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SMALL BUSINESS CHECKLIST
Checklists are a helpful tool. Don’t turn them into a crutch or limitation. When something is missing from your life or business checklist—add it!
—TAXMAMA
Starting a business is really easy. Many small business owners are in business before they even realize it. Someone likes something you make or do and offers to pay for it. Then another person asks. Pretty soon, something that started out as a hobby or family meal is bringing in a stream of income, even though you never intended to be in business. This is particularly true for the millions of people starting their own personal websites. Sure, the sites might start out as personal interest pages. But as they are filled with so much good information, they are suddenly discovered by hordes of people, and income starts rolling in. Oops, you’re in business and didn’t even know it. It is a wonderful feeling, though, isn’t it?
Other times businesses are started with a clear purpose. Some people, for example, get frustrated because a type of product isn’t available or because a service that should be there isn’t obtainable. These smart people see the void and fill it. Sometimes, they simply start doing it for friends, like a carpool service, and a business grows from there.
Other people come up with a great idea to hit it rich and start building the business around the idea. Usually, they get so excited, their friends and family get caught up in the excitement and give them money. Or if they’re really aggressive, they’ll raise the money from strangers or through banks, loans, or venture capital.
And then there are those people who really want to start a business but don’t know what business to start. If you don’t have a clue but want one, read Paul and Sarah Edwards’s book The Best Home Businesses for the 21st Century: The Inside Information You Need to Know to Select a Home-Based Business That’s Right for You, published by Jeremy P. Tarcher. It will not only give you ideas, but it will tell you what skills and tools you need to make that business work for you.
Folks who prefer to run a business from home, here’s another great resource filled with ideas—Raven Blair Davis’s Careers from the Kitchen Table. The book is now in its third edition. (TaxMama Family members can get a free copy of the 2010 edition, where TaxMama is included on page 235.)
Which of these businesses will succeed? Which will fail? Can you tell just by reading about the personalities involved and the nature of the start-up? Not really.
Three Indicators Will Predict the Success of the Business
There are three key factors that will predict the success of any business. Look at the descriptions below and see how they fit your business.
1. How big should your business be? If a business stays small—such as a mom-and-pop operation—it may never make a fortune, but it can generate a nice, modest cash flow without a fuss. If handled properly, some of these businesses will support a household forever—without much stress—in modest, happy style.
2. Has the business developed a plan—something to map out how it is organized and, when it grows, how to deal with success? The people who have the foresight to treat their businesses as real enterprises generally grow them properly, make excellent profits, and have something solid to pass on to their children. Or they sell out to larger companies, for millions, when they are ready to retire or exit.
3. Did the business owners take all the right compliance steps to learn of their tax and licensing obligations and stay on top of them? Too many small business owners, even those who aren’t home-based, just never take the time to look into the laws and rules that regulate their businesses. They just trip along blithely, doing what they do, and not dealing with licenses, payroll issues, or, sometimes, even filing issues, until these issues come and bite them in the derriere. Don’t think I’m kidding. I’ve seen too many nice people come to me because they were in such trouble with the IRS (or city licensing people or sales tax departments) that they were about to lose their businesses—even though they were successful. Or maybe these people were in trouble precisely because their businesses were successful and had finally come to the attention of the authorities.
Remember, ignorance of the law is no excuse. It’s your responsibility to learn what your business must do—it’s not the government’s responsibility to tell you. On the other hand, most cities and states offer excellent free information on their websites and through local training sessions at colleges or other outreach programs. Or there are nonprofit organizations, like SCORE, ready to provide advice. This wealth of information and help is often free or costs very little. Using those resources, you’ll also build a good contact network of the officials and bureaucrats who administer many of the programs. The small effort is well worth the trouble.
Let’s ensure that your business is one of those that succeed. This book will help make sure you’re one of the winners. Even if you’re already in business, and have been for decades, the information you’ll find here will help you.
Dennis Gaskill of BoogieJack.com said, “If you’re already in business for yourself don’t be fooled into thinking you can’t learn plenty from this book. I’ve been in business for myself since 1997, and my eyes were opened wide in several places. In addition to gaining a greater understanding of tax issues, I found oodles of great business advice and a vast array of valuable resources that multiply the end value of the book. If I’d had this book when I started my business I’d have been able to spend more time growing it because I’d have spent less time working it. When you’re working your business you’re keeping it going, but when you grow your business you’re increasing your income. With this book at hand, I’m giving myself a raise!”
It’s not too late to get it right—to protect the time and dollar investment you’ve already made.
So What Do You Need to Do?
Before you get started, use the checklist in this chapter to get on track and make sure you are doing everything right. Try to follow the steps in the order they are presented. As you go along, you may think of some other things that need to be done at that particular point for your specific business or industry. Keep a stack of self-stick notes handy so you can record your thoughts when you think of them. (Did you know that Post-it Notes came about as an error? 3M found a brilliant use for a glue that didn’t stick.)
