Palm Beach SCORE Presentation - Business 101: Starting Your Own Company
Blattfg.com BUSINESS 101Starting Your Own Business from Soup to Nuts PRESENTED FOR SCORE PALM BEACH BY PETER BLATT, J.D. LL.M.
Blattfg.comCORPORATE FILINGSLLC vs. S Corporation – Similarities Both are pass-through entities Liability protection No shield from torts or accidents Operational ease and profit-sharing
Blattfg.comCORPORATE FILINGSThe Limited Liability Company (LLC) Tax simplicity • Single - IRS form 1040 and Schedule C • Partners – 1065 partnership
Blattfg.comCORPORATE FILINGSThe Limited Liability Company (LLC) Simplistic governance • Articles of Organization • Partnership Agreement • No board meeting
Blattfg.comCORPORATE FILINGSThe Limited Liability Company (LLC) Flexible Structure • Profits/ownership • Unlimited members • File as S-Corporation
Blattfg.comCORPORATE FILINGSThe Limited Liability Company (LLC) Limitations • Members are self-employed; must make contributions to SS and Medicare on net income • Dissolved on death or bankruptcy of partner
Blattfg.comCORPORATE FILINGSThe S-Corporation (Subchapter S of IRSCode) Most popular structure in Florida A C-Corporation that offers tax benefits Limited financial liability for shareholders (owners) Avoids double-taxation
Blattfg.comCORPORATE FILINGSThe S-Corporation (Subchapter S of IRSCode) Tax advantages • SS and Medicare taxed on wages only • Distributions taxed at Cap Gains rate • Profits/losses pass through to shareholders
Blattfg.comCORPORATE FILINGSThe S-Corporation (Subchapter S of IRSCode) Structural advantages • Separate and perpetual entity • Shareholders are protected from liabilities
Blattfg.comCORPORATE FILINGSThe S-Corporation (Subchapter S of IRSCode) Limitations • Strict corporate governance • Limited to 100 shareholders; one class of stock • Profits/losses allocated based on ownership
Blattfg.comCORPORATE FILINGSThe S-Corporation (Subchapter S of IRSCode) Limitations • Potential for loss of Subchapter-S status • Beneficial employee must take pay
Blattfg.comCORPORATE FILINGSThe S-Corporation (Subchapter S of IRSCode) IRS/State Forms • Form 1120S – S-Corp Income Tax Return • Form 1120S-K1 – Individual Shareholders • Form 4625 – Depreciation • UCT-6 – Employer’s Quarterly Report
Blattfg.comCORPORATE FILINGSThe S-Corporation (Subchapter S of IRSCode) IRS/State Forms • Form 1040 – Individual Tax Return • Schedule E – Suppl. Income/Loss • Schedule SE – Self-Employment Tax • Form 1040-ES – Individual Estimated Tax
Blattfg.comCORPORATE FILINGSThe S-Corporation (Subchapter S of IRSCode) IRS/State Forms • Form 2553, 940, and 941 • State of Florida Annual Report (Whew…)
Blattfg.comCORPORATE FILINGSLegal Agreements In Detail - LLC Articles of Organization • Creates public, legal notice of active organization • Specifies member and managing member’s name, address, and registered agent • Corrections are recorded with amendments
Blattfg.comCORPORATE FILINGSLegal Agreements In Detail - LLC Operating Agreements • Specifies rights and responsibilities of members • Creates enforceable agreement between members • Succession planning • Not required; highly advisable to hire counsel
Blattfg.comCORPORATE FILINGSLegal Agreements In Detail – S-Corp Articles of Incorporation • Creates public, legal notice of active incorporation • Specifies principle officers and purpose of company, share structure, and registered agent • Corrections are made with Articles of Correction
Blattfg.comCORPORATE FILINGSLegal Agreements In Detail – S-Corp Shareholder Agreement • Specifies rights and responsibilities of shareholders • Protects shareholder’s equity and interests • Plans for the future (succession, M&A) • Private document; highly advisable to hire counsel
Blattfg.comCORPORATE FILINGSIntellectual Property Laws and Protection Copyrights – protects original works of authorship (literature, music, artistic, intellectual works) Patents –protections for novel inventions Trademarks – protection for distinguishable marks
Blattfg.comCORPORATE FILINGSIntellectual Property Laws - Copyrights Exclusive right under U.S. law to protect original works of authorship from being reproduced Granted to created when created General terms: author’s life plus 70 years Work for Hire terms: author’s life plus 95 years
Blattfg.comCORPORATE FILINGSIntellectual Property Laws - Patents Offers protection from unsanctioned “theft” of inventions in exchange for public disclosure Must be novel and “non-obvious” Patent granted through the USPTO Extremely important for inventive companies or individuals
Blattfg.comCORPORATE FILINGSApple vs. GoogleSamsung pays $1Bin settlement…Aug 2012!LARGE Patent infringement lawsuitever…ST
Blattfg.comCORPORATE FILINGSIntellectual Property Laws - Trademarks Identifies the source of a distinguishable product Service mark identifies that of services Can be a symbol, phrase, design, or combination
Blattfg.comCORPORATE FILINGSResources Florida Dept. of State (Sunbiz.org) Local Tax Collector (county, city) Federal Income Tax Filing (IRS.gov) State Income Tax Filing (N/A for Florida) USPTO (uspto.gov) U.S. Copyright Office (Copyright.org)
Blattfg.com BEST IDEASBusiness Plan Serves as a “roadmap” for your business Provides investors with insight Refines and defines what you set out to accomplish Demonstrate purpose and commitment
Blattfg.com BEST IDEASContents – Business Plan Mission Statement • Brief, powerful, definitive • “To refresh the world.” – Coca-Cola Company Core Values • What drives you and your company? • “Integrity, knowledge, and fiduciary” - BFG
Blattfg.com BEST IDEASContents – Business Plan Executive Summary Company Description Target Market Organization Service/Product Marketing/Sales Financial Analysis
Blattfg.com BEST IDEASContents – Business Plan Executive Summary snapshot of your company? Company Description what do you do? Target Market who do you do it for? Organization how are you structured? Service/Product what do you make money? Marketing/Sales how do you sell yourself? Financial Analysis how do you stay in business?
