building business

Best Money Tips: The Best Businesses to Start in 2017

Amy Lu — Wed, 28 Dec 2016 10:30:25 +0000

Welcome to Wise Bread's Best Money Tips Roundup! Today we found articles on the best businesses to start in 2017, tips for throwing a great New Year’s Eve party for cheap, and the things you need for winter hibernation.

LLC's, and S Corps, and C Corps! Oh My!

Joel Ohman — Thu, 29 Jul 2010 12:00:17 +0000

In the mind of many entrepreneurs, there is nothing more dreaded then spending many of their key start up hours agonizing over which form of business entity is best for their new company. But like Dorothy in the Wizard of Oz, most small business owners have nothing at all to worry about if they prepare and just start down the path. (Yes, I was tempted to say "start down the Yellow Brick Road" but American classic notwithstanding, let's avoid anymore clumsy Wizard of Oz references shall we?)

The First Mistake

One common mistake for many new entrepreneurs is to select a type of business entity for their new business based off of the recommendation of a non-professional friend. Different types of businesses with different goals run by different people may not necessarily share the same type of business entity as an ideal match. When I started a company with informational websites about car insurance, for example, it would not have been smart for me to just assume that I should choose the same type of business entity as a friend's landscaping business. While it is admirable that you understand the importance of forming a business entity, it's also important to know what the right business entity is for your company.

Limited Liability Companies (LLC's)

An LLC is a beautiful thing, because it is so flexible. When forming an LLC, the members have the option to either be treated by the IRS for tax purposes as either:

A Partnership (or a sole proprietorship if there is only one member of the LLC)
C Corporation
S Corporation.

If no selection is made, then the default treatment of the LLC is that of a partnership for multiple member LLC's and sole proprietorship for single member LLC's.

In addition to its flexibility, an LLC also has the added benefit of being cheap to set up, as compared to a C Corporation or an S Corporation. It is important to note that Limited Liability Companies are creatures of the state, and as such, there are some differences depending upon the state where the LLC is formed. For the most part, however, the paperwork requirements for both filing and ongoing reporting are less complicated for an LLC than for a C Corporation or S Corporation.

The last benefit to an LLC is that S Corporations and especially C Corporations have a number of requirements that tend to be characterized as simply corporate formalities. While things like issuing stock, recording stock transfers, and adopting and maintaining bylaws are all very important and serve a useful function in many large companies, chances are good that your typical small business owner is not so concerned with any of these types of things.

S Corporations

You have likely heard of many self-employed individuals raving about the tax benefits of being set up as an S Corporation. Technically a Subchapter S Corporation is exactly the same type of entity as a "regular" C Corporation except for that it has met certain IRS qualifications and has made a special election to the IRS (IRS Form 2553 for those of you who just love to know these types of things).

This special S election is designed specifically for small businesses, as the maximum number of S Corporation shareholders allowed by law is 75 — which is why large companies that are publicly traded are formed as C Corporations and not S Corporations. (Just imagine if Google, Apple, or some other large company in the Fortune 500 with highly desirable stock could only sell their stock to 75 people!)

While there are other differences between S Corporations and C Corporations, it is fairly certain that if you took a poll of tax professionals, they would say that the No.1 "extra special" thing about the S Corporation is its avoidance of "double taxation" that the C Corporation is subject to (which we will get to below). They would also mention the additional tax savings that are available to S Corporation owners. The IRS has stated that S Corporation owners are required to pay themselves "reasonable compensation." After paying themselves "reasonable compensation" the S Corporation owners can take distributions from the S Corporation that are not subject to FICA taxes or Self Employment taxes. The absence of these two taxes can add up to substantial amounts of money for many S Corporations.

C Corporations

C Corporations are the "regular" corporations used by virtually all large companies that have publicly-traded stock. One of the major benefits to the C Corporation form of business entity is the IRS allowance of certain tax free benefits (insurance, travel, etc.) that are unique to C Corporations. An additional benefit is the fact that, whether you plan to sell stock in your company to 30 or 30,000 people, the C Corporation is designed to accommodate those goals.

One of the major negatives of the C Corporation is the aforementioned issue of "double taxation." This means that the C Corporation owes federal tax on the company profit at the corporate level, and once any profits are then distributed to shareholders as dividends, the shareholders each owe federal tax on their dividends received at the personal level.

Some additional things to note about C Corporations, as compared to S Corporations, is that C Corporations can make their profits from any classification while no more than 25 percent of an S Corporation's income may be derived from passive income. C Corporations may issue different classes of stock (common, preferred, etc.), while S Corporations may only issue one class of stock.

Which to Choose?

The standard disclaimer for any and all tax information certainly applies to this article, but in this case it REALLY applies. Hopefully you have learned a few tips and some helpful things to discuss with your CPA, tax attorney, or other tax professional, but above all: Be sure to work with a qualified tax expert so that you can set your company up for success by choosing the right business entity. You will be skipping along in your ruby slippers* in no time at all!

* Sorry, I just couldn't resist!

