Business Credit: Every Small Business Owner and Entrepreneur Should Know This
America prides itself on the entrepreneurial spirit. Consequently, small business owners are increasingly becoming major key economic stimulators. When a small business owner decides to incorporate his or her business, that small business owner has just begun the process of creating a brand new and separate entity. Basic business law dictates that a corporation is a “separate and distinct legal entity having its own privileges and liabilities distinct from those of its member.”
Given this information, it then becomes essential and relevant that small business owners develop and maintain a unique and separate business profile. Every small business can and should establish their business credit. Just as it is important to maintain a personal credit profile, the same care, if not more, is needed to maintain a business profile.
The rules and regulations that govern business credit are totally different that the rules that govern your personal credit. Furthermore, the advantages as well as the necessities are apparent to some and not to others.
With the opportunities provided by government agencies, whether local or national, small business owners should be aware that an established business profile is valuable and necessary when partnering with the government for contracts and other ventures.
Additionally, limiting or avoiding personal liability is another key factor why a small business owner needs to be aware of and develop his or her business profile history. Purchasing goods or services under the name of a properly structured business entity can possibly afford the owner or owners some personal protection if the business finds itself in a position of litigation or debt.
The long term gain of a properly maintained business credit profile can afford the small business owner with better financing terms. A financial institution today will usually take into consideration a company’s business credit profile when making business loan decisions. This can also assist in receiving S.B.A. backed loans. Additionally, retailers and vendors can offer great revolving terms or net terms all based on your company’s business credit history.
As a result, when possible, attempt to do business with companies that report your payments to the business credit agencies. This can be a huge plus in developing your corporate credit profile.
Another aspect associated with establishing and maintaining a business credit profile comes in the form of creditability. As well as appearing legitimate to the banks, suppliers or vendors that you do business with, your business credibility can be scrutinized and looked over by individuals as well.
More and more individuals are willing to explore a small businesses’ credibility by actually reviewing the company’s business credit history. This gives information such as – How long has the company been in business. Are they paying their bills on time? Does this company have any judgments or liens against them that the individual should be made aware of?
For example, Joe Smith can take a look at ABC Roof and Repair Inc, and find out if any judgments or liens were ever placed against the company for possible faulty work. This can be a valuable tool when deciding to choose a contractor for major projects.
Business credit can be understood and achieved by any properly structured organization. Whether you are a mobile business, storefront, street vendor, personal trainer, stylist, personal barber, eBay seller, home business or consultant, it is beneficial to you as a business owner to understand the basics creating and maintaining your business credit profile.
Small Business – Big Business.What’s the Diff?
Small Business, Big Business – What’s the Diff?
Well a lot actually!
I become frustrated and angry at the government’s paying lip service to assisting small business. It appears as though all governments, bureaucrats and many accounting advisers do not know what a real small business is.
In Australia the government’s definition for a small business is one which has less than 100 employees. Who are they kidding? In my consultancy that’s a big business.
They believe that ‘small business’ is the same as ‘big business’ on a smaller scale, that ‘big business’ is ‘small business’ with more of the same.
Wrong! About 99% of small business employs less than 10 employees and what is beneficial to the 100-employee firm may be downright dangerous for the 10-employee firm. Governments must know that. They can’t be so stupid not too… can they?
We Aussies are ready to believe anything about our politicians. We have met so many of them and none of them seem any brighter than the fellow next door. (In fact, none of them seem to know as much as I do).
When I decided to go global I was certain that the situation would be different in the USA. I was wrong.
The USA Small Business Authority has set a size standard for most ‘small business’ enterprises. In the full Table of Small Business Size Standards Matched to SIC Codes published by the Small Business Authority it is annual turnover that limits the size of small business firms.
In my consultancy of restaurants, coffee shops, florists, hairdressers, electrical retailers etc. the turnover limit is $5 million. In Australia there are NO single shop establishments achieving that sort of turnover.
In Australia a hairdressing salon working a 7-day week at an average price of $70 per client would need 30 clients each and every hour on ever day of the year. Impossible in Australia and probably in the USA too.
