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Frequently
Asked Questions
Business
Plans
- What
are the Advantages of using a Bizjump's Business
plan?
Do
I need a business plan if I'm not seeking financing?
How
do investors read a business plan, and what do they look
for?
What
steps should I expect a venture capital firm to take with
my plan?
How
long should my business plan be?
Should
I hire someone to write my business plan for me?
Should
I use business plan software?
The
forming and operating of the corporation
What
is an assumed name?
What
are the legal limitations when choosing a name for the
corporation?
What
are articles of incorporation?
What
are bylaws?
What
is certificate of incorporation?
Who
is the Incorporator?
Who
are the directors?
What
is the purpose of the board of directors?
Who
are the officers?
What
is the purpose of annual meetings?
Stocks
and shares
Who
are stockholders?
What
is a dividend?
What
are issued shares?
What
are authorized shares?
What
is the difference between issued shares and authorized
shares?
What
is the minimum amount of stocks required for a corporation
to exist?
What
is meant by the term Par Value?
What
is the market price?
What
is meant by no Par Value Stock?
Is
it necessary for stocks to have par value?
Forms
Of Businesses & Where to Incorporate
What
is the difference between Sole Proprietorship & Partnership?
How
do the sole proprietorship and the partnership differ
from the corporation?
What
is the difference between the "S" corporation and "C"
corporation?
Can
the Owner of the Corporation be an employee?
Is
it better for companies to incorporate out of state?
Who
is a Registered Agent?
Do
I need a business plan if I'm not seeking financing?
Most
entrepreneurs usually develop a business plan to obtain
financing. However, it is the actual process of developing
the business plan itself that is most valuable to them.
During this process, entrepreneurs not only acquire a more
intimate knowledge about their businesses, their customers
and their markets, but also they get the chance at the outset
to resolve most "flaws" on paper – thus increasing
their chances of successfully implementing their business
objectives.
Creating
a business plan forces you to establish and quantify your
business objectives and identify the resources you will
need to execute your plan.
Other
important uses of a business plan are:
- Internal
operational plan – ensuring that everyone in the
organization are on the "same page"
- Securing
contracts with major corporations and government agencies
- Recruiting
executive officers
- Establishing
strategic alliance with business partners
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What
do investors look for in a business plan?
Don't
expect that every investor will be excited about your business
plan. Investors have their own idiosyncrasies. Some investors
prefer to work with traditional businesses, like restaurants.
Others might have a distinct preference for technology firms.
It is therefore essential that the entrepreneur conduct
some background research on the investor to ensure that
the investor is the right match for your business. Or the
entrepreneur could also use a consultant who has established
relationships with various investors.
Even
when there is a match, most investors will not thoroughly
read your plan. They usually focus on a few areas of the
business plan, like the executive summary, marketing and
finance. According to Howard Sommer, a Venture capitalist,
his firm receives over 30 business plans a months. However,
they only fund less that 2% of those plans. He also added
that they are concern is that a firm has the potential to
return at least 60% return on investment (RI). (Other venture
capitalist expect at least 150% RI) Venture capitalists
are preoccupied with whether there is a market you're
your product and whether the firm has the ability to capture
this market.
Commercial
lenders on their other hand are more focused on whether
your business has enough cash for repayment. And if your
business should fold, whether you have collateral to repay
them.
Your
executive summary will likely be the first thing read. Make
it stand out by highlighting the unique nature of your product
or service, the strength of your management team, and why
your business will make money. If the executive summary
grabs their interest, many potential investors will move
to the rest of the plan. But they probably won't read it
in order. Some investors go straight to the description
of the management team - they want to see if anyone involved
with the company has had experience with successful start-ups,
and has relevant experience in this industry. Others may
go to the financials section to see when and how you plan
to attain long-term profitability.
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How
long should my business plan be?
The
maximum should about 40 pages and minimum 20. Anything longer
than that and you risk alienating a potential investor,
or you force them to skim through the document rather than
read it. The more concise and readable you business plan
is, the more focused your business will appear.
Focus
on those details that tell your business' story, that set
you apart from your competition, that make your business
appear to be a good financial investment, and that show
you will be profitable.
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Should
I hire a consultant to write my business plan?
At
the bare minimum, writing a business plan requires the following
skills: marketing, accounting, finance and writing. It is
very rare that a plan writer will be adept in all the above
area. That is why we at BizJump take a "team approach"
in developing business plans. Each member of a business
plan team is a specialist in a critical business discipline.
Furthermore, the quality of a business plan is significantly
enhanced when a diverse approach is taken in it's development
(two heads are better than one syndrome.
However,
it foolish to not be involve in your business plan development
must reflect your goals - so don't be afraid to request
extensive editing and rewrites if necessary.
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Should
I use business plan software?
There
are a wide variety of software programs on the market designed
to help you prepare a successful business plan. These programs
vary, but most include a dedicated word processor, a detailed
outline, and some interactive tools, which can serve as
a starting point for creating a plan.
Much
like using a consultant, don't expect the software to write
the plan for you. It is still up to you to make sure that
the plan honestly reflects your business' goals. Also, be
on the lookout for software that will generate a plan in
a "cookie cutter" approach. You don't want your
business plan to look just like someone else's. It needs
to stand out from the pack to get noticed.
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What
is an assumed name?
An
assumed name is a fictitious name or any other name under
which the corporation operates. The assumed name is usually
used to differentiate the different products or services
that the corporation offers. An assumed name is an alias
name for the same corporation.
