| Soon you will find yourself deeply involved in reaching | | | | register their business names but also trademark them. |
| your marketplace, analyzing customer needs and | | | | Trademarking is a legal technique made available by |
| imagining attention-getting promotional ideas. But first | | | | states and the federal government to give you the |
| there are a number of basic organizational steps you | | | | right to a particular name if you can prove you publicly |
| should complete. | | | | used it before anyone else, To receive national |
| There are just enough stories in newspapers and | | | | protection you must file for a trademark through the |
| magazines about successful new business that were | | | | U.S. Trademark Office (part of the Commence |
| started on a "shoestring" to make you believe you do | | | | Department). This is much more expensive and time |
| it also. In fact, several monthly magazines are devoted | | | | consuming. See an attorney before taking this step. |
| to presenting low-cost home business ideas that are | | | | Selecting a Business Address |
| "guaranteed winners". | | | | You now need a business address to go along with |
| In our experience, very few viable new businesses | | | | your legal business name. While you have been |
| ran be started with less than $1000.00. A recent | | | | researching your startup costs you should have |
| survey by Home Office Computing magazine | | | | thought about where you will locate your business |
| revealed that the average reader spent around $5,000 | | | | office. Will it be in your den? In a local office building? A |
| to start his business. It should be apparent that | | | | retail store? Or in an industrial building? |
| shoestring businesses run out of cash fast - often just | | | | The simplest and least expensive way is to use your |
| when the sales start to come in. | | | | home address as your business address also. But |
| Assessing Your Financial Readiness | | | | before you decide to do this remember the following |
| The first step in examining your financial | | | | tips about selecting an address. |
| preparedness is to sit down with your family and | | | | - Analyze who you want to sell. Would they think |
| analyze where the money goes each month. Start | | | | you are less professional if they see a residential |
| with the major expenses first, such as mortgage or | | | | address on your business card? |
| rent, car payments, utilities, insurance, food and school | | | | - Are there potential zoning problems if your city or |
| expenses. These categories probably represent over | | | | town finds out about your home business? |
| 60% of your total family spending each month. | | | | - Will your suppliers or customers be corning regularly |
| Next add in important but postponeable expenses, | | | | to your house? is there enough parking space so as to |
| such as new clothing or furniture, a vacation or going | | | | not annoy your neighbors? |
| to the movies or out to eat. By the time you are done | | | | - Can you easily receive UPS, Federal Express, etc. at |
| you will probably have 15 to 20 key expenses in the | | | | your home? |
| family budget. Put the total by category on one piece | | | | If you don't locate at home, what are your other |
| of paper and add them for a grand total. Make sure | | | | options? There are three basic alternatives: |
| every family member understands where the money | | | | #1 Post office box. I don't like them because they are |
| has been going each month. | | | | used by scam artists, Also, you can't get to your box |
| Lastly, see what you can cut out of the budget. But | | | | 24 hours per day and customer service at the Post |
| beware, quitting a job (or losing one) and then starting | | | | Office is less than great. |
| a business will put your family under tremendous | | | | #2: Private mail box store: A little more expensive |
| mental stress. Don't expect them to endure too much | | | | than P.O. boxes but offer many more business |
| further pain in order to cut the family budget. | | | | services such as shipping of all kinds, telefax, |
| Most of us would be lucky to cut 5% out of the | | | | photocopying, passport photos, office supplies, to |
| budget. Once you have some agreement on a | | | | mention a few. The largest number of stores are the |
| monthly budget, it is time to review what sources of | | | | Mail Boxes Etc. outlets springing up all over. Costs start |
| income the family has. The most common are: | | | | at $12-$16 per month for a mailbox. |
| spouse's salary and bonus, investment interest and | | | | #3: Shared service office suites: Many traditional |
| dividends and rental income if you own property. Ask | | | | office buildings are setting up areas with small offices |
| yourself a tough question: How reliable are these | | | | which share services, such as the receptionist, mail |
| streams of income? Has your spouse's employer | | | | room, telefax, photocopy and a conference room. |
| announced layoffs? Is the return on your investments | | | | Rents start at $400 per month, but some buildings |
| likely to go up or down over the next twelve months? | | | | offer an abbreviated version, known as identity |
| Subtracting all the family income other than your | | | | programs where you keep your office at home, but |
| income (you'll he quitting remember) from the monthly | | | | rent their address for your mail, have their receptionist |
