Starting A New Business Venture



There are typically three avenues available when going
into business: starting a new venture, buying an existing
business or purchasing a franchise. It is advisable to
seek professional accounting and legal help before
starting any business.

A new start-up is typically pursued when
you have a unique idea that requires special
equipment, specialized talents or a new way of
doing things. A new venture may also be pursued
when there is a customer base you can
serve, or you are aware of an unfilled market
need (e.g., there is not a dry cleaner within 12
square miles). The principal advantage of starting
a new business is that you are in control of
how you want your business to operate. There
will be no negative history or track record to
overcome. You will be able to provide your
product or service the way you think it should
be provided. The principal disadvantage is the
need to start from scratch and to set everything
up from square one. Factors you need to
consider when forming a new venture include:
legal structure, location, marketing and advertising,
facilities, equipment, employees, taxes, a
records system and capital.

Buying an existing business can have its
advantages. By purchasing a business that is
already established, you may eliminate some of
the problems associated with starting a brand
new business. However, when you acquire anexisting 
business, you may also acquire its
debts. Purchasing an existing business can be
fairly complex. The following is a brief summary
of some of the concerns of which you should
be aware:

ï How successful is the business? How well
known is the business? How loyal are the
customers to the business? Is their loyalty
based upon the current ownership?
ï Do you know why the seller is selling the
business? If the business has not been
profitable, find out why. Do you have a plan
to make it profitable?
ï Does your purchase agreement include the
sale of the business name? The property?
The equipment and inventory? The debts?
Be sure the exact terms of the sale are explained
clearly, in writing, before you buy.
ï Ask the seller about outstanding claims on
inventory, equipment and fixtures. Whose
responsibility will it be to settle these claims?
ï Are there liens against the property you are
buying? Check with the seller and recorderís
office in the county where the business
and the seller are located.
ï Will the
owner of the building transfer the lease to
you? What are the terms and restrictions of
the lease?
ï Review the businessí past and current
financial statements. Are they in good order?
Examine any existing contracts that affect
the business.
ï Can you transfer the existing phone number?
The phone service may require information
from both you and the seller.

Purchasing a Franchise

Franchising offers a unique opportunity for
individuals interested in operating a business.
It allows you to both own and operate a business
while drawing from the resources of the
parent company. This arrangement may reduce
some of the risks of going into business for
you depending upon the quality and stability
of the franchiser. While fewer than five percent
of all franchised businesses fail annually, success
is not guaranteed. You should not rush
into franchising before completing a thorough
investigation. It should be noted that while a
franchise is a method for going into business, it
is NOT a form of legal structure. The franchiser
ó the business with the plan and structure ó
and the franchisee ó you ó are two completely
separate businesses. You must each determine
the appropriate form of legal structure for your
own business. Refer to the Legal Structure and
Registration chapter of this Guide.

Information On Starting A Corporation



A Corporation is a legally created entity distinct from its owners with rights, duties, powers, and responsibilities in and of itself. This usually means that when individuals act on behalf of a corporation, these actions are attributable to the corporation but not the individual, thus limiting the liability of the owners.

When forming a corporation, the owners transfer money, property, or services to the corporation in exchange for shares of stock. Each owner, then, is referred to as a stockholder. The managers of the corporation may or may not be stockholders.

Advantages of a Corporation

    * Stockholder liability is limited to the amount of investment.
    * Business continues to exist after the death of an owner.
    * Transfer of ownership is easily done by the sale of stock.
    * Capital may be obtained by selling stock to investors.
    * Employee benefits (insurance programs, pension plans, and other fringe benefits) can be created more easily and possess tax advantages when borne by          the corporation.

Disadvantages of a Corporation

    * Corporationís income is subject to double taxation only if dividends are paid.
    * Costs to organize a corporation are higher than any other form of business.
    * Corporations are heavily regulated .
    * Corporations doing business in other states generally must apply for corporate authority prior to commencing any commercial activity outside their home       state.
    * Stockholders holding the majority of stock will control the corporation.

