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My Note –

If you have an invention, an innovation to something already in existence or a new idea, do not put a precisely descriptive term of it in any search engine. Those search terms are public and once entered belong to anyone that is collecting them, paying for them or reviewing them.

To do a search for an innovation for a para-glider, for instance. Let your mind consider all the patented elements that might be in it. Look those up as they exist now, like para-glider struts, para-glider strut fasteners or strut connectors. Using more general terms like this allows you to find the competitive elements in existence while not giving away what you are designing. The search engines are a great place to start along with specialty free patent search sites, like www.patents.com and freepatentsonline.

There are materials science guides from universities and magazines which list any number of articles about specialized materials being discovered, tested or tested for new uses. These sites have their own search engines on site, some of which are good and some that are frustrating. If I have trouble finding what I want, it is usually easier to go back to a large search engine and add the periodical or site name to the topic of my search.

The other critical thing is about searching the web to see whether other companies or specialties are already offering the product or service and how close they are to what you want to design and offer. Sometimes, a brilliant idea can’t compete with the basic solution already being offered, regardless of how much better it is. That is because – by proximity, a tangible, satisfactory solution is already being offered by industries and businesses that are already in place.

No matter how much “distinctive advantage” your solution offers, it is starting from a position of severe and crippling disadvantage. Not impossible, but very difficult and you will want to know that ahead of time in order to make an intelligent decision before investing time, effort and money into the process. However, that being said, some of that creativity and innovation can seed the positioning and entry of the invention into the marketplace and still make it work successfully. I only know that because we have all seen it done.

I had been watching a show on foxbusiness called, “Your Questions, Your Money.” They had a segment each week about starting your own business, answering questions emailed or called in. Once I started making notes from the segment, I realized they were talking about using the Limited Liability Company form as an easy, inexpensive startup choice and I knew nothing about it, so I looked it up. I see now why people sell drugs illegally. They find a buyer, get the product to them and take the money. It is free market capitalism in the most basic sense. And, there are 50 million details to doing anything else as a business in America.

It has been my hobby to study business, macro-economics, small business how-to, and things in those areas. Over the years, I’ve created many business plans, approached investors, invented things, designed promotional campaigns and materials, then essentially those I showed them to invested their money into doing them without me and made a bunch of money. Not to say that I did it all, because obviously they were positioned to do something with it that I was not. However, I have learned some things.

One thing I have learned is that when someone says, “Ideas are a dime a dozen,” – look out, because for whatever reason, they are up to no good. If you have ideas that are unusual, distinctive, problem-solving, innovative, they are valuable when placed correctly. That is a fact. Those who have thrown every dime and dollar at a problem to see it defy solution, are in a situation where they are in serious need of ideas that will resolve or alter the problem to something manageable and solvable. Or, that will completely take care of the problem such that it is no longer a problem. (And, they don’t care how they get those solutions, as long as it doesn’t cost them anything.)

So, knowing that, most of business is designed to be playing by those same rules across the board by building protections into the business entity itself, harnessing the idea pools, innovations, inventions, designs, patents, distinctive promotional advantages and specific business methods, and protecting them. This is done while making it possible to offer these things to the public, to their customers and to their government contracts. As a small business from outside the established spheres of influence, it is harder to consider these assets in this light, but as a designer, inventor, innovator, creative person outside of any business whatsoever, it is even harder to look at it that way, but it is necessary.

Whether looking into the idea on a search engine to determine if it is already patented or in use or being offered by businesses, or if sitting in a coffee shop talking about the idea in a public place – a sense of value must be given to the protection of those ideas and innovations if you ever want to make money from them. That moment in the coffee shop talking about it may feel good impressing others with your idea that will work, will innovate something, will solve things, will invent something, will promote some business somewhere. It does not allow you to harness that idea and make a business from it. The “feel-good” will be short-lived and exposes your opportunities to use those ideas to theft and person-to-person talk until someone finds it that will use it.

And, after a time, every one of these requirements for starting a business can be accomplished somehow. Some ideas are only presented to corporations successfully by an attorney in your behalf. Some are only presented to anyone successfully after a full patent protects it. But, there is a provisional patent that can be obtained for about $175 that covers a year with the responsibility for searching to see if it will be a clear patent, left to you. If it doesn’t pass muster, you won’t get the actual patent once it is fully filed. There are design patents which protect some of the unique and distinctive qualities of certain things that are the only really successful way to accomplish some protections for innovations, especially. And, some of the most successful protections have come for some products and inventions by literally keeping them a secret. There are protections afforded under Trade Secret Law which cannot be acquired any other way.

From what I’ve looked up – I found some really great info about starting a small business and about the limited liability company form. It is taxed like a sole proprietorship in some states, so I looked up some of the IRS info about it and provide some of that here, too.

And, one last thing – I felt overwhelmed about all the steps involved in the process of creating a legal entity, the steps involved in startup for a small business and all the government requirements – state, local, city, county and federal. What I do know is this, for certain. There have been people both stupider than me and smarter than me who have stumbled through this and found a way to accomplish it. There is a lot of help available, some inordinately time consuming and some effective and efficient. But, it is available – if I use it, if you use it, if we tell others where it is so they can use it. Then, maybe America’s business communities will thrive once again, and so will her people (including me – which would be nice.)

– cricketdiane, 05-08-09

***

Limited liability company


A limited liability company (abbreviated L.L.C. or LLC) in the law of the vast majority of United States jurisdictions is a legal form of business company that provides limited liability to its owners. Often incorrectly called a limited liability corporation (instead of company), it is a hybrid business entity having certain characteristics of both a corporation and a partnership. The primary characteristic an LLC shares with a corporation is limited liability, and the primary characteristic it shares with a partnership is the availability of pass-through income taxation. It is often more flexible than a corporation and it is well-suited for companies with a single owner.

Terminology

Member
LLC members are the owners of the LLC much as shareholders are the owners of a corporation or the partners of a partnership. Like shareholders, a member’s liability to repay the LLC’s obligations is limited to his or her capital contribution. Members may be natural persons, corporations, partnerships, or other LLCs.

Membership Interest
A member’s ownership interest in an LLC is often called a membership interest. Membership interests are often divided into standardized units which, in turn, are often called shares or units. Unless otherwise provided for in the operating agreement, a member’s right to receive distributions or exercise member rights over the LLC is proportionate to their membership interest. Membership interests and member rights are regulated by state law.

Manager
LLCs may be managed by their members in proportion to their membership interests. Many LLC operating agreements, however, provide for a manager or board of managers to oversee or run the day-to-day operations of the LLC. The managers are elected or appointed by members and may also be, if so provided in the operating agreement, removed by members. A member may also be a manager, often called the managing member.

Articles of Organization
All LLCs must file evidence of their existence with the secretary of state (or some governmental office) of the state where they choose to be organized. The Articles of Organization serve this purpose.

Operating Agreement
The Operating Agreement of an LLC is the document most important to its success because it determines, defines, and apportions the rights of the members and the managers if any. The operating agreement generally is not filed with the secretary of state (or other governmental office) .

Flexibility and default rules
The phrase unless otherwise provided for in the operating agreement (or its equivalent) is found throughout all existing LLC statutes and is responsible for the flexibility of the LLC.

In contrast, the phrase unless otherwise provided for in the bylaws is also found in all corporation law statutes but often refers only to relatively minor matters.


Management

LLCs may be either member-managed or manager-managed. A member-managed LLC may be governed by a single class of members (in which case it approximates a partnership) or multiple classes of members (in which case it approximates a limited partnership). Choosing manager management creates a two-tiered management structure that approximates corporate governance with the managers typically holding powers similar to corporate officers and directors. The LLC’s operating agreement (the LLC version of a partnership agreement or a corporation’s bylaws) determines how the LLC is managed. Corporations, S-corporations, Limited Liability Partnerships, Limited Partnerships, Limited Liability Limited Partnerships, and LLCs lie along a spectrum of flexibility with LLCs being the most flexible, and thus preferable, for many businesses.

Income taxation
For U.S. Federal income tax purposes, LLCs that are treated as partnerships use IRS Form 1065. LLCs are organized with a document called the articles of organization, or the rules of organization specified publicly by the state; additionally, it is common to have an operating agreement privately specified by the members. The operating agreement is a contract among the members of an LLC and the LLC governing the membership, management, operation and distribution of income of the company.

Under some circumstances, however, the members (the LLC version of shareholders or partners) may elect for the LLC to be taxed like a corporation (taxation of the entity’s income prior to any dividends or distributions to the members and then taxation of the dividends or distributions once received as income by the members).

Operating as an LLC form of partnership does not mean that appropriate US federal partnership tax forms are not necessary, or not complex. As a partnership, the entity’s income and deductions attributed to each member are reported on that owner’s tax return.

With federal income tax treatment as a partnership, LLCs can lose the tax advantage. The possible label disregarded entity for income tax purposes singles out the one-member owner of an LLC as actually earning income and deductions directly. It is the owner, then, who reports as a business proprietor, rather than as an LLC operating an active trade or business. An LLC passively investing in real estate and owned by a single member would have its income and deductions reported directly on the owner’s individual tax return on a Schedule E tax form. And an LLC owned by a corporation–in other words, an LLC with a single corporate member–would be treated as an incorporated branch and have its income and deductions reported on the corporate tax return, creating double taxation.

Advantages

* Check-the-box taxation. An LLC can elect to be taxed as a sole proprietor, partnership, S corporation or C corporation, providing much flexibility.

* Limited liability, meaning that the owners of the LLC, called members, are protected from some liability for acts and debts of the LLC, but are still responsible for any debts beyond the fiscal capacity of the entity.

* Much less administrative paperwork and record keeping than a corporation.

* Pass-through taxation (i.e., no double taxation), unless the LLC elects to be taxed as a C corporation.

* Using default tax classification, profits are taxed personally at the member level, not at the LLC level.

* LLCs in most states are treated as entities separate from their members, whereas in other jurisdictions case law has developed deciding LLCs are not considered to have separate legal standing from their members (see recent D.C. decisions).

* LLCs in some states can be set up with just one natural person involved.

* Membership interests of LLCs can be assigned, and the economic benefits of those interests can be separated and assigned, providing the assignee with the economic benefits of distributions of profits/losses (like a partnership), without transferring the title to the membership interest (see, for example, the Virginia and Delaware LLC Acts).

* Unless the LLC has chosen to be taxed as a corporation, income of the LLC generally retains its character, for instance as capital gains or as foreign sourced income, in the hands of the members

Disadvantages

* Although there is no statutory requirement for an operating agreement in most states, members who operate without one may run into problems.

* It may be more difficult to raise financial capital for an LLC as investors may be more comfortable investing funds in the better-understood corporate form with a view toward an eventual IPO. One possible solution may be to form a new corporation and merge into it, dissolving the LLC and converting into a corporation.

* Many states, including Alabama, California, Kentucky, New York, Pennsylvania, Tennessee, and Texas, levy a franchise tax or capital values tax on LLCs. (Beginning in 2007, Texas has replaced its franchise tax with a margin tax .) In essence, this franchise or business privilege tax is the fee the LLC pays the state for the benefit of limited liability. The franchise tax can be an amount based on revenue, an amount based on profits, or an amount based on the number of owners or the amount of capital employed in the state, or some combination of those factors, or simply a flat fee, as in Delaware. Effective in Texas for 2007 the franchise tax is replaced with the Texas Business Margin Tax. This is paid as: tax payable = revenues minus some expenses with an apportionment factor. In most states, however, the fee is nominal and only a handful charge a tax comparable to the tax imposed on corporations.
* Some creditors will require members of up-and-starting LLCs to personally guarantee the LLC’s loans, thus making the members personally liable for the debt of the LLC.

* The management structure of an LLC may be unfamiliar to many. Unlike corporations, they are not required to have a board of directors or officers.

* Taxing jurisdictions outside the US are likely to treat a US LLC as a corporation, regardless of its treatment for US tax purposes, for example if a US LLC does business outside the US or a resident of a foreign jurisdiction is a member of a US LLC.

* The LLC form of organization is relatively new, and as such, some states do not fully treat LLCs in the same manner as corporations for liability purposes, instead treating them more as a disregarded entity, meaning an individual operating a business as an LLC may in such a case be treated as operating it as a sole proprietorship, or a group operating as an LLC may be treated as a general partnership, which defeats the purpose of establishing an LLC in the first place, to have limited liability (a sole proprietor has unlimited liability for the business; in the case of a partnership, the partners have joint and several liability, meaning any and all of the partners can be held liable for the business’ debts no matter how small their investment or percentage of ownership is).

* The principals of LLCs use many different titles — e.g., member, manager, managing member, managing director, chief executive officer, president, and partner. As such, it can be difficult to determine who actually has the authority to enter into a contract on the LLC’s behalf.

