Q: I am thinking about starting a non-profit business. Where do I begin to apply for government grants to fund the operations?
A: According to Entrepreneur.com - A Definitive Guide to Government Grants, “The US government has been issuing grants for more than 50 years.” These grants provide money that does not have to be paid back and support organizations whose purpose serves the public good. The article goes on to say “It’s difficult, though not impossible, for an individual citizen to secure a government grant. The chances of success are greater if you have a small business engaged in activities that benefit the general public. Non-profits seeking funding to advance important government goals have an even greater chance of success.”
Make no mistake, obtaining a government grant is a complex process. Because the money does not have to be repaid, the government has certain expectations and imposes obligations in exchange for the funds. There are strict spending and accounting rules and audits are performed annually. Persons applying for these grants should know what is expected of them, as failure to comply can result in legal action.
To begin the process, one resource is the web site http://www.grants.gov/. The site offers information about eligibility and various grant opportunities. It explains the application process and even provides application forms which may be downloaded. There is competition for these government dollars, so do your homework and make sure your application is complete and meets all the selection criteria.
The article cautions…“Applicants should be wary of ads that offer to prepare your grant application and promise positive results. If it sounds too good to be true, it probably is.”You are well advised to thoroughly research these offers and check with the Better Business Bureau before signing a contract for their services.
The volunteer counselors at SCORE Richmond can also assist you in your investigative research and offer opinions as to your chances of success.
Small Business Mistakes to AvoidQ: In a recent article you cautioned that running ones own business is no bed of roses. What are some of most common problems that the small business person encounters? A: The article you refer to is not intended to discourage anyone from starting a business. There are many rewards, both financial and otherwise, that can be realized from successful business ownership. However, one should understand that success comes from the development and implementation of a successful business plan. Your plan should help you to avoid the eight most common mistakes:
You don’t have adequate capital. Determine what your start-up costs are and then factor in what it will take to carry you until you reach positive cash flow.
You don’t charge enough. You must have an understanding of your costs of doing business. Only then can you intelligently know how to price your product or service.
You are reluctant to ask for payment. Asking for payment at point of sale is always the best policy. If credit must be extended, be sure to secure enough up front to cover your costs. Also, have a firm understanding with your customer how the balance is to be paid.
You choose a bad location. Retail stores need good visibility. Locate near other establishments with high customer traffic. Yes, these locations are expensive, but it is a cost of doing business and will ensure your customers can easily find you.
You don’t have a viable advertising and marketing plan. Do not skimp on advertising. One shot ads get little attention. Your local newspaper or ad agency can assist you in developing a campaign that targets the typical customer you wish to attract and stay within your budget.
You fail to deliver what the customer expects. Successful businesses not only meet but they exceed customer’s expectations. It is necessary to know your customer profile. Get to know them personally. Know their birthday and try to develop a relationship that transcends just business.
You don't hire good people. Your customer service representatives can make or break you. Make sure you train your people. Ensure they know how to treat the customer and handle difficult situations. Hold regular staff meetings and solicit their input. Make sure they feel appreciated. Happy employees beget satisfied customers.
You don't recognize your personal strengths and weaknesses. Spend your time doing what you do best and delegate or outsource the rest to others.
In summary, plan your work and work your plan. Be flexible and reevaluate your plan periodically as conditions change. Remember the business plan is always a work in process.
QUESTION: Last year your Richmond SCORE chapter offered a workshop series for aspiring entrepreneurs called Quick Start. Any plans to offer the series again this year?ANSWER: You’re in luck! A new workshop series titled “Simple Steps” is designed for individuals who want to learn how to start a business, as well as existing business owners who want to grow their businesses. You may have a great business idea but have no idea where to start? In five weekly sessions you will learn how to:
Define and evaluate start-up ideas.
Develop a marketing strategy.
Identify the various ways to fund your venture.
Do a real-world financial assessment.
Turn ideas into action with practical tools and templates.
