Entrepreneur's edge

              2B ■ Entrepreneur’s Edge THE BUSINESS JOURNAL phoenix.bizjournals.com NOVEMBER 21, 2003
TABLE OF CONTENTS
Entrepreneur’s Edge
A resource guide filled with the tools to help your business reach the top
•
Credits
Project editor: Randi Weinstein
Copy editor: Carol Rennen
Cover design: Matt DePinto
Contributing writer:
Susan Mercer Hinrichs
On the cover: Slide provided
by the Arizona Office of Tourism
Welcome letters:
■ Arizona Gov. Janet Napolitano . . . . .4
■ Arizona Department of Commerce
Director Gil Jiménez . . . . . . . . . . . .4
■ The Business Journal Editor
Ilana Ruber . . . . . . . . . . . . . . . . . .5
■ Wells Fargo Business Banking
Executive Vice President
and Manager Dean Rennell . . . . . .6
■ Sam’s Club President
and CEO Kevin Turner . . . . . . . . . .7
Chapter 1
Building a Business:
Tools for starting, growing
& locating your company . . . . . .9
Arizona Department of Commerce
programs and services . . . . . . . .10-12
■ Small Business Services . . . . . . .10
■ Minority/Women-Owned
Business Services . . . . . . . . . . .10
■ Governor’s Small Business
Advocate . . . . . . . . . . . . . . . . . .10
■ Business Attraction
and Development . . . . . . . . . . . .10
■ ArizonaBusinessLINC.com . . . . . .10
■ Rural Development Office . . . . . . .10
■ Community Planning Office . . . . . .10
■ International Trade
and Investment . . . . . . . . . . . . . .11
■ Workforce Development . . . . . . . .11
■ Job Training Program . . . . . . . . . .11
■ Apprenticeship Program . . . . . . . .11
■ IT Training Tax Credit . . . . . . . . . .11
■ Arizona Workforce Connection . . . .11
■ Arizona Film Commission . . . . . . .11
■ Business Development
Finance . . . . . . . . . . . . . . . . . . .11
■ Commerce and Economic
Development Commission . . . . . .12
■ Office of Economic Information
and Research . . . . . . . . . . . . . . .12
■ Office of Innovation
and Technology . . . . . . . . . . . . . .12
Discover the Arizona Business
Connection . . . . . . . . . . . . . . . . . . .12
Business structures and registration . .13
■ Sole Proprietorship . . . . . . . . . . .13
■ General Partnership . . . . . . . . . .13
■ Limited Partnership . . . . . . . . . . .13
■ Limited Liability Partnership . . . . .13
■ Limited Liability Company . . . . . . .13
■ Corporation . . . . . . . . . . . . . . . .14
■ S Corporation . . . . . . . . . . . . . . .14
■ Foreign Corporation . . . . . . . . . . .14
■ Tax Exempt Organizations . . . . . . .14
■ A comparison chart of business
structures . . . . . . . . . . . . . . . . .15
Trade Names . . . . . . . . . . . . . . . . .17
■ Questions and answers
to help you get started . . . . . . . .17
■ Where to file for a trade name . . .17
■ Filing guidelines . . . . . . . . . . . . .17
A solid business plan is a must . .18-19
Tips for writing your blueprint . . . . . .19
Library Resources . . . . . . . . . . . . . .20
How to:
Picking a name is an important step .16
Susan Brooks:
Vision, first and always . . . . . . . . . .21
Chapter 2
Locations & Regulations . . . . .22
How to:
Location makes a difference . . . . . . .23
Scott Clark:
Be prepared for OSHA . . . . . . . . . . .25
Protect your business . . . . . . . . . . .24
Industry classifications . . . . . . . . . .25
A chart of industry classifications . . .26
Chapter 3
Finance & Accounting . . . . . . .27
Consider options for capital . . . . . . .28
SBA loans for your business . . . . . . .28
Help is available
for small businesses . . . . . . . . . .29-31
■ Commercial banks . . . . . . . . . . .29
■ Business financial organizations . .29
■ A listing of financial resources . . .30
■ Small Business Administration . . .30
NOVEMBER 21, 2003 THE BUSINESS JOURNAL phoenix.bizjournals.com Entrepreneur’s Edge ■ 3B
■ Venture capital . . . . . . . . . . . . . .30
■ Arizona enterprise zones . . . . . . .30
■ Securities offerings . . . . . . . . . . .31
Be aware of different tax laws . . .32-33
■ Arizona Department of Revenue . .32
■ Arizona’s joint tax application
questionnaire . . . . . . . . . . . . . . .32
■ Transaction privilege (sales) tax . .32
■ Use tax . . . . . . . . . . . . . . . . . . .32
■ Withholding and unemployment
taxes . . . . . . . . . . . . . . . . . . . . .32
■ Wholesale tobacco dealer’s
license . . . . . . . . . . . . . . . . . . . .32
■ Liquor wholesalers,
microbreweries, farm wineries
and cider products . . . . . . . . . . .32
■ Corporate income tax . . . . . . . . .32
■ Exempt cities . . . . . . . . . . . . . . .33
■ IRS resources . . . . . . . . . . . . . . .33
■ Property taxes . . . . . . . . . . . . . .33
■ Unemployment insurance . . . . . . .33
■ Federal tax requirements . . . . . . .33
■ Federal income tax withholding . . .33
■ Social Security taxes (FICA) . . . . .33
■ Federal unemployment tax . . . . . .33
Rick Rayson:
Private firms should note
Sarbanes-Oxley . . . . . . . . . . . . . . . .31
How to:
Choose your accountant with care . . .34
Chapter 4
Technology . . . . . . . . . . . . . . .35
How to:
Find a Web firm that fits your vision . .36
Brad Patten:
Learn to manage technology . . . . . . .37
Tips to leverage the Internet . . . . . . .37
Chapter 5
Sales & Marketing . . . . . . . . . .38
State contracts boost business . . . . .39
Avoid these 6 marketing mistakes . . .41
How to:
Choosing the right ad agency is key . .40
Richard Haasnoot:
Make marketing persuasive . . . . . . .42
Chapter 6
Human Resources . . . . . . . . . .43
Labor regulations . . . . . . . . . . . .44-47
■ Posting requirements . . . . . . . . . .44
■ Federal . . . . . . . . . . . . . . . . . . .44
■ Arizona . . . . . . . . . . . . . . . . . . . .44
■ Local cities . . . . . . . . . . . . . . . . .44
■ Fair Labor Standards Act . . . . . . .44
■ Wage payment laws . . . . . . . . . . .44
■ Minimum wage and overtime . . . .44
■ Employing minors . . . . . . . . . . . .44
■ Right-to-work legislation . . . . . . . .45
■ Safety regulations . . . . . . . . . . . .45
■ Discrimination in employment . . . .45
■ Immigration and Nationality Act . . .45
■ Arizona’s workers’
compensation insurance . . . . . . .45
■ Defining employee/independent
contractor status . . . . . . . . . . . . .46
■ Employees who work
in more than one state . . . . . . . .47
■ What is exempt employment? . . . .47
■ Constructive discharge . . . . . . . .47
How to:
Research health insurance providers .48
Kevin Herring:
Create commitment workplaces . . . .49
Chapter 7
Expanding Your Business . . . . .50
How to:
Program helps finance
overseas trade . . . . . . . . . . . . . . . .51
Douglas Cohen:
Grow your business internationally . . .52
Top Arizona export destinations . . . . .51
Top Arizona exports by sector . . . . . .52
Appendix
Resource Information . . . . . . . .54
■ State licensing agencies . . . . .54-55
■ City & town
licensing agencies . . . . . . . . .55-56
■ State economic development
organizations . . . . . . . . . . . . . . .56
■ Tribal offices & organizations . .56-58
■ Minority organizations . . . . . . . . .58
■ City & town economic
development organizations . . .58-59
■ Chambers of commerce . . . . .59-61
■ Business checklist . . . . . . . . . . .63
■ Business affiliations . . . . . . . .64-65
■ Center for the Advancement
of Small Business . . . . . . . . . . . .65
■ Small Business Development
Centers . . . . . . . . . . . . . . . . . . .66
■ Small Business Services Office . .67
■ SCORE . . . . . . . . . . . . . . . . . . .67
■ Technology resources . . . . . . . . .68
■ On the Web . . . . . . . . . . . . . .69-70
■ Application for a trade name . . . . .71
Don Henninger
Publisher
Ilana Ruber
Editor
Michael Vinales
Sales Manager
Wimberly Doran
Business Manager
David Hostetler
Production Director
Paul Sanders
Circulation Director
■ EDITORIAL:
Managing Editor:
Cathy Luebke
Projects Editor:
Randi Weinstein
Copy Editors:
Dale Brown
Carol Rennen
Graphics Editor:
Matt DePinto
Broadcast Reporter:
Diane Arthur
Senior Reporters:
Angela Gonzales
Mike Padgett
Reporters:
Adam Kress
Mike Sunnucks
Editorial
Coordinator:
John Schwartz
Research Director:
Judy Trunnelle
Research Reporter:
Leslie Donaldson
Photographer:
Jim Poulin
Production Assistant:
Austin Ricks
■ ADVERTISING:
Senior Advertising
Consultants:
Melanie Fallen
Lisa Grannis
Lisa Johnson
Advertising
Consultants:
Alicia Amsbaugh
Mark Lindsey
Jennifer Niccoli
Lesley Sargent
Classified
Advertising
Manager:
Stephanie Handley
Advertising
Coordinator:
Sherri Conley
Graphic
Designer:
Tim Clarke
■ CIRCULATION:
Associate
Circulation Manager:
Jeorgetta Douglas-
Acosta
Sales Development
Specialist:
Ericka Espino
Sales and Marketing:
April Sansoterra
■ ADMINISTRATION:
Senior
Administrative
Coordinator:
Carol Nelson-Park
Marketing
and
Events Coordinator:
Heidi Maxwell
Receptionist:
Renee Nash
The Business Journal of Phoenix
101 N. First Ave., Ste. 2300
Phoenix, AZ 85003
Phone: 602-230-8400
Fax: 602-230-0955
Web: http://phoenix.bizjournals.com
The Business Journal is a publication
of American City Business Journals Inc.
Chairman: Ray Shaw
The
Business Journal
4B ■ Entrepreneur’s Edge THE BUSINESS JOURNAL phoenix.bizjournals.com NOVEMBER 21, 2003
November 2003
Greetings!
The Entrepreneur’s Edge is Arizona’s official guide for establishing and operating a small business. Provided
by the Arizona Department of Commerce free of charge, this guide is the ideal starting point for your ven-ture.
It is comprehensive, well-organized and easy to understand.
The state of Arizona values small business and takes great pride in the phenomenal business growth over
the past decade. The entrepreneurial spirit is the engine that drives our robust economy. Our state and local
governments continue to encourage new ventures through policies and programs friendly to small business.
Whether you are starting a small business, expanding or relocating to Arizona, we welcome you. I know
you will find our business environment favorable and our quality of life unsurpassed.
For more information on what Arizona offers you and your small business, please visit the Arizona De-partment
of Commerce Web site at www.azcommerce.com. Click on Small Business Services for informa-tion
and referrals — including the Arizona Business Connection (ABC) online program — tailored to meet
your individual needs.
Good luck and thank you for your contribution to Arizona’s economy.
Sincerely,
Janet Napolitano
Governor
November 2003
Dear Entrepreneurs:
Whether you’re thinking about starting a business or ready to start or looking for ways to increase your
market share, the Arizona Department of Commerce adds indispensable support and value to your efforts.
This publication makes a great reference guide no matter where you are in the process.
You also will find important information and easy access to many other support services by visiting the
Department of Commerce Web site at www.azcommerce.com. You can write a business plan, learn how to
pursue procurement opportunities through the state and local governments, retrieve the forms you need for
licensing or permits and find out about important networking opportunities available throughout the state.
I also encourage you to take the time to list your enterprise in one or more of the directories we have for
your use online.
The Arizona Department of Commerce at 602-771-1100 or by fax at 602-771-1200 can assist you with find-ing
the perfect site, setting up an apprenticeship program, funding job training for your employees, or even
becoming export-ready.
I hope you will leverage these and all our value-added services and enjoy great success!
Sincerely,
Gilbert Jiménez
Director
Arizona Department of Commerce
NOVEMBER 21, 2003 THE BUSINESS JOURNAL phoenix.bizjournals.com Entrepreneur’s Edge ■ 5B
November 2003
Dear Entrepreneurs:
The only thing harder than starting a small busi-ness
is keeping it up and running — especially in
today’s ever-changing marketplace.
So The Business Journal and the Arizona De-partment
of Commerce once again have teamed
to produce Entrepreneur’s Edge, a resource guide
that can help you answer some of those tough
questions about running your business.
This year marks the second time we have part-nered
with La Voz to publish a Spanish-language version of this
guide. We are excited to be reaching out to the Spanish-speaking
portion of the community.
Running a business of your own can bring independence and ac-complishment.
If you already are in business and have weathered
the stormy economic conditions, that’s great news.
But now it is time to shift your focus from survival to growth. And
this guide was developed to help you empower your small business.
With Entrepreneur’s Edge, we have collected some of the best ad-vice
on everything from writing a business plan, to getting financ-ing
to dealing with state labor regulations. This is a good guide full
of resources and advice that can help you grow your business.
We often hear warnings about the high failure rates of small busi-nesses.
What we don’t hear about is how remarkable it is that en-trepreneurs
so often beat the odds and achieve the seemingly im-possible.
