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.

Five Tips to Obtain Credit for Small Businesses

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As many small business owners know, financing is crucial to the financial health of their enterprise. While some small business owners have the resources to launch their business, most look to the credit market for financial help. Indeed, the banking industry is an important source to gain necessary capital. However, many entrepreneurs may not realize that that applying for commercial credit requires a great deal of preparation. Here are five tips to assist entrepreneurs in improving their chances of getting credit approval. Tip #1: Decide on the type of commercial loan that is needed. Loan options include short-term loans, intermediate loans, long-term loans, and lines of credit. Short-term loans are usually for less than a year. They typically provide interim working capital for a business temporarily in need of cash. Intermediate loans are often used for business set-up, the purchase of new equipment, expansion, or an increase in working capital. This loan can be anywhere from 1-3 years. Long-term loans are for major capital improvements, acquiring fixed assists, and business start-ups. The loan term is usually from 3-5 years and repayment installments are on a monthly or quarterly basis. A line of credit gives a small business the ability to borrow money repeatedly, up to the credit limit. The lender will usually perform a review once a year, at which time the borrower is asked to update financial statements. Tip #2: Make sure all paper work is in order. Applying for commercial loans can be very tedious and requires much more documentation than applying for consumer credit. So, the key is to be prepared. In addition, entrepreneurs who have carefully put together the needed paperwork to include the loan purpose, the amount of money needed and for how long, and a repayment schedule proposal will be viewed more favorably by many lenders. Tip #3: Develop a well thought out proposal. The proposal should include the loan purpose, the amount of money needed and for how long, and a repayment schedule proposal. Points to include are the business description that tells the nature of the business, product and service, a personal profile, and a business plan that outlines the corporate strategy for the next three to five years. Additional points to add are supporting documentation that supports the information outlined in the proposal, and collateral that will be used to secure the loan. Financial statements, both personal and for the business, are important as well. Tip #4: Seek advice! It is important for entrepreneurs to talk with someone who has gone through the process of obtaining commercial credit before a lender is approached. This is especially important for the first time buyer. Entrepreneurs can approach mentors, qualified business counselors, business support groups, and the U.S. Small Business Administration. This step will increase the chances of getting a favorable credit decision. Tip #5: Be prepared to pursue various options. Sometimes, financial institutions will say no. Once again, obtaining credit can be difficult, especially for entrepreneurs who are first-time borrowers. However, since financial institutions have different standards, an inability to meet the standard of one lender does not mean one fails the standards of all. It is highly possible that credit approvals can be gained with another lender. So, it is important to keep seeking until a lender is found. Obtaining credit is necessary for many small businesses. Knowing what steps to take in this process can greatly increase an approval from a financial institution. Now, put these five tips into practice and be on your way to getting the credit you need for your business venture.

Entrepreneurs - You Might Want To Drop Out Of College

Entrepreneurs - You Might Want To Drop Out Of College

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Young entrepreneurs and business owners are often times faced with the choice of which road to take. On one hand, there is the more conservative route of staying in college and getting a degree. On the other hand, many have thriving businesses that are making more money than their degree will ever get for them. Is college simply a hindrance? Or is it a valuable resource that should be continued at all costs. Many college business owners don't even realize they have the choice of dropping out. Knowing this option is there could be vital to the success of their future business. If you are in college and are an entrepreneur or business owner you must ask your-self this question: should I drop out of college? The answer to this question often comes in many forms from many different people. I was recently at an entrepreneurial conference and had the opportunity to discuss this matter with many rich entrepreneurs. The answers I was getting from them were vastly different from those that my family had given me. On the one side I was being told that college is only useful if you are getting something out of it, and that if I was serious my businesses should take priority over schooling. From the family side I was being told to stay in school no matter what, put schooling at the forefront - there will always be time for business and it will be good to have a safe backup. Both of these answers have their merits, but which one is right?. It became clear to me that it was my decision- not the other wealthy entrepreneurs, and not your family. Why are you in college? This question is the fundamental element in the decision to drop out of college. Entrepreneurs must figure out the reality of why they are in college before making a decision to drop out. Some business owners are in college because their parents told them to go there, or because they didn't realize they had the choice. Other young entrepreneurs are in college because they find the information valuable and want to continue learning while they expand their business. Even more still had childhood dreams of one day being an engineer or architect and want to follow through with their early ideals. You must answer this question truthfully and honestly if you are going to make a choice about running your business full time or staying in college. Why Do You Want to Drop Out? It is very important to understand exactly why you want to drop out. Many business owners and entrepreneurs have vastly different reasons for dropping out of college and it is key that you understand yours. I have often fielded this question in conversation, and many times a young entrepreneur will want to drop out of college on pure speculation. This is never a good idea without a solid business plan. I recommend having a solid business plan and some backups in the least, as well as some plans for continued learning of business skills. Dropping out is a risky decision - entrepreneurs will understand and easily accept this fact. Understanding and accepting risk is part of being an entrepreneur and starting new businesses. I have also talked with many entrepreneurs who already have million dollar plus income, and are thinking about dropping out in order to focus more on their business. This instance presents an entirely new set of questions. Whatever your reasoning make sure that you understand and research your position. Here is the Secret to Making the Decision It all comes down to balancing the two sides of the argument. If you've figured out both your reasons for being in college and your reasons for dropping out and starting a business, then you can easily make a decision. The trick is to look at a list of both sides: your reasons for being in college and your reasons for going out and becoming an entrepreneur. If either side has reasons that aren't your own, or that have doubt in them, then you will most likely pick the other side. Here is an example situation, look at the two lists and decide what the student should do. Student A - Reasons to Stay in College: - My parents are paying for it, and they would flip if I left - Everyone I know is in college, it would be weird to leave. - A degree might give me some security later on. Student A - Reasons to Drop Out and Pursue Business - I have a solid business plan and have been working on it for months - My income is almost half of my parents already - Having more time to work on business would let me expand faster I think it is fairly clear in this setup that we have an entrepreneur at heart. There is doubt in the reasoning behind college, and he also doubts that he will even need the security of a degree. The second list is much more profound and certain. This student knows he will be successful as an entrepreneur and he only wants to build his business more. There is certainty and understanding in his tone. With this situation it seems very likely that the student would be far better off dropping out of college and pursuing his business goals. The case is almost never as cut and dry as the situation above, most young businessmen have far more complicated setups. Even with the complications, the end result is always the same. Follow the path that you are sure of in your heart. If you are an entrepreneur in the right position then you will know exactly why you want to drop out and that it will be better for you. Or, you will know that staying in college will teach you more about business and let you grow faster out of college. I will leave you with one last thing. Listen to your own thoughts, and pick the path that you know is better for you.

