small business | FOCUS ON
Reprinted with permission from FirstMonday.
AS A SMALL-business owner, you need to know a little bit about everything — finance, accounting, technology, real estate, labor issues and marketing — in order to successfully run your business. Unfortunately, you don’t have the resources or the time to be expert on all these issues. However, professional advice is out there for the entrepreneur determined to have his or her business succeed. Alan Rowe, president and CEO of First Commercial Bank of Florida, knows firsthand about these challenges. In fact, his bank was created for the purpose of servicing small to
it) and traffic issues (employees and sales reps can’t get around town) top the list, but many other challenges exist. Here are some tips from local experts. SMALL-BUSINESS LENDING Often, says Rowe, small-business owners are good technicians but not good business managers. These are two very different skill sets, and making the transition from one to the other can be difficult. This perception makes it hard for small-business owners to secure loans. “For the small-business owner, credit is critical, as is
Big Tips for Small Business
HERE’S SOME EXPERT ADVICE THAT CAN HELP YOUR BUSINESS PROSPER.
by Jack Roth
medium-sized businesses, and these businesses represent 80 percent of the bank’s business. Rowe also happens to be the Small Business Chamber Board chair, which bestows upon him the responsibility of being the voice for small business in Central Florida. “The small-business voice tends to be fragmented,” he says. “We listen to the needs of local business owners and represent their needs when it comes to local and state business legislation.” In talking to small-business board members, Rowe finds that important issues often are those that have small, hidden costs. Health insurance (can’t provide
management expertise,” says Rowe. “Every case is unique, but all small businesses have challenges when it comes to financing. They need capital to grow, but they don’t have the collateral or management experience to make the loan happen.” His advice: “Unless you have reasonably decent financial wherewithal, it’s very difficult to get a loan as a new business. Having said that, once your business is up and running for a couple of years and you think you’ll need a loan down the road, go to a small business–friendly bank and set up a small line of credit with them
Professional advice is out there for the entrepreneur determined to have his or her business succeed.
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FOCUS ON | small business
From left: Alan Rowe, Nicolette Vilmos and Janet Rapp
“Grow and establish your business first before you buy commercial property.”
CHRIS HURN MERCANTILE COMMERCIAL BANK
now. Don’t wait until you need a loan desperately. Show the bank that you can plan properly; this will go a long way in securing a loan when you need it.” COMMERCIAL REAL ESTATE There’s a current trend that suggests Americans are more cognizant than ever about ownership. People want to own their own property, business, etc. But when do small-business owners buy instead of lease commercial real estate? Chris Hurn, president and CEO of Mercantile Commercial Bank and Small Business Chamber board member, says that many new business owners want to buy property because of the favorable real estate climate, “but they just don’t have the capital.” According to Hurn, the fact that you can rent retail space fairly easily when you are just starting out is a big advantage to new business owners, and renting enables you to build more equity. The advantages of owning are obvious and include receiving tax breaks, not paying a landlord, and enjoying asset appreciation. His advice: “Grow and establish your business first before you buy commercial property and accumulate debt by taking out a loan to do it. Hang on to your capital and use it for research, marketing and other growth needs. When your business cycle is right (three to five years), you’ll have the capital to buy property without getting in over your head.” TECHNOLOGY According to Nicolette Corso Vilmos, an associate with the Broad and Cassel law firm in Orlando, technology plays a bigger role in society today, and many new laws are being enacted to address technology issues. This, she says, can be disconcerting for small-business owners who don’t have large staffs to attend to these concerns. “Businesses are experiencing these issues for the first time, and it’s hard to get a grasp on them,” she says. “What’s true today might not be true tomorrow.”
The trend in Central Florida is toward growth of technology and technology litigation, and business owners need to be aware of electronic issues such as e-mail marketing, software copyrighting and electronic signatures on contracts. The CAN-SPAM Act of 2003 is an example of litigation enacted as a result of technology issues. The title of the bill is an acronym that stands for “Controlling the Assault of Non-Solicited Pornography and Marketing,” and it covers commercial e-mail messages. The law bans, among other things, deceptive e-mail subject lines and prohibits false or misleading header information. According to Bill Robinson, of the GrayRobinson law firm in Orlando, the act has many requirements and includes civil and criminal penalties that can destroy a small business overnight. “The law applies not only to your business if you send out commercial e-mail, but also to third-party affiliates who sell on your behalf,” he says. “You can be prosecuted if those affiliates violate the law.” His advice: Evaluate your e-mail policy and your advertising methods. Make sure you have an opt-out policy that is effective. CAN-SPAM requires companies to stop sending e-mail to anyone who asks to be removed from a mailing list. E-mails must have a working “reply” address or an unsubscribe system that functions for at least 30 days after a mass e-mailing has been sent. Make sure any e-mail list you’ve developed, rented or bought is legal. You can be held responsible if you contract with an e-mail service to use a list that isn’t permission based. Monitor your affiliates’ e-mailings. If you discover that someone promoting your product is sending spam, it’s critical that you report it to the Federal Trade Commission or prevent the e-mails from being sent.
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small business | FOCUS ON
TAXES AND ACCOUNTING The type of business entity you become will affect your taxes. If you want to incorporate, how do you know which type of business entity best fits your needs? According to Janet Rapp, a tax partner with accounting firm Geller, Ragans, James, Oppenheimer & Creel, all types of entities apply to small businesses. Sole proprietorships, partnerships, C corporations, S corporations and limited liability companies all have different advantages and disadvantages from a tax standpoint. Her advice: “As the owner of a company, you need to ask yourself, ‘What are my goals?’ Become the type of entity that allows you to achieve those goals. Meet with a financial advisor, accountant and attorney before you make a decision to set up your business as a specific type of entity. And once you make that decision, be sure you’re advised properly on bookkeeping
and accounting practices, as well as on administrative and organization practices.” Here is some tax-specific information for each entity description: Sole Proprietorship — Net profit is computed on Schedule C and is reported as income on the owner’s Form 1040. Partnership — Income and expenses flow through to the partners. Income is taxed to the partner whether or not it’s actually distributed. Pass-through items retain the same character in the hands of the partner as they had in the hands of the partnership. C Corporation — Pays tax on its profits. When the owners (shareholders) take profits from the corporation, the distributions take the form of taxable dividends (double taxation). Personal service organizations are taxed at a higher rate. S Corporation — Taxed in the same manner as a partnership. Income and expenses flow through to shareholders.
Classifying your business correctly can save you bundles at tax time.
Limited Liability Company — Taxed as a partnership. Income and expenses flow through to members. Businesses, both small and medium-sized, can benefit from having experts giving them the advice they need to maintain profitability. Be sure you work with professionals who can give you tax, legal, marketing and other advice.
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