Taxes

Be sure you are aware of the tax implications in starting a business. Your business will be subject to Federal, State, and local taxes. You may be liable for such Federal taxes as social security (referred to above and shared by you as employer with your employees), excise taxes and, if your business is incorporated, the corporate income tax. From your employees' wages you must deduct their share of the old-age survivor's, hospital and medical insurance taxes as well as their unemployment compensation contributions. From such employees' paychecks, you must withhold the current share of their individual Federal and, where required, State and local income taxes. If you are an employee of your own corporation, the withholding provisions of the social security and individual income taxes apply to you, too.

If you are a sole proprietor or partner, your personal income tax payments must be prepared and submitted on a quarterly basis.

Under the Self-Employed Individual Tax Retirement Act you may take an income tax deduction if you set up retirement plans for yourself and employees. Go to the local office of the Director of Internal Revenue for information about your Federal tax obligations. An excellent booklet [revised from year to year) on this subject is Tax Guide for Small Business, prepared by the Internal Revenue Service.

You will have other State and local taxes. The more common types levied by states are income, property, sales, occupation or business license, and unemployment compensation taxes. Information concerning State and local taxes and fees which apply to your particular business can be obtained from your state and municipality. After you have information on the various kinds of taxes for which you will be responsible you will find it helpful to set up a time table for meeting these obligations.

Insurance

Another function to perform before you can open your business is the secural of adequate insurance protection. Otherwise, a part or all of your investment may be lost. Insure against risks over which you have no control, such as fire, windstorm; liability judgment, or the death of a key employee. On the other hand, do not insure against a loss which would be trivial if it did occur, nor pay for protection when the premium is a substantial proportion of the value of the insured property. Some major types of insurance to consider are fire, general liability, automobile liability, automobile physical damage, workers' compensation, crime, business interruption, glass, group life; group health and disability.

The subject of proper insurance coverage is involved. Consult more than one insurance agent, broker, or company representative for advice. How much coverage do others in businesses comparable to yours carry? Ask business friends sad others who have had experience with different agents. Can the agent supply all the kinds of coverage you need at reasonable prices? Is he or she known as a competent professional? Will the agent devote enough time to your individual problems to justify the commission? At no extra cost, will the agent survey your entire situation and recommend alternative methods of insurance, pointing out the advantages and disadvantages of each? Does the company he or she recommends have a good reputation for service in the event of loss?

Say that you're the sort who's starting new small business. You Have given focus to the general chances for success, and have
selected the new company you wish to establish.

What technical issues will you face in establishing the business? How Much cash will you require for beginning new small business?
Where can you obtain it? What kind of business organization will you have? Where should you locate the company? (start company
tips to follow along )

The very first question you want to reply is: How much cash will I need? However, this question can't be answered until other
questions are answered and many choices are made.

To decide how much money is Required to start a company, enter all Of your potential income and all your planned expenses on a job
sheet or kind.

Even though you may feel that this kind of preparation is more than You need to start a simple small business it is useful to
begin with this approach to direction which puts down figures in black and white. You'll find the exact same approach valuable
within an established small business.

First, estimate your sales volume. This will depend on the overall Quantity of business in the area, the number and skill of
competitors now sharing that business, and your own capability to compete for the consumer's dollar. Obtain assistance in making
your sales quote from wholesalers, trade associations, your banker, along with other business-people. Several business and
statistical books may be useful in making sales volume estimates.

In reaching your final quote of earnings don't be over-enthusiastic. A brand new business generally develops slowly at the start.
If you overestimate sales you're most likely to spend too much in equipment and first stock, and commit to thicker operating
expenses than your actual sales volume will warrant. As you are just starting up you might have no earnings for the first few
months. At any rate you can expect your first few weeks to be quite low.

You must also decide what proportion of your earnings will be cash And what percentage will be sold on credit. If you guess that a
particular part of the sales will be on charge then you must figure whenever you're likely to get the money for all these sales.
One month? Two months? More? Never?

In our guide to starting new small business, estimate how Much money will be paid out. Remember in starting a business you may be
purchasing gear, paying licenses and fees, making deposits on lease, utilities and so on, several months before you open the door.
Some of those expenses are easy to estimate. If you have decided to lease a building (more about that later) then you understand
what your deposits will be and just how much you will need to pay out monthly. You are probably able to get the cost of fees,
licenses and utility deposits with a couple of telephone calls.

Other cost figures might take a bit more work for you. One way Is to obtain average operating ratios for the kind of company in
which you're interested. Among the resources for such ratios are Dun & Bradstreet, Inc., trade associations, publishers of trade
magazines, technical accounting companies, industrial companies, and colleges and universities. The normal ratios for your kind of
business multiplied by your estimated sales volume will serve as bench marks for estimating the various items of expenditure.
However, do not rely solely on this way of estimating each expense item. Verify and change these quotes through investigation and
quotes in the specific market area where you intend to operate.

Don't forget to cover yourself too. You may need money to live on if You have to quit your job. If your partner is working and can
encourage the household for some time you might not have to withdraw money from the business. The longer you can go without taking
money out, the faster you'll develop a strong cash position. Now that you have estimated your money receipts and expenditures,
write down the amount of cash you'll put in the business to begin. This goes on line 1 at the example below. Then add lines 2 and
1 for the first month to find line 3. Then add up all the expenses to find line 5. Subtract line 5 from line 3 to get line 6. This
cash in the end of month then goes to line 1 to the start of the next month, and so on.

If you continue this for the entire year, very soon you will find You've got negative amounts or a negative cash flow. About this
time you will also understand that you ought to be operating on this form with a pencil that has a fantastic eraser.

In this overly-simplified case, you notice that by the end of June you're minus $200 in cash. Two options can be attempted -
reduce your purchases at June by $200 or start with $200 more. You might not be able to reduce costs (they will likely go up as
your company starts). That means you will need to put in $200 more to begin with. If all you have is $4000 then the additional
$200 you will need is capital you need to get from someplace else.

Do not be misled by this very simple illustration. Many small businesses Start with the 200, and try to acquire the $4000 from
somewhere else. Since a Major cause of failure in the early stages of a company is Under-capitalization, be very careful in your
preparation at this point. You can Almost always plan on several unexpected expenses and some delays in anticipated income.

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