| expenses results in what I call the "business burden". | | | | answer your business phone line and meet with clients |
| This is the dollar amount that vour economic activity | | | | in their conference room. Costs start at $75 per |
| must eventually create if the family budget is to | | | | month. |
| continue at its agreed-upon level. Every month that | | | | Picking A Legal Form of Organization |
| your sales are not enough to cover this burden you | | | | When you open a business, your life becomes more |
| must borrow - from yourself, your credit cards, your | | | | formalized because you are now subject to more |
| home equity loan or from your relatives. This gets old | | | | laws and regulations. One of the first legal |
| fast. | | | | requirements you will face is deciding how to organize |
| The second area of personal finance you must | | | | the business from a legal point of view. There are |
| carefully evaluate is your debt. Who do you owe? | | | | three major ways to do this: |
| How much? What percentage of debt could be paid | | | | #1: Sole Proprietorship -- Single owner or husband |
| off in on more than one year? Remember, you won't | | | | and wife. All business profit goes on your personal tax |
| be working a regular job. Be realistic; if you credit card | | | | return. You are personally liable for all business debts |
| debt is $400 per month minimum payment, you will | | | | and legal disputes. Very little regulation by the |
| have a very hard time paying your business phone bill | | | | government. Over 70% of all small businesses are |
| and buying gas for your car. | | | | proprietorships, often because it is the easiest, fastest |
| Examine also what you own that you might turn into | | | | and cheapest way to legally organize. |
| cash or use as collateral for a loan. The house is the | | | | #2: Partnership -- Two or more owners joining |
| most commonly used personal collateral, but | | | | together to invest in and to run a small business. Similar |
| remember what you are risking when you use a home | | | | legally to a proprietorship in that each partner is |
| equity loan. | | | | personally liable for business debts and disputes. In |
| Estimating Startup Costs | | | | addition, each partner is bound by the business actions |
| Startup costs are one-time expenses for equipment, | | | | of the other partners, even if they don't know about |
| furniture, computers, rent deposits, stationery; telephone | | | | them. In our experience it is hard to hold together a |
| hookup, insurance premiums, office supplies, and initial | | | | partnership because it is rare that two (or more) |
| advertising. Be cautious here, it is very easy to spend | | | | people share the same values, grow at the same rate |
| a couple of thousand dollars before you realize it. | | | | or see risk the same way. We strongly urge that you |
| Before you buy anything ask yourself: Can I get it | | | | review a written partnership agreement (sold at office |
| used? Do I already have something that will work? | | | | supply stores) before you talk seriously about joining |
| Can I trade something for it? If you are starting with a | | | | together. |
| home office you of course save on rent deposits and | | | | #3: Corporation - A lot of new entrepreneurs think |
| moving expenses. | | | | that they need to be a corporation. But in reality, few |
| If you will be opening a retail store, it is critical that | | | | new businesses need to be incorporated. The first |
| you research what inventory you will need, who | | | | step is to realize that your life becomes more |
| supplies it and what is the lowest price you can get. | | | | regulated if you incorporate. We also estimate that it |
| You may also be facing a serious investment in | | | | will cost you $700-$1000 more per year in accounting |
| renovation construction, fixtures and carpeting and | | | | and legal bills to be a corporation. However, there are |
| painting. The average startup costs for a retail store, | | | | many potential tax savings for corporations. The |
| including inventory, run around $75,000. | | | | second step is to decide with whom you will organize |
| If you plan to make a product for sale you will need | | | | the corporation (incorporators). The third step is to |
| to buy raw materials. Do the same kind of investigation | | | | decide if you want to operate as "plain vanilla" |
| as the retail business owner does. Calculate the | | | | corporation ("C" corporation) or as a "S" corporation |
| minimum material investment to produce the desired | | | | (requires approval of the IRS). For the next steps see |
| sales for the first few months. In addition, examine | | | | "How to Register" which follows. |
| what additional tools, equipment or vehicles our | | | | No matter what legal form your new business takes, |
| business may require. A typical manufacturing startup | | | | some branch of government (or several) wants to |
| can cost over $100,000. | | | | know about it, But note: before you attempt to legally |
| Exploring Business Expenses | | | | register, you must have selected a business name and |
| For most small businesses, the owners personal | | | | address. |
| compensation is far and away the largest operating | | | | How to Register Your Company |
| expense for the business. This is your contribution | | | | Proprietorships and Partnerships Most proprietorships |
