Small Business Guide - Welcome to Alabama A&M University

Alabama A&M UniversityAlabama A&M UniversityPRIME PROJECTH e l pPRIME i n g y o u c r e a t e a B l uPROJECTe p r i n t f o r B u s i n e s s s u c c e s s !H e l p i n g y o u c r e a t e a B l u e p r i n t f o r B u s i n e s s s u c c e s s !S m a l l B u s i n e s sH a n d b o o kF o rN o r t h A l a b a m aFunded in part through a cooperative agreement withthe U.S. Small Business Administration. All opinions,conclusions or recommendations expressed are thoseof the author (s) and do not necessarily reflect theviews of the SBA

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aAAMU PRIME PROJECTSMALL BUSINESS HANDBOOK FORNORTH ALABAMAFirst EditionByJames Bukenya—Project DirectorEric Ohene-Nyako—Program ManagerEdited byEmmanuel FreemanCopyright 2010All rights reserved. No part of this publication may be produced,stored in a retrieval system, or transmitted, in any formor by any means, electronic, mechanical, photocopying, recordingor otherwise without written permission of the publisher.AcknowledgementsWe would like to acknowledge Thomas Pressl an MBA GraduateAssistant in the School of Business, for his hard work in makingthis Project possible. We would also like to acknowledge Ms.Kim Vincent for her invaluable contribution to the handbook.2

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aPrefaceIn 2004, the most recent year for which firm size data is available,small businesses with fewer than 500 employees accounted for all ofthe net new jobs. According to the Bureau of the Census, firms withfewer than 500 employees had a net gain of 1.86 million new jobs,while large firms with 500 or more employees had a net loss of181,000 jobs. Small businesses employed just over half of the privatesector work force and generated more than half of the nonfarm privategross domestic products. More than 99 percent of Americanbusinesses are small, and the average small business employer hadone location and 10 employees, compared with 62 locations and3,313 employees in the average large business.In 1953, the U.S. Small Business Administration (SBA) was created asan independent agency of the federal government to aid, counsel,assist and protect the interest of small business concerns, as well asto preserve free competitive enterprise and to maintain andstrengthen the overall economy of the United States. The Program forInvestment in Micro-Entrepreneurs (PRIME) funded by the Small BusinessAdministration is one of the programs used by the SBA toachieve its goals.Alabama A&M University is one of 58 non-profit organizations to receivefunding for the PRIME Project. The SBA’s Program for Investmentin Micro-entrepreneurs (PRIME) provides funding to organizationsto assist low-income and very low-income entrepreneurs andsmall businesses (with five or less employees) that lack sufficienttraining and education to gain access to capital to establish and expandtheir small businesses.The “Small Business Handbook for North Alabama” is produced by theAlabama A&M University PRIME Project to aid entrepreneurs in startinga business. Please contact the PRIME Project offices for any questionregarding topics in this brochure and any SBA programs at:AAMU PRIME ProjectSchool of BusinessP.O. Box 429Normal, AL 35762Phone: (256) 372-8667http://www.aamu.edu/prime/default.aspx3

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aTable of ContentsI) Starting a BusinessAm I Ready to Run A Business PAGE 5Business Owner Attributes PAGE 5Business Idea PAGE 6Type of Business PAGE 6Choosing your Business Structure PAGE 8Find the Right Location PAGE 9Location: North Alabama PAGE 9Insurance Checklist PAGE 10II) MarketingResearch and Planning PAGE 11How to Name your Business PAGE 12Trademarks PAGE 13Trade Name / Trademark Registration PAGE 13III) FinancingHow to Finance Your Business PAGE 14Quick reference to SBA Loan Guaranty Programs PAGE 15504 Loan Program vs. 7(a) Loan Program PAGE 17How to Apply for a 504 Loan PAGE 18IV) Hiring EmployeesHiring Employees (9 Steps) PAGE 19Employees Protection Rights PAGE 22Employment Tax Contacts PAGE 23Tax Numbers Contacts PAGE 23V) Business PlanBusiness Plan Checklist PAGE 24Financial Assistance Forms PAGE 25VI) Business TaxesGeneral Information/Forms PAGE 28State and Local Taxes PAGE 29Occupational Taxes PAGE 29Registration Forms PAGE 30Sales Taxes PAGE 32Alabama Consumer Use Tax PAGE 35State Tax Rates PAGE 36VII) Contacts and TemplatesContact Information of the Counties in North Alabama PAGE 37Contact Information of the Chambers of Commerce PAGE 384

