Types
of Business | Write
a Business Plan | Start
Up Costs | Get
Business License | Business
Tax Planning |
Find Business Funding | Personal
Development Training
How To Set Up
Business
Start Setting Up A Business By Understanding Completely What Is
Involved
Research
the startup business steps as described here so that when you decide to
start a business, your success will be guaranteed and startup money
will not be wasted setting up business. Start your new
business
research by reviewing what type of businesses that you would like to
start. When setting up business, it is an excellent time to
look at
what are the needs of the market that you will be providing a service
or product to. Who are your customers. Whose going to buy your product
or service? Are there products or services that your customer base
would buy if available? Who else ids producing your product or service?
How is this industry changeing? Is it growing, maybe declining, maybe
the value of the product or services is different in your area. Have
you priced it on the web, nationally versus locally and how do you fit
in? Review industry trends when setting up a business and a
smooth
business plan will follow with a successful and profitable business.
Other
considerations will be in mapping the exact steps in how a product will
be produced or what are the steps involved in the service you are
providing. There is time involved in each step with inputs you must
have and outputs at each step. Creating a flow diagram of the
processing or production and setting times allowable will help
determine what are your business limits, how much you can handle and of
course how much you can earn. It will also tell you if you need to be
outsourcing tasks or even hiring employees.
How do you reseach
and find answers? Believe it or not there are free as well as
low cost
sources available. You can find trade associations on the world wide
web internet for your startup business.
There is a free online resource of retired executives at Service Corps
of Retired Executives www.scn.org/civic/score-online
. Small business owners can email these online volunteers experienced
in business questions about your startup business at no charge. You may
even search for an executive experienced in your line of service or
producing the products you sell. A partnership could develop where you
would receive one on one mentoring, maybe in exchange for your product
you provide. Startup business owners have flocked to public libraries
or years, at least the successful ones have. Libraries are a tremendous
source of business and business statistics information free. If you are
considering a business website or an unternet based business, you can
learn from successful small business websites with interviews and case
studies at Secrets To Their Success .
After
finding these answers, putting a flow together, inpouts, outputs,
marketing plan, it'll be time to seriously consider the costs involved
in your business startup and business operations. Again, there is
plenty of help available. Your local Department of Liscensing
will
inform you of your need for a liscence or permit to operate business in
your area. Internet Businesses fall into different rules that can be
check locally with government. Many states will collect sales taxes on
internet sales to others within the same state. Business liscences may
or may not be needed depending on your state. Advertising costs, taxes
, supplies, possible outsourcing are other considerations for startups.
It is recommended to check with your local Internal Revenue Office, the
state department of revenue or even an accountant. CPAs can be
outsourced too as many small businesses only need accounting
services
part time. If you do need to hire people for your new small business,
check with the Departmnt of Labor and Industry to see whether you will
add worker's compensation or insurance as a business cost.
Types
of Business
Have you thought about a business structure. You'll need to for
starters to consider a sole propriotorship - the most basic, a
for-profit corporation, or a non-profit corporation. As you experience
growth, there will be other considerations.
You can operate and own your own business that is not incorporated.
Generally, you are doing business under your own name and you are the
only owner of the business. You do so as a sole propriotor
and this sole propriortorship is a popular form of business for many
start up businesses and entrepreneurs. It is the simplest business form
and is easy to get started with minimal paperwork. The accounting
chores are simplified since your sole propriortorship business is not a
corporation. You will be paying taxes on your profits of course but you
won't be paying corporater taxes.
As a sole proprietor, you may do business under your name or simply
create a business name, a fictitious name. It would be your registered
business name. You could be Mary Smith DBA (doing business as) "
Widgets are Us ". Setting this up enables one to have a
personal checking account under your name and a seperate business
checking account under Mary Smith DBA Widgets are Us .
You'll need to consider the advantages and disadvantages of this type
of business.
- You will have the best control over
business decisions as you are the boss and 'top dog'.
- Easy to form and easy to dissolve
- Accounting is simpler as mentioned
- Easy tax prep and minimal
governmental regulations
- Profits directly to owner
There are of course disadvantages also to consider
- It is more difficult to get
financial institutions to finance your business
- Employee Relations ,
Hiring, Firing...
