EDUCATIVE THOUGHT FOR BUSINESS OWNERS.

Forms of Ownership

One of the first decisions that you will have to make as a business owner is how the company should be structured. This decision will have long-term implications, so consult with an accountant and attorney to help you select the form of ownership that is right for you. In making a choice, you will want to take into account the following: - Your vision regarding the size and nature of your business. - The level of control you wish to have. - The level of structure you are willing to deal with. - The business' vulnerability to lawsuits. - Tax implications of the different ownership structures. - Expected profit (or loss) of the business. - Whether or not you need to reinvest earnings into the business. - Your need for access to cash out of the business for yourself. Sole Proprietorships The vast majority of small businesses start out as sole proprietorships. These firms are owned by one person, usually the individual who has day-to-day responsibilities for running the business. Sole proprietors own all the assets of the business and the profits generated by it. They also assume complete responsibility for any of its liabilities or debts. In the eyes of the law and the public, you are one in the same with the business. Advantages of a Sole Proprietorship - Easiest and least expensive form of ownership to organize. - Sole proprietors are in complete control, and within the parameters of the law, may make decisions as they see fit. - Sole proprietors receive all income generated by the business to keep or reinvest. - Profits from the business flow directly to the owner's personal tax return. - The business is easy to dissolve, if desired. Disadvantages of a Sole Proprietorship - Sole proprietors have unlimited liability and are legally responsible for all debts against the business. Their business and personal assets are at risk. - May be at a disadvantage in raising funds and are often limited to using funds from personal savings or consumer loans. - May have a hard time attracting high-caliber employees or those that are motivated by the opportunity to own a part of the business. - Some employee benefits such as owner's medical insurance premiums are not directly deductible from business income (only partially deductible as an adjustment to income). Federal Tax Forms for Sole Proprietorship (only a partial list and some may not apply) - Form 1040: Individual Income Tax Return - Schedule C: Profit or Loss from Business (or Schedule C-EZ) - Schedule SE: Self-Employment Tax - Form 1040-ES: Estimated Tax for Individuals - Form 4562: Depreciation and Amortization - Form 8829: Expenses for Business Use of your Home - Employment Tax Forms Partnerships In a Partnership, two or more people share ownership of a single business. Like proprietorships, the law does not distinguish between the business and its owners. The partners should have a legal agreement that sets forth how decisions will be made, profits will be shared, disputes will be resolved, how future partners will be admitted to the partnership, how partners can be bought out, and what steps will be taken to dissolve the partnership when needed. Yes, it's hard to think about a breakup when the business is just getting started, but many partnerships split up at crisis times, and unless there is a defined process, there will be even greater problems. They also must decide up-front how much time and capital each will contribute, etc. Advantages of a Partnership - Partnerships are relatively easy to establish; however time should be invested in developing the partnership agreement. - With more than one owner, the ability to raise funds may be increased. - The profits from the business flow directly through to the partners' personal tax returns. - Prospective employees may be attracted to the business if given the incentive to become a partner. - The business usually will benefit from partners who have complementary skills. Disadvantages of a Partnership - Partners are jointly and individually liable for the actions of the other partners. - Profits must be shared with others. - Since decisions are shared, disagreements can occur. - Some employee benefits are not deductible from business income on tax returns. - The partnership may have a limited life; it may end upon the withdrawal or death of a partner. Types of Partnerships that should be considered: - General Partnership Partners divide responsibility for management and liability as well as the shares of profit or loss according to their internal agreement. Equal shares are assumed unless there is a written agreement that states differently. - Limited Partnership and Partnership with limited liability Limited means that most of the partners have limited liability (to the extent of their investment) as well as limited input regarding management decisions, which generally encourages investors for short-term projects or for investing in capital assets. This form of ownership is not often used for operating retail or service businesses. Forming a limited partnership is more complex and formal than that of a general partnership. - Joint Venture Acts like a general partnership, but is clearly for a limited period of time or a single project. If the partners in a joint venture repeat the activity, they will be recognized as an ongoing partnership and will have to file as such as well as distribute accumulated partnership assets upon dissolution of the entity. Federal Tax Forms for Partnerships (only a partial list and some may not apply) Form 1065: Partnership Return of Income Form 1065 K-1: Partner's Share of Income, Credit, Deductions Form 4562: Depreciation Form 1040: Individual Income Tax Return Schedule E: Supplemental Income and Loss Schedule SE: Self-Employment Tax Form 1040-ES: Estimated Tax for Individuals Employment Tax Forms FOR WOMEN: THE 5 MOST DEADLY NETWORKING MISTAKES AND HOW TO AVOID THEM As a business woman have you ever committed any of the 5 most deadly networking mistakes? Often business women commit deadly networking mistakes. These tips point them out and tell you how to correct them the next time you meet someone. Remember we are always networking at work, at church, in the neighborhood and of course at our networking events. 1. Mistake #1: Giving someone your business card before they even ask for it or when they really didn’t want it. Note a person may never ask for your business card and you may never need to give it to them in order to effectively network. The process of networking is really about getting to know the other person not knowing what they do or even passing out a business card. A person is more likely to become interested in what you do or how they can help you if they get to know you as a real person first and not specifically as a business person. 