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aI) Starting a BusinessThere are several incentives to starting your own business. For instance,to pursue a higher income, to avoid unemployment, to be independent,or to control your own professional advancement . Theestablishment of your own business can be a long and winding road.This brochure should provide an aspiring entrepreneur with basic informationduring the inception phase of the business.Am I Ready to Run a BusinessTo become an entrepreneur you must answer yes to the followingthree basic questions:Q1. Do you have the ability to operate independently?Q2. Are you willing to work hard and make the sacrifices that startinga small business entails?Q3. Do you have the Self Confidence and Self Discipline that will enableyou to persevere and build your new business into a success?As an Entrepreneur you have to act autonomously. Whether yourbusiness will run smoothly or not is in your hands. You have to face acompetitive environment, where you have to deal with all kinds ofpersonalities, emotional pressures, making decisions under difficultcircumstances, and to accepting a six or seven 12-hour workdays. Youhave to be aware that your life may change tremendously , and thatyou will have less spare time and fewer moments with your family.Business Owner AttributesPersonnel attributes and know-how are the key factors to survive in abusiness. Profound knowledge in business management and legalregulations are important as much as the ability to build a social network.As a business owner you will deal daily with your customers,suppliers, employees and competitors. A lack of social skills, managementand legal know-how may be a reason for a business failing inthe start-up phase.Business owners must posses knowledge in the business they want toengage in. If such knowledge is missing the business owner shouldgain expertise by attending workshops or seminars. The SBA, theAAMU PRIME Project, and various centers funded by the SBA providebesides workshops and technical assistance, publications and onlineresources to give basic information and provide assistance to aspiringentrepreneurs and small business owners.http://sba.gov/tools/resourcelibrary/publications/index.html5

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aBusiness IdeaThe basic key to be successful in a competitive world is to have, or tocreate a competitive business idea. Your idea may arise from one ofyour hobbies, or you copy an idea from a different country or from adifferent industrial sector. Your business idea should be able to coveras many of the below criteria as possible:- Creating a customer demand- Solving a customer problem- Utilizing a current trend- Pursuing new technologies- Competitive edgeType of BusinessFranchisingA franchise is a mutually beneficial agreement between a franchiserand franchisee. The franchiser receives agreed fees from the franchiseefor providing them business expertise, the right to sell their serviceor product, and to support them with advertising and promotions.Franchisees may eliminate some risks but they give up also apart of their independence and they have to share their revenueswith the franchisers.Home-Based BusinessA prerequisite for working at home is to create a professional environmentby setting up a separate office in your home. Furthermore,your home should provide enough space to conduct your business.Also we would recommend contacting an attorney and your statesdepartment of labor to confirm that your home-based business is notagainst any laws and regulations. There are, for instance, some restrictionsfor each state what someone is allowed to produce or notat home. Another obstacle could be special zoning regulation for yourkind of business.6

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aWomen Business OwnerThe U.S. Small Business Administration has implemented several programsand services for businesses owned by women. Women Entrepreneurmay receive offer loan guarantees, federal contracting opportunities,training, counseling and more from these programs andservices. Furthermore, there are about 100 Women Business Centersacross the country providing training, technical assistance, counselingand mentoring for socially and economically disadvantaged women.Most of the classes are free or offered for a small fee.Veterans Business DevelopmentEach SBA office has at least one Veterans Business Development Officerhelping veterans to prepare and plan their entrepreneurship. SBAoffers special assistance for activated Reserve and National Guardmembers and the small businesses they work in or own.Native American Business DevelopmentThe SBA is also working to ensure that entrepreneurship opportunitiesare available for American Indians, native Alaskans and nativeHawaiians seeking to create, develop and expand small businesses.These groups have full access to the necessary business developmentand expansion tools available through the agency’s entrepreneurialdevelopment, lending and procurement programs.7

Choosing your Business StructureS m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m a"C" Corporation "S" Corporation LLC's and LLP'sLimitedPartnershipGeneralPartnershipSoleProprietorshipAssociate (s) 1 2+ 2+ 1 or 2+ 2+ 1 or 2+LLC / LLP has onlylimited liabilities.Limited to asset thatare owned by thecorporation; No personalliabilityLimited to assets thatare owned by thecorporation; no personalliabilityGeneral partner(unlimited personalliability)Unlimited personalliability and jointliabilitiesLiability Unlimited personalliabilityLimited partner(investment)Profits are taxed asincome to the partnersbased on theirshare.Profits are taxed asincome to the partnersbased on theirshare.Profits are taxedtwice. Corporationtax and theshareholder for theirdividends.Profits are taxed asincome to the partnersbased on theirownership.Profits are taxed asincome to the partnersbased on theirownership.Taxation Profits are taxed asincome to the ownerpersonally.LowA few hundred dollarsin fees for filingthe articles of incorporation.Very Low Very Low Very Low A few hundred dollarsin fees for filingthe articles of incorporation.Costs of FormationVery Little Little Little Complex Complex Fewer hurdles thanfor a corporation.FormalityRequirementsLLP are commonamong professionalssuch as attorneys andaccountants, who arenot allowed to usecorporations to limittheir liability.An "S" Corporation is a way to prevent"double taxation". There are several conditionsto meet. For instance, Max. 35 Stockholders.Stockholders must be residentcitizens and individuals (not entities).1. LP has to meetcertain criteria toavoid being taxed asa corporation.The terms of thepartnership shouldbe written down inan agreement.Misc. Insurance can reduceliabilities/risks.2. General Partnermay be a corporation.8

