Answer: A business plan is a document that provides information about your company and its industry, describes a marketing plan, details an operations plan, and projects the financial needs of the business. It details where the company is going and what the company intends to do. It provides direction for you and communicates to others the feasibility of your business model. Investors and/or lenders will use the business plan to evaluate your business and to determine if your business model and your management skills are worthy of their investment.
A typical business plan includes a cover page, table of contents, 10-15 pages of narrative and exhibits as necessary. Three mandatory exhibits are financial projections for three years that include the profit and loss statement (income statement), balance sheet and cash flow statement. Other exhibits may include pictures, contracts, supplier estimates, equipment needs, inventory requirements, or whatever else is important to tell your story.
I recently filed a fictitious name statement with the State of Missouri. Will I be notified if this name is already being used?
Answer: Sole proprietorships and partnerships are required to file a "fictitious name registration" with the Secretary of State's Office; however, this registration does not afford the business legal protection of their business name, e.g., there can be multiple sole proprietorships/partnerships with the same business name. Since there is no name protection, name availability checks will not be done.
Limited Partnerships, Limited Liability Companies and Corporations have legal protection of their business name when they file their registration with the Missouri Secretary of State. Since there can be no duplication of names for these types of entities, you may want to check on the availability of your selected name either through the Secretary of State's Web site or by calling (573) 751-3317.
I currently own a business, which is registered with the state as ABC Enterprises, Inc. I will begin to operate another business in the next few months. Do I need to register the new business separately or can it operate under the umbrella of ABC Enterprises, Inc?
Answer: It depends on how you advertise and market the businesses. If you market a variety of services promoted as being available from ABC Enterprises, Inc., then you can operate under the umbrella of ABC Enterprises, Inc. However, if you want to promote the businesses under different names, each one must be registered under a different name. In the case of a corporation, say ABC Enterprises, Inc., each subsidiary business would register a fictitious name and would be ABC Enterprises, Inc., DBA Bob's Janitorial Supplies; ABC Enterprises, Inc., DBA Janitor on the Run; etc. (DBA - means "doing business as").
A sole proprietor who registers more than one business must get a separate sales tax identification number for each business. A corporation needs separate sales tax identification numbers for each DBA unless they are being operated from the same location.
Of course, some of this depends on whether the products/services offered by the business are subject to sales tax. In the example cited above, Bob's Janitorial Supplies would need a sales tax id number since they make retail sales of products. Janitor on the Run, however, offers a janitorial service and would not collect sales tax from their customers.
What form of organization should I choose for my business?
Answer: Missouri law allows you to select one of the following: sole proprietorship, partnership, limited liability company, S-corporation, and C-corporation. Each of these organizations has it own advantages and disadvantages. The key to selection revolves around liability and taxation. For more information, contact your area Small Business & Technology Development Center (SBTDC). You can also consult with a business attorney or certified public accountant for advice.
Here are some questions you need to ask your attorney or accountant:
How easy is it to set up and operate? Some forms of organization are easier to set up and operate than others. This may be an important factor if startup funds are limited.
What are the tax advantages and disadvantages? Different forms of organization are taxed differently and it is important for you to understand how the business will be taxed.
What is my personal responsibility for business liabilities, debts and losses? If your business poses a risk of personal injury or property damage, this is an important consideration. Protecting your personal assets from claims against your business may be an overriding factor in your selection of a business form of organization. However, it won't eliminate all your risk, so good insurance planning is critical.
What steps should I take to become legally registered in the State of Missouri?
Answer: All businesses are subject to a number of tax obligations, permit and license requirements, zoning restrictions, and other laws at the city, county, state and federal levels. While every business may not be subject to every requirement, it is important to ask questions and carefully study the information provided. Many requirements stem from the legal structure you choose, the type of business you are starting, the estimated revenues of your business, and the number of employees you will employ.
The City Clerk's office in City Hall is the first place to call to learn the requirements of the city where you plan to operate. Ask the City Clerk about obtaining a business license and the Zoning Commissioner about zoning requirements for signs and the business itself.
