How to Start a
Business and Write
a Business Plan
KENTUCKY COALITION OF NURSE PRACTITIONERS & NURSE MIDWIVES
26 TH ANNUAL REGIONAL APN CONFERENCE
APRIL 15-18, 2014
LEXINGTON, KY
Cory Reitz, CPA/ABV, CVA, MBA
Partner
Ray, Foley, Hensley & Company, PLLC
Certified Public Accountants and Consultants
230 Lexington Green Circle, Suite 600
Lexington, KY 40503-3326
859-231-1800
Direct line: 859-519-1668
creitz@rfhco.com
Starting a Business
• Websites that are good references:
• U.S. Small Business Administration
http://www.sba.gov/content/follow-these-steps-startingbusiness
• Internal Revenue Service
http://www.irs.gov/Businesses/Small-Businesses-&-SelfEmployed/Starting-a-Business
• Commonwealth of Kentucky
http://onestop.ky.gov/plan/Pages/default.aspx
• Kentucky Small Business Development Center
http://ksbdc.org/
Is Entrepreneurship for You?
Some characteristics and skills commonly found in
successful entrepreneurs:
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Risk taker
Independent
Persuasive
Able to negotiate
Creative
Supported by others
Questions to Ask Yourself Before
Starting Your Business
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Why am I starting a business?
What kind of business do I want?
Who is my ideal customer?
What products or services will my business provide?
Am I prepared to spend the time and money needed to get my business started?
What differentiates my business idea and the products or services I will provide from
others in the market?
Where will my business be located?
How many employees will I need?
What types of suppliers do I need?
How much money do I need to get started?
Will I need to get a loan?
How soon will it take before my products or services are available?
How long do I have until I start making a profit?
Who is my competition?
How will I price my product compared to my competition?
How will I set up the legal structure of my business?
What taxes do I need to pay?
What kind of insurance do I need?
How will I manage my business?
How will I advertise my business?
10 Steps to Starting A Business
STEP 1: WRITE A BUSINESS PLAN
Use tools and resources to create a business plan. They will help you
map out how you will start and run your business successfully.
STEP 2: GET BUSINESS ASSISTANCE AND TRAINING
Take advantage of free training and counseling services, from preparing
a business plan and securing financing, to expanding or relocating a
business.
STEP 3: CHOOSE A BUSINESS LOCATION
Get advice on how to select a customer-friendly location and comply with
zoning laws.
STEP 4: FINANCE YOUR BUSINESS
Find government backed loans, venture capital and research grants to
help you get started.
10 Steps to Starting A Business
(continued)
STEP 5: DETERMINE THE LEGAL STRUCTURE OF YOUR
BUSINESS
Decide which form of ownership is best for you: sole
proprietorship, partnership, Limited Liability Company (LLC),
corporation, S corporation…
STEP 6: REGISTER A BUSINESS NAME ("DOING BUSINESS AS")
Register your business name with your state government.
STEP 7: GET A TAX IDENTIFICATION NUMBER
Learn which tax identification number you'll need to obtain from
the IRS and your state revenue agency.
10 Steps to Starting A Business
(continued)
STEP 8: REGISTER FOR STATE AND LOCAL TAXES
Register with your state to obtain a tax identification number,
workers' compensation, unemployment and disability insurance.
STEP 9: OBTAIN BUSINESS LICENSES AND PERMITS
Get a list of federal, state and local licenses and permits required
for your business.
STEP 10: UNDERSTAND EMPLOYER RESPONSIBILITIES
Learn the legal steps you need to take to hire employees.
Understand Your Market
• Learn about your customer, your competitors
and your industry.
• Research your market.
• How to Conduct Market Research:
1. Identify Official Government Sources of Market and Industry Data
- Economic Indicators (www.economicindicators.gov)
- Employment Statistics (www.bls.gov/ces) US Dept. of
Labor Bureau of Labor Statistics
- Income and Earnings (www.bls.gov/bls/wages.htm) US
Dept. of Labor Bureau of Labor Statistics
2. Identify Additional Sources of Analysis (trade groups, magazines,
academic institutions, etc.)