Many of the resources mentioned in this book will take you to the Internet. When I was starting my business, I had to drive 50 miles to the nearest Department of Commerce office in Los Angeles, or spend days in the little glassed-in room in the back of the Santa Ana law library to do my tax research. Today, you can get the same answers in a few minutes using the Internet. Most of the resources are free—at least, the ones I’ve found for you and included in this book. If you don’t have Internet access, go to your public library. Most public libraries offer free Internet access, and the librarians can be very helpful. Perhaps it’s time you were reacquainted with those libraries you loved as a kid.
You don’t need a computer to start a business (e.g., house-sitting or dog-walking). You don’t even need Internet access. But it helps. As Chapter 6 points out, the costs of a computer and Internet access are deductible as business expenses.
You’ll be coming back to the checklist often. You would be wise to photocopy the pages and put them on a clipboard so you can work with them as you go along. In fact, make a few extra copies so you can use them in the first exercise. Each chapter will have a to-do list for you to use. Be sure to do everything that applies to you.
STEP 1. The first time you read the checklist, keep your mind open. Free-associate with the ideas and treat the time as a brainstorming session. Don’t do anything yet—just add your notes.
STEP 2. Read the list through again. Treat the second read-through the same way. Only this time, make your notes more specific. Write the names of vendors or suppliers you already know, the ones you’ll be contacting to implement the steps on the checklist.
STEP 3. Finally, start taking the actions and check them off when they are completed. Cross off anything that doesn’t apply to you so that you’re not distracted.
Ready? Let’s go.
The Checklist in To-Do Order
Set Up an Advisory Team
Even if you’re not incorporating your business, you need something similar to a board of directors. No one can run a business in a vacuum. Call upon professionals and people in your social or family circle or people in your community who’ve achieved success in the industries or fields you’ll be servicing. You can’t be expected to know everything, so don’t try. Find an expert in each field to help your business succeed.
Plan to meet at least every month until the business is established. Then meet at least every quarter during the first year or two as the business develops. Meet at least once each year after that. Be sure these are people who are available for you to call upon throughout the year. Expect to pay them for their time. You might even want to keep them on retainer. Questions will come up that they can answer quickly and easily, saving you hours of research time, and perhaps quite a bit of money, in the process.
Who should be on your team? Your insurance broker, business attorney, tax professional, bookkeeper (if you have one), office manager, banker, largest vendor or supplier, largest customer, website manager, at least two people who have successful businesses in your community, perhaps your favorite marketing guru, and your spouse. Include at least one person who has been successful in your industry, too. Once you start hiring employees outside the family, add a human resources expert to your team.
While some people may find setting up an advisory board impractical, I tend to disagree. True, you can certainly start a business without this step, but let’s look at the people who are highly successful in their businesses, who don’t seem to be stressed or struggling, and who seem to always have things go their way. What do we see in most of them? It’s that they have advisors or mentors who have helped them build their business. The folks who are doing just “OK,” or making just enough to live on—they were independent and did it all themselves.
Where can you find these professionals? Ask people you know for recommendations. Or visit the websites of your professional organization(s). These are the best places to find key tax and financial professionals:
• Enrolled agents (EAs). For tax specialists licensed to represent taxpayers before the IRS, people whose license allows them to work anywhere in the nation, contact the National Association of Enrolled Agents (NAEA), http://taxexperts.naea.org, (855) 880-NAEA (6232).
• Certified public accountants (CPAs). CPAs are authorized to perform certified audits and issue financial statements. For a referral, contact the American Institute of Certified Public Accountants (AICPA), http://www.aicpa.org/feedback/shortfb.htm, (888) 777-7077.
• Attorneys with the American Bar Association (ABA). For tax attorneys, business attorneys, and intangibles experts (patents and copyrights), contact the ABA, http://www.americanbar.org, (800) 285-2221 or (312) 988-5522.
• National Association of Tax Professionals (NATP). You’ll find a cross section of all kinds of tax professionals here—EAs, CPAs, attorneys, and licensed tax professionals. You can use NATP’s online search function to find a local tax professional at http://www.natptax.com, or you can call the association’s toll-free number, (800) 558-3402.
• Insurance agents and brokers. To locate insurance professionals, try the Independent Insurance Agents and Brokers of America (IIAA), http://www.independentagent.com, (800) 221-7917.
• Certified financial planners. To locate trained financial managers, contact the Certified Financial Planner Board of Standards, http://www.cfp.net, (800) 487-1497.
