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Question about business

Opening a business and wondering what types of expenses I can write off?
I am opening an online business for website design. (set up as a LLC, I'm the sole owner) Should I start keeping receipts of all business related expenses? Or would my business qualify as a hobby if I don't make a certain amount of money in the year that I'm filing.

What types of things can I write off onto my business? (dinners, gasoline, etc.) Do I need a seperate business credit card/bank account for the expenses?

Do I have to accept payments towards the business's services through a corporate account, or can they make the check/payment directly to me?

Article

Business from Scratch

(By:- Mr. Azfar A Khan)

Most of us sometimes feel that we should have a business of our own and be our own boss but we are shy to jump in the business arena due to some unknown fear. In this indecisiveness, we keep thinking for years and years together and can’t make up our mind one way or the other, thus wasting a lot of time with no tangible results.

“The hardest thing about getting started is getting started.”

 

                                                …Guy Kawasaki

To own a business is a great challenge. It’s not difficult at all to start a business and succeed in it too provided you follow certain laid down principles of entrepreneurship. These principles are time-tested and provide guidance to avoid possible pitfalls. In this article, our discussion would generally revolve around these principles.

While starting a business of his own, an entrepreneur has to decide which main product he’d like to keep in focus. Also, he’ll have to see whether there was any market for that product? Also, he has to see which other competitors already exist. So, he has to do something that distinguishes him from others in the area. He should develop his niche. His product has to be better in quality; he may offer useful options to the customers within the same price range. Say, there’re two Pizza shops side by side. One of them being new in the business has a system for home-delivery whereas the other one doesn’t offer this facility. Naturally, the one with home-delivery system would have an edge over the other.  

Before starting a business, an entrepreneur has to carry out a survey as to which product was required by the market. Then he should choose his product keeping market need in view. He should always be thinking about the new ideas. He should assess his idea’s market potential.  He may look for some add-ons in the existing products; or still, he can make use of new technology, think of innovations. Once, he has done his homework, then he should implement his idea. The uniqueness of his idea would catch the customer’s attention. He may also see which segment of the society he intends to target.

A lot depends these days upon marketing of a product. Marketing is nothing but ways and means to sell your product. He has to resort to massive advertisement for his product through various means like handouts, internet, banners, newspapers, radio, TV, etc. I would explain it in this way: Say, you’ve got gold in your pocket and you want to sell it, but unless you tell somebody about your intention, it would be next to impossible to find a customer for your gold. The same is true for your business.

As mentioned above, an entrepreneur can make the best use of internet to promote his business. He may design his website through some professional in the field and attain international exposure. Website must be promoted through various means. It can be be promoted through search engines, business cards, stationery, etc.

Selling online these days has become a roaring business. It’s a multi-billion industry and is quite cheap as compared to an actual bricks and mortar store. Now, you can access billions of websites, find an item of your choice and place an order online. Say, an entrepreneur is engaged in supplying electronics goods to his customers. For his satisfaction, the purchaser wants to see the item before placing an order so that he could be sure whether the item being supplied to him was exactly the same that he wanted. So, he’ll communicate with the supplier on the internet and at the same time see the item physically on the monitor of his computer before placing an order. Just imagine, how much time, effort and money is saved!

Before starting his business, an entrepreneur has to choose what form of business he intends to follow like sole proprietorships, partnerships or corporations.. In sole proprietorship, he is fully responsible for all debts and liabilities. This form of business is very popular. The examples include home-based businesses, consultants, restaurants, etc. He can do his business in partnership with somebody and share the assets, liabilities and profits of his business. If he intends to conduct his business on a large scale, he can venture into a corporation. Corporations are divided into shares or stocks. Ownership is dependent on the number of shares owned. Corporations are expensive to set up.

There’s one thing that’s very important while starting a business and that’s preparation of a business plan. Anybody, who starts a business, must prepare a business plan in advance. A business plan is a notice board of the company that shows the entrepreneur’s vision about the business. It convinces the client that the company’s business was in safe hands and that it wouldn’t be risky for him to make financial commitments to this company. The business plan comes handy while applying for loan as well. It tells the investor as to how the loan would be repaid. A standard business plan may comprise about 35 to 40 pages. It should make use of bullets and steps for explaining various aspects of the plan. The language should be simple and easy to understand. It shouldn’t give a gloomy outlook; rather it should evince enthusiasm and compel the investors to invest their money in this new venture.

An entrepreneur should have a fair idea through estimates as to how much money would be needed to start his business.  He should be very clear as to which sources he intends to tap to arrange finances. The best choice would be if an entrepreneur invests his own money in the business. It would give a lot of confidence to the lending agencies implying that he himself was ready to take risk for his money, if any. The best part would be that in this case nobody would be sharing his equity. The next preference goes to his family members and friends who could chip in according to their capacity. But, their money should be taken as a sacred loan. By investing in his company, they have reposed a lot of trust in him. But, there’s one danger in this sort of investment and that is: If the entrepreneur incurs a loss, then a long-lasting relationship could be at stake.