Effective Public Speaking for Small Business Owners

Public speaking is comfortably the quickest and easiest way to improve your company visibility, establish your-self as an expert, get you face known and get businesses coming to you. Most small business owners and managers fully recognize this yet even the thought of standing up in public to speak to a room full of strangers can evoke a somewhat nauseous feeling in many people. Some of the most confident business people often do their best to avoid public speaking. But not taking advantage of every public speaking opportunity is a serious mistake. Public speaking is great for your business in two main ways. One - you gain face recognition, and Two - it establishes you and your company as industry experts. Let’s start with face recognition. This sounds like a simple thing, but don't discount its importance. Imagine you are at an industry trade show. You are side by side with another company in the exhibit hall. You sell basically the same product. But you are delivering the keynote speech at the conference. Your picture, name and company is on each of the entry-way signs into the conference center. Which company are attendees at the conference (who, by the way, are qualified prospects) likely to visit? Odds are they will stop at your stand. Even people who are just walking by may stop to talk to the person they saw speak at a conference session. Sometimes that's all the edge you need to make that lucrative sale. The other reason they decide to stop is they recognize you as the industry expert. You must be. How else did you get invited to give the prestigious keynote speech? The prospects assume you know your business or you wouldn’t have been invited to speak at the conference. This is true regardless of industry. If you are a psychologist with a local practice and people see you speak at a conference, or even at a local Rotary meeting, they will begin to see you as an industry expert. Should the occasion arise for that person to need to visit a psychologist, or to refer a colleague or friend, your name may come to mind simply because they’ve seen you before. It is important, however, that if you decide to take public speaking engagements, that you deliver a good speech. The good news is that you don't have to be perfect. In fact, usually public speakers do not have to be particularly good to be a great success. Your audience is usually more than half on your side. They want you to do well. And providing you deliver good, solid content in a professional manner your audience will leave well satisfied. But be prepared. There is nothing worse than letting a prospect see you give a less than well prepared speech. If your lack of preparedness causes you to pause a lot, stumble over sections of presentation, or fumble with slides or other presentational aid , that will give you the air of incompetence just as surely as a well prepared and delivered presentation will give you the air of expertise. Here are my top 7 tips for preparing presentations. 1. Choose 3 or 4 key topics - no more. 2. Make sure you have researched your content. 3. Write a script - you may not need to use it but the act of writing out a script is a great way for getting your thoughts and ideas straight. 4. Structure your speech around your core topics. Make sure you have a beginning, middle and end. 5. Make sure your presentational aids are prepared well in advance. Test them in the conference hall. 6. Rehearse - words that look great on paper often don't flow well when spoken aloud. 7. Rehearse again. Just as much as being seen and heard can gain you recognition and business, being seen and heard giving a poor presentation can lose your business. So you may want to look into taking a few public speaking courses to brush up on your skills. Public Speaking may well seem like a lot of effort and trouble. It might even cause you enormous personal anxiety. But there is no doubt that it is worth the time and energy it takes any manager or business owner to give public speaking presentations. There are few better ways to gain recognition for your name, company and to establish yourself as the obvious expert in your industry.