David William Jordan

Attorney & Counselor at Law

Starting Your Own Business

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Make sure you develop a business plan.  Don't wing it.  Write out a detailed plan.  You can change it as you go along, but have a written plan.  Think of it as a road map to establish and guide your business.

To prepare a business plan you will have to ask and answer a number of questions including:

  1. What type of business do you want to own?

  2. Will it be retail, service or manufacturing?

  3. Who's the competition?

  4. Is the community large enough to support another similar business?

  5. Where will you locate your business?

  6. Is there a similar business nearby?

  7. What are the community's plans for business growth, such as shopping malls and business park expansion?

  8. Will you be able to find enough qualified people to employ?  NH has one of the lowest unemployment rates in the country.

  9. Will you buy, lease or build space for your business?

  10. How will you identify customers for your product or service?

  11. How will you sell to potential customers or clients?

Be prepared to revise your business plan if the information you gather doesn't add up to a strong possibility of success.

Have Enough Capital — Enough Money

The most common reason for failure is not having enough money to start and run your business until you are able to establish yourself.  Unless you are independently wealthy, you will have to borrow some money and most likely invest some of your own money.  Putting your funds into a business venture helps prove your commitment to potential investors or other sources of financing.

Banks, the Small Business Administration (SBA) and private individuals are possible sources of money.  Be aware that many banks avoid new business loans as being too risky even when money is not tight.  The SBA is usually eager to help new enterprises, but competition is keen for the SBA's limited loan guaranty support.

Before applying for financing, you need to carefully prepare a thorough, well-thought-out loan proposal.  Write up detailed figures on the capital needed, and be sure to include a salary for yourself and sufficient funds to cover start-up costs.  A bank or SBA representative will review your business plan to be sure it's solid.  Once you obtain a loan, you'll probably have to provide updated financial statements on a regular basis.  As long as your business is profitable and you're making loan payments on time, you'll probably have minimum contact with the bank or SBA.

You may consider seeking private investors including friends and relatives but keep in mind, however, that these people may, understandably, expect to have a say in how the business is run.

Legal Formations

For tax and legal reasons, you'll need to decide what form your business will take.  Generally, all businesses fall into one of these broad categories: sole proprietorship, partnership, corporation, S corporation and limited liability corporation.  Your choice of business form will affect your exposure to personal liability, how you draw profits and pay taxes and your ability to raise capital.

A Sole Proprietorship is the quickest, easiest way to start a business.  In a sole proprietorship, profits and losses are simply included on your individual tax returns.  On the downside, if someone sues your business, they may be able to sue you personally, and your personal assets are subject to those claims.

A Partnership is an association of two or more people working as co-owners of a business with the intent of making a profit.  General partners can share unlimited liability, and each is usually responsible for the acts of the other.

A Corporation is a legal entity that functions somewhat like an individual, legally and for tax purposes.  Liabilities are held by the corporation, minimizing the personal liability for owners.  The corporation operates as a business and can be owned wholly or partially based on stock.  To set up a corporation, you must file an application for a legal name, pay a corporate franchise fee to the State of New Hampshire and every State in which you wish to do business.  You must also appoint a board of directors and corporate officers, and keep minutes of periodic meetings of the board.

There's a unique type of corporation, called an S Corporation, that provides the advantages of a corporation but, unlike a corporation, is treated for income tax purposes as a flow through entity.  Income is reported individually by the owners or stockholders on their personal income tax returns.  Also, the owners may deduct the corporation's losses against other sources of income.  If your new business will have fewer than 35 stockholders, you may want to talk with your accountant and attorney about this option.

Another alternative is a limited liability company, in which income and income tax are distributed among partners, but generally the partners are not personally liable for debts.  This is a relatively new legal form of business and is simpler than a corporation.

Down To Business

You've got your business pretty well defined, you know what form it's going to take and you know where you're going to locate.  Now it's time to get down to the business of running your business.  Here are some of the major concerns you'll need to address as you get under way:

  1. Marketing.  Identify your potential customers–they're your target market.  Then identify what is unique about your product or service.  Develop a strategy for telling your target market about your product or service, and that's the basis of your marketing plan.

  2. Pricing.  The amount charged for a product must cover all costs and return a profit.  Many small business owners fail to consider all the variables of producing their products in a competitive manner, so they either fail to generate a profit or charge more than the market will bear.  The three main components of price are material, labor and overhead costs.  Do a complete cost analysis and set a price that falls in line with your marketing strategy.

  3. Supply.  Identify suppliers of the materials you will need to provide your product or service.

  4. Production.  Determine the best, most efficient way to make your product or offer your service.

  5. Distribution.  Figure out the fastest, least expensive way to get your product or service to your customers.

  6. Staffing.  If you're going to hire employees, be sure their roles are clearly defined.  Prepare an organizational chart of personnel that covers the functions of sales, service, manufacturing and purchasing.

  7. Training.  Provide opportunities for your staff to learn more about their jobs and responsibilities.

  8. Details, details.  Don't neglect the following:

    • Get a federal tax identification number

    • Get a state sales tax identification number

    • Establish a banking relationship

    • Retain an attorney for the business

    • Retain a CPA/accountant/bookkeeper

    • Choose an insurance company
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