11. Permitting
• Business or Hobby
• DBA
• City Business License
• Home Occupancy
• Sellers Permit
• EDD Registration
• FEIN
• Industry Specific Permits
www.smcsbdc.org
13. Bank Accounts
Personal Business
1 to 31
www.smcsbdc.org
14. INFLOWS
Personal Business
DEPOSITS
CREDITS
INTEREST
EXPENSES
FEES
DRAW
OUTFLOWS www.smcsbdc.org
15. INFLOWS
Personal Business
W2 Pay 1 to 31
Gifts DEPOSITS
=
INCOME
DEBITS
=
EXPENSES
OUTFLOWS www.smcsbdc.org
16. Draw
Personal Business
1 to 31
IN
OUT
Investment www.smcsbdc.org
17. Employees
W2 or 1099
• Primary test: Do you control the manner
or means by which the work is
performed?
• Secondary test: The 14-point balancing
test.
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18. Employees
• 1. Do you tell the person how to do their job or
can they do it their own way?
• •2. Can the worker quit or be fired at any time?
• •3. Is the work they do part of your regular
business (e.g. selling shoes in a shoestore)?
• 4. Does the worker have a separate business
doing the same work for others or his/her own
employees?
• •5. Can the worker lose money on the job?
• •6. Has the worker provided the tools for the job?
• •7. Has the worker provided the raw materials
needed for the job?
www.smcsbdc.org
19. Employees
• 8.Do you provide the workplace where the job is
done?
• 9. Is the worker skilled (e.g. machinist or
accountant) or unskilled (e.g. laborer)?
• 10. Do you provide training for the worker that is
required to do the job?
• 11. Is the worker paid a fixed salary, an hourly
wage or a fixed price based on the job?
• 12. Has the worker previously performed the
same function for you as an employee?
• 13. Does the worker believe s/he is an employee?
• 14.Do you have employees who do the same
work as the worker?
www.smcsbdc.org
20. Employees
• 1099 W9 Due Jan 31st
• W2 W4
• Workers Comp
• Register with State
• FEIN
• Payroll taxes
www.smcsbdc.org
21. Entities
S.P. G.P. LLC S-Corp C-Corp
Default Default State State State
Controlled Controlled Controlled
One One
Unlimited 100 Unlimited
Person Person
Owners Owners Owners
Married Married Liability
Couple Couple Limited Liability Liability
Limited Limited
Unlimited Unlimited Pass
Liability Liability through Pass Double
Pass Pass taxes through Taxation
through through taxes
taxes taxes
www.smcsbdc.org
22. Types of entities
• Sole Proprietorship ;
• Partnership (General and Limited);
• Corporations (“C” and “S” types); and
• Limited Liability Company (LLC).
www.smcsbdc.org
22
23. Sole proprietorship
• a. Default entity;
• b. One person or husband and
wife;
• c. no formalities;
• d. unlimited liability;
• e. pass through entity for tax
purposes;
• f. pay taxes on your tax return at
your tax rate;
• g. you die, it dies
www.smcsbdc.org
23
24. General partnership
• a. default entity;
• b. unlimited number of people;
• c. no formalities;
• d. unlimited liability;
• e. pass through entity for tax purposes;
• f. information only tax return/forms (Form
1065 (tax return) and K-1(share of $));
• g. pay taxes on your tax return at your tax
rate.
www.smcsbdc.org
24
25. Limited partnership
• a. formalities required (register with
the state);
• b. unlimited number of people;
• c. limited liability for limited
partners;
• d. unlimited for general partners;
• e. pass through entity for tax
purposes.
www.smcsbdc.org
25
26. “C” Corporation
• a. formalities required;
• b. unlimited number of owners;
• c. limited liability for all;
• d. files a tax return and pays fed.
and state taxes on $ left in;
• d. double taxation of $ paid to
shareholders (v. employees).
www.smcsbdc.org
26
27. “S” Corporation
• a. formalities required ;
• b. limited number and type of
shareholder(100; green card
holders or citizens);
• c. limited liability for all;
• d. pass through entity (if elect to be
a partnership);
• e. file tax return (Form 1120S) and
K-1 to shareholders;
www.smcsbdc.org
27
28. Limited Liability Company
(LLC)
• GOOD
• a. unlimited number of owners;
• b. non-citizen owners ok;
• c. limited liability for all;
• d. pass through entity (if elect to tax as
partnership v. corp.);
• e. no separate tax return;
www.smcsbdc.org
28
29. Limited Liability
Company
(LLC), continued
• NOT SO GOOD
• 1. formalities required;
• 2. limited tax on gross income on
Ca. tax return.
