THE FIRST STEPS

INTRODUCTIONS & EXPECTATIONS
Instructor:
• La Royce Gaines
• Entrepreneur
Coach/Accountant
• Let’s Talk Business
Attendees, Please introduce yourself:
• Name
• Type of business or business idea
• How far along are you
• What do you hope to gain from the workshop

HOUSEKEEPING
Class Materials
• Handouts
• Evaluation Forms
Break(s)
Restrooms
Ask Questions

AGENDA
Step 1: Decide if Business Ownership is Right for You
Step 2: Start Planning
Step 3: Fund Your Plan
Step 4: Select a Structure
Step 5: Choose a Name

AGENDA
Step 6: Register Your Business
Step 7:Take Care of Taxes
Step 8: Cover Yourself
Step 9: Get Licensed
Step 10: Start Out Strong

Decide if Business Ownership is Right for You

PROS AND CONS OF BUSINESS OWNERSHIP
Pros
• Independence
• Financial Rewards
• Learning Opportunities
• Personal Satisfaction
Cons
• Financial Risk
• Time Commitment
• Undesirable Duties
• Stress
Source: SIU SBDC
Step 1: Decide if Business Ownership is Right for You

SMALL BUSINESS STATISTICS
• Small business makes up 99.9% of U.S. firms ³
• More small businesses are opening than closing ³
• 20% of businesses with employees fail in the first year ¹
• Only half of business starts make it past year 5 ¹
• 42% of small businesses fail because there is no market ²
• 29% of startups failed because they ran out of cash ²
¹ Bureau of Labor Statistics’ Business Employment Dynamics ² CBInsights analysis , 2007 ³ Small Business Administration
Step 1: Decide if Business Ownership is Right for You

WHY START-UPS FAIL
• Inadequate front-end planning
• Insufficient capital (money)
• Lack of experience
• Poor location
• Poor inventory management
• Over-investment in fixed assets
• Poor credit arrangements
• Personal use of business funds
• Unexpected growth
• Inadequate records & financial knowledge
Step 1: Decide if Business Ownership is Right for You

Start Planning

EVALUATE YOUR BUSINESS
• Self Analysis
• Market Analysis
• Start-Up Costs
• Cash Flow
• Financing
Step 2: Plan

BUSINESS PLAN
• Business Description
• Market & Customers
• Operations, Organization &
Management
• Financials
Step 2: Plan

MARKET RESEARCH
Industry
• What is going on in the industry?
• Key trends?
• Local implications?
Market area
• Size
• How effected by the industry
Competitors
• Within the area
• Serve the area
• Strengths & opportunities
Step 2: Plan

MARKET RESEARCH
Demographics
• Who is in my market area?
• Economic conditions
• Political conditions
• Social conditions
Customers
• Demographics
• Psychographics
Step 2: Plan

MARKET RESEARCH
Seven Customer Questions
• Who are they?
• How many are there?
• How much do they spend?
• How often do they spend?
• How do they make a purchasing decision?
• What do they value?
• What/who influences them?
Step 2: Plan

Fund Your Plan

START-UP COSTS
Every expense required to get the business up and running.
• Legal/ professional services
• Utility deposit
• Initial inventory
• Furniture/ fixtures
• Equipment
• Software
Step 3: Fund Your Plan

INITIAL OPERATING EXPENSES
Recurring expenses that must be covered.
• Rent
• Wages
• Insurance
• Utilities
Step 3: Fund Your Plan

WORKING CAPITAL
The cash needed to cover expenses occurring within the business cycle.
• Accounts receivable
• Inventory
• Payroll
• Operating expenses and taxes
Step 3: Fund Your Plan

EMERGENCY FUNDS
A source of funds needed for the unexpected and unforeseen such as:
• Unprogramed supplier price hikes
• Repairs & maintenance
• New laws
For a start-up it is cash and liquid assets
Step 3: Fund Your Plan

WHAT YOU NEED TO START
Start-up Costs
+ Initial Operating Expenses
+ Working Capital
+ Emergency Funds
Total Funds Needed
Step 3: Fund Your Plan

SOURCES OF START-UP FUNDS
• Self
• Friends and family
• Bank loans
• Other
Step 3: Fund Your Plan

LOAN APPLICATIONS
• Personal financial statement and tax return of owner(s)
• Business plan
• Pro-forma balance sheet, income projection and cash flow
• Detail of total funds needed: sources & uses
• Documentation of items to be purchased
Step 3: Fund Your Plan

EVALUATING A LOAN REQUEST
• Cash
• Capacity
• Collateral
• Conditions
• Character, Knowledge, Skills,
& Abilities
Step 3: Fund Your Plan

