Starting a Business
Frequently Asked Questions - Starting a Business
Q: Where do I look for investors?
A: A potential business owner may seek investors by contacting friends, business acquaintances, relatives, clients or industry colleagues. In addition, an owner can contact banks and commercial finance companies. Financial institutions may also know of venture capitalists interested in investing in new businesses.
Q: What is a debt-to-equity ratio, and what does it mean for my ability to attract financing?
A: The debt-to-equity ratio is the relationship between the money the owner has borrowed for the business and the funds the owner has invested in the business. Generally, the more money that an owner invests in the business, the easier it is to attract additional investors and financing.
Q: What are the concerns when naming a new business?
A: A new business owner should determine if the desired name is available. The secretary of state usually has a searchable database with businesses' names. In addition, the business owner should take care not to use a trademark that is registered to another party. Finally, the name should reflect the nature of the business and be easy for customers or clients to remember.
Q: Should I have a written partnership agreement?
A: The law typically does not require written general partnership agreements. It is advisable, however, for partners to write out details regarding management and other responsibilities. If there is no written agreement, the state's default partnership rules will usually attach.
Q: How does incorporating the business affect my individual taxes?
A: A corporation is considered a separate legal and taxable entity. Corporations (and some limited liability companies (LLCs) and limited liability partnerships (LLPs) if they choose to be taxed as corporations) pay taxes on the profits they earn — instead of the business owners paying via their personal income taxes. Owners of corporations do, however, pay taxes on their own salaries or dividends.
Q: How do I fill job openings in my new business?
A: Job openings can be filled in just about any way the business owner desires. Advertising job openings increases the pool of potential employees and gives an owner the best chance of finding the best candidates. During the hiring process, it is important for the business owner to observe federal and state laws that protect applicants against discrimination.
Q: What kinds of discriminatory practices are prohibited under federal equal employment laws?
A: Discrimination on the basis of race, color, religion, sex, national origin, disability and age is prohibited. Discrimination in hiring, firing, compensation and other aspects of employment is unlawful. The laws in your state may supplement the federal laws.
Q: What should be a new business owner's major concern when determining the type and amount of insurance for the new business?
A: A business owner must analyze the potential risk exposure. For example, the business owner should obtain product liability insurance if it manufactures products that are placed into the stream of commerce, or malpractice insurance if the business is part of an industry that requires it. A general business owners' policy should be strongly considered.
Q: Is the minimum wage applicable for employees who receive tips?
A: A business owner is not required to pay minimum wage to an employee who routinely makes at least $30 per month in tips. The amount of pay plus tips, however, must bring the employee's earnings up to the federal minimum hourly wage level. State law may require a higher minimum wage than federal law.
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