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aFind the Right LocationThe location of your business should be well-considered. Each companyhas a different profile of the perfect location. Pivotal questionsabout the locations are for instance:♦♦♦♦How important is the closeness to the customer?How does close-by-competitors affect my business?How important is the access to transport connection?How great are the chances for my business to grow at thislocation?Location: North AlabamaThe “Tennessee Valley” an ideal location, offers a population ofabout one million for a variety of businesses. The principal cities areHuntsville, Madison, Decatur, Florence, and Athens. The HuntsvilleMetropolitan area counts a population of about 400,000 and is thehome of many federal operations (e.g., Marshall Space Flight Centerand Redstone Arsenal). Also, the “Tennessee Valley” is well-known forsome of the biggest organizations in the world, with companies suchas General Electric in Decatur, Sara Lee in Florence, and Boeing, BASFand Adtran in Huntsville. The infrastructure of north Alabama boaststwo Interstates highways (I565 & I65), the International Airport andInter—Model Center in Huntsville, and the Port of Decatur. Furthermore,many higher education institutions are located in North Alabama,educating talented and a skilled labor force for any kind ofbusiness.According to the U.S. Energy Information Administration, one incentivefor engaging in business in Alabama is the low business cost inAlabama. Business Owners in north Alabama benefit from one of thelowest overall corporate income tax burdens, the lowest propertytaxes in the U.S. and a very high skilled labor force. Thus, the overallcorporate income tax burden is one of the lowest in the U.S, with athriving economy, and being cited by many entrepreneur magazinesas one of the best regions in the United States to start a business.9

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aInsurance ChecklistBusiness owners should always protect their business for the unexpected.Each business needs different kinds of insurance; therefore, itwould be advisable to consult an insurance agent to discuss appropriateinsurances for the planned business. The below checklist showsthe recommended needs of insurance for a start-up:•Property Damage•General Liability•Product Liability•Disability•Workers’ Compensation•Business Interruption•Key Person•Health or Medical•Financial Insurance•Crime Insurance•Rent insurance•Special InsurancesFor more information and assistance,contact the Alabama A&M PRIME Project 256-372-8667.10

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aII) MarketingResearch and PlanningMarketing is one of the key elements for running a business. Eachentrepreneur should define a marketing plan based on the collectedinformation from a market research. A market research can be conductedby talking to customers, studying the advertisement of otherbusinesses in your community, and consulting with relevant industryassociations. The next step is to create a marketing plan by definingyour business, defining your customers, and defining your budget.Define your Business:- What products or services are you marketing?- Where do you want to conduct your marketing?- Who are your competitors?- What are your unique selling points?- What are your pricing strategies?- What are your promotion strategies?- What are your distribution strategies?Define your customer:- Who is your target market?- How do you want to inform your target market.about your product and service?- What are the preferences of your potential customers?Define your plan and budget:- What is the marketing cost per customer compared to sales?- Which marketing methods could attract new customers?- How much of your profit can be used for your marketingcampaign?- Which marketing tools are realistic with your budget?- How can you measure the success of your marketing campaign?11

How to Name your BusinessS m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aAvoid GeographicalContentNamesNotToo LongBe RelevantBe Easy toPronounceLegal Requirements for naming acompany regarding their businessstructureSole Proprietorship / PartnershipsLimited PartnershipsLimited Liability CompaniesLimited Liability PartnershipCorporationBe MemorableThe Name of myCompany should:Have an AvailableDomainNameBe Easy toSpellNot TooGenericOwner's name or registered with "doing businessas" (DBA)Name has to be reserved with the Secretary of State'soffice, and has to include “limited partnership” (L.P.) ora phrase that the entity is a limited partnership.Name has to be reserved with the Secretary of State'soffice, and has to include “limited liability company”,(L.L.C.) or a phrase that the entity is a limited liabilitycompany.LLPs are similar to L.L.C., but only available for professionalorganizations, such as accounting firms, doctors,law firms , etc..Name has to be registered with the Secretary of State'soffice; must be unique, no other corporation shoulduse this name; must include the words "corporation,""incorporated," "limited" or "company," the letters"Inc.", or "Corp." or some other phrase indicating thatthe entity is a corporation.S-CorporationsSame rules as for a corporation. An S corporation doesnot have to indicate its status as an S corporation in itsname.12