2. Mistake #2: Not getting to know the person before you set up lunch or dinner or coffee or tea with them. This is very close to #1. Knowing a person means not only that you know their name and what they do, but knowing what their hopes and dreams, and interest are. Family and children often make for a really good conversation should they mention it: like I have to go get me children from school, etc. What they talk about may or may not tie into what is on their business card or your business card. But remember that each person has the potential of knowing at least ten other people who need your service. If the person you are trying to connect with likes you and their outside interest may perhaps be yours and let’s say you become friendly, they will for sure remember you when the right time comes to recommend you to their friends or business associates…yes, for business. 3. Mistake #3: Talking about yourself and not giving the other person a chance to talk. This happens a lot, because we are all eager to tell about what we do and how good we are at doing it. But the truth of the matter is nobody cares how good you are unless they are interviewing you for their next brain surgery or you are having a formal interview! In reality people like to talk about themselves. Start with do you live in the vicinity and I bet they will start talking about themselves whether they live in the vicinity or not. If you listen closely you most likely will get to ask them more about themselves even leading to their hobbies. Then you can move on to what kind of work do they do. But if you do not get a chance to talk about work or profession on the first encounter, if you have built enough relationship with them, you will surely get to start talking about what they do the next time. 4. Mistake #4: Your time to show and tell ends up being too long and not very interesting to the other person. You have to know when to stop taking about yourself. If the other person is not interested in what you have to say, get use to that being alright, because it is alright. It is far better to have a friendly relationship that can go on to become even friendlier, if you keep them interested in you and what you do by just saying enough to wet their appetite about you. 5. Mistake #5: Calling and leaving message after message after message. Of course they could be busy, but if they haven’t called you back by now they might have other plans or they just might not want to talk to you. (What a position to be in. You may have burnt a bridge.) This is a sign of neediness on your part. You are not needy. There are thousands of “other” people out there who really do need your services. All you have to do is find them. You may say this is easier said than done. But just consider, when your target is specific you will know who they are and where they are and you will go straight to them. They may even go straight to you, because you got to know one of their buddies through proper networking and the buddy talked so much about you that the target just can’t wait to meet you so you can solve their problem. Think about this. It is empowering to be able to network effectively. It is empowering because when you really do network effectively you put yourself in the position of the helper who can bring true abundance and whatever the other person needs either through your own personal efforts or by leading one of your friends or contacts to them. That has got to be powerful! Getting Help and Advice on Starting a Business When you want to start a home business, it can be easy to feel alone, confused, and scared. The chances are that you don’t know anyone else who’s ever started a business, and you don’t even know who to ask if you get stuck. Here are a few things you ought to be looking at. The Internet. The Internet is a great resource for people who are thinking of setting up a home business – as well as all the articles you can find with practical advice, there are also many forums, where you can read about others’ experiences, and ask questions. The Government. Scary as it might seem to be getting advice on anything from the government, most governments go really out of their way to produce all sorts of easy-to-understand material on starting your own business. Encouraging you in business is a great way for them to both strengthen the economy and increase tax revenues. Depending on your area, you might find that local government agencies are also keen to give you help and advice, and might even have some kind of ‘small business center’ that you can visit. Mentors. Mentors are usually volunteers who think it would be nice to offer local businesses help and advice. They often have years of business experience, and can be really useful – if you find one, hang on to them. Librarians. Always willing to help and sadly neglected in our ‘wired’ age, you really should talk to a librarian. Libraries generally contain all sorts of business books and resources that they’ll be able to point you towards, and they’ll be more than happy to do research into obscure areas for you. Lawyers. Pricey as they might be, lawyers know all about starting businesses – they’ve almost certainly done it thousands of times over. It can be well worth paying for an hour of a lawyer’s time and just asking them every question you can think of. Accountants. A less expensive alternative to lawyers, accountants also know their stuff, especially (obviously) on the financial side. If you want your business to be profitable, you should take on board what your accountant tells you – and if you don’t have one, you should get one. By the time they’ve helped you navigate through all the tax mazes, they’ll almost certainly have made their fee back for you anyway. Incubators and Investors. If you think your business would be an attractive proposal to people who back businesses for a living, then you can try going to a ‘business incubator’ or some other kind of investor with your idea. If they like it, they’ll often have a quick process set up to get your company up and running as soon as possible. Universities. Here’s an interesting one: universities are full of business students. They’ve all spent ages learning about nothing but business, and many of them would just love to help get a real one off the ground – it’d look great on their CV, after all. Business students can be a great source of free help and advice, and they’ll probably even be thankful to you for letting them help out! Teachers. If you do a course to get a formal qualification in what you want to do before starting the business, you’ll probably find that your teacher is also a good resource on the business side of things. They’ll have had plenty of students starting businesses who’ve asked them similar questions, and they might even have prepared some material to give to anyone who asks for it. The Bank. Traditionally, your bank would have been the first place you went if you were thinking of starting a business, but many people seem to ignore them nowadays. While they’re no replacement for accountants, most banks will offer you a ‘business advisor’ when you open a business account, and they can be especially helpful with the technical and financial elements of starting up. Associations, Societies and Unions. Whatever industry you’re thinking of entering probably has some kind of trade association, society or union. You should join as soon as you can, and take advantage of all the resources that they will almost certainly offer to people wanting to get started in their industry. After all, the more people who are in their industry, the more members they can get. So you see! there’s no shortage of advice out there if you look for it.