And in Arizona, we continue to make national headlines as a top
hot spot for these risk-takers. It takes a lot of work, solid strategy
and good planning to be successful. The Business Journal can
help.
The mission of our paper is to be the premier source of business
news and information in the Valley. We are a key source to help you
grow your business. This magazine is one example of that.
Thank you to Wells Fargo and Wal-Mart, our premier sponsors,
the ADOC and La Voz, our Spanish-language partner in this effort.
We invite you to call us for a free trial of our weekly newspaper,
and watch for our daily news reports on our Web site, phoenix
.bizjournals.com.
Also, I hope you will contact me by phone, 602-308-6513, or e-mail,
iruber@bizjournals.com, if you have suggestions on how we
can continue to help you and your business.
Sincerely,
Ilana Ruber
Editor
The Phoenix Business Journal
and
Reaches 80%
of the Spanish dominant
adult community in
Phoenix and Tucson.*
*Source: Scarborough Hispanic Survey, Release 1 2002; TV y Más Reader Survey, February 2002; Hispanic Track, Sept. 2001
For More Information call
The Ashland Media Group 602 443 4300
800 N. 1st Ave. Phoenix, AZ 85003
6B ■ Entrepreneur’s Edge THE BUSINESS JOURNAL phoenix.bizjournals.com NOVEMBER 21, 2003
Arizona Entrepreneurs:
Wells Fargo is pleased to sponsor The Business Journal’s Entrepreneur’s Edge — an invaluable resource
for business owners. Wells Fargo’s Arizona business banking team is another great resource for entre-preneurs,
combining our community banking approach with ground-breaking technology.
Wells Fargo is developing new services to help us remain Arizona’s leading small-business bank. We
originate more dollars in small-business loans than any other lender in the United States, Arizona and
the Valley. We also were the state’s leading Small Business Administration (SBA) lender last year, and
we’re a preferred SBA lender in 27 states, including Arizona. Wells Fargo is a leader in making loans to
women, Latino and African American-owned small businesses nationwide through our multibillion-dol-lar
lending initiatives.
Behind each of these loans is a financial services expert who gets to know you and your goals for the
future, and then delivers value-added solutions and access to the funds you need. Our decisions are
made locally by professionals with extensive experience in financial services. Many of these profession-als
work in our 10 statewide business banking centers. They understand the needs of business customers
in a changing economic environment, and they deliver fast, customized solutions.
Small business is big business at Wells Fargo. Quality is our focus and innovation is our hallmark.
We have developed multiple ways to serve small businesses. For example, we have placed 20 business specialists in our stores
throughout the state. These specialists connect our customers with Wells Fargo’s extensive business services. One of these, our Busi-ness
Direct Group, provides owners of small companies with a fast, easy application process for loans up to $100,000. We also partic-ipate
in special lending and referral programs, including the Arizona MultiBank and Magnet Capital.
Wells Fargo has developed channels that allow you to conduct your financial business when, where and how you want to. We pro-vide
24-hour service through our phone banks, our industry-leading online services and our network of ATMs.
Providing you with the financial tools to succeed is what we’re all about. We want to offer better products and a broader product line
than our local competitors and to out-perform our national competitors by staying close to our customers and providing professional,
personal, timely advice and service.
We have developed expertise in industries including title companies, government banking, nonprofits, health care and legal services.
And we have developed innovative programs such as qualified retirement plans tailored to meet the special needs of small businesses
in Arizona. We’re also a leader in developing products and services that can help our business customers fight — and win — the grow-ing
problem of financial fraud.
As the leading Internet bank, we continue to develop the most innovative online financial technology. Click on wellsfargo.com/biz,
and you can manage accounts, get credit, buy software, get technology information, create a Web site, advertise online, send mail and
even write news releases. And that’s just a partial list of what you can do with this remarkable resource.
We’re leaders because we constantly ask what you want and need — and you can count on Wells Fargo to continue to keep ahead of
your needs, developing more innovations that will help you build profitable and growing companies. Call me at 602-378-5723 to learn
how Wells Fargo can help you and your business.
Sincerely,
Dean Rennell
Executive vice president and manager
Wells Fargo Business Banking
NOVEMBER 21, 2003 THE BUSINESS JOURNAL phoenix.bizjournals.com Entrepreneur’s Edge ■ 7B
Dear Entrepreneurs:
At Sam’s Club, we exist solely to help small-business owners succeed nationwide. Sam Walton formed
Sam’s Club 20 years ago to help small-business operators live the American Dream — the same dream he
lived when he started Wal-Mart.
We are proud to partner with The Business Journal in support of this edition of Entrepreneur’s Edge. As an ad-vocate
and partner to millions of small businesses, it is an honor to serve the communities of Arizona.
Small businesses generate at least two out of every three new jobs in America, and we’re going to do every-thing
we can to help them succeed. We understand that success depends in part on mastering the basics — ex-pense
control, operational efficiency, and consistent, quality materials. That’s what we provide at Sam’s Club.
We recognize that time is of the essence and invite you to take advantage of the many time-saving
services we offer. We make it easy and fast to shop at Sam’s Club with our early-morning Gold Key hours,
Fax ’n Pull and Click ’n Pull services, special-order catalogue and Web site, www.samsclub.com.
Despite the current economic challenges, we remain committed to ensuring that you can take advantage
of “everyday low prices” that will enable you to drive costs out of your business, thereby lowering your over-all
cost of doing business.
We appreciate your patronage and hope you will allow Sam’s Club to be your resource for wholesale savings on everyday business and
personal needs.
If you are not currently a member of Sam’s Club, I invite you to take advantage of this special guest pass below. See you in the club!
Sincerely,
Kevin Turner
President and CEO
Sam’s Club
Why become a
SAM’S CLUB® Member?
Savings. Quality. Choices. Value. Service.
All under one roof for your convenience. Come
and shop – get the same warehouse prices that
our Business Members enjoy.
Your exclusive Member Benefits and
Services include:
• Travel Services
• Auto Buying Program
• The Home Service Store®
• Mail-Order Pharmacy
• And more
Join us today.
For only $35 (plus tax in some places), receive
two annual Membership cards – one for you
and one for a household member. Your
Membership is 100% guaranteed.
Don’t miss this opportunity.
*The SAM’S CLUB One-Day Guest Pass is good for one day only. Only
original certificates will be accepted. A 10% service fee applies on all
purchases when shopping with this One-Day Guest Pass (not applicable
in CA, SC, or Elmsford, NY). You must pay for your purchases with
cash, debit card (check Club for qualifying debit networks), Wal-Mart
Credit, or Discover® card only (no checks). You may apply for Membership,
subject to qualifications, while visiting any SAM’S CLUB location or
online at samsclub.com.
Good through December 31, 2003.
Your One-Day Guest Pass*
to Shop (10% Service Fee Applies)
Take this Guest Pass to your local
SAM’S CLUB® to gain access to
the exclusive savings that
businesses enjoy every day!
Guest Pass #10256581687
Hurry! Good through
December 31, 2003.
Become a Member today and avoid the 10% Service
Fee that applies to all nonmember purchases.
• C-Stores and Retail Stores • Restaurants and Foodservice • Beauty Salons and Barber Shops • Contractors and Maintenance & Repair
• Daycares and Schools • Vending • Offices and Office Supplies • Churches and Religious Organizations • Motels and Bed & Breakfasts
Our Business Is Saving
Your Business Money.SM
BY SUSAN MERCER HINRICHS
Special to The Business Journal The entrepreneurial spirit has burned
within your soul for years.
After experimenting with various
ideas, you believe you’ve finally determined
the best way to fill a void in a service or in-dustry.
Possibly, you’ve discovered a way to
make an existing product better or you’ve
invented an entirely new gadget.
No matter what the driver, packaging your
idea or product into your own business can
be both invigorating and daunting.
That’s where the Arizona Department of
Commerce and a host of organizations ded-icated
to assisting new and established en-trepreneurs
come into focus.
With names like SCORE, the Service
Corps of Retired Executives; EDIC, the Eco-nomic
Development Information Center;
and ABLE, Arizona Building Local Eco-nomics
program, to name a few, entrepre-neurs
can benefit from a variety of re-sources
readily available to them.
SCORE, for example, provides sound
business advice and mentors to entrepre-neurs
seeking guidance in the startup phase
of their companies.
Take Beverly Rathjen’s dream, for example.
She was a stay-at-home mother taking
care of her infant son, Kyle, when she took
the first steps to turn her e-business idea
into reality.
She saw a SCORE newsletter at a Mesa
Public Library branch and contacted the or-ganization
for help.
“I managed to get a great counselor, Har-vey
Prezant,” Rathjen said. “Harvey led me
through the business plan, and when he did
not have the expertise to help me, he had
me meet with a specialist at SCORE in the
area I needed help.
“It was a labor of love at times and a bur-den
at other times,” Rathjen said, describ-ing
the year-long process to develop her
business plan. “I decided to have an e-busi-ness.
That way I did not have to keep hours
at a store and not be able to spend time with
my son.”
Rathjen’s idea became an Internet-based
business called La Bella Madonna in the
spring of 2003. The business offers gift bas-kets
to new moms and their babies.
“Beverly was fun to work with,” Prezant
said. “She knew what she wanted to do, and
we talked about her product.”
Prezant is a retired Bank of America exec-utive,
with more than three decades of ex-perience.
A SCORE volunteer for some
three years, he described Rathjen’s passion
for her idea as among the reasons the orga-nization
agreed to work with her. Also, he
said her idea made “a heck of a lot of sense.”
Before launching a new business, deter-mine
the position it occupies in its market.
Questions to ask include the following:
1. How does your product or service fill a
void?
2. Who will your customers be?
3. How will you supply them?
4. Who or what stands as a market com-petitor?
5. How much time, energy and resources
are you willing to commit toward establish-ing
your business as a going concern?
6. Do statistics exist concerning similar
business startups?
One online resource entrepreneurs have
available is the Arizona Department of
Commerce’s Web site, www.azcommerce
.com. The site provides a wealth of free in-formation
to help small-business startups.
Click the links for facts and figures about
Business Development and Attraction. The
Innovation & Technology link contains in-formation
about support sources and ven-ture-
capital opportunities. Another will de-scribe
the Arizona Bioindustry Cluster.
The Center for the Advancement of Small
Business at the W.P. Carey School of Busi-ness
at Arizona State University is as an-other
valuable resource.
According to center Director Mary Lou
Bessette, “Success is about making the best
choice (for an individual’s business). You
can live what you imagine.”
Bessette said Arizona’s pro small-business
climate makes it one of the leading states in
the nation for startups. CASB figures indi-cate
651,000 small businesses exist in Ari-zona,
providing for 98 percent of all new
jobs created. Among those businesses, 41
percent of them are started by women.
A key part of establishing a business is de-ciding
the business structure under which
an enterprise will operate. A business can
be established as a partnership, a limited li-ability
company, a limited liability corpora-tion
or an S corporation, to name a few.
(For more information, see Pages 13-15.)
With these basics in place, entrepreneurs
take the first steps in hanging out their own
shingle.
(For a helpful business checklist filled with
important steps to get started, see Page 63.)
NOVEMBER 21, 2003 THE BUSINESS JOURNAL phoenix.bizjournals.com Entrepreneur’s Edge ■ 9B
CHAPTER 1
Building a Business
Tools for starting, growing & locating your company
1•
10B ■ Entrepreneur’s Edge THE BUSINESS JOURNAL phoenix.bizjournals.com NOVEMBER 21, 2003
The Arizona Department of Commerce
provides a wholly integrated ap-proach
to statewide economic devel-opment.
Our job is Jobs! By pursuing
strategies that diversify our economy, we
facilitate the creation of high-paying jobs
and expand our tax base in order to fund
critical public services and improve quality
of life for all Arizonans.
Small business is the backbone of our
economy. More than 95 percent of the busi-nesses
in Arizona have fewer than 100 em-ployees
and nearly one-third (numbering
close to 300,000) are sole proprietorships or
home-based. Every area of service within
the Arizona Department of Commerce sup-ports
the success of this small-business
base. Here’s why:
According to the U.S. Small Business Ad-ministration
Office of Advocacy, small busi-ness
creates more than 75 percent of net
new jobs. Small enterprises also produce 55
percent of innovations, twice as many prod-uct
innovations as large firms, and obtain
more patents per sales dollar than large
business.
Visit the ADOC Web site at www.azcom-merce.
com for information and tools to
start, maintain and grow your business.
Small Business Services
Arizona Department of Commerce Small
Business Services offers support through
several key functions:
The Arizona Business Connection is a step-by-
step resource center providing customized
licensing and referral information for every
stage of small-business development. You can
connect 24/7 via the Department of Com-merce
Web site at www.azcommerce.com.
Click on Small Business Services and follow
the Arizona Business Connection link.
Minority/Women-Owned
Business Services
The Arizona Department of Commerce
collaborates with numerous business orga-nizations
to promote entrepreneurship
among minorities and women in Arizona,
facilitate procurement opportunities and
advocate on issues that are important to
these communities.
Governor’s Small
Business Advocate
The Small Business Advocate keeps an
open line of communication with the gover-nor,
works with chambers and other groups
to develop policies and programs that ad-dress
statewide issues concerning small
businesses, interacts with state regulatory
agencies to improve their responsiveness to
small businesses and assists entrepreneurs
in working with other state agencies.
The Governor’s Council on Small Business
is staffed by the Commerce Small Business
Services division. The council’s role is to sup-port
the outreach and resource-developing
activities of the Governor’s Small Business
Advocate by:
• Identifying and recommending opportu-nities
to promote the prosperity of Arizona
small businesses to the governor and the
state Legislature.
