Before starting or acquiring a small business, it is important to take the time to review a wide array factors and considerations about yourself and the business you plan to enter.

In business, there are no guarantees. There is simply no way to eliminate all the risks associated with starting a small business - but you can improve your chances of success with good planning, preparation, and insight. Start by evaluating your strengths and weaknesses as a potential owner and manager of a small business. Carefully consider each of the following questions:

• Are you a self-starter? It will be entirely up to you to develop projects, organize your time, and follow through on details.

• How well do you get along with different personalities? Business owners need to develop working relationships with a variety of people including customers, vendors, staff, bankers, and professionals such as lawyers, accountants or consultants. Can you deal with a demanding client, an unreliable vendor, or a cranky receptionist if your business interests demand it?

• How good are you at making decisions? Small business owners are required to make decisions constantly - often quickly, independently, and under pressure.

• Do you have the physical and emotional stamina to run a business? Business ownership can be exciting, but it's also a lot of work. Can you face six or seven 12-hour work days every week?

• How well do you plan and organize? Research indicates that poor planning is responsible for most business failures. Good organization of financials, inventory, schedules, and production can help you avoid many pitfalls.

• Is your drive strong enough? Running a business can wear you down emotionally. Some business owners burn out quickly from having to carry all the responsibility for the success of their business on their own shoulders. Strong motivation will help you survive slowdowns and periods of burnout.

• How will the business affect your family? The first few years of business start-up can be hard on family life. It's important for family members to know what to expect and for you to be able to trust that they will support you during this time. There also may be financial difficulties until the business becomes profitable, which could take months or years. You may have to adjust to a lower standard of living or put family assets at risk in the short-term.

According to the U.S. Small Business Administration, the following traits are found among successful entrepreneurs:

• persistence

• desire for immediate feedback

• inquisitiveness

• strong drive to achieve

• high energy level

• goal oriented behavior

• independent

• demanding

• self-confident

• calculated risk taker

• creative

• innovative

• vision

• commitment

• problem solving skills

• tolerance for ambiguity

• strong integrity

• highly reliable

• personal initiative

• ability to consolidate resources

• strong management and organizational skills

• competitive

• change agent

• tolerance for failure

• desire to work hard

• luck

Your answers will help you create focused, well-researched business plan that should serve as a blueprint. It should detail how the business will be operated, managed and capitalized. Before starting out, list your reasons for wanting to go into business. Some of the most common reasons for starting a business are:

• You want to be your own boss.

• You want financial independence.

• You want creative freedom.

• You want to fully use your skills and knowledge.

• What do I like to do with my time?

• What technical skills have I learned or developed?

• What do others say I am good at?

• How much time do I have to run a successful business?

• Do I have any hobbies or interests that are marketable?

Then you should identify the niche your business will fill. Conduct the necessary research to answer these questions

• Is my idea practical and will it fill a need?

• What is my competition?

• What is my business advantage over existing firms?

• Can I deliver a better quality service?

• Can I create a demand for your business?

The final step before developing your plan is the pre-business checklist. You should answer these questions:

• What business am I interested in starting?

• What services or products will I sell? Where will I be located?

• What skills and experience do I bring to the business?

• What will be my legal structure? (see overview below)

• What will I name my business?

• What equipment or supplies will I need?

• What insurance coverage will be needed?

• What financing will I need?

• What are my resources?

• How will I compensate myself?

There are three primary ways to legally organize a business: a sole proprietorship, a partnership and a corporation. When organizing a new business, it is important to take time to review the advantages and disadvantages of while one of these structures you will choose. Factors influencing your decision about your business organization include:

• Legal restrictions

• Liabilities assumed

• Type of business operation

• Earnings distribution

• Capital needs

• Number of employees

• Tax advantages or disadvantages

• Length of business operation

This is the easiest and least costly way of starting a business. A sole proprietorship can be formed by finding a location and opening the door for business. There are likely to be fees to obtain business name registration, a fictitious name certificate and other necessary licenses. Attorney's fees for starting the business will be less than the other business forms because less preparation of documents is required and the owner has absolute authority over all business decisions.

There are several types of partnerships. The two most common types are general and limited partnerships. A general partnership can be formed simply by an oral agreement between two or more persons, but a legal partnership agreement drawn up by an attorney is highly recommended. Legal fees for drawing up a partnership agreement are higher than those for a sole proprietorship, but may be lower than incorporating. A partnership agreement could be helpful in solving any disputes. However, partners are responsible for the other partner's business actions, as well as their own.