Incidentally, if a really big part of your business involves shipping, see if you can get your shipping company’s representative on your team. People rarely think about including representatives from the shipping companies, but they often have worldwide contacts. They may be able to help you find the best vendors, as well as customers, for your business. And they can even design custom packaging for you at little or no cost if you’re doing volume. For example, UPS created really beautiful packaging for Randazzo’s King Cakes.
Get started now assembling your team; you’ll need all these people to help you with the rest of this checklist.
Contact Small Business Advocacy Groups
Two of the most helpful advocacy groups for small businesses have websites with invaluable information. They are the Small Business Administration (SBA) at https://www.sba.gov/ and the Service Corps of Retired Executives (SCORE) at https://www.score.org/.
On these websites, you’ll receive lots of useful information about the business climate, your industry, and general business start-up help. SCORE even provides free advisors, or coaches, to help your business follow the right paths. Bear in mind that most of the people working for SCORE come from the corporate world and have little experience with small businesses. But they have good contacts, and if you let them guide you, they can help groom your business to grow in ways you couldn’t do alone. What’s the key thing to do with SCORE volunteers? Listen.
Decide Your Business Focus
Focus on one or two things you do well or products or product lines you want to sell or produce. If you think of many, list them so you don’t forget about them. Then select only the top one or two things you can implement most easily. Once the business is running smoothly, you can always add products or services. Starting with too many services or product lines dilutes your focus and your market.
Think about McDonald’s. It started with a core product line—hamburgers, fries, shakes, and Filet-O-Fish. That was it for decades until the company had built a solid reputation and market saturation. McDonald’s does field-test new products in certain of its company restaurants. But it generally drops them before they are distributed nationally.
Prepare a Business Plan
We’ll explain why you need a business plan and show you how to create one in Chapter 2.
Decide on Your Business Structure
Will you be a sole proprietor, corporation, or what? We’ll help you decide in Chapter 3.
Decide on the Name or Names You Will Use
How do you decide on a name? Perform some searches first. Try looking online to make sure there isn’t another company with the same name already in operation. Here are some other steps to take when selecting a name:
• Trademark your name. If you are planning for the long term or ever want to take your business public, this is an excellent precaution. You can do it yourself with the U.S. Patent and Trademark Office, http://www.uspto.gov/index.html. Before you file, even before you settle on your name, however, it may be worthwhile to run a trademark search to see if anyone is using it. A great web resource for this is http://www.uspto.gov/trademarks-application-process/search-trademark-database. Once you’ve decided on a name, you may submit your application online at http://www.uspto.gov/trademarks-application-process/filing-online. If you don’t do it right up front, you may have to spend a fortune fighting to protect it. Because I didn’t file right up front, it took me about three years to get TaxMama registered (see Figure 1.1). You can see the history of the battle at http://iTaxMama.com/TaxMamaTM.
• Get an Internet domain name to match your business name. Even if you’re not planning to have a website right away, buy the name now and hold on to it until you need it. Otherwise, it will be gone when you’re ready. Domains are cheap. GoDaddy.com (http://godaddy.com) sells domain names for about $10 per year. When operating online is important to your business, your business name might depend on what’s available as a domain name. The very memorable TaxMama.com was chosen after just such a search. The boring tax-related domains I wanted were no longer available. So, to our everlasting delight, we came up with something clever and original.
TaxMama Tip
The most important type of domain is the “.com” because it’s the one most people auto- matically type. So if you use a domain with any other ending—without also owning the .com—people will be taken to someone else’s website.
• File fictitious name announcements in your local newspaper, if necessary. This step will protect your name at the local level. This is what people call “DBAs” or “doing business as.” It lets the community know who is using the business name that you are announcing. If you are purely using your own name, you don’t need to file. For instance, if your business name is “Georgia Brown,” no DBA is needed. But if it is “Georgia Brown Consultant Extraordinare!,” you need to file the DBA information. Generally, if you incorporate, you can skip the fictitious name filings because the corporate name is protected at the state level.
Set Up a Corporation, Partnership, or LLC—If You Plan to Be One
There are several documents that you have to fill out to become a corporation, partnership, or limited liability corporation (LLC). You’ll need certain of those documents in order to take several of the next steps. So save yourself some time by filling out these documents now. You could use an attorney to handle the setup for you. I’ve found that attorneys tend to charge about $1,500 to $3,000 to set up your entity. They provide about an hour of advice and order the kit from an outside service that creates all the documents. The law firm turns it all over to you; then you have to get your own federal identification number, or your tax professional has to get it for you. Attorneys rarely remember to file the S-corporation election. That problem keeps cropping up consistently when clients come to me with their new corporations. What can you do instead? Do this. Pay your attorney for the hour of consultation about your business structure. Better yet, include your tax professional in that meeting, too. Then use one of these services to set up your entity. They are the same ones your attorney would use.