At the county level, registration is usually required for business property tax purposes. You may also be required to obtain a merchants/manufacturers license if you deal with tangible items. The county courthouse — usually the Assessor's Office — is where you seek information on registering your business.
On the state level, the Missouri Business Portal has a Permits Lookup search tool that can help determine licenses required for various industries. Also, KC SourceLink offers a toll-free call center. Their staff can assist with specific questions about missouri small business licenses, registrations and other concerns. Contact them at 1-888-751-2863 or email firstname.lastname@example.org.
On the federal level, the Internal Revenue Service (1-800-829-3676) can send you information specific to the form of organization you have chosen. Specify either a sole proprietorship, partnership or corporation when requesting information.
Business owners have numerous federal tax obligations. The three main ones are income tax, self-employment taxes and employment taxes. If you have employees, you must also be required to obtain a Federal Employer Identification Number.
If you live in an area governed by a home association, be sure to check their guidelines. Often, they are more restrictive than those found in the city.
Take note that the above requirements also apply to representatives of multi-level marketing companies. Each city or town may treat this type of business differently. Be sure to inquire. Do not rely on information from someone living in a different city or another state. Rules and regulations vary.
(Also see: Licenses and Registration Checklist and "Legal Formation" in Doing Business in Missouri)
I am a small business owner offering secretarial and desktop publishing services. Recently, I compiled a directory of names and addresses for a client. I delivered the directory to the client, but would like to know who now owns the list. Do I have the right to use the list and/or use it with other clients?
Answer: There are several factors that must be considered in order to come up with an answer to this question. First, you must determine this was a "work for hire." If it was, your client could copyright the list and keep you from reusing it.
There are nine types of work that may be considered "work for hire" by non-employees. They include:
Contributions to a collective work such as magazines or newspapers
Part of a motion picture or other audio/visual work
A supplementary work (forewords, charts, editorial notes, etc.)
An instructional text
Answer material for a test
A directory would most likely fall under the category of a compilation. However, merely paying someone to do something does not constitute a work for hire arrangement. You need a signed agreement (before the work is started) that it is a "work for hire." In addition, a "work for hire" must be copyrightable. According to the Copyright Handbook, a "work must be the product of a minimal amount of creativity to be protected by copyright. The selection and/or arrangement cannot be so mechanical or routine as to require no creativity whatsoever." While your directory may or may not be copyrightable, the mailing list would not be and you may have the right to use it.
You may determine that you have the right to use the list you have compiled for a client, but your client may feel differently. Maintaining good client relations may be the prevailing factor in your final decision.
Answer: Most startup companies will find it very difficult, if not almost impossible, to qualify for grant dollars. Grants are free dollars that do not have to be repaid and although everyone would like to obtain one, they are not readily available to business start-ups.
Three things that you should understand about grants:
Need - Grants are usually available to solve societal problems or address societal opportunities. Improving the competitiveness of industry, employing people with disabilities or recycling trash are all issues that might receive grant funding because they address special needs of society. Starting a retail or service business or designing a retail product are not projects granting agencies typically wish to support.
Responsiveness - The second fundamental thing you need to know about grants is that the grant application MUST be responsive to the needs of the granting agency. No one cares that you need money to start a restaurant or photo studio. These are businesses that are started every day without the assistance of grants. You can't just do what you think is a good idea; you must do what the granting agency thinks is a good idea. This requires research into the granting agency to understand its needs and requirements.
Competition - The lure of free money has a strong appeal and attracts many more applications than available money. It is not unusual for granting agencies to receive 10-100 applications for every grant available. The successful applicant is likely to be networked with the right people including political entities, non-profit organizations and agency professionals.
My business is in my home. My homeowners insurance covers my business, doesn't it?
Answer: Maybe, maybe not. It depends on your policy. The standard policy gives you "$2,500 coverage for Personal Property at the insured location used at any time or in any manner for business purposes." What exactly does this mean? Let's look at some definitions:
Personal property owned by you as an individual. Property that you bought personally and you use in your business would fall under this definition. Items purchased specifically for your business and written off as a business expense on your tax filing might not qualify.
