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
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 counselling 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
Each has a number of advantages and disadvantages. We’ll try to
enumerate some of them for you.
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
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 yo 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
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
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
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
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 sella 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
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
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
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
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
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
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
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,
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
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 amy 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
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
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