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Opening a small business requires all sorts of preparations such as raising capital, writing a business plan, finding a suitable premises, hiring staff and myriad other tasks. But even the best planning and care will mean nothing if your venture is saddled with fees and penalties or is forced to close down because it was operating illegally.

 

 

Make sure you get things right from the beginning. Approach the legal aspect of opening a business systematically. What are the laws pertaining to launching a business? Are you required to get a business license? If you are you planning to hire employees, what laws apply? What kind of taxes will you have to pay? Make sure that you consult with qualified professionals who are required to keep themselves current on any changes in the business law environment.

Here are a few legal areas to consider:

• Company Law. Your new company constitutes a separate legal entity. In the event that you are a director of a company, the Companies Act 2006 states your legal responsibilities, including your obligation to act in good faith in the best interest of the company.

 

• Tax Laws. Familiarize yourself with the various tax laws including regulations pertaining to the filing of tax returns. If you are selling merchandise, look into the issue of sales tax. There are additional taxes such as withholding taxes, corporate taxes, pass through taxes and both state and local taxes. Consulting with a CPA will help you to understand the complex issue of taxes and your own obligations.

 

• Employment Laws. If you are planning on hiring employees, there is a wide range of laws with which you must become acquainted. The Health and Safety at Work Act 1974 (enforced by the Health and Safety Executive) defines your duty as an employer to ensure the safety and wellbeing of your employees. It is illegal to discriminate against people because of their gender, race, belief, sexuality, disability or age when hiring, employing or firing them. Relevant laws in this area are: Sex Discrimination Act 1975 and Equal Pay Act 1970; Race Relations Act 1976; Employment Equality (Religion or Belief) Regulations 2003; Employment Equality (Sexual Orientation) Regulations 2003; Disability Discrimination Act 1995; Employment Equality (Age) Regulations 2006. You may be obligated to pay your employees Statutory Sick Pay (SSP) if they become ill for a period of between four and 28 days. If the duration of their illness exceeds this period, they may become eligible for an Incapacity Benefit.

 

• Environmental Laws. Businesses are obligated to protect the environment according to the Environmental Protection Act 1990. The law stipulates the sensitive management of waste products and enacts controls regarding emissions into the environment (including noise). This act applies only to direct pollution. The current law does not obligate businesses to behave in an environmentally friendly way.

 

• Zoning Laws. Zoning laws are usually local ordinances that regulate the type of business that is allowed to be conducted in a specific area, how the land surrounding the business is used, parking, advertising and other details. When in doubt, turn to the local Chamber of Commerce for assistance.

 

These are only a few of the many federal and local laws that may apply to your new business. Again, as ignorance does not exempt you from adhering to the various laws, seek the advice of tax and legal professionals who can inform you of the particular laws affecting your specific business.

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Running a solo business brings all the glory and all the grief. On the one hand, the business owner is free to make every decision. On the other hand, he or she bears the burden of performing every last task.

 

 

Here is a list of some of the challenges associated with solo entrepreneurships, along with some measures you could take to work around them:

• Getting Stuck in a Rut. Even the most brilliant minds need someone to bounce ideas off of. Especially when you are starting a business, it’s important to have a sounding board to fine-tune your good ideas and head off your less realistic plans. To this end, it’s a good idea to consult with an “advisory board” of family, friends, and/or colleagues to discuss your business’s direction. Don’t worry about bothering people with this; they will likely be flattered that you respect their opinions.

 

• Lack of Direction. Once you have a great idea for a new business, you need concrete plans about how to develop it. You also have to consider the end-game: will the business remain small, or would you like to continually expand and/or sell it? One technique to ensure that you remain focused on your business goals is to create a well thought out business plan.

 

• Financial Drain. Starting and running a business generally requires a signifcant financial investment. Determine whether you can, or want to, take on the full financial burden. You might decide in the end that you will need to take on investors or partners. Take time to speak to an attorney about setting up your business in a way that protects your personal assets.