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aBusiness Names and Trademarks:Your new business name should not violate trademark laws; researchingyour business name will prevent such violations.- First, contact your county to see if your chosen business namehas already been registered .- Second, contact your state to see if your chosen business namehas been registered by an existing corporation or limited liabilitycompany.- Third, search the internet using different search engines to seeif you can find an existing company with the same businessname.The United States Patent and Trademark Office provides a search toolfor existing trademarks at the following website:http://www.uspto.gov/trademarks/Trade Name / Trademark Registration:Business Owners in Alabama are not required to register a fictitiousname; however, businesses may elect to register a trade name withthe Secretary of State. Forms for a trade name or trade mark registrationcan be found at:http://www.sos.state.al.us/B u s i n e s s L i c e n s e s a n d P e r m i t s :Almost every business needs a business license or permit issued bythe state and your local government. The Alabama Department ofRevenue publishes a Handbook which can be used to determine therequired licenses for Alabama. The handbook can be found at the followingwebsitehttp://www.revenue.alabama.gov/licenses/handbook.pdfThe State and County licenses are issued by the county Probate Judgeor License Commissioner in the county where the business is located.A listing of all county probate offices and their contact information forthe counties in North Alabama can be found on page 35.For other counties see:http://www.revenue.alabama.gov/licenses/authrity.htmlFor more information and assistance,contact the Alabama A&M PRIME Project 256-372-8667.13

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aIII) FinancingHow to Finance Your BusinessFederal, state and local governments offer a wide range of financingprograms to help small businesses start and grow their operations.These programs include guaranteed low-interest loans, venture capital,and scientific and economic development grants. The followingwebsite provides a listing of financing programs for which a businessmay qualify: http://search.business.gov/startLoans.htmlThe SBA 7(a) and 504 loan programs provide financial assistance forstart-up companies. These loan programs provide guarantees toqualified small businesses that may otherwise not qualify for theloans through normal lending channels without the government'sguaranty. The vast majority of small businesses are eligible to qualifyfor these loans provided they:• Intend to operate for a profit• They are engaged or plan to engage in business within the UnitedStates or its possessions• Have some owner equity of their own to invest in the business• Look to alternative funding methods first - such as personal assets,Access the following website for more information about the7(a) Loan Programhttp://www.sba.gov/financialassistance/borrowers/guaranteed/A quick reference to various SBA Loan Guaranty Programs is providedon the next two pages.14

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aQuick reference to SBA Loan Guaranty Programs:(Alabama SBA “Small Business Resources”)15

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aQuick reference to SBA Loan Guaranty Programs:NON-7a Loans:16

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aHow to Finance Your BusinessThe following chart provides a comparison of the 504 Loan programand the 7(a) loan program.For more information and assistance,contact the Alabama A&M PRIME Project 256-372-8667.17

How to Apply for a 504 LoanS m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aA 504 loan can be initiated by contacting a CDC. They will assist thesmall business in packing the loan application.CDC’s in AlabamaAreas of Operation____ALACOM FinanceAll counties in Alabama117 Southcrest Drive, Suite 100 excluding Washington,Homewood, Alabama 35209 Choctaw & SumterPhone: (205) 942-3360Fax: (205) 942-5984Toll-free: (800) 239-5909Southern Development Council8132 Old Federal RoadMontgomery, AL 36117-8007Phone: (334) 244-1801Fax: (334) 244-1421Toll-free: (800) 499-3034Contact: John ReynoldsEverette StrongAngie WinterAll counties in AlabamaFor more information about the SBA Loan program go to:http://www.sba.gov/financialassistance/borrowers/guaranteed/18

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aIV) Hiring Employees(http://www.business.gov/business-law/employment/hiring/first-employee.html)The above website describes steps to hiring an employee. In Alabamathere are nine requirements. The State of Alabama does notrequire an employer to obtain disability insurance.Step 1: Obtain an Employer Identification Number (EIN)Step 2: Set up Records for Withholding TaxesStep 3: Employee Eligibility Verification (Form I-9)Step 4: Register with Your States New Hire Reporting ProgramStep 5: Obtain Workers' Compensation InsuranceStep 6: Unemployment Insurance Tax RegistrationStep 7: Post Required NoticesStep 8: File Your TaxesStep 9: Get Organized and Keep Yourself InformedStep 1) Obtain an Employer Identification Number (EIN)?An EIN also known as the federal tax identification number, is used toidentify a business entity. Employers with employees, business partnerships,and corporations and other types of organizations must obtainan EIN from the U.S. Internal Revenue Service. The EIN is alsoknown as the Employer Tax ID/Form SS-4 and is required if one of thefollowing is true:19

