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Business Start-Up Fact Finder Manual
Business License? - Incorporate Online
America is coming home to work. Home-based offices are becoming
the wave of
the future. Tens of thousands of workers are opting for this
new way of life, a life in which they can make their own hours,
commute to work in seconds, make their own choices and become
their own bosses.
For many, the home office is becoming the location for a full-time
job and the primary
source of income. For others it is a part-time venture. Many
start on a part-time basis and grow their business into a full-time
Current figures available indicate that during 1991, the percentage
working from home jumped by almost 6% to approximately 12 million.
While working at home has an almost irresistible appeal to many,
and many have some big misconceptions of what it is like, here
is some very useful information that can help you get started
successfully.Legalities of Working at Home
Before setting up your new business, it would be advisable
to check on the legal
status of your business. You need to check zoning laws for your
community which may dictate if you can legally operate a business
from home. We realize that many businesses never check on zoning
for their home-based business and chances that they will ever
get into difficulties with the law are probably pretty slim.
If there are no changes in structure and you do not have customers
and or employees enter your home, regulations will tend to be
far easier. Laws and regulations change from community to community,
but the following 5 items will generally be regulated:
1. Separate business and private entrances.
2. Square footage of the home which is taken up by commercial
3. Employees working in the home.
4. Certain occupations such as jewelry or clothing manufacturing.
5. Storage of commercial goods, especially any hazardous materials.
Here is an important suggestion: Keep relations with your
neighbors on a friendly basis. Your neighbors will soon become
aware that you are working at home. Some may even be envious,
and yes, unfortunately zoning authorities will generally becomeaware
of home office zoning infractions through a "friendly neighbor".
Most cities or counties require businesses to be licensed.
businesses, however, are not required to have a business license.
Check with your local
City or County Clerks Office to obtain regulations for your locality.
If you are using your own name as your business name it will
not need to be
registered, but if you use any other name, or even your abbreviated
name, almost all
localities require that you register the name. This is called
a fictitious name registration or D.B.A "Doing Business
As" registration. If your names is:
Randy M. Jones and you name your business Randy Jones or Randy
Enterprise you will not have to register it, but if you call
it RMJ Enterprises, you will
generally have to register the name.
Most states have a name search bureau which is a part of the
state government. You will generally be able to call this office
to see if a given name has already been
registered to someone else in the state. This is important to
do, or it could be costly later. If you give your business a
name which is already registered to another company, the other
company may demand, and even take legal action, to make sure
you comply, that you cease to use the name.
Your Company as a Legal Entity
Businesses are most commonly set-up as one of the following
The Sole Proprietorship
Most new businesses are Sole Proprietorships. It is the least
complicated. It requires no paperwork. The proprietor, you or
you and your spouse as the owner, or owners, are taxed for all
net profit from your business. You add the income of the business
to other income, or deduct the business loss from other income.
Your tax adviser can give youspecific information.The disadvantage
of the Sole Proprietorship is that as the owner you can be held
fully liable in a lawsuit. An Incorporation, on the other hand,
will give you some protection. In this case the "INC"
rather than you is the legal business entity. If you are starting
a business that tends to have liability exposure the, corporation
may be the way to go. In this and other legal questions, only
your attorney can give you competent legal advice.
Partnerships are generally chosen when unrelated individuals
own a business. A
partnership should be set up by an attorney, or all kinds of
problems can develop later.
Designing Your Work-space
First, you must determine how much space you need. Chances
are what you may
initially think is quite large may be crowded or not enough space.
While many businesses are started from a corner of the bedroom
or kitchen, if the space is available it would be a far better
idea to take a spare area of the house and convert it into your
office. There may be space in the basement, garage, or a spare
bedroom. Having a separate space is more efficient and will make
for maximum efficiency. It is also psychologically important.
You do not want home activities to interfere with your business,
or vice versa. Friends and family will need to be told politely
but firmly that business hours mean business and dropping in,
or calling to chit chat is not acceptable. Psychologists suggest
that you work "from" home not just in your home. There
is a danger of becoming isolated. In as much as time allows,
participate in seminars and local business activities and organizations.
It is said, and also my own personal experience, that owners
of new businesses
never have enough time or money. The majority of small businesses
which do not succeed will fail because they are not properly
financed. In your financial planning, carefully review all required
start-up expenses as well as on-going expenses before revenue
will be generated. Estimate your profit margins and all fixed
and controllable expenses. Almost all entrepreneurs will tend
to be much more optimistic about their estimate of the financial
performance of a business than what is necessarily realistic.