This does clear up an anomaly I had noticed in the different approach business plans took in Australia as opposed to that taken in America.
When Australian business began to use the Internet almost all the business plan software was from the States. The plans, although meant for small business, were not appropriate for Australian firms because they focused entirely on obtaining venture capital.
There were very few venture capital providers in Australia and of those that were few were interested in providing capital to the majority of our small ‘small business’. Business Plans languished in the filing cabinet and were hardly ever seen again.
The Australian consultants began to oversee business plans that focused on their being used as management tools. The planning itself was a vital element in the success of the business…and the plans were used to chart the course of the firm.
Each month the actual results were compared to what had been expected in the business plan. Tactics were formulated to overcome shortcomings or build upon favorable results.
Are you a small business owner who has studied all the books and web information that you can get hold of, and it is still not happening for you?
Perhaps it is because the information was directed to firms much larger than yours – firms with 100 employees or $5 million in sales. You need information more suited to your own business size.
Various organisations publish benchmarks for your industry. Compare your own results with the industry average. This will show where you should be concentrating your efforts for improvement.
You should seek out advisers and information that applies to ‘mini’ business – firms that are your size whatever it is. Perhaps you own accountant can help you find it.
But never be so foolish as to believe that what the government says is good for small business will be necessarily good for you.
Kelvyn Peters CPA and Associates knows profitable business strategies that really work.
And he’s only an e-mail away.
How to Start a Tax Service
Tax Service Businesses from home are the hot home business of today. As more and more companies downsize and outsource work, there’s a higher demand for business tax service, tax preparation service and small business tax advice than ever before. If you’re thinking about starting a tax service business from home, consider these things:
Do you have the background and education you need? If not, are you willing to, and do you know where to go to get it? Do you want to have an income tax preparation service or a business tax service, or would you prefer to offer small business tax advice? Is this a profession you want to pursue full-time or only part-time? Will your family be affected by your having a tax service business in your home? Do you like working with numbers? Can you deal with frustrated and angry people? Is there a space in your home for an office? What equipment or supplies do you need? Do you need to get any financial assistance in starting a tax service business? Are you willing to put the necessary effort starting a tax service business? Should you have a partner? Do you need to get any additional insurance? What accounting knowledge will you need for your tax service business? Where will you go to get the information about what your state’s requirements are on starting a tax business from home? Does your state require you to have a license? What are your neighborhood’s zoning regulations concerning home businesses?
Questions like these will start you thinking about all the details you need to attend to before opening the doors to your tax business from home. Do as much research as you possibly can before making a decision.
Once you’ve done your homework and have decided that, yes, you want to go ahead with starting your own tax service business from home, make or purchase a business plan. Outline what you need to get started with your own tax business and the steps you need to take.
Goals aren’t reached by magic. They’re reached by understanding what’s involved in undertaking starting a tax business and knowing what you need to do. Making a business plan and following it will keep you on track. This will enable you to actually open a tax service from home more quickly with less trial and error. Ultimately, a good business plan ensures you’ll be successful at your tax business.
Even with a good business plan, you need to be aware that there will be obstacles in having your own tax business from home. There will be days you think you must’ve been nuts to go into business for yourself. Especially if you’re used to being in a larger business environment where there many people to help carry the business.
Because in a small business, whether it’s a tax business from home or a home show business, you’re forced to wear many hats. You have to be the boss, the administrative assistant, the office manager, the accountant, the receptionist, as well as the employee doing the work-often all at once. And there’s also the stress and pressure of having all the work, as well as all the financial burdens on your shoulders alone. Having your own business isn’t for everybody.
And, if after you’ve given it some thought and done your research, you’ve decided that a tax business from home is just the right business opportunity for you, you have many things to look forward to. There are far more positives to being your own boss than there are negatives. Not facing that morning commute is usually enough to make most people never look back. Not having to face that evening commute either, is enough to make them rejoice-and never regret for a minute, starting a tax service business at home of their own.