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aStep 2: Set up Records for Withholding Taxes:- By Law you have to keep records of employment taxes for at leastfour years.- Submit a signed Federal Income Tax Withholding (Form W-4) to theIRS.All responsibilities for an employer regarding Tax Withholdings aredescribed at the following website:http://www.irs.gov/pub/irs-pdf/p15.pdf?cm_sp=ExternalLink-_-Federal-_-Treasury- Submit Copy A of Forms W-2 (Wages and Tax Statement) to the SocialSecurity Administration (SSA).Employers must send Copy A of Forms W-2 (to the Social SecurityAdministration by the last day of February (or the last day of Marchif you file electronically) to report the wages and taxes of your employeesfor the previous calendar year. In addition, employersshould send copies of Form W-2 to their employees by January 31of the year following the reporting period.- State Taxes: Depending on the state where your employees arelocated, you may be required to withhold state income taxes. Goto the website below for the requirements:http://www.ador.state.al.us/salestax/register.htmlStep 3: Employee Eligibility Verification (Form I-9)Form I-9 is used to prove if the employee is eligible to work in theUnited States. Instructions for completing a Form I-9 is available atthe following website: http://www.uscis.gov/files/nativedocuments/m-274.pdfAn online copy of Form I-9 can be found at the above website.Step 4: Register with Your States New Hire Reporting ProgramEmployers have to report a new employee within the first 20 days tothe state directory. Please visit the Alabama Department of IndustrialRelations Homepage shown below for further information about theregistration and requirements for the reporting of new employees.http://dir.alabama.gov/nh/Step 5: Obtain Workers' Compensation InsuranceBusinesses with employees are required to carry Workers' CompensationInsurance coverage through a commercial carrier, on a selfinsuredbasis, or through the state Workers' Compensation Insuranceprogram. Please visit the website below for more information.http://dir.alabama.gov/wc/insurance.aspx20

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aStep 6: Unemployment Insurance Tax RegistrationBusinesses with employees are required to pay unemployment insurancetaxes under certain conditions. If your business is required topay these taxes, you must register your business with the state'sworkforce agency. The State Taxes page includes the website belowthat provides a link to each state's agency.http://www.business.gov/manage/taxes/state.htmlStep 7: Post Required NoticesEmployers are required by state and federal laws to prominently displaycertain posters in the workplace that inform employees of theirrights and employer responsibilities under labor laws. These postersare available for free from federal and state labor agencies. Using thewebsite below, an employer can find workplace posters needed fortheir business for both the state and federal governments.http://www.business.gov/business-law/employment/posters/Step 8: File Your TaxesIf you are a new employer, there are new federal and state tax filingrequirements that apply to you. Generally, each quarter, employerswho pay wages are subject to income tax withholding, social security,and Medicare taxes and must file IRS Form 941; Employer's QuarterlyTax Return. Small businesses with an annual income tax liability of$1,000 or less may file IRS Form 944; Employer's Annual Federal TaxReturn instead of Form 941. Employers must also file IRS Form 940;Employer's Annual Federal Unemployment (FUTA) Tax Return, if theypaid wages of $1,500 or more in any calendar quarter or had one ormore employees working 20 or more weeks of the year.21

Step 9: Website Links to get OrganizedS m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aSet up Recordkeeping: Federal Reporting Requirements can be foundat:http://www.irs.gov/businesses/small/article/0,,id=98575,00.html cm_sp=ExternalLink-_-Federal-_-TreasuryLabor Recordkeeping Requirements:http://www.dol.gov/compliance/topics/recordkeeping.htmcm_sp=ExternalLink-_-Federal-_-DOLCreate a safe Workplace:http://www.osha.gov/dcsp/compliance_assistance/quickstarts/index.html?cm_sp=ExternalLink-_-Federal-_-DOLEmployee Benefit Standards:http://www.dol.gov/compliance/guide/erisa.htm?cm_sp=ExternalLink-_-Federal-_-DOLMore tips about Managing Employees:http://www.sba.gov/smallbusinessplanner/manage/manageemployees/index.html?cm_sp=ExternalLink-_-Federal-_-SBAEmployees Protection Rights:Following Websites provide information about employee rights:http://www.dol.gov/compliance/guide/index.htm?cm_sp=ExternalLink-_-Federal-_-DOLhttp://www.dol.gov/elaws/FirstStep/?cm_sp=ExternalLink-_-Federal-_-DOLhttp://www.eeoc.gov/http://www.dol.gov/compliance/laws/comp-flsa.htm?cm_sp=ExternalLink-_-Federal-_-DOLFor Child Labor Provision:http://www.alalabor.alabama.gov/POSTERS/Child_Labor_Law_Poster_09.pdfhttp://www.alalabor.alabama.gov/PDFs/CHILDLABOR/ChildLaborBrochure.pdfAlabama Department of LaborChild Labor Divisionhttp://www.labor.alabama.gov100 North Union St. Suite 620Montgomery, AL 35130334-353-176122