A Partnership Agreement should include the following:

• Type of business

• Amount of equity invested by each partner

• Division of profit or loss

• Partners compensation

• Distribution of assets on dissolution

• Duration of partnership

• Provisions for changes or dissolving the partnership

• Dispute settlement clause

• Restrictions of authority and expenditures

• Settlement in case of death or incapacitation

A business may incorporate without an attorney, but legal advice is highly recommended. The corporate structure is usually the most complex and more costly to organize than the other two business formations. Control depends on stock ownership. Persons with the largest stock ownership, not the total number of shareholders, control the corporation. With control of stock shares or 51 percent of stock, a person or group is able to make policy decisions. Control is exercised through regular board of directors' meetings and annual stockholders' meetings. Records must be kept to document decisions made by the board of directors. Small, closely held corporations can operate more informally, but record-keeping cannot be eliminated entirely. Officers of a corporation can be liable to stockholders for improper actions. Liability is generally limited to stock ownership, except where fraud is involved. You may want to incorporate as a "C" corporation or "S" corporation.

You will need to develop a business plan before starting or acquiring your business. A more detailed description and discussion of business plans can be found in the Business plan entry of Smallbusiness.com. The following outline of a typical business plan can serve as a guide. You can adapt it to your specific business. Breaking down the plan into several components helps make drafting it a more manageable task.

• Give a detailed description of the business and its goals.

• Discuss the ownership of the business and the legal structure.

• List the skills and experience you bring to the business.

• Discuss the advantages you and your business have over your competitors.

In-depth help on developing a sound business plan can be found on the SBA Web site in the Starting Area.

• Explain how the business will be managed on a day-to-day basis.

• Discuss hiring and personnel procedures.

• Discuss insurance, lease or rent agreements, and issues pertinent to your business.

• Account for the equipment necessary to produce your products or services.

• Account for production and delivery of products and services.

• Summarize your business goals and objectives and express your commitment to the success of your business.

• Once you have completed your business plan, review it with a friend or business associate or a Service Corps of Retired Executives (SCORE) or Small Business Development Center (SBDC) counselor. (See SCORE and SBDC listings in this guide).

• When you feel comfortable with the content and structure make an appointment to review and discuss it with your lender. The business plan is flexible document that should change as your business grows.

There are numerous ways that businesses are financed. Funding sources are the sources from which someone obtains the funds necessary to startup or operate a business. There are several sources available for such funds, also called capital. For more information on

Businesses that use a name other than the owner's must register the fictitious name with the county as required by the Trade Name Registration Act. This does not apply to corporations doing business under their corporate name or to those practicing any profession under a partnership name. For more information contact your state or local government. You should also go to the website of your home state and hometown and search for "trade name registration" or "county information".

If applicable to your business, you may want to apply for trademarks, patents and your copyright.

• Trademarks: Trademarks are names or symbols used in any commerce that is subject to regulation by state government or the U.S. Congress.

• State Registration of a Trademark: Trademarks and service marks may be registered in a state for a term of ten years. For more information about Applications for Registration of Trademark or Service Mark in your state, contact your state government.

• To register a trademark contact:

U.S. Department of Commerce
Trademark Office
2021 Jefferson Davis Highway
Arlington, Virginia 22202
(703) 305�8341 or (800) 786�9199

• To register a patent, contact:

Asst. Commissioner for Trademarks, Patent Applications
Washington, D.C. 20231
(800) 786�9199

Also, visit their web site at http://www.uspto.gov
Caution: Federally registered trademarks may conflict with and supersede state registered business and product names. Businesses are encouraged to check for conflicts with federal trademarks.

• Patents

Contact:
Superintendent of Documents
P.O. Box 371954
Pittsburgh, Pennsylvania 15250-7954
(412) 512�1800
New and useful inventions can be protected by a U.S. patent. Professional assistance from a patent attorney is strongly urged because patent procedures are detailed and technical. A patent search is performed to see if a patent currently exists on the same or nearly the same device and, if not, to make proper application with the Patent Office.
Note: Only attorneys and agents registered with the U.S. Patent Office may represent inventors in related matters. The office has geographical and alphabetical listings of the more than 11,000 registered agents. Only these agents may perform patent searches in the patent office. Inventors or their attorneys can make arrangements with one of those agents. U.S. patents are issued by the Assistant Commissioner of Patents, Washington, D.C.
Additional information is provided in the publication, General Information Concerning Patents and other publications distributed through the U.S. Patent and Trademark Office.

