Small Business Start-Up Guide
by Robert Sullivan
. . brought to you by The Small Business Advisor
already mentioned a number of times that it's necessary to confer with
your attorney and accountant (or certified public accountant, CPA).
This chapter will give some basic advice on finding and dealing effectively
with attorneys and accountants, as well as insurance agents, all of
whom you should be contacting for advice on a regular basis. Another
important professional is your banker who is discussed separately in
very important that you seek advice often and early enough to keep you
out of trouble. It's equally important that you are able to ask the
right questions. One of the primary objectives of this book is to give
you enough information so you are comfortable asking questions. You
need to find business professionals with whom you are comfortable and
have confidence. This is not always easy to do. Going to the Yellow
Pages is probably not the answer. A better approach is to first ask
for referrals from other small business owners. In this manner you can
obtain a listing of individuals who are providing services in the areas
of interest to you and you can begin a process of selection by interviewing.
Lack of professional advice often and early
will surely cause problems sooner or later.
book frequently recommends that the advice of an attorney be obtained
on various matters. You should be dealing with your attorney often and
on a wide range of issues, so thoughtful selection is a must. Do not
use attorney referral services, including the bar association in your
area, since these services are generally "name brokers." What you need
is a referral by someone who knows that a certain attorney is well versed
AND INTERESTED in the problems of small businesses. A good place to
start is with recommendations from your banker, accountant, and other
owners of small businesses.
with and interview at least three attorneys. Remember, you will be working
closely with whoever you select and it can be difficult and expensive
to switch later. During the interview you should try to determine if
the attorney has an understanding of the problems associated with your
type of small business and is interested in working with you. In all
likelihood, you and your business will at best represent only a small
percentage of the attorney's time so don't expect a lot of attention
after the interview! You should also make certain you understand the
rates and how you will be charged for services. Also, determine before
the interview if you will be charged for the interview time. If you
are not completely comfortable during the interview, move along to your
next choice. Remember that you may get better service from one of the
smaller law firms.
WITH YOUR ATTORNEY
that attorneys are trained to solve problems and may not necessarily
understand the business ramifications. They are, of necessity, generally
very conservative. As such they may not have your entrepreneurial qualities.
Keep this in mind when asking for their advice.
blindly follow your attorney's advice ... ask lots of questions so that
you fully understand the basis for the advice. Ask for any documents
to be prepared in "plain text" and not "legalese." If legal terminology
is used, make certain you understand the meanings. After you fully understand
the advice and any associated documents, you may decide against it for
reasons of your own. Your attorney's job is to ensure you are aware
of the risk involved in making or not making a certain decision.
one of my early business ventures, I asked my attorney for assistance
in develop-ing a contract form to use with my potential clients. Well,
I got my form ... all three single spaced pages of it with a total
of around 30 items! My attorney had attempted to protect me from every
possible contingency but in doing so, generated a document so onerous
that no one would sign it, including my current customers. I should
have given my attorney more direction ... he assumed, in keeping with
his training, that I needed as much protection as possible. With no
customers, I needed no protection!
Your business attorney will not be proactive.
you are probably a very small client, your attorney will probably not
be thinking about you unless you bring a specific issue to his or her
attention. In other words, you need to find the potential problems and
not wait for your attorney to alert you.
#5: WORKING WITH YOUR ATTORNEY
questions until you fully understand the issues and the "legalese."
that your attorney will not be giving advice from your entrepreneurial
perspective but rather from a conservative point of view. The advice
you get may or may not be right for YOU.
hesitate to get another opinion on a specific matter if you are not
completely con-fident with your attorney's advice. There is a tendency
to take everything one hears from an attorney at face value.
for a cost estimates for every matter before you take it up with your
attorney. Ask how expenses may be held down.
never be less than totally honest with your attorney.
extra charges such as copying and faxes are being charged without
padding. (The ABA requires lawyers charge actual costs for these extras).
for detailed invoices including hours spent on each item and review
your attorney to your place of business at least every 6-months to
show him or her what you are doing. The better your attorney under-stands
your business, the more effective the advice.
select with great care. Your prospective accountant should be a member
of the American Institute of Certified Public Accountants (AICPA). Contact
them at (212) 575-6200. The National Society of Public Accountants produces
several useful booklets such as "How Accountants Set Fees." Contact
them at (703) 549-6400.
accountant (or CPA), will be involved in every phase of your business
and, if you are dealing with someone who understands the problems of
a small business, you can benefit greatly from his or her advice. Your
accountant can help you in the following areas:
given for selecting an attorney also applies when selecting your accountant.