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aEmployment Tax ContactsPayroll Taxes (Federal):Federal Income Tax & Federal Unemployment TaxInternal Revenue Service (IRS) 1-800-829-1040http://www.irs.gov/businesses/small/article/0,,id=172179,00.htmlSocial Security TaxDepartment of Health & Human ServicesSocial Security Administration1-800-772-1213 http://www.ssa.gov/Payroll Taxes (State):Alabama Department of Industrial RelationsUnemployment Compensation649 Monroe Street, Industrial Relations BuildingMontgomery, AL 36131334-242-8830 http://dir.alabama.gov/uc/Alabama Department of Industrial RelationsWorkmen’s Compensation Division649 Monroe Street Montgomery, AL 36131334-242-2868 http://dir.alabama.gov/wc/Tax Numbers ContactsFederal Employer Identification Tax Number (Form SS-4)Internal Service 1-800-829-3676 www.irs.govAlabama Sales Tax Number (Form COM 101)State Department of Revenue (Central Registration)P.O. Box 327790 Montgomery, AL 36132-7790334-242-1490 http:/www.revenue.alabama.gov/Alabama Income Tax Withholding Number (Form COM 101)State Department of RevenueIncome Tax Division Withholding Tax SectionP.O. Box 327480 Montgomery, AL 36132-7480334-242-1170 http://www.revenue.alabama.gov/Unemployment Compensation Tax Number (Form SR2 & CR4)Department of Industrial RelationsIndustrial Relations Building (Status Unit)649 Monroe Street, St. Room 416 Montgomery, AL 36131334-242-8830 http://dir.alabama.gov/ucFor more information and assistance,contact the Alabama A&M PRIME Project 256-372-8667.23

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aV) Business PlanA business plan is needed for any business venture. A business plan is a formal statementof a set of business goals, the reasons why they are believed attainable, and theplan for reaching those goals. A good plan includes has several components, includinga cover page, executive summary, business overview, state of the industry, competitiveanalysis and marketing strategies, operations plan, management overviewand company finances. Research has shown that a business with a well thought outbusiness plan has a high rate of success compared to one without a plan.Advantages:♦ You'll be able to tell if you are likely to make any profit.♦ You'll know how much you will need to make in order to live.♦ You'll be forced to see if this really is a workable business or not.♦ You'll have a blue print to spot problems early and before they turn into businessthreatening problems particularly in the first couple of years.♦ If you want finance banks or investors will want to see what they can expectfrom your business; this helps them keep an eye on their investment.Business Plan Checklist1. Executive Summary: - Objectives- Mission- Keys to Success2. Company Summary - Company Ownership- Start-up Summary / Company History- Company location and Facilities3. Products - Product Description.- Competitive Comparison- Sourcing- Technology- Future Products4. Market Analysis Summary- Market Segmentation- Target Market Segment Strategy- Industry Analysis5. Strategy and Implementation Summary- SWOT Analysis- Strategy Pyramid- Value Proposition- Competitive Edge- Marketing Strategy- Sales Strategy6. Management Summary - Organizational Structure- Management Team- Personnel Plan7. Financial Plan - Key Financial Indicator- Break-Even Analysis- Projected Profit and Loss- Projected Cash Flow Sheet24

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aFinancial Assistance FormsBALANCE SHEEThttp://www.sba.gov/tools/Forms/smallbusinessforms/fsforms/index.html25

Income StatementS m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m a26

Cash Flow StatementS m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aFor more information and assistance,contact the Alabama A&M PRIME Project 256-372-8667.27

VI) BUSINESS TAXESS m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aIn General:Keep all your relevant tax documents for at least six years. Be knowledgeableabout all state and federal tax law changes. Contact yourlocal district revenue office or the federal/state agency office for anyupdates. Do not ignore any correspondence from the Internal RevenueService (IRS) or the Alabama Department of Revenue. Report anydiscovered errors on your tax documents immediately.IRS Forms / Publications:Please contact the IRS when you are not sure what kind of forms yourbusiness needs: IRS Tax Information: 1-800-829-1040Forms & Publication: 1-800-829-3676You may request the following forms and/or publications from theIRS:- SS-4 (EIN application form)- Form W-4 (Federal Exemption Certificate)- Circular E (Federal Tax Tables)- 1040ES (Federal Declaration of Estimated Income Tax)- Publication 334 (Tax Guide for Small Businesses)IRS forms & publications can be downloaded at: www.irs.gov.Tax Contacts and Information for Businesses with employeesContact the IRS to determine if federal withholding requirements apply.To register for an Alabama withholding tax account number contactthe Alabama Department of Revenue, Business Registration Unit,(334) 242-1584 and request:- Form COM:101 (Combined Registration Form)- Forms A-4 (Alabama Exemption Certificates)- Alabama Withholding Tax TablesAll forms/tables are also available at:http://www.revenue.alabama.gov/Withholding/index.html28

