Organizing Your New Business Start Up

Are you thinking about starting a new business? Then you will need to decide what type of legal structure your new business will have. The legal structure you choose will determine how your business will be taxed and the rules your business must follow.

The Five Most Commonly Used Business Organizations

There are five common types of business organizations. Outlined below you will find the definitions of each type of business and why you might want to choose that type of structure.

Sole Proprietorship

The sole proprietorship is for someone who owns a company and is not planning to incorporate or become a limited liability company. This is mainly for a business that will be owned by one individual. That individual may or may not have employees. When you have this type of business structure, you report your business income on your individual tax return. Some of the risks of the sole proprietorship are that your business debts and obligations could be attached to your personal assets, even if they are not directly related to your business.

Partnerships

The second type of structure is a partnership. Usually a partnership will consists of two or more people who want to do business together. Each partner has a fiduciary duty of loyalty and trust to the other partners and put his own interests below the interests of the partnership. Partners have unlimited liability to the business. Creditors can require that liabilities be paid from personal assets. Partnerships report profits or losses on individual income tax returns. Partners are not allowed to sue each other. Usually partnerships require a written partnership agreement.

Limited Partnerships

The third type of structure is a limited partnership. This is made up of at least one or more general partners and at least one or more limited partners. General partners act as the fiduciaries of the business and assume all the monetary risk. All parties can profit from the company. Limited partners assume risk of their contributions and that is all. Limited partners often assume the role of raising capital and do not participate in the day-to-day business operations. Members file their own individual tax returns. The partnership files an information return with the Internal Revenue Service, notifying the IRS of each partner’s share of the year’s profit or loss.

Corporations

The fourth type of business structure is a corporation. This is the type of organization that is most often used with the term business. Most large businesses are corporations. People can invest in corporations without assuming liability or management responsibilities. Corporations are creations of the state. Corporations have a board of directors and can issue stock. Shareholders are owners of the corporation and have limited liability and are not involved in the day to day operations of the business. A corporation is a legal person and a legal entity separate from its shareholders and managers. A corporation pays state and federal income taxes on its income.

Limited Liability Company

The fifth business structure is a limited liability company or LLC. LLCs are created by filing Articles of Organization with the state in which you live and have one or more “persons” conducting business. One benefit of this organization structure is that no member, manager or employee is personally liable for any debt obligations of the company. The LLC has a tax status of a general partnership with limited liability protection. No annual meetings are required. Members can participate in management more than in a limited partnership. They are responsible for disclosure, record keeping and annual reporting requirements. LLCs are only taxed once and the earnings of a partnership are treated as the earnings of its partners.

Conclusion

This information is intended to be used as a very brief overview of the main types of business structures. Consulting with a CPA or attorney can help you make the final decision about your new business. Protect yourself against unnecessary risks and get your new business off to a good start.

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Strategic Business Plans Pay Off

Any business starts with an idea. Ideas are then put down on paper, discussed with esteemed partners and friends or at least mulled over in your own mind. Work begins to put the business strategy into production.

Small business plans are created in the same way large business create their plans. In fact, looking at the development of  large companies is helpful to the small business owner. Modeling the success strategies they use can help you take your business to the next level.

Molycorp Inc.

For example, the story behind the scenes of the well publicized Molycorp, Inc. gives small business owners key strategies to emulate. Making a paper profit of $2.3 billion dollars in less than three years, Molycorp Inc. made some strategic business plans.

Molycorp Minerals LLC was formed in 2008 by a group of investors. Two critical players  in this LLC are  Mark S. Kristoff,  CEO of Trayxs, (which provides financial services for the mining, metals and minerals industries) and Dr. Ross R. Bhappu, of  Resource Capital Funds  (focused on investing exclusively in the mining and minerals industry).

These two individuals have expert, inside knowledge of the mining industry. When Mr. Kristoff was just 12 years old, his father, who worked as an executive at the mine,  gave him a tour of the Mountain Pass rare earth mine in California, one of the largest rare earth mines in North America.   Dr. Bhappu’s father was also an executive at the mine which was then owned by a Union Oil company. In 2005, the company was  acquired by Chevron.