Variations

* A Professional Limited Liability Company (PLLC or P.L.L.C.) is a limited liability company organized for the purpose of providing professional services. Usually, professions where the state requires a license to provide services, such as a doctor, chiropractor, lawyer, accountant, architect, or engineer, require the formation of a PLLC. Exact requirements of PLLCs vary from state to state. Typically, a PLLC’s members must all be professionals practicing the same profession. In addition, the limitation of personal liability of members does not extend to professional malpractice claims.

* A Series LLC is a special form of a Limited liability company that allows a single LLC to segregate its assets into separate series. For example, a series LLC that purchases separate pieces of real estate may put each in a separate series so if the lender forecloses on one piece of property, the others are not affected.

History by country

Companies with limited liability exist in business law worldwide, however the limited liability company is a specific legal structure defined by the laws of states of the United States and with quite distinct characteristics. Several other countries have similar structures.

United States
A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute.[1] The LLC is chiefly inspired by the GmbH, a type of business organization in Germany, and by limitadas, a type of business organization available in many Latin American countries.[2]

The first limited liability company act appeared stateside in Wyoming in 1977 as special interest legislation for an oil company.[3] In 1980, the Internal Revenue Service issued a private letter ruling to an LLC formed under Wyoming LLC Act indicating that the IRS would treat the LLC as a partnership for federal tax purposes.[4] However, later that year, the IRS proposed regulations that would deny partnership classification to any business entity in which no member bore personal responsibility for the entity’s liabilities. [5] In 1982, Florida adopted an LLC act modeled on Wyoming’s LLC Act.[6] Due to uncertainty over the tax treatment of LLCs, no other states introduced LLC legislation until after 1988.[7] In 1988, the IRS issued a revenue ruling stating that it would treat a Wyoming-style LLC as a partnership for tax purposes.[8] By 1996, nearly every state had enacted an LLC statute.[9] The National Conference of Commissioners on Uniform State Laws adopted the Uniform Limited Liability Company act in 1996 and revised it in 2006.

United Kingdom

The new form of Limited liability partnership (created in 2000) is similar to a U.S. LLC as it is tax neutral: member partners are taxed at the partner level, but the LLP itself pays no tax. It is treated as a body corporate for all other purposes including VAT. Otherwise all companies, including limited companies and US LLCs, are treated as corporate bodies subject to Corporation Tax if the profits of the entity belong to the entity and not to its members.

Belgium

In Belgium there are several different forms of corporations which provide limited liability. The BVBA (Besloten Vennootschap met Beperkte Aansprakelijkheid) in Dutch, or SPRL (Société Privée à Responsabilité Limitée) in French, is the smallest where the startup capital is required to be 18.500 EURO by law. It is mostly used for smaller business owners who want to protect themselves in case of bankruptcy.

[describes other countries, as well . . . ]

Names and abbreviations

Most states require that the company name contain one of the following terms, with some variation by state:

* Limited Company, L.C., or LC
* Limited Liability Company, L.L.C., or LLC
* Ltd. Co.

Limited liability companies may not use the following terms on their own:

* Company or Co. — reserved for corporations in most states (the use of the term company alone is not valid for a corporation in some states)

* Limited or Ltd. — reserved for corporations in Texas (except in Nevada, which allows the use of Limited or Ltd.)

See also

* GmbH, a European form of the LLC
* Limited liability
* LLP
* Series LLC
* Types of business entity
* Uniform Limited Liability Company Act

http://en.wikipedia.org/wiki/Limited_liability_company

***

http://sos.georgia.gov/
Georgia Secretary of State office

***
Washington, D.C. – Helping Small Business Start, Grow and Succeed
from January 2009 – SBA booklet

Legal Requirements

A home-based business is subject to many of the same laws and regulations affecting other businesses.

Some general areas include:

• Zoning regulations. If your business operates in violation of them, you could be fined or shut down.

• Product restrictions. Certain products cannot be produced in the home. Most states outlaw home production of fireworks, drugs, poisons, explosives, sanitary or medical products and toys. Some states also prohibit home-based businesses from making food, drink or clothing.

Be sure to consult an attorney and your local, city and state departments of labor to find out which laws and regulations will affect your business. Additionally, check on registration and accounting requirements needed to open your home-based business.

You may need a work certificate or license from the state. Your business name may need
to be registered with the state. A separate business telephone and bank account are good business practices.

Also remember, if you have employees you are responsible for withholding income and social-security taxes, and for complying with minimum wage and employee health and safety laws.

If you’re convinced that working from home is for you, it’s time to create your business plan. The SBA and its resource partners, such as SCORE, SBDCs and WBCs can help make the process easier.

REACHING UNDER-SERVED AUDIENCES

Women – Business Owners

Women entrepreneurs are changing the face of America’s economy. In the 1970’s, women owned less than five percent of the nation’s businesses. Today, they are at least equal owners of nearly half the nation’s businesses and are majority owners of about a third of all small businesses. SBA serves women entrepreneurs nationwide through its various programs and service, some of which are designed especially for women.

Many of these are overseen by SBA’s Office of Women’s Business Ownership. Women’s business ownership representatives in every SBA district office coordinate services for women, helping them access appropriate training, counseling, mentoring, federal contracting opportunities, financing, and more. They can also provide information on other local resources,
including SBA resource partners and lenders

http://www.sba.gov/idc/groups/public/documents/dc_washington_dc/washington-dc.pdf

***

The SBA’s Women Business Centers are a nationwide network of 114 community based centers that provide business training, counseling, mentoring and other assistance geared to women, particularly those who are socially and economically disadvantaged. To meet the needs of women entrepreneurs, the WBCs offer their services at convenient times and locations. Some offer child care during training and many provide assistance and materials in different languages, depending on the needs of the individual communities they serve. Classes are either
free or offered at a small fee, and scholarships are often available to those who need them.

A number of WBCs also provide courses and counseling via the Internet, mobile classrooms and satellite locations. Both SBA district offices and women’s business centers offer mentoring
roundtables. If there is not an existing roundtable nearby, women’s business centers may be able to help women entrepreneurs set them up.

To find the nearest women’s business ownership representative or women’s business center, and to learn more about SBA programs and services, visit the Office of Women’s Business Ownership at www.sba.gov/women.

Women’s Business Centers
(WBCs)

Since women are starting their own businesses at twice the rate of men, the SBA Washington Metropolitan Area District Office is committed to providing the necessary management and technical assistance to address the unique issues women face in starting or expanding business
ventures.

The SBA Washington Metropolitan Area District Office has a partnership with the Women’s Business Center (WBC) to provide low-cost and free training and counseling to women seeking to start or expand a business.

The Center’s programs include comprehensive long-term raining, hands-on workshops, and full-day seminars for women entrepreneurs at every stage of business development. For additional information and assistance, call or visit one of the Women’s Business Centers which are listed in this publication or access our website: www.onlinewbc.gov

• Provides excellent, affordable business training.

• Creates opportunities for clients to participate in business-to-business networking.

• Introduces entrepreneurs to business uses of technology, including the Internet and World Wide Web.

• Develops mentor partnerships to enhance the individual capabilities of entrepreneurs as their businesses grow

http://www.sba.gov/idc/groups/public/documents/dc_washington_dc/washington-dc.pdf

***

Limited Liability Company (LLC)

A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute.

LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.

Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single member” LLCs, those having only one owner.

A few types of businesses generally cannot be LLCs, such as banks and insurance companies. Check your state’s requirements and the federal tax regulations for further information. There are special rules for foreign LLCs.

For additional information on the kinds of tax returns to file, how to handle employment taxes and possible pitfalls, refer to Publication 3402, Tax Issues for Limited Liability Companies (PDF). http://www.irs.gov/pub/irs-pdf/p3402.pdf

References/Related Topics
* Forms and Publications By U.S. Mail
* Prior Year Forms, Instructions and Publications
* Other Small Business and Self-employed Forms and Publications.
* Other Useful Forms for Limited Liability Companies (LLC)
* Single Member Limited Liability Companies

Page Last Reviewed or Updated: October 14, 2008

http://www.irs.gov/businesses/small/article/0,,id=98277,00.html

***
http://www.irs.gov/pub/irs-pdf/p3402.pdf

What Kind of Tax Return Do I File?


1. Single member LLCs.


Generally, when an LLC has only one member, the fact that it is an LLC is ignored or “disregarded” for the purpose of filing a federal tax return.1

Remember, this is only a mechanism for tax purposes. It doesn’t change the fact that
the business is legally a Limited Liability Company.

If the only member of the LLC is an individual, the LLC income and expenses are reported on Form 1040, Schedule C, E, or F.

If the only member of the LLC is a corporation, the LLC income and expenses are reported on the corporation’s return, usually Form 1120 or Form 1120S.

If you prefer to file as a corporation instead of as a “disregarded entity” Form 8832 must be submitted. Otherwise, you don’t need to file Form 8832.

Single-member LLCs may not file a partnership return.

2. Multiple Member LLCs

Most LLCs with more than one member file a partnership return, Form 1065. If you would rather file as a corporation, Form 8832 must be submitted.1

You don’t need to file a Form 8832 if you want to file as a partnership.

How do I handle Employment Taxes?

Employment tax requirements apply to LLCs in much the same way as other types of businesses.

Information Reporting

Employees of all LLCs are subject to withholding taxes. Forms W-2 and Forms 1099 must be filed when required.

As a member, your liability for LLC debts are limited by state law. However, you may be
held personally liable in situations involving unpaid employee withholdings if you are
found to be the person responsible for making the payments.2

Self-Employment Taxes

1. LLCs filing Schedule C or F

Members are subject to self-employment taxes on earnings.

2. LLCs filing Partnership Returns

Generally, members pay self-employment tax on their share of partnership earnings.

Employer Identification Numbers (EINs)

General information on EINs is provided in Publication 1635.

Are there any Pitfalls?
There are two common situations where unintentional errors may occur:

1. If you convert an existing business, such as a corporation, into an LLC there may be tax implications, such as:

The conversion may result in a taxable gain;

Employment tax wage bases may be affected.

2. Special rules may apply when your LLC has an operating loss:

The amount of loss you can deduct may be limited because of your limited liability
for LLC debts.3

Passive Activity Loss limitation may restrict the amount of loss you can deduct.4

If either of these situations applies to you, professional advice may be needed.

Here are some places where you can find out more about federal tax issues for Limited Liability Companies:

What If I Need More Help?

Tax Assistance by telephone:
1-800-829-1040

Order forms by telephone:
1-800-829-3676

IRS on the Internet:
http://www.irs.gov.

Publication 15
(Employer’s Tax Guide)

Publication 334
(Tax Guide for Small Business)
Publication 541
(Partnerships)

Publication 542
(Corporations)

Publication 1635
(Understanding Your EIN)

Form 8832
(Entity Classification Election)

1 Treasury Regulations Section 301.7701-1,-2,-3
2 Internal Revenue Code Section 6671 and 6672
3 Internal Revenue Code Section 465
4 Internal Revenue Code Section 469

http://www.irs.gov/pub/irs-pdf/p3402.pdf

***
The nearest SCORE chapter can be located at: www.score.org.
For business plan help at the SCORE Web site, click on “Business Tools” from the lefthand menu, then click on “Template Gallery.”

You can find the nearest VBOC at:
www.sba.gov/vets.

To find WBCs, click on: www.sba.gov/services/ and choose “Women’s Business Centers” from
the “Counseling and Assistance” heading at the bottom.

You can also find business-plan help on the SBA’s Web site at:
http://www.sba.gov/smallbusinessplanner/
then choose “Writing a Business Plan” from the “Plan Your Business” menu along the bottom.)

http://www.sba.gov/idc/groups/public/documents/dc_washington_dc/washington-dc.pdf

***

U.S. EXPORT ASSISTANCE CENTER (USEAC)

U.S. Export Assistance Centers, which consist of SBA staff and the U.S. Department of Commerce in a single location, provide trade promotion and export-finance assistance for small businesses. The USEACs also work closely with other federal, state and local international trade organizations. To find the USEAC nearest to you, go to:

http://www.sba.gov/aboutsba/sbaprograms/internationaltrade/useac/index.html

**

It may be inconceivable to you that your home-based consulting service or hand-knit sweater business would have to comply with any of the numerous local, state, and federal regulations, but in all likelihood it will. Avoid the temptation to ignore regulatory details.Doing so may avert
some red tape in the short term, but could be an obstacle as your business grows. Taking the time to research the applicable regulations is as important as knowing your market. Below is a checklist of the most common requirements that affect small businesses, but it is by no means exhaustive.

Bear in mind that regulations vary by industry. If you’re in the food service business, for example, you will have to deal with the health department. If you use chemical solvents, you will have environmental compliances to meet.

Carefully investigate the regulations that affect your industry. Being out of compliance could leave you unprotected legally, lead toexpensive penalties and jeopardize your business.

