Refocus. Retrain. Rebuild.
Startup.
10 STEPS TO STARTING A BUSINESS
Starting a business involves making key financial decisions and
completing a
series of legal activities. Here are a list of initial activities
and steps that you can take to help you plan, prepare, and manage
your business.
CHOOSING YOUR CORPORATE STRUCTURE
Reduce Your Personal Liability - a corporation properly formed and organized can shield the owners (shareholders) from liability for business debt or lawsuits against the company thus protecting your personal assets such as homes, cars, savings, etc.
Add Credibility to Your Business - a corporation communicates permanence, prestige and credibility and also can make it easier to establish credit.
Reduce Taxes - a corporation is able to deduct many expenses that a sole-proprietorship or partnership cannot, including healthcare, entertainment and travel expenses. Also, pension or retirement plans can be grown more effectively in a corporate structure.
Raise Money Easier - via the sale of stock and also transfer ownership easily via the transfer or sale of stock.
Build Business Credit - a corporation, being a separate entity, can establish a new and separate credit profile that is distinct from your personal credit profile.
BOOKKEEPING AND ACCOUNTING
Be sure to keep proper accounting records. You can start out by keeping your own books there are several software on the market that will help you keep up with your payables (bills), receivables (income), as well as your accounts. As you grow you may want to consider hiring a CPA or accountant to keep your records for you. Keeping your books can be broken down into these simple steps:
Assets - those things of value that your company owns.
Liabilities - obligations of one company to another.
Using accounting software such as Peachtree, Microsoft Money, or Quickbooks will generate financial reports automatically.
REVENUE & EXPENSES
Here are a few pivotal pieces of information that you need to know about your business at all times.
PERMITS, LICENSES & LAWS
Be sure to visit your city, state, and federal websites and obtain all information on permits, licensing and laws pertaining to your particular businesses. Also, remember to research zoning laws in your city when choosing a location.
TAXES
Business or Hobby? Answer Has Implications for Deductions, FS-2007-18, April 2007
The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is a business or a hobby, an activity not engaged in for profit.
In order to educate taxpayers regarding their filing obligations, this fact sheet, the eleventh in a series, explains the rules for determining if an activity qualifies as a business and what limitations apply if the activity is not a business. Incorrect deduction of hobby expenses account for a portion of the overstated adjustments, deductions, exemptions and credits that add up to $30 billion per year in unpaid taxes, according to IRS estimates.
In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit. In order to make this determination, taxpayers should consider the following factors:
The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year undefined at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.
If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.
Deductions for hobby activities are claimed as itemized deductions on Schedule A (Form 1040). These deductions must be taken in the following order and only to the extent stated in each of three categories:
Further information is available in IRS Publication 535, Business Expenses
COLLECTING SALES TAXES OVER THE INTERNET
If you a run business with a physical storefront, collecting sales tax is pretty straightforward: you charge your customers the sales tax required by the jurisdiction where your business is located. So, if you operate a retail store in Nashville, Tennessee, you collect both state and local sales taxes from customers buying merchandise at your store. Now, suppose you start selling your products online. Does mean you charge them the same sales taxes on those coming into your store? It depends. If your business has a physical presence in a state, such as a store, office or warehouse, you must collect applicable state and local sales tax from your customers. If you do not have a presence in a particular state, you are not required to collect sales taxes.
For federal taxes visit IRS.gov.
For state taxes click here.
EMPLOYER & TAX IDENTIFICATION NUMBERS
Federal Registration
All businesses are required to pay federal and state taxes, and depending on where you live, local taxes. If you are just starting a business you may need to obtain employer tax identification numbers from the IRS and your state revenue agency that identifies you as a business. Not every business is required to obtain n tax ID, so consult the following resources to learn more about the requirements for your specific type of business:
Employer Identification Number (EIN)
An EIN is also known as a federal tax identification number, and is used to identify a business entity. Employers with employees, business partnerships, and corporations and other types of organizations, must obtain an EIN from the U.S. Internal Revenue Service. The EIN is also known as an Employer Tax ID and Form SS-4:
U.S. Internal Revenue Service Phone: 1-800-829-4933 or visit www.irs.gov
STATE TAX REGISTRATION
Businesses that operate within the state are required to register for one or more tax-specific identification numbers, licenses or permits, including income tax withholding, sales and use tax (seller's permit), and unemployment insurance tax. The State Tax Guide provides links to information about business registration requirements and your tax obligations in your state.
BUSINESS PLANS MADE SIMPLE
You need a business plan. Not planning is planning to fail!
Download
your free copy today!
THE BUSINESS PLAN.pdf
Business is personal. No matter how you look at it. That has been the problem with big business; they forgot that business is not about money, especially when it is your life’s work. When your business is your life’s’ work, it is an extension of you, that you are giving to the world. You are giving your skill, talent, product and/or services in exchange for compensation. And you will do it to your greatest ability and responsibly.
