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Most businesses are started as an offshoot of a personal hobby or interest,
be it floral arranging or computer repair. If you are still
on active duty, you should check with your JAG office to determine
if you have any special requirements to start your own business.
If you retired and want to start a second career, do your
homework by contacting the Small
Business Association.
The two main issues to consider when you start a new business
are questions about running a business
and regulatory requirements.
Running a Business
First, determine the kind of business you want: service or manufacturing. As you face
the issues in the column on the left, you'll find a business hint on the right.
| Issues of Running a Business |
Hints for Success |
Figure out the capital you will need to get through financing your business
until your start-up costs are met. Start up costs include the following:
- Office lease
- Moving expenses
- Capital business expenses for furniture and equipment
Do you have a source for borrowing money until
a sustainable profit can be expected?
Create a business plan that will help you when
you seek financing.
What is your competition and can you market
better, underprice at a profit, or offer a better
product or service
How easy is it for a competitor to duplicate the product or service?
Where should you locate the business?
Is it a franchise and what should you look for?
Factor business risk management by purchasing insurance:
office location liability, Errors and Omissions, Directors and
Officers Liability Insurance, and workers' compensation.
Consider employee benefits like life and health
insurance and pension/retirement plans.
Should you incorporate or act as a sole entrepreneur? If you incorporate,
what is the best corporate form, e.g., C Corporation, Sub-Chapter S, Limited
Liability Company, Professional Association?
What to negotiate in a lease, especially, pass-throughs during the term
of your lease for increased building expenses including real estate taxes, upkeep
of grounds and facility equipment, etc.
Should you use a commercial real estate broker representing the landlord or
should you use a commercial real estate broker representing you?
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Look at potentially, low cost leasing from a vendor of the equipment, bank
financing, SBA loans, even zero percent credit cards.
Check out software that can assist you with this at computer stores.
Shop the competition. Know what they do and how they advertise. Do a lot of research
before you begin. Talk to people who work at companies like the one you'd like to own
and find out what the advantages and disadvantages are.
Some states, like Delaware, may have preferable corporate tax laws than others.
Check out the weekly advertisements for franchises in publications like "The Wall
Street Journal."
Get help from people who know the business and know how to shop for insurance.
AARP and SBA are two places to start.
There are many different packages. Don't do all the research yourself; there are
benefit brokers who will compare packages for you.
If you are still on active duty, check with your JAG department and see if they
can provide you with some professional advice on which entity might best meet your needs.
Another person to ask for advice is your CPA or tax lawyer. They'll explain tax
consequences of the different types of corporations to you.
Get a lawyer, or a JAG officer if on active duty, to read the lease, and set a
fixed limit of what increase you are willing to pay in future years (e.g., no more than
the lesser of three percent or the Consumer Price Index; watch the lease provisions for
what your obligations are).
Find a broker that represents you, not the potential landlord,
but educate them on setting fixed limits for things like
pass-throughs (see above). |
Regulatory Requirements
One aspect of starting a business that most people neglect to consider is the various local, state,
and federal regulations that govern all types of businesses. Just like the state government forcing a
motorist to carry liability insurance, a state government will force a business to carry fleet
insurance if their employees use a vehicle for the business.
| Regulatory Requirements |
Regulatory Hints |
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What needs to be filed with the local, state and federal
taxing authorities (e.g., State Assessments for Business
Property, Unemployment Assessments, Sales Tax and Resale
Tax Exemptions)? |
Getting a business license differs from state to state
and town to town. Go to your town's and state's website
and check out the comptroller's requirements. |
Securing a Federal Tax ID number from the IRS for your
business.
Filing of your incorporation papers, including your Articles
of Incorporation and By-Laws with a state corporation
commission or similar department.
Filing and paying quarterly withholding taxes contributed
by your company and deducted from employee salaries with
appropriate taxing authorities, federal, state or local. |
A good place to start is www.irs.gov.
In addition to basic information, you'll find out next
steps.
Many retired business owners belong to AARP or the SBA
and will help you for no or low cost. |
Will you need a Certificate of Authority to operate for
businesses that affect services you might provide the
general public, such as, group homes for disabled persons,
day care for children, starting an insurance company,
etc?
Are you allowed to operate your chosen type of business
from your home (state or local housing codes may forbid
your type of business operated from a home) or do you
have to deal with regulatory agencies, such as, the state
insurance department, Department of Taxation and Assessments,
etc.? |
A good corporate attorney (perhaps even a JAG officer
if you are on active duty prior to starting a business)
and/or employee benefits consultant can be invaluable,
with the understanding that the attorney's fees and any
other consultants outside the military can be a significant
start-up cost for your business.
Don't be afraid to do your own research. Many cities have
Planning and Zoning Commissions whose representatives
are well-versed in what you can and can't do in a certain
area. Real-estate agents also make good sources. Remember,
these are sources and not authorities. You'll get information,
but not necessarily all the information you need. |
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