• Incorp Services Inc. in Nevada. http://iTaxMama.com/InCorpTM, (800) 2 INCORP: You’ll get 20 percent off on formation services and registered agent services when you use the coupon code TAXMAMA.
• The Company Corporation. https://www.incorporate.com/, (800) 315-9420: Register your corporation, LLC, or other formal structure at this site, which is one of the oldest incorporators in the country. Mention that Tax Mama sent you to get a $25 discount.
• Hubco. http://www.inc-it-now.com, (800) 443-8177: Hubco has the cheapest prices for entity setup. Attorneys who prepare some of their own bylaws and articles use these folks. Hubco services the public, too, but you’ll need to take care of several aspects of the setup yourself. (It is also a good source for supplies, such as corporate seals, stock certificates, etc.)
It’s essential to get the guidance of your team’s attorney and tax pro on this issue before you take action. Read Chapter 3 to better understand why you need guidance.
Before you start working with a partner or an investor who plans to participate actively in your business, consider reading Doug Thorburn’s Drugs, Drunks and Debits: How to Recognize Addicts and Avoid Financial Abuse (visit his website at http://www.preventragedy.com). Deciding to work with a recovering addict or obvious addict is easy. Once you know the person’s condition, you can make your decision with your eyes open. It’s the hidden addict who will destroy your business and your own emotional stability. Read the book and you’ll know the signs going in; then you’ll be able to decide if you want to go forward.
Open a Separate Bank Account for Your Business
Open a unique bank account for your business even if you plan to operate as a sole proprietor. Remarkably, many people overlook this fundamental business step. But it is crucial so that your personal money doesn’t get confused with funds from your business. If you are ever audited, having a separate account can help you gather your paperwork quickly.
When you are picking a bank, shop around. Find a local bank with nationwide ATMs, willing to waive first-year fees on business accounts. Arrange to get copies of your canceled checks. Many banks are discouraging this service or charging for it. Pay the fee. Having those canceled checks at hand will save you a lot of time and money in audits and tough situations. Arrange for online access and downloads. Often with online banking, you’ll get free accounting software. If you are given a choice, opt for Sage 50c or QuickBooks, not Quicken (we’ll cover this topic in detail in Chapter 4). You’re welcome to establish a business savings account or an investment account to store your profits or start-up loans until you need the money.
Select an Accounting System or Software
Chapter 4 will guide you through the record-keeping process.
Research the Licenses You Need and Agencies to Which You’ll Be Reporting
Gather all the forms and determine what your costs will be—both initially and annually. You’ll need all this for your business plan and budget (we’ll discuss this more in Chapter 2). In brief, though, here are several forms you’ll probably need to fill out:
• City or county license. Even a home-based business may need one. Call your city, county, or parish clerk’s office for more information. The SBA has a resource linking to small business information in each state; see the State Resources list at the end of this chapter. Read your local government’s business website carefully. Most localities have inexpensive licenses, around $25 to $75 per year. Be aware, however, that the Los Angeles license, for example, based on a percentage of sales, could cost hundreds of dollars each year. And Los Angeles aggressively collects those funds. Do you have the same multiplicity of jurisdictions where you live?
• IRS registration for an employer identification number (EIN). File Form SS-4 online yourself. You’ll find a link at TaxMama.com’s Resource Center. Note: If you are a sole proprietor who doesn’t plan to have employees, say you will have them, just to get the identification number issued. Having that EIN will make the difference between looking like a real business and looking like a hobby. (More about this in Chapter 2.)
• IRS online payment system. Sign up with the IRS’s online payment system at https://www.eftps.gov/eftps/. You can deposit your estimated tax payments, pay payroll taxes, and conduct other business tax transactions online.
Research State Taxes and Licenses
A variety of agencies may be regulating your industry, and you should learn the details about taxes, licensing, zoning, unions, and so on before you start. The fastest way to get the information you need is on the Internet. Start with your state’s official website. When you get to the state’s home page, look for a business link. If you need information about other states, use this link to all state tax agencies: http://www.taxadmin.org/state-tax-agencies. This is the website for the Federation of Tax Administrators. The link goes to the federation’s tax forms pages, but if you do a little backtracking, you’ll find the tax home page of the state you are interested in.
If you don’t have access to the Internet, pull out your residential telephone book. In the front, you’ll find pages listing all your local and state agencies. Spend some time reading that whole section. You’d be surprised at the agencies you’ll find. Some of them may even become a source of funding or contracts. Who knows? At least you’ll find the key agencies that affect your industry. Be sure to call your city clerk (or local equivalent) about local licensing. For state issues, call your secretary of state’s office. If that office is not the one you need to speak with, someone there will tell you whom you should call.
• State income tax registration. This is generally necessary only if you have formed an entity other than a sole proprietorship.