• Providing a forum for small-business
owners to voice concerns and recommenda-tions
to the governor.
• Investigating and evaluating the impact of
state regulation, legislation and administra-tive
processes on Arizona small businesses.
Business Attraction
and Development
The Arizona Department of Commerce
provides a single point of contact for assis-tance
in site selection and access to busi-ness
resources. Free services include:
• Information on available sites through-out
Arizona.
• Customized research on the state, its
economy and industry sectors.
• Cooperative participation in state-spon-sored
trade shows.
• Access to incentive programs and appli-cation
assistance.
• Coordination and facilitation of meet-ings
with statewide resource providers.
• Specialized assistance in aerospace, bio-sciences,
environmental and information-technology
sectors.
AZBusinessLINC.com
The Arizona Department of Commerce ex-panded
this supplier network online service
to cover the state. AZBusinessLINC.com is
where buyers and sellers meet through a
comprehensive and interactive database that:
• Profiles the capabilities of Arizona busi-nesses.
• Increases buyer awareness of the products
and services available throughout the state.
• Assists sellers to identify new marketing
opportunities and access companies with im-mediate
procurement needs, companies seek-ing
longer-term supplier relationships and
businesses looking for collaborative partners.
AZBusinessLINC staff provides technical
support and extended confidential buyer-needs
search assistance. If your search effort
is unsuccessful or your company’s product
or service category is not adequately de-fined,
call toll free 866-882-5462.
Rural Development Office
The Arizona Department of Commerce
promotes local self-sufficiency and supports
sustainable economic development with
technical and financial assistance from a
broad range of sources. The Rural Develop-ment
office provides local leaders and com-munity
organizations with customized train-ing
and resources through three programs:
Main Street Program
The Arizona Department of Commerce af-filiates
with the National Main Street Pro-gram
to assist Arizona communities in revi-talizing
their downtown business districts by:
• Organizing and training Main Street
boards and committees.
• Facilitating meetings and work program
retreats.
• Accessing technical and financial assis-tance
for program implementation.
• Offering design assistance to business
owners.
Rural Economic Development Initiative
The Arizona Department of Commerce
provides direct assistance to rural commu-nities
in evaluating resources and organiz-ing
economic development efforts. Quali-fied
rural programs and organizations with
an ongoing commitment to economic de-velopment
can be accredited through REDI,
making them eligible for technical and
matching-fund assistance to develop an ef-fective,
locally generated program of activi-ties;
and implement plans to become more
attractive for capital investment and indus-trial
and business locations.
Business Retention and Expansion
Department of Commerce efforts in com-munities
throughout Greater Arizona for
the retention and expansion of business em-phasize
creating an environment that en-courages
stability and success. We provide
expertise and resources to aid in the design
and implementation of a locally defined and
community-based BR&E program.
Community Planning Office
The Arizona Department of Commerce
Community Planning Office directs the
state’s largest job-retention program in his-tory
through the Arizona Military Airports
Regional Compatibility Project, a proactive
endeavor to convene stakeholders around
each base — the governments, military,
homeowners and business people — to ad-dress
land-use compatibility issues. Military
installations throughout Arizona account
Arizona Department of Commerce
Continued on Page 11B
NOVEMBER 21, 2003 THE BUSINESS JOURNAL phoenix.bizjournals.com Entrepreneur’s Edge ■ 11B
for some 83,000 jobs and $5.7 billion to the
state economy each year — all of which is
threatened by uncontrolled growth.
Certified community planning profession-als
foster community capacity-building and
foundation development through technical
expertise on the Growing Smarter man-dates,
land-use and strategic planning, zon-ing,
infrastructure, research and public par-ticipation.
International Trade
and Investment
The Arizona Department of Commerce In-ternational
focus is twofold: to help small-and
medium-sized businesses thrive by as-sisting
them with foreign trade; and to at-tract
foreign investment to the state.
In addition to an Arizona-based team of
international trade specialists, expertise and
resources are available through foreign
trade offices in Mexico, Japan, Taiwan and
the United Kingdom. These experts facili-tate
contacts with local partners and gather
sales leads that can be matched with Ari-zona-
based suppliers.
Educating Arizona businesses
on elements of foreign trade
From questions about getting started to
specific concerns about developing the ex-port
side of your business, our trade spe-cialists
are experts in marketing abroad.
In addition to general trade information
available online at www.azcommerce.com,
experts help you find interested trading
partners and meet with you and your staff
to assist in developing your trade strategy.
Getting started
Your first step is to identify the most lucra-tive
potential markets for your product or
service. We provide country-specific infor-mation
gathered by U.S. embassies and con-sulates
detailing market size, distribution
channels and major in-country players; ref-erence
materials/sources for your industry,
including trade journals, associations and
promotional events; and reports on world-wide
trends in your primary target areas.
Contact facilitation
Once you’ve decided which markets are
best for your business, we assist you in iden-tifying
potential buyers, distributors, suppli-ers
or other strategic partners. We maintain
numerous sources and will assist you in de-veloping
a list of targeted companies.
Company background
Before responding to foreign leads or sign-ing
any contractual agreements, do your
homework. We’ll help you obtain general
background information on your potential
partners so you can make informed decisions.
Trade missions and trade/catalog shows
Arizona Department of Commerce trade
missions are designed to introduce small
and medium-sized Arizona businesses to in-ternational
markets. Our trade specialists
and foreign offices help you identify
prospective partners/distributors, schedule
meetings, and arrange for interpreters and
networking events. These missions provide
an opportunity to assess target markets
first-hand.
We invite Arizona businesses to exhibit
with us at trade and catalog shows world-wide.
In some cases, you can promote your
business through catalog shows attended by
our trade specialists.
Workforce Development
The Arizona Department of Commerce pro-vides
staff oversight and policy direction to
the Governor’s Council on Workforce Policy.
The 35-member council is made up of busi-ness,
state and educational leaders who rec-ommend
and advise the governor on all is-sues
related to improving the effectiveness of
Arizona’s work-force development system,
known as the Arizona Workforce Connection.
Job Training Program
Design a customized curriculum to meet
your specific work-force needs by applying
for a grant through the Arizona Department
of Commerce Job Training Program. The
program supports the design and delivery of
training plans that meet unique industry
standards and challenges.
Under the “Net New Hire” portion of the
grant program, businesses can apply for
grants that return up to 75 percent of the
costs of training net new employees in jobs
that meet the threshold wage criteria.
The “Incumbent Worker” portion of the
grant program allows for training that up-grades
the skills of existing employees who
also must meet the threshold wage criteria.
The Incumbent Program can reimburse
employers up to a maximum of 50 percent
of allowable training costs and may include:
course development fees; and development,
purchase or production of training materi-als
or trainer fees.
Applications for the Arizona Job Training
program are available online at www.az
commerce.com or by calling 602-771-1181.
Apprenticeship Program
Registered apprenticeship is a training
system that produces highly skilled workers
to meet your demands. Apprenticeship is a
proven strategy that combines on-the-job
training with related classroom instruction.
Arizona has more than 100 registered ap-prenticeship
programs with more than
2,500 apprentices in industries such as agri-culture,
construction and manufacturing.
For more: 602-771-1182 or www.azcom
merce.com.
IT Training Tax Credit
Meet your immediate needs for in-house
information technology skills and offset
training costs through the Arizona Informa-tion
Technology (IT) Training Tax Credit
available to businesses as a 50-50 match for
training up to 20 employees in information
technology skills. To qualify for the Infor-mation
Technology Training Tax Credit, an
Arizona business must:
• Be sending an Arizona employee to qual-ified
information training.
• Use accredited training institutions.
For applications, visit www.azcommerce
.com or call 602-771-1181.
Arizona Workforce Connection
Attract qualified applicants and cut em-ployee
selection and retention costs through
the Arizona Workforce Connection. Arizona
employers profit from the simple, flexible
services that Arizona Workforce Connection
sites tailor for unique business needs.
Streamlined and standardized for busi-ness
efficiency, Arizona Workforce Connec-tion
sites integrate the major work-force de-velopment
players across the state. And,
most services are provided free of charge.
Services include:
• Job bank posting.
• Screened and trained labor pool.
• Training and education resources for in-cumbent
workers.
• On-site applicant screening and job fairs.
• Rapid response pre-layoff support.
• Current and historical labor market in-formation.
• Unemployment insurance information.
For more information, visit the Web site at
www.arizonaworkforceconnection.com.
Arizona Film Commission
Housed in the Arizona Department of
Commerce, the Arizona Film Commission
attracts film and television production from
around the globe for economic development;
serves as the statewide liaison for local,
county, state, federal and tribal governments
as well as private-sector businesses and prop-erty
owners statewide; promotes Arizona
employment for film professionals and Ari-zona
businesses used by film companies.
Businesses benefiting from film-company
spending include everything from hotels
and restaurants to car rental agencies and a
wide range of support services.
Business Development Finance
Arizona Department of Commerce finan-cial
programs that promote economic de-velopment
opportunities statewide include:
• The Arizona Enterprise Zone Program,
or EZ, offers tax benefits to businesses lo-cated
in distressed areas of the state. The
EZ program offers a tax credit to nonretail
Continued from Page 10B
See ADOC, Page 12B
12B ■ Entrepreneur’s Edge THE BUSINESS JOURNAL phoenix.bizjournals.com NOVEMBER 21, 2003
What are the right reasons for start-ing
your own business? It starts
with asking yourself what makes
your business idea different; what is your
competitive edge?
Regardless of the type of business you are in-terested
in, there are many community and edu-cational
organizations that can help you, with-out
charge, explore your business options.
Once you know what type of business you
want to start, visit the Arizona Department of
Commerce’s Web site at www.azcommerce
.com and click on “Small Business Services.”
The Small Business Services Division is your
statewide resource for licensing, certification
and small-business assistance for every stage
of business development: startup, expansion
or relocation.
The Arizona Business Connection is a step-by-
step online service that walks you through
what you need to know to start or expand
your business, and it is accessible 24 hours,
seven days a week (24/7). This program ap-plies
to the majority of people/organizations
seeking occupational, business or license in-formation,
and will provide other valuable
information and resources.
The program is designed to take you
through a series of brief statements; you can
skip over any statement that doesn’t apply to
your business needs. Once you have com-pleted
the program, a customized report will
appear on the screen. Your report will enable
you to link over and download most of the
forms you may need. It also provides you
with telephone numbers and addresses in
the event that you wish to contact an agency
or organization directly.
You can revisit the program as many times
as you like. A personalized “Welcome Back”
page will be created after your first visit, of-fering
quick links to the pages you want in-formation
about. Some of the information
available to you on our Web site and in En-trepreneur’s
Edge include:
Trade Name/Trademark
Information on how to register and re-search
your business name or logo with
county, state and federal agencies.
Corporations/LLCs
Which is right for me? This book contains
one of the best reference charts for making
an informed decision. Once you decide, our
Web site will direct you to the necessary
forms to get started.
Industry Specific Information
Regulatory licensing and/or certification
and environmental restrictions or require-ments,
health permits, child-care licensing,
contractor’s license, auto dealer’s license, etc.
State Taxes
Access to information and brochures on
Arizona’s Transaction Privilege (Sales) Tax
(TPT) and Use Tax.
Employees
The most important part of any business is
its employees. How do I hire employees?
What forms am I required to file? Where can
I go for help? Step-by-step to hiring your em-ployees.
City & County Tax/Licensing
Every city and county in Arizona has a dif-ferent
set of requirements for starting a busi-ness
within its jurisdiction.
Some of these requirements include: home-based
business permits, licenses, tax licenses,
zoning permits, etc.
Referrals/Special Assistance
Small Business Services has developed a
free online directory to promote the state’s
minority and/or women-owned businesses
throughout the world. This directory helps
state, county, city and corporate buyers look-ing
to do business with minority and/or
women vendors. You can add your business
to the directory. You can search the directory
for vendors to do business with. You also can
download the directory.
For Bid Opportunities, there are links to
public and private-sector buyers. The Calen-dar
of Business Events links to a schedule
of statewide networking meetings.
Discover the Arizona Business Connection
businesses for net increases in new quality
jobs within a zone. The program offers
manufacturing businesses a property tax re-duction
for a period of five years if the com-pany
makes the required investment in
fixed assets in the zone.
• The Private Activity Bonds Program, or
PAB, allocates the state’s portion of the feder-ally
established tax-exempt private activity
bond volume cap. PABs can be used to fi-nance
industrial and manufacturing facilities
and equipment, student loans, single and
multifamily housing, private utility projects
and some municipal facilities.
In addition, Commerce Business Develop-ment
Finance administers the Military Reuse
Zone. For more: www.azcommerce.com.
Commerce and Economic
Development Commission
The Commerce and Economic Develop-ment
Commission, or CEDC, is appointed
by the governor to advise and coordinate
economic development policy for the state
of Arizona.
Office of Economic
Information and Research
The Office of Economic Information and
Research serves as the state’s clearinghouse
for economic information and manages re-search
related to Arizona’s economy. The of-fice
also provides information and analyses of
trends, opportunities, best practices, market
issues and department/program impacts.
Office of Innovation
and Technology
The Arizona Department of Commerce
serves as a catalyst to accelerate the growth
of technology businesses throughout the
state. The goal is to achieve dynamic eco-nomic
development through innovation
and technology. Resources provided by this
office to Arizona entrepreneurs and high-tech
firms include:
• A statewide network of industry part-ners,
university leadership and professional
organizations that provide expertise to
startup businesses.
