THE MECHANICS OF START-UP
THE MECHANICS OF START-UP
Start-up Capital
In the initial stages of starting your own import/export business, the funds needed to support expenses most likely will come from your own pocket. It is possible to begin an import/export business with as little as $1000 a year.
When your personal financial outlook will not sustain those costs (expenses of start-up), you must look for outside financial assistance. Unfortunately, banks are seldom the source of startup capital. Why? Banks do not take risks. They generally expect a track record and collateral. Catch 22? Where can you go for financing? Most often, the source is relatives and/or friends, people who know you and believe in you. Even they might want a description of your intended business, often in the form of a business plan. So, from the beginning, you should develop a written plan for your business. You might want to skip to the second part of this chapter immediately to learn how to write that plan. You can return to this section when you complete your business plan.
Business Name
Think of a name for your business. The company's name should reflect what your business does. For example, you easily can visualize the nature of the business of the "Southeast U.S. Furniture Import." It gives a more accurate picture of that company than would "Kim Yee and Son." Teresa Brown named her company International Costumes. In this case, because the name does not contain the owner's surname, most states would require a request to use a fictitious name, or DBA (doing business as). If the name of your business included your last name, you might not be required to file a fictitious name approval with your local county. The cost for ^registering your., fictitious name is_ about $10 in most counties. There is also a requirement to publish thatjiarnejji a newspap_ex_fpr several days. That cost Is usually not more tHan~$20 to $30.
The Business Organization
Next, decide how you will organize your business. The three common legal forms are sole proprietorship, partnership, or corporation. Most start-up import/export businesses begin as proprietorships or partnerships. They find little need to take on the extra paperwork and reporting requirements of a corporation, in the beginning. Select the form of your business based on the intent, complexity, tax implications, and liability requirements of the business. If in doubt, consult a lawyer. Partnership agreements and incorporation papers can be expensive, requiring as little as a few hundred dollars or as much as several thousand dollars.
Business License
The United States does not require a special license for importing or exporting. That is, there is no regulatory body that requires you to show special qualifications in order to be an importer or exporter. However, like any other business, you probably must meet local and state licensing requirements. It is possible that the foreign country you are doing business with will require a license as well. Check with your freight forwarder.
Seller's Permit
Most states have a sales tax. In order to ensure collection, a board of equalization or sales tax board requires a seller's permit. Usually the state controls these permits. As you begin your own import/export business, you should investigate your local laws.
Financial Records
Open a separate bank account in the name of your business. Keep^^ccurate~recOTds7ahd pass all busiriess~income ana expenses through your business account. Do not pay personal expenses from this account or otherwise mix personal income or expenses with business income and expenses. You may list personal "capital contributions" and "capital withdrawals," but keep these infrequent and in reasonably large sums—don't take out money in dribbles and drops.
Accounting
From the beginning, learn to keep a simple set of books to feed into your Internal Revenue^ Service (IRS) Schedule C (Profit or Loss from Own Business or Profession) at tax time. Keep a careful record (all^ecgipts) of all business expenses, and invoice^ all work on your letterhead pager. At a minimum, you will need a general ledger organized into four sections: expenses, income, receivables (sales invoiced), and payables (bills received). For example, you should list your expenses, like the cost of your trip to Hong Kong or Paris, chronologically, by month, down the left margin of the expense section. Across the page, the categories should correspond to the categories called for by the Schedule C. Check current IRS publications.
What kind of expenses should you expect in your own import/export business?
• Stationary and business cards
• Telephone, answering machines, adding machine, copier, typewriter, facsimile, telex machine
• Rent, utilities, office furniture
• Inventory
• Business checking account
• Salaries and other staff expenses
• Travel
Table 7-1 shows an example of the categories of expenses shown in the expense section of your general ledger. You should set up the other sections of your ledger similarly.
anyone, you must obtain an employers I.D. number from the IRS, and consider Worker's Compensation and Benefits insurance.
Business Insurance
Other business insurance that you should consider on a case-by-case basis are Liability, Disability, FCIA Umbrella policy, and a customs bond.
Support Team
Early in the establishment of your import/export business,
you should develop a relationship with your international sup-
port team. After a brief period of shopping around, settle on a
long-term relationship with (a) an international banker; (b) a
freight forwarder; (c) a customhouse broker, (d) an interna-
tional accountant, and (e) an international attorney. Also, con-
sider contacting the Small Business Administration (SBA) if
you run into problems. Members of the SBA's Service Corps of
Retired Executives (&Cj5.R.E.) often are available to provide
free advise. ~ -
The Office
You can set up an office in your home or elsewhere. The volume and complexity of your'business will determine the location and outfitting. In the beginning, you might do business by letter and only use the telex and part-time employees occasionally. However, as your import/export business grows, you might need warehouse space for inventory and a larger office for a growing staff.
Employees
As your office and trading staff grows, the complexity of paperwork and record keeping also will grow. Prior to hiring
The Ten Commandments
of Starting an Overseas Business
1. Limit the primary participants to people who can agree and contribute directly and who are experienced in some form of international business.
2. Define your import/export market in terms of what is to be bought, precisely by whom, and why.
3. Concentrate all available resources on two or three products or objectives within a given time period.
4. Obtain the best information through your own industry.
5. Write down your business plan and work from it.
6. "Walk on two legs." Pick a good freight forwarder or customhouse broker to walk alongside your banker.
7. Translate your literature into the language(s) of the country(s) in which you will do business.
8. Use the services of the United States Departments of Commerce and Treasury.
9. Limit the effects of your inevitable mistakes by starting slowly.
10. Communicate frequently and well with your international contacts, and visit the overseas markets and manufacturers.
Start-up Capital
In the initial stages of starting your own import/export business, the funds needed to support expenses most likely will come from your own pocket. It is possible to begin an import/export business with as little as $1000 a year.
When your personal financial outlook will not sustain those costs (expenses of start-up), you must look for outside financial assistance. Unfortunately, banks are seldom the source of startup capital. Why? Banks do not take risks. They generally expect a track record and collateral. Catch 22? Where can you go for financing? Most often, the source is relatives and/or friends, people who know you and believe in you. Even they might want a description of your intended business, often in the form of a business plan. So, from the beginning, you should develop a written plan for your business. You might want to skip to the second part of this chapter immediately to learn how to write that plan. You can return to this section when you complete your business plan.
Business Name
Think of a name for your business. The company's name should reflect what your business does. For example, you easily can visualize the nature of the business of the "Southeast U.S. Furniture Import." It gives a more accurate picture of that company than would "Kim Yee and Son." Teresa Brown named her company International Costumes. In this case, because the name does not contain the owner's surname, most states would require a request to use a fictitious name, or DBA (doing business as). If the name of your business included your last name, you might not be required to file a fictitious name approval with your local county. The cost for ^registering your., fictitious name is_ about $10 in most counties. There is also a requirement to publish thatjiarnejji a newspap_ex_fpr several days. That cost Is usually not more tHan~$20 to $30.
The Business Organization
Next, decide how you will organize your business. The three common legal forms are sole proprietorship, partnership, or corporation. Most start-up import/export businesses begin as proprietorships or partnerships. They find little need to take on the extra paperwork and reporting requirements of a corporation, in the beginning. Select the form of your business based on the intent, complexity, tax implications, and liability requirements of the business. If in doubt, consult a lawyer. Partnership agreements and incorporation papers can be expensive, requiring as little as a few hundred dollars or as much as several thousand dollars.
Business License
The United States does not require a special license for importing or exporting. That is, there is no regulatory body that requires you to show special qualifications in order to be an importer or exporter. However, like any other business, you probably must meet local and state licensing requirements. It is possible that the foreign country you are doing business with will require a license as well. Check with your freight forwarder.
Seller's Permit
Most states have a sales tax. In order to ensure collection, a board of equalization or sales tax board requires a seller's permit. Usually the state controls these permits. As you begin your own import/export business, you should investigate your local laws.
Financial Records
Open a separate bank account in the name of your business. Keep^^ccurate~recOTds7ahd pass all busiriess~income ana expenses through your business account. Do not pay personal expenses from this account or otherwise mix personal income or expenses with business income and expenses. You may list personal "capital contributions" and "capital withdrawals," but keep these infrequent and in reasonably large sums—don't take out money in dribbles and drops.
Accounting
From the beginning, learn to keep a simple set of books to feed into your Internal Revenue^ Service (IRS) Schedule C (Profit or Loss from Own Business or Profession) at tax time. Keep a careful record (all^ecgipts) of all business expenses, and invoice^ all work on your letterhead pager. At a minimum, you will need a general ledger organized into four sections: expenses, income, receivables (sales invoiced), and payables (bills received). For example, you should list your expenses, like the cost of your trip to Hong Kong or Paris, chronologically, by month, down the left margin of the expense section. Across the page, the categories should correspond to the categories called for by the Schedule C. Check current IRS publications.
What kind of expenses should you expect in your own import/export business?
• Stationary and business cards
• Telephone, answering machines, adding machine, copier, typewriter, facsimile, telex machine
• Rent, utilities, office furniture
• Inventory
• Business checking account
• Salaries and other staff expenses
• Travel
Table 7-1 shows an example of the categories of expenses shown in the expense section of your general ledger. You should set up the other sections of your ledger similarly.
anyone, you must obtain an employers I.D. number from the IRS, and consider Worker's Compensation and Benefits insurance.
Business Insurance
Other business insurance that you should consider on a case-by-case basis are Liability, Disability, FCIA Umbrella policy, and a customs bond.
Support Team
Early in the establishment of your import/export business,
you should develop a relationship with your international sup-
port team. After a brief period of shopping around, settle on a
long-term relationship with (a) an international banker; (b) a
freight forwarder; (c) a customhouse broker, (d) an interna-
tional accountant, and (e) an international attorney. Also, con-
sider contacting the Small Business Administration (SBA) if
you run into problems. Members of the SBA's Service Corps of
Retired Executives (&Cj5.R.E.) often are available to provide
free advise. ~ -
The Office
You can set up an office in your home or elsewhere. The volume and complexity of your'business will determine the location and outfitting. In the beginning, you might do business by letter and only use the telex and part-time employees occasionally. However, as your import/export business grows, you might need warehouse space for inventory and a larger office for a growing staff.
Employees
As your office and trading staff grows, the complexity of paperwork and record keeping also will grow. Prior to hiring
The Ten Commandments
of Starting an Overseas Business
1. Limit the primary participants to people who can agree and contribute directly and who are experienced in some form of international business.
2. Define your import/export market in terms of what is to be bought, precisely by whom, and why.
3. Concentrate all available resources on two or three products or objectives within a given time period.
4. Obtain the best information through your own industry.
5. Write down your business plan and work from it.
6. "Walk on two legs." Pick a good freight forwarder or customhouse broker to walk alongside your banker.
7. Translate your literature into the language(s) of the country(s) in which you will do business.
8. Use the services of the United States Departments of Commerce and Treasury.
9. Limit the effects of your inevitable mistakes by starting slowly.
10. Communicate frequently and well with your international contacts, and visit the overseas markets and manufacturers.
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