• Sales tax. You’ll need to know about sales taxes even if all your sales are online sales. Chapter 12 explains why. You must collect sales taxes if you are selling products to the end user. Some states might charge sales taxes on services. Check with your state’s department of revenue or its equivalent.
• Payroll taxes. Register with your state’s payroll tax department if you plan to have employees. Your children might be employees—if they actually do the work they’re supposed to do. (Chapter 9 will explain who is and isn’t an employee.)
• State licenses. State licenses are usually required for childcare providers, cosmeticians, most professionals, contractors, those selling alcohol, anyone dealing with hazardous substances, truckers, and who knows what other industries. It’s best to check before you find you’re operating without a license. The SBA has an excellent resource to help you look up your state’s requirements at https://www.sba.gov/starting-business/business-licenses-permits/state-licenses-permits.
• Other. Check to see what else your industry needs or requires. If you can’t find answers online, interview people who are successful in your industry. Or just call your state and ask the folks there to point you to a list of your obligations. Better yet, have them mail the list to you. Save the list and use it as a checklist. Of course, hiring a good tax professional with expertise in your industry will save you hours or even weeks of research. A good tax professional already knows what you must do. Another way to save time researching all the licenses you need is to use BusinessLicenses.com (http://iTaxMama.com/BusLicense). It will do the research for you. For an extra fee, it will even fill in the forms for you.
Research Your Costs—Especially Insurance
One of the first things you’ll need to get quotes on is insurance costs. Consider working with good business insurance brokers. They’ll know where the deals are and your coverage requirements.
• Business liability, fire, theft. Get a combined policy. For malpractice insurance, check with your professional association for the best prices.
• Auto. A good local broker can find you the best rates. You may be able to cut your rates by having one company carry several of your policies. Check several sources for better rates, but be sure that the coverage you’re pricing is equivalent across all carriers. Visit the American Automobile Association at http://www.aaa.com to find your local automobile club or call information to get the number of a local office. AAA offers some of the most complete insurance coverage and great service in case of accidents. GEICO, (800) 861-8380 or http://www.geico.com, offers different discounts for members of organizations such as government workers, AARP, and so on. I started with a “Good Sam” discount. When I obtained a letter from my alma mater, the “university discount” cut my policy by another $116 for six months. Seniors taking driving classes can get another discount from most insurers. Mercury Insurance runs great commercials. It has good prices, but its policies do not cover other people driving your car or accessories on your car, even if the accessories were from the dealer. Read the proposed coverage before buying!
• Health. You’ll probably need health coverage for yourself and your employees. Start out small. If you can’t afford to pay for your employees’ insurance, consider setting up a Health Savings Arrangement (HSA) plan. Find an insurance carrier in your state at https://www.ehealthinsurance.com/. HSAs were signed into law in 2003 and have become very popular. Read Chapter 10 for information on insurance benefits and tax credits. Note: HSAs consist of two parts, both of which are abbreviated as HSA. There is the Health Savings Arrangement (the plan) and the Health Savings Account (the bank account that comes with the plan).
• Workers’ compensation (WC). Find a local carrier. Some WC carriers, especially the quasi-state agencies, will pay you dividends if the fund makes money. Those dividends can reduce your net premiums by 10 percent or more per year. If you belong to an association or a professional or trade organization, contact it. Some organizations have negotiated deals for their members. I got a substantial rate reduction through one of my accounting associations. For a comprehensive list of state agencies and carriers across the country, visit http://www.workerscompensationinsurance.com/links/index.htm or call your state insurance commissioner for carriers in your area.
• Disability insurance. If you can qualify, get covered. You’ll need a source of income if you get sick or hurt and can’t work for several weeks. Check with your state if you can’t get covered commercially. Many states offer state disability insurance coverage for small business owners that are similar to employees’ coverage. The cost may be higher if you’re on Schedule C rather than on payroll. Another way to get coverage if you don’t meet the minimum health requirements is to buy a group policy for yourself and your employees. It usually requires a minimum of three people, but there are no medical exams. If you can find a really good policy, you’ll be able to live on it if—heaven forbid—you become permanently disabled. If you don’t have employees, look to your union or professional or trade association for group coverage. If that organization has not arranged for coverage, bug it until it does.
• Life insurance. Work with your advisory team on life insurance. Don’t go overboard, but get the coverage you need. For instance, seriously consider getting key person insurance, which allows you to buy out partners or their heirs in case of catastrophic injury or death.
• Other. There may be other insurance you will need, depending on your area, your business, and your industry. Your advisory team can alert you to the right coverage.
