Check List and Thought Starter on BEGINNING A NEW BUSINESS

STARTING A NEW BUSINESS

Prepared by the Erie Chapter of the Service corps of Retired Executives (SCORE) a volunteer organization sponsored by and operating under the aegis of the Small Business Administration.

This guide is not an operating manual. The sole purpose of this guide is to outline the basic requirements for initiating a business in Erie County and to provide sources or information for meeting these requirements. No other representations are made or intended.

The information relating to State and Federal requirements is applicable to all locations. However, other townships and boroughs usually have similar requirements. Check with them for their specifics.

To gauge chances for success in business, there are two fundamental considerations:

What customer-desired goods or services you are going to offer?
What knowledge or skills can you bring to the business?

BUSINESS PLANS

For a person proposing to start a new business the most important think to be done is to prepare a detailed business plan, as the chance of succeeding without it is very slim. Some of the actions required are:

Accumulate extensive knowledge of the proposed business.
Makes sales and profit projections based on your knowledge of the business.
Be sure to have adequate capital for starting and operating the business until it can support you.
Study the competition.
Select a location where there is sufficient opportunity for a new business.
Decide the image of the business (quality, services, price).
Be prepared to keep precise records of all receipts and expenses.
Plan to seek professional help where needed in areas such as: legal, accounting, insurance, finance and advertising.
Know where to buy the products or services you will need at a price which will permit satisfactory profit margins.
All business is operated to make a profit; if your business plan does not indicate that a profit cane be made, drop the whole idea.

MARKETS

These are considerations:

Size and characteristics of markets to be served. Demographic data by census tract and economic information by trading area are available from:
(a) Your Chamber of commerce or Dept. of Economic & Community Development (814) 870-1270
(b) PA Small Business Operation & Resource Guide from your local State Rep.
Competitors. (Competitors can be determined from:
(a) Yellow Pages
(b) Industrial & Trade directories
(c) Suppliers
Market Share (Your judgment, after appraising size and growth of market, competition and your abilities.)

SITE SELECTION

Check zoning regulations for site or sites being considered. For a manufacturing plant - transportation, parking, type of lease and suitability of building and equipment are important actors.

For retail and service establishments, availability to customers is essential. If you will be dependent on drop-in- trade, you will want a high traffic location among prosperous neighbors.

If your business is of suck a specialized nature that customers seek you out, you will want to have a readily accessible location with adequate parking.

You will need to check with your local Fire Department regarding fire safety regulations.

FORM OF ORGANIZATION

Most small businesses operate as proprietorships. This is the simplest form of organization with greatest freedom from regulations and paper work. Disadvantages are unlimited personal liability for debts of the business and business terminates with death of owners.

In a partnership )like a proprietorship except two or more persons are involved), the liability for the firm's debts is also unlimited to all partners, and any one of the partners can commit to he firm to obligations. Death of a partner terminated the partnership; however, the partnership agreement normally provides for the surviving partner (s) to continue the business.

A corporation has the advantage of liability limited to the amount owners have paid for their share of stock together with undistributed profits, and its continuity is unaffected by death or transfer of shares by any of the owners.

Stockholders of family corporations whose stockholders are usually the officers, may be required to personally guarantee the business debts and may have liability for all of the business transactions, similar to proprietorship and partnerships. Disadvantages extensive record keeping, close regulations, double taxation - taxes on profits, and then again on dividends paid to owners. however, some of disadvantage are eliminated under a "Chapter S" election with IRS and PA recognize for the benefit of certain small corporations.

For any form of organization beyond a single proprietorship, it is best to consult with legal council.

REGULATIONS & TAXES
LOCAL AUTHORITIES

This information is prepared primarily for those intending to operate a business in the Erie and surrounding Erie County areas. However, other than the items specifically designated for this area, all material is valid statewide except for local street address and telephone numbers. If you propose to operate outside the City of Erie, contact the borough or township authority governing that area to check zoning., taxes, licenses, fees, etc.