Choose Your Business
Structure
 SOLE PROPRIETORSHIP
 LIMITED LIABILITY CORPORATION
 CORPORATION
 PARTNERSHIP
 S CORPORATION
HTTP://ONESTOP.KY.GOV/START/PAGES/STRUCTURE.ASPX
Sole Proprietor
Advantages of a Sole Proprietorship
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Easy and inexpensive to form: A sole proprietorship is the simplest and least
expensive business structure to establish. Costs are minimal, with legal costs
limited to obtaining the necessary license or permits.
Complete control. Because you are the sole owner of the business, you have
complete control over all decisions. You aren’t required to consult with anyone else
when you need to make decisions or want to make changes.
Easy tax preparation. Your business is not taxed separately, so it’s easy to fulfill
the tax reporting requirements for a sole proprietorship. The tax rates are also the
lowest of the business structures.
Disadvantages of a Proprietorship
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Unlimited personal liability. Because there is no legal separation between you
and your business, you can be held personally liable for the debts and obligations of
the business. This risk extends to any liabilities incurred as a result of employee
actions.
Hard to raise money. Sole proprietors often face challenges when trying to raise
money. Because you can’t sell stock in the business, investors won't often invest.
Banks are also hesitant to lend to a sole proprietorship because of a perceived lack
of credibility when it comes to repayment if the business fails.
Limited Liability Company
Advantages of an LLC
 Limited Liability. Members are protected from personal liability for business
decisions or actions of the LLC. This means that if the LLC incurs debt or is sued,
members' personal assets are usually exempt. This is similar to the liability
protections afforded to shareholders of a corporation. Keep in mind that limited
liability means "limited" liability - members are not necessarily shielded from wrongful
acts, including those of their employees.
 Less Recordkeeping. An LLC's operational ease is one of its greatest advantages.
Compared to an S-Corporation, there is less registration paperwork and there are
smaller start-up costs.
 Sharing of Profits. There are fewer restrictions on profit sharing within an LLC, as
members distribute profits as they see fit. Members might contribute different
proportions of capital and sweat equity. Consequently, it's up to the members
themselves to decide who has earned what percentage of the profits or losses.
Disadvantages of an LLC
 Limited Life. In many states, when a member leaves an LLC, the business is
dissolved and the members must fulfill all remaining legal and business obligations to
close the business. The remaining members can decide if they want to start a new
LLC or part ways. However, you can include provisions in your operating agreement
to prolong the life of the LLC if a member decides to leave the business.
 Self-Employment Taxes. Members of an LLC are considered self-employed and
must pay the self-employment tax contributions towards Medicare and Social
Security. The entire net income of the LLC is subject to this tax.
Corporation
Advantages of a Corporation
 Limited Liability. When it comes to taking responsibility for business debts and
actions of a corporation, shareholders’ personal assets are protected. Shareholders
can generally only be held accountable for their investment in stock of the company.
 Ability to Generate Capital. Corporations have an advantage when it comes to
raising capital for their business - the ability to raise funds through the sale of stock.
 Corporate Tax Treatment. Corporations file taxes separately from their owners.
Owners of a corporation only pay taxes on corporate profits paid to them in the form
of salaries, bonuses, and dividends, while any additional profits are awarded a
corporate tax rate, which is usually lower than a personal income tax rate.
 Attractive to Potential Employees. Corporations are generally able to attract and
hire high-quality and motivated employees because they offer competitive benefits
and the potential for partial ownership through stock options.
Disadvantages of a Corporation
 Time and Money. Corporations are costly and time-consuming ventures to start and
operate. Incorporating requires start-up, operating and tax costs that most other
structures do not require.
 Double Taxing. In some cases, corporations are taxed twice - first, when the
company makes a profit, and again when dividends are paid to shareholders.
 Additional Paperwork. Because corporations are highly regulated by federal, state,
and in some cases local agencies, there are increased paperwork and recordkeeping
burdens associated with this entity.
Partnership
Advantages of a Partnership
 Easy and Inexpensive. Partnerships are generally an inexpensive and easily formed business
structure. The majority of time spent starting a partnership often focuses on developing the
partnership agreement.
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Shared Financial Commitment. In a partnership, each partner is equally invested in the success
of the business. Partnerships have the advantage of pooling resources to obtain capital. This
could be beneficial in terms of securing credit, or by simply doubling your seed money.