This is the address shown on your policy. If you take any of this property away from home (e.g. laptop computer, samples, and products for sale) there may not be coverage.
Business means any full or part-time trade, profession, occupation or enterprise undertaken with the prospect of financial gain.
Often, a standard homeowner's policy gives only a limited amount of coverage for property used for a business in the home. Additionally, under the liability section of your homeowner's policy any bodily injury or property damage arising out of your business pursuits is specifically excluded.
(Also see: Home-Based Business Insurance)
How can I make sure my business is properly insured?
Answer: Talk to an insurance agent or broker licensed to sell commercial (business) insurance. Agents that sell personal insurance such as auto, home, boat, recreational vehicle, retirement or health insurance may not be licensed to sell commercial insurance. Your insurance representative should understand commercial insurance and should take the time to learn about your particular business needs. Be wary of any insurance representative that quotes prices for insurance without first studying your specific needs and business situation.
(Also see: Insurance)
What kind of insurance should I buy for my business?
Answer: It depends on the business, what you can afford, and what risks you are willing to accept. There are six categories of insurance that you should review with your commercial insurance representative: Commercial General Liability, Commercial Auto, Property, Workers' Compensation, Bonding and Umbrella insurance. With the exception of commercial general liability insurance, not every category will apply to every business. However, commercial general liability insurance is a "must have" for all businesses.
Whom should I contact for business insurance?
Answer: You should contact a person licensed to sell commercial insurance; either a commercial insurance broker or a commercial insurance sales representative. They are licensed by the State of Missouri to sell business insurance. A broker will usually represent more than one insurance company whereas a sales representative usually works for one company. When looking in the Yellow Pages, look for companies that list commercial or business insurance as one of their products. Those companies that list only personal insurance such as auto, home, boat, life, recreational vehicle, and health typically are not licensed to sell commercial insurance and will not be able to help you.
Is Workers' Compensation Insurance required for my business?
Answer: All businesses with five or more employees (except agricultural or domestic labor) must provide workers' compensation insurance to protect their workers in case of jobrelated injury, illness or death. Construction companies with one or more employees are required to carry this insurance. Companies can obtain this protection through a private insurance carrier. Premiums are based on the risks associated with each occupation and are determined by the State of Missouri.
Contact the Division of Workers' Compensation (1-800-775-2667) for more information or consult with your attorney or insurance representative.
Is unemployment insurance required for my business?
Answer: Most companies doing business in Missouri are required to pay unemployment insurance to protect workers during periods of unemployment. This applies to most businesses having one or more workers on their payroll for 20 weeks during the calendar year, and to businesses paying an individual employee $1,500 or more in a given quarter.
Contact the Division of Employment Security at (573) 751-9889 for more information.
What should I know about applying for a bank loan?
Answer: There are five things that a commercial loan officer will review with you in your initial visit:
Equity (cash) - you are expected to have at least 20 percent of your own money (cash) invested in the project. Some lenders may require 25-30 percent but the minimum you can be expected to contribute is 20 percent. If your business project is estimated to cost $25,000, the bank will request that you put at least $5,000 of your own money into it if they are to consider lending you the remainder of $20,000.
Collateral - all lenders look for a secondary source of loan repayment that is called collateral. You are expected to pledge other household income sources or additional material assets that are equal to or greater in value than the loan itself. These assets must be free and clear of debt or you must have a substantial equity (cash) investment in them such as would be found in a house, land or heavy equipment. Your lender will discount the value of your collateral assets, generally 20-50 percent of appraised values, depending on their perceived risk in reselling them. If you seek a $20,000 loan, expect to pledge assets with net cash values of $25,000 or greater.
Completed business plan - this is a formal document (usually 10-15 pages plus exhibits) that contains information about your business and its industry, and includes a marketing plan, operations plan and financial plan. Of particular importance to the lender will be the financial projections for income, cash flow and the balance sheet. These projections must cover a period of at least three years each.