*&*

BUSINESS.GOV
Business.gov is the official business link to the U.S. government providing a one-stop shop for federal resources from the federal government agencies that regulate or serve businesses.

Business.gov’s new “Permit Me” feature provides a single source for obtaining federal and state permits and professional licenses for businesses. While most businesses in the United States are required to obtain a permit, professional license, or identification number to operate, finding the right license can be a major challenge for potential business owners.

“Feature Topics” focuses on common business concerns. It provides context to the compliance information provided on the site and helps business owners understand in plain language the regulatory requirements their businesses face. Additional topics will be added on a regular basis in response to the most frequent searches on the site.
The Content Partners Program formalizes relationships with government agencies, trade associations and professional organizations to develop compliance assistance tools and resources for small- and medium-sized businesses. Partner organizations provide domain specific compliance information featured on the site’s FeatureTopics and Compliance Guides pages.

Business.gov is managed by the SBA in partnership with 21 other federal agencies.

You’re just a computer click away from help 24-hours a day at:
www.business.gov

***

BUSINESS ORGANIZATION

There are many forms of legal structure you may choose for your business. The most common structures are Sole Proprietorships, General and Limited Partnerships, C and S Corporations and Limited Liability Companies. Each legal structure offers organizational options which are appropriate for different personal situations and which affect tax and liability issues. We suggest you research each legal structure thoroughly and consult a tax accountant and/or attorney prior to making your decision.

***
CHOOSING YOUR BUSINESS STRUCTURE

You may operate your business under one of many organizational structures. The most common organizational structures are sole proprietorships, general and limited partnerships, “C” and “S” corporations and limited liability companies.

Each structure offers unique tax and liability benefits. If you’re uncertain which format of business is right for you, contact your local SBA office, SBDC, SCORE or WBC for assistance.

Sole Proprietorship

One person operating a business as an individual is a sole proprietorship. It’s the most common form of business organization. Profits are taxed as income to the owner personally. The personal tax rate is usually lower than the corporate tax rates. The owner has complete control of the business, but faces unlimited liability for its debts. There is very little government regulation or reporting.

General Partnership

A partnership exists when two or more persons join together in the operation and management of a business. Partnerships are subject to relatively little regulation and are fairly easy to establish. A formal partnership is recommended to address potential conflicts such as, who will be responsible for performing each task; what, if any, consultation is needed between partners before major decisions, what happens when a partner dies, and so on. Under a general partnership each partner is liable for all debts of the business. Profits are taxed as income to the partners based on their ownership percentage.

Limited Partnership

Like a general partnership, a limited partnership is established by an agreement between two or more individuals. However, there are two types of partners.

• A general partner has greater control in some aspects of the partnership. For example, only a general partner can decide to dissolve the partnership. General partners have no limits on the dividends they can receive from profit so they incur unlimited liability.

• Limited partners can only receive a share of profits based on the proportional amount on their investment, and the liability is similarly limited in proportion to their investment.

“C” Corporation

A “C” corporation is a legal entity created under State law by the filing of articles of incorporation. A corporation is a separate entity having its own rights, privileges and liabilities, apart from those of the individual(s) forming the corporation. It’s the most complex form of business organization and is comprised of shareholders, directors and officers. Since the corporation is an entity in its own right it can own assets, borrow money and perform business functions without directly involving the owners.

Corporations are subject to more government regulation and it offers the owners the advantage of limited liability, but not total protection from lawsuits.

Subchapter “S” Corporation

Subchapter “S” references a special part of the Internal Revenue Code that permits a corporation to be taxed as a partnership or sole proprietorship,
with profits taxed at the individual, rather than the corporate rate. A business must meet certain requirements for Subchapter “S” status. Contact the IRS for more information.

LLCs and LLPs

The limited liability company is a relatively new business form. It combines selected corporate and partnership characteristics while still maintaining status as a legal entity distinct from its owners. As a separate entity it can acquire assets, incur liabilities and conduct business. It limits liability for the owners. LLC owners risk only their investment, not personal assets. The limited liability partnership is similar to the LLC, but it is for professional organizations.

***

BUSINESS LICENSES

There are many types of licenses, both state and local as well as professional. Depending on what you do and where you plan to operate, your business may be required to have various state and/or municipal licenses, certificates or permits.

Licenses are typically administered by a variety of state and departments. Consult your state or local government for assistance.

FICTITIOUS BUSINESS NAME

Registering your business name, after doing a search to make sure that it is not already in use, protects you from others who might be using the same name. For more information, contact the county clerk’s office in the county where your business is based.

BUSINESS INSURANCE

Like home insurance, business insurance protects the contents of your business against fire, theft and other losses. Contact your insurance agent or broker. It is prudent for any business to purchase a number of basic types of insurance. Some types of coverage are required by law, other simply make good business sense. The types of insurance listed below are among the most commonly used and are merely a starting point for evaluating the needs of your business.

**
Liability Insurance –

Businesses may incur various forms of liability in conducting their normal activities.
One of the most common types is product liability, which may be incurred when a customer suffers harm from using the business product. There are many other types of liability, which are frequently related to specific industries.

Liability law is constantly changing. An analysis of your liability insurance needs by a competent professional is vital in determining an adequate and appropriate level of protection for your business.

Property –


There are many different types of property insurance and levels of coverage available. It is important to determine the property you need to insure for the continuation of your business and the level of insurance you need to replace or rebuild. You must also understand the terms of the insurance, including any limitations or waivers of coverage.

Business Interruption –

While property insurance may pay enough to replace damaged or destroyed equipment or buildings, how will you pay costs such as taxes, utilities and other continuing expenses during the period between when the damage occurs and when the property is replaced?

Business Interruption (or business income ) insurance can provide sufficient funds to pay your fixed expenses during a period of time when your business is not operational.

Key Man –

If you (and/or any other individual) are so critical to the operation of your business that it cannot continue in the event of your illness or death, you should consider key man insurance. This type of policy is frequently required by banks or government loan programs. It also can be used to provide continuity in operations during a period of ownership transition caused by the death or incapacitation of an owner or other key employee.

Automobile –


It is obvious that a vehicle owned by your business should be insured for both liability and replacement purposes. What is less obvious is that you may need special insurance (called non-owned automobile coverage ) if you use your personal vehicle on company business. This policy covers the business’ liability for any damage which may result for such usage.

Officer and Director –

Under most state laws, officers and directors of a corporation may become personally liable for their actions on behalf of the company. This type of policy covers this liability.

Home Office –


If you are establishing an office in your home, it is a good idea to contact your homeowners’ insurance company to update your policy to include coverage for office equipment. This coverage is not automatically included in a standard homeowner’s policy.

***

EMPLOYER IDENTIFICATION NUMBER

An EIN, Form SS-4, also known as a federal tax identification number, is used to identify a business entity. Generally all businesses need an EIN. You may apply for an EIN in a variety of ways, including online, phone, fax. Taxpayers can call a toll-free number, 800-829-4933, to get an EIN. Internal Revenue Service customer service representatives are available to answer calls –
Monday through Friday, from 7:30 a.m. to 5:30 p.m. customer’s local time.

Taxpayers can fax EIN requests seven days a week/24 hours a day by dialing the fax number to one of three IRS Campus’ that accept applications. The instructions on the newly revised Form SS-4, Application for Employer ID Number, indicate which IRS Campus is assigned to their specific state.

Detailed information and an electronic SS-4 can be found at the IRS Small Business/Self Employed Community Web site at:
http://www.irs.gov/businesses/small/index.html

click on New Businesses. Faxed applications are processed in four days. The IRS Campus’ accepting faxed applications are:

Holtsville, NY 631-447-8960
Cincinnati, OH 859-669-5760
Philadelphia, PA 215-516-3990

IRS accepts third party Form SS-4’s. Tax practitioners complete the new“Third Party Designee” section on their client’s behalf by obtaining the client’s signature on Form SS-4.

IRS no longer requires that practitioners file a Form 2848, Power of Attorney or Form 8821,Tax Information Authorization to get an EIN for their clients.

***


FEDERAL SELF-EMPLOYMENT TAX


Everyone must pay Social Security and Medicare coverage. If you are self-employed, your contributions are made through the self-employment tax.

The IRS has publications, counselors and workshops available to help you sort it out. For more information, contact the IRS at 800-829-1040.

***

BUSINESS TAX INFORMATION

If you plan to hire employees you are also required to obtain a Federal Employee Identification Number from the IRS. To obtain the registration form and reference documents, contact the IRS at 800-829-1040 or visit their website:
http://www.irs.gov/businesses/small/index.html
for complete information.

***


SALES TAX EXEMPTION CERTIFICATE

If you plan to sell products, you will need a Sales Tax Exemption Certificate. It allows you to purchase inventory, or materials, which will become part of the product you sell, from suppliers without paying taxes. It requires you to charge sales tax to your customers, which you are responsible for remitting to the state. You will have to pay penalties if it is found that you should have been taxing your products and now owe back taxes to the state. For information on sales tax issues, visit your state’sWeb page.

http://www.sba.gov/idc/groups/public/documents/dc_washington_dc/washington-dc.pdf

***

My Note –

when you send off the sales tax forms quarterly or however often, make sure to keep a copy of the original that was sent and the date it was put in the mail or there is no way to prove you sent it when they lose it.

***

FEDERAL INCOME TAX

Like the state income tax, the method of paying federal income taxes depends upon your legal form of business. The following procedures must be considered:

Sole Proprietorship:

You must file IRS Federal Form Schedule C along with your personal Federal Income Tax return (Form 1040) and any other applicable forms pertaining to gains or losses in your business activity.

Partnership:

You must file a Federal Partnership return (Form 1065). This is merely informational to show gross and net earnings of profit and loss. Also, each partner must report his share of partnership earnings on his individual Form 1040 based on the information from the K-1 filed with the Form 1065.

Corporation:

You must file a Federal Corporation Income Tax (Form 1120). You will also be required to report our earning from the corporation including salary and other income such as dividends on your personal federal income tax return (Form 1040).

***

FEDERAL PAYROLL TAX

Federal Withholding Tax:


Any business employing a person must register with the IRS and acquire an EIN and pay federal withholding tax at least quarterly. File Form SS-4 with IRS to obtain number and required tax forms. Call 800-829-3676 or 800-829-1040 if you have questions.

SOCIAL SECURITY CARDS

All employees must have a social security card. It must be signed by its owner, and you should always ask to see and personally record the social security number. Failure to do so may cause your employee to lose benefits and considerable trouble for yourself in back tracking to uncover the error.
Each pay day, your employees must receive a statement from you telling them what deductions were made and how many dollars were taken out for each legal purpose. This can be on the check as a detachable portion or in the form of an envelope with the items printed and spaces for dollar deductions to be filled in. No deductions may be made by any employer for any reason unless the employee has previously signed a paper authorizing the deduction. There are no exceptions.

EMPLOYEE CONSIDERATIONS

Taxes

If you have any employees, including officers of a corporation but not the sole proprietor or partners, you must make periodic payments, and/or file quarterly reports about payroll taxes and other mandatory deductions. You may contact these government agencies for information,
assistance and forms.

Social Security Administration
800-772-1213
http://www.ssa.gov

Federal Withholding
U.S. Internal Revenue Service

800-829-1040
http://www.irs.gov

Social Security’s Business Services Online

The Social Security Administration provides free electronic services online at
www.socialsecurity.gov/employer/

Once registered for Business Services Online, business owners or their authorized representatives can:

file W-2s online, and verify Social Security Numbers through the Social
Security Number Verification Service (SSNVS),which can be used for all employees prior to preparing and submitting Forms W-2.

Employee Insurance

If you hire employees you may be required to provide unemployment or workers’ compensation insurance.

WORKPLACE PROGRAM
Americans with Disabilities (ADA):

For assistance or clarification with the
ADA, call 800-669-3362 or visit them at:
http://www.ada.gov

My note –

The ADA was supposed to help people with disabilities but most of the services are offered to businesses so that they can have money, resources and help for making their business satisfy the ADA requirements. It does have information at this site about what those requirements are and there are places to call with questions.

A good portion of the money that has been made available to help people with disabilities has been diverted here in order to make grants to businesses for adjusting to legislated efforts that are supposed to give user-friendly access to those businesses for people with disabilities. Where these requirements are not met, the Justice Department of the United States is responsible for investigating and requiring those changes to be made. They can pursue charges, fines and other penalties where the requirements of the ADA are not met, but seldom consider them to be top priority.

– cricketdiane

[the information above my note – came from this online document -]

http://www.sba.gov/idc/groups/public/documents/dc_washington_dc/washington-dc.pdf

***
USCIS

The Federal Immigration Reform and Control Act of 1986 requires employers to verify employment eligibility of new employees. The law obligates an employer to process Employment Eligibility Verification Form I-9. The U.S. Citizenship and Immigration Services Office of Business Liaison offers a selection of information bulletins and live assistance through the Employer Hotline.