Hone you skills so that you can offer your clients and customers the best. Study, practice, work and do. Develop your product, whether service, goods or talents, in such a way that they offer your customers more than their perceived value. Always do your best and give your best work. Your clients will love you, your customers will keep buying from you and they will tell other people about you.
So, as your to do list grows in solidifying your business be sure not to neglect the very thing that will keep your doors open.
This Section is sponsored by: SOWGlobal, Inc. 
SOW Global, Inc., is a nonprofit organization assisting self-employed, independent professionals, small business owners, churches and nonprofit organizations in creating solid local economies through local business and economic development.
With over fifteen years of business, professional and service experience we take pride in our clients success. Our organization supports small businesses across the Country and we look forward to assisting you! www.SOWGlobal.com
Starting a business involves making key financial decisions and
completing a
series of legal activities. Here are a list of initial activities
and steps that you can take to help you plan, prepare, and manage
your business.- Research and Plan Your Business - Prepare your business plan
- Get Business Assistance and Training - Take advantage of free and paid training and counseling services.
- Choose a Business Location - Choose a customer-friendly location that complies with zoning laws.
- Finance Your Business – Savings, family, friends, associates, strangers, and government backed loans, venture capital and research grants to help you get started.
- Register a Business Name ("Doing Business As") - Register your business name with your state government.
- Determine the Legal Structure of Your Business - Decide whether you are going to form a sole proprietorship, partnership, LLC, corporation, non-profit or cooperative.
- Get an Tax Identification Number - Visit IRS.gov.
- Register for State and Local Taxes - Register with your state to obtain a tax identification number, workers' compensation, unemployment and disability insurance.
- Obtain Business Licenses and Permits - Get a list of federal, state and local licenses and permits required for your business.
- Employer Responsibilities - Learn the legal steps you need to take to hire employees.
CHOOSING YOUR CORPORATE STRUCTURE
Why should you incorporate your organization?
Reduce Your Personal Liability - a corporation properly formed and organized can shield the owners (shareholders) from liability for business debt or lawsuits against the company thus protecting your personal assets such as homes, cars, savings, etc.
Add Credibility to Your Business - a corporation communicates permanence, prestige and credibility and also can make it easier to establish credit.
Reduce Taxes - a corporation is able to deduct many expenses that a sole-proprietorship or partnership cannot, including healthcare, entertainment and travel expenses. Also, pension or retirement plans can be grown more effectively in a corporate structure.
Raise Money Easier - via the sale of stock and also transfer ownership easily via the transfer or sale of stock.
Build Business Credit - a corporation, being a separate entity, can establish a new and separate credit profile that is distinct from your personal credit profile.
- Corporation Formation Information
- LLC Formation Information
- S-Corp Formation Information
- Nonprofit Formation Information
- Legal Structure Comparison
- S-Corp vs. LLC
- LLC Formation Worksheet
- Corporation Formation Worksheet
- Nonprofit Formation Worksheet
- Limited Partnership Formation Worksheet
- What Corporation Don't Protect Your From
- Corporation FAQs
- Out of State Filings
BOOKKEEPING AND ACCOUNTING
Be sure to keep proper accounting records. You can start out by keeping your own books there are several software on the market that will help you keep up with your payables (bills), receivables (income), as well as your accounts. As you grow you may want to consider hiring a CPA or accountant to keep your records for you. Keeping your books can be broken down into these simple steps:
- Keep receipts or other acceptable records of every payment to you business;
- Keep receipts or other acceptable records of every expenditure by your business;
- Summarize your income and expenditure records periodically (daily, weekly, or monthly);
- Use your summaries to create financial reports that will tell you specific information about your business, such as how much monthly profit you're making or how much your business is worth monthly, quarterly, or yearly.
Assets - those things of value that your company owns.
Liabilities - obligations of one company to another.
Using accounting software such as Peachtree, Microsoft Money, or Quickbooks will generate financial reports automatically.
Here are a few pivotal pieces of information that you need to know about your business at all times.
Sales revenue: In business,
revenue or revenues is income that a company receives from its
normal business activities, usually from the sale of goods and
services to customers. Some companies also receive revenue from
interest, dividends or royalties paid to them by other companies.
Know how much income you are generating at all times.
Fixed costs: Fixed costs are business expenses that are not dependent on the level of production or sales, ie, rent, utilities, maintenance, and wages. You must know how much you need to spend every month to keep the doors open.
Gross profit: A company's total sales revenue minus its cost of goods sold (how much it costs to make the product, directly, ie material, machinery).
Break even analysis: Point at which total income equals total expenses. How much production, clients or sales do you have to have each month to cover your costs?