There are always unforseen expenses.
It is a good idea to only invest in absolutely necessary expenses.
This applies to
furnishings, supplies and all equipment. Computer equipment in
recent years has become outdated within a short period of time.
So, if what you acquire will serve you well for 2-3 years you
will be able to upgrade your equipment later on. Your emphasis
should be on conserving capital. As your business develops, unexpected
hurdles will come along and periods of low revenue. Your capital
will make it possible to keep your business operating during
Why Should You Have A Business Plan?
While writing a business plan can be made into a highly sophisticated
especially by large corporations, it is easy to do when done
for a new or small owner
operated-business. Essentially, you will be committing your plans
to paper. As you do so, your thoughts will become more formal
and concrete and this will tremendously assist you in the development
of your business. If you are considering obtaining financing
for your new business either through a bank or the SBA, a formal
business plan will be a necessity. Home-operated businesses have
a much more difficult time obtaining financing that businesses
outside the home.
Don't Forget Uncle Sam
As in all undertakings of life from birth to death and beyond,
the IRS will be there to
watch over you. Almost all small, home-based businesses will
start out as "Sole
Proprietorships." This legal status is best for ease of
handling and for tax benefits. Your net business income or loss
becomes an addition or deduction to other income you declare
at the end of the year.
Careful record-keeping of all business revenue and expenses
is a must. Keep a
separate business checking account for your business. Do not
intermingle business and
personal expenses. Other special tax benefits and regulations
apply to home-operated
businesses. You should obtain professional advise from your tax
Free Publications available:
"Record-Keeping For A Small Business" IRS publication
583. Call the IRS 1-800-
"Business Use Of Your Home" can also be obtained
free from the IRS.
"Tax Guide For Small Business" is an annual IRS
publication, #334. It is also free.
One disadvantage of being self-employed is not having health
and disability insurance. You may also need liability insurance.
Your homeowners insurance covers your belongings in your home,
but it may not cover all business inventory and equipment. Check
with your insurance agent to make sure you have the right coverage.
Factors that will Determine Your Success [related
Do Your Homework
The more you know about your business, the better your chances
of success. Attend
seminars and join trade associations. Read books and trade publications.
If you do not
have a business background a business introductory class at a
local college would be
Planning is Key to Your Success
You and your family's future and livelihood are at stake.
So your decision and planning to start a business are a very
serious matter. Establish a long range plan which
encompasses your business and financial plans. You should obtain
legal or financial
advice from an attorney or accountant before committing to any
long range or major
financial transactions. Agreements with suppliers or customers
should be put into writing.
You Must Wear Many Hats
Small business owners over time can become experts on a variety
of subjects. At
the start the most important aspect is the development of your
business so you have to
acquire a marketing mind-set. Your communication to the rest
of the world through all
available means will determine your success. Here is an abbreviated
marketing check list:
Advertising (Don't forge the Yellow Pages)
Membership in Organizations
Invest in Good Equipment
The right equipment will make your work easier and your business
more efficient. To
conserve cash, used equipment should also be considered.
So What Are Your Chances
The better you think they are, the better they generally are,
and don't forget that
among thousands of others:
Apple Computer, Domino's Pizza, and Walt Disney all started
There is a great deal of expert advice and resource material
available to you. Much
of it is free of charge. A variety of literature is available,
both excellent books on all
business subjects and various magazines. Your local Chamber of
sponsors classes. Banks can give you advice, or can be used as
a sounding board. Local
schools offer a variety of classes of interest to business owners.
Don't forget the Public
Library. Last, but not least, don't forget the U.S. Government.
SBA (Small Business Administration) offers a range of services
such as loans,
financial consulting, computer and technical consulting services
and a variety of
Check your local telephone pages, or contact:
Small Business Administration
1441 L Street NW
Washington, DC 20416
United States Chamber of Commerce provides literature, telephone
other services to small businesses. Contact your local Chamber
of Commerce or:
United States Chambers of Commerce
1615 H Street NW
Washington, DC 20062
Internal Revenue Service offers a variety of services which
includes workshops, films
and publications to clarify tax matters for small businesses.
Contact your local IRS office or:
Education Branch, Taxpayer Service Division
IRS, Department of the Treasury
1111 Constitution Ave. NW
Washington, D.C 20274
Better Business Bureau (BBB) The BBB can be an important ally
in checking on
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potential suppliers and other businesses. Check for telephone
listing in the city where the company you are checking on is
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