- A corporation or LLC today has a
higher 'legitamacy' than a home or small business sole propriortorship
and raising capital can be more of a challenge.
- You may be subject to a "double
taxation" where you are subject to the Federal tax rate as well as a
self employment tax
- The last item here may be the
deciding factor for many depending what your products or services are
and whether you use dropshippers of other products . Unlimited
Liability means that if your business gets sued, you are getting sued
as well with your personal assets at risk. The limitations of liability
enjoyed by a corporation and limited liability partnerships do not
apply to sole proprietors
If you are a sole proprietor, there are helpful organizations with
major benefits as Association 105, The Benefits Administration for the
self -employed, B.A.S.E, (http://www.association105.com).
This next International Association of Home Business Entrepreneurs
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A sole
proprietorship is when one person operates and owns a business and it
is not incorporated. This form of business is how many enterprises get
their start. One person goes out and offers his or her services, or
this one person makes some kind of product which is sold to the public.
This is the simplest type of business in terms of the paperwork
involved in getting started, and simple in terms of having only
yourself to deal with rather than a host of employees or a board of
directors.
There are several forms that a for-profit
corporation can take. Sometimes a small business will choose to become
a LLC, or limited liability company. This type of incorporation can
protect your personal assets in the event of bankruptcy, and it
provides a somewhat easier and less expensive form of incorporation
than some of the others available. LLC owners are called members, which
can consist of one person or many.
A C Corporation
is legally a separate entity from its owners. Shareholders own it
because they have exchanged money and/or property for the C
Corporation's stock. You can tax or sue it, and you can create a
contract with it. You have to file articles of incorporation with the
government and pay a fee. A board of directors will make the decisions
for the business and the policies it will abide by, called bylaws
www.corporate.com. You can sell a corporation to new shareholders, if
you choose, and it will continue to exist as an entity. This type of
corporation will also protect your personal assets in a bankruptcy, and
corporations can also take special tax deductions. In addition, you can
sell stock in a corporation.
An S Corporation offers
the advantage of being exempt from federal income tax in certain
situations. This means that each of the owners, or shareholders, which
in this case have to be natural human beings and not other
corporations, report the income, deduction, loss and credit on their
own personal tax return in proportion to their interest in the
business. It offers the advantage of protection of personal assets if
the business falls into bankruptcy.
Depending on the
purpose of the new business you are planning to start, you might find
that it would be to your benefit to form a non-profit corporation. By
forming a non-profit corporation, one type of which is a 501(c)(3), the
advantages are that you may become exempt from some taxes, and your
personal property would not be at risk in the event of bankruptcy of
the business. Individuals cannot become a non-profit corporation, only
groups. The Internal Revenue Service can tell you if the business you
want to form will qualify as a non-profit, at
http://irs.gov/charities/index.html The other great news is that
non-profits are eligible for many more grants than are for-profit
corporations, so if you are looking to procure grant money, you will
want to consider the non-profit business form and see if your business
will fit into that format.
Write
a Business Plan
After
you have done some research on your new business idea, you will have a
better idea of the specifics of the business. Next it is worthwhile to
try to articulate all those great ideas on paper, in the form of a
business plan.
At this stage it is not a bad idea
to carry around a small pad of paper and something to write with
everywhere you go, or your favorite high-tech gadget that can record
your thoughts. Your ideas will be percolating in your brain even when
you are working on other things, and you never know when you will get a
good idea, so be ready for it.
A business plan can
help you get funding for your business, will explain how you will
market your new service or product, and much more. Even before that,
however, it can show the new business idea for what it is, in all its
glory and warts. Then you can decide if you still want to proceed with
it, make some changes to it so that success is more likely, or perhaps
try again with another business idea. This paper step can save you a
lot of time and frustration when you actually have to go out and
provide the new service or begin to manufacture the new product for the
first time.
The United States Small Business
Administration has a branch called the Office of Small Business
Development Centers. These centers can be found in each state, and they
offer free or low-cost help with all aspects of starting a new small
business, including help with writing a business plan
http://www.sba.gov/sbdc/sbdcnear.html.