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Complementary Skills. A good partnership should reap the benefits of being able to utilize the
strengths, resources and expertise of each partner.
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Partnership Incentives for Employees. Partnerships have an employment advantage over other
entities if they offer employees the opportunity to become a partner. Partnership incentives often
attract highly motivated and qualified employees.
Disadvantages of a Partnership
 Joint and Individual Liability. Similar to sole proprietorships, partnerships retain full, shared
liability among the owners. Partners are not only liable for their own actions, but also for the
business debts and decisions made by other partners. In addition, the personal assets of all
partners can be used to satisfy the partnership’s debt.
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Disagreements Among Partners. With multiple partners, there are bound to be disagreements
Partners should consult each other on all decisions, make compromises, and resolve disputes as
amicably as possible.
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Shared Profits. Because partnerships are jointly owned, each partner must share the successes
and profits of their business with the other partners. An unequal contribution of time, effort, or
resources can cause discord among partners.
S Corporation
Advantages of an S Corporation
 Tax Savings. One of the best features of the S Corp is the tax savings for you and your
business. While members of an LLC are subject to employment tax on the entire net
income of the business, only the wages of the S Corp shareholder who is an employee are
subject to employment tax. The remaining income is paid to the owner as a "distribution,"
which is taxed at a lower rate, if at all.
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Business Expense Tax Credits. Some expenses that shareholder/employees incur can be
written off as business expenses. Nevertheless, if such an employee owns 2% or more
shares, then benefits like health and life insurance are deemed taxable income.
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Independent Life. An S corp designation also allows a business to have an independent
life, separate from its shareholders. If a shareholder leaves the company, or sells his or her
shares, the S corp can continue doing business relatively undisturbed. Maintaining the
business as a distinct corporate entity defines clear lines between the shareholders and the
business that improve the protection of the shareholders.
Disadvantages of an S Corporation
 Stricter Operational Processes. As a separate structure, S corps require scheduled
director and shareholder meetings, minutes from those meetings, adoption and updates to
by-laws, stock transfers and records maintenance.
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Shareholder Compensation Requirements. A shareholder must receive reasonable
compensation. The IRS takes notice of shareholder red flags like low salary/high
distribution combinations, and may reclassify your distributions as wages. You could pay a
higher employment tax because of an audit with these results.
Choose & Register Your
Business
 CHOOSE YOUR BUSINESS NAME
o Uniqueness, check for trademarks, connotations, web,
part of a logo, social media, trademark protection, etc.
 REGISTER YOUR BUSINESS NAME
o Register your “Doing Business As” name with the state
government (http://revenue.ky.gov/business/register.htm)
 REGISTER WITH STATE AGENCIES
o https://secure.kentucky.gov/sos/ftbr/welcome.aspx
Obtain Business Licenses &
Permits
• Step 1: Tax Registration
 Employer Identification Number (EIN)
Employers with employees, business partnerships, and corporations,
must obtain an Employer Identification Number (EIN) from the U.S.
Internal Revenue Service. The EIN is also known as an Employer Tax
ID and Form SS-4. http://www.irs.gov/Businesses/Small-Businesses-&Self-Employed/Apply-for-an-Employer-Identification-Number-(EIN)Online
 Kentucky Tax Registration
Businesses that operate within Kentucky 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. Contact the
following agency for more information about business registration
and your tax obligations:
http://revenue.ky.gov/business/register.htm
Obtain Business Licenses &
Permits (continued)
• Step 2: Business Licenses
 General Business Licenses
• Information about how to obtain business and
occupational licenses and permits.
KY One Stop Business Portal
http://onestop.ky.gov/start/Pages/default.aspx
Obtain Business Licenses &
Permits (continued)
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Step 3: Local Permits
You may be required to apply for permits and licenses from your local government (e.g.,
city or county). Every place has different requirements. The following are common types
of local permits and licenses.
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Business Licenses / Tax Permits - from your city or county clerk or revenue
department. Many jurisdictions require a trader's license or tax certificate in order to
operate.
https://www.lexingtonky.gov/index.aspx?page=169
http://www.fcps.net/administration/departments/tax-office/tax-forms
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Health Permit - from your city or county health department.
