Ready to be your own Boss, Part 2 - ABC's of Small Business

Ready to be Your Own Boss? Part 2

Licenses and Permits (or Forms, forms and more forms!):
You will need to apply at city and/or county offices for local licenses required for your particular business. If you are going into a retail business and your state is subject to sales taxes, apply for a permit and number with the State Revenue Services, Treasury or other appropriate department. (State Resources)

Sales taxes will have to be added to your customer's purchases and you will be required to pay the proceeds over to the state on a prescribed schedule. Some states require a nominal deposit with your application. Your various suppliers will need your permit number for their files before they will sell to you. You do not have to collect sales taxes across state lines unless you have businesses in other states. For example: Individuals providing a mail order business that sends their advertising and products nationwide need only collect taxes for sales made to customers within the state.

Occupational Licenses:
Individuals entering into specific businesses will have to obtain occupational licenses through their state or local licensing agencies. These may include real estate personnel, medical professions, barbers, cosmetologists, electricians, plumbers, contractors, insurance agents, engineers and many others. Paying a fee and passing a written examination is often required before a license can be issued.

Other Licenses:
Federal regulations control many kinds of interstate activities with license and permit requirements. These include such businesses as common carriers, certain food processors, TV stations, radio stations, and drug manufacturers, among others. Any organization that shops, sells, or advertises in more than one state is subject to Federal Trade Commission (FTC) regulations. This includes mail order operations although no license is required in most cases. Any firm distributing food products, including restaurants, is subject to permits and periodic inspections.

Other permits required for certain businesses include inspection and permit for occupying a new building that caters to the public, fire permits, pollution control permits, and those which regulate the size, shape, style and placement of signs, etc. If you are in doubt about which permits and licenses pertain to your chosen business it may want to visit with the owner of a similar business in a different area or town and get some information from them. Again, your attorney will also be a good place for this type of information.

Insurance:
Don't forget about insurance. The premiums are expensive, especially business liability, but you cannot operate with peace of mind without full coverage. Check with a good agent regarding Fire, Liability, Workmen's Compensation (a legal requirement in most states), Business Interruption, Burglary, Glass, Extended Coverage, Vehicles, etc. It's a good idea to have two or three agents submit estimates. If you're unsure about the contracts have your attorney review them with you. ABC's has other articles on this topic including Choosing Insurance Coverage, Do You Need Disability Insurance, Patent Infringement Insurance, and Copyright Protection.

Potential Business Failure:
Think positive about your new venture but don't expect to make a great deal of money with little or no investment. Lack of capital has been the downfall of many otherwise good business start-ups. You may have limited take home pay for the first few months as you plow your profits back into the business to make it grow. You will need a substantial cash reserve or other source of income during the build-up phase to take care of your personal expenses. Lack of training and experience is another great destroyer of dreams. Be sure you have the knowledge and are capable of running the business you propose. Get into something you already know or can learn without getting hurt in the process.

If you are going into a retail operation know who your suppliers will be before you even start looking for a location. Buy the right kind of merchandise, at the right prices, to fit the kind of customer you will be serving. Keep your inventory in balance with sells and cash flow. Plan ahead. Learn how to promote and advertise for best results. Keep up with the trends of the time and know at all times what your competition is doing.

A few of the other things leading to quick failure are: lack of over-all business planning, inept managers or employees, incomplete accounting records, improper financial reports, lack of control over assets, bad credit policy and inability of the owner to reach or act on decisions. Make sure you establish a good return policy. You can get more information on this from our article, Returns.

You also need to anticipate an exit strategy as you develop your business plan. Your business won't go on forever; and should not go on forever. Build in some security in how you plan to exit your business smoothly. For more information on this topic see our article, Planning for the End: Leaving Your Business.

Bank Account:
Get to know the manager of your bank. He will be one of your best references. Greet him or her as often as possible and let him know how your business is going. If your bank is an advocate of your success, you have a great asset! Ask his advice and get his help on financial matters. The more he advises you the better he will come to know you. Develop a line of credit so cash will be available when you need it. The banks can't exist without making loans so don't hesitate to apply. When you handle high cost items your bank may be able to work up installment contracts for your customers. Get set up with MasterCard, Visa, etc. It will cost you from 3% to 5% but you must have this service available for your customers if you want to stay in business.

To establish your bank account you will need a Federal ID number or social security number along with your certificate of assumed (fictitious) business name. If you are incorporated, the bank will want a copy of the minutes and a corporate resolution authorizing the account.

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