You will be mentored by experienced professionals and have the opportunity to connect with other entrepreneurs. With the help of SCORE counselors, you will assess the viability of your business plan before you invest the first dime.Session # 1 “Start-up Basics” is a workshop that discusses all of the necessary things that need to be done leading to the preparation of a Business Plan. At the conclusion of the 5-step series you will have an understanding of how to move your business forward and an outline of your business plan. You can then make an informed “go or no go” decision to move forward with your venture. If you choose to proceed, a coach will continue to work with you for as long as it takes to get up and running.All sessions will be held on Tuesdays at Village Bank, 15521 Midlothian Turnpike, beginning February 8, from 6:00 -8:30 PM. The cost for the entire series is only $99. To register call the SCORE office at (804) 771-2400, ext. 131 or log on to their websitehttp://richmondscore.org/workshopregistrationss.html
QUESTION:Your last article on year-end tax planning tips cautioned employee owners of S Corporations to be mindful that distributions of profit should not be disproportionate to the amount of salary received. Can you please elaborate more on this subject?
ANSWER:The S Corporation is a marvelous entity that allows its owners to offset income with reasonable business related expenses.S Corporations do not pay federal and state corporation income taxes. All profits after expenses pass through to the stock holders and are taxed at their individual rates. Also, these distributions of profit are not considered earned income and, therefore, are not subject to Social Security and Medicare tax rates.
Social Security, also known as FICA taxes, must be withheld from your wages.As an employer you must also pay a matching amount of FICA taxes for your employees. The combined employee/employer FICA tax is currently 12.4%.of salary, up to $106,800.
Also the Medicare tax rate for the employee and employer is a combined 2.9%, with no wage base limit. Because distributions of profit from an S Corporation are not subject to FICA and Medicare taxes, tax savings of up to 15.3% are possible.
Employee owners of S Corporations may be tempted to take little or no compensation in the form of salary, to avoid payment of FICA & Medicare taxes. This could trigger an audit by the (IRS) Internal Revenue Service. It is wise to pay yourself a “reasonable” salary at regular intervals. Reasonable is a subjective term, but can be generally defined by the scope of duties and number of hours invested each month.
Owners are also investors and, as with any investment, are entitled to a return of profits generated by the business. It is when these distributions of profits become disproportionate to wages received that the IRS may reclassify some of the distribution as earned income. While there is no tried and true formula, prudence dictates that owners are wise to take at least 50% of profits in the form of salary.
Disclaimer:The information provided here is general in nature, and may not apply to your specific situation.Before relying on this information, you should consult with a qualified tax advisor for your individual or business tax needs.
QUESTION:As we come to the end of a difficult year for small business, any suggestions for an improved outlook in 2011?
ANSWER:Albert Einstein defined insanity as “doing the same things over and over and expecting a different result.” If you are not achieving the results you want, you may want to step back and do a little self examination of your goals and business practices.
Just as individuals make New Year’s resolutions to exercise or stop smoking, so too should businesses resolve to make necessary changes in the way they operate and interact with employees and customers. Here are ten ideas for your consideration:
Develop or revise your business plan. Decide what your goals are for the coming year and devise a plan of action to achieve the goals.
Encourage and reward your employees for ideas that can help grow the business. Weekly staff meetings to discuss issues and assess progress, fosters a team spirit.
Set specific goals that are understood and agreed upon by the team; goals that are measurable, and most important, are achievable within a reasonable time frame.
Develop a project management plan with specific tasks, assigned to specific individuals, and establish a time line for completion of each task.
Owners and bosses need to avoid the impulse to micromanage every aspect of your business. It will discourage employee initiatives and you run the risk of burnout.
Review your marketing plan. Is your website current and is it a “selling” site or just informational?If not, consider outsourcing maintenance and optimization (SEO) to a professional.
Reconnect with your existing customers. Do not risk the loss of a valued customer because of inattention or failure to meet their expectations.
Don’t beat a dead horse. If after several efforts to fix a problem results in failure, move on and concentrate your energy on more productive projects.
Give back to your community. Join civic groups and support charitable causes. Strive to be recognized as a good corporate citizen. The contacts you make will more than reward your efforts.
Above all, make some time for yourself. Take a well-earned vacation and recharge your batteries.It will cleanse your mind and allow you to return with a fresh perspective.
Q: I am interested in starting a sole proprietorship arts/crafts business. Selling online (on an existing established site), face to face, and perhaps at shows. I would like help in knowing what licenses I would need, who to contact for these licenses, registering a business name, sales tax requirements and general start-up business advice. Is any of this something you can help me with?
