Starting a Small Business

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(This article appeared in the January/February 2013 issue of The American Postal Worker magazine.)

Joyce B. Robinson, Research & Education Department Director

Starting a business is an exciting proposition, but it’s also an incredibly challenging undertaking.

It involves extensive planning, making key financial decisions, and completing a series of legal activities.

Before you decide to become your own boss, examine your goals and expectations. Choose the right business venture; your business should be profitable, but should also suit your skills and strengths. When considering a business venture, remember the following businesses have higher than average failure rates: computer stores, laundries and dry cleaners, florists, used car dealerships, gas stations, trucking firms, restaurants, infant clothing stores, bakeries, grocery stores, and meat stores. If your choose one of the listed business ventures, be especially careful when preparing your business plan.

If possible, get a part-time job working in the type of business you want to start. Learn everything you can about every aspect of the business. After working for a few months, decide if you are good at the work, if you enjoy it, and whether the business venture has a good chance to make a profit.

Besides determining what you can afford, you will need to be aware of other financial considerations: Hidden costs, such as renovation, decorating, and IT system upgrades; taxes, including federal income, sales, and state property taxes; and employee wages.

Choosing a Business Location – Selecting a great business location is important. Choose a location that provides visibility to your customers. Assess the competition from other businesses in the area. Determine if the commute is feasible. Look for a building with extra space to plan for future growth. Consider the crime rate in the area, and check on zoning regulations. Do your research. Talk to other business owners in the area, and use available resources such as free, government-provided demographic data.

Writing a Business Plan – A business plan defines your business, outlines your goals, explains your strategy, and serves as your business’ resume. It should include: a description of the business; a plan for how you will market and manage your business; financial projections and the appropriate supporting documents; a current income statement and a cash flow analysis; specific information about your business goals; and an explanation of how you will repay business loans.

Financing Your Business – State and local economic development agencies as well as numerous nonprofit organizations provide low-interest loans to small business owners who may not qualify for traditional commercial loans. The U.S. Small Business Administration (SBA) also administers loan programs. The loans include:

Business & Industrial (B&I) Guaranteed Loan Program – The purpose of the program is to improve the economic and environmental climate in rural communities. A borrower may be: An individual, a cooperative organization, corporation, partnership, or other legal entity organized and operated on a profit or nonprofit basis, or an Indian tribe on a federal or state reservation or other federally-recognized tribal group.

7(a) Loan Program – The 7(a) loan may be used to establish a new business or to assist in the acquisition, operation, or expansion of an existing business and is designed to accommodate the most diverse variety of small business financing needs. Most American banks participate in the program. Businesses must: Meet SBA size standards, be for-profit, lack the internal resources (business or personal) to provide the financing, and be able to demonstrate the ability to repay the loan.

Registering Your Business Name – If your business name is not the same as your personal name, you must register it with the appropriate authorities. This process is known as registering your “Doing Business As” (DBA), a fictitious business name. You can register your DBA with the county clerk’s office or with the state government, depending on where your business is located. Some states do not require businesses to register fictitious names. The legal name of your business is required on all government forms and applications, including your application for employer tax IDs, licenses and permits.

Determining Tax Obligations – The most common types of tax requirements for small businesses are income taxes and employment taxes. Most states levy a business or corporate income tax. All states require payment of state workers’ compensation insurance and unemployment insurance taxes. Also, the states of California, Hawaii, New Jersey, New York, Rhode Island, and the territory of Puerto Rico require payment for temporary disability insurance. In addition, the federal government levies four basic types of business taxes: income tax; self-employment tax; taxes for employers, and excise taxes.

Obtaining Your Federal Employer Identification Number (EIN) – An Employer Identification Number (EIN) is also known as a Federal Tax Identification Number, and is used to identify a business entity. Applying for an EIN is a free service offered by the Internal Revenue Service. Beware of websites that charge for this free service. For additional information, call the IRS Business & Specialty Tax Line at (800) 8294933 Monday through Friday, 7 a.m. 7 p.m. Check with your state to determine if you need a state number or charter as well.

Obtaining Business Licenses & Permits – To runy our business legally, there are certain federal and state licenses and permits you will need to obtain. If you manufacture, wholesale, import, or sell alcoholic beverages at a retail location, you will need to register your business and obtain certain federal permits with the U.S. Treasury’s Alcohol and Tobacco Tax and Trade Bureau (TTB). Also, contact your local Alcohol Beverage Control Board for information about business permits and licensing. If your business broadcasts information by radio, television, wire, satellite or cable, you may be required to obtain a license from the Federal Communications Commission (FCC). If you operate an oversized or overweight vehicle, you’ll need to abide by the U.S. Department of Transportation’s guidelines on maximum weight. Permits for oversized/overweight vehicles are issued by your state government.

Online Business Assistance and Training – The SBA provides small business counseling, mentoring and training through a variety of programs and resource partners, located strategically around the country. Online training includes: Finance Primer: Guide to SBA Loan Guaranty Programs; Government Contracting 101(Small Business Contracting Programs, How the Government Buys, and How to Sell to the Government); How to Write a Business Plan; How to Prepare a Loan Package; Marketing 101: A Guide to Winning Customers; Technology 101: A Small Business Guide; and Young Entrepreneurs: An Essential Guide to Starting Your Own Business.

Online courses can be found at on the “online training” icon. To obtain additional information on starting and financing a small business, visit and

I wish you much success in your endeavors

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