Locate and interview at least three. Select someone who is sensitive to
the problems of your small business. A good accountant is a very valuable
resource for you but, as with an attorney, it is up to you to get and
keep their attention.
up your books
of an accounting package
up retirement plans
various financial reports
with the IRS
with deciding to buy or lease
source of referrals for an accountant is your banker and owners of other
small businesses in your area. Look to businesses that are closely related
to yours in terms of operation: Manu-facturing, retail, etc.
preferable to work with an independent accountant or very small firm
to take advantage of the fact that you will probably represent more
than a name on an invoice and the service received will be more personalized
(they can grow as you grow). However, we would be remiss if we didn't
mention the potential advantages of working with one of the "big 6"
accounting firms (for you who need to know, these are Price Waterhouse,
Arthur Andersen, Ernst & Young, KPMG-Peat Marwick, Coopers & Lybrand,
and Deloitte & Touche). These big firms have every conceivable accounting
service available and are usually perceived to be so reputable that,
in some cases, having your business audited by one of these companies
as part of the paperwork for a loan can make the difference in obtaining
the loan. However, as a small business, you may have a difficult time
getting the attention you require. Or, for that matter, being able to
WITH YOUR ACCOUNTANT
will make suggestions based on a very conservative point of view, just
like your attorney, and it is up to you to accept or ignore the advice
and make the final decision. You, the entrepreneur, may always be testing
the limits of whatever you are involved with, whereas the accountant
will usually be quoting "from the book" on any given issue.
accounting chores, such as bank deposits, check writing, posting to
your ledger, etc., can be satisfactorily handled by a bookkeeper whose
services will certainly be less than that of an accountant. However,
an accountant should be involved with preparation of your financial
statements and all taxes to ensure statements are prepared in accordance
with accepted accounting principles and that you are in compliance with
all tax submissions.
having your business accountant also prepare your personal tax returns
so they can help with your financial and estate planning.
Federal and State requirements imposed on businesses with employees
(See Chapter 11) makes payroll a complicated issue. Neither you nor
your accountant need to get involved in this thankless task. It would
be a poor use of your time and too expensive to use your accountant.
Fortunately, there are excellent payroll processing services in nearly
every major city throughout the United States. These services are inexpensive,
complete, and, if a mistake is made, they pay any penalties that may
be imposed by government agencies. Their services include preparing
and delivering the checks, preparing the payroll register, sending all
funds to the state and IRS, as required, preparing and filing all quarterly
and annual reports. Check your local yellow pages for a service near
#5 (Working with your attorney) is also applicable to your accountant.
AN INSURANCE AGENT
10 includes a discussion of the various forms of insurance you may be
involved with in your business. You might glance at this chapter now
just to take note of the variety and complexities involved with business
and personal insurance issues. This will give you a better understanding
of the importance of your insurance agent's role.
again, you should shop around and interview a number of commercial agents
until you find one that you are comfortable with who understands your
needs as a small business owner.
15 An independent insurance agent is most likely to provide unbiased
references from the agent and, if possible, talk to another client who
has had to make a claim against one of the agent's companies. Determine
how helpful they were and how quickly and easily the claim was settled.
You can learn a lot about an insurance company in this manner.
you select must be aware of the details of your business. The interview
with the agent should be at your place of business so that he or she
can gain a better understanding of exactly what your business involves.
This is especially important if you have manufacturing facilities.
a good idea to select an agent who is a Chartered Property/Casualty
Underwriter (CPCU) and a member of the Independent Insurance Agents
of America (IIAA). See references at the end of the chapter for additional
#6: WORKING WITH YOUR AGENT
the agent to your place of business on a regular basis.
sure to keep the agent up to date on any changes that would affect
your insurance program such as new employees or equipment, change
of location, etc.
about every 6-months or so, review your entire insurance program to
be sure you are adequately protected but not over-insured.
purchasing a new item requiring in-surance coverage, call your agent
and get a binder. Follow up within a few days to make sure the binder
has been attached to your policy.
with professionals such as attorneys, accountants, and insurance agents
will be a fact of your business life. You are responsible for selecting
these individuals and ensuring they are aware of your specific concerns
and problems. They work for you and your responsibility extends to ensuring
that you are getting good value for your money. The professionals you
deal with, in most cases, may not understand your motivations as an
entrepreneur, but they can help to keep you out of legal hot water.
Listen to and make certain you understand their advice ... then decide
if you want to accept it based on a clear assessment of the risks.