 

• Time Drain. There is not enough time in the day to perform every task. You need business development, bookkeeping, client relations, and purchasing, in addition to actually doing whatever your business does. Consider hiring employees or consultants to cover some duties. To better manage your time, assign yourself certain tasks for certain times of the day, and do not allow yourself to veer from those times. Remember also that allotting personal time is essential to your well-being.

 

• Skill Deficit. No one is an expert in every domain. You might be great at buying and selling, but know nothing about keeping track of account receivables. Where necessary either hire workers or outsource tasks to those who know how to do them.

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As a small business owner, keeping overhead costs to a minimum may be top priority. So, when it comes to accounting issues, it may be tempting to tackle the job on your own rather then spending precious capital on hiring a professional accountant to do the job.

 

But is this really a wise move or could you possibly end up losing more than you gain?

The following are some questions that small business owners should ask themselves to determine if they should hire an accountant:

• Are you really saving money by doing your own bookkeeping? How much time and resources are being put aside to do the job on your own?
• Do you need professional help in establishing your accounting systems for quarterly and year-end reports?
• Will you need to complete year-end paperwork for your business, such as W-2 and 1099 forms?
• Are you aware of what taxes you are obligated to pay and when they are due?
• Do you need professional help for company payroll?
• Do you know what expenses are tax deductible?
• Do you know how to separate personal expenses and business expenses for tax purposes?
• Do you understand financial statements?
• Do you know what health insurance is best for you and your employees?
• How difficult and time consuming is it for you to remain informed regarding tax law changes?

 

If you decide in the end to take professional accounting help, it does not mean that you should dump all the accounting matters on an accountant and walk away – it always pays to be well informed about your business’ cash flow, tax obligations, and overall financial health. Although accounting functions generally get easier the longer you are in business, take a good look at the questions above and consider whether it is really worth the time and hassle to deal with your own accounting.

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When times are tough, people can get disparate…. As the economy huffs and puffs along, it has left in its wake a surge in business theft, and this trend has had a disproportionate impact on smaller businesses. According to the Association of Certified Fraud Examiners (ACFE), employee theft at businesses with less than 100 employees cause an average loss of $200,000; that’s $57,000 more than the average loss of bigger businesses.

 

A while back I did a series on employee theft in general- what the effect is, how to spot it, and how it can be prevented within a small business. Recently, much attention has been given to the rise in reported incidents of accounts payables fraud within smaller businesses; so I thought it would be a good idea to cull a few tips on how to spot this kind of fraudulent activity based on the advice of ACFE and experienced auditing companies.

Here are a few telltale signs to look out for:

1. Duplicate or similar payments. One glaring red light is repeated incidents of duplicate payments being made for the same or similar amount, to the same vendor, and/or with the same or similar date.
2. Invoices just below approval limits. Repeated invoices set at amounts that lie just below the threshold for managerial approval- whether in terms of amount or billing cycle- should be flagged as questionable.
3. Rounded-off billing amounts. The presence of invoices for rounded amounts- ie those rounded to the nearest dollar amount. May be a sign of fraudulent activity.
4. Fishy vendor information. Some signs to be on the lookout for include: the absence of a phone number, or a home phone, multiple vendors with the same number, and phone numbers that always go to an answering machine; PO box billing addresses or billing addresses that are far away; mis-spelled or similar-sounding vendor names.
5. Unusual invoice activity. Bursts or lulls in invoice activity, above average invoiced amounts, and activity occurring at abnormal times are all possible signs of employee theft.

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Sources:

http://www.auditnet.org/articles/10waystoidentifyAPfraud_Pt1.pdf

http://www.allbusiness.com/manage/finances/12375493-1.html

In the begining, when Americans were still reeling from the after shock of a freshly burst credit bubble and a crash in the housing market, to mention the term Recession felt almost dirty. Only the brave few dared to mention the “R” word for fear of persecution or being labled as a doomsday party-pooper. Most settled for the more amicable Economic Slowdown.