For forms call 800-870- 3676,
For the Employer Hotline call 800-357-2099

SAFETY & HEALTH REGULATIONS

All businesses with employees are required to comply with state and federal regulations regarding the protection of employees. The Occupational Safety and Health Administration outlines specific health and safety standards adopted by the U.S. Department of Labor.

Use of hazardous substances in businesses is highly regulated and there are heavy fines for non-compliance.

Federal Occupational Safety
& Health Administration (OSHA)
Department of Labor
820 First St. N.E.
Washington, DC 20020
202-693-5000

BUILDING CODES, PERMITS AND ZONING

It is important to consider zoning regulations when choosing a site for your business. You may not be permitted to conduct business out of your home or engage in industrial activity in a retail district.

Contact the business license office in the city or town where the business is located.

***

BAR CODING


GS1 US™ (not a government agency) provides a unique company number to create bar codes (including UPCs) for your products. Many stores require bar coding on packaged products.

Many industrial and manufacturing companies also use bar coding to identify items they receive and ship. GS1 US, formerly the Uniform Code Council, Inc., provides tools and assistance to help you meet these requirements.

For information, visit
www.gs1us.org/pc

For additional questions, contact:

GS1 US
7887 Washington Village Dr., Ste. 300
Dayton, OH 45459-8605
937-435-3870

***

Federal Registration of Trademarks and Copyrights

Trademarks or service markets are words, phrases, symbols, designs or combinations that identify and distinguish the source of goods. Trademarks may be registered at both
the state and federal level. To register a federal trademark, contact:

Patent and Trademark Office:
P.O. Box 1450
Alexandria, VA 22313-1450
800-786-9199
http://www.uspto.gov/

Trademark Information Hotline
703-308-9000

**

State Registration of a Trademark

Trademarks and service marks may be registered in a state.

Caution: Federally registered trademarks may conflict with and supersede state registered business and product names.

***

Patents


A patent is the grant of a property right to the inventor by the U.S. Patent and Trademark Office. It provides the owner with the right to exclude others from making, using, offering for sale or selling the patented item in the United States.

Additional information is provided in the publications, General Information Concerning Patents and other publications distributed through the U.S. Patent and Trademark Office. For more information, contact the:

U.S. Patent and Trademark Office
800-786-9199
http://www.uspto.gov

**

Copyrights


Copyrights protect original works of authorship including literary, dramatic, musical and artistic, and certain other intellectual works. Copyright does not protect facts, ideas and systems, although it may protect the way these things are expressed. For general information contact:

U.S. Copyright Office
U.S. Library of Congress
James Madison Memorial Building
Washington, DC 20559
202-707-9100 – Order Line
202-707-3000 – Information Line
www.copyright.gov

http://www.sba.gov/idc/groups/public/documents/dc_washington_dc/washington-dc.pdf

***
***

FINANCING

Many entrepreneurs need financial resources to start or expand a small business themselves and must combine what they have with other sources of financing.

These sources can include family and friends, venture-capital financing, and business loans. This section of the Small Business Resource guide discusses SBA’s primary business loan and equity financing programs.

These are: the 7(a) Loan Program, the Certified Development Company or 504 Loan Program, the MicroLoan Program and the Small Business Investment Company Program. The distinguishing features for these programs are the total dollar amount that can be borrowed, the type of lenders who can provide these loans, the uses for the loan proceeds, and the terms placed on the borrower.

Note: The SBA does not offer grants to individual business owners to start or grow a business. (but a lot of other govt. agencies do, including the Commerce Department, Departments of Energy, of Transportation and about every other one I could find, actually.)

The only grants the SBA is authorized to provide are for entities to provide businesses management technical assistance to other businesses.

When you seek a business loan familiarize yourself with the SBA’s business loan programs to see if they may be a viable option.

The three principal players in each of these programs are — the small business, the lender and the SBA.

SBA guarantees a portion of the loan.

The business should have its business plan prepared before it applies for a loan.

**This plan should explain what resources will be needed to accomplish the desired business purpose including the cost of everything, the applicants’ contribution, use of loan proceeds, collateral, and most important, an explanation of how the business will be able to repay the loan in a timely manner.**

The lender will analyze the application to see if it meets the lender’s criteria as well as SBA requirements.

SBA will look to the lender to do much, if not all, of the analysis before it provides its guaranty on the lender’s loan or provides the microlenders with funds to re-lend to the business.

The SBA’s business loan programs provide a key source of financing for viable small businesses that have real potential, but cannot qualify for loans from traditional sources.

***

My Note –

there have been some recent changes made to the amount of collateral required for many of the SBA loan programs from a previous requirement of 50% + collateral to current requirements around 10%. Apparently, there are several other changes as well and it would bear a good look into both what those are and whether they are actually being applied across various regions in SBA offices. Policy changes do not always mean immediate application in states where they basically don’t agree with those changes for political reasons and idealogical differences of opinion, regardless of it being a federally based agency. It also does not discuss it here, but there are incentives, loans, grants and disbursements in the regional development commissions locally, counties and states among their various agencies, urban renewal commissions and agencies, rural revitalization grants, and others. Cities and communities also have grants, loans programs and business incentives, including property purchase or lease incentives, and enterprise zones’ incentive packages.

Some industry associations have a great deal of help available also including access to loans, information about grants, special leases, inside track info and participation incentives, demographics, costs analysis, marketing help and other trade information. They often have scholarships available, training of all different types, specialized information and loan opportunities particular to them, microlending, sponsorship and promotional outlets to help businesses promote themselves and networking possibilities for their industry and markets.

– cricketdiane

***

7(A) LOAN PROGRAM

The 7(a) Loan Program is the SBA’s primary business loan program. It is the agency’s most used non-disaster financial assistance program because of its flexibility in loan structure, variety of loan proceeds uses, and availability. This program has broad eligibility requirements and credit criteria to accommodate a wide range of financing needs.

The business loans that SBA guarantees do not come from the agency, but rather from banks and other lenders. The loans are funded by these organizations and they make the decisions to approve or not approve the requests.

The SBA guaranty reduces the lender’s risk of borrower non-payment. If the borrower defaults, the lender can request SBA to pay the lender that percentage of the outstanding balance guaranteed by SBA. This allows the lender to recover a portion from SBA of what it lent if the borrower can’t make the payments. The borrower is still obligated for the full amount.

To qualify for an SBA guaranty, a small business must meet the lender’s criteria and the 7(a) requirements. In addition the lender must certify that it would not provide this loan under the proposed terms and conditions unless it can obtain an SBA guaranty. If the SBA is going to provide a lender with a guaranty, the lender must be eligible creditworthy and the loan structured under conditions acceptable to SBA.

PERCENTAGE OF
GUARANTIES

The SBA only guarantees a portion of any particular loan so each loan will also have an unguaranteed portion giving the lender a certain amount of exposure and risk. The percentage of guaranty depends on either the dollar amount or the method by which the lender obtains its guaranty. For 7(a) loans of $150,000 or less the SBA will guaranty as much as 85 percent and for loans over $150,000 the SBA can provide a guaranty of up to 75 percent. The maximum loan amount is $2 million and the maximum guaranty amount to any one business is $1.5 million.

The one exception is when a business needs both working capital and fixed assets to promote exporting in which case the SBA can provide a maximum guaranty of $1.75 million.

Loans made under the SBAExpress program, which is discussed subsequently, have a 50 percent guaranty.

INTEREST RATES AND FEES


Both fixed and variable interest rates are available. Rates are set based on the lowest prime rate* and maturity. For loans with maturities of less than seven years the rate will be fixed or start at prime plus no more than 2.25 percent. For loans with maturities of seven years or more the rate can be as high as prime plus 2.75 percent. For loans under $50,000 and for loans processed through SBAExpress, rates are permitted to be higher.

The fee is based on the size of the guaranty percentage associated with the SBA loan whether the loan is short-term (12 months or less) or long-term (over 12 months).You can finance the fee.

On any loan with a maturity of one year or less, the fee is just 0.25 percent of the guaranteed portion of the loan. On loans with maturities of more than one year, the guaranty fee is 2 percent of the SBA guaranteed portion on loans up to $150,000; 3 percent on loans over $150,000 but not more than $700,000; and 3.5 percent on loans over $700,000. There is also an additional fee of 0.25 percent on any guaranteed portion over $1 million.

* All references to the prime rate refer to the lowest prime rate as published in the Wall Street Journal on the day the application is received by the SBA.

**

7(A) LOAN MATURITIES

SBA loan programs are generally intended to encourage longer term small business financing, but actual loan maturities are based on the ability 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 (depending on the useful life of the equipment); and

generally up to 10 years for working capital.

Short-term loans and revolving lines of credit are also available through the SBA to help small businesses meet their short-term and cyclical working capital needs.

**

STRUCTURE

Most loans are repaid with monthly payments of principal and interest. For fixed rate loans the payments stay the same whereas for variable rate loans the lender can re-establish the payment amount when the interest rates change or at other intervals as negotiated with the borrower.

Applicants can request that the lender establish the loan with interest-only payments during the startup and expansion phases (when eligible) to allow the business time to generate the income to start repaying the loan. There are no balloon payments or call provisions allowed on any 7(a) loan. The lender may not charge a prepayment penalty if the loan is paid off before maturity, but the SBA will charge the borrower a prepayment fee if the loan has a maturity of 15 or more years and is pre-paid during the first three years.

COLLATERAL

The SBA expects every loan to be fully secured, however, in most cases, the SBA will not decline a request to guaranty a loan if the only unfavorable factor is insufficient collateral, if all available collateral is offered. (my note – don’t believe that.)

What these two policies mean is that every SBA loan is to be secured by all available assets (both business and personal) until the recovery value equals the loan amount or until all assets have been pledged to the extent that they are reasonably available, to adequately secure the loan. Personal guaranties are required from all the principal owners of the business. Liens on personal assets of the principals may be required.

ELIGIBILITY

7(a) loan eligibility is based on four different factors. The first is size, as all loan recipients must be classified as “small” by SBA. The basic size standards are outlined below. A more in-depth listing of standards can be found at:
http://www.sba.gov/services/contractingopportunities/index.html

then select “Size Standards” from the “Contracting Opportunities” menu in the right hand column.

SBA Size Standards:

• Manufacturing from 500 to 1,500 employees

• Wholesaling — 100 employees

• Services from $4.5 million to $32.5 million in average annual receipts

• Retailing from $6.5 million to $26.5 million

• General construction from $6.5 million to $32 million
• Agriculture from $750,000 to $16.5 million in average annual receipts

***

Nature of Business

The second eligibility factor is based on the nature of the business and the process by which it generates income or the customers it serves. The SBA has general prohibitions against providing financial assistance to businesses involved in such activities as lending, speculating, passive investment, pyramid sales, loan packaging, presenting live performances of a prurient sexual nature, businesses involved in gambling and any illegal activity.

The SBA will also not support non-profit businesses, private clubs that limit membership on a basis other than capacity, businesses that promote a religion, businesses owned by individuals incarcerated or on probation or parole, municipalities, and situations where the business or its owners previously failed to repay a federal loan or federally assisted financing.

Use of Proceeds

The third eligibility factor is what the loan proceeds can and cannot be used for. 7(a) proceeds can be used to: purchase machinery, equipment, fixtures, supplies, leasehold improvements, as well as land and/or buildings that will be occupied by the business borrower.

Proceeds can also be used to:

• Expand or renovate facilities;

• Finance receivables and augment working capital;

• Finance seasonal lines of credit;

• Construct commercial buildings; and

• Refinance existing debt under certain conditions.

7(a) loan proceeds cannot be used (except for compensation for services rendered) for floor plan financing or to have funds for the purpose of making investments.

**


Miscellaneous Factors

The fourth factor involves a variety of requirements such as SBA’s credit elsewhere test and utilization of personal assets requirements where the applicant business and its principal owners must use their own resources before getting a loan guaranteed by SBA. It also includes SBA’s anti-discrimination rules and prohibitions on lending to agricultural enterprises because there are other agencies of the federal government with programs to fund such businesses.

However, some factors here are the SBA’s most important eligibility rules, including:

• Every loan must be for a sound business purpose;

• There must be sufficient invested equity in the business so it can operate on a sound financial basis;

• There must be a potential for long-term success;

• The owners must be of good character and reputation; and

• All loans must be so sound as to reasonably assure repayment.

More can be found out about SBA’s eligibility requirements at:
http://www.sba.gov/services/

then select “Loan Eligibility” from the “Financial Assistance” list along the bottom.

***

What to Take to the Lender

Documentation requirements may vary; contact your lender for the information you must supply.

Common requirements include the following:

• Purpose of the loan.


• History of the business.


• Financial statements for three years (existing businesses).


• Schedule of term debts (existing businesses).


• Aging of accounts receivable and payable (existing businesses).


• Projected opening-day balance sheet (new businesses).


