| A Practical Guide To Starting A Business
by: Sharon Davis
Starting a business can be an exciting prospect....or a frustrating, confusing task that seems impossible to conquer. Which one will apply to your situation will depend on how well you plan, how much you educate yourself, and how disciplined you are in following through. Many people start out with a great idea, but don’t know how to translate that idea into a viable business. ==Where Do I Start? Your first step should be your business plan. Many would-be entrepreneurs will skip this step, choosing the fly-by-the-seat-of-your-pants method instead, but starting a business without a business plan is like embarking on a long journey to an unfamiliar place without a map. A business plan serves to define your goals, map out your plan of how to achieve them, and will provide you with a sense of purpose and accomplishment along the way. Your business plan should include the following elements: 1) the description of the business 2) the marketing plan The Small Business Administration offers an online tutorial on how to write a business plan. http://www.sba.gov/starting/indexbusplans.html One of the first decisions your will have to make is what form your business should take. The most common forms are: -Sole Proprietorships Which form you choose will depend on many factors, including: -Legal restrictions Some of the advantages and disadvantages of each type is outlined below: Sole Proprietorship This is the easiest and least costly way of starting a business. A sole proprietorship can be formed by finding a location and opening the door for business. There are likely to be fees to obtain business name registration, a fictitious name certificate and other necessary licenses. Operating a Sole Proprietorship is easiest as the owner has absolute authority over all business decisions. Partnership There are several types of partnerships. The two most common types are general and limited partnerships. A general partnership can be formed simply by an oral agreement between two or more persons, but a legal partnership agreement drawn up by an attorney is highly recommended. Legal fees for drawing up a partnership agreement are higher than those for a sole proprietorship, but may be lower than incorporating. A partnership agreement could be helpful in solving any disputes. However, partners are responsible for the other partner's business actions, as well as their own. Corporation A business may incorporate without an attorney, but legal advice is highly recommended. The corporate structure is usually the most complex and more costly to organize than the other two business formations. Control depends on stock ownership. Persons with the largest stock ownership, not the total number of shareholders, control the corporation. With control of stock shares or 51 percent of stock, a person or group is able to make policy decisions. Control is exercised through regular board of directors' meetings and annual stockholders' meetings. Records must be kept to document decisions made by the board of directors. Small, closely held corporations can operate more informally, but record-keeping cannot be eliminated entirely. Officers of a corporation can be liable to stockholders for improper actions. Liability is generally limited to stock ownership, except where fraud is involved. You may want to incorporate as a "C" or "S" corporation. ==What About Taxes? It is very important to understand the tax laws that apply to the type of business you have chosen. There are four basic taxes that you should be aware of: -Income Tax Income Tax If you expect to owe more than $1,000 in Income Tax, you may have to pay Estimated Taxes. There are four ways to pay estimated taxes: 1. By crediting an overpayment on your 1999 return to your 2000 estimated tax. For more information on Estimated Taxes, see the IRS website at http://www.irs.ustreas.gov/forms_pubs/pubs/p505ch02.htm Self-Employment Tax You can deduct 1/2 of your SE tax from your net earnings on your 1040. For more information on SE taxes: http://www.irs.ustreas.gov/forms_pubs/pubs/p3340103.htm Employment Tax Whether or not you need an EIN (Employment Identification Number) depends on your business structure. You only need an EIN if you: To obtain an EIN, you must fill out an SS-4 which is available through the IRS. Excise Tax For a list of businesses that apply, see the IRS website: http://www.irs.ustreas.gov/forms_pubs/pubs/p3340105.htm A free Small Business Tax Kit is available from the IRS. Their Small Business Corner offers advice, publications and links to useful information. http://www.irs.gov/ They also offer a Tax Calendar which tells you when to file returns and make tax payments. You should also be aware that the laws vary by state and by industry, so it is highly recommended that you consult a tax advisor in your area. You can get information on local zoning regulations from your city hall, county court, or state department of taxation and finance. ==For More Information... The Small Business Administration is an excellent source of information and a great place to start. You can get a free Startup Kit, download a Business Plan Tutorial and find many free publications. http://www.sba.gov/ Other useful resources: ====STAWRS One Stop Guide http://www.tax.gov/newbusiness.htm ====Business Plan Pro 4.0 http://www.amazon.com/exec/obidos/ASIN/B00003IE59/americashomebase ====The Legal Guide for Starting & Running a Small Business http://www.amazon.com/exec/obidos/ASIN/0873373790/americashomebase ====J.K. Lasser's Taxes Made Easy for Your Home-Based Business http://www.amazon.com/exec/obidos/ASIN/0028627970/americashomebase ====The Complete Idiot's Guide to Starting a Home-Based Business ====Business Start-Up Guide: How to Create, Grow, and Manage Your Own Successful Enterprise http://www.amazon.com/exec/obidos/ASIN/0965321207/americashomebase ________________________________________________________________ Sharon Davis is the Mother of two girls, the owner of www.2Work-At-Home.Com and the Editor of the site's monthly ezine, America's Home. In her spare time she reminisces about what it was like to have spare time. Subscribe to her free ezine here: http://www.2work-at-home.com/ezine/subscribe/ezines.shtml |