• Copyrights

Contact:
U.S. Library of Congress
James Madison Memorial Building
Washington, D.C. 20559
(202) 707-9100 (Order Line)
(202) 707-3000 (Information Line)
Copyrights protects the thoughts and ideas of authors, composers and artists. A copyright prevents illegal copying of written matter, works of art or computer programs. In order to ensure copyright protection, the copyright owner should always include notices on all copies of the work.

Business owners are required by law to withhold the following from the wages paid to employees: federal income taxes, state income taxes and FICA (Social Security) Insurance.

Income taxes will also be levied by the federal and state governments on earnings of any business. Therefore, each business must file an income tax return with both agencies. Businesses may be required to file estimated tax returns and pay estimated taxes on a quarterly basis.

For federal tax information,
contact:
U.S. Internal Revenue Service (IRS)
You can go to IRS's website area for business taxes or call your local IRS office to receive a number of publications that are available upon request to small businesses. One of the most helpful is Your Business Tax Kit, which includes data and forms for a Federal Employer Identification Number and a tax guide for small businesses that can be ordered by calling Forms and Publications at (800) 829-3676 or through a visit to your local IRS office.

You may want to contact your local Social Security Administration Office for (FICA) Insurance information or visit one of these helpful SSA web sites:

• Employers' Information

• Social Security Forms

For State tax information, try these state web sites for tax information, call your state government or visit your official state Web site.

Like home insurance, business insurance protects the contents of your business against fire, theft and other losses. Contact your insurance agent or broker. It is prudent for any business to purchase a number of basic types of insurance. Some types of coverage are required by law, other simply make good business sense. The types of insurance listed below are among the most commonly used and are merely a starting point for evaluating the needs of your business.

• Liability Insurance -- Businesses may incur various forms of liability in conducting their normal activities. One of the most common types is product liability, which may be incurred when a customer suffers harm from using the business product. There are many other types of liability, which are frequently related to specific industries. Liability law is constantly changing. An analysis of your liability insurance needs by a competent professional is vital in determining an adequate and appropriate level of protection for your business.

• Property -- There are many different types of property insurance and levels of coverage available. It is important to determine the property you need to insure for the continuation of your business and the level of insurance you need to replace or rebuild. You must also understand the terms of the insurance, including any limitations or waivers of coverage.

• Business Interruption -- While property insurance may pay enough to replace damaged or destroyed equipment or buildings, how will you pay costs such as taxes, utilities and other continuing expenses during the period between when the damage occurs and when the property is replaced? Business Interruption (or "business income") insurance can provide sufficient funds to pay your fixed expenses during a period of time when your business is not operational.

• "Key Man" -- If you (and/or any other individual) are so critical to the operation of your business that it cannot continue in the event of your illness or death, you should consider "key man" insurance. This type of policy is frequently required by banks or government loan programs. It also can be used to provide continuity in operations during a period of ownership transition caused by the death or incapacitation of an owner or other "key" employee.

• Automobile -- It is obvious that a vehicle owned by your business should be insured for both liability and replacement purposes. What is less obvious is that you may need special insurance (called "non-owned automobile coverage") if you use your personal vehicle on company business. This policy covers the business' liability for any damage which may result for such usage.

• Office and Director -- Under some circumstances, officers and directors of a corporation may become personally liable for their actions on behalf of the company. This type of policy covers this liability.

• Home Office -- If you are establishing an office in your home, it is a good idea to contact your homeowners' insurance company to update your policy to include coverage for office equipment. This coverage is not automatically included in a standard homeowner's policy.

In your state there is a percent sales and use tax which applies to the retail purchase, retail site, rental, storage, use or consumption of tangible personal property and certain services. In other words, sales tax must be collected on just about every tangible item sold.

A sales tax number is required for each business before opening. The number, plus instructions for collection, reporting and remitting the money to the state on a monthly basis, can be obtained from your state government.

The above information in this Guide to Starting a Small Business comes from the "Small Business Startup Guide" developed by the U.S. Small Business Administration. You can find the SBA Small Business Guide at the following URL: www.sba.gov/starting_business/startup/guide.html

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