• A grant program specifically for entrepre-neurs
to develop and commercialize global
technology by accessing Small Business Inno-vation
Research (SBIR) and Small Business
Technology Transfer (STTR) federal funding.
• Information and referrals from a wide
spectrum of financial resources that provide
capital for growing technology businesses.
The 31-member Governor’s Council on In-novation
and Technology is staffed by the
Commerce Office of Innovation and Tech-nology.
Charged with developing strategies
to improve Arizona’s knowledge-based econ-omy,
the council will deliver a technology
blueprint that can be implemented by pri-vate
and public sectors on a statewide basis.
For more: see the Innovation & Technology
link at www.azcommerce.com.
ADOC: Commerce Department services help business owners
Continued from Page 11B
NOVEMBER 21, 2003 THE BUSINESS JOURNAL phoenix.bizjournals.com Entrepreneur’s Edge ■ 13B
The first step to establishing a business
in Arizona is to determine which
form of business structure is most
appropriate for your operations.
To do this, an analysis of the various legal
and tax-related implications associated
with the forms of business structure must
be conducted.
In Arizona, as in all states, several busi-ness
structures exist. The four most com-mon
are the sole proprietorship, general
and limited partnership, limited liability
company and corporation. The state also
recognizes a limited liability partnership.
The following section provides a brief de-scription
of each, including general advan-tages
and disadvantages. An attorney and/or
certified public accountant should be con-sulted
for further information and advice
on selecting the appropriate structure for
your business.
Once you have determined the legal struc-ture
of your business, the next step is to com-plete
the necessary registration requirements.
Most businesses are required to register
with the state and/or county in which the
enterprise will operate, and these registra-tion
requirements vary.
Additionally, when establishing a business
with two or more people, or as a corpora-tion,
you will need an Employer Identifica-tion
Number (EIN), also known as a federal
tax identification number. There are various
methods of applying for an EIN.
• Apply online at www.irs.gov/businesses
/small/.
• By calling 800-829-4933.
• By mailing your completed SS-4 from to:
EIN Operations, Philadelphia, PA 19255.
Sole Proprietorship
The sole proprietorship is the simplest and
most common form of business organization.
A sole proprietorship is defined as a business
that is owned by one individual. Arizona is a
community property state and a husband
and wife can operate as a sole proprietor.
The owner is personally responsible for all
debts of the firm. Profits are considered as
personal income and taxed accordingly.
Advantages of a sole proprietorship:
• Minimum legal restrictions.
• Ease of formation.
• Low startup costs.
• Sole ownership of profits.
• Maximum freedom in decision-making.
Disadvantages of a sole proprietorship:
• Unlimited liability.
• Less available capital than in other types
of business organizations.
• Relative difficulty in obtaining long-term
financing.
If the business is going to be a sole propri-etorship
operating under a name other than
your own, it is not required — however, it is
an accepted businesses practice — to regis-ter
the business name (commonly known as
“doing business as” or “dba”) with the Ari-zona
Secretary of State’s Trademark and
Trade Name Registration Office or the
County Recorder of the county in which
you will operate.
General Partnership
A general partnership is an association of
two or more persons joined together to carry
on trade or business for profit. As in the sole
proprietorship, each partner (spouse) is per-sonally
responsible for all debts of the firm.
Formal partnership agreements should be
prepared by an attorney. In general, partner-ship
agreements outline each partner’s share of
income, gain, loss, deductions, credits and
methods to dissolve the partnership under var-ious
situations including death of a partner.
Advantages of a partnership:
• Ease of formation.
• Direct rewards.
• Broader management base.
Disadvantages of a partnership:
• Unlimited liability of general partners.
• Divided authority in decision-making.
• Difficulty in disposing of partnership in-terest.
General partnerships transacting business
in Arizona under a trade name, or a desig-nation
not showing the names of the part-ners,
should register the business name
“doing business as” or “dba” with the Ari-zona
Secretary of State’s Trademark and
Trade Name Registration Office or the
County Recorder of the county in which the
business operates.
Limited Partnership
This form is similar to the general part-nership
with several major differences.
Some of these differences include:
• At least one person must be identified as
a general partner and be responsible for the
operation and liability of the organization.
• Limited partners are not active man-agers
of the business and are not liable for
the organization’s debts, etc.
If the business is a limited partnership,
you are required to register with the Ari-zona
Secretary of State’s Trademark and
Trade Name Registration Office or the
County Recorder of the county in which the
business is located.
Limited Liability Partnership
Limited Liability Partnership, or LLP, is a
recent form of business entity in Arizona.
For information regarding an LLP, contact
an attorney or your local county bar associ-ation.
The lack of clear legal precedents
could be a disadvantage.
If the business is a limited liability part-nership,
you are required to register with
the Arizona Secretary of State’s Trademark
and Trade Name Registration Office or the
County Recorder of the county in which the
business is located.
Limited Liability Company
A Limited Liability Company, or LLC, of-fers
businesses the protection of a corpora-tion
and the single taxation feature of a
partnership.
Limited liability company advantages:
• Limited disclosure of owners.
• Limited documentation.
• No advance IRS filings.
• No public disclosure of finances.
• Lower filing fees.
• Professional LLCs are allowed.
• Can build in buy/sell and owner compen-sation
provision — no separate document.
• Ease in transfer of ownership.
• Can use special allocations between
owners.
• Can use different classes of owners.
• Member (owner) involved in LLC oper-ation
insulated from liability.
• Can assign management to a nonmember.
Limited liability company disadvantages:
• Out-of-state business complicates status
if the other state does not recognize LLC.
• Large number of owners complicates
status.
• Death, bankruptcy or withdrawal of
owner could cause problems.
Tax provisions advantages:
• No tax at LLC level.
• Established and well-seasoned partner-ship
rules apply.
• No new federal ID number required
when converting from partnership to LLC.
• No withholding tax on owners’ salaries.
• No double tax on appreciation.
• More flexible restructuring possible.
• No problem with retained earnings.
• Easier structuring of debt.
Business structures and registration
Continued on Page 14B
• Step-up in tax basis on death of member
or sale of interest.
• Less tax on owner’s retirement pay.
• Tax-free distribution of assets possible.
• Flexibility in contribution of assets.
• Member’s “outside” expenses not classi-fied
as miscellaneous itemized deduction
subject to 2 percent disallowance.
Tax provisions disadvantages:
• Status of self-employed tax on owners
uncertain.
• Status of sales tax on owner/lessees un-certain.
• Some gain on appreciation may be taxed
as ordinary income.
• No shifting of appreciation on contribu-tion
of property to LLC.
To register a Limited Liability Company,
domestic or foreign, contact the Arizona
Corporation Commission.
Corporation
A corporation, sometimes referred to as a
“C Corporation,” is the most complex type
of business organization. It is formed by
law as a separate entity, completely distinct
from those who own it, and has its own
rights and responsibilities.
In forming a corporation, potential share-holders
offer money and/or property in ex-change
for capital stock. The stockholders
are the owners of the corporation, and the
managers of the firm may or may not be
stockholders. Businesses that incorporate in
this state must file Articles of Incorporation
with the Arizona Corporation Commission.
Out-of-state corporations conducting
business for 30 days or more in the state
must file an Application for Authority to
Transact Business as a foreign corporation.
Advantages of a corporation:
• Separate legal entity.
• Limited liability for stockholders.
• Unlimited life of the business.
• Relative ease in raising capital.
• Transfer of ownership stock sale.
Disadvantages of a corporation:
• Complex and expensive to organize.
• Activities limited by the corporate charter.
• Extensive regulation and record-keeping.
• Double taxation — once on corporate
profits and again on dividends.
Incorporation of a business in Arizona
involves the following steps:
1. Make sure the name you plan to use has
been checked with the Arizona Corporation
Commission and is available for use by your
corporation.
2. Deliver the original and one or more
copies of the Articles of Incorporation to the
Corporation Commission.
3. Show a street address for the statutory
agent (P.O. Box not accepted).
4. File Certificate of Disclosure (included
in the incorporation application forms).
5. Pay the required fees.
6. Advise the commission, in writing, of
the fiscal year to be used by the corporation.
7. Publish the Articles of Incorporation
within 60 days after filing.
The Articles must be published in three
consecutive issues of a newspaper in gen-eral
circulation in the Arizona county of the
corporation’s known place of business.
Within 90 days after filing, an affidavit of
this publication must also be filed with the
Arizona Corporation Commission.
S Corporation
Subchapter S Corporations, sometimes re-ferred
to as “S Corporations,” elect not to be
subject to federal corporate income tax.
The shareholders, however, include their
shares of the corporation’s items of income,
deduction, loss and credit, or their shares of
nonseparately computed income or loss, as
part of their personal income.
To qualify as an S Corporation, a
corporation must meet the following:
• It must be based in the United States.
• It must have only one class of stock.
• It must have no more than 75 share-holders.
• It cannot have any nonresident alien as a
shareholder.
Recent changes in tax laws have liberalized
Subchapter S rules; however, current restric-tions
must be checked at the time of filing.
Check with your attorney and certified
public accountant for further information
regarding the changes in law. Publications
may have outdated information.
A corporation that meets all of the above
criteria can become an S Corporation if:
1. All shareholders consent to the corpora-tion’s
election of S Corporation status.
2. The corporation has a permitted tax year.
3. IRS Form 2553, Election by a Small
Business Corporation, is filed to indicate
the choice of S Corporation status. The cor-poration
must qualify as an S Corporation
at the time it files Form 2553.
For information on S Corporations, ob-tain
IRS Publication 542.
To incorporate your business, contact the
Arizona Corporation Commission.
Foreign Corporation
If the business is a foreign corporation (an
entity organized under the laws of another
state or country), it also must register with
the Arizona Corporation Commission.
Foreign corporations applying for Au-thority
to Transact Business in Arizona
must comply with the following at the
time of filing:
1. Make sure the name that you are using
has been checked with the Arizona Corpo-ration
Commission and is available for use
by your corporation. The name may be re-served
for 120 days while filing.
2. Deliver the original and one or more
copies of the Application for Authority to
the Corporation Commission.
3. Show a street address for the statutory
agent (P.O. Box not accepted).
4. File Certificate of Disclosure (included
in application forms).
5. Pay the required fees.
6. Advise the Corporation Commission, in
writing, of the fiscal year to be used by the
corporation.
7. Publish the Application for Authority
within 60 days after filing with the Arizona
Corporation Commission.
The Articles must be published in three
consecutive issues of a newspaper in gen-eral
circulation in the Arizona county of the
corporation’s known place of business.
Within 90 days after filing, an affidavit of
this publication also must be filed with the
Arizona Corporation Commission.
Additional information on incorporating
may be obtained from the Arizona Corpora-tion
Commission Corporations Division.
Tax-Exempt Organizations/
(Nonprofit Corporations)
There are more than a dozen different
types of corporations approved by the Inter-nal
Revenue Service as “Nonprofits.”
These organizations usually are developed
and operated exclusively for one or more of
the following purposes: charitable, reli-gious,
educational, scientific, literary, test-ing
for public safety, fostering amateur
sports competition (under certain restric-tions),
or the prevention of cruelty to chil-dren
or animals.
The organization must be a corporation,
community chest fund or foundation. A sole
proprietorship or partnership will not qualify.
Other organizations that may qualify in-clude:
civic leagues; social welfare organiza-tions;
labor, agriculture and horticultural or-ganizations;
social and recreation clubs; and
fraternal beneficiary societies.
For a free IRS booklet on this subject, call
800-829-3676 and request publication 557,
or visit the IRS Web site at www.irs.gov.
To register a nonprofit corporation, con-tact
the Arizona Corporation Commission.
14B ■ Entrepreneur’s Edge THE BUSINESS JOURNAL phoenix.bizjournals.com NOVEMBER 21, 2003
Business
structures
and registration
Continued from Page 13B
NOVEMBER 21, 2003 THE BUSINESS JOURNAL phoenix.bizjournals.com Entrepreneur’s Edge ■ 15B
SOLE
PROPRIETORSHIP
Advantages
Minimum legal
restrictions
Ease of formation
Low startup costs
Sole ownership of profits
Maximum freedom in de-cision-
making
Disadvantages
Unlimited liability
Less available capital
Relative difficulty in ob-taining
long-term financ-ing
No. of owners allowed
Only one owner
Arizona filing required
Trade name registration
Formation
Nontaxable
Taxation issues
(Subject to federal in-come
tax at entity level)
No, tax items reported
on Schedule C to
personal return
Liquidation
Not applicable
GENERAL/LIMITED
PARTNERSHIP
Advantages
Ease of formation
Direct rewards
Broader management
base
Disadvantages
Unlimited liability of
general partners
Divided authority
Difficulty disposing of
partnership interest
No. of owners allowed
At least 2; no upper
limits
Arizona filing required
Certificate of limited
partnership
Formation
Nontaxable, unless
disguised sale or the
partner is relieved
from debt
Taxation issues
(Subject to federal in-come
tax at entity level)
No, if meet Internal Rev-enue
Code tests
Liquidation
Nontaxable to the extent
of a partner’s tax basis
LIMITED LIABILITY
COMPANY
Advantages
Single-member LLC
treated as sole
proprietor for taxation
Limited disclosure
of owners
No advance IRS filings
Ease in transfer of
ownership
Can use different
classes of owners
Lower filing fees
Disadvantages
Large number of owners
complicates status
Death, bankruptcy or
withdrawal of owner
could cause problems
Doing business in other
states may require filing
individual tax returns in
each
No. of owners allowed
At least 1; no upper
limits
Arizona filing required
Articles of organization
Formation
Nontaxable, unless
disguised sale or the
member is relieved
from debt
Taxation issues
(Subject to federal in-come
tax at entity level)
No, if meet Internal Rev-enue
Code tests
Liquidation
Nontaxable to the extent
of a member’s tax basis
“C” CORPORATION
Advantages
Separate legal entity
Limited liability for
stockholders
Unlimited life of business
Relative ease in raising
capital
Transfer of ownership
through sale of stock
Ability to draw on exper-tise
of more individuals
Disadvantages
Complex and relatively
expensive to organize
Activities limited by
charter
Extensive regulation,
record-keeping
requirements
Double taxation of
profits and dividends
No. of owners allowed
At least 1; no upper
limits
Arizona filing required
Articles of incorporation
Formation
Taxable; however, if the
transferors receive only
stock and meet the 80
percent control test of
the Internal Revenue
Code, section 351,
nontaxable except to the
extent of debt relief
Taxation issues
(Subject to federal in-come
tax at entity level)
Yes
Liquidation
Taxable to both corpora-tion
and shareholders
“S” CORPORATION
Advantages
Liability limits for
shareholders
Unlimited life of busi-ness
Disadvantages
Restrictions on number
of shareholders
Limitations on ownership
No. of owners allowed
At least 1; upper limit
is 75
Arizona filing required
Articles of incorporation
Formation
Taxable; however, if the
transferors receive only
stock and meet the 80
percent control test of
the Internal Revenue
Code, section 351,
nontaxable except to
the extent of debt relief
Taxation issues
(Subject to federal in-come
tax at entity level)
No, however any
shareholder may cause
loss of tax status
Liquidation
Generally nontaxable
at corporate level and
taxable at shareholder
level via flow-through
of corporate tax items
Comparison of Business Structures
Source: Gammage & Burnham PLC
16B ■ Entrepreneur’s Edge THE BUSINESS JOURNAL phoenix.bizjournals.com NOVEMBER 21, 2003
Naming the business is one of the
most critical steps a business owner
will take.
