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Creative
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Small
Business Home >> Information
for your own Business >>
Secrets To Successfully Starting Your
Own Business
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 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 counseling 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. 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 you 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 sell 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 may 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.
If this article is of use to you, please provide
a link back to Hoover Web Design http://www.hooverwebdesign.com.
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