Structure
Select a Legal

SOLE PROPRIETORSHIP ADVANTAGES
• Owner receives all profits
• Profits are taxed only once
• Owner makes all decisions
• Low organizational costs
• Few legal restrictions
• Simple to organize
Step 4: Select a Structure

SOLE PROPRIETORSHIP DISADVANTAGES
• No separate legal status
• Unlimited liability
• Limited in raising funds
Step 4: Select a Structure

PARTNERSHIP ADVANTAGES
• Easy to organize
• Access to more funds and skills
• Profits taxed only once
• Taxed at partner’s rate
Step 4: Select a Structure

PARTNERSHIP DISADVANTAGES
• Unlimited liability to general partner
• Divided decision making
• Transferability of ownership
Step 4: Select a Structure

LIMITED LIABILITY COMPANY ADVANTAGES
• Limited liability
• Separate legal entity
• Usually taxed as a sole proprietorship
• Unlimited number of owners
• Capital is easy to raise through the sale of interests
Step 4: Select a Structure

LIMITED LIABILITY COMPANY DISADVANTAGES
• Can be costly to form
• More administrative duties
• Personal tax liability
Step 4: Select a Structure

S-CORPORATION ADVANTAGES
• Limited liability
• Profits taxed only once
• Capital is easier to raise through sale of stock
• Transfer of ownership
Step 4: Select a Structure

S-CORPORATION DISADVANTAGES
• Can be costly to form
• S-corporation requirements
• More administrative duties
• Cannot provide company-paid fringe benefits
Step 4: Select a Structure

C-CORPORATION ADVANTAGES
• Limited liability
• Transfer of ownership
• Capital is easier to raise through sale of stock
• Company-paid fringe benefits
Step 4: Select a Structure

C-CORPORATION DISADVANTAGES
• Double taxation
• Can be costly to form
• More administrative duties
Step 4: Select a Structure

Choose a Name

CHOOSING A NAME
• Keep it simple
• Avoid unusual spellings
• Avoid limitations
• Make sure it is available
Step 5: Choose a Name

REGISTER YOUR NAME
• Doing Business As (DBA)
• Reserving a corporate name
• Protect your name
Step 5: Choose a Name

STEP 6
Register Your Business

BUSINESS REGISTRATION
Legal Structure
• Sole Proprietorship & General Partnership
• Limited Partnership & Limited Liability Partnership
• Limited Liability Company
• Corporation
Professional Registration
Step 6: Register Your Business

STEP 7
Take Care of Taxes

FEDERAL TAX INFORMATION & FORMS
• Federal Employer Identification Number (EIN)
• Income tax – estimated and paid quarterly
• Self-employment taxes – estimated and paid quarterly, monthly or bi-weekly (FICA & Medicare)
• Federal employment taxes – employee tax
Step 7: Take Care of Taxes

STATE & LOCAL TAXES
• Missouri identification number
• Missouri retail sales license
• Local Taxes
Step 7: Take Care of Taxes

Cover Yourself

EMPLOYEES
• Income taxes
• Federal Insurance Contributions
Act (FICA)
• Unemployment taxes
• Workers’ compensation insurance
• Independent contractors
Step 8: Cover Yourself

BUSINESS INSURANCE
Insurance requirements
• By law
• By lender or landlord
Categorize risk
Analyze what must be insured
Types of business insurance
Step 8: Cover Yourself

INTELLECTUAL PROPERTY
• Trademarks
• Patents
• Copyrights
• Trade Secrets
Step 8: Cover Yourself

YOU NEED BAIL & OTHER HELP
BAIL
• Banker
• Accountant
• Insurance Agent
• Lawyer
Others
• Mentor
• Business counselor
• Information Technology
• Appraiser
• Engineer
• Contractor
Step 8: Cover Yourself

STEP 9
Get Licensed

DO I NEED BUSINESS LICENSES?
• Federal
• State
• County
• City
Step 9: Get Licensed

POTENTIAL CITY & COUNTY REQUIREMENTS
• Bond/Insurance
• Health Inspection
• Liquor/Beer Licenses
• Local Taxes
• Zoning
• Environmental Regulations
• Business Property Taxes
• Home-Based Business
Rules
• Building Codes/Permits
• Health/Food Laws
• Child Care Regulations
Step 9: Get Licensed

Start Out Strong

RECORD KEEPING
• Business bank account
• Adopt an accounting system
• Monitor inventory
Step 10: Start Out Strong

LET ’S TALK BUSINESS!

m i s s o u r i b u s i n e s s . n e t
Missouri Business
Development Program
Funded in part through a
Cooperative Agreement with the
U.S. Small Business
Administration.