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Question:
My wife and I are starting a new business and we are in the process of forming a Corporation, listing ourselves as the sole officers and directors. We are preparing a business plan in order to obtain a loan from our bank. We would like to add to our Board of Directors some prominent members of our community. We have experienced some resistance due to their fear of personal liability. We have been told we should form a board of advisors and that would solve the problem. What do you advise?
Answer:
We agree that an impressive advisory panel would enhance your business plan. Notice we avoided using the term directors. It is important to structure the board in a way that it is clear that it has an "advisory role" only. All decision-making authority, power and legal responsibility still rests with the owners of the business and the formal Board of Directors elected by the shareholders, not the advisory board members. Larger companies provide insurance to protect their Board of Directors from liability. This cost for your small startup company would be unwarranted.
The makeup of your advisory board should have functional relevance to your company’s objectives. Experience in your industry, marketing capability and financial expertise are some of the skills the advisors could provide. This would not only benefit your business but would enhance the business plan being presented to your bank.
Your advisory board should have scheduled meeting dates and at these meetings the
Company’s progress and plans should be presented and discussed. These meetings should have an agenda with prepared information. The objective is to get your advisors feedback. Many advisory board members become directly involved in specific tasks, such as helping to sell a particular customer, evaluating marketing strategy and fund raising. Minutes should be taken and then presented to your formal Board of Directors for consideration. This will further substantiate the advisory group separation from the board.
You should pay a visit to a local SCORE office near you. We are sponsored by the US Small Business Administration. For locations on Staten Island go to www.score476.org We can address this matter in greater detail and also cover any other business question your may have. Our services are free and confidential and our volunteers have extensive experience in a variety of business ventures.
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Question: We are starting a new business that will entail extensive use of computers and we are confused with all the choices being offered. What advice do you offer in this regard?
Answer: Operating a successful small business today means keeping up with a great many technology-related tasks. You need basic computers and perhaps laptops, as well as a bunch of different business software, depending on what your business does. Then there are networks, Internet access, email and Web sites to contend with. Even selecting the right technology is not easy. It’s hard to know what works best for a small business.
Common missteps include buying only bargain-shelf hardware, using pirated software or buying it piecemeal rather than in discount bundles and setting up e-mail accounts without controls or Web sites that don’t work.
Helping small businesses avoid such technology blunders has become big business itself. There’s now a nationwide network of computer or IT consultants who specialize in setting up tech systems and solving problems for small companies.
The future success of your business hinges on systems that work properly, so seeking professional help makes sense. An outside tech expert can become a vital extension of your business, almost like a trusted attorney or accountant. But not just anyone with a little PC smarts will do. You’ll want someone who does this full-time for you and other clients rather than a person who merely dabbles in computers on the side.
To find the right fit, develop a detailed list of your needs and how you want the person to work including part-time, on-call or a project basis. Look for someone who understands your type of business. They should also be able to explain the work in plain English so you or someone else in your business can learn how it all works.
Experience with businesses of your size is also important. Someone who works only with big companies may not be familiar with the best solutions for you. You should tap your independent tech guru for advice before making hardware or software purchases. A few minutes on the phone can prevent costly mistakes.
For help finding a tech consultant, contact the Independent Computer Consultants Association at www.icaa.org a national nonprofit membership group based in St. Louis. Their Web site has a free feature that lets you search for consultants by area or special skills.
To learn more about technology issues facing your small business, contact SCORE "Counselors to America's Small Business." SCORE is a nonprofit organization of more than 10,500 volunteer business counselors who provide free, confidential business counseling and training workshops to small business owners. To reach the Staten Island Chapter of SCORE call 718-727-1221. Also visit their web at www.score476.org for valuable business resources. |
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Question: I have a small business on Staten Island and have created a Web site to sell dolls and bears and have been fairly successful. I operate from home and conduct my business without any employees. As I am getting busier I find there are not enough hours in the day to do all the needed tasks. I have heard that I can engage a fulfillment company to handle my inventory shipping needs. Would this be a good choice for me to consider? Would they handle a small business such as my own?
Answer: For small businesses such as yours that sell products online, by phone, fax, e-mail or mail order, success often brings with it a new problem: an order fulfillment backlog. Packing, shipping and tracking orders can quickly become daunting. And if you are constantly lugging packages to the Post Office or UPS Store, you have less time to spend on building other facets of your business.
This may be a good time to consider using an outside order fulfillment service to take the burden off of your shoulders. Handling order fulfillment properly can be critical to your success. Poorly packaged items and slow service will annoy customers.