| toward the "business burden". But there are potentially | | | | and partnerships use a business name other than the |
| many other business expenses you will face. Among | | | | name on the owner's birth certificate. This business |
| the most common are: Rent, utilities, telephone and | | | | name is known legally as a fictitious name, assumed |
| telefax charges, supplies, computer software and | | | | name or as a DBA (Doing Business As). The county in |
| repair, insurance, bookkeeping fees, auto expenses, | | | | which you live requires you to register this assumed |
| dues and subscriptions, travel and entertainment and | | | | name. The procedure usually goes as follows: |
| sales promotion expenses. Some new business need | | | | - Call your County Clerk's Office and request an |
| an employee right from the beginning, so you would | | | | Assumed Name Registration form and ask the fee. |
| have to add in wages and withholding taxes. | | | | - Fill in all forms with the legal name of the business, its |
| You find out what expenses your business will have | | | | official address, your real name arid your home |
| to pay by talking with owners of similar businesses, | | | | address. One of the forms may have to be notarized, |
| through magazine and newspaper articles and from | | | | so see the accompanying instructions. |
| trade associations, just to mention a few. Also apply | | | | - Usually you send back one form, the longer one, and |
| some common sense: ask yourself what expenses | | | | keep the shorter form. Include a check made our to |
| seem normal for my type of business? I suggest that | | | | the County Clerk for the registration fee. |
| you add 20% to your estimate of monthly business | | | | - Take the shorter form to any newspaper in your |
| expenses. | | | | county (call first to get their rate for an assumed name |
| To discover what magnitude of starting capital your | | | | ad) and place an ad for three consecutive weeks. The |
| business will need, take your "business burden" and | | | | newspaper will give you proof that the ad ran. |
| multiply by three. Add in the one-time startup costs. | | | | - Send proof of ad placement back to your County |
| Multiply the monthly business expenses by three and | | | | Clerk, right away. |
| add to the other two groups of costs. The total is | | | | - In three to four weeks you wilt receive a registration |
| known as "initial capitalization" -- the money you had | | | | certificate. |
| better have access to before you open the door of | | | | Corporations Registering a corporation is more |
| your new business, Don't kid yourself; new businesses | | | | involved than the assumed name registration. Here is |
| are very hungry -- for money. Try to starve them and | | | | the procedure commonly found. It may vary in your |
| they perish! | | | | state: |
| Picking A Business Name | | | | - Call your Secretary of State and ask for |
| Up to this point, you have probably only spoken | | | | Corporate Name Registration. |
| about your new business to your family and yourself. | | | | - Have two or three name choices written down by |
| But now it is time to prepare to talk to the outside | | | | the phone. Ask if the first name is available. If not, go to |
| world. The first step in communicating all the wonderful | | | | the next, and the next. Hopefully one of the three is |
| things your business can provide is to create an | | | | available. |
| identity for it by carefully selecting a business name | | | | - While you have them on the phone, request two |
| and address. | | | | copies of the registration paperwork known as the |
| I have long believed that there is no such thing as the | | | | Articles of Incorporation (or similar name). |
| perfect name for a new business. After all your | | | | - Use an attorney or one of the Small Business |
| customers are largely buying you in the beginning. But | | | | Development Centers for help in filling out the Articles |
| a cleverly selected business name goes a long way | | | | of incorporation. They are pretty easy, but the section |
| toward making your new company more memorable. | | | | on issuing stock can be a little tricky. Check the form |
| Here are some tips for selecting a business name: | | | | for how to calculate the incorporation fee. |
| - Keep it Short - no more than four words | | | | - Send two copies of the Articles with a certified |
| - Make sure It can be easily pronounced | | | | check or money order for the incorporation fee made |
| - Use either your own name or one that says what | | | | out to the Secretary of State at the address in the |
| your business does | | | | instructions. |
| - Look in the Yellow Pages to avoid a name that is | | | | - In a few weeks you will receive the official notice of |
| confusingly similar to an existing business | | | | incorporation. After this time whenever you use your |
| - Make sure that is looks as good on a business card | | | | business name it must be ended by one of four |
| as it does on a piece of letterhead. A way to do this is | | | | suffixes: "Inc.", "Corp.", "LTD", or "Co.". Place the |
| to use a graphic artist to sketch the name business | | | | certificate in a safe place. You will need it for a |
| card size. | | | | number of purposes but most importantly you must |
| Be aware that some businesses not only legally | | | | show it in order to open a corporate checking account. |