Mr. Kristoff and Dr. Bhappu developed an interest in buying the Mountain Pass mine  in 2005.  In 2008, Chevron sold the mine to their LLC because they promised to keep the existing employees and to revitalize the unproductive mine. It had been inactive since 2002. Mr. Mark Smith, former President of Mining for Chevron  was lured away from Chevron to become the new CEO of Molycorp Inc.

Investment Strategies

In the beginning, there were four principal investors in the company, Resource Capital Funds, Pegasus Capital Advisors, Traxys  and Goldman Sachs. In 2009, Goldman Sachs sold their shares of the company because the economy was in such turmoil.

Demand Exceeds Supply

Molycorp Inc. invested  $80 million into upgrading the mining equipment and facility. Currently producing 3,000 tons per year, their next goal is to produce 20,000 tons. Leaders have predicted that this will double in production by 2014. With China recently announcing that they are limiting the export of rare earth materials,  demand (predicted to be 190,1000 tons in 2014) is now exceeding the supply (170,000 tons).  Cerium oxide rose in price from $6,000 to $71,000. Ianthanum oxide rose from $8,400 to $73,000.

Production of Green Technologies

The rare earth minerals that will come from this mine are used in many green earth technologies like wind turbines and hybrid cars. They are also used in electronics, plasma and LCD televisions and the widely popular Apple Ipad.

The combination of the world events and good strategic business planning by the Molycorp, Inc. leaders have caused, “one of the fastest windfalls in private-equity history.” (Wall Street Journal).

Small Business Plans

For small business owners, the key strategies that created this success were familiarity and expertise with the product line, choosing products that are in demand, effectively using global trade news to make plans, hard work, passionate leaders and the ability to communicate their business plans to key investors. Definitely a good model for small business owners to emulate.

Can You Qualify For A Second Mortgage?

If you are thinking about getting a second mortgage, you may discover that you just don’t qualify.

The Wells Fargo formulas for deciding whether you will be offered an increase in a home equity line of credit are making it more difficult for the average American.  Self employed business owners seem to be affected deeply.

If you were caught up in the economic problems that started in 2008, you may have lost your job and had to look for other work or make other plans. So maybe it wasn’t the end of the world for you, but it wasn’t fun either. So you try something new and decide to go into a new type of work or something totally different than you were used to doing. You end up building your own business and it doesn’t start off with a bang, but hey, it pays the bills. Good for you.  You helped yourself cope with a difficult situation.

So your business begins to grow and your 2009 income isn’t too bad.  In fact it’s rather decent so you want to do the best thing for your financial situation by consolidating your debt and getting rid of any credit card debt so that while you are working to pay off debts you are getting a lower interest rate and can use the interest you pay to lower your taxable income.  That would help you out.

Well, 2010 comes along and you’re business is really doing well. The best you could have ever hoped for and it’s growing. Congratulations! Great news. Life looks better in 2010 doesn’t it?

Not to Wells Fargo. Wells Fargo uses this procedure to decide whether they can increase your home equity loan. They require that you send in two years of tax returns. Well, remember that in 2008 with your new business just starting, you may have made over $10,000  and had $4,000 in deductions. Now Wells Fargo says that well in that year, you get credit for making $6,000.  They won’t even count the rest of 2008 because it was in a different field. They then divide that by 12, because of course that is how many months there are in a year.

So they calculate that you are making $500 a month.  Do they consider the 2009 income at all?  Well sure they do, but because there is such a huge discrepancy, they have to go with the smaller amount of money that was made in 2008. But they will give you what they call a cap of 125%. They then multiply 125% times the $500 a month and come up with a $626.25 figure . That is the new figure of how much they think you make per month, regardless of what you made in 2009. Isn’t that smart?