Outsourcing fulfillment can save you time. Your products, labels and other unique packaging can be stored in the fulfillment company’s facilities. When orders are placed, the fulfillment firm packs and ships the items and perhaps handles customer service and returns as well. Orders can come through you via your usual methods, or can go direct to the service.
There are many different ways to approach shipping and fulfillment solutions based on the type, weight, size and destination of the items you ship, along with your customers’ needs and expectations. Outside fulfillment involves a cost, but you should also consider the costs you are avoiding such as storage space, payroll and your own time. If you charge customers for shipping and handling, you may be able to recover all or a portion of it.
When selecting an order fulfillment firm, be sure to align your needs with the services they offer. Ask about minimum and maximum order quantities, error rates and restrictions on the types of products they will ship. Some, for example, only ship via UPS and the Postal Service and don’t handle oversize items. If you have special packaging, ask if they will use it.
For Web savvy business owners, fulfillment services can work especially well. Orders from your Web site can be routed directly to the center. Plus you can easily track and manage your orders, inventory and other details online. The Mailing and Fulfillment Service Association, a professional organization for mailing and fulfillment companies, offers a search feature on its Web site that can help you locate a fulfillment house that’s right for you. Visit www.mfsanet.org or call (800) 333-6272.
To learn more about shipping and fulfillment at your small business, contact SCORE "Counselors to America's Small Business." SCORE is a nonprofit organization of more than 10,500 volunteer business counselors who provide free, confidential business counseling and training workshops to small business owners. Call (718) 727-1221 for the Staten Island SCORE chapter nearest you, or find a counselor online at www.score476.org.
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Question: I started my business in April of this year and I intend to have my taxes prepared by an accountant sometime after the end of this year. I was told that I should have some tax planning strategies done before the end of this year so that I may reduce my income tax burden. How can I do this if I do not know what profit I will have until after I close my books at the end of the year?
Answer: The Staten Island Chapter of the CPA Society is planning two free seminars in early December of this year, open to the public, covering this very subject. At the end of this article look for the locations and time they will be held. This should prove to be of great value to both Individual and Business taxpayers.
You should understand that too many taxpayers and business owners overlook the opportunity to take certain steps before year-end, which can have a major impact on your final tax liability. Tax planning is concerned with the timing and method of reporting income and deductions. The basic philosophy is to defer the payment of tax by accelerating deductions and postponing recognition of income items that typically accomplish this. This article can only cover a few of these strategies so make sure to consult with your tax professional regarding all the tax saving opportunities available to you.
It should not be difficult for your accountant before the end of the year to project your potential tax liability. With that information available here are some of the tactics that may be taken to legally reduce your tax burden.
For cash-basis method businesses, you could send out invoices late in December so that collections will not be made until January.
Upgrade your equipment -- from office computers and phone systems to furniture and machinery -- and write off the cost this year. If profitable, you can opt to expense up to $125,000 of equipment placed in service by the end of the year, instead of depreciating the cost over several years. The deduction is allowed whether you pay cash or finance the purchase. This amount is $160,000 for qualified enterprise zone and qualified community property.
Purchase supplies that you'll use in the coming year to deduct their cost now. You'll also save on money through better buying (e.g., bulk purchases).
You can establish a retirement plan before the end of the year. The deduction is allowed on the current-year return even if funded just before you file the return next year. Only a SEP plan can be established and funded after the end of the year and can be funded all the way to the last extension date in October.
Establish a medical insurance plan or convert to or establish a high-deductible health plan.
Employ your minor children (under 18) to perform administrative tasks and avoid Social Security taxes on the wages – this shifts income to a lower bracket. (The children may establish Roth IRAs to gain significant benefits for the future.) This is only available to sole proprietorships as well as husband and wife partnerships. Federal Unemployment tax is also avoided but not workmen’s compensation insurance.
Once considered a tax on the wealthy, by virtue of its construction, the AMT (Alternative Minimum Tax) is catching more and more individuals. Those who happen to have significant deductions – those living in a state with a relatively high personal income tax rate and high real estate taxes – are vulnerable. The AMT makes year-end planning essential.
You should consider the status of any final estimated tax payment requirements. A penalty for underpayment of taxes can be costly.
These are just a few of many strategies that will be covered at the forthcoming free seminars being sponsored by the Staten Island Chapter of the CPA Society.
Saturday - December 1st – 10 am to Noon – St. George Library – 5 Central Avenue – Staten Island, NY – Guest Speaker Doreen Inserra CPA
For Reservations call 718-979-5163 or the Library at 718-442-8560
Saturday – December 8th – 10 am to Noon – Historic Richmond Town Court House – 441 Clarke Avenue – Staten Island, NY – Guest Speaker John J. Vento, CPA, MBA CFP®
For Reservations call 718-980-9000 or SCORE at 718-727-1221
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Question: I have developed a unique educational program to assist children with learning disabilities. What type of entity should I start my program with? I have very little startup capital. I was told that I should incorporate as a not-for-profit company as opposed to a for profit company. If I do, how would I be rewarded? What procedure do I have to follow?