Employer's Identification Number:
It is suggested that you make early application for a federal identification (ID) number.
Once received, this number will be your ID for tax returns and other federal business, including tax returns for additional taxing bodies (see Federal Government)

City of Erie:
(814) 870-1220 626 State Street, Erie Pa 16501 Visit the Tax Offices at City Hall in Erie and department personne4l will explain the city taxes to you. They will indicate those that apply and arrange for appropriate tax forms to be sent to you as required.

Local income taxes can be as high as 1.5%. They cary by municipality. You should call the city or town in which you will operate your business for details.

Zoning:
(814) 870-1265 626 State Street, Erie Pa 16501 You should always verify with the municipality in which the real estate is located, that the zoning laws support the use.

Food & Beverage Permit:
Anyone contemplating a business that in any way requires the preparation and service of food and/or liquor - its storage or transportation, grocery stores, butcher stores, delicatessens, etc - should apply promptly to the Dept of Health (814) 451-6740 606 W 2nd St. Erie Pa 16501 or www.dsf.health.state.pa.us

PA Guidelines: State Taxes & Fictitious Name Registration:
See publication "Starting a Business in Pennsylvania: A Beginners Guide", publication REV - 588 PO (06-99) for important information and phone numbers or on the internet at www.state.pa.us

Federal Government:
(800) 829-4933 or on the internet at www.irs.gov Your Federal ID Number may be obtained here (Application Form SS4) The IRS also publishes a booklet on business taxes, Publication 334, which is valuable and free.

Other Regulations:
Federal law and regulations vary considerably with the legal form or nature of your business. As a new small business, contact SBDC (Small Business Development Center) (814) 871-7232. They can give you specific information for all federal rules and regulations or direct you to the specific area you need to contact.
New regulations are frequently being promulgated and interpreted by Federal Occupational Safety & Health Administration (OSHA) Contact them at the Bureau of Occupational Safety and Health Administration (814) 833-5758 3939 W. ridege Rd Ste B-12 Erie Pa 16506

Other Development Agency Contacts:

Gannon Small Business Development Center (SBDC)
(814) 871-7232 120 W. Ninth St. Erie Pa 16501 www.gannon.edu
SCORE - Counselors to America's Small Business
9814) 871-5650 120 W. Ninth St Erie Pa 16510 www.scoreerie.org
Erie Regional Chamber & Growth Partnership
(814) 454-7191 208 E. Bayfront Pkwy Erie Pa 16501 www.eriepa.com/chamber
County Dept. of Community & Economic Development
(814) 871-4241 100 State St Ste 205 Erie Pa 16501 www.state.pa.us
City of Erie Economic Community Development
(814) 870-1270 626 State St. Erie Pa 16501 www.cityoferiepa.com

RECORDS

Every business, no matter the size, must keep written records of the transactions which affect the business.
Proper records are required for the banker, IRS, other taxing authorities and the business owner/manager. The best records are those which satisfy the latter requirement first; they will generally satisfy the other requirements in turn.

There is no prescribed way to keep books or records.
The IRS simply says your system must be suited to the purpose and nature of your business and properly reflect the profit and loss thereof. Proper accounting records need not require "books". What is really required is an orderly system for moving handling and maintaining the pieces of paper which are generated with each business transaction.

The record keeping system should be simple enough that the owner/manager can take care of it if necessary. A record keeping system should be maintained on a daily basis for optimum results. In any case, the record keeping system must be so designed that it will meet the level of sophistication or education of the owner/manager who is to record and use revealed data.

Basically, the usual system* will provide for:

A daily or otherwise periodic summary of cash receipts.
A disbursement journal.
*including, in all cases, easily accessible storage of supporting papers.
A business check book (which in itself could be the only record of receipts and disbursements needed.)
A record of sales and purchases.
employee compensation record (and withholding Social Security and other taxes)
Inventory records (if inventory changes are basic to the profit and loss determination)
Asset register (including depreciation when applicable)

Added to that will be some kind of record detailing costs and expenses, set up or kept in such a fashion that the owner/manager can have a "handle" on the business. Proper combination of several of the basic records will usually produce all the data needed.