• 3. newest form of entity
• 1) California - 1994;
• 2) least amount of law on
how it operates.
www.smcsbdc.org
29
30. Limited liability partnership
(LLP)
• a. formalities required (e.g. control
group; creation costs, etc.);
• b. for licensed professionals;
• c. lawyer requirement: $1,000,000
or more in professional liability
insurance;
• d. pass through entity.
www.smcsbdc.org
30
31. Possible reference book
• Still have tax questions on which
corporate form to choose or how to
handle taxes as a small business?
• Tax Savvy for Small Business by
Frederick Daily, 11th Edition, Nolo Press;
2007;
• This book is a useful reference.
www.smcsbdc.org
31
32. Possible alternative to a
corporate form–Insurance
• Commercial General Liability insurance:
• 1. If sued, it generally pays the lawyer
and the judgment;
• 2. Covers more than one business, you
and your property;
• 3. Might be faster to get;
• 4. Comparative cost to forming and
maintaining a corp. or LLC (generally).
www.smcsbdc.org
32
33. Other corporate formation
issues– CA v. Other states
• 1. Nevada Corp./LLC –
• A. No income tax for Nevada
business income;
• B. Lower incorporation fees;
• C. What if you live in California, do
business in California, but register in
Nevada?
• 2. Delaware Corp./LLC –
• A. More favorable laws;
• B. Lower incorporation fees.
www.smcsbdc.org
33
36. SBA Presentation
• The biggest challenges in starting and
growing your business are: .
• No Money
• No Collateral
• No relevant experience
www.smcsbdc.org
37. Express Capital Loan
Program
• $5,000 to $50,000
• Loan is fully amortized with no access fees per transactions
• Automated process provides fast turn-around time
7 year term – Fully Amortized
Collateral may not be required
Variable Interest Rate based on Wall Street Journal Prime,
adjusted calendar quarterly:
• Loans of $ 5,000 - $25,000 at Prime + 4.75%
• Loans of $26,000 - $50,000 at Prime + 3.75%
• Loans over $50,000 between Prime + 2.25% and +
2.75% depending upon term of loan
www.smcsbdc.org
38. Express Capital Loan
Program
• $525 packaging fee – deducted from loan
proceeds.
• SBA Guaranty fee of 2% of the guaranteed portion
(85%) of the loan will be deducted from the loan
proceeds
• Loan payments automatically drafted from the
business checking account at your established
financial institution
• No prepayment penalty – 21 day payoff notification
required
• Technical Assistance Included – borrowers receive
pre-and post loan closing management and
technical assistance
www.smcsbdc.org
39. SBA 7(a) Loan Program
Inventory and Working Capital financing
• SBA 7(a) Loan Features:
• Size of Loans:
$100,000 to $2 Million
• Terms of Loans:
• Real Estate - up to 25 years, fully amortizing
• Business Acquisition – up to 10 years, fully
amortizing
• Debt Refinance – 7 to 25 years fully amortizing
depending on the use of loan proceeds
• Equipment, Inventory and Working Capital – 7 to 10
years fully amortizing
www.smcsbdc.org
40. SBA 7 (a) loan program
• Real Estate financing for acquisition, refinance, construction,
improvements for owner occupied properties
• Business Acquisition financing
• Business Start-Up financing
• Equipment, Inventory and Working Capital financing
• SBA 7(a) Loan Features:
• Size of Loans: $100,000 to $2 Million
• Terms of Loans:
Real Estate - up to 25 years, fully amortizing
Business Acquisition – up to 10 years, fully amortizing
Debt Refinance – 7 to 25 years fully amortizing
depending on the use of loan proceeds
Equipment, Inventory and Working Capital – 7 to 10
years fully amortizing
www.smcsbdc.org
41. SBA 7(a) Loan Program
• Loan Advance Rates:
Real Estate – up to 90%
Business acquisition – up to 85%
Debt Refinance – up to 100%
Equipment, Inventory and Working Capital – up to 100%
• Loan Costs:
SBA guaranty fees range from 2% to 3.75% depending on
size of loan
Additional fees for loan packaging, appraisal, environmental,
title/escrow, construction, etc.
• Loan Turnaround Times:
10 business days for Bank loan approval upon receipt of
complete loan application package
30 to 60 business days for initial funding from receipt of
complete loan application package
•
www.smcsbdc.org
42. SBA Presentation
• What is a small business?
• What is an SBA Loan?