• Lease details.


• Amount of investment in the business by the owner(s).


• Projections of income, expenses and cash flow as well as the assumptions.


• Personal financial statements on the principal owners.


• Resume(s) of the principal owners and managers.

****

How the 7(a) Program Works

Applicants submit their loan application to a lender for the initial review. The lender will generally review the credit merits of the request before deciding if they will make the loan themselves or if they will need an SBA guaranty.

If a guaranty is needed, the lender will also review eligibility, and the applicant should be prepared to complete some additional documents before the lender sends its request for guaranty to the SBA.

In guaranteeing the loan, the SBA assures the lender that, in the event the borrower does not repay the loan, the government will reimburse the lending institution for a portion of its loss.

By providing this guaranty, the SBA is able to help tens of thousands of small businesses every year get financing they would not otherwise obtain.

After SBA approval, the lender is notified that its loan has been guaranteed.

The lender then will work with the applicant to make sure the terms and conditions are met before closing the loan, disbursing the funds, and assuming responsibility for collection and general servicing.

The borrower makes monthly loan payments directly to the lender. As with any loan, the borrower is responsible for repaying the full amount of the loan in a timely manner.

**
What the SBA Looks for:

• Ability to repay the loan on time from the projected operating cash flow.

• Owners and operators who are of good character.

• Feasible business plan.

• Management expertise and commitment necessary for success.

• Sufficient funds, including the SBA guaranteed loan, to operate the business on a sound financial basis (for new businesses, this includes the resources to meet start-up expenses and the initial operating phase).

• Adequate equity invested in the business.

• Sufficient collateral to secure the loan or all available collateral if the loan cannot be fully secured.

***

SBAEXPRESS

SBAExpress is available to lenders as a way to obtain a guaranty on smaller loans up to $350,000. The program authorizes selected experienced lenders to use mostly their own forms, analysis and procedures to process, service and liquidate SBA-guaranteed loans.

The SBA guarantees up to 50 percent of an SBAExpress loan. Loans under $25,000 do not require collateral. Like most 7(a) loans, maturities are usually five to seven years for working capital and up to 25 years for real estate or equipment. Revolving lines of credit are allowed for a maximum of seven years.

For a list of lenders in your area, contact your local SBA office available at:
www.sba.gov/localresources/index.html

***

PATRIOT EXPRESS

The Patriot Express Initiative pilot loan initiative is for veterans and members of the military community wanting to establish or expand a small business. Eligible military community members include:

• Veterans

• Service-disabled veterans

• Active-duty service members eligible for the military’s Transition Assistance Program

• Reservists and National Guard members

• Current spouses of any of the above, including a service member

• Widowed spouse of a service member or veteran who died during service or of a service-connected disability

The Patriot Express loan is offered by SBA’s widest network of lenders nationwide and features our fastest turnaround time for loan approvals. Loans are available up to $500,000 and qualify for SBA’s maximum guaranty of 85 percent for loans of $150,000 or less and 75 percent for loans over $150,000 up to $500,000. For loans above $350,000, lenders are required to take all available collateral.

The Patriot Express loan can be used for most business purposes, including start-up, expansion, equipment purchases, working capital, inventory or business-occupied real estate purchases.
Patriot Express loans feature SBA’s lowest interest rates for business loans, generally 2.25 percent to 4.75 percent over prime depending upon the size and maturity of the loan. Your local SBA district office will have a listing of Patriot Express lenders in your area.

More information is at:
http://www.sba.gov/patriotexpress

***

COMMUNITYEXPRESS PILOT LOAN PROGRAM


The CommunityExpress Pilot Loan Program provides streamlined business financing and management and technical assistance to small businesses located in distressed or under-served markets.

The CommunityExpress program is offered through hundreds of selected SBA lenders throughout the nation. Under CommunityExpress, approved lenders may use streamlined and expedited loan review and approval procedures to process SBA guaranteed loans.

These lenders may thus use, to the maximum extent possible, their own loan analysis, loan procedures, and loan documentation to process SBA loans to $250,000. However, borrowers must receive technical assistance to qualify for this program.

Washington Metropolitan Area
District Office
740 15th St., 3rd Fl.
Washington, DC 20005-3544
202-272-0345
or visit: www.sba.gov/dc

* My Note – these programs are available throughout the US – check with your state and local SBA offices and ask specifically about them. Do not assume they know anything about what is available in entirety – they don’t. If they have no clue about the program, it doesn’t mean that it isn’t available in your state or in your area. May require tracking down the paperwork, info and handing it to them.

***

Special Purpose 7(a) Loan Programs

The 7(a) program is the most flexible of SBA’s lending programs. The agency has created several variations to the basic 7(a) program to address the particular financing need of certain small businesses. These special purpose programs are not necessarily for all businesses but may be very applicable to some small businesses. They are generally governed by the same rules, regulations, fees, interest rates, etc. as the regular 7(a) loan guaranty. Lenders can advise you of any variations.

**

CAPLines


The CAPLines program is designed to help small businesses meet their short-term and cyclical working capital needs.There are five loan programs under the CAPLines umbrella. The programs can be used to finance seasonal working capital needs; finance the direct costs of performing certain construction, service and supply contracts; finance the direct cost associated with commercial and residential construction; finance operating capital by obtaining advances against existing inventory and accounts receivable; and consolidate short term debt. SBA provides up to an 85 percent guarantee. There are five distinct programs under the CAPLine umbrella:

• The Contract Loan Program is used to finance material and labor needs for a specific contract or contracts. Proceeds can be disbursed before the work begins. If used for one contract, it is generally not revolving; if used for more than one contract at a time, it can be revolving. The loan maturity is usually based on the length of the contract, but no more than five years. Payment from the contract award must be sent directly to the lender.

• The Seasonal Line of Credit Program is used to support buildup of inventory, accounts receivable or labor and materials above normal usage for seasonal inventory. The business must have a definite established seasonal pattern and thus must have been in business for a period of 12 months in order to establish that pattern. The loan does not revolve during the season but may be used over again after a “clean-up” period of 30 days. These also may have a maturity of up to five years. The business may not have another seasonal line of credit outstanding
but may have other lines for non-seasonal working capital needs.

• The Builders Line Program Provides financing for small contractors or developers to construct or rehabilitate residential or commercial property. Loan maturity is generally three years but can be extended up to five years if necessary.

Proceeds are used solely for direct expenses of acquisition, immediate construction and/or significant rehabilitation of the residential or commercial structures. The purchase of the land can be included if it does not exceed 20 percent of the loan proceeds. Up to 5 percent of the proceeds can be used for physical improvements that benefit the property.

• The Small Asset-Based Line is a revolving line of credit used to support an increase in accounts receivable or inventory. The loan can be used for revolving lines up to $200,000 to purchase inventory, pay direct labor or finance accounts receivable and is advanced against existing inventory or accounts receivable. Repayment comes from the collection of accounts receivable or sale of inventory. It does require periodic servicing and monitoring of the collateral for which the lender can charge up to two percent annually to the borrower. These
lines are generally used by businesses providing credit to their customers.

• The Standard Asset-Based Line is similar to the Small Asset-Based Line, but for loan amounts over $200,000. It does require stricter servicing and monitoring and the lender may pass these costs along to the borrower.

***

EXPORT TRADE FINANCING

Export Working Capital Program
www.sba.gov/aboutsba/sbaprograms/internationaltrade/index.html


The SBA’s Export Working Capital Program

assists lenders in meeting the needs of exporters seeking short-term export working capital.

This program enables U.S. exporters to obtain loans to fund their direct export costs.

The EWCP supports single transactions or revolving lines.The maximum dollar amount of an export line of credit under this program is $2 million.

SBA guarantees up to 90% of a loan amount or $1.5 million, whichever is less. Loan maturities are generally for a term of 12 months. The guaranty can be reissued for an additional 12 months through an abbreviated application process.

The guaranty fee the SBA charges is 0.25 percent of the guaranteed amount of the loan for the initial 12 months.

The borrower negotiates the interest rate and all other fees with the lender.

The program offers flexible terms, low fees and a quick processing time.

**

Eligibility of Exporter

You must have an operating history of at least one year – not necessarily in exporting. The SBA may waive this requirement if you have sufficient export trade experience or other managerial experience.


Eligible Buyers

The foreign buyer must be a creditworthy entity located in an acceptable foreign country, to both the lender and SBA.

Use of EWCP Proceeds:
• To acquire inventory for export or to be used to manufacture goods for export.

• To pay the manufacturing costs of goods for export.

• To purchase goods or services for export.

• To support Standby Letters of Credit related to export transactions.

• For pre-shipment working capital directly related to export orders.

• For post-shipment foreign accounts receivable financing.

**((**

Ineligible Use of Proceeds


• To support the applicant’s domestic sales.

• To acquire fixed assets or capital goods for the applicant’s business.

• To support a sale where the exporter is not taking title to the goods.

• To acquire, equip, or rent commercial space overseas.

• To serve as a Warranty Letter of Credit.

***

Collateral Requirements

• Collateral for the manufacturing sector typically consists of a first lien on all export-related inventory and export related accounts receivable.

Collateral for the service sector typically consists of assignment of proceeds of export-related contracts or purchase orders and a first lien on export-related accounts receivable.

• Other collateral may be required.

How to Apply — A small business exporter seeking a guaranteed EWCP loan must apply to a lender.
SBA Ex-Im Bank Co- Guarantee

This is designed to provide small business exporters the ability to obtain larger export working capital loans through the Export Working Capital Program than SBA could support alone. This program enables U.S. exporters to obtain loans that facilitate the export of goods or services.

Under this program, the total export working capital line, with a 90 percent guarantee, cannot exceed $2 million. Loan maturities are generally for a term of 12 months.

At the end of the 12-month maturity, a borrower may reapply for a new guarantee. The guarantee fee SBA charges is 0.25 percent of the guaranteed amount of the loan for the initial 12 months. The guarantee fee that Ex-Im Bank charges is 0.25 percent on the loan amount that is guaranteed by them. The borrower negotiates the interest rate and all other fees with the lender.

Eligibility of Exporter

The same as for the SBA EWCP Program.

Eligible Buyers

The foreign buyer must be a creditworthy entity located in an acceptable country in conformity with the Ex-Im Bank’s Country Limitation Schedule.

Use of Proceeds

Same as the SBA EWCP.

Ineligible Use of Proceeds

• Goods or services with less than 50 percent U.S. content.

• To support the export of any Defense Articles or Defense Services.

• To support the applicant’s domestic sales.

• To acquire fixed assets or capital goods for the applicant’s business.

• To acquire, equip, or rent commercial space overseas.

• To serve as a Warranty Letter of Credit.

Collateral Requirements

Same as the SBA EWCP.

Discounted Credit Insurance Premiums

The Export-Import Bank of the United States and the SBA provide SBA export loan recipients with a 25 percent discount on export credit insurance premiums. Ex-Im Bank export credit insurance protects your company against nonpayment and enables you to sell on the competitive “Open account” terms. You can enter new markets and increase sales in existing markets and have the ability to match the credit term offered by your foreign competitors.

Ex-Im Bank provides up to 95 percent coverage for both commercial risks, for example buyer insolvency and default, and political risks, war, revolution, and the cancellation of an export or import license.

**

How to Apply

A small business exporter seeking a co-guaranteed loan must apply to a lender that is a participant in SBA’s 7(a) Loan Guaranty Program. PLP and SBAExpress processing are not permitted.

The lender must submit a completed Joint Application for Working Capital Guarantee and loan package to SBA. SBA evaluates and processes the application in accordance with SBA rules for its Export Working Capital program.

**

INTERNATIONAL TRADE LOAN PROGRAM

The program helps small businesses engaged or preparing to engage in international trade as well as small businesses adversely affected by competition from imports. This program allows for an increased maximum dollar amount of SBA guaranty outstanding to any one business (and affiliates) from $1.5 million to $1.75 million.
In order to reach the $1.75 million SBA guaranty ceiling, the borrower must have an international trade loan as well an SBA working capital loan or line of credit.

The international trade loan provides an SBA guarantee up to $1.5 million of a term loan used for the acquisition, construction, renovation, modernization, improvement or expansion of long-term fixed assets or the refinancing of an existing loan used for these same purposes. In addition a borrower may have a separate working capital loan (term or line of credit) with a maximum SBA guarantee of $1.25 million.

When combined, the maximum SBA guaranty outstanding to any one business is $1.75 million. The SBA guarantee fee and interest rates are the same as for any standard 7(a) loans.

**

Eligibility of Exporter

• Applicants must meet the same eligibility requirements for a 7(a) loan.

• Applicant must establish the loan will significantly expand or develop an export market, or the applicant has been adversely affected by import competition, and, in addition the applicant must show that upgrading equipment or facilities will improve its competitive position.

• If eligibility is based on entering or expanding export sales, the applicant must submit a one or two page international business plan, including sufficient information to reasonably support the
likelihood of expanded export sales.