There are two types of corporations: Regular and Subchapter S corporations. The profits of a regular corporation are taxed twice, at the corporate as well as the individual level, only if dividends are paid. A regular tax return must be filed each year to pay tax on the corporationís income. Any profits left after taxes may be given to stockholders, who must then pay tax on the amounts they receive.

The S corporation is treated as a partnership for tax purposes and like a corporation it enjoys limited liability. But like a partnership, it is not subject to corporate federal income tax. Although a tax return is filed, the income and expenses of the S corporation are divided among its stockholders who report the profits on their individual returns. Thus, it is taxed only once.

Because the S corporation avoids double taxation while providing stockholders the protection of a regular corporation, this form of organization is popular among small businesses. However, Subchapter S status may create certain disadvantages that should be considered.

Specifically, an S corporation may have no more than 100 shareholders and may issue only one class of stock, thus limiting its ability both to raise capital and to attract certain investors. Meanwhile, stock in an S corporation cannot be sold to another corporation or partnership. Only individuals, estates and some trusts may own shares. Further, all shareholders must be United States residents and must consent to the S corporation election.

Finally, shareholders that own more than two percent of the corporationís stock are not eligible for taxsheltered fringe benefits allowed to regular corporations. This includes accident and health plans, group term life insurance, and employer-provided meals and lodging.

Corporations

    * May be for-profit or nonprofit.
    * Must have at least two officers, elected at annual meeting. 28 Going into Business in West Virginia Deciding on a Legal Structure
    * Corporation operated under charter and by-laws; law governs voting requirements for amendments and changes & record-keeping.
    * May create and issue stock.
    * Law provides personal liability protection for directors and officers acting in good faith.
    * Annual report, attorney-in-fact fee and corporation license tax required.
    * File Articles of Incorporation for Corporations, S- and C-type.

Starting A New Business

Starting and managing a business takes motivation, desire and talent. It also takes research and planning. Lack of
planning is one of the leading causes of business failures. Developing a business plan will walk you through the
questions that every prospective or new business owner should answer. Before you start your plan, carefully
research and answer these basic questions:

ï What niche will my business fill?
ï What services or products will I sell?
ï Is my idea practical, and will it fill a need?
ï Who is my competition?
ï What is my business's advantage over existing firms?
ï Can I deliver a better quality service?
ï Can I create a demand for my business?
Once you've determined that your idea is feasible, answer these questions:
ï What skills and experience do I bring to the business?
ï What will be my legal structure?
ï How will my company's business records be maintained?
ï What insurance coverage will I need?
ï What equipment or supplies will I need?
ï How will I compensate myself?
ï What are my resources?
ï What financing will I need?
ï Where will my business be located?
ï What will I name my business?
If you are starting a home-based business, you will want to answer these additional questions:
ï Does my home have the space (preferably separate) for a business?
ï Can I successfully run the business from my home?
ï Can I deal with the isolation of working from home?

Your answers to these questions will help you create a focused, well-researched business plan that should serve as a
blueprint. The plan should detail how the business will be operated, managed and capitalized.
Research Resources

Some questions you will be able to answer on your own, others will require careful research. There are many sources
available to help you find the answers and make informed decisions. The SBA's business information centers, located
throughout the country, offer the latest in high-technology hardware, software and telecommunications to help you in
your research. BICs offer electronic bulletin boards, computer databases, on-line information exchange, periodicals
and brochures, counseling, videotapes, reference materials, texts, start-up guides, application software, computer
tutorials and interactive media. One-on-one counseling with seasoned business veterans is available through the
SBA-affiliated Service Corps of Retired Executives, also known as SCORE.

Other sources include -

ï trade association studies, journal articles and trade shows;
ï regional planning organization studies on growth trends;
ï banks, realtors and insurance companies; and
ï customer surveys in your market area, which you can conduct on your own or may already exist.

Starting A New Business Checklist

Starting a business is risky. Understanding the risks and
reducing them through careful planning improves the
chances for business success. You should be fully aware
of the implications of owning your own business. A new
business venture will affect both you and your family.
Carefully analyze your reasons for starting a business.
How will it fit with your family and your lifestyle?