A: Yours is a set of good questions that most people who start businesses of all kinds have. While each individual step is relatively easy, there are a fair number of them, and also some basic decisions to make. (For example: Is a sole proprietorship really the best entity for your business?) An hour with a SCORE counselor can get most, if not all, of your questions answered for you, and if you don't have the time to meet face to face, we offer on-line counseling as well. So why not see www.RichmondSCORE.org or phone our office manager, Sandra Crone, at 771-2400, ext. 131, to set it up?
Q: I wish to start my small business. Please let me know if I attend your Workshop, it would be considered as one of the eligibility criteria to get finance from any lending institution? Please also let me know if any Government grant is available to start a business to the people like me who are ambitious and ready to start own business with total investment of $ 150,000 to $200,000, but have no sufficient funds. If there is any low cost help is available to meet entrepreneur's equity.
A: Attending a SCORE Workshop will not guarantee that you will get a loan. However, the workshop will provide you with information that will increase your chances of getting a favorable review of a loan application. For example, one of the topics the workshop covers is how to construct a Business Plan, which is the document that most lending institutions require. There are no government grants available to start a for-profit enterprise. The Small Business Administration (SBA) does provide loan guarantees, but not direct funds to start up businesses. Most lending institutions (and SBA loan guarantees) require the entrepreneur to provide approximately 20% of the required start-up funds. Using the numbers you provided ($150,000 to $200,000), you should have between $30,000 to $40,000 of your own funds available. I would encourage you to sign up for the SCORE Workshop. The expert presenters will explain these issues and many more. You can get more information and register by visiting the SCORE web site, www.richmondscore.org.
Q: I want to start a web and graphic design business. Most projects and work will be done by myself or other independent contractors. I will not have any paid employees to start, but would like to have interns for certain positions. I was thinking of LLC, or Sole Proprietorship and I am not sure if I need EIN number or not for each business structure.
1. What would benefit me the most?
2. Can I have an intern work for me as either LLC, or Sole Proprietorship?
3. Can I negotiate with intern as a freelancer (independent/sub contractor) to pay a certain price at the end of the month?
4. What is important important information to gather from independent/subcontractors for 1099?
Should I come in and talk about it in more detail?
A: First, it’s better for you to have some sort of corporation than to operate as a sole proprietorship. There are tax advantages, and, more important, incorporation puts a wall of separation between your business and personal assets and liabilities. To find out what kind of corporation works best for you, you should either attend our one-day workshop – where an attorney and professionals in other business-related fields go through just about every aspect of getting a business up and running – or set up a SCORE counseling session. The workshop is $79 and includes an hour free post-workshop consultation with any (or all) of the eight experts.
Go to: Workshop Information for details and registration. Face-to-face counseling is free and can cover your questions in this area in about an hour. You can sign up at www.richmondscore.org Regardless of what kind of entity your business is, you can pay employees. If not a sole proprietorship, you’ll need an Employer Identification Number, which you can get from the Social Security Administration either online or with a toll-free phone call. It’s easier for you to pay workers as independent contractors, because your only reporting is a 1099 form to them for payments over $600. They’re responsible for any other paperwork. If you hire salaried employees, you have to not only file payroll returns throughout the year to the state and the feds, but you also have to pay the employer’s share of withholding, social security, Medicare and unemployment compensation tax. So whether you do business as some kind of corporation or a sole proprietorship, it makes more sense to pay by 1099.
Q: I want to open my own business. As a black female, I've been told that I may qualified for several grants for black females wanting to open a business. I also would like to know if I can qualify for a business loan if I file personal bankruptcy?
A: I am not aware of any grants for people wanting to start a for-profit business. Grants are usually reserved for not-for-profit and/or research activities. In today's economic climate I doubt that you would be able to get a business loan if you have filed for personal bankruptcy. Banks or other lenders would ask where you would get the funds to repay the loan if you cannot cover your current expenses and liabilities.
Q: I'm a human resource consultant; I've been in business for the last 10 years and am looking at taking some on-line classes to become more credentialed in my field. Is there any tuition assistance available? If so, how do I go about getting it?
