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We hope you find this arcthve useful. A subscription to The Small Business Advisor Newsletter is free. Subscribe now - it's easy! The Small Business Advisor Newsletter for July, 2002 ======================== ======================== Here are a few of the more commonly asked questions we are asked about starting and operating a small or home based business. Maybe you have wondered about these same questions. Q: I'm starting a home based mailorder business that involves the buying and reselling of Musical instruments. I am the only employee and I have obtained a DBA certificate for my business name. Do I need to do anything with the IRS at this time? Should I obtain a federal tax ID number or just my own social security number? A: You do not need to get an EIN (federal tax ID or Employer Identification Number) from the IRS if you are a sole proprietor without employees. You can open your business bank account with your DBA name using your social security number (SSN). You will file Schedule C at the end of the year with your personal tax return, and if you have made a profit, Schedule SE (for self-employment tax) as well. Q: What's a DBA? A: DBA is an acronym for "Doing Business As" (also known as a "Fictitious Name."). Most states require that sole proprietorships and partnerships that are conducting business under a name other than the owner(s) must file for a DBA certificate in the county where business is conducted. The DBA certificate is generally obtained at the Clerk of Court of the county in which business will be conducted. Fees are typically $10 or less and most courthouses have records that may be searched to determine if your suggested name will be unique. Q: I have an idea for a small business. How do I go about finding out if there is a need and what the specifics of that need would be? Do I conduct my own marketing research, and if so, how can I find out the proper questions to ask? I'm sure a company that does this for you would be costly. A: You are right about the expense of market research companies. In general, this can be an expensive approach but there are some things you can do yourself to make a market determination. Basic questions you must answer include: Who are likely customers? How can you reach these customers? How much will these customers pay for your product or service? How should the product or service be marketed? Who is the competition? How to find the answers: Contact your local SBA office (check specific STATE information for contact information) Contact your local SCORE office Check out the Bureau of the Census website (http://www.census.gov) Browse the web for the product or service using major search engines. (this is a POWERFUL approach) As you start this process, you will be led to additional sources of information. It will snowball quickly and you will end up with plenty of data upon which to make your decision. Q: What's special about incorporating in Delaware & should I do it? A: First of all, you may incorporate in any state regardless of where your business is physically located. Delaware has been a favorite in years past due to their very liberal incorporation statues. However most states now have corporation statues similar to those in Delaware. Also, if you incorporate in a state other then where you are located, you may have to qualify to do business in your state as a foreign corporation. Furthermore, you will be subject to taxes in both your home state and the state in which you are incorporated. There is generally no reason to incorporate in a state other than your own. Before you make a decision, consult your legal advisor. ======================== No doubt, one of the most asked questions by the
prospective business owner is "Should I incorporate?"
Here are the choices available for operating your business: Sole Proprietorship. The vast majority of small and home-based businesses operate as a sole proprietorship. There is no limited liability - the owner is solely responsible for all debts. Business profit or loss becomes part of the owners personal tax returns. Major advantage: Simplicity. Regular ("C") Corporation. Limited liability is its major asset. Profits are taxed at corporate rates (lower than personal rates). Salaries paid to owners is subject to their regular personal tax rate. Major advantage: Relief from personal liability. S Corporation. Limited liability as with a "C" corporation but with some additional restrictions that only affect a few. Business profit and loss is passed through to the shareholders' personal tax returns. Major advantage: Profit and loss pass through to personal returns. Limited Liability Corporation ("LLC"). A fairly new entity that offers limited liability like a corporation and the tax advantages of a partnership and S-corporation. (No Federal taxes and personal pass through of losses). Major advantage: Limited liability PLUS profit and loss pass through to personal returns. General Partnership. No limited liability. Each partner reports profit and loss on their personal tax returns. Major advantage: No Federal taxation. Limited Partnership. Limited partners enjoy limited liability but the general partners (at least one is required) do not enjoy limited liability. Major advantage: Limited liability for the limited partners. Except for the sole proprietorship, each of these legal entities can be complex to setup. It is very important that you engage the services of an attorney and/or CPA to ensure no mistakes are made. There is no "best" choice. Oh, and by the way, the answer to the question, "Should I incorporate?" , is maybe but unlikely. ======================== Patient entrepreneur is an oxymoron. The fire that drives us to quit our jobs, risk our finances, and