Then they look at your current minimum payments for your mortgage, association fees and revolving credit and come up with your debt to income ratio. It doesn’t take a rocket scientists to figure out that most mortgages will exceed $626.25, so right there you’ve gone over 100% debt to income ratio and they come to the brilliant decision that they shouldn’t give you a loan, because well…your debt to income ratio is too high.

For people who have the guts to start their own business and pursue it, you are going to have to have to know that it is pretty useless to try to borrow any money until you’ve had a solid two years of income that they can wave their magic formulas on to predict what you will do in the coming years.

It’s a good thing that entrepreneurs have more insight and determination to grow a business than the banks have to risk lending their money to you.

Discover Card Review

The last five days of growth for Discover Financial Services (DSF), located in Riverwood, Illinois has been well above their credit card competitors, Visa, American Express and Mastercard. Why has this happened? David Nelms, CEO of Discover since 2004 says, “Our very strong results this quarter were driven by a significant improvement in the credit performance of our loyal customer base along with continued solid growth in cardmember spending.”

During the fiscal second quarter, Discover reported a record sales volume at $23 billion. Discover topped their prior year statistics by 6%. Where are the profits coming from?

Discover has three payment services Pulse, an ATM/debit network, Affiliate Banking and Diners Club. Together these services process billions of financial transactions a year.

PULSE is one of the nation’s leading ATM/debit networks, currently serving more than 4,500 banks, credit unions and savings institutions across the country and they have just partnered with MoneyPass which offers thousands of surcharge-free ATMs. It is now the company’s biggest money maker.

Diners Club International was acquired by Discover in July of 2008. Diners Club card entitles consumers to exclusive savings on travel, dining, and entertainment.

Struggling with the new banking rules which prohibit charging late fees over $25, Discover will be loosing between $80 to $90 million a year. To help make up for that they will be focusing on their consumer banking division to make up for lost profits. They have two bank affiliates, Discover Bank and Bank of New Castle. In addition to the credit card division, they also offer personal and student loans, online savings accounts, certificates of deposit and money market accounts.

With David Nelms as the CEO, this company seems to be doing better and better. In fact, the earnings statement for Mr. Nelms is staggering. For 2009, his salary was $1 Million dollars, restricted stock awards $4,627,613.00, other compensations at $17,150.00 and pension valued at $39,750.00 for a grand total of $5,684,513.00 – over 5 1/2 million dollars a year. Looks like his MBA from Harvard Business school served him well.

The two most significant reasons he gives for the recent improvements have to do with how you and I have improved our credit reliability and continued to use Discover Card for purchases. Some employees from Discover have even suggested ways of making money through the significant rewards program they offer. If you are dedicated to watching your spending and able to actually pay off the monthly balance, you can earn money on what you spend. But that is only for the very self-disciplined spenders. This practice could leave you with nothing more than a huge credit card bill so be wary.

The Value of Scarcity and Uniqueness in Business

Auctions can bring hefty prices for unique, rare items. Recently, a manual typewriter fetched the amount of $254,000.

Why the astronomical price? You may wonder about this because living in the digital age, who needs a typewriter?

Possibly similar to the sale of one of Michael Jackson’s glove, this memorabilia belonged to Cormac McCarthy, American fiction writer. From this humble looking typewriter, McCarthy typed more than 5 million words over a period of 50 years.

Cormac McCarthy, born in 1933, is an American novelist and playwright sometimes compared to Faulkner. Six of his novels were made into films. Well known for his 2007, Pulitzer prize winning, work of fiction called, “The Road.”

In 2008, McCarthy was awarded the Pen/Saul Bellow Award for Achievement in American Fiction. His work was recognized for qualities of excellence, ambition and scale of achievement during his writing career. This places him in the highest ranks of American literature.

People predicted his typewriter may go for $18K or so. Those predictions were far below the price it received. The large sum of money was donated to a scientific research organization, the Santa Fe Institute.