Ask Yourself the Following Questions:

- Am I a self-starter? Do I have the discipline
  to maintain a schedule?

- Do I want to earn more money? Will this
  business earn more money from the beginning
  or do I need to be prepared to initially
  work for less?
- Do I want to be more creative? Do I have
  the necessary skills to be successful in this
  business?

- Have I discussed this proposed business
  with my family?

- Do I have the money needed for business
  start-up and initial operating expenses until I
  start earning a profit?

- Have I decided upon the legal structure
  of my business, chose a business name and
  registered my business with the appropriate
  city, state and/or federal agencies? Sole proprietors,
  general partnerships, and unincorporated
  non-profit associations are registered with the
  Secretary of State.

- Am I looking for more flexibility in my work
  and family schedule? Will this business allow
  me to work the schedule I desire?
- Am I ready for different challenges and
  adventures? Am I prepared to respond quickly
  to the needs of my business?

- Have I defined the products or services I
  will provide? Is there actually a need for what
  I will provide in todayís marketplace? Is the
  demand great enough to be profitable? Who
  are my competitors? What is my competitive
  advantage? Develop your marketing strategy.

- Am I aware of the personal and business
  tax implications of starting my own business?
  Refer to the Income and Property Tax chapter
  of this Guide and/or contact the Internal
  Revenue Service at 1-800-829-1040 or www.
  irs.gov for more information.

Getting Started in Business

In business, there are no guarantees. There is simply no way to eliminate all the risks associated with starting a small business. However, you can improve your chances of success with good planning, preparation, and insight. Your local SBA District Office is a great place to start on your way to entrepreneurial success.


If You're Just Starting
The U.S. Small Business Administration and its partners can help you with government loans and business management skills.

If You're Already in Business
The SBA's resources can help you manage and expand your business, obtain government contracts, and have your voice heard in the federal government.
Small Business Development Centers

As the SBAís largest non-finance program, Small Business Development Centers meet the needs of small businesses and promote economic development in local communities by helping to create and retain jobs. Partially funded by a cooperative agreement with SBA, SBDCs meet the counseling and training needs of more than 650,000 start-ups or existing business clients annually.

SBDCs provide services such as development of business plans, manufacturing assistance, financial packaging assistance, contracting assistance and international trade assistance. Special emphasis areas include e-commerce, technology transfer, IRS, EPA and OSHA regulatory compliance, research and development, Defense Economic Transition Assistance, disaster recovery assistance and market research. Based on client needs, SBDCs tailor their services to meet the evolving needs of the local small business community.

SBDCs deliver management and technical assistance to prospective and existing small businesses using an effective business education network of 63 lead centers and more than 1,000 service center locations contracted to manage a broad-based SBDC program. SBDCs are located throughout the U.S., District of Columbia, Guam, Puerto Rico, American Samoa and the U.S. Virgin Islands.

There are specialized programs for small businesses owned by individuals who are socially and economically disadvantaged, women, veterans, Reservists, people with disabilities and persons in low- and moderate-income urban and rural areas.

Score -  Help for Small Business

SCORE is a 10,500-member volunteer nonprofit association which operates under a cooperative agreement with the U.S. Small Business Administration.

With more than 40 years experience helping small businesses succeed, SCORE matches volunteer business-management counselors with clients in need of expert advice.

SCORE has experts in virtually every area of business management and maintains a national skills roster to help identify the best counselor for a particular client. Volunteer counselors, whose collective experience spans the full range of American enterprise, share their management and technical expertise with both current and prospective small business owners.

Most SCORE volunteers are retired business owners or managers, though some members are still actively employed. Volunteers work in or near their home communities to provide management counseling and training to first-time entrepreneurs and current small business owners. They meet with clients at a SCORE chapter office, an SBA office or at the client's place of business.

Every effort is made to match a client's needs with a counselor who is experienced in a comparable line of business. All individual and team counseling is free; there may be a nominal fee for workshops and seminars.

Through in-depth counseling and training, SCORE volunteers help prospective and established small business owners and managers identify problems, determine the causes and find solutions.