A business
plan needs to show your methods for running the business. For example,
who will be involved in running and working in the business and what
expertise they bring to the endeavor. It will show how you plan to sell
your product or service, what the product is exactly and what all the
steps are that are necessary to manufacture it. Or, in some cases, what
specific service will you offer in full detail, and money particulars
focusing on what it will cost to bring the product or service to the
buying public. Basically, what it will bring in terms of revenue.
Banks
and charitable organizations will want to look at your business plan
and see if it is a sound investment. A business plan will also offer
the entrepreneur peace of mind, because you will have gone through
every aspect of the business, and you know how it will work, how much
you can make from it, and how much it will cost to start and continue
operating. After the business plan is written, you will have a pretty
clear idea if your business has a good chance of succeeding or if it
won't work.
Start
Up Costs
So
let's say that, after analyzing the market, you come to the conclusion
that your idea will sell like hotcakes. But perhaps one factor that is
standing in your way is high start-up costs. Start-up costs include
things like paying for a place to work out of, buying all the initial
equipment, furniture, and tools necessary for the business to operate,
possibly legal fees and consultation fees, licensing fees,
communication fees for telephone and Internet services, taxes, buying
raw materials if you plan to manufacture a product, and marketing your
new business venture. When you start adding it all up, it can become a
little daunting. At this point you might need to ask yourself if there
is some way that you can maintain the quality of your potential service
or product, yet cut some of the initial costs to start. This is when
creativity will come into play. Anyone who is rich can throw money at a
problem, but if you have a lack of funds, this will be the impetus you
will need to get creative and find other solutions. (Not to mention
that people pay big money for creative ideas that lead to solutions to
problems--that can be a business in and of itself, if you have a talent
for it!) All viable businesses provide a solution to a client or
customer's problems. So, by thinking along these lines from the start,
you will be helping yourself greatly in the process.
One
way to cut costs is to start small. Can you work out of a room in your
home, or a garage? You can avoid renting an office or workspace for a
while until you start making money, which can help lower initial costs.
You might not ever need a brick and mortar office if you start an
online business or store. Get creative and consider as many
possibilities and options as you can so your business idea will work.
Another
method you can try is to figure out a way to do the work by yourself in
the beginning. This is not a bad way to start, because you will want to
know every aspect of how your business runs, so you will want to work
every job yourself to see where all the strengths are, and where you
can improve on any weak areas. This can give you vital information you
will need to potentially lower costs, improve productivity and increase
the amount of money you can make. Then, when you start making money you
can hire some employees to help you. It will also make it easier when
you have to train employees, because you will understand all the
requirements of every job your business must perform to stay in
business and how they interact with each other, because you will have
worked them all yourself.
Be certain to keep an open
mind during the business planning and start-up cost phase. Keep talking
to other small business people or a mentor who might have suggestions
for starting small and less expensively. Also remember that the
start-up costs will be offset by the revenue that your business will
generate, so over time you will break even and then begin to make money
from the business.
Get
Business License
You
might need a license or a permit to conduct business in your state.
Each state has a Department of Licensing that will explain all the
parameters of what you will need and the fees involved for all types of
businesses. If you go to the state's Department of Licensing website,
you can often select the type of business you will conduct and where it
will be located. In return, you will receive a list of all the licenses
you will need and exactly who you will need to contact. Your local city
and county may also require licensing and permits as well. Look under
your city or county's Finance Department for more information.
Business
Tax Planning
When
you are starting a business for the first time, it is a good idea to
consult with a certified public accountant. Let this person help you
get your bookkeeping system set up, and let him or her help you get set
up to pay your taxes. Depending on your business parameters you might
be paying taxes quarterly or yearly, and your CPA can help you with
this. When it is set up to work properly, then you can take it over and
keep it running smoothly to begin your business. Eventually you may
want to hire a bookkeeper to take care of all the paperwork aspects of
your business, freeing you to focus on the product or service you are
trying to sell.
There are also several software
programs available that will help you keep business records on your
computer. You want something that is easy to use and flexible, so you
can set it up to meet your business's unique needs. Although they come
with several extra bells and whistles, the bottom line is that you need
to keep track of revenue and expenses, clients and invoices, and
information that will be needed at tax time. You will need a simple
filing system to store receipts, contracts and other important hard
copies that will be needed when you are computing your taxes and for
auditing purposes.