The qualities of uniqueness combined with scarcity can drive up the value of an item exponentially. With many competing businesses in similar niches popping up all over the web, thousands will collapse and a few will prosper. It seems to be a natural cycle of business.

If you want your Internet business to prosper, ask yourself if you have something to offer people that is both unique and scarce. The more you can meet this criteria, the better your business will do. What can you bring to the table that is different from every other company? Opportunities to create new, unique products are endless.

The entrepreneur in us sees opportunities everywhere we look, but many people see only problems everywhere they look. The entrepreneur in us is more concerned with discriminating between opportunities than he or she is with failing to see the opportunities. ~Michael Gerber

How To Apply For A Government Grant

There are many different types of grants. The United States Government offers over 1,000 grants and a total amount of $500 billion dollars is available for these grants. Grants are awarded to people who have demonstrated that there is a public benefit for their project or research.

There are twenty one different categories that government grants fall into. There are environmental grants, educational grants, energy grants and many others. For a full list of the categories, you can go to www.grants.gov.

Grants are available to companies or organizations and to individuals. There are more grants available to organizations than there are to individuals. The government website lists 27 grants for individuals and hundreds of grants available for organizations.

One example of a grant for individuals is offered by the United States National Fish and Wildlife Service. They want to promote interest in conservation, and ecology. There is $5,000,000 available to be awarded for this project and they will give 40 awards out. The highest amount awarded can be up to $500,000 and the lowest amount awarded will be $1,000. So what does this grant require you to do?

They are looking for people interested in natural resource careers and would like to provide individuals with guidance and training by professionals. You will be working in wildlife refuges, fish hatcheries, and ecological services offices as an intern. You will be assigned seasonal work sometime between June 1 and Sept. 30. Award recipients need to be willing to administer a program for identifying and recruiting people for assignments at various stations in the United States.

After you have found a grant that fits your expertise and interest, you will need to go through an online application procedure at www.grants.gov. There are multiple steps involved in applying,  however there are videos to help you walk through the entire process.

You first will need to register with the website and then you need to apply for the grant you want. This procedure can take time to do, so plan on several weeks for this process.

Writing a successful grant proposal can be very challenging and competitive. You have several options. One is that you can hire someone to write it for you or you can train yourself to write a good proposal. There are classes you can take that can prepare you for this.

If you are going to write the grant yourself, you will need to summarize your project in two or three paragraphs. You will need to communicate important information about your organization that shows that you can be trusted to use their funds wisely. You’ll need to state what your organization’s track record is with similar achievements. One  thing to remember when writing your proposal is to describe the problem you are attempting to solve with the same magnitude as the solution you provide.

Although the procedure for applying is lengthy and requires you to write a very good proposal, you should try your best and see if you qualify. A federal grant could be just what you need.

How To Register A Trademark

If you are in business for yourself, you might be interested in learning about trademarks and possibly registering a trademark for your company.

Owning a trademark is appealing to people because they hope that one day, their particular brand may receive universal recognition. This universal recognition can make your company become more profitable than you may have imagined.

Historically, famous trademark names like Levi Strauss Jeans, Dutch Boy, McDonald’s and Coca-Cola have made life long impressions on millions of people. There are trademarks on other things that you may not have thought of like sounds. In 1924, Metro-Goldwyn-Mayer registered the sound of a lion roaring. When you go to the movies today, you’ll hear that sound and associate it with Metro-Goldwyn-Mayer movie productions. Even the design of buildings can be trademarked. The famous McDonald’s golden arches are trademarked.

Images can be trademarked and they have powerful effects on consumers. The most reproduced image in the world is that of Walt Disney’s Mickey Mouse. There are over 7,500 items that have that image on it. The second most reproduced image is that of Jesus. Surely you’ve seen thousands of products with his image on them. You may be surprised to know that the third most reproduced image is of Elvis Presley and he “ain’t nothing but a hound dog.”

The average person knows what these symbols, sounds and words mean and generally that is good for business because of their universal appeal. So how does that affect you and your new business?