Any small business can obtain help from SCORE. Whether you are considering starting your own business, have a business that is experiencing problems, are ready to expand, or need some other type of advice, SCORE can help. The approach is confidential and personal.

You don't need to be applying for or have an SBA loan to participate in the program. In fact, an idea is all that is necessary; consultation and counseling before a business start-up is an important part of SCORE's service.

How Do I Get Started in A Business?

The U.S. Small Business Administration (SBA) provides a wealth of information on starting a business at the SBA home page sba.gov under "Small Business Planner." You will find information on writing a business plan as well. You may take advantage of SBAís resource partners. The Service Corps of Retired Executives (SCORE) and the Small Business Development Center (SBDC) provides free one-on-one counseling to those interested in starting and expanding a business. This includes critiquing your business plan, legal requirements, marketing, and licenses needed for your business. To find the location nearest you, please visit us at SBA and click on your state.

How To Start A Small Business

Starting and managing a business takes motivation, desire and talent. It also takes research and planning.

Like a chess game, success in small business starts with decisive and correct opening moves. And, although initial mistakes are not fatal, it takes skill, discipline and hard work to regain the advantage.

To increase your chance for success, take the time up front to explore and evaluate your business and personal goals. Then use this information to build a comprehensive and well≠thought≠out business plan that will help you reach these goals.

The process of developing a business plan will help you think through some important issues that you may not have considered yet. Your plan will become a valuable tool as you set out to raise money for your business. It should also provide milestones to gauge your success.


Getting My Business Started.

Before starting out, list your reasons for wanting to go into business. Some of the most common reasons for starting a business are:

--- You want to be your own boss.

--- You want financial independence.

--- You want creative freedom.

--- You want to fully use your skills and knowledge.


Next you need to determine what business is "right for you." Ask yourself these questions:


--- What do I like to do with my time?

--- What technical skills have I learned or developed?

--- What do others say I am good at?

--- How much time do I have to run a successful business?

--- Do I have any hobbies or interests that are marketable?


Then you should identify the niche your business will fill. Conduct the necessary research to answer these questions:

 
--- Is my idea practical and will it fill a need?

--- What is my competition?

--- What is my business advantage over existing firms?

--- Can I deliver a better quality service?

--- Can I create a demand for your business?


The final step before developing your plan is the pre-business checklist. You should answer these questions:

--- What business am I interested in starting?

--- What services or products will I sell? Where will I be located?

--- What skills and experience do I bring to the business?

--- What will be my legal structure? (see overview below)

--- What will I name my business?

--- What equipment or supplies will I need?

--- What insurance coverage will be needed?

--- What financing will I need?

--- What are my resources?

--- How will I compensate myself?

 
Your answers will help you create focused, well≠researched business plan that should serve as a blueprint. It should detail how the business will be operated, managed and capitalized.

Start A  Statutory Close Corporation in South Carolina?

Answer: 

You will need the following: 

ï	Unique name of corporation 
ï	Name and address of registered agent in South Carolina 
ï	Industry Classification (NAICS Code) 
ï	Type of shares authorized (common, preferred, etc.) 
ï	Series (if applicable, such as A, B, etc.) for each type of shares 
ï	Transfer variations 
ï	Whether or not the corporation elected to have the provisions of Sections 33-18-140 through 33-18-170 of the 1976 South Carolina Code of Laws apply 
ï	Optional provisions of the Articles of Incorporation, which can be faxed or uploaded to the Secretary of State 
ï	Name, SSN and address of each incorporator 
ï	Name, phone number, and address of South Carolina attorney 
ï	Signature of Attorney and at least one Incorporator on the Signature Form, which can be printed from SCBOS and faxed or uploaded to the Secretary of State  
ï	Federal EIN number 
ï	Name, SSN and address of each corporate officer 
ï	Information abou the previous owner if the business was acquired 
ï	The Doing Business As (DBA) name, phone number, physical address, mailing address, and record address for each location in South Carolina 
ï	Account Number and routing number (for EFW payments) or credit/debit account number (for credit/debit card payments) and other applicable payment information 
ï	
Note: SCBOS generates a signature package for the attorney. An attorney must sign the signature sheet.