A: To my knowledge, there are not general sources of tuition assistance. You would have to contact each educational institution toinquire about their tuition assistance programs. That said, a Google search revealed some online courses and certifications in HR that do not appear to be very high-cost. One, for example is ERI http://www.eridlc.com/?FuseAction=Main.Home#List. Please understand that I have no personal experience with ERI and am NOT endorsing them. I present it only as a suggestion for an alternative approach; there are probably other alternatives as well. Best of luck.
Q: My wife and I have been selling laptops for some time now (about 2 years) on bay and we are just now incorporating. What is your advice as far as paying taxes go? Should we go back to the first of the year and pay all at once or should we begin paying taxes from the date our business started? What can we expect from the IRS as well?
A: This is the way I would expect the IRS to view your tax liability. If the laptops you have been selling on Ebay were purchased by you for the purpose of selling them to the public at a profit, these, in my opinion, would be considered by the IRS as retail business transactions and would be subject to the appropriate income taxes. On the other hand, if these products had been pre-owned by you and your wife, were used, and you were looking to dispose of them, I don't feel that the income you made, if any, would be subject to tax. If you are truly concerned about this I suggest you call the IRS and explain the circumstances. Nowadays the IRS is not looking to make life miserable for tax payers, so don't be afraid to speak to them. Whatever income you've earned on the sales of these products during 2008, whether they were on Ebay or your new corporation should be reported. Again, if you want to make certain phone the IRS. The tax liability will depend upon how you've structured the corporation. There are some differences in filing based on whether you are a C Corp, S Corp, or LLC.
Q: How do I get started with getting my small business off the ground? I was released October 20 of this year, after serving 9 months. I have a vision of starting a carpet cleaning and repair business, but my funds are strained. Could you please send me some information as to how I can get started. Other than financially, what else must I do?
A: As you look to starting a business, there are a number of things to consider and steps to take. They include: legal entity formation, tax structure, financing, insurance, marketing. As you begin, all these issues will be addressed as you prepare your initial business plan. I urge you to consider attending the SCORE workshop that is offered each month. It is an investment of one day and $79; you will receive many, many benefits from the day. Each workshop includes highly informative presentations from experts in each of the above subjects. The workshop may not answer every question you have, but in my view, it is the single best place for you to start.
Q: 1. Can a business registered agent live in one city and have the business post office box in another?
2. How can I register my business in a city other than where I live?
A: It isn’t clear, but I’d like to assume you are asking about registering an LLC entity with the Commonwealth of Virginia. For that registration, the person starting the business can serve as his/her own registered agent, regardless of the location within the state. In other words, if the entity’s place of business is inside Virginia, and the person starting the business is a resident of Virginia, he/she can serve as registered agent. Cities don’t really matter for the state registration. BUT the registered office must be a street address, not a PO Box. (Review the requirements on the state website for registering an LLC at http://www.scc.virginia.gov/publicforms/320/llc10101.pdf). Where the specific locality within the state does matter is business licenses. Each locality has its own rules for the business license process. Take Henrico County as an example: That code (Ch.20, Article XI, § 20-385) requires that there is a definite place of business in the county OR if there is no definite place of business in the county, the person applying for the license is a resident of the county. See http://www.municode.com/resources/gateway.asp?pid=10909&sid=46 Again, on the local business license, the localities vary and it is necessary to review the specific requirements of the county where the business is. (And if it is a home based business, there may be zoning questions as well). Depending on the nature of the business, other licenses may also be required
Q: I started an online store about a year and a half ago. I work with a distributor so I have no inventory on hand myself. Someone orders an item from my website, I then order it from the distributor and have it shipped to the customer. The problem started back in the spring when I finally started getting some orders. Most of the orders were purchased through fraudulent credit card activity. My payment processor would send notice of a chargeback. I would contest it with an approval code which they provided at the time of purchase and proof of delivery. Some charge-backs were reversed, but not all. Either way, I still had to pay the distributor for the item since it was shipped and delivered. Because of this and other maintenance costs (advertising, web-site maintenance, etc.) my business is $20,000.00 in debt. Is there a program out there that can help me pay off this debt without getting a loan?