• For what purposes may an SBA
loan be used?
• What purposes are ineligible?
• Benefits to the borrower
• Terms
• Fees
• Interest rates
• 5 C’s of Credit
www.smcsbdc.org
43. What is a small business?
A small business is one that is:
• Independently owned and operated for profit
• Not dominant in its field
• Meets employment or sales standards developed by the SBA
www.smcsbdc.org
44. What is a small business?
• The maximum general size standards for a few major industry types
are as follows:
• Manufacturing - varies by industry from 500-1500 employees
• Wholesaling - up to 100 employees
• Services - up to $14.5 million in annual receipts, depending on the
type of business
• Retailing - up to $13.5 million in annual receipts, depending on the
type of business
www.smcsbdc.org
45. What is a small business ?
• The maximum tangible net worth of the
applicant is not more than $15,000,000
• The average net income after Federal
income taxes (excluding any carry-over
losses) of the applicant for the 2 full fiscal
years before the date of the application is
not more than $5,000,000
www.smcsbdc.org
46. What is an SBA Loan?
• A loan issued by a commercial bank or
other financial institution and guaranteed
by the federal government.
www.smcsbdc.org
47. For What Purpose May
an SBA Loan Be Used?
• SBA Real Estate Loans
• SBA Non-Real Estate Loans
• Real Estate Loans can be amortized up to 25 years
• Heavy Equipment and Machinery Loans can be
amortized up to 15 years
• SBA Business Loans can be amortized up to 10 years
www.smcsbdc.org
48. SBA Real Estate Loans
• The borrower/buyer must be an owner-user occupying a
minimum of:
• 51% of an existing structure
• 60% of newly constructed buildings
• Maximum Loan-to-Value
• 90% for real estate
• 70% for businesses
www.smcsbdc.org
49. SBA Loan Program
Qualified properties include:
• Franchise specialty buildings LTV up to
85%
• Free standing industrial & commercial
buildings 90%
• Gas Stations LTV up to 85%
• Hotels & Motels LTV up to 85%
• Office, medical and industrial
condominiums 90%
• Restaurants LTV up to 85%
• Warehouses LTV up to 90%
www.smcsbdc.org
50. SBA Non-Real Estate
Loans
• Proceeds used for:
• Inventory
• Equipment
• Business acquisition
• 100% debt refinancing
• Working capital
• Furniture & fixtures
• Tenants Improvements
• Expansion
www.smcsbdc.org
51. Ineligible Use of Proceeds
• To refinance existing debt where the lender is in a position to
sustain a loss and the SBA would take over that loss through
refinancing
• To effect a partial change of business ownership or a change that
will not benefit the business
• To permit the reimbursement of funds owed to any owner.
• To repay delinquent state or federal withholding taxes or other
funds that should be held in trust or escrow
• For a non-sound business purpose.
www.smcsbdc.org
52. Ineligible Businesses
• Real Estate Investment
• Other Speculative Activities
• Lending Activities
• Pyramid Sales Plans
• Illegal Activities
• Gambling Activities
• Charitable, Religious, or Other Non-Profit
www.smcsbdc.org
53. Benefits to Borrowers
• Longer Terms
Business loans up to 10 years with 30% injection in the business
Real Estate loans up to 25 years
• No balloon payments on SBA business loans
• Limited prepayment penalty on real estate 5%
the first year, 3% the second year, and 1% the
third year
• Low down payments on real estate transaction
10 to15% down payment on real estate transactions
www.smcsbdc.org
54. Terms
Use of Proceeds Maturity up to
• Real estate 25 years
• Business purposes 7 to 10 years
• Equipment & machinery 15 years
www.smcsbdc.org
55. Interest rates
• SBA loans may be variable or fixed
rate ( 504)
• SBA variable loans adjust quarterly
• SBA variable loans are tied to the
Wall Street Journal prime rate
commonly called (Prime)
• Business loans are priced at
• Prime + 1.5% to 2.
