__________Small Biz Toolbox

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Since many of us are turning to contracting/freelancing as the job market slows, we need to realize that, as a contractor, you are your own small business. Or, maybe you've got a great idea or you just want to be your own boss. Here is some information and resources to help you get started.

Small Business Tool Box

Business Plan:
Company Summary - What are your objectives, goals, mission statement?
Product/Services Summary - What products or services are selling, manufacturing, etc.
Market Analysis Summary - Who are your competitors? What will you do differently, better, etc.
Strategy and Implementation Summary - Specifics: How will you market your business? What is your sales strategy? Who are your customers and how will you reach them?
Management Summary - Who is in charge? How many employees and who does what?
Financial Plan - What are the costs of running your business? Examples: wages, equipment, materials, utilities, insurance, taxes. What is your projected income?

Business Entities:
Sole Proprietorship - Ownership of business entity by an individual; individual is the business.
- Ease of formation and implementation, Lack of Structure, Unlimited Liability, Profits/Losses taxable/attributable to proprietor, Taxes payable at individual rates, Limited to assets of proprietor, SEC regulations prohibit investing.
Partnership - A voluntary association of two or more persons for the conduct of a business enterprise for profit as co-owners.
- Governed by PA Uniform Partnership Act, Quasi separate entity (Paperwork, liability, ownership, taxes shared by owners), profits shared by partners in accordance with partnership agreement, Taxes reported by each partner on individual returns.
Limited Partnership - Special type of partnership for the conduct of a business in which there is at least one general partner and one limited partner.
- Most characteristics same as above, Limited partner contributes cash/property in exchange for an interest in profits, losses, credits, deductions, etc.
Corporation - “Artificial” legal entity that exists independently of the people who own and manage it.
- Owned by shareholders, centralized management, Generally perpetual, Generally no owner liability. Corporate name must include the word "corporation", "company", "incorporated", or an abbreviation of one of the above. Articles of incorporation and Docking statement must be filed, Taxes filed at corporate level.
Type S - Can have no more than 75 share holders. Taxes filed in pass through manor.... Avoids double taxation of Type C corp.
Limited Liability Company - An independent legal entity created pursuant to statutory law. Can be managed by members or by managers.
- Can be member operated or manager operated, limited liability to individual members/managers, Certificate of Organization and Docking Statement must be filed, name must contain the word "limited", "limited liability company", or an abbreviation of either. Taxation is similar to partnership

Financial Considerations:
Talk to your BANK!!!!
Even if you are a sole proprietor, keep your business funds in a separate account.
Financial Proposal:
Collateral - Found in business balance sheet and personal financial statement. Types of collateral: equity in home or other property, cash balance in CDs or money market accounts, Stocks, Bonds, Cash value of insurance policies.
Character - Your credit history. Also previous job experience, or prior success running a business.
Capacity - Your ability to pay back the loan. Determined by combining business cash flow, projected cash flow, and personal financial strength of guarantors.
Note: Projected cash flow generally does not carry much weight for bank loans. However, the SBA does consider projections important .
Capital - Business equity and personal net worth of guarantors.
Condition - Overall market/economic conditions locally, nationally, and in your industry.
Your proposal should include:

  • Business Plan
  • Copies of last 3 year's business tax returns
  • Copies of your last 3 year's personal tax returns
  • Current personal financial statement
  • Details of loan request (amount, term, collateral, interest rate)
  • Projected cash flow

To use the SBA for your loan, you must meet your lenders requirements. The SBA does not lend money, it guarantees loans up to 80%. There are many types of SBA loans. For more information visit: www.sba.gov.

Investors:
Venture Capital - Looking for a 30-50% return. Will want to see a plan for cashing out: IPO or Buy-out... 5 years max. Investment range: $500,000 - $25,000,000
Friends - Could be business associates. Looking for a return, but not nearly as large or as quick as VC. Investment range: $5,000 - $10,000
Angels - Ideal candidate is already successful entrepreneur who can help you. Looking for return in 15-30% range. Check into Angel networks such as ACE-net or North Eastern PA Angel Network. Investment range: $25,000 - $200,000
You will be expected to give up equity in your business.