Guest Post Blurb:

This is a guest post by Joel Ohman. Joel is a Certified Financial Planner™ and the founder of a website for learning more than any one person could ever care to know about car insurance as well as a website for comparing insurance quotes.

This article is from Joel Ohman of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Building a Better Business

Christian Arno — Sat, 03 Jul 2010 17:03:04 +0000

With the effects of the global economic meltdown still being felt, budding entrepreneurs could be excused for thinking now is not the time to launch a new business initiative. But this isn't necessarily the case — it all depends on the type of business that you're launching.

A quick look across different industry sectors reveals that not everyone has suffered as a result of the recession. Chocolate sales are doing particularly well, for example, and video games are also enjoying an increase in sales. Greggs — a mass-market fresh bakery chain based in Europe — has been doing exceptionally well during the recession, as people are looking for cheap eats at lunch time rather than going for an expensive sit-down meal.

The point is, the state of the industry you plan to enter should dictate whether you actually set up shop there or not. So before starting your business, take a look at the main industries you'll be working in or with: How are they doing? Have sales been going from strength to strength? By putting in this initial groundwork, you can help minimize the chances of failing; market research should underpin all your decision-making.

The important thing to remember in the early days is that your startup funds are precious, so don't throw money at any old scheme in a vain attempt to drum up business. In fact, try and do as much as you can for free. You'd be surprised at how easy it is to save money by thinking just a little creatively.

Innocent Drinks is a UK-based company that specializes in smoothies. They have almost 75% of the UK smoothie market cornered and have a turnover of almost $200 million USD. So it's safe to say they're a big company now, but in 1999 they were just three guys with an idea to start a smoothie company. They hired a small stall at Glastonbury music festival in England and sold low-cost smoothies. All they asked from their customers was this: If you think we should start this up as a full-time business, throw your cup in the left bin, if you think we're wasting our time, throw it in the right-hand bin.

Needless to say, the left bin was full to the brim and the rest, as they say, is history. The beauty of this scheme was that they spent very little money and got valuable feedback from the very same people who would form their future client base. Any budding entrepreneur can learn a lot from this exercise. You need to engage with your potential customers before you spend a lot of money on a business.

Pay as you go

It's also important that you start small and follow a carefully-managed growth model. (Many businesses fail because they try to grow too much too quickly.) This may mean taking on a lot of the administrative tasks yourself in the early days, but that's a good thing as it means you learn a lot about what it takes to run a business and you can understand the inner workings of your own company.

Of course, you won't be able to do the job of a fully qualified accountant, for example. But that doesn't mean you should employ a full-time accountant, either. Outsourcing certain services is a good way of keeping your costs down so that you only pay for the services of an expert as and when required.

SEO

The internet is the first of call for many consumers, so you'll also need a website to help promote your product or services. However, there's little point launching a company website if nobody can find you on Google, Bing or Yahoo. You need to commit some resources to search engine optimization (SEO) — essentially, the process of ensuring you rank highly on search engines for key search terms that are relevant to your industry.

It's certainly worth getting to grips with the basics of SEO yourself before you consider paying for digital marketing experts. It'll help you understand the importance of online marketing and how much extra business it will secure for you. (For example, the difference between ranking number 1 and number 10 on Google.com for the search term 'car insurance' will be considerable, in terms of the number of visitors clicking through to your website.)

The social web

LinkedIn, Twitter, Facebook, YouTube are all social media platforms you should be embracing to their full capacity. And the beauty is, they're free to use.

The need to maximize your online presence can't be overstated. In fact, many businesses have social media strategies, distinct from other marketing strategies. If you have clients you're on particularly good terms with, connect with them on LinkedIn. Then other business acquaintances of your clients can connect easier with you; it can be a good way of generating new business for very little effort. Also, join group discussions that are relevant to your service offering. Offer advice, mentoring — whatever it takes to build your reputation and business relationships.

Twitter is also a fantastic forum for keeping your finger on the pulse of your industry. You can follow publications, read news, connect with people with similar interests and build your own following through offering insightful updates from your daily business experiences.

Life in cyberspace

It's also worth considering whether you actually need an office in the early days. You can save a lot of money on premises by working from a spare room in your house. These savings can then be passed on to customers, meaning you can undercut your competition and secure new business quickly.

If this is the route you go, you have to know what technology to use to help streamline your business. If you have a few people working from home in your business, you can use the likes of Google Docs to collaborate in real-time, so you can have joint access to the same documents and spreadsheets. And because they're all stored in "the Cloud" (Google's servers), they're safe from any internal system crashes at your end.

You can also use Skype for one-on-one video conferencing and for Skype-to-Skype phone calls — both of which are free.

Go forth and prosper…

By carrying out just a little market research, ensuring your costs are kept to a minimum and understanding the benefits technology can bring you, your chances of building a successful business are greatly increased. Now go forth…and prosper!