Blattfg.com BEST IDEASRaising Capital – Business Plan Debt, Equity, or Combination • Debt – pay with interest • Equity – pay with share of ownership • Combination – convertible debt instruments
Blattfg.com BEST IDEASSources of Capital – Business Plan Debt • Banks/traditional institutions • Capital marketplaces (bond market) Equity • Private/public investment (C-Corp!) • Swaps, mergers, acquisitions
Blattfg.com BEST IDEASSources of Capital – Business Plan Greatest sources for capital in the U.S.?
Blattfg.com BEST IDEASSources of Capital – Business Plan Greatest sources for capital in the U.S.? 1. your savings 2. Your family’s savings 3. Your friend’s savings
Blattfg.com EMPLOYEESPayroll Taxes (*Florida only – may differ in other states) Employees pay FICA • Social Security • Medicare Employers pay FICA plus • Unemployment tax
Blattfg.com EMPLOYEESPayroll Taxes (*Florida only – may differ in other states) Employer Compliance • Withhold employee FICA • ADA, discrimination laws, Fair Pay Act, minimum wage If applicable… • Wage garnishment • Worker’s compensation
Blattfg.com EMPLOYEESPayroll Taxes Employer collects W-4 and I-9 FICA – 6.25% to $113.7k Medicare – 1.45% Federal withholding
Blattfg.com EMPLOYEESPayroll Taxes File tax liability (monthly) Payroll form 941 (quarterly) Payroll form 940 (annually) UCT-6 (unemployment) Annual state reporting Occupational licensing
Blattfg.com EMPLOYEESRecruitment and Hiring THINK like a Fortune 500 company… • Job descriptions – specific and detailed • Employee handbook – policies and procedures • Definitions of Exempt/Non-exempt • Probationary period • Equal Employment Opportunity (EEO) • Non-disclosure agreement (NDA)
Blattfg.com EMPLOYEESRecruitment and Hiring THINK like a Fortune 500 company… • Personnel files and performance reviews • Standards of conduct (dress, behavior) • Typical work day (lunch, breaks, activates) • Benefits and Services (PTO, military leave) • Wage, salary, and pay procedures • At-will employment termination
Blattfg.com EMPLOYEESResources US Small Business Assoc. (SBA.gov) US Dept. of Labor (DOL.gov) IRS Tax Info (IRS.gov/Businesses) Florida Dept. of Revenue (DOR.MyFlorida.com)
Blattfg.com OFFICESRent vs. Own Expense versus investment Small commitment versus large capital outlay Uninterrupted operations versus maintenanceIn short, it’s all about your situation andyour needs.
Blattfg.com OFFICESLocation, location, location… Spend time on market and consumer data • Demographics and socio-economics • Distance from competitors and to value-added Parking, space, and lease requirements Commercial vs. residential zoning
Blattfg.com OFFICESCommon Issues with Leases Have competent counsel review lease Perform public records searches Pay attention to tenant responsibilities Negotiation favorable assignment provisions
Blattfg.com ACCOUNTINGTurbo-Tax (preferred) First, important to have a competent CPA Prepares returns for C-Corp, S-Corp, LLC, PA, Sole Props and virtually every other entity Web-based Files forms with the IRS and state online
Blattfg.com CONTRACTSLook for… Specific language of responsibilities of parties Compare to compliance issues in your industry Consideration between parties Beware of obvious duplicate contracts Read your whole contract Hire competent counsel to review your contracts!
Blattfg.com CONTRACTSResources Peter Blatt, J.D. LL.M. and Blatt Legal (561) 625- 0900 Uniform Commercial Code (FloridaUCC) Dunn & Bradsheet (MyCredit.DNB.com) Better Business Bureau (BBB.com) Personal Credit Reporting (Equifax.com)
Blattfg.com MARKETING METHODSWebsite and Online Promotion Website as a resource Active user engagement Guerilla marketing and PR Mailings Referrals Compliance
Blattfg.com MARKETING METHODSWebsite as a resource You are your representation on the web Self-managed Third-party provider Combination of both Resources: WordPress, Freelance.com, referral
Blattfg.com MARKETING METHODSActive user engagement (AUE) Content is king – blogs, articles, authorship Social Media – LinkedIn, Facebook, Twitter SEO – bookmarking, link building, fresh content Videos and media – YouTube, VimeoBest Tip: hire a professional!
Blattfg.com MARKETING METHODSGuerrilla marketing and PR DIY Marketing • Add events to community calendars, etc. • Submit to business directories (Google, Yelp) PR – written as a news story, submitted via wire • Providers include PRNewsWire and MarketWire • Free directories and providers not as effective • Must be written well and be news-
Blattfg.com MARKETINGMailing METHODS Hard mailing – still effective! • Providers include RME, InfoUSA • Promote events, entice and inspire Email marketing Consistent, promotional message Message of expertise Providers include MailChimp
Blattfg.com MARKETINGReferrals METHODS Build referrals by doing good business Join and attend networking groups Consider “referral-required” events ASK for referrals!
Blattfg.com MARKETING METHODSCompliance Industry and trade specific Join your industry’s trade group to stay up to date Be aware of Federal, State and Local levels Big fines and penalties for indiscretion Hire competent counsel!