Good credit - described as having no bankruptcies in your background. If the bankruptcy was the result of illness or a financial problem that is considered to be beyond your control, discuss it with your loan officer. There may be a way around it. If it was the result of poor financial management, chances are your lender will not be interested in making a loan.
Good character - described as paying your bills on time and not being in the middle of a divorce which could have a dramatic impact on your ability to repay financial obligations. Lenders are always concerned about getting repaid and look for assurances in your character that you will meet your obligations.
Answer: It starts with a business plan. Today, a lender will not consider lending an individual money unless he or she can prove in writing that they've done their research, developed a plan of action and can demonstrate that they have the knowledge and experience to operate a business. A well-written business plan can make the difference between loan approval and disapproval. The plan should have a table of contents, be typed, be easy to read, and have the supporting documentation necessary for the lender to make an informed decision. A business plan should be presented to the lender by the business owner(s) in person so that the lender will have the opportunity to review it and ask questions as necessary.
For business plan assistance, please contact your area Small Business & Technology Development Center for help. They have a library of resources available to help you and also provide free counseling services.
(Also see: Grants/Loans/Capital)
How do I get an SBA loan?
Answer: Start with your local lending institution. SBA does not make direct loans to individuals. SBA guarantees loans made by banks and other private lenders. The guarantee lowers the potential loss exposure for the lender, therefore enabling the lender to make a business loan that otherwise might be considered too risky.
Answer: You need to know everything there is to know about your competition and your industry. Are they planning a big promotion? Are they offering new products or services? Are they thinking about lowering or raising prices? To stay ahead, it's essential that you monitor everything that's happening in your business environment. But you ask, "How?" Most busy small business owners don't have the time or the resources to devote to sophisticated and expensive market research.
Here are ten simple, inexpensive market research techniques to try that work:
You can start by getting to know your competition and other business owners in the community on a friendly, personal basis. For example, meeting informally after hours works great for some. For others, just walk into their business, identify yourself and start talking. Sometimes you may need advice or want to give them a suggestion; other times they may have a suggestion for you. Business people appreciate the camaraderie and you'll be surprised at the many problems you share in common. They'll also become good friends.
Read the telephone book
Peruse the Yellow Pages and you'll quickly discover your competitors' specialties. Armed with that knowledge, you may decide to target a different market segment or go head-to-head with them.
Ask a friend
Your competitors may not appreciate your visits to their business to see what's new. Ask a friend to help out. They can observe changes and also get on the mailing list.
Call your competitors
Many competitors have a toll-free number. Use it to learn if the competitor has a surplus of certain inventory or is offering specials on certain items. Learn how they handle customer inquires.
Attend conferences, trade shows and meetings
Why attend? Because your competitors, customers and suppliers will be there. Trade shows give you a wonderful opportunity to view your industry's products and services. They allow you to meet your competitors in person and talk to them. While visiting your competitors' booths you can pickup marketing materials, observe how they interact with potential clients, and figure out what you need to do better.
Go to the library
Trade magazines, case studies, industry directories, credit reports, statistical collections and computer services await you. Many college libraries will allow you to use their resources also. Your trade association is a good source of industry information. Their library resources will allow you to profile competitors and get a better understanding of your industry and the customers it serves.
Who knows the word on the street better than customers do? Just ask them if they've ever used your competition, what their impressions were, and why they're now shopping with you. You'll learn more than you thought possible. (Don't forget your competition will be doing the same thing).
Ask your workers
Casual conversations with your employees can reveal all kinds of tidbits. After all, they rub shoulders with distributors, suppliers, sales people, customers and others who know your competition and industry firsthand.
If you're not reading your local newspapers daily, you should start. Scan all the sections, focusing on the business pages. Frequently a local business will be profiled or mentioned as part of a larger story. Also subscribe to trade journals and newsletters pertaining to your business. They will highlight industry trends, legal rulings and new developments. Chances are your competitors use this information to make decisions, so should you.
Foster relationships with non-competitors
Visit businesses similar to yours in non-competing markets. This is a first class way to expand your knowledge and discover up-and-coming trends. Try to foster a mentor in a different geographic area that offers an opportunity to exchange ideas and information.
