Business and Small Business

Small businesses are usually sole proprietorships, partnerships or privately owned corporations. They employ a small number of employees and often do not have financial turnovers as large as those of large multinational companies. Small businesses are present in every industry. Ranging from interior designing to jewelry sales and even pet services, it is hard to avoid any of these businesses in our daily lives.

However, with so many small businesses selling products and services in society, we often forget that they can potentially be a very lucrative pool of customers as well. Any company that provides products or services to small businesses can benefit greatly from having a small business list.

Fortunately, the advancement of technology has enabled almost anyone to get access to a small business list with ease. There are online portals available for organizations and individuals to communicate with these small businesses, allowing them to get up-to-date information about company details and any other updates. One can also do a quick search online to look for such publicly available small company details. However, this is a potentially long and tedious process.

A good alternative is to look for small business mailing lists offered by list brokers and compliers on the web. The small business lists provided by brokers enable immediate access to a large pool of up-to-date information about other small businesses. The best part is that these lists are continuously being updated, so you won’t have to worry too much about getting outdated information. A quick rental of such a list would save one the time of having to personally search and update records.

Next, after having a small business list, individuals and other businesses can use it to their advantage. Entrepreneurs, start-up firms and home-based workers can use the list to conduct market analysis and research for example. This way, they easily identify market needs and are able to offer their products and services to these potential clients.

Another way a small business list can be used is to send out promotional material to highly targeted business prospects. For example, if you own an air-conditioning repair service, you could send out promotional brochures advertising your services to small businesses that could very well be your clients in the future. After all, which business office doesn’t own an air-conditioner or two?

The benefits of having access to a small business list is worth it’s weight in gold. But should one compile the list themselves, or rent one instead? If one wishes to manually compile the small business list himself, he will have to ensure that they are constantly being kept up-to-date.

This is because companies often make changes in their management, causing contact persons to change, or even a change in company address. The time and monetary costs required to maintain an accurate list of small business contact information is not small.

To avoid this, it would be best to rent a small business list and spend their time on making actual sales.

Having immediate access to a complied updated business list helps individuals and organizations to save time and money. When they require small businesses for their marketing needs or require help in their businesses, they can tap on this large resource base easily and efficiently.

Evaluate a Start Up

Before starting a company the Small Business Administration, SBA, recommends that potential entrepreneurs make a list of reasons for wanting to go into business. Some of the most common reasons for starting a business are: to be your own boss; financial independence; creative freedom; and to fully use your skills and knowledge. In addition, the SBA suggests entrepreneurs answer the following questions:

(1) What type of business am I interested in starting? (2) What services or products will I sell? (3) Where will I be located? (4) What skills and experience do I bring to the business? (5) What will be my legal structure? (6) What will I name my business? (7) What equipment or supplies will I need? (8) What insurance coverage will be needed? (9) What financing will I need? (10) What are my resources? (11) What will I compensate myself?

Select A Business Structure

The success or failure of a new company can depend on a variety of factors including, the manner in which a business is formed, managed and promoted. Although there are different opinions as to the process involved with starting a company, entrepreneur advisors agree that the first step to starting your own business is selecting the business structure that is best fitted for your intent and purposes.There are various ways an entrepreneur may conduct business, including sole proprietorship, partnership, limited liability and corporation. Before selecting a business structure, the potential entrepreneur should consider the following: legal restrictions; liabilities assumed; type of business operation; earnings distribution; capital needs; number of employees; tax advantages or disadvantages; and length of business operation.

The following is a list of advantages and disadvantages of different business entities:

Advantages

Sole Proprietorship (1) You are the boss. (2) Easy to form and to dissolve. (3) You retain all profits.

Partnership (1) Simple to organize but should get partnership agreement. (2) Business will benefit if partners have complementary management skills. (3) Ability to expanded capitalization increased from sole proprietorship.

Corporation (1) Limited personal liability for debts and judgments. (2) Can raise income through sale of stock therefore, maximum capitalization. (3) Lower cost per unit of doing business. (4) Can deduct the cost of benefits. (5) Can elect to be S corporation (to be taxed similar to a partnership) if you meet requirements.

Disadvantages

Sole Proprietorship (1) Very hard work. (2) Unlimited financial and legal liability. (3) Management deficiencies. (4) Limited working capital continuity of operation. (5) Potential lack of continuity of operation.

Partnership (1) Unlimited financial responsibility partners are jointly and individually liable for actions of their partners. (2) Potential conflicts of authority. (3) Potential personality conflicts.

Corporation (1) Expensive, complicated to form. (2) More legal compliance requirements from federal and state agencies. (3) Double taxation – dividend paid to shareholders aren’t deductible. (4) May be considered Impersonal by customers.

Choose A State of Formation

One of the first decisions a business must make after deciding to incorporate involves selecting the proper state of incorporation. A corporation is not required to incorporate in the state of its operations. However, often the best decision may be to incorporate in your home state. Two issues must be weighed to determine the proper state: (1) a dollars and cents analysis comparing the costs of incorporating in the state of operation versus qualifying to do business as a foreign (non-resident) corporation in the state under consideration and (2) determining the advantages and disadvantages of each state’s corporate laws and tax structure. If the corporation is a closely held corporation (not publicly traded) and does business primarily within a single state, local incorporation is often preferable. The cost of local incorporation will usually be less than incorporating in another state and qualifying to do business as a foreign corporation in the state. A foreign corporation that qualifies to do business in another state is subject to taxes, annual report fees, potential lawsuits and legal manners from both the state of incorporation and the qualifying state.