Select Facilities
Will you work from home, or will you buy or rent space? Whenever possible, look at the long-term picture. If you can afford to buy a place, do it. If you outgrow it, you can always rent it or sell it. Be unconventional, if you can. Will your business work if you put it into a house or an apartment? If it will, buy one. Many law firms and professionals take over old houses and fix them up as stately offices. If buying isn’t an option, be creative. Can you share space with a vendor in exchange for some service? If the service doesn’t interfere too much with your time, that may be a way to fund your first office space. (Read Chapter 5 about barter income.) If you must rent, negotiate. Offer to accept a higher monthly rent than you’d like in exchange for free months each year. That helps the landlord show a high monthly rental rate in case he or she wants to sell the building. Meanwhile, you end up paying a lower overall average rate.
The other option is to set up an office in your home, which has some excellent tax benefits—but could be too distracting to allow you to work. We’ll discuss this in depth in Chapter 7.
One of my EA Exam students graduated and passed all three of the IRS’s Special Enrollment Examinations. He met a man in church who ran a chain of check cashing outlets. They worked out a deal. Joe set up a tax office in one of the check cashing stores and did tax returns for the patrons. In exchange, Joe agreed to double his tithe to their church—paying the church 20 percent of his income instead of 10 percent. The arrangement worked out so well that the following year Joe had to hire staff and expand the arrangement to all the check cashing stores in the chain. Perhaps you can work out a mutually beneficial rental arrangement, too.
Make Lease-Versus-Buy Decision on Equipment and Vehicles
When it comes to the equipment and vehicles you’ll use, your first step is deciding whether you want to lease or buy. For equipment that either becomes obsolete quickly or is older and more subject to breaking down, a lease may be preferable. You can deduct the lease costs. Leases will often include service contracts, which will save you some money on that score. There are also benefits to buying automobiles you need for your job. We’ll cover this in more depth in Chapter 8.
Arrange for Inventory
When manufacturing a product, inventory is the heart of your operation. Though you’ll find suppliers around the world on the Internet, don’t rely on people you’ve never seen at facilities you’ve never visited to make your main products. Legwork is critical. Inspect the facilities and talk to their customers. Once you have prices, plug them into your business plan. Let your advisory team help you find the right sources. Always be on site when the factory manufactures your products—or have a representative there to inspect the finished products—before shipping.
Several years ago, when computer ports were precious and not to be wasted, Chris invented the EasyStick, a mechanical joystick that could be strapped over the number pad on the keyboard instead of having to be plugged into the computer. He knew this device would only have a brief life before it became outmoded—perhaps two to three years at the most. It garnered rave reviews from the Computer Shopper and other major computer and gaming magazines. Chris found a major wholesaler who contracted with him to buy all the units he could produce. He raised money from a handful of investors, knowing he’d be able to give them a generous profit. Chris found a company in China to manufacture it, using LexanTM, a hard plastic that would withstand the heavy-duty use. Well . . . Chris wasn’t there to oversee the process on the day the Chinese factory did its production run. It didn’t use Lexan, but instead used a cheaper material. When people used them, the EasySticks broke almost immediately. The wholesaler canceled the contract. The company went bankrupt. Investors got nothing back.
Establish Supplies Accounts
Establish accounts with office supply houses, both locally and online. My company has worked with Quill (http://www.quill.com/) and Office Depot (http://www.officedepot.com) for decades. They offer free shipping for orders of $35 to $45 or more. If you call Quill customer service to upgrade your account as a frequent shopper, you will generally get overnight shipping for free with no minimum purchase. Quill usually includes something extra—cookies, briefcases, radios, and so on. Whenever a product is wrong or damaged, both companies take the materials back, no questions asked.
Develop a reasonable budget for the things you need, and be careful not to spend money on things you don’t need. Don’t get things because they’re cute.
Consider Your Services Needs
Even if you decide not to hire employees initially, you’ll still need help. There are many people who can assist you with their services. Get an answering service so that you’re not constantly interrupted by calls. You may even need a virtual assistant. Certainly, you’ll need an attorney and a tax professional, and you might need a consultant or two. For instance, you may not want to ship all your own products. Will you need a fulfillment house? Price out all the services you’re going to need. Chapter 9 will give you a hiring setup checklist for freelancers and will provide you with more information on paying taxes for the people who work for you.
Research Legal Issues
A variety of legal issues will affect your business. For instance, you’ll need to know about your area’s labor laws—so call your state’s employment department.
• Contract law. Everything you sell is under contract, even if it is implied. Understand how to limit your responsibilities to your customers. The attorney on your advisory team can help.
• Bad debts. Customers don’t always pay on time . . . or ever. Set up protections in your invoices and contracts before the problems arise. Search online for contracts similar to those you expect to use. Modify them for your business.