What Info Do I Need To Start A Business AS A Domestic Corporation in South Carolina ?

Answer: 
You will need the following information:
ï	Domestic Corporations 
ï	Unique name of corporation 
ï	Name and address of registered agent in South Carolina 
ï	Industry Classification (NAICS Code) 
ï	Type of shares authorized (common, preferred, etc.) 
ï	Series (If applicable: A, B, etc.) for each type of shares 
ï	Optional provisions of the Articles of Incorporation, which can be faxed or uploaded to the Secretary of State 
ï	Name, phone number, and address of South Carolina attorney 
ï	Signatures of attorney and incorporators on the Signature Form, which can be printed from SCBOS and faxed or uploaded to the Secretary of State 
ï	Federal EIN number 
ï	Name, SSN and address of each corporate officer 
ï	Information about the previous owner if the business was acquired 
ï	The Doing Business As (DBA) name, phone number, physical address, mailing address, and record address for each location in South Carolina 
ï	Account Number and routing number (for EFW payments) or credit/debit account number (for credit/debit card payments) and other applicable payment information 
Note:  SCBOS generates a signature package for the attorney.  An attorney must sign the signature sheet.

Starting A Business in New Mexico

General Tax and Licensing Requirements

In New Mexico most businesses must register with the New Mexico Taxation and
Revenue Department, and may be required to report and pay gross receipts tax and state income
tax withholding on employee wages, as well as income tax on taxable income of the business. If
the business has employees, it will be required to register with the New Mexico Department of
Labor, and will probably be required to pay State Unemployment Taxes. In addition, if the
business is required to provide Workers Compensation coverage, the business will be required to
file quarterly reports with the New Mexico Taxation and Revenue Department.
Most businesses will also be required to obtain an occupation license from the
municipality or county where its office(s) is located. Property used in the business must be
assessed for property taxes by the County Assessor's office in the county where the property is
located.

Choice of Entity

If you are considering starting a business in New Mexico, you will need to decide how
you want to organize your business. The decision involves many different factors, including
questions of legal liability, tax considerations, and operational factors. It is a good idea to
consult with professionals in making this decision.

Many of the registration and licensing requirements imposed by State and local
governments are determined by the type of entity that you select. The following is a brief
summary of some of those requirements and the agencies that you should contact.

Sole Proprietorship A sole proprietorship is not a separate entity. The owner of the
business and the business itself are one and the same, and there is no need to file a document to
create a sole proprietorship. The General Tax and Licensing Requirements discussed above
will usually be applicable to a sole proprietorship
.
The Public Regulation Commission does not recommend one form of
legal entity over another and urges that you seek the advice of counsel and other
appropriate professionals before deciding whether to organize and, if so, what
form of legal entity is best for you.

Partnerships A partnership is an association of two or more persons who carry on a
business for profit as co-owners. There are various types of partnerships. As with a sole
proprietorship, the General Tax and Licensing Requirements may be applicable.

General Partnerships. 

Although it s a good idea to have a written agreement, a
general partnership can be formed orally or in writing. There is no requirement that a general
partnership file an agreement or certificate before it can exist. However, the partnership may file
a certificate of registration with the New Mexico Secretary of State, under the New Mexico
Uniform Partnership Act.

Limited Partnerships.

 A limited partnership provides some protection from
liabilities of the partnership for limited partners. The partnership must have at least one general
partner who is not protected from the liabilities of the partnership, and at least one limited
partner. A limited partnership is formed by filing a Certificate of Limited Partnership with the
New Mexico Secretary of State, in compliance with the Uniform Limited Partnership Act.
Limited Liability Partnerships. Partnerships (general or limited), who comply
with certain insurance requirements, and file a registration statement with the New Mexico
Secretary of State, may obtain some protection from liabilities.