invest every waking hour in a venture is also the force that makes it impossible to accept the truth about starting a business: It always takes longer than you think it will. Plan on three times the money and twice the amount of time you think you'll need. I am often asked: "What qualities does someone have to possess to be a successful entrepreneur? The obvious answers: persistence, commitment, resilience, and courage. This list should include another often-neglected consideration - patience. Without patience, an entrepreneur will burn out and give up too soon, or at the very least, be miserable in the process of trying to reach their goals. I am six months pregnant while writing this column. I'm at that stage when it feels like I have been, and will be pregnant forever. Although part of me wishes I could "get this pregnancy over with," I know that if my baby were born now, he would have little chance of living a healthy life. And so, I wait patiently for his full term development, knowing there is good reason for his extended incubation. As a mother of two other babies, I vividly remember my labor experiences as extraordinary tests of patience. Contractions seem to go on for hours and hours, and you can't push the labor process any faster than your body, and the baby are willing to go. As a self-employed professional, wife and mother, patience is one of my most fragile, and yet most cherished assets. Patience, or lack of it, is directly responsible for the quality of my emotional experience, able to create a calm, peaceful state of mind, or an agitated one. Here are six strategies you can use to increase your patience quotient. They form the acronym "PLEASE", since if there was a special tune associated with impatience, wouldn't it begin with: "PLEASE. . . " To improve your patience level, you must understand where your impatience originates: P - Passion is what drives an entrepreneur, and also what keeps us from accepting the molasses like quality of our journey. To be nonchalant about our entrepreneurial goals would threaten our ability to reach them, so we attack our work with fervor and a voracious appetite for success. It's fine to be fueled by such intensity - if you can learn to tone it down when circumstances demand that you do so. An unbridled, impatient, entrepreneur is no more likely to win than a wild untrained horse at the racetrack. L - Lack of faith in God, the universe, employees, co-workers, customers, vendors, or family members will lead an entrepreneur to try to push the process and make things happen on their predefined schedule. When you don't trust anyone or anything but yourself, impatience will be your steady companion. Complete this sentence: "I trust that, besides me, ___________is guiding this process or is instrumental to its success, and I can trust him, her or it to do their part." Also try the serenity prayer; "God grant me the willingness to accept the things I cannot change, courage to change the things I can, and the wisdom to know the difference." E - Egocentricity and entrepreneurship go hand in hand. Business owners need strong, confident egos. When you are feeling impatient, your ego is insisting: "Why can't my_______ do this the right way!" If only my ______ would stop______ I wouldn't be so angry." We expect the world to revolve around our schedule, needs, and demands, and then get self righteous and impatient when others don't comply. Remind yourself that your business success relies on dozens of other people, all of whom have their own lives, schedules, and needs. Unless you're a hermit, you'll never have it your way all the time. A - Anxiety and fear are the great enemies of patience. Most impatience stems from terror that if we don't make things happen the way we think they need to, we will fail with horrendous consequences. Keep overstated self-talk and negative visualizations in check, and notice if your impatience is fueled by an exaggerated doomsday message. Pay attention to the direct relationship between fear and lack of faith. Rebbe Nachman of Breslov counsels: "Learn to wait. If despite all your determined efforts you cannot seem to reach your goals, be patient. Between acceptance and anxiety, choose acceptance." S - Shortsightedness comes from our insistence that the plan we have created is the best and only way to achieve our goals. Tied up with ego even better plan in mind for us than we have for ourselves. Surrender at times to what life is handing you, rather than what you planned on. Ask yourself; "Have I ever gotten something I didn't plan on, but was even better than I asked for?" E - Entrepreneurial vision is by its nature grandiose and impatient. When you are reaching for the stars, it's hard to watch grass grow. And yet, even the most spectacular dreams are achieved one painstakingly slow accomplishment after another. Support your long-term vision with daily goals and celebrate the progress you make along the way. Let me leave you with an analogy that applies to developing patience. One Thanksgiving, my family gathered at my brother's house for the anticipated turkey dinner. Unbeknownst to him, my brother's oven needed repair, and his broil and bake functions were reversed. After broiling a turkey for three hours, (while we thought it was baking), we ended up with a bird that was burned on the outside and raw on the inside. If we turn the heat to broil on our business, our
relationships, or ourselves, when what we really need is a slow
roast, the outcome will be unpleasant, if not ruined entirely. Patience
is not only a virtue for your emotional well being - it may be the
deciding factor in your success as well. Remember - good things
are usually worth waiting for. Return to top of page - Back to Home Page - Back to Archive Index |