• Real estate
• Prime + 1% to 2.75%
www.smcsbdc.org
56. Fees – SBA Guarantee Fee
• The SBA charges a one-time fee of
2% to 3.5% for the guaranty. The fee is based
on the guaranteed amount. There is an
additional ¼% fee on loans over $1,000,000
Loan Amount $150,000 $300,000
Guaranteed % 85% 75%
Guaranteed Amount $112,500 $225,000
Guarantee Fee % 2% 3%
Guarantee Fee $2,250 $6,750
www.smcsbdc.org
57. Purchase price $5,000,000
• 75% of $5,000,000 Equals $3,750,000
• SBA Guaranty
• $0 to 150,000 = 2%
• $150,001 to $700,000= 3. 0%
• 700,001 to $1,000,000 = 3.5% $35,000
1,000,000 to $5,000,000=3.75 $96,000
• Total SBA Guaranty $131,250
www.smcsbdc.org
58. Fees – 3rd Party Costs
• The borrower is responsible for
costs associated with securing the
loan
• Appraisal
• Phase 1
• Title insurance
• Lender fees
• UCC’S
• Legal
www.smcsbdc.org
59. Prohibited Fees:
• Processing fees
• Closing Fees
• Origination fees
• Application fees
• Points
• Brokerage fees, Paid by the Bank
• Bonus points
www.smcsbdc.org
60. Prepayment Penalties
• Only for loans that have a maturity of 15
years or more
• Usually real estate or Heavy Machinery &
Equipment
• The prepayment fee calculation is as
follows:
5% the 1st Year
3% the 2nd Year
1% the 3rd Year
www.smcsbdc.org
61. Pre-Qualification
• Items needed to furnish a Letter of interest
• BUSINESS
• Previous Year's Business Tax Returns (2010,2009,2008)
• Current Profit & Loss Statement
• Business Balance Sheet ( No later than 45 days)
• Loan Request / Use of Loan proceeds
• Aging of Accounts: Receivables and Payables
• Total Project Cost
• Personal
• Previous Year’s Personal Tax Returns (2010,2009,2008)
• Personal Financial Statement (No later than 45 days)
www.smcsbdc.org
65. Sales and Marketing
Monica Rayes
http://www.youtube.com/watch?v=
lFZ0z5Fm-Ng
www.smcsbdc.org
66. Objectives
• Define Marketing
• Review Preparing your
Marketing Plan
• Prospecting Opportunities
• Brand Creation and Identity
www.smcsbdc.org
67. What is Marketing?
• Techniques used to attract and
persuade consumers to a product
or service
• Identifying and responding to
customers needs
• The art of getting the customer to
come to the product
Effective marketing strategies:
• Generate sales leads
• Affect image
• Increase product awareness
• Enhance propensity to buy
www.smcsbdc.org
68. What is Marketing?
• Be able to define current and future
customers
Target Audience
www.smcsbdc.org
69. Marketing Tactics
• Direct Marketing
Direct Mailing
Advertising
• Viral Marketing
Encourages consumers to pass along messages
online to others in order to generate added
exposure
• Affiliate Marketing
A method of promoting your business in which
an affiliate is rewarded for every customer
and/or sale provided through his/her platform
• Public Relations
Media
Partnerships
Publicity stunts
www.smcsbdc.org
71. Why implement social
networking?
• Optimize search engine…Drive traffic.
• Build Brand awareness.
• Focus on direct selling.
• Influence consumers purchasing
decisions.
• Present information in real time. Current
and frequent.
• Organizational tool for contacts.
• Easy to update.
• Archived information.
• User friendly!!!!
www.smcsbdc.org
73. Marketing is satisfying the
customer at a profit!
• Identifying and responding
to customers needs.
• Art of getting the customer
to come to the product.
• Be able to define current
and future customers.
www.smcsbdc.org
74. What Does Selling Mean to
You?
• Group Exercise
http://www.youtube.com/watch?v=9QUT0tw
eX1M&feature=related
www.smcsbdc.org
75. Creating a Sales Plan
• Define your product
• Analyze what the competition is doing
• Look at existing, similar businesses
• Differentiate from competition
• Talk to potential customers
• Know your customer
• Establish competitive price points
www.smcsbdc.org
76. How to Build your Brand?
• Chose a business name that is easy to
remember, describes your business and
establishes “mind share.”
• Create a logo that symbolizes your
business to the customer.
• Develop a good reputation.
• Create brand personality.
• Communicate your brand personality to
your target audience.
www.smcsbdc.org
77. Closing Comments
• Be passionate
• Practice the 55-38-7 Rule
• Listen and learn!
• Follow those you are interested in
• Be solution oriented
• Remember why you want to start your
business in the first place
• Acknowledge that resources are
available to assist you in your venture
www.smcsbdc.org
78. Questions/ Additional
Business Counseling
• Monica Rayes, Business
Counselor, Santa Monica College-Small
Business Development Center
• E-mail: rayes_monica@smc.edu
• Phone: (310) 434-3566
• Please call the SBDC and schedule an
appointment!!!
• Best of luck and thank you for your time!!!
www.smcsbdc.org