For more information on
market research refer to the Market Research Workbook.
For how long do we need to store the application files on people who applied for a job with our company but who were not hired?
Answer: There's no law that dictates how long you must keep resumes on file, but there are several federal laws that regulate record keeping for applications and resumes. According to the Americans with Disabilities Act, the Rehabilitation Act and Title Seven of the Civil Rights Act, you must keep applications and resumes on file for at least a year. The Age Discrimination in Employment Act states that you must keep the applications and resumes of applicants who are covered by the Act for at least two years. To determine who's covered by the Age Discrimination in Employment Act, you have to find out an applicant's age. This can be tricky since you can't ask applicants how old they are before you hire them. As a general precaution, you may want to keep all applications and resumes for at least two years.
(Also see: Human Resource Issues).
Answer: Every business will be different but if you expect to borrow money to get started, you will need at least a 20 percent equity position (cash investment) in your business. (Some lenders may require more). This equity position is best described as your ownership in the business that is free and clear of debt.
In the pre-start-up phase, it's best if you don't spend any of your own monies until the lender has approved you for a loan. Lenders prefer that your equity investment be in the form of cash. Although they will accept other forms of equity such as land, buildings, and heavy equipment that become part of the business, they are usually reluctant to give you equal value for the monies invested unless they were involved in the purchasing decisions from the beginning. In addition to your equity position, you will also be expected to have money in collateral items (material assets that you own) with a dollar value equal to or greater in value than the borrowed monies.
For example, if you determine through the business planning process that your startup expenses will be $50,000, you can be expected to demonstrate a cash contribution to the business of at least $10,000 (20 percent). In addition, you will be expected to pledge material assets (collateral) with a net value of $40,000 or more to cover the remainder of the loan in the event of default. The value lenders place on collateral varies greatly and is always discounted so don't be surprised if you are asked to pledge collateral you think is worth 1/2 to 2 times the amount of the loan. (Note: A house with an appraised value of $100,000 and a $80,000 mortgage has a net value of $20,000. For collateral purposes, a lender will usually discount a single-family residence 20 percent, placing a value on this collateral at $16,000).
Where can I get money to get started?
Answer: There are a number of sources where you can obtain monies to get started in a business but none of them will come without some form of risk and expense. The primary source of money will be from your own personal funds. This could be from a savings account, insurance policy, retirement plan, home equity loan or some other personal investment that can be easily converted to cash. Although you may be reluctant to use these monies, especially if you think you can find someone else's money to use, just remember that no one is likely to lend you money if you don't put yourself at risk first.
Other sources of funds could include family and friends, partners, credit cards, bank loans, finance companies, credit unions (for personal loans only), investors, suppliers and customers. You may also consider renting or leasing instead of buying, to reduce heavy outlays of cash in the startup phase.
(Also see: "Financing Your Business" in the Doing Business in Missouri series.)
In the publication "Doing Business in Missouri...Taxes," it is specifically mentions that craft sellers must charge the sales tax rate at the point of sale. Does this affect any other types of businesses? What about multilevel marketing companies or other home-based business owners who take their products to various locations?
Answer: This pertains to anyone who sells at retail in various locations. The idea is that the sales tax is collected at the point of sale and includes any local sales taxes. So, if you are located in Kansas City and sell from your home, you charge the local sales tax rate. If you go to a show in Springfield and sell at the show, you charge the sales tax rate for Springfield and report those sales separately on your sales tax report. Frequently, vendors at shows report their sales under an umbrella provided by the organizer of the show. In the case of multilevel marketing companies, the parent company may collect and submit sales tax for their distributors. This varies between companies. Of course, if you are crossing state lines you should have a sales tax license in each state and submit taxes accordingly.
I have several questions about my taxes. Where can I get assistance?
Answer: The tax laws and their applicability to your business vary from business to business. This is an area that consultation with a tax attorney or certified public accountant is highly recommended. A good source for finding a tax attorney nearest you is The Missouri Bar Referral Service, 326 Monroe Street, Jefferson City, MO, 65101, at (573) 636-3635.
(Also see: Taxes)