New Mexico Corporations 

Corporations are legal entities separate from the owners. Corporations
provide the owners (referred to as shareholders) with some protection from liabilities incurred by
the business. A corporation is created (formed), by filing articles of incorporation. New Mexico
corporations are formed by filing articles of incorporation with the New Mexico Public
Regulation Commission-Corporations Bureau. Certain special purpose organizations may be
required to comply with other laws before they may file articles of incorporation. For example,
organizers of banks formed under State law are required to obtain permission from the Director
of the Financial Institutions Division of the Regulation and Licensing Department, prior to
filing articles of incorporation with the Public Regulation Commission. Similar requirements
apply to trust companies and other special purpose corporations.

Many people mistakenly believe that S-corporations under Federal tax law are formed
differently from other corporations under State law. A corporation's status as an S-corporation
is governed by the Internal Revenue Code, not by State law.

New Mexico Professional Corporations (P.C.)

Professionals such as lawyers, doctors, accountants,
engineers, and other licensed professions may incorporate under the New Mexico Professional
Corporations Act. Unlike business corporations, a professional corporation may only be
incorporated by a person licensed to conduct the profession for which the corporation is
organized. The corporation is organized by filing articles of incorporation with the New Mexico
Public Regulation Commission-Corporations Bureau.

New Mexico Limited Liability Companies.

 Limited liability companies (LLC's), are a relatively
new type of entity. They are sometimes mistakenly referred to as limited liability corporations.
The New Mexico Limited Liability Company Act was adopted in 1993. LLC's provide the
owners with protection from liabilities that is similar to corporations. LLC's are formed by
filing articles of organization with the New Mexico Public Regulation Commission-
Corporations Bureau. The owners have some flexibility in deciding how an LLC will be taxed,
and professional assistance is generally advisable.

New Mexico Non-Profit Corporations. To qualify as a non profit corporation, no part of the income
or profit may be distributable to its members, directors or officers. The corporation is formed by
filing articles of incorporation with the New Mexico Public Regulation Commission-
Corporations Bureau. In addition, charitable corporations that solicit funds may be required to
register and file reports with the New Mexico Attorney General's Office under the Charitable
Solicitations Act.

Businesses Organized in Other States / New Mexico Certificate of Authority

Businesses that have been organized in other states may be required to register and
qualify to do business in New Mexico. Foreign corporations and limited liability companies
should contact the New Mexico Public Regulation Commission-Corporations Bureau.
Foreign partnerships should contact the New Mexico Secretary of State.

Tradename (D.B.A.) and Trademark Issues.

The State of New Mexico does not require that a business register its use of a tradename
(sometimes referred to as a fictitious name, doing business as or d.b.a.). The use of a tradename
that is different from the legal name of the business can have legal implications that should be
discussed with your attorney.

If the business has a unique tradename or mark that distinguishes it from other
businesses, the business may want to register the mark with the New Mexico Secretary of State.
New Mexico=s trademark and service mark registration law is designed to mirror federal
trademark protection. It should be noted that the Secretary of State and the New Mexico Public Regulation
Commission-Corporations Bureau, each maintain separate data bases, and registration with one
of these State offices may not prevent someone else from registering the same name with the
other State office.

Other Applicable Laws of New Mexico

Depending upon the nature of the business, and its intended activities, other State or local
laws could affect your business. For example, if your business intends to raise capital by issuing
securities, you may be required to comply with the New Mexico Securities Act, which is
administered by the Securities Division of the New Mexico Regulation and Licensing
Department. The definition of "securities" is broad and includes stock, limited liability
company membership interests, limited partnership interests, notes, and investment contracts.
Solicitation of capital in violation of the Securities Act, could subject a promoter to civil and
criminal liability under State and Federal law. If your business will have more than a few
owners, or owners who are not going to be directly involved in the operation of the business, you
should determine whether you are required to register or file a claim of exemption with the
Securities Division of the New Mexico Regulation and Licensing Department.
Insurance companies, credit unions, escrow companies, trust companies and other types
of businesses may also be required to comply with registration requirements and other applicable
State laws.

Most professions, and many other business activities, such as construction activities and
businesses that serve alcohol, are also regulated by State law, and require compliance with
licensing requirements. Most of the occupation licensing laws are regulated by the New Mexico

New Mexico Regulation and Licensing Department.

Local governments may also have special permit requirements for certain businesses.
Businesses that serve food or drink may be required to obtain permits by the municipal or county
government where the business is located.