Answer: First and foremost, your reward, as founder, of a public-benefit program is the meeting of your mission which, in your case, is to develop a unique educational program to assist children with learning disabilities. If your program qualifies as a not-for-profit entity and you subsequently qualify for tax-exempt status, you would be able to apply for grants and donations to generate the capital you would need to operate your program. You would be permitted to hire staff who may receive fair salaries for their efforts, through payroll based on industry benchmarks, but would not be entitled to take any remaining net profits. The income generated must be used for the public benefit intended. Since you do not have adequate capital to promote your program for profit, choosing the not-for-profit route is worthy of consideration.
A not-for-profit corporation is simply a corporation that is formed pursuant to state Not for Profit law. The Department of State and State Attorney General's recommends that you consult an attorney and an accountant regarding the formation of a not-for-profit corporation. Generally, the corporation must be formed for some religious, charitable, educational, literary or scientific purpose to be considered eligible for becoming federally tax-exempt under Internal Revenue Code Section 501(c)(3). Not-for-profit corporations, granted tax-exempt status under the Internal Revenue Code Section 501(c)(3) are also allowed to apply for exempt status from sales tax on the state level for its purchases if the state permits. While a standard business corporation is designed to benefit and generate a profit for its shareholders as well as pay its respective taxes on its profits, not-for-profits are mission-driven and are obligated to use their revenue to cover their expenditures, thus, not having a profit motive in order to maintain its tax exempt status. The award to the founder is that the not-for-profit successfully goes on to meet its original mission and goals.
The first step is to file not-for-profit articles of incorporation with the proper state agency. It is important that the articles contain the required clauses, under the respective state not for profit law, to make sure your articles will qualify for tax-exempt status.
After the not-for-profit articles are filed, tax-exempt status must be applied for at both the federal and state levels. To apply at the federal level, a timely filing of Internal Revenue Service form 1023 (Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code) or form 1024 (Application for Recognition of Exemption Under Section 501(a) of the Internal Revenue Code) must be made. To determine what forms need to be filed on the federal and state level, contact an accountant or tax attorney who specializes in this area. The corporation must comply with corporate formalities and hold annual meetings of directors (generally not less than three) and members. Bylaws and Conflict of Interest Policies must be adopted for the corporation. Documents that help you comply with these corporate formalities are contained in your corporate kit, and, on the respective state websites.
You would be well advised to attend a free Seminar on this very subject, covering NYS Not-for-Profit Corporations, on November 17, 2007, Saturday morning, 10am at the St. George Library. Our Guest speaker will be Doreen M. Inserra, CPA, CGFM who was a former Treasurer of a local Not-for-Profit Corporation. This seminar is open to the public, however we advise reservations be made by calling SCORE 718-727-1221 or the St. George Library at 718-442-8560 |
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Question: I am semi-retired and would like to create a web site on a subject I have been interested in for many years. My hobby has been choosing and evaluating wines, foreign and domestic. I could share this information on my web site with other wine lovers, and wonder if I could also make a profit doing so. The extra money would come in handy. How would I go about accomplishing this?
Answer: There are many such sites already existing on the Internet both as formal web sites and Blogs. Some are commercial but many are discussion groups sharing their knowledge via the Internet. We firmly believe that if you want an online business that is going to have any chance of financial success, you have to fully devote yourself to it. You must be willing to learn the techniques required and devote considerable time and effort to be rewarded.
If you study existing sites that come up on the first few pages of a search, dealing with wine, you will discover that they are rich in content. Your content should be unique and valuable, containing information that will encourage repetitive viewers. Your site should enable visitors to share data with others. Be prepared to spend some serious time and some money to get the content you will need. Do not copy and paste information from other sites.
Do not expect immediate results. Be patient since this effort may take a couple of years. Keep providing content frequently to attract a substantial number of visitors to your web site. Keep it commercial free initially, and later when your traffic becomes substantial you will find advertisers coming to you.
Another most important things you must do to increase your Internet ranking is make yourself link-worthy. When you have a content rich site with many visitors, you will get inbound links that will enhance your ranking with the search engines.