Fixed costs: Fixed costs are business expenses that are not dependent on the level of production or sales, ie, rent, utilities, maintenance, and wages. You must know how much you need to spend every month to keep the doors open.
Gross profit: A company's total sales revenue minus its cost of goods sold (how much it costs to make the product, directly, ie material, machinery).
Break even analysis: Point at which total income equals total expenses. How much production, clients or sales do you have to have each month to cover your costs?
Be sure to visit your city, state, and federal websites and obtain all information on permits, licensing and laws pertaining to your particular businesses. Also, remember to research zoning laws in your city when choosing a location.
TAXES
Business or Hobby? Answer Has Implications for Deductions, FS-2007-18, April 2007
The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is a business or a hobby, an activity not engaged in for profit.
In order to educate taxpayers regarding their filing obligations, this fact sheet, the eleventh in a series, explains the rules for determining if an activity qualifies as a business and what limitations apply if the activity is not a business. Incorrect deduction of hobby expenses account for a portion of the overstated adjustments, deductions, exemptions and credits that add up to $30 billion per year in unpaid taxes, according to IRS estimates.
In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit. In order to make this determination, taxpayers should consider the following factors:
- Does the time and effort put into the activity indicate an intention to make a profit? * Does the taxpayer depend on income from the activity?
- If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
- Has the taxpayer changed methods of operation to improve profitability?
- Does the taxpayer or his/her advisers have the knowledge needed to carry on the activity as a successful business?
- Has the taxpayer made a profit in similar activities in the past?
- Does the activity make a profit in some years?
- Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?
The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year undefined at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.
If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.
Deductions for hobby activities are claimed as itemized deductions on Schedule A (Form 1040). These deductions must be taken in the following order and only to the extent stated in each of three categories:
- Deductions that a taxpayer may take for personal as well as business activities, such as home mortgage interest and taxes, may be taken in full.
- Deductions that don’t result in an adjustment to basis, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.
- Business deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.
Further information is available in IRS Publication 535, Business Expenses
COLLECTING SALES TAXES OVER THE INTERNET
If you a run business with a physical storefront, collecting sales tax is pretty straightforward: you charge your customers the sales tax required by the jurisdiction where your business is located. So, if you operate a retail store in Nashville, Tennessee, you collect both state and local sales taxes from customers buying merchandise at your store. Now, suppose you start selling your products online. Does mean you charge them the same sales taxes on those coming into your store? It depends. If your business has a physical presence in a state, such as a store, office or warehouse, you must collect applicable state and local sales tax from your customers. If you do not have a presence in a particular state, you are not required to collect sales taxes.
For federal taxes visit IRS.gov.
For state taxes click here.
EMPLOYER & TAX IDENTIFICATION NUMBERS
Federal Registration
All businesses are required to pay federal and state taxes, and depending on where you live, local taxes. If you are just starting a business you may need to obtain employer tax identification numbers from the IRS and your state revenue agency that identifies you as a business. Not every business is required to obtain n tax ID, so consult the following resources to learn more about the requirements for your specific type of business:
Employer Identification Number (EIN)
An EIN is also known as a federal tax identification number, and is used to identify a business entity. Employers with employees, business partnerships, and corporations and other types of organizations, must obtain an EIN from the U.S. Internal Revenue Service. The EIN is also known as an Employer Tax ID and Form SS-4:
U.S. Internal Revenue Service Phone: 1-800-829-4933 or visit www.irs.gov
STATE TAX REGISTRATION
Businesses that operate within the state are required to register for one or more tax-specific identification numbers, licenses or permits, including income tax withholding, sales and use tax (seller's permit), and unemployment insurance tax. The State Tax Guide provides links to information about business registration requirements and your tax obligations in your state.
BUSINESS PLANS MADE SIMPLE
You need a business plan. Not planning is planning to fail!
Download
your free copy today!THE BUSINESS PLAN.pdf
Business is personal. No matter how you look at it. That has been the problem with big business; they forgot that business is not about money, especially when it is your life’s work. When your business is your life’s’ work, it is an extension of you, that you are giving to the world. You are giving your skill, talent, product and/or services in exchange for compensation. And you will do it to your greatest ability and responsibly.
Hone you skills so that you can offer your clients and customers the best. Study, practice, work and do. Develop your product, whether service, goods or talents, in such a way that they offer your customers more than their perceived value. Always do your best and give your best work. Your clients will love you, your customers will keep buying from you and they will tell other people about you.
So, as your to do list grows in solidifying your business be sure not to neglect the very thing that will keep your doors open.
SOW Global, Inc., is a nonprofit organization assisting self-employed, independent professionals, small business owners, churches and nonprofit organizations in creating solid local economies through local business and economic development.
With over fifteen years of business, professional and service experience we take pride in our clients success. Our organization supports small businesses across the Country and we look forward to assisting you! www.SOWGlobal.com
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