But as time went on and people got used to the idea, Recession began to frequent headlines and coffee table conversations alike. It became a familiar companion and guide, helping the masses decide what to buy and what to leave out, where to go, and what to pass up on. Then, as the year 2009 was coming to a close, Economic Recovery took center stage. But ER’s fame seems short-lived, it’s spot light dimmed due to the possible immergence of Double-Dip Recession…

Our economy is still lousy: the housing market continues to be weak, unemployment remains high, and now, surprise, surprise, there has been an overall slow down in economic growth.

As economists and governement officials duke it out with the likes of Wallstreet financials and power lobbyists over what to do to spur some economic salvation, a new economic reality seems to be setting in; and all indicators suggest that it will leave an indelible imprint in the collective consumer psyche for years to come.

For the small business owner, accepting this reality and knowing how to adapt to it can make the vital difference between success and failure. In this post I will offer a rundown of the five long-term consumer trends that will continue to shape our economy- trends that small businesses owners cannot afford to ignore- and what all this may mean for the average small business in the US.

1. High unemployment changes the workforce lanscape. According to the U.S. Bureau of Labor Statistics, the rate of unemployment has stalled at 9.5%, with some 14.6 million people seeking jobs, and it doesn’t look like that figure will be coming down any time soon. The fallout? The Wall Street Journal recently reported that more people over the age of 60 are choosing to retire rather than search for scarce jobs. Many out of work are also seeking freelance or independent consultant jobs, others are trying the entrepreneurial route. In

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In short, there are three trends that will likely affect small business owners:

1. Consumers have less disposable income.
2. A large pool of talented freelancers and independent consultants are out there, and using their services is generally more cost effective than bringing these same functions in-house.
3. Depending on the nature of your small business, there may be more competition from other new business owners looking to tap into your niche market.

 

2. It’s becoming more acceptable to rent. There was a time when owning a piece of real estate was part of the American Dream. These days, the housing marketed is limping badly. According to the National Association of Realtors, existing home sales plummeted at staggering 27.2% in July.

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Why the sea change? Typical home buyers may lack funds to buy a new house, or they might fear investing in a property now that home prices are poised to fall again. Belying all these figures has also been a growing societal acceptance of a renter’s lifestyle. According to a recent Harvard study, the number of renters has risen by 10% in the past five years.

This trend is heavily affecting several industries including, home buildering, construction and rennovation companies, home refurbishing, home cleaners, and landscapers.

3. Saving is the (new) goal. With their hubrious in check, Americans are curbing their spending. In June, credit card balances fell by 6%, according to the Federal Reserve, while personal savings have tripled in the past three years. Another sign of a thriftier lifestyle: retail e-commerce sales rose slightly in the 2nd quarter of 2010, as cost-conscious consumers seek out the best deals.

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While no one would argue that all this saving is detrimental, the fallout has been that there is less cash flowing specifically when it is most needed to grease the wheels of our stalled economy.

4. Risk adverse money manuvering. Weary Americans seem to have lost their appetite for risky ventures. Wanting to avoid repeating the losses they suffered when the market plunged, and not trusting the current economic “stability,” individual investors have pulled out of the stock market in droves, choosing the more staid bond vehicles instead. Additionaly, many consumers as well as small and home-based business owners alike are moving away from banks and seeking do-it-yourself financing alternatives, such as peer-to-peer lending or borrowing against retirement plans.

 

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5. Purchases influenced by the Internet, social networking. In an effort to stretch their dollars, consumers are increasingly scouring the Internet for the lowest prices and the best deals. The U. S. Census Bureau recently reported that U.S. retail e-commerce sales for the second quarter of 2010, was $39.7 billion, an increase of 2.6 percent from the first quarter of 2010.

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This trend has been helped by the rise of Internet coupon sites as well as group purchasing sites (where consumers band together to take advantange of a promotional offers by various businesses), such as groupon.com, which have changed the way consumers shop. Social networks are also heavily influencing most consumers’ purchase decisions, according to recent research. Consumers are paying attention to recommendations made by friends or the negative comments made about new products.