Unfortunately, in the startup process,
many people do not consider the impor-tance
of name selection and its role in the
success of their business.
Professional assistance is available from
attorneys, public relations or advertising or-ganizations,
marketing consultants and
trademark agents.
Several books and
magazine articles
are available from
local libraries to help you select a name.
Terms used to describe a business name in-clude
trade name, “doing business as” (dba)
and fictitious name.
Here are some considerations in selecting
a business name:
• The name should be easy to understand,
spell, pronounce, remember and find in the
telephone directory.
• Will it depict the image you want for the
business? This may include the level of ser-vice,
speed, promptness, quality, skill, low
cost, timeliness, experience, effectiveness, etc.
• Can your product or service be listed as
part of the name (such as health food or
marketing consultants)?
• Using individual letters or an acronym
may make the name very difficult to find in
the telephone directory.
• The terms Corporation, Corp., Incorpo-rated,
Inc., LLP, etc., may be used only for
businesses registered accordingly.
• Unusual spellings such as “Kar” for Car
may cause your customer difficulty in find-ing
your business name or listing.
• Avoid names similar or identical to those
used by another business.
Once a name is selected, there are three
places you can register your business name:
• The Arizona Secretary of State’s Trade-mark
and Trade Name Office: 1700 W. Wash-ington
St., Seventh Floor, Phoenix, AZ 85007.
For more information: 602-542-6187, 800-
458-5842, or online at www.sosaz.com.
The Southern Arizona Office also accepts
Trade Name and Trademark applications
and is located at 400 W. Congress, North
Building, Room 252, Tucson, AZ 85701. The
office also may be contacted by telephone at
520-628-6583. A certificate of registration is
mailed in about 10 business days.
• The County Recorder will register a busi-ness
name. This involves filing a simple
form (which may be obtained at a local sta-tionery
or legal-forms store) and remitting
with the required fee.
• If incorporating your business, contact
the Arizona Corporation Commission at
602-542-3230 or visit the office at 1300 W.
Washington St., Phoenix, AZ 85007.
The Arizona Corporation Commission’s Web
site can be accessed at www.cc.state.az.us.
Additional resources
Copyrights
Copyright Office, Room 401
James Madison Building
Washington, D.C. 20540
202-707-5959 or 800-688-9889
Patents
Commissioner of Patents & Trademarks
Washington, D.C. 20231
800-786-9199; www.uspto.gov
Picking a name is an important step
■ HOW TO
HOW
Arizona Small Business Association
help you grow your business
can the
?
Business Education Workshops/Seminars
Networking Mixers
Workers' Comp Dividend Plan
Health Insurance
Communication Services
Financial Service Referrals
Monthly Special Interest Round Tables
Home-Based Business Council
Members Website List
Newsletter & Online Membership Directory
Small Business Conferences
Legislative Representation
Purchasing & Lending Fairs
Conference Centers
Business Resource Referrals
4444 E. Grant Road #119
Tucson, AZ 85712
520-327-0222 Fax 520-327-0440
codowd@asba.com
4130 E. Van Buren St., #150
Phoenix, AZ 85008-6996
602-265-4563 Fax 602-265-3681
info@asba.com
Visit us today www.asba.com
NOVEMBER 21, 2003 THE BUSINESS JOURNAL phoenix.bizjournals.com Entrepreneur’s Edge ■ 17B
How do I file my
business name?
The registration of a trade name is not
legally required in Arizona but is an ac-cepted
business practice. Trade names, also
known as business names and dba’s, can be
filed with the Office of the Secretary of
State.
Although the office will search its data-base
for similar names on file, we recom-mend
that customers follow the guidelines
found at the Phoenix Public Library before
submitting the trade name application.
Registration forms are available to down-load
at www.sosaz.com. The filing fee is $10
and must be in the form of a check, cashier’s
check, money order or cash. Currently,
credit-card payments are not accepted.
How do I search the
Secretary of State database
for a business name?
The Office of the Secretary of State can
conduct a preliminary name check either
over the phone (602-542-6187) or via e-mail
(trades@mail.sosaz.com).
It is recommended that you wait to order
stationery or other office supplies until you
receive your trade name certificate in the
mail.
Corporations and Limited Liability Com-panies
should check name availability with
the Arizona Corporation Commission at
602-542-3230. Construction companies
should check name availability with the
Registrar of Contractors by calling 602-542-
1525. Mortgage companies should check
with the Department of Banking by calling
602-255-4421.
How do I get a federal
trademark?
To file for a federal trademark, contact the
U.S. Patent and Trademark Office at 2021
Jefferson Davis Highway, Arlington, VA.
General information requests should be ad-dressed
to General Information Services,
U.S. Patent and Trademark Office, Crystal
Plaza 3, Room 2C02, Washington, D.C.
20231.
Questions regarding federal trademark
registration can be answered at 800-786-
9199 or on the Internet at www.uspto.gov.
Arizona residents also may conduct fed-eral
trademark searches at the Noble Sci-ence
and Engineering Library at Arizona
State University, a U.S. Patent and Trade-mark
Depository Library (www.asu.edu/
lib/noble/ptdl). For more: 480-965-6164.
What is the statutory
authority?
Statutory authority for the registration of
trade names can be found in Arizona Re-vised
Statutes §44-1460 through §44-
1460.05.
What if my trade name
is rejected?
The general rule governing trade name ac-ceptability
is found in A.R.S. §44-1460.01(B).
It states “The Secretary of State shall not file
an application for the registration of any
trade name, title or designation if it might
mislead the public, or is not readily distin-guishable
from names, titles or designations
previously registered under the provisions of
this article.”
Are there any additional
business-related functions
offered by the Secretary
of State?
In addition to the initial registration of
trade names, the Office of the Secretary of
State is the centralized filing office for the
registration of Trade/Service Marks, Lim-ited
Partnerships, Charitable Organiza-tions,
Telephone Solicitors, Contracted
Fundraisers, Uniform Commercial Code fil-ings,
Athlete Agents, Intergovernmental
Agreements and Public Meeting Notices.
The agency also provides Notary Public
Commissions and the maintenance and
publishing of the Administrative Code and
Register.
Forms and filing information are available
online at www.sosaz.com or by calling 800-
458-5842.
Trade Names
■ Customers are encouraged to file
descriptive names. There are roughly
350,000 names registered at the
state level as trade names, trade-marks,
partnerships, LLCs or corpora-tions.
■ Adding a city, state or direction
does not create a more descriptive
name.
■ Adding names such as corporation,
company, services, manufacturing, as-sociates,
store, enterprises, associa-tion,
etc., to the end of a name does
not create a more descriptive name.
■ “Made-up” names (words that are
not found in a dictionary) should not
be created for the purpose of a more
descriptive name.
■ The Office of the Secretary of State
suggests that customers perform ex-tensive,
independent research before
submitting an application for registra-tion
of a trade name.
■ The Office of the Secretary of State
does not warrant or guarantee that
chosen names will not conflict with ex-isting
business names.
■ In the event of a name conflict, it is
advisable to seek legal counsel since
the Office of the Secretary of State is
a filing agency and not authorized to
resolve legal matters involving trade
name conflicts.
■ Send a check or money order to:
Secretary of State
Business Services — Trade Names
1700 W. Washington St., Seventh
Floor, Phoenix, AZ 85007
For a trade name application, see
Page 72.
Filing guidelines
By mail:
Office of the Secretary of State
1700 W. Washington St., Seventh
Floor
Phoenix, AZ 85007
602-542-6187 or 800-458-5842
(state of Arizona only)
In person:
Secretary of State
Customer Service Center
14 N. 18th Ave.
(southwest corner of 18th Avenue
and Adams), Phoenix, AZ 85007
Hours: Monday-Friday, 8 a.m. to 5
p.m., except holidays
or
Office of the Secretary of State
400 W. Congress, Ste. 252
Tucson, AZ 85701
Where do I file?
18B ■ Entrepreneur’s Edge THE BUSINESS JOURNAL phoenix.bizjournals.com NOVEMBER 21, 2003
Below are guidelines intended to help
you develop and write a business
plan. Your business plan is very im-portant
to your success. It represents your
“road map” toward a successful venture.
These guidelines do not address every as-pect
of every possible business plan. You
should consider more questions than those
that are posed in each section. Be sure to ask
many questions — your success depends on
the completeness of your planning process.
Each numbered section below (I, II, III,
etc.) should start a new section of your plan,
while other lettered items within each section
will each be one to three paragraphs long.
I. Title Page
The title page should be double-spaced,
horizontally centered and positioned just
above the center of the page. It should con-tain
the following items: business name, ad-dress,
phone number and owner(s) name(s).
II. Table of Contents
The table of contents should list the title of
each section of the document and indicate
the page number where each is located. It
also should list specific support items (ap-pendices)
by name.
This page will be done last, since it requires
the entire document as input. It allows the
reader to quickly locate specific sections.
III. Business Concept
or Executive Summary
This section should be a one-page expla-nation
of what your business is and its com-petitive
advantage.
Here you will provide a clear description
of the industry in which you are competing
and a precise explanation of your business’
unique qualities that set it apart from others
that are competing for the same customers.
This section should include key points from
marketing, operational and financial plans.
Your explanation should answer these
questions:
• What does your business do?
• In what general market does your busi-ness
compete?
• What quality/price image will it have?
• What customer needs are met?
• What makes it unique from competition?
• Why will it be financially successful?
IV. Marketing Plan
This section should contain a narrative de-scription
of these factors:
A. Products/Service
• What needs/benefits are sought by your
customers?
• Specifically how does your product meet
those needs/benefits?
• How is your product/service unique
from the competition?
• What customer services do you provide
to support the central product?
B. Target market
First, determine if your focus is on con-sumers
(end-users) or other businesses.
Then tailor your responses to the appropri-ate
category below.
• What needs/benefits are sought by your
customers that your product/service satisfies?
• When and under what circumstances does
your customer buy your product or service?
• Describe the volume and frequency of
your customer’s purchases.
• Based on available data, what is the ex-pected
volume of your target market?
• Of that target market, what is the pro-jected
volume of actual paying customers?
• Describe your customer base.
Consumers: It is important for you to de-velop
a clear, mental picture of your ideal
customer.
Describe your potential customers using
the following factors: age, sex, income, edu-cation,
location, occupation, interests, buy-ing
habits, and goals and aspirations.
Businesses: If selling to a business, your
description should include: type of busi-ness;
size of business; priority placed on
purchasing your product; projected image
of the business; markets that the business
services; its trade organizations and mem-berships;
and the trade publications read.
B. Competition
A description of your competition should
answer the following questions:
• Who are your major competitors?
• Why are they successful?
• What alternatives are there to your product?
• How do alternatives impact your sales?
• What distinctive differences separate
you from your competitors?
• Why should customers leave your com-petitors
to choose your product?
• What market share do you expect to get?
C. Location analysis
Describe your business location and how
it will enhance the sale of your product or
service. Your description should answer the
following questions:
• What strategic advantages do you have
at this location?
A solid business plan is a must
Continued on Page 19B
NOVEMBER 21, 2003 THE BUSINESS JOURNAL phoenix.bizjournals.com Entrepreneur’s Edge ■ 19B
• Is there opportunity for expansion?
• What are the neighboring businesses?
• Do they complement/detract from yours?
• Are renovations needed? At what cost?
• What is the zoning classification?
• Is the neighborhood stable, changing,
improving, deteriorating? How?
• How is customer access, parking, etc.?
NOTE: Include in the appendix a photo-graph
of the building, a drawing of the im-mediate
area showing road access and iden-tity
of adjoining businesses and a drawing of
the floor plan of your business.
D. Price determination
A description of the price structure for
your product or service will answer the fol-lowing
questions:
• How does the unit cost of your product
compare to the relative value seen by the
customer?
