Small business setup

PLANNING FOR SUCCSESS

Planning is a key factor in the success of any business, and conversely, the failure to plan adequately is one of the fastest routes to business failure. There are many considerations that an entrepreneur must decide such as: type of business, legal structure, permits and licenses, market planning, business plan, location, organization management planning, business telephone line, mission statement, and a business checking account. There are many sources of information to help to start a business in an organized way, such as a business plan from the office of Economic Development & Planning located in the County Office Building, or books in that can be found in any library.

The first decision that the entrepreneur must make is what type of business he/she wants to start. The decision should be based on the amount of knowledge and skill that they have in the field that they are considering. The better that they know the industry, the stronger there likelihood they will have a successful business, and the better base they will have for the rest of the decisions that will have to be made in the time to come.

The next important decision in the business planning process is the legal structure of the company. The three legal structures are Sole-proprietorship, Partnership and a Corporation. Each one of these legal structures has its advantages and disadvantages. The different aspects that each legal structure differs are: management control, capital, liability, income taxes, business continuity, and government regulations. The understanding of these different issues is crucial to the decision of which structure is the best one for the entrepreneurs business. Be sure to consult an attorney before making this decision.

In a sole-proprietorship, the owner retains total control of all the decisions that need to be made. The ability to raise capital is limited by the financial resources and the credit worthiness of the individual owner. The owner has the ultimate liability for all the actions and debts of the business. A sole-proprietorship is not a separate taxable entity. The individual owner reports business revenue, expenses and net income (or loss) on his/her individual tax return (form 1040). The business ends with death of owner unless previously sold or transferred. The government has very limited regulations, and few records are legally required. A D.B.A. (Doing Business As) form is available at most office supply stores or at a County Department of Economic Development office, which also requires a small fee. Completed form with notarized signatures must be filed with the County Clerk's Office.

In a partnership, the control is shared by the partners in accordance with the partnership agreement. If there are two partner's the agreement does not have to be fifty-fifty. It can be what ever the two decide on in the beginning. The ability to raise capital is expanded somewhat as partners are able to pool their respective financial resources. Both partners have joint and several liabilities for actions and debts of partnership. The partnership is not a separate taxable entity. An information return (form 1065) must be filled out each year to report partnership activity; however, individual partners report their respective shares of income (or loss) personally. The business ends with death of a partner unless written partnership agreement contains transfer conditions. The government has limited regulation and few records are required. They should have a partnership agreement, which is available at most office supply stores or at the local County Department of Economic Development office. Completed form with all signatures notarized must be filed with the County Clerk's Office. It is advisable to consult a lawyer about a partnership agreement before filing the certificate.

With a corporation, the day-to-day control rests with the hired management team. Ultimately control is vested with the Board of Directors who are influenced through the voting process by the shareholders. The ability to raise capital is potentially greatly expanded because additional shares of stock may be sold. The liability of the individual shareholders for actions and debts of the Corporation is limited to their equity investment. A C Corporation is a separate taxable entity (form 1120 is required to be filled out). An S Corporation is taxed essentially like a partnership. An information return (form 1120s) must be filled out. The business has a perpetual life distinct from that of its owners. The shares of stock are freely transferable. The government treats a Corporation as a separate legal and taxable entity, and extensive record-keeping is required. There are also complex operating regulations to follow (which differ from state to state). Forms to incorporate are available at any office supply store and should be filed with the Secretary of State in Albany (518-474-6200) if planned start up is in New York State.

Licenses and permits are grants of authority from the Federal, State and local political subdivisions to individuals, corporations or partnerships to carry on certain activities. Licenses often involve the payment of fees and proof of qualification by examination. Legally, it is up to you (the business owner) to know if your business requires licensing. Before you start a project, carefully research the applicable state and local laws. For local licenses and permits contact the village/town hall and the county office for local requirements. If you plan to operate a business in your own home, check to make sure you are not in violation of local zoning ordinances. For a construction company the owner or contractor will need to have specific permits and licenses for each job. A call to the County Clerk's office gets you started with local government. Depending on your plans, you may also need to check with your local planning board, zoning board and building inspector. For construction jobs it is advisable that you check with the DOT regional office in the area of the project to determine if any permits may be necessary for your particular job.

There are many occupations in which various governmental agencies and privately owned businesses require the worker to have a license before he/she can work on the project. Each year there will be fewer trades people, contractors, ect., that will need to be licensed. In the years to come it must be expected that all contractors, trades persons, etc. will be required to be licensed by government authority. The majority of cities in the United States require the trades people to be licensed to conduct their business.

As the business owner and the employer it is your responsibility to determine if a licensed operator is required for the job. If a license is required you must assure that only a properly licensed person performs the job. The failure to make sure that the employee has the correct license for the job can result in severe penalties and possible imprisonment. It is generally required that in larger cities workers such as carpenters, plumbers, welders, truck drivers, crane operators, heavy equipment operators, masons, steel erectors, laborers, etc., all have the proper licenses. Some licenses are state issued and are required in order to work any place in the state (crane operators, truck drivers, etc.).

Let's turn now to the issues of marketing.

Marketing may be defined as the planning, pricing, promoting, and placing of your product of service. General construction companies have an unusual marketing problem because they are sometimes hard to categorize, especially if their project tends to be unique, as opposed to products of manufacturers, which tend to be massed produced. Some important questions the owner should ask are exactly the same issues covered in the mission statement:

_ Who are my customers?

_ Where are they?

_ What do they want?

_ When do they want it?

_ Why should they buy it from me?

_ How do I get it to them?

Pricing, for the construction company, relates to how well the project is estimated. After the contractor estimates the cost of the project they must add a fair profit. At this point it is important to know your competition and to determine construction ?profit margins? for your locale. The better you know your competitors the more competitive you will be. The success of the firm can very well be determined by the skill of the estimator. In the competitive bidding market the lowest reasonable bid most often get the contract.

Promoting is the art of selling and can be accomplished in a number of different ways, such as advertising, brochures, direct mailings, and personal contacts. Your decision on the best way to promote your construction company will depend on the type of contract you are competing for and your market. In the construction business competing for the jobs in your market area is done with bids. The two different types of contracts are public bids, or negotiated bids. For public competitive bids pricing is the primary marketing emphasis, and for negotiated bids contacts are most important. ...

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