Sources:

http://money.cnn.com/2010/08/20/news/economy/New_normal_economy.fortune/index.htm

http://www.nytimes.com/2010/08/22/business/22invest.html?_r=1&hp

http://www.census.gov/retail/mrts/www/data/html/10q2.html

http://www.gartner.com/it/page.jsp?id=1409213

These days, while many small business owners are dealing with tightened budgets and strained cash flow, heading for the latest conference may seem like an unnecessary luxury. It’s hard to justify taking time away from work, paying for a hotel, food, and travel expenses. Yet, hobnobbing at conferences and tradeshows could infuse your business with fresh ideas and help it thrive.

 

 

According to the authors of a new book, “The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion,” conferences are some of the best places to meet those “in the know.” Nowadays, people create business success by tapping into information resources. Finding people who can provide knowledge that’s relevant to your business keeps you current and on top of your game.

At industry conferences, information is available at many levels. The workshops, plenary sessions, and lectures provide the “meat,” updating attendees about new innovations. The hallway conversations and elevator chats yield the juicy tidbits that make chance encounters so sweet.

Serendipity allows you to meet strangers who can give you new contacts and business ideas. You can help serendipity along by attending conferences and sending your employees to conferences. What you learn there can be invaluable to your business.

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The US economy is still on the slow road to recovery, and no one is more aware of the fact than those small businesses owners who have watched their customer base dwindle. In response, many enterprising small business owners are considering expanding into international markets.

 

In recent years, growing economies like China and India have witnessed the emergence of extremely large middle classes which barely existed prior to the current boom in Asia. There are unprecedented markets out there, just waiting to be tapped.

Sounds intimidating? It does not have to be. Here are some tips on running a successful global small business:

1. Network with existing customers. A good way to discover suitable markets overseas is to ask existing customers or partners whether they require your support in international markets. This kind of expansion provides ready income and significantly reduces initial risks.

 

2. Look for local funding opportunities. The expansion of business beyond your own boundaries is in your government’s best interest. Look into funding and incentives for businesses interested in going global including grants and loans from the federal and local governments.

 

3. Seek out local partners/franchises. Try to find someone who already runs a business in the country of your choice. By partnering with them you can save the money needed to set up your own business there. An added plus is that a local businessman is familiar with local laws and regulations as well as the country’s culture. If you hook up with an established local businessman or franchise, you will not only be saving yourself funds but many headaches as well.

 

4. At the beginning, rely on virtual offices. These days you don’t need to run an office in the country of your choice – you can simply offer your services through a virtual office. If, for example, you are interested in the Chinese market, hire a Chinese speaker, acquire a Chinese or international phone number, and get the business rolling. If business picks up you can then invest in a local office and staff.

 

5. Maximize global sourcing. If you want to keep your prices competitive, seek out the best manufacturing/staffing deals in China or other Asian countries. Cut down on staffing costs by establishing a sales center in India or the Philippines. Take a look at your opportunities worldwide and take advantage of lower prices to give yourself an edge over your competitors.

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Throughout much of his tenure, President Obama been lending a significant amount of lip service to the idea that America should be investing in its small businesses.

 

Since the onset of our current economic difficulties, small businesses have disproportionally been suffering from the overall slowdown in consumer spending, leading to less cash flow and poor credit- two factors that have effectively crippled many businesses by limiting their ability to operate effectively and receive necessary financing.

As of late, Obama has been trying to push through legislation meant to provide some relief to small businsses by offering tax credits and other incentives. But the truth is that the new bill is loaded with features that seem more suited to bigger businesses.

The new legislation provides a tax break for companies that make large capital purchases, such as airlines and telecommunications firms. Most small businesses do not usually make such large capital purchases.

The issue of bonus depreciation is more relevant for large or middle-sized firms. Small businesses can already write off 100% of equipment costs up to $250,000. The fact that the Senate bill proposes to increase that limit to $500,000 may help a few small businesses out – but only if their purchases actually reach that level.

That said, the new legislation does contain some tax breaks which are specifically aimed at smaller companies. It sets higher limits for small business expensing, and includes a proposal to grant self-employed individuals tax breaks for health insurance similar to those now received by employees.

The bill would also abolish capital-gains taxes on the sale of certain small business stock. Loan limits of the Small Business Administration would increase, providing $30 billion in loans to community banks for small-business lending.

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