1
• Operations Planning Creating &
Running a Legitimate Business
• Finalizing the plan What is the
Size & Scope of Your Business
Entity (Forms of Business)
• Due Diligence Verifying &
Validating YOUR business plan
2
Operations Planning
“An ounce of
prevention is worth
a pound of cure”
3
Do your research
As the business owner, you are
responsible and accountable for
meeting the legal obligations of
your business.
Get your information straight
from the source (i.e. IRS, City
zoning office) or from experts (i.e.
certified accountant, attorney).
Don’t take a friend or family
member’s word for it.
4
Business Compliance
Considerations
 Registering Your Business Name
with the Appropriate Authorities
• Involves selecting a legal form of
business
 Registering with taxing agencies to
obtain tax ID numbers for the business
 Paying all appropriate taxes – in the
right amount and the right time
5
Tax Identification
Numbers
• Federal Employer
Identification Number (EIN),
also known as Federal ID
number
• State Tax Identification
Number
• State Workforce
Identification Number
• State Sales and Use Tax
Permit
6
Business Taxes
1.Business Income Tax
2.Self-Employment Tax
3.Excise Tax
4.Employment Taxes
5.Sales and Use Taxes
7
Sole Proprietor
•
•
•
•
One Owner
Owner is liable for all debts
Proprietor receives all profits
Proprietor has full authority
8
Partnership
• Two or more Owners
• Each Partner is equally liable
for all debts incurred
• Profits & losses are based on
agreement
• Partners share equally in their
rights & responsibility Partner
Legal Entity of Shareholders
9
Corporation
• C-Corporation – Profit and loss
belong to the Corporation and
are distributed by the
corporation
• S-Corporation – Profit and loss
flow through the shareholders
• LLC – Profit and loss belongs
to the members and liability is
limited to their investment in
the corporation
10
Business Compliance
Considerations
Obtaining any required licenses and
permits based on your type of business
Ensuring you are complying with any
zoning regulations for your location
Obtaining appropriate insurance
coverage, both to comply with the law
and protect yourself
 Having a separate business banking
account and keeping appropriate
records of business income and
expenses
11
Employment Relationships
•
INDEPENDENT CONTRACTOR: The general rule is
that an individual is an independent contractor if the
individual has the right to control or direct only the result
of the work and not what will be done and how it will be
done. The earnings of a person who is working as an
independent contractor are subject to Self-Employment
Tax.
•
If you are an independent contractor, you are
self-employed.
•
You are not an independent contractor if you perform
services that can be controlled by an employer (what
will be done and how it will be done). This applies even
if you are given freedom of action. KEY: the employer
has the legal right to control the details of how the
services are performed.
•
EMPLOYEE: Under common-law rules, anyone who
performs services for you is your employee if you
control what will be done and how it will be done.
This is so even when you give the employee freedom
of action.
12
Employment Relationships
www.dol.gov
•
•
•
•
•
•
•
•
•
Minimum wage
FLSA (Fair Labor Standards Act)
Workers’ Compensation
FMLA
OSHA
ADA
Employee Handbook
Always define your rules and expectations
A good handbook tells what YOU as the
employer expect; and what YOUR employees
can expect.
• Employees are a relationship
USE don’t ABUSE.
13
Your Professional
Advisors
Start building your team of professional
advisors to help keep you in
compliance, help you protect your
business, and help you grow your
business:
 A CPA (certified public accountant)
 An Attorney
 A Banker
 An Insurance Agent
14
Recordkeeping
Why keep records?
What information can a good
recordkeeping system provide
the business owner?
15
Recordkeeping
rules
1. Don’t co-mingle: track business
transactions separate from personal
transactions
2. Record every business transaction when it
happens
• What is a transaction?
• Information to record: Date, Amount,
Name of client or vendor,
Description/Notes, Check #, category
(revenue or expenses)
3. Save (and organize) all source documents
4. Summarize the transactions at least
monthly
16
Recordkeeping
•KNOW what must be done.
•KNOW how to get it done.
•DO IT, or get it done.
•KNOW what the information means to you.
•UNDERSTAND the systems and procedures you
have in place.
•If you pay for professional services they CHARGE
by the hour.
•If your books are a mess or non-existent, YOU
WILL PAY!
17
Small Business
Financing
How much money do you
need to start your
business?
Do not answer this question based
on “gut” feel.
Let the numbers talk.
18
Small Business
Financing
The amount you need for start-up
includes:
Start-up Costs: Expenses that are
incurred before the first sale is made.
Working Capital: Shortfalls in cash flow
in the early months of business when
sales are not high enough to cover
expenses. Your monthly cash flow
projections will tell you how much you
will need.
19
Example
Start-up
I will make
I will spend
Difference
Month
1
Month
2
Month
3
$0
$300
$400
$600
$1500
$600
$600
$600
-($300) -($200)
$0
-($1500)
How much start-up capital does
this business owner need?
20
Bank Financing
When reviewing your application
for a loan, a lender will consider
the 5 Cs of Credit:
Capacity: How will the company repay the
loan?
Capital: What other sources of capital are
being used?
Collateral: What can you use to secure the
loan?
Conditions: What is the current local
economic climate for the industry?
Character: Are you likely to be able to
successfully run this business and
appropriately manage the finances to repay
the loan?
21
Your Next Steps
 Continue to work at your own pace.
 Research, research, research!
 Take your business for a test drive
to test your assumptions.
 Complete as much of the business
plan as you can based on what was
covered during this course.
 Decide if your business idea is
desirable, feasible, and viable to move
forward
 Continue to meet with your counselor
and have your progress reviewed.
22
23
Planning Your Business
____________________________
____________________________
____________________________
____________________________
____________________________
____________________________
____________________________
____________________________
____________________________
____________________________
____________________________
____________________________
____________________________
____________________________
____________________________
____________________________