• How does your price compare with the
competition’s?
• Why will customers pay your price?
• What image will this price project?
• What special advantages do your cus-tomers
get that is included in the price?
• Will you offer credit terms?
E. Marketing approach
A description of your marketing effort
should answer the following questions:
• What are the test market results?
• Where do your customers seek informa-tion
about purchasing your product/service?
• How will your image be clearly and con-sistently
conveyed to potential buyers?
• Which media are most suitable?
• How will you evaluate the effectiveness
of each advertising and promotional effort?
• How will you use/evaluate a sales staff?
V. Management Plan
or Operational Plan
This section contains a description of who
will run the business and how they will do
it, including the following:
A. Management team
A description of how the business will be
managed will answer these questions:
• What business management background
do you have?
• How will that drive the business?
• How is the experience of key people re-lated
to this type of business?
• What legal form will you use — corpora-tion,
partnership, proprietorship, etc.?
• Who does what? Who reports to whom?
• What resources are needed and who will
provide them (accountant, lawyer, etc.)?
NOTE: Include in the appendix the résumés
of key personnel.
B. Employee relations
A description of your methods for hiring,
training and communicating with your staff
will answer these questions:
• What are your personnel needs?
• What skills will be required?
• How will you hire and train?
• What salary/benefits will be provided?
• How will you determine wage increases?
• What personnel policies will be provided?
C. Operational controls
A description of the kinds of management
systems and how they will be used will an-swer
these questions:
• What is your production capacity?
• What operating advantages do you have?
• What elements are key to your success?
• What will be indicators of success?
• How will you monitor these factors?
• What hazards do you anticipate for your
business? What protection and/or alternate
plans do you have?
• What policies will you establish for the
operation of your business?
VI. Financial Plan
A description of how your business will be
financed and how you will maintain a
sound financial condition will answer the
following questions:
A. Current funding requirements
• How much money will be needed for
starting your business?
• What will be the sources of startup capital?
• What business and personal assets will
be pledged as collateral?
B. Use of funds
• How will the money be spent (working
capital, capital expenditures, etc.)?
• How will borrowed funds make your
business more profitable?
C. Long-range financial strategies
• How will you liquidate your investors’
position?
• What terms of repayment are feasible?
• What will you do if repayment cannot be
accomplished as planned?
D. Financial statements
To support this section, several financial
statements will be required, such as the fol-lowing:
• Personal financial statement of owner.
• Business startup costs.
• Pro forma cash flow analysis (expected).
• Balance sheet (actual or proposed).
• Income statement (actual or proposed).
• Capital equipment list.
VII. Strategic Plan
It is very important to include a descrip-tion
of where you want your venture to be
in the next few years and how you intend to
achieve those goals. This strategic plan
should focus on years two through five and
include descriptions of the following items:
• Strengths within your organization.
• Weaknesses within your organization.
• Opportunities available to you.
• Threats impeding you.
Using these four factors, you should de-scribe
strategies that use your strengths to
take advantage of opportunities and over-come
threats; and strategies to reduce weak-nesses
and avoid threats to your business.
The strategies should identify intermedi-ate
goals (yearly) and the marketing, man-agement
and financial resources that will be
used to achieve these goals.
For assistance in preparing your business
plan, visit www.azcommerce.com and click
on Small Business Services.
Tips for writing your blueprint
Consider the following when constructing a business plan:
■ The business opportunity is pre-sented
in a clear, exciting manner.
■ The entrepreneur understands that
projections are, at best, hopeful
guesses and tries to base the projec-tions
on realistic assumptions.
■ The entrepreneur estimates, as
much as possible, the pitfalls of the
business as well as its strengths.
■ The plan is carefully proofread and
edited until it does not contain any
errors in grammar or math.
■ The entrepreneur knows the plan by
heart before making a presentation to
a potential lender or investor.
■ The company has taken the time to
study and understand its competitors
and can address their strengths and
possible weaknesses.
■ The plan contains enough informa-tion
to tell a complete story about
the company, and it is presented in a
concise, tight writing style.
■ The plan does not make exagger-ated
claims about the product or
the management.
■ The plan shows why the company
and its products are different and
significantly better than what is out
there in the marketplace.
Source: The Capital Connection, www.capital-connection.com
Continued from Page 18B
20B ■ Entrepreneur’s Edge THE BUSINESS JOURNAL phoenix.bizjournals.com NOVEMBER 21, 2003
Economic Development
Information Centers:
Apache Junction Public Library
480-474-8555
Academic Library
Arizona Western College/NAU-Yuma
928-344-7777
Casa Grande City Library
520-421-8710
Chandler-Gilbert Community College
Learning Resource Center
480-857-5138
Chandler Public Library
480-782-2803
City of Mesa Library
480-644-3721
Clifton/Greenlee County Public Library
928-865-2461
Eastern Arizona College Library
928-428-8304
Estrella Mountain Community
College Library
623-935-8072
Flagstaff City-Coconino County
Library District
928-779-7670
Florence Community Library
520-868-9471
Glendale Public Library
623-930-3530
Globe Public Library
928-425-6111
Maricopa County Library District
602-506-2957
Mohave Community
College Library
928-453-5809
Mohave County Library District
928-692-2665
Nogales City-Santa Cruz County
Public Library
520-287-3343
Northland Pioneer College Library
Learning Resources Center
928-524-7320
Peoria Public Library
623-773-7556
Phoenix Public Library
602-262-4636
Prescott Public Library
928-777-1500
Scottsdale Public Library
480-312-2476
Sierra Vista Public Library
520-458-4225
Tempe Public Library
480-350-5511
Tucson-Pima Library
520-791-2647
Yavapai College Learning Resource Center
928-776-2265
Yuma County Library District
928-782-1871, ext. 106
Visit your local library, it’s a great
resource for starting or running a busi-ness.
Librarians will help you find information
on every phase of business ownership,
information on writing the business plan,
and electronic databases where you can
research industries and competitors.
The library provides access to sub-scription
databases you can use in the
library, office or home when you obtain a
library card and a PIN number.
(Check your local library for details).
In addition, libraries provide free ac-cess
to the Internet. Many libraries pre-sent
free programs, workshops and
book lists on business topics.
For a list of Arizona libraries, visit the
Arizona Library Association Web site at
www.azla.org/azinfo/libraries.html.
Library Resources Visit your local library
Developing a business plan? Tracking
industry and market trends? Re-searching
other factors that may af-fect
the success of your enterprise?
Start your research on these and other key
business development issues with your local
Economic Development Information Center
(EDIC) library.
The Arizona State Library, Archives and Pub-lic
Records was awarded federal grant funds to
initiate the EDIC program in 1992. There cur-rently
are 27 EDICs based in public and com-munity
college libraries throughout the state.
EDICs provide the business community and li-brary
users with:
• Business information from a core collec-tion
of business reference materials.
• Research experts familiar with the local
economy and the community.
• Referrals for business information and as-sistance.
• Database searching and Internet access,
assistance and training.
Through a statewide pilot project, the Ari-zona
State Library, Archives and Public
Records recently enhanced EDIC services by
providing an online business database that
covers the latest information from top news-papers
such as the New York Times, Wall
Street Journal and USA Today.
EDIC library customers can use this database
for identifying market and industry trends,
tracking potential customers and competitors,
and analyzing business strategies.
For more: 800-255-5841, 602-542-5841, or
contact one of the EDIC libraries listed below.
NOVEMBER 21, 2003 THE BUSINESS JOURNAL phoenix.bizjournals.com Entrepreneur’s Edge ■ 21B
BY SUSAN BROOKS
Special to The Business Journal So, you want to be a business owner.
You think you have an entrepreneurial
spirit. You are sure that now is your
time to be in charge of your own destiny.
You start with baby steps, getting valida-tion
from family and friends, guidance from
advisers.
But you need a business plan. You need to
know your costs — down to the penny. You
need a compassionate banker, a disciplined
CPA and an over-protective attorney. Now
you think you’re ready?
Whoa! Instead of focusing on what’s next,
you have to ask yourself what’s first. A pas-sion
to serve, whether it’s cookies or wid-gets,
must start with a vision — your vision.
Who is your customer? Who do you want
to serve, and how? Where do you see the
greatest need, the hole in the marketplace
that your product/service can fill better than
anyone else? What are the pictures in your
mind that define your product/service: your
company name and logo, your merchandis-ing
and image and your core values that de-fine
and differentiate your product/service
from all the others already in the market-place?
When you focus on vision, you soon
realize you have opinions about things you
didn’t even realize mattered before.
Having been in the trenches as a business
owner for more than 25 years, I’ve learned
these lessons. Knowing how to grow a busi-ness,
how to best serve customers and em-ployees,
and how to keep integrity of the vi-sion
— these are the questions that have
kept me awake all hours of the night and,
fortunately, have taught me lessons that
now help me guide budding entrepreneurs
back into the light of day.
The integrity of your vision always is
being tested. There are several non-nego-tiable
caveats in my vision that I held onto
tightly. Honoring my family history and the
integrity of our recipes to use fresh and real
ingredients meant that our cookies have a
limited shelf life. I often was advised to add
preservatives to our cookies.
No way, no how! Our name, Cookies from
Home, declared this truth from the get-go.
Our niche had to focus on immediate munch-ing,
emphasizing the quality and freshness as
an advantage rather than a limitation. Our
cookies are homemade by people, not ma-chines,
and every step of our process involves
the human and “back to basics” philosophy.
Vision defines your passion. My vision
was to make our world a better place by
treating customers to the best chocolate
chip cookies and service.
Everyone loves cookies, right? Yes, but if I
took my limited dollars
and tried to market to
“everyone,” I would have
disappeared long ago with
all the other startup com-panies
that failed. I
needed to be much more
specific, much more defi-nite
about the cookie
lovers I wanted to serve.
Look at Southwest Air-lines.
Its niche is clearly
defined: cheap fares and
lots of them. No empty promises of gourmet
meals and first-class seats. When customers
book a Southwest flight, they “buy in” to the
cattle calls and peanuts. Southwest Airlines
knows what it does best and doesn’t try to
be what it is not.
Your vision holds your truths. When you
stay focused on that, your next step and bot-tom-
line direction become clear.
This is your vision, your destiny, which
owns lessons learned, triumphs celebrated
and every ounce of risk that made it happen.
Susan Brooks, co-founder and president of
Cookies From Home, also is a professional
speaker and consultant. She can be reached at
www.servesyouright.net or tobserved@aol.com.
Vision, first and always
Susan
Brooks
■
Daily business headlines
sent to you via e-mail
Get The Phoenix Business Journal’s NEW
e-mail headline service for breaking
local business stories every day at 3pm.
Read the news before the next day’s
morning paper. It’s FREE in your e-mail.
To sign up, point your browser to
phoenix.bizjournals.com and click on
E-MAIL ALERTS to get news that’s
strictly business, strictly local.
22B ■ Entrepreneur’s Edge THE BUSINESS JOURNAL phoenix.bizjournals.com NOVEMBER 21, 2003
CHAPTER 2
Location & Regulations
2•
BY SUSAN MERCER HINRICHS
Special to The Business Journal Location, location, location.
Like real estate, the 3L’s apply in busi-ness
as an entrepreneur decides
where to physically establish an enterprise.
Three other words — regulations, licens-ing
and permitting — also are key to start-ing
a business off on the right foot and
growing it into a thriving enterprise.
Whether you’ve launched a home-based
business or staked out a promising com-mercial
site, you’ll need to comply with li-censing
and permitting requirements.
A business owner looking at a downtown
redevelopment site may wrestle with leasing
or buying the property, for example.
That’s where the Small Business Develop-ment
Center can come into focus. Mike
York, the SBDC’s state director, said em-ployees
there can help people understand
commercial leasing.
“It’s not astrophysics; it’s just business,”
York said. “But it can be pretty intimidating.”
He said an SBDC counselor can help
translate commercial real estate jargon and
forms for a business person who is deciding
whether to rent or buy.
Economic development officials stand as a
ready source of information, too. Cities and
counties may offer credits or incentives for
businesses choosing to locate within special
sites, sometimes known as enterprise zones
or development areas.
In southwestern Arizona, the cities of
Yuma, Wellton, Somerton and San Luis have
teamed with Yuma County and dozens of
local businesses to form the Greater Yuma
Economic Development Corp. According to
the GYEDC Web site, www.gyedc.org, all of
Yuma County is designated as an enterprise
zone — an area offering income-tax incen-tives
for businesses choosing to locate there.
Miguel Bravo, a GYEDC business develop-ment
representative, said the group often has
contact with small and light-manufacturing
companies from Southern California where
owners are looking to move to a more af-fordable
area.
In talking with prospective relocators,
Bravo said the GYEDC looks at things such
as the number of jobs to be created, starting
wages offered, and benefits to be rendered
as the public-private partnership members
negotiate to offer relocation incentives.
“Our goal is to provide all the information
they (prospective businesses) need and as-sist
them,” Bravo said.
Likewise, when it comes to navigating the
process for permitting and licensing, the
SBDC’s York said workers there can help,
too, whether through the organization’s on-going
workshops and seminars statewide, or
a one-on-one question-and-answer basis.
Arizona is a “virtual nirvana to do busi-ness
in,” York said. Despite that, he said li-censing
and permitting could — and should
— be easier to navigate.
According to York, the SBDC annually
counsels about 3,500 people in Arizona on
regulatory and licensing matters, among
other issues. Over the past 15 years, the
SBDC has assisted some 100,000 people in
various capacities through its ongoing sem-inars
and workshops statewide.