Introduced in 2003, AdSense was an outgrowth of Google's AdWords program, which put sponsored ads at the top of search results at Google's own site. Google created AdSense as a way to expand beyond search listings and onto hundreds of thousands of websites and Blogs. Google rivals Yahoo and MSN have similar programs, but they have found limited acceptance on the Web, where Google dominates both search, with more than 50% market share, and search advertising, with 90%.
Google's computers scan the content on Web pages to match it with appropriate advertisers. If you are highly ranked by Google, they will put ads on your site and pay you when these ads are clicked. There is a little more to it. The folks who reap the biggest rewards put in long hours setting up their site and feeding it lots of content.
Don’t skimp on design and be prepared to engage consultants who have a history of success. Choose a company that offers not only professional consulting but also design, and implementation. If you cannot afford a consultant Google and Yahoo have free tools to enable you to create Web pages or Blogs. And many Internet website-hosting companies (such as GoDaddy and Brinkster) have online site creators that come as part of their monthly fees. Apple's iWeb is another such tool. With these, AdSense can be automatically added to your pages with the click of a mouse.
The Internet may be a young person's medium, but the retired and those nearing retirement have found that they can work the Web just as well. Sometimes, these retirees can live a richer, more financially rewarding life than when they were working. For more information Contact SCORE (US Small Business Administration) visit our website http://www.score476.org or call us at 718-727-1221. |
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Question: My husband and I have both recently retired and we are interested in opening and operating a Bed and Breakfast business. We are shopping for a house in upstate New York where we will live and conduct our B&B business. We would appreciate any advice you can offer in this regard.
Answer: You should first spend time traveling and staying at other inns, so you'll have an understanding of what guests want. Participate in a quality seminar for aspiring innkeepers, and try to work at a bed and breakfast for at least a weekend.
Make sure to check zoning and license restrictions on the house before considering the house's potential as a B&B. When looking for a property in New York, you will learn that many properties are marketed as being "perfect for a B&B" with no regard for the fact that it would be nearly impossible to open one at that location (legally of course). Before buying a home and turning it into a B&B, you should predicate your choice on the ability to obtain a license and comply with the health codes, safety codes, and zoning requirements. To determine what the license requirements are in New York State go to www.nys-permits.org Look for the link to bed and breakfast requirements and complete their questionnaire. You will then get the needed information for licensing a B&B. For the other requirements you would be best served by consulting with a local attorney in the county or town where your house will be located. This information also will enable you to determine what renovations you must make to the premises. Contact an insurance specialist to learn what special coverage will be required.
You need to be very much a "people" and a "morning" person, and have income other than what you would expect to receive from your B&B. Also, you need to devote as much energy on marketing as you will on service and amenities.
To attract repeat business, show that you both enjoy being B&B hosts, which will encourage repeat business. Try to cook good things, using good ingredients, and decorate well to please them.
Also, to be competitive and make money with a bed and breakfast, you’ll need to supply the room with everything a couple or traveler will need. This means that you should have a television and phone in each room as well as ample space for a comfortable bed and area for clothes to be stored. A wireless Internet connection would be a big plus. It’s the small touches that can really add to the ambience of a bed and breakfast.
This must be a joint effort by both of you to succeed. Make certain that you both can work together and have the same enthusiasm for running this type of business. You should visit with a SCORE counselor, thus enabling you to receive valuable mentoring and good advice in this endeavor. |
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Question: Are there any special loans for Veterans starting a business?
Answer: SBA Patriot Express Pilot Loan Initiative.
The U.S. Small Business Administration has announced the SBA’s Patriot Express Pilot Loan Initiative for veterans and members of the military community wanting to establish or expand small businesses. Eligible military community members include:
Veterans
Service-disabled veterans
Active-duty service members eligible for the military’s Transition Assistance Program
Reservists and National Guard members
Current spouses of any of the above
The widowed spouse of a service member or veteran who died during service or of a service-connected disability
The SBA and its resource partners are focusing additional efforts on counseling and training to augment this loan initiative.
Patriot Express Loan Initiative
The new Patriot Express loan is offered by SBA’s network of participating lenders nationwide and features our fastest turnaround time for loan approvals. Loans are available up to $500,000 and qualify for SBA’s maximum guaranty of up to 85 percent for loans of $150,000 or less and up to 75 percent for loans over $150,000 up to $500,000. For loans above $350,000, lenders are required to take all available collateral.
The Patriot Express loan can be used for most business purposes, including start-up, expansion, equipment purchases, working capital, inventory or business-occupied real-estate purchases.
Patriot Express loans feature SBA’s lowest interest rates for business loans, generally 2.25 percent to 4.75 percent over prime depending upon the size and maturity of the loan. Your local SBA district office will have a listing of Patriot Express lenders in your area.