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Occupational Permit - from your city or county building and planning development
department. This permit is required for home-based business in some jurisdictions.
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Signage Permit - from your city or county building and planning department. Some
jurisdictions require a permit before you can erect a sign for your business.
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Alarm Permit - from you city or county police or fire department. If you have installed
a burglar or fire alarm, you will likely need an alarm permit.
http://www.lexingtonky.gov/index.aspx?page=123
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Zoning Permit - from your city or county building and planning department. This
permit is generally required if you are developing land for specific commercial use.
Obtain Business Licenses &
Permits (continued)
• Step 4: Incorporation Filing
 If your business is a corporation, a non-profit, a
limited liability company or a partnership
(limited, or limited liability) you must register
with a state agency. If your business is a sole
proprietorship, you do not need to register your
business with the state.
 http://onestop.ky.gov/start/Pages/default.aspx
Obtain Business Licenses &
Permits (continued)
• Step 5: Doing Business As (DBA)
• A fictitious name filing, also known as Doing Business As or
DBA, allows you to create name for your business that is
different than your personal name, the names of your
partners or the officially registered name of your LLC or
corporation. In Kentucky, Sole Proprietorships wishing to
operate under an assumed name must contact the county
clerk office where the business is located to file an assumed
name registration form. General Partnerships doing business
under an assumed name, must submit aCertificate of
Assume Name with the Kentucky Secretary of State and the
county clerk where the business is primarily located. All other
business entities (Corporations, LLCs, etc. are required to
making business entity filings with the Secretary of State).
Obtain Business Licenses &
Permits (continued)
• Step 6: Employer Requirements
 If you plan to have employees, here are some
requirements:
1. Withholdings income taxes
Federal income tax – Form W-4, W-2
State income tax - http://revenue.ky.gov/wht/
2. Employee Eligibility Verification (I-9 Form)
3. Insurance – Unemployment
http://www.oet.ky.gov/des/ui/ui.htm , Workers Comp,
Workplace Poster Requirement (Fed & State)
Writing a Business Plan
Components of a business plan:
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Executive Summary
Company Description
Market Analysis
Organization & Management
Service or Product Line
Marketing & Sales
Funding Request
Financial Projections
Appendix
Executive Summary
• Start-up or New Business
- Focus on your experience and background as
well as the decisions that led you to start this
particular business.
- Show that you’ve done your homework with
market analysis, why you think there’s a need or
gap in the marketplace, try to convince the
reader that you will be successful, and you future
plans.
- Should be the last thing you write.
Company Description
What to Include in Your Company Description:
 Describe the nature of your business and list the
marketplace needs that you are trying to satisfy.
 Explain how your products and services meet
these needs.
 List the specific consumers, organizations or
businesses that your company serves or will serve.
 Explain the competitive advantages that you
believe will make your business a success such as
your location, expert personnel, efficient
operations, or ability to bring value to your
customers.
Market Analysis
What to include in Your Market Analysis:
 Industry Description and Outlook – Describe your industry, including its
current size and historic growth rate as well as other trends and
characteristics (e.g., life cycle stage, projected growth rate). Next, list the
major customer groups within your industry.
 Information About Your Target Market – Narrow your target market to a
manageable size. Many businesses make the mistake of trying to appeal
to too many target markets. Research and include the following
information about your market:
 Distinguishing characteristics – What are the critical needs of your
potential customers? Are those needs being met? What are the
demographics of the group and where are they located? Are there any
seasonal or cyclical purchasing trends that may impact your business?
 Size of the primary target market – In addition to the size of your
market, what data can you include about the annual purchases your
market makes in your industry? What is the forecasted market growth for
this group? For more information, see our market research guide for tips
and free government resources that can help you build a market profile.
Market Analysis (continued)
What to include in Your Market Analysis:
 How much market share can you gain? – What is the
market share percentage and number of customers you
expect to obtain in a defined geographic area? Explain
the logic behind your calculation.
 Pricing and gross margin targets – Define
your pricing structure, gross margin levels, and any
discount that you plan to use.
 When you include information about any of the market
tests or research studies you have completed, be sure
to focus only on the results of these tests. Any other
details should be included in the appendix.