Guest Post Blurb:

This is a guest post by Christian Arno. Christian is founder of the translation company Lingo24. Launched initially as a home business in 2001, Lingo24 now has 127 employees across three continents, clients in over 60 countries and a turnover of $6 million. Read more by Christian:

This article is from Christian Arno of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Small Business Pitfalls, and How to Avoid Them: PART ONE

Nora Dunn — Sat, 27 Sep 2008 00:08:24 +0000

Whether you have been downsized by the corporate world and are going out on your own, or are “retired” and opening that business you have always dreamed of running, or are simply filling a niche with your special idea and skill set, the world of small business is vast and rife with pitfalls.

The opportunities are as great as the hazards, and no matter which way you slice it, running a small business takes a lot of hard work and tenacity.

But it doesn’t have to be all bad: by knowing where the typical traps lay and how to avoid them, you can soar to great heights with your business.

In this, the first of a two-part series, we will examine four of the six ways you can avoid some of the largest pitfalls any business owner can fall into. Navigating through these entrapments can mean the difference between success and failure.

Get a Jump on the Learning Curve

When starting out in your new business, you often have to do it all yourself. And a lack of management experience (outside your area of expertise) is a recipe for disaster if you don’t address it properly.

A tradesman I know was recently downsized and decided to seize the opportunity to work for himself. He figured that he knows the business – he has spent a lifetime working in it – and so he was astonished when he floundered and ultimately failed at his own craft. What he didn’t realize is that running a small business is about so much more than performing the service or providing the product in question; you have to manage the books, file taxes and understand your write-offs, meet legal requirements, provide exemplary customer service, collect debts, pay employees, and so on.

And even if you can accomplish all the tasks above in addition to the daily income-generating work, what will your life look like if you have to learn it all – the hard way - as you go? You probably won’t have much of a life at all, you will work back-breaking hours, and with every day of maintaining this level of activity, it will be even harder to delegate these tasks later on (we will get to that shortly) since they probably weren’t done optimally to begin with.

If you run your business in an off-the-cuff manner without at least seeking management training and a grounding in the basics, you will run the business right out of business. Training doesn’t have to be expensive – many local government offices offer free courses to help encourage new entrepreneurs. It will be well worth the time (and money) spent; it could be the difference between solvency and bankruptcy.

Learn to Delegate

Eventually – and possibly right from the start – you will have to delegate if you want your business to grow (or even just to succeed). Wearing every hat and being everything to everybody will quickly tire, and if you survive it without burning out, you may likely lose sight of why you got into business for yourself in the first place.

Learning to delegate involves two crucial steps:

Trust Your Employees and Contractors

You simply have to trust that you are paying the right person to do the right thing. They may not always do it your way, but if they get the job done, let it be. If they need some extra guidance to get it right, then provide it patiently and wait for the results. And if they still can’t do what you need them to do, find a new employee or contractor. Yes – your business may stumble in the process, but it is all part of the fabric of entrepreneurship; pick yourself up and keep on going. The big businesses of the world didn’t become so from one person doing everything themselves.

Your clients will indeed understand if you pass the management of their accounts on to an employee. Assure them that you are still at the helm and are there to help them, but that in order for you to provide exemplary service, you can’t always be the one to answer the phone, or send their statements, or even provide the actual service (depending on the level of delegation you embrace).

Phase Yourself Out of the Business

It may seem strange to be discussing how you will phase yourself out of the business before you are even out of the starting gate, but this is a foundational principal of good business. Your aim should be to structure it to run smoothly – with or without you. Even if you don’t have ambitions of being the next huge conglomerate, there will be times when you will want to take time off, or may fall ill, and your business should not suffer as a result. The ultimate indicator of success in business is if you can step away from it and continue to enjoy a passive income from a distance.

Cash is King. So Avoid the Cash Crunch: Buy & Manage Sensibly

The amount of expenditures when starting a business is overwhelming. Knowing this, there are ways to engineer your business so that you don’t experience the cash crunch. The last thing you need is to default on loans and have a business that is just getting off the ground ripped out from under you.

A big temptation when getting started in business is to insist that you need a whole pile of items that you don’t actually need. You absolutely “must have” the top of the line this, or super-expensive that, or you may drastically over-estimate what you will sell and how much of it will move off your shelves. Some ideas:

That bulk sale for a stock item that you don’t yet need replenished may be a great deal, but if you already have stock that isn’t flying off the shelves, resist the urge to stockpile. It’s a surefire recipe for a quick cash crunch.
Lease equipment instead of buying it, especially if you only need it for short-term use, or if it will be obsolete by the end of the lease term. Although leasing isn’t always the most financially effective way of doing things, having cash in a fledgling business means increased solvency.
If you have stock that just isn’t moving, be ruthless: get rid of it by discounting it more deeply than you may wish to. As long as it sits on your shelf, your bills won’t get paid.
Avoid state of the art equipment. Choose the frugal route and buy second hand at auctions or through online or newspaper ads. You can save a bundle of money and still have all the functionality you need.

Don’t Forget About Tax!

Income Tax, along with various mandatory employer-paid benefits, can turn year-end accounting into a shocking experience if you haven’t made proper allowances. Cash in hand does not translate directly into profits for pockets.

Next time, we will look at the two remaining small business pitfalls – and they’re doozies! For now, put the above into practice and you’ll already be ahead of the small business game.

This article is from Nora Dunn of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: