A.
Should I start a small business?
Starting a small business
usually requires a substantial commitment of resources,
including time and money. Generally
speaking, you should only consider starting a small business
if you feel that you have a great idea that you feel passionately
about and you have evaluated the opportunity rigorously.
Making a business successful requires a lot of work, and
most entrepreneurs find that they devote more time to their
new businesses than they did to their previous jobs. If
you are giving up a job, given the additional risk, you
should consider a business only if the prospects suggest
that you will at least double your income – within 2 to
3 years. For more information on evaluating a new business
opportunity and the process of starting a business, take
a look at the courses we offer – especially "The
First Step".
B. If I can’t
find a job or have been laid off, should I start a business?
Starting a business involves much more than creating
a job for yourself. You must make a commitment to paperwork,
record keeping, financing, marketing, planning and a
host
of other issues involved in operating a business. In
addition, revenues may or may not come quickly. And ultimately,
of
course, you must have a product or service about which
you feel passionately and which you can deliver. In some
cases, starting a business may be a good alternative
if you cannot find other employment, but lack of employment
alone is not a good reason to start a business.
C. What business should
I choose?
Choosing
the right business
is extremely
important.
There should
be a match
between your talents,
interests and
capabilities and the
competition and market
demand for your
products and/or services.
Do not fall
prey to
an “if I build
it they will come” mentality.
Many otherwise good
businesses have failed
because they simply
did not have an adequate
market or the competition
was too strong. Ask
yourself: “How
will I win? What is
my competitive advantage?” If
you can not come up
with compelling answers,
then you should probably
choose another business.
It is also valuable
to consult others when
choosing a business.
You may want to visit
and talk with similar
businesses
outside your service
area. Talk with professionals
such as attorneys,
lawyers, marketing
professionals, and
bankers.
Ask family and friends
for their thoughts.
If you don’t
already have experience
in the field you are
considering, you may
even want to work for
a similar business
before
venturing out on your
own. In short, do your
homework before you
jump in.
D. What
basic skills do I need to run a business?
Basic skills involved
in running a business include knowledge of record-keeping,
accounting, financial
management,
human resources management, marketing, legal issues,
tax issues,
and knowledge about your product and/or service. Although
no one can be an expert in all of these areas, it is
important to “know what you don’t know” so
that you can engage the help of professionals in these
areas
when necessary.
E. What do I need to do to start my
business?
Starting a business
involves research, planning, and logistical issues.
Generally speaking, you should
do
market research
to determine issues such as the potential size of
your market, pricing, etc. You should construct a
written
business plan which explains/tells your company’s
story, including its organizational, financial and
market-related details.
Finally, you will have to go through the process
of setting up your company, including its legal form,
its tax identification
numbers, it permits and/or licenses and so forth.
Every
business in Philadelphia must have a business privilege
license, and some require other local or
state licenses.
Entrepreneurs outside of Philadelphia should contact
their municipal government office where they plan
to open
their business to determine licensing requirements.
In Philadelphia,
call the Department of Licenses and Inspections at
215-686-2490.
Another step in opening your business
enterprise will be to acquire a federal tax identification
number.
This process
makes you liable for federal unemployment, withholding,
social security, and corporation/company income
tax. If you are in Philadelphia, contact the Internal
Revenue
Service
at 215-574-9900.
NewPA has an excellent downloadable
guide called “The
Entrepreneur's Guide -- Starting and Growing a
Business in Pennsylvania” which outlines
many of these details. You can also call the PA
Department of State at 717-787-1057
for more information.
F. Can I operate a small business
from my home?
It depends. For example, if your business involves
customers coming to your premises, such as with
a retail store, then
there may be zoning restrictions that prohibit
such activity in a residential area. Most businesses
that
are contained
entirely within a home and are non-disruptive
to surrounding residential areas will be okay.
If in doubt,
check with your local business license or zoning
officials.
G. How long will it take to start a small
business?
Speed is not always
best when starting a small business. While many businesses
are started within
a matter
of weeks, some of the best businesses take several
months
to a year
or more to start. The time frame is driven by your
commitment and energy, as well as by how much time
and effort you
put in to research and planning. Whatever your
time frame, we recommend that you make the commitment to research
and plan
your business in advance. Even after a business
is “started,” it
may be some time before the businesses generates
a profit. Many startup companies are not profitable
in the first
couple of years.
H. Where can I get help in starting
a small business?
The Wharton SBDC
can help with many issues related to starting your business. In some cases, you
may want
to
engage our consultants for help. A great place
to start, however, is with our courses. Our course "The
First Step" outlines the planning process
for starting a new business. There are also many
other resources in
the
Philadelphia region. Check out the links at Innovation
Philadelphia for a list of other organizations
that may be able to help.
I. I have an idea for
an invention. What should
I do first?
Ideally, if you
have a unique invention, you could file for a patent
with the U.S. Patent and Trademark
Office,
and perhaps with patent offices abroad. Unfortunately,
this can be an expensive and time-consuming process
that generally requires the use of an attorney.
You can also
file a provisional patent, which recognizes the
date of your invention and provides you with one
year
to undertake the full patent process. Before undergoing
the patent
process,
however, you should consider whether or not there
is
a real market for your product. The expense may
not be worth
the return. You should also consider whether you
should pursue your invention on your own or whether
you should
license your intellectual property to another organization.
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A. What
is a business plan? Do I need to write one?
A business plan is
a “road map” for
the direction of your business. It will contain information such
as the history
and development of your business, an explanation of the
products and/ or services you offer, your marketing strategy,
your legal and ownership structure, your management team,
your human resources plan, and your financial projections.
If you seek financing, you will almost certainly need one.
Lenders such as banks, angel investors or venture capitalists
will almost always require a business plan. One of the
most important reasons to write such a plan, however, is
that you, as an entrepreneur, will have to engage in a
systematic process of thinking through and planning your
business.
B. How long will it take to write a business
plan?
The time frame is based on the complexity of the business
and its markets, and on your commitment to the process.
A simple plan could be completed in a matter of weeks,
while a well-researched and well-constructed plan could take
several months to a year.
C. What do I need to include
in my business plan?
There is no universally accepted format for a business
plan. A good plan might include the following elements:
- Executive Summary – A clear and exciting overview
- Company Products and Services – Describes company and
services in
terms of customer functions, segments, technologies,
distribution channels, features, benefits, current
stage of development,
proprietary position
- Customer and Market Analysis
– Customer description, market analysis, competitor
analysis
- Strategy
Analysis – Justified overall strategy and
competitive advantage
- Marketing and Operations – Plans
for marketing
and sales, production/delivery of product or services,
product costs, operating complexity, required resources
- Management and Organization – Backgrounds of key individuals,
your ability to execute strategy and personnel needs,
type of business, summaries of staffing requirements,
organizational
chart
- Milestone Events and Key Risks – Realistic schedule of events, their anticipated timing and
interrelationships between the major events necessary
to launch and grow
the venture; critical events and
their
impact on your plan; and outline of your contingency plan
- Financials – Capitalization plan, uses of funds, pro
forma financials
and cash flow projections, current financials
- Appendix – Supplementary supporting materials.
About 25 pages, not including the Appendix, is a good
rule of thumb for length. Be clear, concise, and non-repetitive.
D. Who should write my business
plan?
You, the entrepreneur, should write your business
plan. It should reflect your character and style.
While this
might seem a daunting task, the process that you
will go through to produce this information is invaluable.
It will
help you to understand your own business better and
therefore to better explain it to lenders, investors,
customers,
and others. It is appropriate, however, to seek guidance
and feedback on your business plan. While the Wharton
SBDC will not write your business plan for you, our
consultants can provide this type of guidance and
feedback.
E. What is a feasibility study?
A feasibility study is a precursor to a business
plan. In some cases it is a formal written analysis,
and
in some cases it is a less formal assessment process.
In either
case,
the feasibility study involves a process of gathering,
analyzing and evaluating information in order to
determine whether or not you should go into a particular
business.
If the answer is yes, you should proceed with a
business plan.
F. How do I find a
list of firms in an area for a particular industry?
You can research
local competitors and suppliers by visiting www.thomasregister.com.
Also, you can
try
the local yellow
pages.
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3.
Basics
A. How much money do
I need?
There is no easy answer to this question. As part
of your planning process, you should construct pro-forma
financials
statements, based on anticipated revenues, expenses, and
sources of funding. Part of this process will involve thinking
through a line-item budget for your business, which is
broken down over a period of months and/or years. By analyzing
these numbers, you should be able to determine how much
money you will need. Be realistic in your budget and allow
some extra for unanticipated expenses. However, most successful
entrepreneurs are frugal in their spending habits, for
example, they will may buy used equipment. Review your
financial plan with individuals who have experience in
small business to help ensure that you do not miss important
costs. Generally, in businesses where growth is expected
to be not very fast, the sources of funds tend to be one's
own savings and collateral and those of owners' friends
and family (only take what you and your family and friends
can afford to lose). Bank loans are likely here too. For
businesses that will only be viable with fast growth, there
is a need to tap outside funds, and the promise there is
big returns to the outsiders. This is the context in which
we consider outside equity.
B. What
is equity?
Equity is the value of anything that is owned, such
as a business or a house, less any outstanding debt.
If
your business is worth $100,000 and you owe $70,000
in business
loans to your bank, then you have $30,000 worth of
equity in the business. Businesses can be financed
with equity
and/or debt. If a business is financed with equity,
then the provider of equity receives an ownership stake
in
the business. For example, your company may sell shares
of
stock (equity) to raise money. The value of equity
in a business changes over time as the value of the
business
itself changes. Please see Section 4 below.
C. What is debt?
Debt is a promise to pay some amount in the future.
Examples include business loans and mortgages. Debt
does not imply
ownership of an asset, although assets are sometimes
promised as collateral to help guarantee payment.
If a business
if financed with debt, then the business is obligated
to repay that debt, usually with interest and fees. Please see Section 5 below.
D.
What are grants?
Grants are like gifts. They do not have to be repaid,
and they do not require ownership of an asset.
In some cases,
however, grants may be contingent on your meeting
certain criteria. Grants are rare and are not a
typical source
of funding for small businesses.
E. Does the Wharton SBDC offer grants or loans?
The
Wharton SBDC
is not involved
in any way in providing grants, SBA loans or
any other type of loan.
F. Are there any grants
for start-up businesses? For established businesses?
There are no SBA grants,
and almost no other grants, which are available
to
start or expand
a business.
Two exceptions
are the Small Business Innovation
Research Program (SBIR) and the Small
Business
Technology Transfer
Program (STTR).
Don’t get your hopes up, however.
These programs are highly competitive,
merit-based awards for serious
Research and Development activities.
The SBA does maintain a list of links
to grants, but few if any of them
would
apply to a typical small business.
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4. Equity
A. Should I raise equity?
Raising money through the sale of equity is a very
popular technique. The advantage is that there
is no requirement
that equity be repaid. The disadvantage is that
you are giving up a share of your business, and
thus
also, you
may be giving up some control. In many cases,
it is easier to raise equity than acquire debt.
B. Who can I
raise equity from?
You can raise equity from anyone you choose,
including friends, family, angel investors,
venture capitalists
or other companies. If you raise funds using
equity, it is
advisable to have the assistance of an attorney
who is familiar with these types of transactions.
With
certain
business forms, there can be tax implications
of raising equity from certain sources. Also,
raising
equity from
unqualified investors or raising equity in
an improper way could compromise your ability to
seek further
rounds of financing.
C. What are angel investors?
Angel investors are most often wealthy individuals
who are willing to take a risk on a small
company. There
are many of these individuals out there,
and a large percentage
of early-stage companies receive money from
these types of individuals. The process with
angel
investors is
often less formal than with traditional lenders
or venture
capital firms. They usually provide smaller
rounds of financing
(typically $10,000 - $500,000) than venture capital firms would. Angel investors usually look for
equity in return
for their
investment. In addition to being a source
of
money, angel investors can be a source of
great advice.
You can find
these types of individuals through your own
contacts or through angel networks. It is
important to
be well prepared
with a solid business plan and with the terms
of the financing you seek before contacting
angel investors.
D. Who are the active
angel investors in the region?
The majority
of angel investors are found through contacts
and
the initiative
of the entrepreneur. The Angel Capital Network maintains an active list of
angel investors.
E. How do I get venture capital
money?
Venture Capitalists are generally interested
in bigger deals (typically $500,000 and
above) than
angel investors.
Many VCs are involved in venture capital
firms, and they are professionals in this
field. To
receive VC funding,
you must convince VCs that you have a strong
management team, a good product or service
with strong revenue
potential, and a good plan. A
written
business
plan that is well thought-out is vital. VCs are not usually the
first place to seek funding.
They often come in with larger investments
after a company has received startup funding
from other
sources.
There
is an organized VC group in the Philadelphia
area called the Greater Philadelphia Venture
Group.
You can also
check out a list of funding sources maintained
by Ben Franklin
Technology Partners. It is important to
be well prepared with a solid business
plan
and with
the terms of
the financing you seek before contacting
venture capitalists.
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5. Debt
A. Who should I go to
for a business loan?
Most traditional banks
and many other lenders offer business loans. A good place
to start is with your
own bank where
you have already established accounts
and a history. You can also approach friends,
family,
and others
for loans.
(Be careful, though, when you borrow
from those close to you. Remember that you are
putting
other peoples’ money
at risk. Make sure that they are prepared
for that fact!) In addition, the state
of Pennsylvania has Funding and Program Finder on NewPA.com.
B. What do I need
to qualify for a
business loan?
If you seek financing from a typical
bank or commercial lender, you will
need reasonably
good credit, proper
paperwork, and probably some form of
collateral. Because most lenders
such as banks are governed by federal
lending guidelines, they are limited
in their ability
to provide non-collateralized
loans. If you have equity in real estate,
automobiles,
stocks, or something else that you
can promise as security, then your
chances
of receiving
a loan will
be greatly
improved.
C. What documentation
do I need to get a loan?
Different lenders
will require different paperwork. You can expect
to be asked
for a business plan – especially
the financials portion. Also, you will
likely be asked for verification of
your income and assets, including past
tax returns, W-2s, bank statements,
etc. They may also
have certain application forms that
they will want you to fill out. Contact
each individual lender for its requirements.
D.
Can I get a loan if my credit rating is low?
As the
quality of your credit record and personal
history declines, so do
your chances
of getting
a loan – especially
if you do not have good collateral.
It is important to clear up your credit
history and any other outstanding
legal issues to the extent that you
can. With a shaky history, you may
have more success borrowing from individuals
than
from institutions.
E. What are some
modes of financing when your credit
rating is reduced
and you need
temporary
sources
of capital to
stay out of bankruptcy?
Sell your accounts receivable to a
bank or a credit collection agency
for cash,
pledge firm
assets
for a loan from a bank,
pledge personal assets of the owners
of the business for a loan from a bank,
or
squeeze
your accounts
receivable to get more cash on hand.
F.
What is a Small Business Administration (SBA) loan? Where can I apply for one?
The SBA offers a series of loan guarantee
programs tailored to various situations.
Generally,
these programs are
intended for small businesses that
could not obtain this type of
financing under normal circumstances.
SBA loans are administered by private
sector
lenders,
such as traditional
banks
and some non-bank lenders. Most lenders
will be familiar with
the process, and you should contact
them directly for further information
and
assistance. The
Wharton SBDC
is not involved
in any way in providing SBA loans or
any other type of loan.
G. What are
the interest rates and other terms of SBA loans?
Interest rates and other terms of the
loans are subject to negotiation between
you
and your lender,
subject
to certain limitations by the SBA.
The SBA simply guarantees the loan,
and charges
the
lender certain
fees to do
so.
These charges will be built in to your
terms by the lender.
H. How long will
it take to get a loan?
Depending on the policies of your lender
and the type and size of the loan you
seek, it
could take
from a
few days
to several weeks to process a business
loan after all materials have been
submitted.
I. Are there loans for minority-owned businesses?
The
Pennsylvania Minority Business Development
authority (PMBDA) provides
low-interest
financing to businesses
owned and operated by ethnic minorities.
The federal government
does not offer any guaranteed loans
specifically for minorities.
However, through
the Women and
Minorities Pre-Qualification Loan Program,
the SBA pre-qualifies
women
and minority business owners in certain
regions of the U.S. for loans of up
to $250,000 before
they
even apply
to a lender. The program focuses on
the character, credit, experience and
reliability
of an
applicant, not just
their collateral.
J. Are there loans for
women-owned businesses?
The federal government
does not offer any guaranteed loans
specifically for women.
However, through
the Women and
Minorities Pre-Qualification Loan Program,
the SBA pre-qualifies
women
and minority business owners in certain
regions of the U.S. for loans of up
to $250,000 before
they
even apply
to a lender. The program focuses on
the character, credit, experience and
reliability
of an
applicant, not just
their collateral.For more information on resources available for women entrepreneurs,
see the SBA’s Office of Women’s
Business Ownership website.
K. Are there loans
for veterans?
The SBA provides special consideration
for veterans in processing and administering
SBA loans, but
there is
no government-backed business loan
program specifically targeted
to veterans. Please see the SBA website for more information on opportunities for veterans.
L.
If I need funds that will help to develop
lower income neighborhoods
of
Philadelphia,
what is the
cheapest source
of funds?
The City of Philadelphia has several
programs to improve access to non-traditional
sources
of capital.
For manufacturing
and industrial firms, you may apply
to the Philadelphia Industrial Development
Corporation
by calling
215-496-8020. Another possibility is
the Philadelphia Commercial
Development Corporation at 215-790-2200.
Another good source of funding
is the Enterprise Zone Program (EZP),
which provides grants and loans to
assist
financially
disadvantaged
communities
to prepare and implement business development
strategies within local enterprise
zones. For more information
about this program and other programs
like it (e.g. Opportunity
Grant Program, Community Economic Development
Loan Program), call the PA Department
of Community and
Economic Development
at 717-787-4305.
M. How does a lender
evaluate my application?
Traditional lenders, such as banks,
evaluate on the basis of creditworthiness,
collateral,
financial
strength of
those involved, assessment of the business
(from the business plan and financials)
and to a lesser
extent
on their history
with and sense of trust of an individual.
N. What are non-bank
lenders?
Some lenders do not qualify as banks
in a traditional sense, but yet provide
some
similar
services
such as SBA-guaranteed
loans. An example is a finance company.
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LEGAL AND TAX IMPLICATIONS FOR BUSINESS
6. Business Form
A. What is a sole proprietorship?
A sole proprietorship
is the simplest form of business organization. It has
only one owner, and that owner
reports all profits and losses as personal income on
his or her
personal income tax forms. The primary disadvantages
are: unlimited personal liability for all debts and
legal liabilities
of the business, difficulty in raising capital, and
discontinuation of the business upon the owner’s
death. While most small businesses are sole proprietorships,
this would not
be an appropriate form if you intend to grow to any
substantial size.
B. What is a general
partnership?
A general partnership
is like a sole proprietorship with multiple owners. All
profits and losses are
reported as personal income on the individual partners’ income
tax forms, according to the partner’s pro-rata
share of ownership. A general partnership is easy
to establish.
The partners need only form an agreement among themselves.
It is advisable that this agreement is in writing.
No state filing is required, with the possible exception
of a fictitious
name registration. The primary disadvantages are:
unlimited personal liability for the partnership’s
debts and legal liabilities, difficulty in raising
capital, discontinuation
of the partnership upon the death of a partner, and
the fact that any partner can commit the firm (and
thus other
partners) to legal obligations. This would not be
an appropriate form if you intend to grow to any
substantial size.
C.
What is a limited partnership?
A limited partnership
is a fairly simple business form in which there are one
or more general partners
and
one or more limited partners. General partners
are generally
those involved in day-to-day decision making or
operations. Limited partners are not involved in day-to-day
operations
and are most often just investors. All profits
and losses flow through to partners according to their
partnership
agreement, which should be written. Limited partners
have limited exposure to liability. The primary
disadvantages
are: general partners face unlimited liability
for the firm’s debts and legal liabilities, discontinuation
of the partnership upon the death of a partner,
and the fact that any general partner can commit the
partnership
(and thus other general partners) to legal obligations.
D.
What is a limited liability partnership (LLP)?
A limited liability
partnership (LLP) is formed when an existing partnership
(see above) files
an election
with
the Corporations Bureau of the Pennsylvania Department
of State, claiming this status. Once this status
is claimed, all partners, including general partners,
are provided
additional protection against unlimited future
liability. Income still flows through to individual
partners’ income
tax forms, and the partnership still terminates
on the death of a partner.
E. What is a limited
liability company (LLC)?
A limited liability
company (LLC) is a sort of hybrid form between
a partnership and an S corporation – it
has the liability protection of a corporation,
with the advantage
of being treated as a partnership. All profits
and losses flow through to the individual owners’ income
tax forms. An LLC is simpler to establish and
maintain than
a corporation. A Certificate of Organization
and a docketing statement must be filed with
the state. This is a popular
form for many new small businesses.
F. What is
an S corporation?
An S corporation is a fairly complex business
form, where the owners all hold shares of stock.
Nevertheless,
all
profits and losses flow through to the individual
shareholders according to their ownership interest,
and there is
no corporate income tax. To establish a corporation,
Articles
of Incorporation must be drawn up and filed with
the state, along with a docketing statement.
An S corporation
election
must be filed with the IRS and with the state
Department of Revenue. (If you do not file this
election,
you will be considered a C corporation!) All
owners have
limited
exposure to liability, and the business can continue
upon the death of a shareholder or the transfer
of ownership of shares. The primary disadvantages
of
an S corporation
are: the relative complexity of the paperwork
involved, and the fact that there may be no more
than 75
shareholders. It is advisable to have an attorney
handle the setup
of
a corporation. This is a great form for businesses
that plan to grow large.
G. What is a C corporation?
A C corporation is the most complex business
form. This is the only business form that faces
double
taxation. That is, the corporation pays corporate
tax on earnings,
and
then individual shareholders pay income tax
again on dividends. To establish a corporation, Articles
of
Incorporation
must
be drawn up and filed with the state, along
with
a docketing statement. All owners have limited
exposure to liability,
and the business can continue upon the death
of a shareholder
or the transfer of ownership of shares. The
primary disadvantages are: the relative complexity
of
the paperwork involved,
and the issue of double taxation. It is advisable
to have an attorney handle the setup of a corporation.
Most very
large companies are C corporations, although
they often
started with a simpler form.
H. Which form of
business organization should I pick?
The answer depends
on the balance you seek between complexity of the
form, liability
limits, the
need to raise capital,
the need for the business to continue after
a death, the number of owners, and so on.
If your
business
is a fairly
risk-free “mom and pop” operation
operated from your home, then a sole proprietorship
or general partnership
may be appropriate. For most businesses who
plan to grow or engage in activities with
risk, limited liability is
an important issue. For these companies,
an LLC, an LLP, or an S Corporation are probably
good choices. Most small
businesses would not want to start out as
a C Corporation if they have 75 or fewer
owners, because they would not
want to face double taxation.
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7. Insurance
A. What type of insurance
coverage should I obtain for my business?
Insurance needs vary by size of the business,
number of employees, industry, property
owned, and other
factors. Most businesses should carry a
general liability policy
that protects against many general types
of claims. In addition, you may want to
consider property/casualty
insurance,
automobile insurance, health insurance,
workers compensation insurance, disability
insurance,
key man insurance
and
others. Some of these may be required by
law
or required by your lenders, depending
on your specific
circumstances.
It is a good idea to talk with a couple
of insurance agents to understand what
is appropriate
for
your circumstances.
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8. Legal Issues
A. What are patents?
Patents are protections for inventions
and discoveries. A patent is a property
right
that grants the
owner an exclusive right to exclude
others for a period
of time
(usually 20
years) from making, using, offering,
selling, or importing anything that utilizes the
intellectual property contained
in the patent without the permission
of the patent owner. There are three types
of patents:
Utility
patents may
be granted to anyone who invents or
discovers any
new and
useful process, machine, article of
manufacture, or compositions of matters, or any new
useful improvement thereof. Design
patents may be granted to anyone who
invents a new, original, and ornamental design
for an article
of
manufacture.
Plant patents may be granted to anyone
who invents or
discovers
and asexually reproduces any distinct
and new variety of plants. Patents are expensive
to
obtain and
generally require
the use of an attorney who specializes
in this field. In the United States,
patents are handled
by the
U.S. Patent
and Trademark Office. Other countries
have their own patent systems that apply within
their borders.
The
Product Development
Center at the Bucknell SBDC also assists
inventors and entrepreneurs with product
design, prototype
construction, testing, and preliminary
patent
searching. The Product Development Center at the Bucknell SBDC also assists inventors and entrepreneurs with product design, prototype construction, testing, and preliminary patent searching for those entrepreneurs who have a business plan approved by the Wharton SBDC for referral.
B. What are
trademarks and service marks?
Trademark
and service mark registrations are
protections for certain things
that distinguish one source
from another. This registration allows
the holder to exclude
others
from using its mark, generally for
as long as that mark remains
in use by the owner. A trademark is
a word, phrase, symbol or design, or
a
combination
of words,
phrases, symbols
or designs, that identifies and distinguishes
the source of the goods of one party
from those
of
others. For
example, “Coca-Cola” is
a trademark of the Coca-Cola Company.
Slogans are registered as service marks.
This provides trademark protection
to
a slogan which uniquely identifies
your company or service (e.g. Just
Do It (Nike), The Real Thing (7-Up)).
In essence,
a service mark is the same as a trademark,
except that it identifies and distinguishes
the source of a service
rather than a product. Trademark and
service mark registrations are sometimes
expensive to obtain and often require
the
use of an attorney who specializes
in this field. In the United States,
trademarks and service marks are handled
by the U.S. Patent and Trademark Office.
In Pennsylvania,
call the Pennsylvania Corporation Bureau
at 717-787-1057. They will check to
see if the trademark has not already
been issued and mail you the required
forms and instructions.
Other countries have their own mark
protection systems that apply within
their borders.
C.
What is a copyright?
Copyright is a form of
protection provided to the authors of “original
works of authorship,” including
literary, dramatic, musical, artistic,
and certain other intellectual works.
A copyright generally gives the owner,
for a period of time (usually life
of the author + 70 years,
or up to 120 years for works for
hire) the exclusive right to do and
to authorize others to do the following:
to reproduce
the work, to prepare derivative works
based upon the work; to distribute
copies of the work to the public,
to perform
the work publicly, and to display
the work publicly. A copyright exists
immediately upon creation of a work,
however,
registering that copyright provides
additional protections. Copyright
registration is fairly inexpensive
and easy to
obtain. In the United States, copyright
registration is handled by the U.S.
Copyright Office. Other countries
have
their own copyright protection systems
that apply within their borders.
D.
Do I need a lawyer to start a
business?
You do not necessarily need a lawyer
to start a business, especially if
you select
one
of the simpler
business
forms. Nevertheless, it often advisable
to consult a lawyer as
you start your venture, since you
may overlook key issues. If you choose
a corporate form
of organization, you should
certainly use a lawyer.
E.
Do I need a sales agreement to buy a building?
You should always have a written
sales agreement when purchasing real
estate.
The sales agreement
should
clearly spell out
the price, terms, and exactly what
is included and what is not included
in
the sale. The
sales agreement
is a
legal document that gives you legal
recourse if problems should
arise after the sale.
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9. Taxation
A. What are my federal,
state and local tax responsibilities?
Depending on your
location and the nature of your business, you
may
be subject
to: federal
income
tax, state income
tax, local income or wage tax,
sales tax, property tax, withholding
taxes,
unemployment
insurance,
various licenses
and permits and taxes. It is advisable
to seek the help of an accountant
to help you
determine
which
taxes you
are subject to and how and when
you should pay them. A great resource
for more information
on
this is "Starting
A Business in Pennsylvania" by
the PA Department of Revenue, available
on the PA Power Port.
B.
Do I need a Federal Employer
Identification Number (FEIN) or
tax number? If so,
how can I obtain one?
The FEIN is like a social security
number for your business. All businesses
with
employees and all
businesses that
collect sales tax must have an
FEIN. In some cases, sole proprietors
with no employees and no sales
tax
can simply use their own social
security number for
tax
purposes,
but most
businesses will need an FEIN. Often,
your lawyer or accountant will
handle this for you. You can apply
by
phone, fax, or mail. A downloadable
form (SS-4)
is available on the
IRS website.
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10. Permits and Licensing
A.
Do I need any registrations, permits or business licenses?
How do I obtain
them?
Depending
on your business form, you may
have to register with
the state
by calling
717-787-1057.
See “The
Entrepreneur's Guide -- Starting
and Growing a Business in Pennsylvania” available
on the NewPA website for
more information. In addition,
business licenses are
required for most businesses
and are handled locally. Certain
other licenses, permits or
zoning approvals may be necessary,
especially
if your business relates to
food, alcohol, health,
safety, hazardous materials
or other regulated industries.
Some
of these other licenses are
explained on the Pennsylvania
Department of Labor and Industry
website. In general, you will
need a business privilege license,
a city tax number,
a use registration permit,
and
a zoning permit, certificate,
or variance. In Philadelphia,
call the Department of Licenses
and Inspections at 215-686-2490. Businesses outside
of Philadelphia
should
contact their municipal government
office where they plan to open
their business to determine
licensing requirements.
In addition,
your business enterprise will
need a federal
tax identification
number,
which will
make
you liable
for federal unemployment, withholding,
social security, and
corporation/company income
tax. If you are in Philadelphia,
contact
the Internal
Revenue
Service
at 215-861-1225.
The PA Power
Port has an excellent downloadable guide called Starting
a Business in Pennsylvania which outlines
many of these details. You can also call the PA Department
of State at 717-787-1057
for more information.
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11. Business Names
A.
Can I use my own name as my business name?
Yes. This is fairly common.
B.
What is a fictitious name? Why do I have to
register a
fictitious name?
A
fictitious name is any
business name you will
use that is different
than
your name,
or your
corporation’s
legal name. (There are
some exceptions if all
owners’ last
names are included in the
business name. For example, “Smith’s
Appliance Service” could
be okay if it was owned
entirely by Smith.) If
you plan to do business
under any name other than
your own last name or your
corporation’s
name then registration
of the fictitious name
is required by law. See The
Entrepreneur's Guide --
Starting and Growing a
Business in Pennsylvania available
on the NewPA website
for more information.
C.
Must I register a fictitious
name if I am only going
to use the name
I incorporated
under?
No. If you are incorporated,
then your corporation is
a legal entity
with
its own name. As long
as you use
that
name, you do not have to
file a fictitious name
for the corporation.
D.
How should I pick a name for my new business?
You should pick one
that fits with your marketing
plan for
the business.
It should
help customers
identify you. Be careful
not to use trademarked
names or
names of other
firms in your area. You
cannot incorporate under
the
same, or a very similar
name, to
another corporation in
your state. If you choose
a name
that |