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What
are the legal limitations when choosing a name for the corporation?
What
are articles of incorporation?
It
is the document that is prepared when individuals decide
to form a corporation. It contains pertinent information
about the corporation such as the name, length of intended
operation, the nature and purpose of the business and the
number of shares that will be issued. This document is sent
to the appropriate department of the state in which the
company will be incorporated.
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What
are bylaws?
They
are the set of rules that regulates the operation of the
corporation. In essence they are the rules that the corporation
has for its stakeholders, officers and directors. When bylaws
are amended at the directors meeting, an annotation should
be made in the minutes and placed in the corporate records
book.
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What
is the certificate of incorporation?
The
certificate of incorporation is sometimes referred to as
a charter or articles of incorporation. It is the document
issued by the state as proof that a corporation is legitimate
or valid and has met all state requirements. However in
some states, it is considered as the document that is filed
in order to incorporate your business.
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Who
is the Incorporator?
The
individual who actually files the articles of incorporation.
Once the company has been incorporated, the duties of the
incorporator officially end.
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Who
are the directors?
Individuals
chosen by the shareholders to oversee the business affairs
of the corporation.
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What
is the purpose of the board of directors?
It
is the committee that oversees the business affairs of the
corporation. The board members are not responsible for the
daily operations of the corporation, but they do approve
all important business decisions. They hire officers to
manage the corporation.
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Who
are the officers?
Officers
are hired by directors, to manage the day-to-day operations
of the business. In small corporations the owners sometimes
act as the officers. A Corporation normally has 4 officers,
namely, the president, vice- president, secretary &
treasurer.
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What
is the purpose of annual meetings?
Annual
meetings are held once a year in order to inform shareholders
of the progress of the company, as they are not involved
in the day-to-day activities of the company. Officers and
directors normally serve a one-year term and are therefore
re-elected at annual meetings.
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Who
are stockholders?
Stockholders
otherwise know as shareholders or stakeholders are individuals
who invest money into the company in exchange for future
dividends. In small corporations shareholders are the individuals
who actually start up and run the business.
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What
is a dividend?
It
is the payment that shareholders receive at the end of each
quarter, from the corporation, usually in the form of cash
or stock. The amount of dividends that shareholders receive
depends on the amount of profit that the corporation makes.
Thus, it may not be a regular payment.
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What
are issued shares?
The
number of shares distributed to the shareholders. These
are the only shares that are counted for ownership purposes.
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What
are authorized shares?
The
maximum number of shares that the board of directors is
permitted to issue to shareholders. The board of directors
does not necessarily have to issue all the shares at the
same time. It can be done periodically.
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What
is the difference between issued shares and authorized shares?
Shares
can be authorized but not issued. These shares are referred
to as authorized but un-issued shares. Un-issued shares
are not considered for ownership purposes. Issued shares
are those, which are actually distributed to shareholders.
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What
is the minimum amount of stocks required for a corporation
to exist?
A
company needs at least one shareholder and one share of
stock in order to be considered a legitimate corporation.
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What
is meant by the term Par Value?
Par
value is the purchase price of the stock. When the stock
is bought directly from the corporation, or the amount of
money the corporation receives when stock is issued to shareholders.
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What
is the market price?
It
is the amount that is paid for stock sold on the open market.
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What
is meant by no Par Value Stock?
This
term refers to stocks that do not have a fixed price yet.
The directors will actually determine the price of stock,
when they are issued to the stockholder.
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Is
it necessary for stocks to have par value?
No,
each time stock is issued directors will decide how much
stocks are worth.
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What
is the difference between Sole Proprietorship & Partnership?
The major difference between both forms of businesses is
that a sole proprietorship has one owner and the partnership
involves two or more people.
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How
do the sole proprietorship and the partnership differ from
the corporation?
In
both the sole proprietorship and partnership, the owners
are liable for business debts however, in corporations,
the owner is not liable for debt seeing that the corporation
is a separate legal entity.
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What
is the difference between the "S" corporation and "C" corporation?
The
"S" corporation is a corporation that chooses a special
tax treatment wherein the corporation is not responsible
for its own taxes. It is the duty of the shareholders to
pay necessary income taxes if the "S" corporation
makes a profit, or on the contrary, receive a tax deduction
if the company losses money. However, in the "C" corporation,
the corporation itself is liable to pay its own income taxes.
(Contact your accountant to see which type of corporation
is most suitable for your business.)
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Can
the Owner of the Corporation be an employee?
Yes,
the owner has to be an officer in the corporation and is
therefore eligible to receive employee benefit such as health
& life insurance and pension plans.
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Is
it better for companies to incorporate out of state?
Laws
that regulate the incorporation process vary from state
to state. However, although it may seem cheaper or easier
to incorporate in certain states such as Delaware, in the
long run it is actually cheaper to incorporate the company
in the state in which it will operate or do business. When
companies operate out of state they are subject to double
taxation (paying taxes in state of incorporation and state
where business operation takes place) and filing fees in
order to qualify to operate out of state. (Please discuss
this matter with your lawyer or accountant before making
your decision.)
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Who
is a Registered Agent?
A
registered agent is an individual who ensures that the corporation
has a representative in the state in which the company has
been incorporated. The main responsibility of the registered
agent is to receive and forward important legal documents
for the corporation. Companies that do not operate in the
state in which they were incorporated normally use registered
agent service companies as their registered agent.
The only stipulation is that the registered agent's address
cannot be a P.O. Box address. The agent should have a valid
street address.
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