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aWorker’s Compensation Insurance Requirements:Alabama Department of Industrial Relations(334) 242-2868 or 1-800-528-5166State Unemployment Compensation tax:Alabama Department of Industrial Relations(334) 242-8830www.dir.alabama.govState and Local Taxes:Please contact one representative of the Alabama Department ofRevenue’s Taxpayer Service Center:HUNTSVILLE Service Center Mailing Address:994 Explorer Boulevard HUNTSVILLE Service CenterHuntsville, AL 35807 P O B o x 1 1 4 8 7Phone: (256) 922-1082 Huntsville, AL 35814-1487Further information about state and local taxes:www.revenue.alabama.govIf a privilege license is required contact County and State Licenses –County Courthouse (Probate Judge or License Commissioner) or theCity Licenses (City Hall) to purchase it. For City of Huntsville PrivilegeLicense: http://www.hsvcity.com/clerk/priv_lic.phpOccupational taxes: (Contact your City and County Officials )Keep Forms A-4 (state) and W-4 (federal), completed by the employeesin your file. Withhold income tax from your employees accordingto the Alabama Withholding Tax Tables and the Federal Circular E usingthe information on the A-4 and W-4. File your Alabama Form A-1or A-6 and remit payment for Alabama income tax withheld to theAlabama Department of Revenue. File Federal Forms 941 (Federalincome tax withheld, Social Security and Medicare) and Form 940(Federal unemployment) and remit payments to the appropriateagencies. At the end of the year, complete Form A-3 (state) and FormW-3 (federal). These should be filed with the appropriate agencyalong with the proper copies of Forms W-2. Furnish each employeewith a copy of the Form W-2 on or before the last day of January. Ifyou have “contract labor,” please contact the Alabama Taxpayer ServiceCenter in your area for verification that it actually is “contractlabor” and/or that withholding is required.29

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aRegistration Forms:RETAILERRetailers have to use Form COM: 101 (Combined Registration Form)to register their businesses. Listed below are the sources to obtainthe COM: 101.First time applicants: http://www.revenue.alabama.gov/salestax/register.htmlOrAlabama Department of RevenueBusiness Registration Unit(334) 242-1170www.revenue.alabama.gov/salestax/index.htmlA current list of all city and county tax rates are available on the department’sWeb site at: www.revenue.alabama.gov/salestax/index.html(See also PAGE 30)WHOLESALERSContact ADOR’s Sales, Use & Business Tax Division or any local taxpayerservice center to determine if a Certificate of Exemption, ConsumersUse Tax License, or other registration is required.CORPORATIONS AND LIMITED LIABILITY ENTITIES♦ Foreign corporations (not incorporated in Alabama) have to file aForm CD-2 ($175 qualification fee) with the Secretary of State’soffice: (334) 242-5324♦♦Domestic corporations must incorporate by first reserving thecorporate name with the Secretary of State; filing the articles ofincorporation (original and two copies); the certificate of namereservation with the probate judge of the county in which thecorporation has its initial registered office, and paying the appropriatefiling fees ($50 for Secretary of State and a probate judgefee of $35 minimum).same contact information as for foreign corporation.All corporations and limited liability entities are required to fileand pay Alabama Business Privilege Tax no later than 2½ monthsafter the taxpayer comes into existence, qualifies, or registers todo business or commences to do business in Alabama. You canobtain a Business Privilege Tax forms at:Alabama Department of Revenue: (334) 353-7923or visit: www.revenue.alabama.gov/incometax/bpt_index.htm30

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aCONTRACTORSContact the following department to determine if any taxes will applyto your business activity:Alabama Department of Revenue,Sales, Use & Business Tax Division1-866-576-6531 (Toll free)(334) 242-1490For additional licensing requirements:Contractor’s Licensing Board(334) 272-5030 forALL OTHER BUSINESS TYPES• Contact the Alabama Department of Revenue’s Taxpayer ServiceCenter in your area to determine what state taxes apply.• Contact the IRS at 1-800-829-1040 to determine what federaltaxes will apply.• In Alabama there is no one central licensing authority for the variousregulatory and professional licenses which may be requiredfor businesses and individuals. You may wish to consult with youraccountant and/or make inquiries at the local level to ensure thatyou have met all necessary licensing requirements.31

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aSALES TAXESAll persons or businesses that sell tangible personal property at retail,operate places of entertainment/amusement must collect sales taxand make reports and payments to the Alabama Department of Revenue.State Sales & Use Taxes:Local Sales & Use Taxes:Local sales taxes vary from each city and county. An overview of thetax rates of the counties in North Alabama is shown on the next page.Please see the following web site for current rates and other localstate taxes: http://www.revenue.alabama.gov/salestax/Sales/index.cfm32