• Liability laws. When you have an online presence, your business is exposed to liability in a number of ways—sometimes through actions of others. As you’re beginning your business planning, please read Jonathan I. Ezor’s Clicking Through: A Survival Guide for Bringing Your Company Online. It will give you a handle on the legal areas you’ll need to address so that you can develop your legal budget. There’s lots of practical information in his book—if only he’d written it before I went online. Yup, this book is copyright 2000 and is out of print. So you can probably only find used copies. But, honestly, I haven’t seen anyone else write a book like this for the small business owner. Also, read Chapter 12 of this book to learn more about the nexus issues you face due to your Internet presence.
Select Communications
If there’s a way to integrate your telephone, cell phone, Internet, and fax into one billing plan, do it. It’s easier to get one bill from one service provider. On the other hand, it doesn’t hurt to duplicate some of these services in case of trouble. For instance, my company has AT&T U-verse for the Internet. In case it goes down, we have Verizon’s wireless thumb drive for our laptops, which we can use to run the entire business. Since services like U-verse use your office’s electrical supply, keep at least one old-fashioned phone line that is powered by the phone company’s electrical supply at the socket. It doesn’t hurt to also have a smartphone. That way, you have triple power redundancy.
Find the best vendors, providing good service at fair prices. Be willing to sacrifice a bit of price to get personal service. For instance, our toll-free line is through National Comtel, a small local company at (800) 987-0100, http://www.telecommunicationsdenver.com/. We can call the office and speak to the same two or three people every time, even the company president. No long waits on hold. No random customer service people who keep getting it wrong. I pay five cents per minute for incoming calls on my toll-free line. Small companies are willing to negotiate, which is great. But don’t make them cut their prices low enough to put them out of business. With a little bit of work, you’ll be able to find good suppliers in your own neck of the woods.
Start to Work on Image and Visibility
Establishing brand awareness among your clientele and in the marketplace will help you keep your customer base in tough times. When they’re devoted to your brand, you become their only choice.
• Build your brand. Rob Frankel’s The Revenge of Brand X provides invaluable guidelines that you can use to cement your identity from day one.
• Develop a presence in the marketplace. Public relations is less costly than advertising—and more effective. Good PR will get you established as an expert in your industry. If you can’t afford a public relations firm but you’re able to speak clearly and eloquently about your business, sign up for Dan Janal’s PR Leads service available at http://www.prleads.com and Peter Shankman’s HelpAReporter.com at https://www.helpareporter.com/. Having both services will give you access to the broadest base of journalists and publicists. Be prepared to invest a lot of time, at least initially. But if you write good responses to journalists’ requests for experts, you’ll be flooded with calls. Press releases also generate attention when written well. For that, you will need an expert. Your advisory team can help you find the best person locally—or consult Dan Janal at http://www.prleads.com or Shel Horowitz at http://www.FrugalMarketing.com.
• Consider advertising. It’s the lifeblood of a growing business. But don’t shotgun your ads all over the place. Target your audience carefully and find the most effective, least expensive publications. If you’re on a tight budget, Jay Conrad’s and Shel Horowitz’s Guerrilla Marketing to Heal the World: Combining Principles and Profit to Create the World We Want offers twenty- first-century tips for getting the most attention for your product or service, while also helping your business make a big impact solving problems like hunger, poverty, war, violence, and catastrophic climate change while making a healthy profit—also found at http://www.FrugalMarketing.com.
Take Care of Money Issues
Some businesses or industries have a really long accounts receivable lag. Some businesses require you to advance money on merchandise or services. Then you must wait 30, 60, 90, or even 120 days to get paid. That’s industry standard. Unless you have a charming and clever way to speed up the payments, you will need financing. Look into all the options available to you. In some industries, like the schmatte industry (the textile trade), “factoring” is common. Factoring is the practice of selling your accounts receivable to another company at a slight discount. Essentially, you’re paying interest on your money in advance. The factor becomes responsible for collecting the money from your customers. Consider factoring or accounts receivable financing if you’re planning to sell to any government agencies. They are notoriously slow pays—often 90 days or more.
This checklist (shown in shorter form in Table 1.1) is probably more comprehensive than you expected from a tax book, but you’ll soon find that good tax planning goes hand in hand with good business planning. Without a solid business, who needs to worry about taxes? You’ll have nothing but losses, and that requires a whole different set of plans—for failure. Well, this book isn’t about failing. It’s designed to make you a stunning success, without expending too much money or stress on your part.
TABLE 1.1 The Carry-With-You Checklist in To-Do Order
Checklist Resources
In this chapter, you saw a variety of resources. Here’s a summary of them, so you can find them quickly and easily.
U.S. Government Resources
• IRS. https://www.irs.gov/. For IRS forms and publications. Use the links on the navigation bar at the top of the page to find things quickly, or use the two search boxes to search the site or the forms and publications database.
• Employer ID number. http://iTaxMama.com/IRS_ein. This site explains how to fill out your SS-4 application and file for your EIN online.