Market Analysis (continued)
What to include in Your Market Analysis:
 Competitive Analysis – Your competitive analysis should identify
your competition by product line or service and market segment.
Assess the following characteristics of the competitive landscape:
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Market share
Strengths and weaknesses
How important is your target market to your competitors?
Are there any barriers that may hinder you as you enter the market?
What is your window of opportunity to enter the market?
Are there any indirect or secondary competitors who may impact your
success?
– What barriers to market are there (e.g., changing technology, high
investment cost, lack of quality personnel)?
 Regulatory Restrictions – Include any customer or governmental
regulatory requirements affecting your business, and how you’ll
comply. Also, cite any operational or cost impact the compliance
process will have on your business.
Organization & Management
What to include:
 Organizational Structure – Organization chart with
narrative descriptions
 Ownership Information
- Legal structure (S-Sorp, C-Corp, Partnership, Sole Proprieter, etc.)
- Names of owners
- Percentage ownership
- Management profiles (key people and their backgrounds)
- Name
- Positions (incl brief position description along w/ primary duties)
- Past track record
- Special skills
- Prior employment
- Compensation levels
- Quantify acheivements
- Board of Directors
Service or Product Line
A Description of Your Product / Service
Include information about the specific benefits
of your service – from your customers'
perspective. You should also talk about your
service's ability to meet consumer needs, any
advantages your have over that of the
competition.
Marketing & Sales
Develop a marketing strategy (creating
customers/patients or bringing in business)
• Strategies for a marketing strategy:
– Market penetration strategy
– Growth strategy (increase human resources, buying
another business, expanding services, etc.)
– Communication strategy (how are you going to
reach your customers/patients? Promotions,
advertising, public relations, personal selling, print
materials, etc.)
Marketing & Sales (continued)
• Develop a sales strategy (creating customers or
bringing in business)
• Strategies for a sales strategy:
– Identify your patients/customers
– Make contacts
Funding Request
If you need funding to start your business, you should include
the following:
 Your current funding requirement
 Any future funding requirements over the next five years
 How you intend to use the funds you receive: Is the funding
request for capital expenditures? Working capital? Debt
retirement? Acquisitions? Whatever it is, be sure to list it in
this section.
 Any strategic financial situational plans for the future, such
as: a buyout, being acquired, debt repayment plan, or selling
your business. These areas are extremely important to a
future creditor, since they will directly impact your ability to
repay your loan(s).
Funding Request (continued)
• When you are outlining your funding
requirements, include the amount you want
now and the amount you want in the future.
Also include the time period that each request
will cover, the type of funding you would like to
have (e.g., equity, debt), and the terms that you
would like to have applied.
• To support your funding request you’ll also
need to provide historical and prospective
financial information.
Financial Projections
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All businesses, whether startup or growing, will be required to supply
prospective financial data. Most of the time, creditors will want to see what
you expect your company to be able to do within the next five years. Each
year's documents should include forecasted income statements, balance
sheets, cash flow statements, and capital expenditure budgets. For the
first year, you should supply monthly or quarterly projections. After that,
you can stretch it to quarterly and/or yearly projections for years two
through five.
Make sure that your projections match your funding requests; creditors will
be on the lookout for inconsistencies. It's much better if you catch
mistakes before they do. If you have made assumptions in your
projections, be sure to summarize what you have assumed. This way, the
reader will not be left guessing.
Finally, include a short analysis of your financial information. Include a
ratio and trend analysis for all of your financial statements (both historical
and prospective). Since pictures speak louder than words, you may want
to add graphs of your trend analysis (especially if they are positive).
Appendix
The appendix would include:
 Credit history (personal & business)
 Resumes of key managers
 Letters of reference
 Details of market studies
 Relevant magazine articles or book references
 Licenses, permits or patents
 Legal documents
 Copies of leases
 Building permits
 Contracts
 List of business consultants, including attorney and
accountant
Common Business Plan
Mistakes or Pittfalls
1. Plan is poorly written
2. Plan presentation is sloppy
3. Plan in incomplete
4. Too vague
5. Too detailed
6. Unfounded or unrealistic assumptions
7. Inadequate research
8. Claim there’s no risk involved in your new venture
9. Claims there’s no competition
10.The business plan is really no plan at all