Catching the American Dream

By Garth Wilcox

This practical guide to small business management gives readers the information needed to run a small business profitably. It also motivates and inspires readers to follow their dreams, achieve success, and earn their prosperity. This easy-to-read book tells how to start a small business and teaches concepts of management and it describes common character traits of successful people.

• Language: English
• Publisher: Garth Wilcox
• Release date: Jan 6, 2011
• ISBN: 9781452474731

Garth Wilcox

I grew up on a small farm near Rexburg, Idaho and from an early age, learned the value of hard work. I graduated from Madison High School, Ricks College, and Idaho State University. I passed the CPA exam in May, 1993 with the 4th highest score in Idaho for that testing period. I am married to my high school sweetheart and we are the parents of six children. We now have 10 grandchildren. In addition to my CPA practice, I have ownership and management responsibilities in 3 other businesses.

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Catching the American Dream

By Garth Wilcox, CPA

Smashwords Edition

Copyright 2010 Garth Wilcox

All rights reserved.

Table of Contents

Chapter 1 – Getting Started

Chapter 2 – Financing

Chapter 3 – Financial Management

Chapter 4 – Time Management

Chapter 5 – Employees

Chapter 6 – Marketing

Chapter 7 – Income Taxes

Chapter 8 – Risk Management

Chapter 9 – Adversity

Chapter 10 – Decision Making

Chapter 11 – It is Worth It!

Preface

The American Dream is a phrase that has been around for decades. It probably takes on different meanings for different people, but for nearly everyone it conjures up feelings of prosperity, property ownership, and happiness. For some it may mean winning the lottery or a huge amount of money on a game show. For others, it may mean a steady job with benefits. For me, it has a more traditional approach to prosperity and includes the ideas of hard work, frugality, being productive, and being creative. It means taking part in the free enterprise system that has made America great for more than 200 years. It is all about managing an enterprise that creates products or services that will improve your customers’ lives and compensate you for what you know and do.

This book is meant to be a practical guide to small business management; to give you the tools you need and the knowledge and information to run a small business profitably. Moreover, it is a motivational and inspirational tool to help you achieve your dreams. It is not a guide to easy money, nor does it tell you how to get something for nothing. It does tell you how to earn your prosperity. Anything worthwhile will take effort to achieve. There is no better feeling in the world than to know you have earned your own financial security. Now is the perfect time to start enjoying all of the fruits of your labors.

The word management is synonymous with decision making. Business management is basically making decisions and then making sure those decisions are carried out. The broad term business management can be broken down into several smaller aspects of management such as financial management, personnel management, marketing, risk management, production management, information management, and time management. Often times the small business owner is responsible for all of the different aspects of management.

This book is geared toward an individual who is preparing to start his or her own business, but many of the principles found here can also be applied to existing small business owners or managers who want to improve their management skills. The emphasis is on managing resources to accomplish results. There are many who chase the American Dream, but few who catch it.

Chapter 1 – GETTING STARTED

The secret to getting started is breaking your complex, overwhelming tasks into small manageable tasks, and then starting on the first one. – Mark Twain

There has never been a better time in history to be in business. This is an exciting time. With today’s technology there are more ways than ever to market your product or service, purchase inventory and supplies, and get the information needed to manage your business. You are living in the information age. You can reach people all over the world! Technology seems to have no limits and it will continue to get even better. The technology we have today will seem primitive in a relatively short period of time. You will need to embrace technology in every form or the world will leave you behind in no time. Technology can make you more efficient in all aspects of management, but you need to be careful not to let it be a time waster instead of a time saver.

CHOOSING A BUSINESS

The first step in starting your own business is deciding what type of business fits you best. For some the decision is easy. For others it may be more difficult. Often times a person starts his or her own business in the same line of work that he or she already has been involved in. For example, an auto mechanic working for the dealership may decide to open his own repair shop. Or a person working in the cabinet making shop may decide to open his own cabinet making business. It is a natural transition and experience is the best teacher. Alternately, you may have a hobby that you enjoy and can find a way to turn the hobby into a business. But sometimes you just need to look around and find a niche that no one is filling, do some research on the business and come up with a plan to start a business. To have a successful enterprise, you must clearly define what you want to accomplish.

There is some type of business opportunity out there for everyone. Everyone has skills that can be marketed. Look around, be creative, and find out what works best for you. Choose something that you like to do. That is what makes business ownership so fun and exciting. You get to do something you love to do and get paid for it.

SELECTING THE PROPER LEGAL ENTITY

One of the first decisions you will need to make is the best form of legal entity for your business. There are several to choose from: Sole proprietorship, partnership, Limited Liability Company, Corporation, or S-Corporation. Each of these entities has advantages and disadvantages both from a legal standpoint, and from a taxation standpoint. The form of entity you choose can have an impact on the way you are protected under the law and also how much you pay in income taxes.

Sole Proprietorship

A sole proprietorship is the simplest form of business. It really is not considered a legal entity, but is merely an extension of the person who owns it. The owner has possession of the business assets and is directly responsible for the debts and liabilities incurred by the business. There is no legal protection from liability in a sole proprietorship. The income or loss from the business is reported on the owner’s personal income tax return and profits are subject to self-employment tax as well as federal income tax and state income tax.

The sole proprietorship does not require any specific legal organization except the normal business licenses and permits. If you choose a business name other than the owner’s name, you may need to register an assumed business name with the state authorities.

Partnership

A partnership is an entity with two or more individuals who join together to own the business. In a general partnership each individual partner has ownership of the partnership assets and responsibility for liabilities. The authority in running the business and the way the profits and losses are split usually depends on the individual’s percentage of ownership in the partnership. However, these can be modified in the partnership agreement if all the partners agree.

A general partnership resembles a sole proprietorship other than there is more than one owner. The partnership creditors typically are able to go after the personal assets of the partners to settle a debt.

A limited partnership is comprised of one or more general partners and one or more limited partners. The limited partners do not take part in running the business nor are they liable for debts and liabilities of the partnership. Limited partnerships are effective when an owner wants to give up some ownership without giving up control. For example, if the owner wanted to start gifting a portion of the business to his or her children without giving them control over the business or the right to sell the assets, he or she might do it through the use of a limited partnership.

A partnership is a legal entity recognized under the law. A partner can sign contracts in behalf of the partnership. The partnership can borrow money, but most creditors require a personal guarantee of the general partners. Although not required, it is a good idea to have a legal document such as a partnership agreement drawn up by an attorney to spell out the rights and responsibilities of each partner. Generally, when a partner dies or withdraws from the partnership, the partnership ceases to exist.

A partnership is required to file a tax return, but the taxes are typically not paid at the partnership level. The partnership profits and losses are passed through to the owners and are reported on their personal tax returns. The general partners’ share of the profits is subject to self-employment tax where the limited partners’ share is not. If the partnership experiences a net loss, it flows through to the partners and can offset income from other sources. These losses generally can be deducted even if they exceed the partner’s basis in the partnership.

Corporation

A corporation is a totally separate legal entity that exists under the authority of state law. The owners of a corporation own stock in the corporation, but the entity itself owns all the business assets and is responsible for the debts and other liabilities of the corporation. This provides the stockholders with the ultimate legal liability protection because the most they can lose is the