Use of Proceeds

• For facilities or equipment, including purchasing land and building(s); building new facilities; renovating, improving, or expanding existing facilities; purchasing or reconditioning machinery, equipment and fixtures; and making other improvements that will be used within the United States for producing goods or services.

Collateral Requirements –

Collateral requirements are the same as regular 7(a) loans.

• How to Apply –

A small business exporter seeking a guaranteed loan must apply to an SBA participating lender. Call your local SBA District Office for a list of participating lenders.

***

Export Express

The Export Express program is designed to help SBA meet the export financing needs of small businesses.

It is a subprogram of SBAExpress and is therefore subject to the same loan processing, making, closing, servicing, and liquidation requirements as well as the same maturity terms, interest rates, and applicable fees as for other SBA loans except as noted below.

The total Export Express loan cannot exceed $250,000. SBA guarantees 85 percent for loans of $150,000 and under and 75 percent for loans over $150,000 to $250,000.

SBA allows participating lenders to make their own credit decisions. SBA provides a quick processing time, less than 36 hours.

**

Eligible Buyers

The foreign buyer must be a creditworthy entity located in an acceptable country.

Use of Proceeds

• Finance standby letters of credit used for either bid or performance bonds;

• Finance export development activities such as export marketing and promotional activities, participation in foreign trade shows, translation of product literature for foreign markets, and other activities designed to initiate or expand the applicant’s export of its products/services
from the U.S.;

• Provide transaction-specific financing for overseas orders;

• Provide revolving lines of credit for export purposes, the term of which must not exceed seven years. In some instances, as a normal course of business, the borrower may use portions of revolving lines of credit for domestic purposes, but no less than 70 percent of the revolver to be used for export related purposes;

• Provide term loans and other financing to enable small business concerns, including small business export trading companies to develop foreign markets; and

• Acquire, construct, renovate, modernize, improve or expand production facilities or equipment to be used in the U.S. in the production of goods or services to be exported from the U.S.

**

Ineligible Use of Proceeds

Proceeds may not be used to finance overseas operations, other than those strictly associated with the marketing and/or distribution of products/services exported from the U.S.

How to Apply

The application process is the same for the SBAExpress, except the applicant must demonstrate that loan proceeds will enable it to enter a new export market or expand an existing export market. The applicant must submit to the lender a plan that includes projected export sales for the upcoming year as well as the dollar volume of export sales for the previous year.

***

Community Adjustment and Investment Program

The Community Adjustment & Investment Program helps communities that suffered job losses due to changing trade patterns following the North American Free Trade Agreement.

The North American Development Bank has partnered with the SBA and the U.S. Departments of Agriculture and the Treasury to make credit available to businesses in affected communities to help create or retain jobs.

***

SBA’s non-7(a) Loan Programs

In addition to the 7(a) Loan Program SBA has four other non-disaster assistance programs which can help small businesses gain access to capital and bonding.

CERTIFIED DEVELOPMENT COMPANY LOANS
(504 LOAN PROGRAM)

The 504 Loan Program is an economic development program that supports American small business growth and helps communities through business expansion and job creation.

This SBA program provides long-term, fixed-rate, subordinate mortgage financing for acquisition and/or renovation of capital assets including land, buildings and equipment. Most for-profit small businesses are eligible for this program.

The types of businesses excluded from 7(a) loans (listed previously) are also excluded from the 504 loan program.

Loans are provided through Certified Development Companies. CDCs work with banks and other lenders to make loans in first position on reasonable terms, helping lenders retain growing customers and provide Community Redevelopment Act credit.

The SBA 504 loan is distinguished from the SBA 7(a) loan program in these ways:

The maximum debenture is:

• $1.5 million for businesses that create a certain number of jobs or improve the economy of the locality;

• $2 million for businesses that meet a specific public policy goal, including veterans; and

• $4 million for manufacturers.

• Eligible project costs are limited to long-term, fixed assets such as land and building (occupied by the borrower) and substantial machinery and equipment. Working capital is not an eligible use of proceeds.

• Most borrowers are required to make an injection (borrower contribution) of just 10 percent which allows the business to conserve valuable operating capital. A further injection of 5 percent is needed if the business is a start-up or new (less then 2 years old) and a further injection of 5 percent is also required if the primary collateral will be a single purpose building.

• Two-tiered project financing: a lender finances approximately 50 percent of the project cost and receives a first lien on the project assets (but no SBA guaranty); A CDC (backed by a 100% SBA-guaranteed debenture) finances up to 40% of the project costs secured with a junior lien. The borrower provides the balance of the project costs.

• Fixed interest rate on SBA loan. SBA guarantees the debenture 100 percent. Debentures are sold in pools monthly to private investors. This low, fixed rate is then passed on to the borrower and establishes the basis for the loan rate. A recent history of debenture rates may be found at www.nadco.org

• All project-related costs can be financed, including acquisition (land and building, land and construction of building, renovations, machinery and equipment) and soft costs, such as title insurance and appraisals. Some closing costs may be financed.

• Collateral is typically a subordinate lien on the assets financed; allows other assets to be free of liens and available to secure other needed financing.

• Long-term real estate loans are up to 20- year term, heavy equipment 10 or 20-year term and are self-amortizing.

**

Businesses that receive 504 loans are:

• Small — net worth under $7.5 million, net profit after taxes under $2.5 million, or
meet other SBA size standards.
• Organized for-profit.

• Most types of business — retail, service, wholesale or manufacturing.

The SBA’s 504 Certified Development Companies serve their communities by financing business expansion needs. Their professional staff works directly with borrowers to tailor a financing package that meets program guidelines and the credit capacity of the borrower’s business.

For more information, go to
www.sba.gov/services

then choose “SBA Loans” from the links in the right-hand column. From there, click on “CDC/504 Program.”

***
MICROLOAN PROGRAM

The Microloan Program provides small loans ranging from under $500 to $35,000.

Under this program, the SBA makes funds available to nonprofit intermediaries that, in turn, make the loans directly to entrepreneurs, including veterans. Proceeds can be used for typical business purposes such as working capital, machinery and equipment, inventory and leasehold
improvements. Interest rates are negotiated between the borrower and the intermediary.

For more information, go to
www.sba.gov/services
then choose “SBA Loans” from the links in the right-hand column. From there, click on “Micro Loans.”

***


SMALL BUSINESS INVESTMENT COMPANY PROGRAM


There are a variety of alternatives to bank financing for small businesses, especially business start-ups. The Small Business Investment Company Program fills the gap between the availability of venture capital and the needs of small businesses that are either starting or growing.

Licensed and regulated by the SBA, SBICs are privately owned and managed investment funds that make capital available to qualifying small businesses through investments or loans. They use their own funds plus funds obtained at favorable rates with SBA guarantees.

SBICs are for-profit firms whose incentive is to share in the success of a small business. In addition to equity capital and long-term loans, SBICs provide managerial assistance.

The SBIC Program provides funding for a broad range of industries and stage of investment, in areas across the country. Some SBICs invest in a particular field or industry while others invest more generally.

Most SBICs concentrate on a particular stage of investment such as start-up or expansion and focus on a specific geographic area.

For more information contact your nearest SBA office or the Web site at www.sba.gov/services
then choose “Financial Assistance” from the menu below. From there, click on “Equity Capital” and choose “SBA’s Investment Program.”

***
THE SURETY BOND GUARANTEE PROGRAM

Although it is not a business loan program, the Surety Bond Guarantee Program is a public-private partnership between the federal government and the surety industry providing small businesses with the bonding assistance necessary for them to compete for government and
private contracting opportunities.

The guarantee provides the necessary incentive for sureties to bond small businesses that would otherwise be unable to obtain bonding. They typically lack the combination of working capital and a performance track record necessary to secure bonding on a reasonable basis through regular commercial channels.

Through this program, the SBA guarantees bid, payment, performance and necessary ancillary bonds issued by surety companies for individual contracts of up to $2 million on behalf of eligible small construction, service, and supply contractors.

The SBA reimburses sureties a predetermined percentage of losses sustained if a contractor breaches the terms of the contract.

The SBA has two program options available, the Prior Approval Program (Plan A) and the Preferred Surety Bond Program (Plan B).

In the Prior Approval Program, SBA guarantees 90 percent of a surety’s paid losses and expenses on bonded contracts up to $100,000, and on bonds for socially and economically disadvantaged and HUBZone contractors and veterans and service-disabled veterans.

All other bonds guaranteed in the Plan A Program receive an 80 percent approval for each bond guarantee issued.

Under the PSB Program, SBA guarantees only 70 percent, but sureties may issue, monitor and service bonds without SBA’s prior approval.

For more information on the Surety Bond Program, visit SBA’s web site at
www.sba.gov
and choose “Services.” From there, select “Financial Assistance” and click on “Surety Bond.”

**

Small Office Loan Initiative

The SBA Washington Metropolitan Area District Office has implemented a new marketing initiative under SBA’s Community Express Loan Guarantee Program.

The Small Office Loan Initiative combines financial and technical assistance to enable small and home-based business to access business loans in the amount of $5,000 to $25,000.
For more information contact:

District of Columbia Cooperative Extension Service-UDC
4200 Connecticut Ave. N.W.
Washington, DC 20008
202-274-7126
Gordon A. White
By Appointment
gwhite@udc.edu

DC Chamber of Commerce Business Resource Center
7408 Georgia Ave. N.W.
Washington, DC 20012-1722
202-545-0220
Amir Clayton Powell, JD
By Appointment
acpowell@dcchamber.org
www.dcchamber.org

The International Center for Assistance, Inc.
P.O. Box 838
Norfolk, VA 23501
757-498-1800
Susan Carlson
See website for workshop listings
sscarlson@msn.com
www.icfainc.org

***

The Small Business Training Network is an Internet-based training site. It provides small businesses with free online courses, workshops, learning tools and direct access to electronic
counseling and other forms of technical assistance.

Key Features of the SBTN:

• Training is available anytime and anywhere—all you need is a computer with Internet access.

• More than 23 free online courses and workshops available

• Offers a comprehensive e-library with hundreds of e-publications, electronic tools and information resources.

• Online, interactive assessment tools are featured and used to direct clients to appropriate training.

Find the SBTN at
www.sba.gov/training

http://www.sba.gov/idc/groups/public/documents/dc_washington_dc/washington-dc.pdf

***

****
The federal government is the largest purchaser of goods and services in the world.
However, small businesses face challenges when trying to win federal contracts. The SBA can help small businesses work through these challenges.

Working closely with federal agencies and the nation’s leading large contractors, the SBA works to ensure that small businesses obtain a fair share of government contracts and subcontracts.

The SBA has a number of programs to help small firms do business with the federal government.

For more information, visit:
www.sba.gov/gc

***

THE PRIME CONTRACTS PROGRAM

Through the Prime Contracts Program, the SBA helps to increase small business’ share of government prime contracts. SBA Procurement Center Representatives work to expand contracting opportunities for small businesses. PCRs review contracting strategies and actions, recommend contracting sources, and provide one-to-one counseling and training to small businesses seeking to do business with the federal government.

Visit the SBA’s Office of Government Contracting home page at:
www.sba.gov/gc
for a listing of PCRs and buying installations nationwide.

**

The Subcontracting Assistance Program

The Subcontracting Assistance Program promotes maximum use of small businesses by the nation’s large prime contractors. The SBA’s Commercial Market Representatives work with large businesses to identify and expand subcontracting opportunities for small businesses. CMRs conduct compliance reviews to ensure that large businesses comply with small business subcontracting requirements.

They also provide guidance to assist small businesses in identifying
subcontracting opportunities and marketing their products and services to these large contractors.

CMRs also work with agencies to ensure subcontracting with small and small, disadvantaged businesses, women-owned small businesses, HUBZone firms and small businesses owned by service-disabled veterans through inclusion of subcontracting evaluation factors and sub-factors.

**

THE CERTIFICATE OF COMPETENCY PROGRAM

The Certificate of Competency program allows a small business to appeal a contracting officer’s determination that it is unable to fulfill the requirements of a specific government contract on which it is the apparent low bidder. The SBA will conduct a detailed review of the firm’s technical and financial capabilities to perform on the contract. If the business demonstrates the
ability to perform, the SBA issues a Certificate of Competency to the Contracting Officer, requiring award of that contract to the small business.

**

SMALL BUSINESS SIZE STANDARDS

The Small Business Act states that a small business concern is “one that is independently owned and operated and which is not dominant in its field of operation.” The law also states that in determining what constitutes a small business, the definition will vary from industry to industry to reflect industry differences accurately. The SBA’s Small Business Size Regulations (13 CFR Part 121, www.sba.gov/size/indextableofsize.html) implement the Small Business Act’s mandate to the SBA.

The SBA has also established a table of size standards, matched to North American Industry Classification System industries, used to determine eligibility for SBA programs and small business preferences for federal government contracts.