• IRS online payment system. Sign up with the IRS’s online payment system at https://www.eftps.gov/eftps/.
• U.S. Patent Office. http://www.uspto.gov/index.html. This is the place to go for patents and trademarks.
State Resources
• State-by-state business start-up information. http://www.taxadmin.org/state-tax-agencies.
• SBA. https://www.sba.gov/starting-business/business-licenses-permits/state-licenses-permits. An excellent resource to help you look up your state’s requirements.
• State tax forms. http://www.taxadmin.org/state-tax-forms. This site links to the tax agencies of all 50 states.
• Business licenses. http://iTaxMama.com/BusLicense. Save time researching all the licenses you need. BusinessLicenses.com will do the research for you. For an extra fee, it will even fill in the forms for you.
Business and Legal Resources
• Incorp Services Inc. in Nevada. http://iTaxMama.com/InCorpTM, (800) 2 INCORP. You will get 20 percent off the price of formation services and registered agent services if you use coupon code TAXMAMA.
• The Company Corporation. https://www.incorporate.com/, (800) 315-9420. Register your corporation, LLC, or other formal structure at this site, which is one of the oldest incorporators in the country. Mention that TaxMama sent you to get a $25 discount.
• Hubco. http://www.inc-it-now.com, (800) 443-8177. Register your corporation, LLC, or other formal structure, and handle most of it yourself, a cheap option. It is also a great source of corporate supplies, such as corporate seals, binders, and so on.
• Clicking Through: A Survival Guide for Bringing Your Company Online by Jonathan I. Ezor (Bloomberg Press). The best book about how Internet issues affect your business. If you read nothing else I recommend, you must read this book. Ezor provides practical information in plain English about the issues you face the minute your business opens its website.
• The Revenge of Brand X by Rob Frankel (Frankel & Anderson Publishers). http://www.frankel-anderson.com/brandx2/overview.html. Find out how to make your company the only choice.
• Guerrilla Marketing to Heal the World: Combining Principles and Profit to Create the World We Want by Jay Conrad and Shel Horowitz ( Morgan James Publishing). http://www.frugalmarketing.com. This book will help you focus your marketing efforts to get the most attention for the least amount of money, while still being socially responsible.
• Dan Janal’s PR Leads. http://www.prleads.com. Janal explains how to get interviewed by the top publications in the country.
• Help a Reporter.com. https://www.helpareporter.com/. A great way to be interviewed or even for you to find expert sources to interview or write about.
• Drugs, Drunks and Debits: How to Recognize Addicts and Avoid Financial Abuse by Doug Thorburn (Galt Publishing). http://www.preventragedy.com. This book will help you avoid going into business with hidden addicts—or do it with your eyes open and precautions in place.
Internet Resources
• GoDaddy. http://godaddy.com. Domain names are under $9.00 per year. Even though there are other designations you could choose to buy, like .biz or .org, if you can’t get the .com version of the name, choose another name. Otherwise, whoever owns the .com site will get all your traffic.
• Yahoo! https://www.aabacosmallbusiness.com/. Yahoo.com has entered the domain name business—and calls its offering Aabaco. So if you’re more comfortable with a brand name you recognize, Yahoo! is selling domains for $9.95 per year. Naturally, it has added a host of website tools.
• SiteBuildIt (SBI). buildit.sitesell.com/taxmama.html. Ken Evoy has built an all-inclusive online business package. It includes the website, hosting, domain name, mailing lists, merchant accounts, shopping cart, all the tools you need to build a website and make it pay—even if you don’t have a clue about programming or Internet mysteries. It even has a built-in affiliate program that lets you track and pay for referrals. For little more than the price of hosting a website, you’re going to get tools I’ve paid thousands of dollars to use. You really can put up your own site—even without the help of your 10-year-old.
• National Comtel. (800) 987-0100, http://www.telecommunicationsdenver.com/. Long-distance toll-free numbers.
Office Supplies for Accounting and Taxes
• Avery Labels. http://avery.com, (800) GO-AVERY, (800) 462-8379.
• Costco. http://costco.com, (800)-774-2678. Shop online or visit a warehouse nearby.
• Office Depot. http://officedepot.com, (800) GO DEPOT. Shop online or visit a store nearby.
• Quill Corporation. http://www.quill.com/, (800) 982-3400. Great customer service.
• Staples. http://www.staples.com, (800) 3STAPLE. Shop online or visit a store nearby.
• Greatland. http://www.greatland.com, (800) 968-1099. For accounting forms and supplies.
• TaxMama’s Quick Look-Ups. http://iTaxMama.com/TM_QuickLookUp. You will find all kinds of useful reference materials, webinars you can replay, e-books, and more.
• Your Business Bible. http://www.yourbusinessbible.com. Look for worksheets, printable checklists, and other goodies and resources.