Suppose you have been dreaming of a new product or already have a great product and a very unique name for that product. You will want to make sure that you and your company are the people who benefit from your brilliance. You don’t want other people using this name to generate profits for themselves which will ultimately diffuse your profit making efforts. The best thing to do is to get a trademark for your name, idea or product.

Cost of Trademarking

This is perhaps the first question on your mind. It has a complicated answer. There are fees involved in getting a trademark and they vary. You may be able to complete the process for as low as $325.00 or if you have a lawyer handle it for you, you could be looking at several thousand dollars in fees.

How To Trademark

The government has a special procedure for you to apply for a trademark. Perhaps the easiest thing for you to do is to call them at 1-800 786-9199. If you want to be a bit more prepared to talk to them, you’ll need to find out if the idea you have is already trademarked. You can use a trademark search at the United States Patent and Trademark Office.

You can apply online for a trademark, but you must be able to provide information in a timely fashion. They have strict deadlines that must be met to process your application. You will need to provide the name of the applicant, name and address for correspondence, a clear drawing of your symbol or  the words you want trademarked, the goods or services you intend to provide and a filing fee.

Once you submit that information, a lawyer will research it and decide whether it will be approved. This procedure may take up to two months. Once it is approved, they will print a public notice in the the Official Gazette. The public is given 30 days to issue a protest against your filing if they can prove that your trademark will be damaging to their business. If you make it through that step, then within 3 months you will be issued a NOTICE OF ALLOWANCE. Then you have six months to notify them of your intended STATEMENT OF USE plan. Once that is sent in and approved, you will be issued a REGISTRATION CERTIFICATE.

Do you think it’s worth your time and effort to register a trademark? I’m sure Levi Strauss did!

Control What You Can To Improve Your Life

I have been to my local gym to exercise, swim and use their public steam bath many times. One of my favorite things about this experience is to enjoy ten minutes of sitting in the steam bath. The heat and moisture make me feel good and more energetic during the rest of my day.

One of the things I hate about the steam bath is that many many times I’ve sat in the steam bath when there is barely any steam at all. I’ve watched people use various methods of trying to get the steam regulator to cool down, thus triggering the release of more steam. The small regulating device is strategically placed at a height of 6 1/2 feet and must be all of about 3/4 of an inch wide. Some people are successful at getting it to restart the steam. They were either taller than I was or had a better water bottle.

If you have ever tried to actually squirt water out of a drinking container, you’ll know that the water doesn’t go very far and accuracy is difficult to obtain. I have thought many times in the past as I was sitting in the steam bath that I should buy a cheap water gun and see if that would work. I had the idea months ago, but today I actually went to buy the water gun  and make it part of the necessary piece of equipment for my exercise routine.

I walked into the steam room. There were about six people sitting there and the steam looked like it was on its way to fizzling out. I sat down and inquired about the steam. I was told that it had just stopped but had previously been fine. I took my little water gun, filled with tap water and proceeded to take aim at the regulator. My first few attempts seemed to miss the bulls eye, but I continued until I could see that it was hitting it and felt that it had been sufficiently soaked. I walked to the seating area and within ten seconds the steam started coming forth with vigor. It provided the group with the best steam bath. In fact it got so hot in there that several people left.

What I learned from this experience is that if there is something that you can control to improve your life, do it. Don’t just think about it. Do it. The next time I go to the gym, I feel confident that I will be able to enjoy the best steam bath possible at the time that I want it to and it cost me 99 cents. That is really sweet.

When you work on the Internet and devote your days to building your business, many things that you choose to do can grow your business. However there are a slew of things that you can do that will not help you in the least. You have most likely already spent hours and hours getting distracted from your main Internet goals in the past.  Choose to do something that you know will help. Are you offering people better information? Are you offering them a reason to link to your site? Are you improving anything about your services and letting people know?

Each player must accept the cards life deals him or her. But once they are in hand, he or she alone must decide how to play the cards in order to win the game. ~ Voltaire

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