One of SBA’s resource partners is SCORE, Counselors to America’s Small Business; To find a SCORE office on Staten Island visit www.score476.org or call (718) 727-1221. You will receive help with the following:
Writing a business plan
Financing options to start or grow your business
Managing the business
Expanding the business
Selling goods and services to the government
Plus many other business mentoring services you may require |
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Question: I have developed a unique educational program to assist children with learning disabilities. What type of entity should I start my business with? I do need and want to make money for my efforts. I have very little startup capital. I was told that I should incorporate as a not-for-profit company as opposed to a for profit company. If I do, how would I be rewarded? What procedure do I have to follow?
Answer: If you qualify as a not-for-profit entity and you subsequently qualify for tax-exempt status, you would be able to apply for grants and donations to generate the capital you would need to operate your business. You would be permitted to receive a fair salary for your efforts but would not be entitled to any remaining net profits. The income generated must be used for the public benefit intended. Since you do not have adequate capital to promote your business for profit, choosing the non-profit route is worthy of consideration. You might consider having two entities one for profit and another for non-profit.
A nonprofit corporation is simply a corporation that is formed pursuant to state law. The Department of State recommends that you consult a private attorney and an accountant regarding the formation of a not-for-profit corporation. The corporation must be formed for some religious, charitable, educational, literary or scientific purpose. While a standard business corporation is designed to benefit and generate a profit for its shareholders, nonprofit do not have the profit motive. Nonprofit corporations are allowed to apply for tax-exempt status at both the federal and state level.
The first step is to file nonprofit articles of incorporation with the proper state agency. It is important that the articles contain the required clauses to make sure your articles with qualify for tax-exempt status.
After the nonprofit articles are filed, tax-exempt status must be applied for at both the federal and state levels. To apply at the federal level, a timely filing of form 1023 must be made. To determine what form needs to be filed at the state level, contact department that deals with taxation.
The corporation must comply with corporate formalities and hold annual meetings of directors and members. Bylaws must be adopted for the corporation. Documents that help you comply with these corporate formalities are contained in your corporate kit.
You would be well advised to attend a free Seminar on this very subject on November 17, 2007, Saturday morning, 10am at the St. George Library. Our Guest speaker will be Doreen M. Inserra, CPA, who services many not-for-profit companies. This seminar is open to the public, however we advise reservations be made by calling:
SCORE (718) 727-1221 or St. George Library (718) 442-8560. |
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Question: I would like to become a business broker since I have owned and sold numerous businesses. How do I become licensed as a business broker? I have called Albany and was told there is no such licensing category in New York State. I would appreciate any information you can provide on this subject.
Answer: In the US, licensing of business brokers varies by state, with some states requiring licenses, some not. New York State does not require licensing of Business Brokers unless real estate is involved in the negotiation. In that case you would be required to have a Real Estate Brokers License. A Business Broker is similar to a real estate agent who sells homes and earns a commission. But instead of selling homes, Business Brokers specialize in selling small and mid-size companies - everything from your local pizza parlor, dry cleaner and convenience store to larger companies such as manufacturing, distributing and service businesses. A business broker connects people who are looking to sell a business with people who are looking to buy a business, and helps them to complete the transaction. It’s as simple as that.
Brokers supply numerous benefits to both buyers and sellers. For example, sellers benefit because they do not have to spend time and money searching for buyers. Qualified brokers have access to people that are in the market to purchase a company, and they know how to attract and screen potential buyers much more quickly than do typical business owners. The broker may also be able to help the seller place an accurate value on his enterprise, devise a strategy to transfer ownership over time, address necessary paperwork, and know where to seek professional help to overcome legal hurdles and tax related matters.
We suggest you join the International Business Brokers Association, which maintains rigid standards for its members. The International Business Brokers Association (www.IBBA.org) is the largest international non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of business brokerage and mergers and acquisitions. Take their training program and you can obtain their designation as a Certified Business Intermediary. This title is not a legal requirement but simply enhances your credentials.
For their services, brokers typically receive in compensation a percentage of the total value of the transaction. The buyer, seller, or both parties, depending on the nature of the transaction, may pay the fee. Commissions vary widely, usually depending on the size of the transaction and the level of service provided by the broker. A typical commission rate in New York is 10%.
As a broker you will be in a relationship of trust and confidence as an agent with the seller or buyer as the principal. The duties of a broker as an agent are obedience, loyalty, disclosure, confidentiality, accounting for funds, and reasonable use of skill, care, and diligence.
We thank Staten Islanders, Tony Racanalli of Castle Rock Realty and Don Daskowski, Donald Michael & Associates www.businessmart.com for helping us with the above information. |
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