See more at:
http://www.sba.gov/services/
then click on “Size Standards” under the “Contracting Opportunities” menu across the bottom.

**

Size Determination

The Size Determination Program, administered by SBA’s six government contracting area offices, ensures that only small firms receive contracts and other benefits reserved exclusively for small business. When a firm’s claim that it is small is challenged, the SBA determines if the firm does, in fact, meet established SBA size standards. Size determinations may also be made when requested in connection with other federal small business programs.
Additional information is available at the above “Size Standards” site.

***

SMALL BUSINESS VENDOR DATABASE

As part of the Integrated Acquisition Environment Initiative, the SBA works with the General Services Administration and Department of Defense to provide a database of vendors, including small business.

The Central Contractor Registration System is the primary gateway vendor and grantee database for the federal government. CCR collects, stores and disseminates data to support agency acquisition and grants missions. Both current and potential federal government vendors and grantees are required to register in CCR to receive federal contracts or grants. Vendors are required to complete a one-time registration to provide basic information relevant to procurement, grant and financial transactions.

Vendors must update or renew their registration at least once a year to maintain an active status. The SBA provides the CCR with authoritative source information regarding certifications under 8(a) Business Development, HUBZone and Small Disadvantaged Business programs and provides the small business size status against each North American Industry Classification code listed in a registrant’s profile. SBA maintains the Dynamic Small Business Search function of the CCR.

Businesses profiled on the DSBS can be searched by NAICS codes, keywords, location, quality certification, bonding level business type, ownership, SBA certification, and by women, minority, veteran and service-disabled veteran ownership. The DSBS serves as a marketing tool for small businesses because the business profiles in the DSBS include information from SBA’s files and other available databases plus additional business and marketing information on individual firms.

To search the DSBS for small businesses, click on:
http://dsbs.sba.gov/dsbs/search/dsp_dsbs.cfm
or select the “Dynamic Small Business Search” at the CCR Web site at:
http://www.ccr.gov

***

Registration in the DSBS is through the CCR. For more information on CCR, or to register, click the CCR Web site. Before registering in CCR, go to the top of the Web page and download the handbook which contains data for a successful registration.

***

SUB-NET

Prime contractors use SUB-Net to post subcontracting opportunities. Small businesses can review this Web site to identify opportunities in their area(s) of expertise.

While the Web site is designed primarily as a place for large businesses to post solicitations and notices, it is also used by federal agencies, state and local governments, nonprofit organizations, colleges and universities, and even foreign governments for the same purpose.

The Web site has shifted the traditional marketing strategy from the shotgun approach to one that is more focused and sophisticated.

Instead of marketing blindly to hundreds of prime contractors, with no certainty that any given company has a need for their product or service, small businesses can now use their resources (saving time and money) to identify concrete, tangible opportunities and then submit bids/proposals targeting these potential subcontracting
opportunities.

SUB-Net is available at the SBA Web site by visiting:
http://web.sba.gov/subnet

***

HUBZONE PROGRAM

The Historically Underutilized Business Zone Program stimulates economic development and creates jobs in urban and rural communities by providing federal contracting assistance to small businesses.

The HUBZone program establishes preferences for award of federal contracts to small businesses located in historically underutilized business zones.

In general, small businesses may obtain HUBZone certification by employing staff who live in a HUBZone and maintaining a “principal office” in one of these specially designated areas.

SBA is responsible for:

• Determining whether or not individual concerns are qualified HUBZone small business concerns, and therefore eligible to receive HUBZone contracts;

• Maintaining a list of qualified HUBZone small business concerns for use by acquisition agencies in awarding contracts under the program; and

• Adjudicating protests and appeals of eligibility to receive HUBZone contracts.

To qualify for the program, a business must meet the following criteria:

• It must qualify as a small business by SBA size standards;

• Its principal office must be located within a HUBZone, which includes lands on federally recognized Indian reservations and covered by phrase “Indian Country”;

• It must be owned (at least 51 percent) by one or more U.S. citizens, Community Development Corporation, an agricultural cooperative, an Indian tribe; and

• At least 35 percent of its employees must reside in a HUBZone.

Existing businesses that choose to move to qualified areas are eligible.

To fulfill the requirement that 35 percent of a HUBZone firm’s employees reside in a HUBZone, employees must live in a primary residence within that area for at least 180 days or be a currently registered voter in that area.
For additional information regarding the HUBZone Program, please visit:
http://www.sba.gov/services/contractingopportunities/contracting/hubzone/index.html/

***

*****

ASSISTANCE FOR SMALL AND DISADVANTAGED BUSINESSES

8(a) Business Development Program

The SBA’s Section 8(a) Business Development Program provides various forms of assistance (management and technical assistance, financial assistance, government contracting assistance and advocacy support) to foster the growth and development of businesses owned by socially
and economically disadvantaged individuals.

SBA assists these businesses, (during a nine year tenure in the 8(a) Business Development Program), to gain access to the resources necessary to develop their businesses and improve their ability to compete in the mainstream of the American economy.
Business development assistance includes one-to-one counseling, training workshops, and other management and technical guidance required to expand into the federal government contracting arena.

The SBA enters into contracts with other federal agencies and subcontracts the performance of such contracts to 8(a) program participants.

Eligibility Criteria:

To participate in the 8(a) program, a business must be:

• a small business concern

• owned by a U.S. citizen

• at least 51 percent unconditionally owned and controlled by one or more an individual(s) who qualify as socially and economically disadvantaged

• established for two full years before applying (or qualifying for a waiver of the two-year rule)

Social disadvantage:

Socially disadvantaged is defined as individuals who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual capabilities.

The following individuals are presumed to be socially disadvantaged: Black Americans, Native Americans, Hispanic Americans,Asian Pacific Americans and Subcontinent Asian Americans. An individual who is not a member of one of the groups presumed to be socially disadvantaged must establish individual social disadvantage by a preponderance of the evidence.

Anyone may apply for 8(a) Program certification.

For additional information regarding evidence of social disadvantage, please visit:
http://www.sba.gov/aboutsba/sbaprograms/8abd/index.html

***

Economic disadvantage:


Economically disadvantaged individuals are socially disadvantaged individuals whose ability to compete in the free-enterprise system has been impaired
due to diminished capital and credit opportunities as compared to others in the same or similar line of business who are not socially disadvantaged.

Net worth:

For initial 8(a) Program certification, the net worth of an individual claiming disadvantage, must be less than $250,000.

For continued 8(a) Program eligibility after admission, net worth must be less than $750,000. In determining such net worth, SBA will exclude the ownership interest in the applicant business and the equity in the primary residence.

Day-to-Day Management:

• Management and daily business operations must be controlled by the disadvantaged individual(s) upon whom eligibility is based.

• The individual(s) must have management or technical expertise.

For additional information on the 8(a) Business Development Program, please visit:
http://www.sba.gov/aboutsba/sbaprograms/8abd/index.html

***

Small Disadvantaged Business Certifications

To qualify as a small disadvantaged business, a firm must be owned and controlled by one or more individuals who are socially and economically disadvantaged. Congress has directed that individuals who are members of certain ethnic groups are presumed to be disadvantaged.

Other persons, including women and persons of any race, can also qualify by establishing their disadvantaged status.

Once certified by the SBA, the firm can be added to an online registry of SDB-certified firms maintained in CCR/DSBS. Firms remain on the list for three years. Contracting Officers and prime contractors may search this registry for potential contractors.

For additional information on SBD Certification and Eligibility, visit the SBD Web site at: www.sba.gov/services
and select “Small Business Certifications” from the “Contracting Opportunities” menu in the
center of the page.

Online 8(a)/SDB Application

The online 8(a)/SDB application allows small companies to apply for 8(a) Business Development and Small Disadvantaged Business certification directly from SBA’s Web site. The 8(a)/SDB online application incorporates features including context sensitive help, real-time validation, printer friendly versions and integrates with the CCR/DSBS.

You may access the electronic 8(a)/SDB application by visiting:
https://sba8a.symplicity.com/applicants/guide

If you are having difficulty with SBA’s General Login System (GLS), please e-mail SBA at ITSecurity@sba.gov

If you are having difficulty with the Central Contractor Registration (CCR), please go to
http://www.ccr.gov/help.asp
for contact information.

If you are having difficulty with the Dynamic Small Business Search (DSBS), please contact Robert.Connolly@sba.gov

Small Disadvantaged Business (SDB) E-application, please contact
SDB@sba.gov

8(a) Business Development E-application, please contact
8ABD@sba.gov

***

The Mentor-Protégé Program for 8(a) Participants


Through the SBA’s Mentor-Protégé Program, 8(a) Program participants can receive in-depth business advice to assist them in becoming more competitive in obtaining federal government contracts. The SBA’s Mentor-Protégé Program encourages private-sector relationships and broadens the agency’s efforts to address the needs of clients in the 8(a) Program.

If you are an 8(a) participant, mentors can provide you with technical and management assistance, financial assistance in the form of equity investments or loans, subcontract support, and assistance in performing prime contracts through joint-venture arrangements with 8(a) businesses.

For additional information, please visit:
http://www.sba.gov/aboutsba/sbaprograms/8abd/index.html

***

Free patent search service online – there are several available – including

www.patents.com – which has an easy to use search engine

***

****

WRITING A BUSINESS PLAN

After you’ve thought about your business, the next step is to develop a business plan. The business plan is a formal document explaining in some detail your plans to develop a financially successful business. It’s vitally important for two reasons:

• Preparing a business plan forces you to think through every aspect of your business. If you need outside money, your business plan will be one of the first things the lender or investor wants to see.

• A business plan serves as an assessment tool for you. A comprehensive business plan is not done on the spur of the moment. It can be a long process, and you need good advice. The SBA and its resource partners, including Small Business Development Centers located on many college campuses, Veterans Business Outreach Centers, SCORE, Counselors to America’s Small Business, and Women’s Business Centers, have the expertise to help you craft a winning business plan.

You can find the nearest SBDC at:
http://www.sba.gov/aboutsba/sbaprograms/sbdc/index.html

***

IN GENERAL, HERE’S WHAT A GOOD BUSINESS PLAN CONTAINS:

Introduction

• Give a detailed description of the business and its goals.

• Discuss ownership of the business and its legal structure.
• List the skills and experience you bring to the business.

• Discuss the advantages you and your business have over competitors.

Marketing

• Discuss the products and services your company will offer.

• Identify customer demand for your products and services.

• Identify your market, its size and locations.

• Explain how your products and services will be advertised and marketed.

• Explain your pricing strategy.

Financial Management

• Develop an expected return on investment and monthly cash flow for the first year.

• Provide projected income statements, and balance sheets for a two-year period.

• Discuss your break-even point.

• Explain your personal balance sheet and method of compensation.

• Discuss who will maintain your accounting records and how they will be kept.

• Provide “what if” statements addressing alternative approaches to problems that may develop.

Operations

• Explain how the business will be managed day-to-day.

• Discuss hiring and personnel procedures.

• Discuss insurance, lease or rent agreements, and issues pertinent to your business.
• Account for the equipment necessary to produce your goods or services.

• Account for production and delivery of products and services.

Concluding Statement

Summarize your business goals and objectives and express your commitment to the success of your business. Once you have completed your business plan, review it with a friend or business associate or SCORE counselor or Small Business Development Center representative.

Remember, the business plan is a flexible document that should change as your business grows.

From: pp. 13 – 14
http://www.sba.gov/idc/groups/public/documents/dc_washington_dc/washington-dc.pdf

***

OnLine Business Training Courses Available through the SBA – they are very handy, easy to follow and allow you to pause while taking notes – great stuff!

http://www.sba.gov/services/training/onlinecourses/index.html

STARTING A BUSINESS

About these Courses

1. Small Business Primer: Guide to Starting a Business
2. How to Prepare a Business Plan
3. Franchising Basics
4. Technology 101: A Small Business Guide

SURVIVING IN A DOWN ECONOMY

About these Courses

* Strategic Marketing: How to Win Customers in a Slowing Economy
* Down-Shifting in a Slowing Economy: Business Planning Guide
* How to Prepare a Loan Package
* Business Opportunities: A Guide to Winning Federal Contracts
* Investing in Small Business: 2009 Recovery Act

Related Business Tools

* Automated Business Plan Template
* Peak Performance – Surviving in a Slowing Economy

BUSINESS MANAGEMENT

About these Courses

1. Technology 101: A Small Business Guide
2. How to Prepare a Business Plan
3. Franchising Basics
4. My Own Business
5. Global Enterprise: A Primer on Exporting
6. Disaster Recovery: Guide to SBA’s Disaster Assistance Programs
7. Retirement Planning


FINANCING & ACCOUNTING

About these Courses

1. Finance Primer: Guide to SBA’s Loan Guaranty Programs
2. How to Prepare a Loan Package
3. Assessing Financial Needs *
South-West Texas SBDC
4. Introduction to Accounting

MARKETING & ADVERTISING

About these Courses

1. Marketing 101: Guide to Winning Customers
2. Marketing for Small Business
Maine SBDC
3. Conduct a Marketing Analysis *
PA SBDC – Kutztown University

GOVERNMENT CONTRACTING

About these Courses

1. Business Opportunities: A Guide to Winning Federal Contracts
2. INSIGHT: Guide to the 8(a) Business Development Program
3. Government Contracting Workshop – Maine SBDC

BUSINESS PLANNING

About these Courses

1. How to Prepare a Business Plan
2. Strategic Planning & Execution *
PA SBDC – Kutztown University
3. Developing a Business Plan (en español) PA SBDC – Kutztown University

E-COMMERCE

About these Courses

1. Technology 101: A Small Business Guide
2. Building Your Website *
South-West Texas SBDC
3. Managing the Digital Enterprise

INTERNATIONAL TRADE

About these Courses

1. Global Enterprise: A Primer on Exporting

FEDERAL TAX TRAINING

About these Courses
1. Economic Stimulus Briefing

http://www.sba.gov/services/training/onlinecourses/index.html

***
http://app1.sba.gov/training/sbprimer/index.html

from the section –

“Is Your Idea Viable?”