Individualized business counseling is of-fered
without cost, York said. Workshop
sessions can involve a nominal charge.
Terree Wasley, vice president of entrepre-neurial
services at the Greater Phoenix
Chamber of Commerce, agrees with York
that the gauntlet of permits for establishing
and operating a business can be over-whelming.
Regulatory issues “are a problem,” said
Wasley, citing business-owner frustration
with city regulations and taxation matters.
One particularly troublesome area now, she
said, is enforcement of municipal smoking
bans in eateries.
The Greater Phoenix Chamber also acts as
an ongoing legislative lobbying force to
make regulations and taxation issues more
business-friendly, Wasley said.
Another regulatory information source is
online. A visit to the Arizona Department of
Revenue’s Web site, www.revenue.state
.az.us, gives entrepreneurs a comprehensive
picture of what startups and growing com-panies
need to know about building a busi-ness
in Arizona.
One link on the home page leads to gen-eral
small-business information; another
lists all the organizations and activities that
are required to obtain an employer identifi-cation
number; and another lists a guide, ti-tled
A-Z for Taxes for Small Business, where
tax obligations are outlined.
Once armed with the necessary permits
and licenses, entrepreneurs take another
step toward fulfilling their independent
business dreams.
NOVEMBER 21, 2003 THE BUSINESS JOURNAL phoenix.bizjournals.com Entrepreneur’s Edge ■ 23B
The choice of a location may have a
profound effect on the success of
your business. Therefore, this aspect
of your planning should be given great
consideration. Some of the items to re-search
and assess include the following:
Home-based
Businesses must comply with the same li-cense
and permit requirements as a com-mercial
location, including applicable sales
tax licenses, trade or professional licenses,
residential zoning
and homeowner as-sociation
rules.
Among the factors
to consider in obtaining approval is
whether you will increase traffic substan-tially,
the ease of access for your clients and
suppliers, and if there is any pollution cre-ated,
including excessive noise.
Buy or lease
One of the first decisions you must make
is whether to purchase property and con-struct
a new building, modify an existing
building or lease a site.
There are many issues to consider in mak-ing
this decision. You should consult with
an attorney, accountant and real estate pro-fessional
for assistance and information.
Client base
Where are your current and targeted cus-tomers
located? Use a map and pins to iden-tify
client locations. This information will
assist you in selecting a site.
Traffic count
Determine the traffic passing potential
sites. You can make this study or, in many
cases, the city, county or state traffic engi-neers
will provide official counts of auto
traffic. Commercial real estate agencies
often have considerable research data on
this subject.
Which side of the street
Some retail products and services are
most attractive to customers on their way to
work. Examples include coffee and pastry
shops.
Some chambers of commerce have very
detailed studies of traffic, existing business
data and other valuable information. Con-tact
the local chamber for additional infor-mation.
Demographics
What changes are taking place in that
area? Is the population age shifting? What
is the income level? Does the local popula-tion
fit your target market profile? The U.S.
Census Bureau provides information on
these and other related subjects. The tele-phone
number is 800-253-1882. The Web
site is: www.census.gov. In addition, the Ari-zona
Department of Commerce, Commu-nity
Development Division Web site, www
.azcommerce.com, provides community
and county profiles. Local chambers of
commerce and libraries also usually have
information on area demographics.
Type of site
Commercial locations include individual
or stand-alone buildings, neighborhood
strip centers with a few stores, power cen-ters
with a major tenant and several com-plementary
businesses, and regional malls,
usually with three or more major anchor
stores.
Nearby stores
Are neighboring stores compatible or
complementary to your business? Will they
help attract business to your establishment?
Parking
Does the site provide adequate parking for
your customers and employees? Will your
customers have to compete with employees
of the area businesses to find a place to
park? Is the parking lot easy to enter and
exit? What is its overall condition? Is it well
illuminated at night? Is adequate parking
provided for handicapped customers?
Condition of the building
Carefully check the condition of the build-ing
and calculate the modifications re-quired
to meet your needs. Do the building
and property meet current zoning and other
local requirements? Has the owner main-tained
the building and property or is the lo-cation
in need of repair? What do other ten-ants
say about the owner’s willingness to
make repairs and do preventive mainte-nance?
Total cost of the lease
Cost of the lease is calculated a number of
ways. Some items to consider include:
• Exterior building maintenance.
• Tenant improvements.
• Common area expenses.
• Insurance.
• Utility costs.
• Security services.
• Taxes.
• Flat lease rate and/or percentage of your
business revenue.
• Increase in lease based on changes in the
consumer price index.
Terms of the lease
Lease terms can be confusing to the busi-ness
owner. Many commercial brokers pro-vide
a glossary of terms commonly used in
leasing space to businesses. Other consider-ations
include dispute resolution, required
hours open for business, and whether future
expansion is possible at reasonable rates.
History of the site
Why is the potential location available?
How long has the site been vacant? What
caused the previous tenant to leave? If sev-eral
businesses have failed at that site, you
may wish to carefully consider your odds
for success.
Professional representative
You should obtain professional assistance
in negotiating a commercial lease. Leasing
agents or brokers fall into two categories —
those who represent building owners and
those who represent tenants. Lease negotia-tions
may directly affect the success or fail-ure
of your business. You should obtain the
professional assistance of your own broker,
attorney, accountant, insurance agent,
banker and architect.
While many of these items may not seem
important when you are beginning to look
for a site, they are extremely important for
the long-term success of your business.
The right location makes a difference
■ HOW TO
24B ■ Entrepreneur’s Edge THE BUSINESS JOURNAL phoenix.bizjournals.com NOVEMBER 21, 2003
Small businesses performing services
may need to be licensed, bonded
and/or insured. That is especially true
for commercial and residential construc-tion
contractors.
A bond or surety is a third-party obligation
promising to pay if a vendor does not fulfill
its valid obligations for work under a con-tract.
It is not an insurance policy, said
Brian Pugh, surety-underwriting manager
for CNA Surety in Phoenix.
“It’s a financial guarantee that a vendor
will honor a business contract,” he said. “In-surance
is a two-party contract where the
contractor buys a policy that pays for claims
or losses.”
With a surety, the bond guarantees the busi-ness
is going to complete the project. If the
business fails, the surety company guarantees
fulfillment of the business’ obligation, then
the vendor pays back the surety company. So
it’s more of a credit function, he said.
Although there are various types of bonds,
a few of the most common are:
• Taxpayer bond: Contractors that must
be licensed with the Registrar of Contrac-tors
or licensed as dealers of manufactured
housing (mobile homes) must post a bond
with the Department of Revenue before a
Transaction Privilege Tax license will be is-sued,
unless the contractor qualifies for an
exemption from the bonding requirement.
• Performance bond: Guarantees that a
business will perform work in accordance
with the terms of a contract.
• Bid bond: Guarantees that a business
will perform the work if they win a bid.
• Indemnity bond: Promises to reim-burse
loss incurred if the business fails to
perform, or if the business fails to pay other
vendors or subcontractors in the perfor-mance
of the contract.
• Payment bond: Promises a business will
pay all subcontractors and material providers
used in the performance of the contract.
According to Alan Felber, chief of licens-ing
for the Arizona Registrar of Contractors,
license bonds are required by statute in Ari-zona
for construction contractors to obtain
or renew a license.
The Registrar of Contractors promotes
quality construction by Arizona contractors
through a licensing and regulatory system
designed to protect the health, safety and
welfare of the public.
Bonds may be obtained from an insurance
agent or an insurance company authorized
by the Arizona Department of Insurance to
operate in Arizona and issue contractor’s li-cense
bonds.
Since bonds do not pay for property dam-age
or personal injury on the job, business
owners also need to consider health and life
insurance, as well as workers’ compensa-tion
coverage.
In Arizona, all businesses that have even one
part-time employee must, by law, carry work-ers’
compensation insurance, and it must be
in place before the first person is hired.
The Industrial Commission will close down
those operating without workers’ compensa-tion
insurance and charge them a fine, said
Chris Kamper, vice president of claim ser-vices
for the State Compensation Fund
(www.statefund.com). At present, the penalty
ranges from $1,000 to $10,000 depending
upon the number of prior violations.
“When a business doesn’t have insurance
and a worker gets hurt on the job, the com-pany
loses its exclusive remedy doctrine,”
Kamper said.
“The doctrine provides that if the employer
has workers’ comp coverage, then the injured
worker’s sole remedy for a workplace injury
is workers’ compensation benefits, which in-clude
medical benefits and lost wages.”
The State Compensation Fund is a program
operated on behalf of the state of Arizona.
Without it, the employer loses the exclu-sive-
remedy protection, and the injured
worker can elect to either file a workers’
comp claim, or sue the employer for tort
damages such as lost wages, medical bills
and pain and suffering in Superior Court.
“So, in addition to all the other coverages
necessary for operating a small business,
get your workers’ comp insurance in place,”
Kamper says. “It’s extremely important.”
Protect your business
Make sure you’re licensed, bonded and insured
NOVEMBER 21, 2003 THE BUSINESS JOURNAL phoenix.bizjournals.com Entrepreneur’s Edge ■ 25B
BY SCOTT CLARK
Special to The Business Journal If you own a business, you eventually
can expect an unannounced visit from
an OSHA inspector. These visits aren’t
social. These inspectors are charged with
inspecting your business for potential
health and safety violations, and they will
expect access to the entire facility.
OSHA stands for Occupational Safety and
Health Administration. It is organized within
the U.S. Department of Labor and is charged
with setting and enforcing workplace safety
and health standards.
OSHA inspectors conduct periodic, random
inspections of businesses. The agency also fo-cuses
on businesses where there have been se-rious
accidents or reports of imminent job
dangers, accidents or illnesses.
In fiscal year 2001, federal and state in-spectors
conducted about 92,000 inspec-tions,
found 220,000 workplace violations
and assessed more than $156 million in
penalties. Of this total, 82 percent were clas-sified
as “willful” or “serious” violations.
However, if you have a small business, have
had no previous violations, have not willfully
violated the regulations and demonstrate
good faith in correcting the deficiencies,
penalties may be reduced or eliminated.
OSHA has four primary strategies: 1. Lead-ership
— leading the dialogue on occupa-tional
safety and health; 2. Strong, fair and
effective enforcement; 3.
Outreach, education and
compliance assistance —
providing training and ed-ucation
materials; and 4.
Partnerships — currently
numbering more than 900.
If your business has 11 or
more employees, you are
required to keep records of
work-related injuries or ill-nesses.
However, work-places
in low-hazard in-dustries
such as retail, service, finance,
insurance and real estate are exempt from
these record-keeping requirements.
All employers must post the federal (or state)
OSHA poster to provide their employees with
information on their safety and health rights.
You may order a printed copy from OSHA
Publications by calling 800-321-OSHA, or you
can download and print a copy from the
OSHA Web site home page at www.osha.gov.
The OSHA Web site contains a wealth of
information on various health and safety
topics, so it is well worth a visit. In fact, if
you as an employer would like to secure
help from OSHA to fix hazards in your
workplace, you may wish to contact the
OSHA Consultation Program Office in your
state for free on-site assistance in identify-ing
and correcting hazards or setting up
safety and health programs.
You also can contact the OSHA Area Of-fice
nearest you to speak to the compliance
assistance specialist about training and ed-ucation
in job safety and health issues.
Another option is OSHA Advisors, interac-tive
software that walks you through spe-cific
OSHA standards for things such as as-bestos
or help identifying potential hazards
throughout your workplace.
All of this information is available on the
OSHA Web site, as well as additional infor-mation
on specific OSHA topics.
If you are a worker with a safety concern,
you can call the nearest OSHA Area Office
or you can file a complaint online through
the OSHA Workers’ Page.
If you own a business, it’s only a matter of
time before the OSHA inspector comes calling.
Scott Clark is a business consultant and
columnist based in Cedar Rapids, Iowa. He
can be reached at www.saclark.com.
Be prepared for a visit from OSHA
Scott
Clark
■
BY TOM R. REX
Special to The Business Journal The old Standard Industrial Classifica-tion
(SIC) has been replaced with the
new North American Industry Classi-fication
System (NAICS).
The SIC first was created in the 1930s and
periodically was revised over five decades.
NAICS represents a significant change in
the classification of industries. The first
data released using NAICS in 1999 was the
result of the 1997 Economic Census. The
phase-in of NAICS for other federal govern-ment
programs is nearly complete.
NAICS was created as a joint effort be-tween
Canada, Mexico and the United
States. Differences in production processes
largely act as the demarcation between in-dustries.
Special attention was given to
emerging industries, service industries in
general and industries engaged in the pro-duction
of advanced technologies. The
goods/services distinction is not explicitly
reflected in NAICS, but five of 20 sectors are
largely goods-producing while the other 15
are entirely services-producing.
Ten (one-digit) divisions comprised the
SIC. These were subdivided into two-digit
major groups, three-digit industry groups
and four-digit industries.
NAICS consists of 20 sectors progressively
subdivided into three-digit subsectors, four-digit
industry groups and five-digit indus-tries.
The definition of most five-digit in-dustries
is the same in the United States,
Mexico and Canada.
In some cases, a sixth digit is added to U.S.
industries. As implied by the greater number
of digits, NAICS provides more detail on a
larger number of economic activities. In the
United States, 1,170 industries are defined,
358 of them being new industries.
As NAICS has been phased in, discontinu-ities
in the historical series have occurred in
some cases. For example, nearly one-third
of the former four-digit SICs are not deriv-able
under NAICS.