An entrepreneur has to protect his creations against copying. He must know what his rights were as far as intellectual property was concerned. He can opt for patents, copyright, trade secrets or trademarks.

A new entrepreneur should not worry about the size of his business. He should find out the strengths of his new business. It has been observed that at times a lean company has defeated well-established companies. Why? Because, it has efficient management, its executives take quick decisions, its staff employs innovative techniques and responds to market needs, its monitoring mechanism is efficient; its management is alert to change; the quality of its product or service is superb; its staff is alert to all queries; it provides efficient after-sale service, and, above all, its clients are highly satisfied.

In the modern world, technology is the name of the game. It’s changing at a very fast pace. In recent years, the entire concept of doing business has undergone a dramatic change. If an entrepreneur wants to succeed, he must keep himself abreast with the latest developments in technology as applicable to the business field. He should know that the time of typewriters is a story of the past and that he should now develop his liking for computer and internet.

During my recent visit to the United States, I was staying with one of my friends running a super market in Long Island along with a franchise of “Subway.” One day I saw him sitting with a laptop at his residence and passing some instructions to somebody in his office in his super market that was some 20 kilometers from his residence. Suddenly, he asked that person as to why his office had been opened without his (my friend’s) permission. The person from the other end explained his position and satisfied his boss. He was connected to his super market through a video camera and the internet.

Being an entrepreneur, if you hire some workforce, you have to provide them resources as well. You shouldn’t bother about petty things and waste your time on non-issues. I know a gentleman who owned a large indenting business and making millions in defence deals but was extremely miser in providing necessary resources to his staff. I noticed that there was only one typewriter that was being used for typing the entire stuff of the company. You could always see three to four managers lined up in a queue waiting for their turn to get their letters typed on that single typewriter.

An entrepreneur can use his website to introduce his business to a large audience in the shortest possible time. This way, even a small home-based business can easily get international exposure and that too at a negligible cost. Your website should be professionally prepared and be able to convince why people should place their orders at your store despite the fact that millions already exist for the purpose.

If possible, an entrepreneur should get his company certified according to the requirements of the international standard for Quality Management System i.e. ISO 9001. This job should be accomplished right in the beginning so that the company starts on the right foot. But, one word of caution! He must make it a point that he himself gets involved fully during the preparation process. Only then that he would be able to exercise effective control on the quality management system of his company.

An entrepreneur should know how to prioritize his jobs. I know a gentleman who lacked in this quality. He was based in Gulf and dealing in transporting manpower to African countries by chartering airliners from various companies. Once, he won a contract to airlift manpower from his country to a country in Africa. He hired an aircraft and called the passengers on the fixed date without first ensuring landing permission from the host country. He woke up when only two days were left in the departure date whereas 45 days were available to him since the contract was won. The aircraft and the passengers reached the airport at the appointed date and time. Due to various reasons, he couldn’t obtain permission for the next one week. The passengers had to be accommodated in the hotels and the aircraft had to be returned. The gentleman had to incur a colossal loss, running into millions. As a matter of fact, he should have known as to which actions were most important and needed immediate attention besides constant monitoring. If his company had been an ISO 9001 certified company, this problem would never have arisen as everybody in the company would be having his duties in writing and the gentleman entrusted with the duty of obtaining landing permission would have been on the job the moment he had come to know about the company having won the contract!

An entrepreneur has to be extremely judicious in using his resources during the start-up phase of his business; like for example, during the initial phase, he could run his business from his home rather than hiring an office away from his residence. He could take office equipment like fax machine, photostat machine, computers, printers, scanners, etc, on lease rather than purchasing it.

An entrepreneur has to be flexible while conducting business. Suppose he’s running a fast food business and preparing burgers for his customers and it’s running fine; but the people are approaching him with a lot of enquiries for Donuts as well. So, it would be prudent on the part of the entrepreneur to respect the demands of his customers by starting a franchise of the Donuts as well.

It’s generally perceived that one needs a lot of money to start a new business which isn’t true. The main thing is how you manage it. You can start a business with even as little an amount as $ 3000! The main thing is ensuring an adequate cash flow i.e. the difference between the money you have received and the money you have spent. A successful entrepreneur always keeps the cash flow on the plus side.

Starting business from scratch is an interesting endeavour. One has to pay heed to the proven principles of entrepreneurship. These principles were true yesterday; they are true today.  An entrepreneur doesn’t have to re-invent the wheel. He should just follow these principles in letter and spirit. Whosoever follows them is bound to excel and would ultimately touch the dizzying heights of success.

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