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2. Operations Planning Creating & Running a Legitimate Business Finalizing the plan What is the Size & Scope of Your Business Entity (Forms of Business) Due Diligence Verifying & Validating YOUR business plan 2

3. 3 Operations Planning Operations Planning “An ounce of prevention is worth a pound of cure”

4. 4 Do your research Do your research As the business owner, you are responsible and accountable for meeting the legal obligations of your business. Get your information straight from the source (i.e. IRS, City zoning office) or from experts (i.e. certified accountant, attorney). Don’t take a friend or family member’s word for it.

5. 5 Business Compliance Considerations Business Compliance Considerations  Registering Your Business Name with the Appropriate Authorities Involves selecting a legal form of business  Registering with taxing agencies to obtain tax ID numbers for the business  Paying all appropriate taxes – in the right amount and the right time

6. Tax Identification Numbers Federal Employer Identification Number (EIN), also known as Federal ID number State Tax Identification Number State Workforce Identification Number State Sales and Use Tax Permit 6

7. Business Taxes 1.Business Income Tax 2.Self-Employment Tax 3.Excise Tax 4.Employment Taxes 5.Sales and Use Taxes 7

8. Sole Proprietor One Owner Owner is liable for all debts Proprietor receives all profits Proprietor has full authority 8

9. Partnership Two or more Owners Each Partner is equally liable for all debts incurred Profits & losses are based on agreement Partners share equally in their rights & responsibility Partner Legal Entity of Shareholders 9

10. Corporation C-Corporation – Profit and loss belong to the Corporation and are distributed by the corporation S-Corporation – Profit and loss flow through the shareholders LLC – Profit and loss belongs to the members and liability is limited to their investment in the corporation 10

11. 11 Business Compliance Considerations Business Compliance Considerations  Obtaining any required licenses and permits based on your type of business  Ensuring you are complying with any zoning regulations for your location  Obtaining appropriate insurance coverage, both to comply with the law and protect yourself  Having a separate business banking account and keeping appropriate records of business income and expenses

12. Employment Relationships INDEPENDENT CONTRACTOR: The general rule is that an individual is an independent contractor if the individual has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax. If you are an independent contractor, you are self-employed. You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. KEY: the employer has the legal right to control the details of how the services are performed. EMPLOYEE: Under common-law rules, anyone who performs services for you is your employee if you control what will be done and how it will be done. This is so even when you give the employee freedom of action. 12

13. Employment Relationships www.dol.gov Minimum wage FLSA (Fair Labor Standards Act) Workers’ Compensation FMLA OSHA ADA Employee Handbook Always define your rules and expectations A good handbook tells what YOU as the employer expect; and what YOUR employees can expect. Employees are a relationship USE don’t ABUSE. 13

14. 14 Your Professional Advisors Your Professional Advisors Start building your team of professional advisors to help keep you in compliance, help you protect your business, and help you grow your business:  A CPA (certified public accountant)  An Attorney  A Banker  An Insurance Agent Your Professional Advisors Your Professional Advisors

15. 15 Recordkeeping Recordkeeping Why keep records? What information can a good recordkeeping system provide the business owner?

16. 16 Recordkeeping rules Recordkeeping rules 1.Don’t co-mingle: track business transactions separate from personal transactions 2.Record every business transaction when it happens What is a transaction? Information to record: Date, Amount, Name of client or vendor, Description/Notes, Check #, category (revenue or expenses) 3.Save (and organize) all source documents 4.Summarize the transactions at least monthly

17. 17 Recordkeeping Recordkeeping KNOW what must be done. KNOW how to get it done. DO IT, or get it done. KNOW what the information means to you. UNDERSTAND the systems and procedures you have in place. If you pay for professional services they CHARGE by the hour. If your books are a mess or non-existent, YOU WILL PAY!

18. 18 Small Business Financing Small Business Financing How much money do you need to start your business? Do not answer this question based on “gut” feel. Let the numbers talk.

19. 19 Small Business Financing Small Business Financing The amount you need for start-up includes: Start-up Costs: Expenses that are incurred before the first sale is made. Working Capital: Shortfalls in cash flow in the early months of business when sales are not high enough to cover expenses. Your monthly cash flow projections will tell you how much you will need.

20. 20 Example Example Start-upMonth 1 Month 2 Month 3 I will make $0$300$400$600 I will spend $1500$600 Difference -($1500)-($300)-($200)$0 How much start-up capital does this business owner need?

21. 21 Bank Financing Bank Financing When reviewing your application for a loan, a lender will consider the 5 Cs of Credit: Capacity: How will the company repay the loan? Capital: What other sources of capital are being used? Collateral: What can you use to secure the loan? Conditions: What is the current local economic climate for the industry? Character: Are you likely to be able to successfully run this business and appropriately manage the finances to repay the loan?

22. 22 Your Next Steps Your Next Steps  Continue to work at your own pace.  Research, research, research!  Take your business for a test drive to test your assumptions.  Complete as much of the business plan as you can based on what was covered during this course.  Decide if your business idea is desirable, feasible, and viable to move forward  Continue to meet with your counselor and have your progress reviewed.

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24. Planning Your Business ____________________________ ____________________________ ____________________________ ____________________________ ____________________________ ____________________________ ____________________________ ____________________________