Standardized accounting record systems for many kinds of businesses are available from almost any office supply store. The "best" of these is the one of the owner/manager can work with and understand. Trade associations for different kinds of businesses may sometimes have available "standard" accounting systems for that business. If one cannot be adapted, an accountant should be asked to set up a system which will meet the demands of the business and the particular abilities of the owner/manager. computer programs are available.

INSURANCE

Insurance in its various forms may be likened to a Survival Kit - it may never be used but without it your business might be seriously impaired or indeed, may expire. Five basic coverage's are included under the designation of General Insurance: fire, property damage, liability, workers compensation and errors and omissions.

Technical detail, integration and maintenance of such policies are best placed in the hands of a professional,. qualified insurance agent who is equipped to provide personal and on-the-spot-service.

Business life insurances is increasingly employed to provide funds that may guarantee the survival of not only a partnership entity but also of a closely held corporation in the event of the death of a key person or business co-owner.

Other arrangements of life policies may be used to fund employees group and retirement plans, Individual Retirement Accounts (IRAs) Keogh Plans and other deferred compensation plans. Finally, it is never too early for even the novice entrepreneur to integrate his personal and business life insurance policies into an organized estate plan with the aide of a qualified life insurance counselor.

COSTS

Before you start your business, you will have to make an initial investment in start-up costs.

A Capital Requirements:

List below the cost of business items you already have and/or paid for.

List below how much more you need.

Organization Expenses
(Legal & Accounting)

$__________________

$____________

Truck & Vehicle

__________________

____________

Tools & Supplies

__________________

____________

Furniture & Fixtures

__________________

____________

Machinery & Equipment

__________________

____________

Building Improvements

__________________

____________

Land & Building

__________________

____________

Starting Inventory

__________________

____________

Cash

__________________

____________

Other (including living expenses during start-up

__________________

____________

Total

$__________________

$____________

SALES AND EARNINGS FORECAST

Experience records indicate it may take several years for a new business to become established and generate profits satisfactory to the owner. Therefore, you should forecast annual sales and earnings for at least the next three years.

B. Sales and Earnings Forecast:

Gross Sales	1st year	2nd year	3rd year
Less returns, allowances & discounts	$________	$_______	$________
Net Sales	________	_______	________
Less cost of good sold	________	_______	________
Gross Profit	$________	$_______	$________

Less Operating Expenses	________	_______	________
Rent	________	_______	________
Owner's Payroll	________	_______	________
Payroll, Other	________	_______	________
Phone	________	_______	________
Heat, Lights & Water	________	_______	________
Interest & amortization	________	_______	________
Postage	________	_______	________
Advertising & promotions	________	_______	________
Travel & meetings	________	_______	________
Vehicle expenses	________	_______	________
Taxes (payroll)	________	_______	________
Taxes (other)	________	_______	________
Supplies	________	_______	________
Legal & accounting fees	________	_______	________
Insurance costs	________	_______	________
Repairs	________	_______	________
Other deductions	________	_______	________
Total operating expenses	________	_______	________
NET PROFIT	$________	$_______	$________

SUMMATIONS

If you've been able to follow all these guidelines satisfactorily, you are then ready to launch your business.
However, there is one essential ingredient, without which no business can succeed, it is WORK.

If you need help in using this information, please call SCORE at (814) 871-5650

Good luck and thank you for looking to SCORE for support.

"SCORE" services are provided without regard to race, color, national origin, gender, age and disability. Persons with disabilities may request reasonable (special) accommodations (with a two-week advance notice) For special accommodations, please contact:

SCORE Chapter 193 Chairman
120 West Ninth Street
Erie, Pa 16501
(814) 871-5650