  • VC: 15-45%
  • Angel: 10-15%
  • Friend: 5%

Merchant Services - The ability to accept credit cards.
Swipe, Non Swipe, Internet, Paper, Electronic Paper
Factoid: Internet transaction are among the safest of all credit card transactions.
Fees: Application Fee, Set up fee, monthly statement fee, transaction fee, yearly or monthly minimum, discount rate. Consult with your bank for what arrangements are best for your type of business.

Accounting & Taxes:
Your financial statement:
Assets: Cash, equipment, furniture, property, trademarks, inventory, patent, accounts receivable.
Income: Fees, commissions, sales.
Liability: accounts payable, vacation pay, taxes, loans.
Expenses: Insurance, rent, utilities, equipment, payroll, supplies, interest, etc.
Assets minus Liabilities = Equity... bottom line of your financial statement.
Records you need to keep:

  • Revenue and expense Journal (checkbook)
  • Petty Cash Record
  • Inventory Records
  • Fixed Assets Log
  • Accounts Payable
  • Accounts Receivable
  • Milage, entertainment, and travel expenses
  • Payroll Expenses (W-4, I-9)
  • Continuing Education
  • Customer data base

Forms, forms and more forms:

  • Quarterly payroll (941, PA W-3R, Local, UC2)
  • Federal and State deposit
  • Federal Unemployment (Form 940)
  • OPT - withholding
  • Federal - Employee ID Number (ss-4)
  • State - PA - (PA-100)
  • Local registration
  • W-4 and I-9 for each employee
  • 1099 for each contractor

Entity Filing:

  • Sole Prop. - 1040, Schedule C
  • Corporation - 1120, 1120S, due 3/15/XX
  • State - Corporate return
  • Partnership - 1065 and state report - generally due 4/15/XX
  • Limited Liability Company - Single member - 1040, schedule C
    or See Corporation and partnerships
  • Fictitious name registration
  • Sales Tax:
    See form PA-100
    May also require use tax.
  • Check your municipality for licenses and business privilege tax.

Insurance:
Fire/Casualty
General Liability
Business Owners
Umbrella Liability
Errors and Omissions (Professional Liability)
Worker's Compensation
Auto for Business
Equipment/Personal Property

Marketing:
Networking! Build B to B contacts and customer base.
Speak at seminars and conferences. Check out your local chamber of commerce.
Ask:

  • Who? Your target market... What do they read, watch, do, listen to, where do they go?
  • What? Your product/Service... What are the benefits?
  • When? Set time line... Right it down, but be adjustable.
  • Where? Ask: How did you find us?
  • Why? What is the value of this product or service?
  • How? Strategy/Implementation

Advertising mediums: TV, Radio, Newspaper, yellow pages, Press release, direct mail, newsletters, FAX, inserts, rack cards, brochures, point of purchase.
Price Point: You don't have to have the lowest priced product. Maintain attitude that you are worth the price.
Do Research!
Know your and your competitors Strengths, Weaknesses, Opportunities and Threats.

Resources:
Your Bank!
Internal Revenue Service - www.irs.gov
PA Department of revenue - www.revenue.state.pa.us
- Click link to PA Open 4 Business
Small Business Administration - www.sba.gov
Small Business Development Centers - Phila.: www.sbm.temple.edu/~sbdc
Online Women’s Business Center - www.onlinewbc.com
Working Women - wwww.workingwomen.com
WMBX: Women and Minority Business exchange - wmbx.wwa.com/wmbx

Your "Tool Box"
Business Plan - Be thorough... Be flexible.
Your Bank - Get to know your banker. They want to help you succeed.
Accountant - Keep careful records. Make sure your tax forms are filled out properly.
Lawyer - Paperwork, licenses, trademarks, etc.
Insurance Representative - Discuss liability and other insurance particular to your business.
Marketing Resources - Network... Make "friends" who can support your business.
Yourself - YOU CAN DO IT!!!!!


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