It can potentially save you
money at tax time if, throughout the year, you are keeping track of
deductible tax items. These are usually some type of business-related
expense. For example, if you have a business that provides a
house-cleaning service, then the automobile expenses that are incurred
while providing the service, your mileage, as well as cleaning supplies
and equipment used on the job can be tax deductible. You might also be
able to deduct up to $5,000 of your new business start-up costs.
Depreciation on equipment, such as computers and printers used for
business purposes, the business automobile, or a carpet steam cleaner
in this example, might also qualify as a deduction. According to the
IRS, you can depreciate machinery, equipment, buildings, vehicles and
furniture used to conduct business if it can wear out and will
ordinarily have a useful life longer than one year
http://www.irs.gov/faqs/faq11-1.html. The IRS Publication 535 covers
all sorts of business expenses, so you can find more information
specific to your new business there.
Find
Business Funding
Once
you have a great idea for a business, and after putting it down in
writing in a business plan, you see that it can make money. The next
step is to find funding to get the business started. If you have
personal savings you can use, then you are all set to go. However, most
people look for funding from two main sources: loans and grants.
Loans
Loans
are funds that will need to be paid back to the lender. There are also
loan guarantees available for new businesses, where if you default on
the loan the government agency agrees to pay the loan back. You can
find loans and loan guarantees for businesses at the Small Business
Administration. The SBA doesn't offer grants for small business
start-up purposes, but it does offer to guarantee their loan programs
that you can access through a private or other institution www.sba.gov.
One excellent program that they offer is a loan pre-qualification
program. Before you head off to a bank asking them for money, the SBA
will use an "intermediary" to go over your loan application and help
you make it stronger. Then it is submitted to the SBA, and if they like
it they will write you a letter of pre-qualification, essentially
saying that they will guarantee your loan. Then the intermediary will
help you find a lender and get the best rates on the loan. Then off you
go to the lender with your spiffy loan application and letter of
pre-qualification, thereby improving your chances of getting the loan.
So
let's say that you have begun your new business and it is really taking
off. It is time to expand the business, and that also takes money. The
SBA could be a resource for you, depending on who you are and what your
business entails, because they also guarantee loans to grow your
business. If you are a woman or a military veteran-business owner, or
your business is located in an area that the government is trying to
revitalize, for just a couple of many examples, then you might qualify
for this type of loan. For more information go to www.sba.gov and look
under "SBA Loans."
Loans may not have been the
first source on your list of financing options for your new business
because they must be repaid, but sometimes they offer the best solution
to your money needs to get the business up and running. There tends to
be more loans rather than grants available for business start-up costs,
so this bears keeping in mind also, depending on what your financial
purpose for the funding is.
Grants
Grants
are funds that are given to you outright, and you do not have to pay
them back. Generally speaking, you will likely find more grants with
awards available for starting or growing a small business on the state
and local level rather than the federal level. One informative place to
start looking for state and local grants is your state's Economic
Development Council. They usually will have a search engine, so type in
"grants" and you will likely be surprised at how many offerings come
up. You will also notice that some grants are for businesses, while
others are for funding city projects, for example. Every grant is
different, and has different eligibilities and requirements, so this is
a stage where you will need to spend a bit of time reading to see what
all is available. Some grants are made available to non-profit
corporations. As you read about different grants, you will discover
that if your business is a non-profit, or if you as an individual are
affiliated with a non-profit organization, there will be several grants
for which you will be eligible, more so than if your business is a
for-profit corporation. You might even want to look into forming a
non-profit corporation yourself.
There are many
grants available, and the first step to success with obtaining a grant
is knowing where to look for it. The next chapter will go into more
detail about grants at the federal, state and local levels, so you will
know where to begin your search to access essentially free money, and
what it can and cannot be used for.
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Grant Money Articles
A
Business Plan Will Help You
Get A Grant
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Federal
Grants for Small Business
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An
Introduction To Local Grants
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An
Introduction To State Grants
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Federal
Grants Cans & Cannots
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Research
Before Grant Applications
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Starting
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The
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What
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Where
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