The table on Page 26 compares the SIC di-visions
to the NAICS sectors. The SIC’s
transportation, communications and public
utilities (TCPU) division was split into three
NAICS sectors. Similarly, the SIC’s FIRE (fi-nance,
insurance and real estate) division
was divided into two NAICS sectors.
The largest SIC division — services — has
been split into seven sectors. The last
NAICS sector shown in the table does not
correspond to any SIC division.
For more: 800-756-2427 or www.census
.gov/naics. (See Page 26B for a related chart.)
Tom R. Rex is research manager at the Cen-ter
for Business Research at the L. William
Seidman Research Institute at Arizona State
University’s W.P. Carey School of Business.
He can be reached at 480-965-5476.
Industry classifications have changed
The OSHA Web site
contains a wealth
of information on various
health and safety topics.
26B ■ Entrepreneur’s Edge THE BUSINESS JOURNAL phoenix.bizjournals.com NOVEMBER 21, 2003
SIC Division NAICS Sector Differences from SIC to NAICS
Agriculture, Forestry
and Fishing
Agriculture, Forestry,
Fishing and Hunting
Logging was transferred to this NAICS sector from the SIC manufacturing division. Parts of the SIC Agriculture
Services major group were shifted to other NAICS sectors.
Mining Mining Very few changes were made.
Construction Construction The NAICS definition is nearly the same as in the SIC.
Manufacturing Manufacturing The SIC printing and publishing major group was moved to the NAICS information sector. Logging was shifted to the
agriculture sector. Numerous other minor additions and deletions were made.
Transportation,
Communication and
Public Utilities
(TCPU)
Transportation and
Warehousing
Except for parts of the SIC transportation services major group, which were shifted to other NAICS sectors, the
transportation portion of this SIC division closely corresponds to the NAICS sector.
Information The portion of the TCPU division relating to communications makes up part of this new NAICS sector. The
information sector groups industries that primarily create and disseminate a product subject to copyright. In addition
to communications, it consists of the SIC major groups of printing and publishing part of business services and
most of motion pictures.
Utilities The public utilities portion of TCPU is very similar to the NAICS sector
Wholesale Trade Wholesale Trade Few changes were made, but portions of the SIC division were assigned to the NAICS retail trade sector.
Retail Trade Retail Trade The SIC eating and drinking places major group was moved to the NAICS accommodation and food-services sector.
Finance, Insurance
and Real Estate
(FIRE)
Finance and Insurance The finance and insurance major groups from the SIC are very similar to the NAICS finance and insurance sector.
Real Estate and
Rental and Leasing
Various types of rental activities, such as rental of automobiles and consumer goods, were transferred from the SIC
services division to this NAICS sector. Real estate is defined nearly the same in NAICS as in the SIC.
Services Professional,
Scientific and
Technical Services
This new NAICS sector comprises establishments in which human capital is the major input. It consists of the SIC
major division of legal services, engineering, accounting, research and management services; parts of business
services and various other SIC industries.
Administrative and
Support, and Waste
Management and
Remediation Services
Routine support functions provided to other companies, such as employee-leasing services and janitorial services,
make up this new NAICS sector. It was formed from portions of many SIC major groups. The most significant were
business services, repair services, transportation services and public utilities.
Educational Services This NAICS sector closely corresponds to the SIC educations services major group.
Health Care and
Social Assistance
Nearly all of the SIC health services and social services major groups combine to form this NAICS sector.
Arts, Entertainment
and Recreation
Most of this NAICS sector comes from the SIC major groups of amusement and recreation services, museums, art
galleries and gardens.
Accommodation and
Food Services
The SIC major groups of eating and drinking places, and hotels and other lodging places form most of this NAICS
sector.
Other Services This NAICS sector consists of the combination of most of several SIC major groups, including personal services,
automotive services, miscellaneous repair services, membership organization and private households.
Public
Administration
Public Administration Few changes were made.
— Management of
Companies and
Enterprises
This new, small NAICS sector includes part of the SIC holding companies major group (part of FIRE). The rest of this
sector is made up of auxiliaries, which were spread throughout all SIC divisions. (Auxiliaries performed management
and support services for other establishments of the same enterprise.)
Source: Center for Business Research, L. William Seidman Research Institute, College of Business, Arizona State University from U.S. Office of Management and Budget
Industry classification system at a glance
NOVEMBER 21, 2003 THE BUSINESS JOURNAL phoenix.bizjournals.com Entrepreneur’s Edge ■ 27B
CHAPTER 3
Finance & Accounting
3•
BY SUSAN MERCER HINRICHS
Special to The Business Journal Armed with a solid busi-ness
plan and seed
money to get started,
entrepreneurs can begin
building a successful busi-ness.
But many business
owners eventually will face
the question of where to turn
for continued funding to
keep their businesses grow-ing
strong.
This is where a sound busi-ness
plan comes into play. A
business plan establishes the
framework for a new busi-ness.
Part of that plan should
include projected balance
sheets and income and cash-flow
statements.
It’s important that those
early-stage projections take
into account the likely need for
further capital infusion for con-tinued
business growth. But
where can funding be found?
At the earliest stage of a
startup, entrepreneurs can
use personal savings, invest-ments
and even revolving
lines of credit, such as credit
cards, to get their enterprise
up and running. Another be-ginning
step is to tap “friends,
family and fools,” said Terree
Wasley, the vice president of
entrepreneurial services at the Greater
Phoenix Chamber of Commerce. Wasley
said seed money for startups often is consid-ered
a risky form of business lending.
Subsequent financing steps can come in
the form of small, unsecured personal loans
if a person has an established relationship
with a financial institution. However, inter-est
rates on such loans can be quite high
and costly for the borrower.
Additional steps can come from the federal
Small Business Administration, Small Busi-ness
Development Centers, community
banks, community-based programs, venture
capitalists or regional banks.
The Neighborhood Economic Develop-ment
Corp. of Mesa represents one commu-nity-
based avenue where small-business
owners can seek seed money. NEDCO, a
nonprofit organization, provided loans to-taling
about $38,000 to four small busi-nesses
during its fiscal 2002-2003 year,
which ended June 30, said Executive Direc-tor
Karen LaFrance.
NEDCO funds are loaned at variable rates,
depending on the degree of risk associated
with a business and usually for terms of
four to five years, she said.
Without naming loan terms for specific
businesses, LaFrance said startups will bor-row
from NEDCO at rates above the prevail-ing
prime. More established business own-ers
may be able to negotiate loan terms for
interest-only payments in the early part of
the term that ramps up to include principal
payments further along in the loan schedule.
“We can assess, in talking, whether the busi-ness
is ready to borrow funds,” LaFrance said.
The conversations also reveal whether, on
a long-term basis, NEDCO will be working
with “profitable businesses that are creating
jobs,” she said.
Retired Bank of America
banker Harvey Prezant worked
with business loans in the
course of his 31-year career. He
said banks want to see solid fi-nancials
before lending to
small-business owners.
“A bank isn’t a venture-capital
organization; it rents money,”
Prezant said. “So they want their
money back at an interest rate.”
He, too, stresses the impor-tance
for small-business own-ers
to formulate a sound busi-ness
plan before approaching
prospective lenders.
Prezant volunteers with the
Service Corps of Retired Execu-tives,
or SCORE. Through
SCORE, retired business pro-fessionals
serve as counselors
to help small-business owners
develop a business plan and
grow their businesses.
Small businesses also con-front
tax obligations.
From sales and use taxes to
withholding, unemployment
and business-specific licenses,
small-business owners face a
range of expenses that occur in
the course of ongoing business.
Corporate income taxes also
can present a hurdle.
Jay Kaprosy, vice president of
public affairs at the Greater Phoenix Cham-ber
of Commerce, said Arizona has estab-lished
a corporate-property tax rate at 25
percent of assessed valuation.
Kaprosy lobbies state lawmakers to en-courage
them to set a rate that would be
“more equitable” with the 10 percent rate
assessed to residential properties. He says
the 25 percent commercial assessment rate
is the “number one issue impeding growth
of businesses that are here.”
But entrepreneurs should take heart. Re-sources
such as the Arizona Department of
Commerce, SCORE, Small Business Devel-opment
Centers, chambers of commerce
and the like exist to help small-business
owners navigate their way through the
maze of finance and accounting rules.
Armed with solid information and a good
accountant, the future is bright for startup
ventures.
28B ■ Entrepreneur’s Edge THE BUSINESS JOURNAL phoenix.bizjournals.com NOVEMBER 21, 2003
One key to a successful business
startup and expansion is your ability
to secure appropriate financing.
Raising capital is one of the most basic of
all business activities, but, as many new en-trepreneurs
quickly discover, it can be a
complex and frustrating process.
However, if you are informed and have
planned effectively, raising capital doesn’t
have to be a painful experience.
This information summary focuses on
ways a business can raise money and ex-plains
how to prepare a loan proposal.
Finding the money
There are several sources to consider
when looking for financing. It is important
to explore all of your options before
making a decision.
The primary source of capital for
most new businesses comes from
personal savings and other forms
of personal resources. While
credit cards often are used to fi-nance
business needs, there may be
better options available, even
for very small loans.
Many entrepreneurs look
to private sources such as
friends and family when
starting out. Often,
money is loaned interest
free or at a low rate,
which can be beneficial.
The most common
source of funding, banks
and credit unions, will provide a loan if you
can show a sound business proposal.
Venture-capital companies help expanding
companies grow in exchange for equity or
partial ownership. In Arizona, there are two
Small Business Investment Companies li-censed
by the SBA: Magnet Capital, 602-222-
4801 or www.magnetcapital.com; and Gray-hawk
Venture Partners, 602-956-8700 or
www.gvp.us. For a national listing of SBICs,
visit www.sba.gov/INV/opersbic.html.
Borrowing money
It often is said that small-business owners
have a difficult time borrowing money. This
is not necessarily true.
Banks make money by lending money.
However, the inexperience of many small-business
owners in financial matters
often prompts banks to deny loan
requests.
Requesting a loan when you
are not properly prepared
sends a signal to your lender.
That message is: high risk.
To be successful in obtain-ing
a loan, you must be pre-pared
and organized. You
must know exactly how
much money you need,
why you need it, and
how you will pay it
back. You must be able
to convince your lender
that you are a good
credit risk.
SBA loan maturities
Small Business Administration loan pro-grams
generally are intended to encourage
longer-term small-business financing, but
actual loan maturities are based on the abil-ity
to repay, the purpose of the loan proceeds
and the useful life of the assets financed.
However, maximum loan maturities have
been established: 25 years for real estate; up
to 10 years for equipment; and generally up
to seven years for working capital.
Short-term loans guaranteed by the SBA
also are available to help small businesses
meet their short-term and cyclical working-capital
needs.
Types of loans
Terms of loans may vary from lender to
lender, but there are two basic types of
loans: short-term and long-term.
Generally, short-term loans have a matu-rity
of up to a year. These include working-capital
loans, accounts-receivable loans and
lines of credit.
Long-term loans have maturities greater
than one year but usually fewer than seven
years. Real estate and equipment loans may
have maturities of up to 25 years.
Long-term loans are used for major busi-ness
expenses such as purchasing real es-tate
and facilities, construction, durable
equipment, furniture, vehicles, etc.
For more information, call the Small Busi-ness
Administration Answer Desk at 1-800-
U-ASK-SBA (800-827-5722) or visit www
.sba.gov.
Consider options in search for capital
Whether you are looking for a long-term
loan for renovations or
equipment, a working capital
loan, a revolving line of credit, or a mi-croloan,
the U.S. Small Business Adminis-tration
has a program to fit your needs.
Contact the SBA’s Arizona District Office at
602-745-7200 or www.sba.gov/az to find
out how they can help.
Most small businesses are eligible for SBA
programs, and nearly all banks participate
with the SBA. The loan package can be ap-proved
as quickly as one to seven days.
First you must apply for a business loan at
your local bank. If the bank turns you down
or if reasonable terms for financing are un-available
from the lender, ask the bank to
submit your loan application for reconsid-eration
using the guarantee of the SBA. If
your lender is in partnership with the SBA
and the loan is approved subject to an SBA
guarantee, a copy of the application and a
credit analysis are forwarded by the lender
to the nearest SBA office.
After SBA approval, the lending institution
can choose to close the loan and disburse the
funds. For a list of SBA Arizona lenders, visit
www.sba.gov/az and select “Financing.”
According to Jim Hammersley, director of
the Office of Loan Programs at the SBA of-fice
in Washington, D.C., “The single most
important part of the loan application is the
business plan, showing every detail about
your business, its markets and all about the
products or services it provides.”
To be successful in obtaining an SBA loan,
you must know exactly how much money
you need, why you need it, and how you will
pay it back. You must be prepared, orga-nized,
informed and ready to convince your
lender that you are a good credit risk.
Approval of your loan, in part, depends on
how well you present yourself, your busi-ness
and your financial needs to a lender.
When your loan request is reviewed, the
lender primarily is concerned about your abil-ity
to repay and may require a copy of your
business credit report from a reporting agency.
The lender will want to know how much
you have invested in your business; if you
are creditworthy; if you are experienced
enough to operate a successful business; if
you have prepared a loan proposal and
business plan; and if your business has suf-ficient
cash flow to make the payments.
For more information, see Page 30 of this
magazine or visit www.sba.gov/financing.
There’s an SBA loan to fit your business
NOVEMBER 21, 2003 THE BUSINESS JOURNAL phoenix.bcentral.com Entrepreneur’s Edge ■ 29B
Small-business loans are difficult to
obtain for startup ventures. Grants to
start a business do not exist.
Entrepreneurs requiring funding for all
new busi