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Business Start-up Frequently Asked Questions
Marketing | Small Business Statistics
General:
- What is a small business?
- Do I have what it takes to own/manage a small business?
- What business should I choose?
- What is a business plan and why do I need one?
- Why do I need to define my business in detail?
- How do I develop a business plan?
- What do I need to succeed in a business?
- Would a partner(s) make it easier to be successful?
- What kind of profits can I expect?
- What legal aspects do I need to consider?
- How do I select a lawyer?
- How do I set up the right record-keeping system?
- What should I know about accounting and bookkeeping?
- How do I incorporate my business?
- Where do I get a business license?
- What do I do when I'm ready?
What is a small business?
It is important that you be able to determine if you qualify as a small business for purposes of loans and special federal procurement opportunities. The SBA website (http://www.sba.gov) is a great resource. The "Administrator" is mentioned a few times - for clarification, that is referring to the SBA Administrator.
A small-business concern, including but not limited to enterprises that are engaged in the business of production of food and fiber, ranching and raising of livestock, aquaculture, and all other farming and agricultural related industries, shall be deemed to be one which is independently owned and operated and which is not dominant in its field of operation: Provided, That notwithstanding any other provision of law, an agricultural enterprise shall be deemed to be a small business concern if it (including its affiliates) has annual receipts not in excess of $500,000.
The small business standards may also utilize number of employees, dollar volume of business, net worth, net income, a combination thereof, or other appropriate factors.
Do I have what it takes to own/manage a small business?
You will be your own most important employee, so an objective appraisal of your strengths and weaknesses is essential.
Some questions to ask yourself are:
- Am I a self-starter?
- How well do I get along with a variety of personalities?
- How good am I at making decisions?
- Do I have the physical and emotional stamina to run a business?
- How well do I plan and organize?
- Are my attitudes and drive strong enough to maintain motivation?
- How will the business affect my family?
What business should I choose?
Usually, the best business for you is the one in which you are most skilled and interested. As you review your options, you may wish to consult local experts and businesspersons about the growth potential of various businesses in your area. Matching your background with the local market will increase your chance of success.
What is a business plan and why do I need one?
A business plan precisely defines your business, identifies your goals and serves as your firm's resume. Its basic components include a current and pro forma balance sheet, an income statement and a cash flow analysis. It helps you allocate resources properly, handle unforeseen complications, and make the right decisions. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan package. Additionally, it can tell your sales personnel, suppliers and others about your operations and goals.
Why do I need to define my business in detail?
It may seem silly to ask yourself, "What business am I really in," but some owner-managers have gone broke because they never answered that question. One watch store owner realized that most of his time was spent repairing watches while most of his money was spent selling them. He finally decided he was in the repair business and discontinued the sales operations. His profits improved dramatically.
How do I develop a business plan?
The SBDC offers training workshops for small business start-ups. Access the IED Calendar at http://www.iedtexas.org for scheduled workshops.
What do I need to succeed in a business?
There are four basics of success in small business:
- sound management practices
- industry experience
- technical support
- planning ability
Few people start a business with all of these bases covered. Honestly assess your own experience and skills; then look for partners or key employees to compensate for your deficiencies.
Would a partner(s) make it easier to be successful?
A business partner does not guarantee success. If you require additional management skills or start-up capital, engaging a partner may be your best decision. Personality and character, as well as ability to give technical or financial assistance, determine the ultimate success of a partnership.
What kind of profits can I expect?
What legal aspects do I need to consider?
Licenses required, zoning laws and other regulations vary from business to business and from state to state. The SBA website (http://www.sba.gov) will provide you with general information, but you will need to consult your attorney for advice specific to your enterprise and area. You also must decide about your form of organization (corporation, partnership or sole proprietorship) or tax status (e.g., should you opt for a Subchapter S status?).
How do I select a lawyer?
If you find that you need a lawyer at the inception of your business, SBA's web site offers several areas that may assist you. Visit http://www.onlinewbc.gov/DOCS/Finance/legal_select.html.
How do I set up the right record-keeping system for my business?
The kind of records and how many you need depend on your particular operation. The SBA's resources and an accountant can provide you with many options.
When deciding what is and is not necessary, keep in mind the following questions:
- How will this record be used?
- How important is this information likely to be?
- Is the information available elsewhere in an equally accessible form?
What should I know about accounting and bookkeeping?
The importance of keeping adequate records cannot be stressed too much. Without records, you cannot see how well your business is doing and where it is going.
At a minimum, records are needed to substantiate:
- Your tax returns under Federal and State laws, including income tax and Social Security laws
- Your request for credit from vendors or a loan from a bank
- Your claims about the business, should you wish to sell it.
But most important, you need them to run your business successfully and to increase your profits.
How do I incorporate my business?
Once the decision to incorporate your business has been made, the legal process begins with the preparation of a certificate of incorporation. The incorporator may or may not be a person who will own stock.
The State of Texas has a standard form for incorporating a small business. Three pieces of information are requested:
- corporate name;
- purpose;
- and corporate life span
The corporate name is usually required to be a business name dissimilar from any other firm incorporated within the state. The state charter office can tell you whether the name you want is available. The purpose of the business must be stated. It is a good practice to use a "specific object" clause that spells out the specific purpose for which the corporation is being formed. While most corporations are formed for an indefinite period, it is possible to set up a specific limited life. Often the reason for creating a corporation is because the life span of the business is unlimited.
Incorporation documents will require:
- the names and address of incorporators;
- location of the registered corporate office in the state;
- the maximum amount and type capital stock to be issued at the time of incorporation;
- a provision for preemptive rights;
- a provision for regulation of internal affairs of the corporation;
- names and addresses of corporate directors until the first stockholders’ meeting;
- and the right to amend or repeal provisions within the certificate of incorporation.
The above requirements cover incorporating as either a "C Corporation" or Sub-Chapter S Corporation." However, the sub chapter S Corporation has several additional incorporation requirements such as:
- it must be an independent group not affiliated with any other;
- it may have only a single class of stock;
- no more than 35 stockholders and it may have only individuals or estates as stockholders;
- and it must be a domestic corporation.
Before signing any legally binding documents, consult with your attorney for legal advice. (Contributed by the Delaware SCORE Office.)
Also visit http://www.sba.gov/hotlist/businessnames.html for information on business names, licenses and incorporations.
Where do I get a business license?
Your state and local governments provide business licenses. Visit http://www.sba.gov/hotlist/license.html for specific information.
What do I do when I'm ready?
You have done your homework:
- you have a complete business plan;
- you know where you want to operate;
- you know how much cash you will need;
- and you have specific information on employee, vendor and market possibilities.
You now may want someone to look over your plans objectively. Contact the business department at a local college for another opinion. A SCORE representative at the Small Business Administration can also review your work and help with the fine-tuning. Then, when you have made the final decision to go ahead, it is time to call the bank and get going. Good luck!
All of SBA's programs and services are extended to the public on a nondiscriminatory basis.