More Help

Most State agencies are happy to answer general questions and provide forms that may
assist you in the operation of your business. However, if you have legal questions, State
employees are not permitted to provide legal advice. You should consult a lawyer if you have
legal questions. Other professionals, including accountants and financial planners may be able
to provide assistance as you decide how to organize and operate your business.

Incorporate - Protection From Liability ó


Liability is often the biggest concern
cited by those choosing a corporation for
their business identity. The types of
liabilities incurred by most businesses
can be characterized as debt ó either
through borrowing, supplier credit, or
unpaid bills ó or tort liability, through
accidents, product claims, or actions of
employees.

When it comes to borrowing
money, a bank seldom makes a loan to a
small business without requiring personal
guaranties in addition to the business'
collateral. Likewise, trade creditors often
require personal guaranties from the
principals. Unpaid bills for which the
corporation has sole responsibility may,
therefore, be a small portion of the business
debt. The corporate structure may or
may not protect you from tort liabilities.
One Santa Fe attorney suggests anticipating
from where the tort is likely to
arise. ìIs it your act or the act of others...?
We are always responsible for
what we do.î If liability arises from an
employeeís action, then the employee
and the corporation are responsible, but
not necessarily the owner. If it is your
action, or you were personally supervising
the employeeís action, then you may
have personal as well as corporate
liability.

Even when the liability would
typically be corporate, the owner may
not be immune from the other party
ìpiercing the corporate veil,î and thus
being held personally liable as well.
There are two common instances when
this occurs. The first is where the
owners have failed to act consistently
with the existence of a corporation; for
example, by not fulfilling the requirements
that a corporation hold meetings,
elect officers, pay franchise taxes, or file
biennial reports.

The second may occur if the
corporation is insufficiently capitalized.
While there is no absolute measure of
ìthin capitalization,î a court will look at
the anticipated needs of the individual
business. If the business does not have
enough assets to reasonably address its
needs, including anticipating tort
liability, nor does it provide insurance
as an alternative, then the owner may
be held personally liable.

What is the bottom line? Picture
yourself down to your last $500 in startup
money and trying to decide between
spending it on insurance coverage or on
setting up a corporation. Your best advice
may be to purchase insurance.

Should I Incorporate My Business?

Nearly all entrepreneurs at one
time or another struggle with the question
of whether or not to incorporate their
business. Many choose to incorporate
even though they may not need to do so.
For some it seems a panacea, solving
problems from liability to credibility.
Others opt for incorporating on the advice
of a banker or business consultant because
of one specific issue, without
considering their business needs as a
whole. With so many changes in the tax
code, tort cases, and financing laws,
incorporation may no longer be the one
right answer to some very real business
concerns.

One Santa Fe attorney suggests
looking at the following key issues in
analyzing why you wish to incorporate.
There may be simpler, more effective
ways of addressing your concerns.

LEGITIMACY ó Some see incorporating
as a way of obtaining instant legitimacy.
Being a corporation is a way of saying you
are ìreal.î Further, being ìpresidentî of a
corporation is seen as prestigious and
according instant respect.

Although only a corporation can
have ìInc.î as part of its business name,
even a sole proprietorship can attach
ìCompanyî or ìCo.î to the business name.
Becoming president of a company is a
simpler process than becoming president
of a corporation and looks nearly the same
on a business card. Thus, a sole proprietor
might have business cards printed
with ìAndy Gomez, President; The Gomez
Co.î instead of ìGomez, Inc.î
The public, however, has become
much more sophisticated about labels.
Businesses are scrutinized more thoroughly.
Simply incorporating will not
guarantee respect. Youíd do better to
focus on quality, service, price, and other
important areas. In other words, get the
basics right. Respect will follow.

Starting A Corporation Corporation / Benefits

For-profit corporations, like nonprofit corporations, are formed to ensure an ongoing entity that
is separate from the members of the organization, and the organization can operate on its own
legally, e.g., to have its own checking account and enter into contracts. The members of the
organization are not directly liable for the effects of the organizationís operations (the limited
liability shield) unless the members engage in deliberate illegal acts for which individuals can be
prosecuted.