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m a33

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aDue Days for Sales Taxes:Sales tax reports are due on the first of the month following themonth in which sales are made. They are considered delinquent andsubject to penalty and interest charges if filed or paid after the 20thday of the month following the month covered by the report. Afterone year you can request the following filing alternatives:Calendar quarter basis:♦ The preceding calendar year shows that your business has atotal state sales tax liability average of less than $200/month.♦♦The request to change to a quarterly sales tax payment hasto be made in writing to the Alabama Department of Revenueno later than February 20 of each year in which youwish to file and pay taxes quarterly.Quarterly due days are the 20 th of January, April, July, andOctober.Annually basis:♦ The preceding calendar year shows that your business has atotal state sales tax liability average of less than $10/month.♦Due day is January 20 for the previous year’s sales.For more detailed information visit the Alabama Department Revenueweb site at : www.revenue.alabama.gov34

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aALABAMA CONSUMER USE TAXWHAT IS A USE TAX?Use tax is the counterpart of sales tax. It is due when merchandise ispurchased for use inside Alabama and tax is not paid to the seller. Theuse tax rate is the same amount as the state sales tax rate.WHY A USE TAX?The Alabama use tax was enacted in 1939 to prevent vendors locatedoutside the state from having an unfair competitive advantageagainst the instate vendors who have to charge the sales tax. The liabilityfor paying the use tax falls on the purchaser. If the vendor doesnot collect the use tax, it is the responsibility of the purchaser to selfassessand report the tax due to the Alabama Department of Revenue.WHAT IS TAXABLE?The use tax applies to the same type of merchandise that is taxableunder the Alabama sales tax law. This includes all tangible personalproperty that is purchased at retail and brought into Alabama forstorage, use, or consumption in Alabama unless it is specifically exemptedby law.35

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aTHE STATE TAX RATES2% Automotive RateIf you purchased an automotive vehicle from outside the state anddid not pay the usual sales and use tax when you purchased your tag,or, if no tag is required for the vehicle, you owe use tax at the rate of2% of the purchase price. Examples of items not requiring tags whichqualify as automotive vehicles include: off-road motorcycles, ATVs,and self-propelled construction equipment.1½% Agriculture RateMachines and equipment and parts for machines and equipmentused in connection with the production of agricultural products, livestock,or poultry on farms are subject to tax at the rate of 1½%.1½% Machine RateMachines and the parts for machines used in mining, quarrying, compounding,processing and manufacturing tangible personal propertyare taxed at the rate of 1½%.4% General RateAll other taxable tangible personal property is taxed at the rate of 4%of the purchase price.Individual Estimated TaxAll incomes from self-employment, interest, dividends, alimony, rent,gains from the sale of assets, prizes, and awards are subjects of estimatedtax, if Income (except wages) is≥ $1,875 (single person or married person filing separate return)≥ $3,750 (married person living with spouse and filing a joint return)And the estimated tax ≥ $100The Form 40 ES is required to file your estimated tax.Due days are the 15 th of April, June, September, & January.More details: http://www.irs.gov/businesses/small/article/0,,id=110413,00.htmlProperty Tax: http://www.ador.state.al.us/advalorem/index.htmlFor more information and assistance,contact the Alabama A&M PRIME Project 256-372-8667.36

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aContact Information of the Counties in North Alabama37

Contact Information of the Chambers of CommerceS m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aFor more information and assistance,contact the Alabama A&M PRIME Project 256-372-8667.38

S m a l l B u s i n e s s H a n d b o o k f o r N o r t h A l a b a m aList of Referenceshttp://sba.gov/http://www.business.gov/register/incorporation/http://www.uspto.gov/trademarks/http://www.sos.state.al.us/http://www.revenue.alabama.gov/licenses/handbook.pdfhttp://search.business.gov/startLoans.htmlhttp://www.sba.gov/financialassistance/borrowers/guaranteed/http://www.roycejosephcapitalllc.com/comparision.phphttp://www.business.gov/business-law/employment/hiring/firstemployee.htmlhttp://www.irs.gov/businesses/small/article/0,,id=172179,00.htmlhttp://www.revenue.alabama.gov/taxpayerassist/brochures.htmhttp://www.business.gov/register/incorporation/West Alabama Small Business HandbookAlabama’s Answers “A Guide to Doing Business in Alabama”Alabama SBA “Small Business Resource”39

Program for Investment in Micro Enterpriseshttp://www.aamu.edu/prime/default.aspx256-372-8667Funded in part through a cooperative agreement with the U.S. Small BusinessAdministration. All opinions, conclusions or recommendations expressedare those of the author (s) and do not necessarily reflect the viewsof the SBA.40