Choose Name for Corporation

Once the structure of the company is chosen the potential entrepreneur should choose a business name for the corporation. The name of the company should be chosen carefully. It is very important that entrepreneurs portray the desired image for their new corporation. Legally, the name selected must not be “deceptively similar” to any existing corporation within the incorporation state. In addition, there are state specific required corporate indicators such as Corporation, Incorporated or an abbreviation.During this process it is advised that potential entrepreneurs contact their Secretary of State, Corporations Division to learn about name availability.

Determine the Composition of Company Stock

The next step is to determine the composition of the business stock. Many different options are available in regards to the structure and composition of a corporation’s stock. Where the corporation has a fewer than 35 shareholders, a simple, inexpensive model for the structure of corporate stock may be most appropriate. A savvy business owner will recognize that authorizing a number of shares that will qualify for the minimum annual state filing fee is often a wise, money-saving choice.

Determine Tax Year

Each business taxpayer must figure their taxable income on an annual accounting period called a tax year. The first year the business files an income tax return it adopts either a calendar tax year or a fiscal tax year. The calendar year is the most common tax year. A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. The other tax year is a fiscal tax year. A fiscal tax year is 12 consecutive months ending on the last day of any month except December.

Businesses must use a calendar tax year if:

(1) You keep no books. (2) You have no annual accounting period. (3) Your present tax year does not qualify as a fiscal year. (4) You are required to use a calendar year by a provision of the Internal Revenue Code or the Income Tax Regulations.

Designate Board of Directors

The designation of Board of Directors is legally required if a corporation is formed. The Board of Directors are essentially necessary for the management of the corporation. Their responsibilities include establishing all business policies and approving major contracts and undertakings. In addition, the Board may also elect the President. Ordinary business practices, however, are carried out by the Officers and employees of the corporation under the directives and supervision of the Directors.

Designate a Registered Agent

Almost all jurisdictions require that the corporation designate a registered agent for service of process. However, in most cases, anyone who has a street address (no P.O. Boxes) within the state of incorporation may act as a registered agent for the corporation. The main purpose of the registered agent requirement is to provide potential claimants against your corporation with a live person, whose whereabouts are available in public records, who may accept service of process on behalf of the corporation.

File Articles of Incorporation

Although state laws differ in their filing requirements of sole proprietorships, corporations must file “Articles of Incorporation” – the main filing document which begins the corporation’s existence. Some state laws, such as Illinois, require a sole proprietorship to file an Assumed Name form with the County Clerk.

Hold First Board of Directors Meeting

After incorporation, the first Board of Directors meeting will resolve the following matters: adopt bylaws; issue stock; adopt a corporate seal; and designate a banking institution to serve the corporation’s banking needs. Many states allow the Board of Directors to be comprised of one person.

Determine Accounting Methods

Each new business must also use a consistent accounting method, which is a set of rules for determining when to report income and expenses. The most commonly used accounting methods are the cash method and an accrual method. Under the cash method, you generally report income in the tax year you receive it and deduct expenses in the tax year you pay them. Under an accrual method, you generally report income in the tax year you earn it. Regardless of when payment is received, expenses are deducted in the tax year you incur them.

Obtain an Employer Identification Number (EIN)

To obtain an employer identification number (also known as a tax identification number) the IRS Form SS-4, available on the IRS web site at rs.gov, must be completed. The completed form can and be mailed or faxed to the IRS office indicated on the instructions to Form SS-4. There is no fee. If the EIN is needed quickly, the IRS can assign a tax identification number by calling at (866) 816-2065. The IRS requires Form SS-4 to be completed and present in order to verbally complete the process. The following questions provided by IRS will determine if your company needs to obtain a tax identification number. You will need an EIN if you answer “Yes” to any of the following questions:

(1) Do you operate your business as a corporation or a partnership? (2) Do you file any of these tax returns: Employment, Excise, or Alcohol, Tobacco and Firearms? (3) Do you withhold taxes on income, other than wages, paid to a nonresident alien? (4) Do you have a Keogh plan? (5) Are you involved with any of the following types of organizations? Trusts, except certain grantor-owned revocable trusts, IRA’s, Exempt Organizations, Business Income Tax Returns, Estates, Real estate mortgage investment conduits, Non-profit organizations, Farmer’s cooperatives and Plan administrators.According to the IRS website, individuals doing business as sole proprietors will not need an EIN, unless they decide to hire employees. All income for sole proprietors without employees can be reported using the owners Social Security number.

Register Business/Obtain License

Depending on state laws your business may be required to register with the Department of Revenue or obtain a retail license to sell/service to the public. Most states have sales tax laws designed to turn retail businesses into tax collectors. Call or go to your states Department of Revenue office and request the form for business registration to obtain a retail license. A small fee will generally be required and in some states you must renew the license each year. Once your permit is mailed to you, you will be given detailed instructions on how to file the sales tax forms each month.

Get a Business License

Many states and localities require business to obtain a business licenses or permits no matter what type of entity it is. The license can usually be obtained in person by going to the city or village hall business licensing office. These offices usually charge a nominal annual fee for the annual issuance of a business license.My real estate background and experiences with various city halls have demonstrated that the licensing offices’ primary areas of concern are the type of business, hours of operation and location of business. Depending on the scope of your business, your home may require clearance from the zoning department. Although every municipality has different zoning laws, zoning is generally not a problem with small home based businesses. The zoning departments’ main focus is to ensure that new businesses remain legal and conforming to their zoning regulations; don’t improve or build additions that may encroach on easements or public utility lines; and do not disturb the neighbors.