Corporate status is granted by the state, province or federal level. Corporations can benefit from
the oversight and guidance of a Board of Directors (required for corporations). Board members
usually are paid for their services.

Corporations can generate funds from distribution of stock to owners. The corporation is owned
by the stockholders. The corporation can distribute earnings in the form of dividends to owners
of the stock. The corporation is taxed for its profits, and the owners also are taxed for earnings
and equity/stock distributed to the owners.

Registering A Corporation

If you decided to create a corporation, a non-profit, a limited liability company or a partnership (limited, or limited liability), you will have to register your business and file certain documents with your state government. If your business is a sole proprietorship, you do not need to register your business with the state. However, many states require a sole proprietor to use their own name for the business name unless they formally file another name as a trade name, or a fictitious name.

Additional Ideas in Starting A New Business


	Once youíve covered the initial steps of selecting your business venture and analyzing the your strengths and holes in your business idea, the next step is to determine whether or not it is feasible. In order to do so, an entreprenuer needs to understand the market that they are entering. If youíve decided to start a day care, it is important to know how many children currently attend day cares, how many day cares exist in your area, and how many children of day care age are in town. By doing so you can estimate how much of the market is available. If the market is saturated your product or service must have a competitive advantage in order to succeed.

	Another important item in determining the feasibility of your business is to study the costs involved in the process. These items will revolve around your startup costs and your monthly expenditures. Typically each business has a few key items that directly affect the overall cost of the project. Some examples are location, facilities or equipment. For example, if youíre starting a restaurant your location will play an important role in your cost structure. The location must be accessible, have ample parking and be located near homes or businesses to succeed. The building itself will determine what modifications you need to make in order to meet health and fire codes.

	By identifying the key items for your venture, you can begin estimating the overall cost of your business and determine how much the business needs to generate in order for it to survive. Typically, a business needs to also have enough operating capital to survive the first three months of operation. If your cost analysis determines that in order for the business to survive you need to capture 25% or more of a saturated market, you may want to seriously consider entering other alternatives. If for example, it is determined that you only require 5% of a fragmented market, then it may be a feasible business.
Up to this point weíve covered the process of generating your idea, analyzing your strengths and the holes in your business venture, covered how to view the market and the costs associated with your business venture. In the next article weíll discuss the process of selecting the appropriate location for your business and conducting the appropriate research for your permits or licenses.

Steps To Start A New Business

The first step is to know what you want to start. The idea can come from various sources: friends, family, business partners, customers, the internet, or simply by driving past a similar business in another city. The main idea is to do something that you will enjoy and not something that you have to do. Remember that while the idea may work great for other people, you are the one who will ultimately have to spend those long hours trying to make sure the business succeeds. If you do not have some affinity for the business, then the odds of it flourishing are reduced.

 The second step is to determine what you already have to start the business. In other words, what assets or resources do you possess that will help start and sustain the business? If you are planning to start a hair salon, perhaps you have ample experience within the industry, own your own grooming equipment and have a base of customers. If you are starting a website design company, you may already possess the necessary training and equipment to work on customer websites. By determining your resources you are effectively comparing your strengths and assets to the functions that the business requires.
The third step is to see where the holes are. What are the items that you lack to get the business going? Most of the time individuals only consider items such as money, equipment, a location and other tangible assets when looking for holes. The truth of the matter is that technical expertise and business knowledge are very important as well. While some individuals are great at the technical process of delivering a service or good, they may lack knowledge in the areas of marketing, accounting, financial planning or other management oriented areas. Without these items a business may get started, but its success is not secure.

 In order to compensate for these areas of need, a person must either learn the necessary skills themselves or outsource them via an accountant, attorney, bookkeeper or another expert in the area of need. An alternative to outsourcing is engaging in a partnership with other entities or individuals to provide you with these expertise.
So far weíve discussed the basics steps of starting your own business. We have covered the idea formation process, determining your strengths and analyzing the holes within your plan. In the next article we will discuss the process of determining the feasibility of starting the business by analyzing the market and costs associated with the venture.