A: The payment processor does not have the right to arbitrarily reverse a payment, unless there is legal justification, and that you are advised of the reason for the chargeback. Without his justifying the reason for the chargeback the processor is technically committing fraud, because he is taking money that belongs to you. I would urge you to contact this company and demand that they return the funds that were taken from you, and remind him that what he has done is illegal. It's very possible that the processor can provide just cause for these various charge-backs. If so, it's his duty to give you the details to support his action. Without doing so I believe you have justification to take legal action against him. As far as paying off your debt, there is no source of funds available other than the usual business or personal loan process. An alternative could be to offer a piece of your business to a private investor in return for providing you with the amount of funds you need.
Q: I have a friend in NC that is being offered a 40% ownership of a restaurant (the Remington Grill). The ownership is being given to him as a reward for doing a good job. However, the restaurant is not profitable, and there are 3 total owners if you include him. He's in a little over his head with this implications of this deal, and doesn't know where to turn for advice or help. He's worried he's being set up as a patsy for debts and creditors that he hasn't been made aware of. I saw a write-up of your organization featuring an old employer of mine, Raul Cantu (Nacho Mamma's). It sounds like you may really be able to give him some sound advice. Could you please tell me if there is a chapter in the Wake Forest, NC area where he could get a little guidance?
A: It sounds like your friend could use some face-to-face SCORE business counseling. There are SCORE chapters throughout the country and North Carolina. Finding the nearest one is as easy as going to http://www.score.org/findscore/index.html and keying in your zip code. That will give you the nearest chapter's contact information, and from there experienced business counseling help is just a click or a phone call away.
Q: Can you help me with me develop a successful business plan? My ideal is to start my own Fashion Line of Clothing and also freelance for other major Designer Companies? I already have a clothing line fully completed and a website. I just need help 1 on 1 in developing the structure of my business.
A: Your question really involves two areas – setting up your business entity and creating a business plan. Fortunately there are two good ways to deal with each. The first is our SCORE startup workshop on the second Friday of each month. It's a full, eight-hour day, packed with professional input from experts on law, business plans, taxes, insurance, leasing, marketing, websites and other useful subjects. In addition, each attendee is entitled to an hour's free consultation with any and all of our presenters at a later date. The workshop is a bargain at $79. For more information and to register, go to http://www.richmondscore.org/workshop/workshop_information.html or call our office at 804-771-2400, ext. 131 on Tuesday or Thursday. The next workshop is this Friday, and the next one won't be till next year. Business plans are also a staple of our one-on-one business counseling. One of our counselors will be glad to take you through the structure and purpose of a business plan, go over yours with you as you compose it and help you make it a roadmap to success for your business. Our counselors can help you compare the advantages of different kinds of business entity and take you through the ins and outs of setting up your business entity. Just call our office number or go to www.richmondscore.org to set up an appointment.
Q: What would it take to start an advertising company?
A: There are several levels of answers to your question. The first level is what it takes to start a company of any kind – deciding on what kind of business entity you want to have (sole proprietorship, partnership, S corporation, LLC), where you’ll locate it, what your business plan will be, etc. There are too many specifics to cover briefly in an e-mail, but there are two ways to get excellent input. The first is to meet with a score business counselor. Sessions usually run an hour or so, can be set up to your convenience, are free, and give you input from an experienced business professional who’s very likely set up and run a successful business of his or her own. The second is to attend a monthly SCORE workshop. These usually take place on the second Friday of each month and cost $79. What you get for your money is a full day of professional experts – an attorney who specializes in small business work, an accountant, real estate and insurance experts, a business banker, etc. – plus the opportunity to get an hour’s free consultation with any of them at a later date. On another level, you need to figure out just what kind of advertising company you want to start: Full-service agency? Media planning and buying? Design? Creative? Account planning? Specializing in print? In broadcast? In new media? Do you have the credentials, work samples and people to persuade prospects that you can do the work they need? Do you have a pricing structure? Do you have the infrastructure you need – the computers, the software, the domain and e-mail addresses, etc.? Will you have capital to run the business while you’re building it? Most important, do you have a client? Or, that failing, do you have a list of prospects to go after? Have you worked out a pitch, a presentation, a brochure or direct- or e-mail letter or other promotional materials? So when you get right down to it, the first thing it takes is a good deal of thinking, planning and decision-making. As you drill down to more specific questions, the business counselors or Richmond SCORE will be more than happy to work with you to develop good answers.