* Is there an identifiable target audience for your business?

* Will the business fill a need that is not currently being met?

* Can you sell your product or service to enough people at a price that gives you a desirable margin of profit?

* Does your idea or product have a competitive advantage over the competition?

* Do you have sufficient capital to cover both the start-up costs and the beginning stages of your business?

Talk to Your Customers – Understand Their:

NEEDS
WANTS

* Conduct Market Research

Whether you take a formal approach, by using questionnaires and surveys, or an informal approach, by chatting casually with prospective customers, you can uncover a wealth of information from your intended target market. These people often have the keenest insight on niches that may be overlooked in the marketplace because they are so familiar with it. Perhaps you will find that the majority of the people you speak to are yearning for particular products or services that aren’t currently being offered by any other company.

Perhaps they want and need accessories for products they are currently buying from other companies. Or maybe they’re just yearning for really great and convenient service. All of these scenarios represent promising niche opportunities.
**

* Talk To Insiders:

Attend industry conferences, networking events, Chamber of Commerce events, and so on, and use these opportunities to gather as much information about your industry, competitors and target audience as you can.

**

* Shop the Competition –

Try to determine where you think the opportunities lie by seeing the offerings of your future competitors firsthand. Ask yourself how you can capitalize on their shortcomings.

***

A Business Plan Is Your Roadmap – A Guide to the Details of Your Business
That helps you think through the details of starting and growing your own business

Clearly Outlines the Goals of the Business and Describes How They Will be Achieved

Starting and Growing Your Business

Helps you to Identify the Areas that may need more work
Tells Your Story
What Your Business Does

a Written document that clearly outlines the Goals of a Business
and Describes how they will be achieved

Simply put, a good business plan tells your story

The story will describe what the business does?
Why it exists?
How the business operates?
Why it will be successful?
How it will be profitable?

**
A well-written business plan will typically include the following:

Executive Summary

A one-page summary of the key points in your plan. This section should briefly and concisely highlight your business concept, the management team and their relevant experience, the financial projections and requirements, and the current status of the business (including when it was founded and any major developments, such as preliminary market research results and applications for patents).

Business Description

A list of the business name, address and owner information, as well as a brief description of the business and your specific goals and objectives.

Product and Service Description

A descriptive explanation of all the products and services you plan to offer, with an emphasis on the competitive advantage they bring to your business. Here is the place to discuss pricing strategies, packaging ideas, unique flavors, special service options, and so on.

Market Analysis and Sales

A depiction of the market for your products and services, an explanation of how you will be competitive, and a specific discussion of your marketing efforts to generate sales. This is where you will conduct a competitive analysis: Identify all major competitors, and then list their respective strengths and weaknesses. Discuss the ways in which you plan to combat their strengths and capitalize from their weaknesses. Finally, discuss any strategies that will give you a significant competitive advantage in the market and any ways that you can limit future competitors from hurting your bottom line.

Operating Requirements

An explanation of how your products and services will be produced and made available to customers. You will discuss the costs of doing business, as well as the costs of producing your offerings.

Management Profile

A listing of key personnel, along with their resumes showing relevant skills, experience and education. This is your chance to really “sell” your team.

Financial Management

A section dedicated to the vital financial schedules that will help guide the business. These include the income statement, the cash flow statement and the balance sheet.

**

If you are just starting a business, your plan should include:

projected start-up costs,
expected return on investment (ROI) for the first year,
as well as a projected income statement,
balance sheet, and
projected monthly cash flow for the next 12 months.

**


If you have a new or established business, your plan should include:

income statements and balance sheets for the last two years,
as well as a projected income statement,
balance sheet and projected monthly cash flow for the next 12 months.

***

Attachments


Includes supporting documents, such as brochures, franchise agreements, business licenses, lease agreements, legal documents and other pertinent information.

**

And, don’t forget . . .

When you have generated all of the appropriate information for your business plan, be sure to add a title page and table of contents, and bind the entire document in a professional-looking cover that can be obtained at an office-supply store. Be sure to make as many copies of the plan as you think you will need during the first several months of the start-up phase, as it can be time-consuming and expensive to continually reprint copies on an as-needed basis.

(My note – Remember, that every business who has conducted an intentional fraud has really slick, fancy packages of paperwork, descriptions and other business props – because they work. Therefore, it makes sense that worthy businesses need to do the same when they have no intention of fraud. – also because it works. Borrow a ferrari, a Rolex and an Armani suit, if you have to – have everything printed on slick paper using a professional layout and then, your business plan will have the same impact as the Bernie Madoff’s and Wall Street brokers of the world. And, people will give you money with absolutely no guaranteed return, apparently. – do not be yourself, that is not perceived as honest and above board compared to the most risky and even fraudulent business opportunities done up slick.)

***
Getting Assistance to Write the Business Plan

Preparing a good business plan is one of the most important things an entrepreneur can do. Much assistance is available.

Business Plan Workshops – Online Training
http://app1.sba.gov/survey/training_workshops/

Targeted Web Information – Descriptive Information
http://www.sba.gov/smallbusinessplanner/plan/getready/index.html

http://www.sba.gov/smallbusinessplanner/plan/writeabusinessplan/index.html

Business Plan Templates – Specific Guide
http://www.score.org/template_gallery.html

SCORE – Online Counseling, Training & Traditional Counseling
www.score.org

Small Business Development – Training and Counseling
http://www.sba.gov/sbdc/sbdcnear.html

Women’s Business Centers – Training and Counseling
http://www.sba.gov/onlinewbc/wbc.pdf

SBA District Offices – Guidance, Referrals and Assistance
http://www.sba.gov/localresources/index.html

Sample Business Plans – Descriptive Information
http://www.sba.gov/cgi-bin/buebue.pl?TO=http://www.bplans.com/samples/sba.cfm

[from – ]
http://app1.sba.gov/training/sbprimer/index.html


***
MANAGEMENT AND TECHNICAL ASSISTANCE

SBA’s Section 7(j) Management and Technical Assistance Program authorizes the SBA to enter into grants, cooperative agreements and contracts with public or private organizations to pay all or part of the cost of technical or management assistance for individuals or concerns eligible for assistance under sections: 7(a) (11), 7(j) (10), or 8(a) of the Small Business Act.

Specifically, the following are eligible to receive management and technical assistance including businesses which qualify as small under 13CFR part 121 of this title: concerns located in urban or rural areas with high proportions of unemployed or low-income individuals, or which are owned by such low income individuals; and businesses eligible to receive 8(a) contracts.

The types of assistance available to eligible individuals through the Management and Technical Assistance Program include counseling and training in the areas of:

• Finance


• Management


• Accounting


• Bookkeeping


• Marketing and presentation analysis


• Advertising


• Loan packaging


• Proposal bid preparation


• Feasibility studies


• Industry specific technical assistance


• The identification and development of new business opportunities


More information is at:
http://www.sba.gov/aboutsba/sbaprograms/ 8abd/index.html

**

Procurement Technical Assistance Centers (PTAC)

PTA Centers provide assistance to business firms in marketing products and services to the Federal, State and local governments at no or nominal cost.

***

And, from foxbusiness show “Your Questions, Your Money”, the author of the Accidental StartUp suggested that taking out a provisional patent will protect for a year – allowing the prototype to be shown (using a non-disclosure agreement which can be found on the International site for protecting intellectual property – I’ll get that page resource and put it here in a little while.)

http://www.freepatentsonline.com/5003004.html

***

http://www.cts-online.co.uk/shows/ifsec09/
11 – 14 May 2009 – NEC Birmingham – UK

http://www.ifsec.co.uk/pmifsec09/conference.html

James Blue, Director of Fire and Security at UBM Live, organisers of IFSEC

The IFSEC conference offers a first-rate range of speakers from our own industry and across the business world. Giving an insight into the latest security issues, the conference will prove to be an invaluable element of your visit to IFSEC.

John Bates, Chief Executive, BSIA

The annual IFSEC conference programme is a ‘must-attend’ event for security practitioners. this year’s programme promises to be one that will satisfy all segments of the security industry.

Mike Bluestone, Director, The Security Institute

There are a number of sponsorship and promotional opportunities availble at the IFSEC Conference.
Contact Frazer Stokes, Sponsorship Account Manager on T: 020 7921 8746 or frazer.stokes@ubm.com for details on how you can promote your business and network with key decision-makers at this unique event.

Building on the initial success of last year, the IFSEC Conference 2009 is a vital event for all security professionals in both the public and private sector.

Against a back-drop of terrorism, crime and economic turmoil, the IFSEC Conference will provide you with all the advice, solutions and systems you need to keep your organisation and staff protected and secure.

Three themed days and nine modules – Click here to see a summary of the conference modules

To download the conference brochure please click here

Day1 – Global, National and Local Protection

Module A1 – Global Terror
Module A2 – Critical National Infrastructure
Module A3 – Crisis Management

Day2 – Corporate Security Management

Module B1 – Security Management in a Recession
Module B2 – Employee Security
Module B3 – Data and E-security

Day 3 – Technological Innovation in Practice

Module C1 – IP Integration and Convergence
Module C2 – Interoperability and Compatibility
Module C3 – Cutting-Edge Technologies

Hear from over 25 expert speakers including key contibutions from: NaCTSO, SISBO, The Olympic Delivery Authority, IBM, McDonald’s, Deutsche Bank, Travelex, Home Office, Cabinet Office, PWC and the National Association for Healthcare Security

http://www.cts-online.co.uk/shows/ifsec09/
11 – 14 May 2009 – NEC Birmingham – UK

***

from the WORLD INTELLECTUAL PROPERTY ORGANIZATION –

http://www.wipo.int/sme/en/documents/disclosing_inf.htm

Disclosing Confidential Information

by Vivien Irish, Director of Intellectual Property, NXT plc September 2003

Worldwide, the law protecting confidential business information (or trade secrets) is very varied. This summary of confidential information, what it is, and how it can be protected, is based on English law. However, the principles of English law in this context can be applied to good effect in many other countries.


What can be protected

Sharing a Secret

Model Non-Disclosure Agreements


Two-way NDAs

Which Law Applies

When to use an NDA

Annex: Model Non-Disclosure Agreement


What can be protected?

All companies have secrets. Some are technical such as the detailed specification of a manufacturing process; some are business-related such as a list of customer names and addresses, which would be useful to a competitor. Some are of enormous value, e.g. the recipe for Coca Cola; others are less valuable. Some are simple, even one word long, such as the name of a company takeover target, others are complex, such as the details of a planned advertising campaign. The common factor is that all can be protected.

In recent years, many countries have introduced laws on the protection of confidential business information along the lines proposed by the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), which states that for information to be legally protectable:

  • (i) the information must be secret, i.e., not generally known ore readily accessible to persons that normally deal with that kind of information;
  • (ii) it must have commercial value because it is secret;
  • (iii) the owner must have taken reasonable steps to keep it secret.

The most important thing is for SMEs to have a basic understanding and sensible internal rules, so that their valuable information retains that value and remains confidential.

An important factor in protection is proper management control. Managers should restrict access to secrets to the staff who need to know them – the biggest loss of confidential information from a company occurs when its staff leave and move to another firm in the same area of business. Also it is important to mark documents with a word such as “confidential” if this is the case, but avoid the tempting mistake of marking every document, because such marking will have no real meaning and will be ignored. Other security precautions may be needed, such as imposing password protections on access to information.

Sharing a secret

In a normal business it is sometimes necessary to share a secret with another company. A manufacturer may need to have specialised tests carried out on a prototype, and does not want competitors to know details of the new product. An assembly company may wish to know if a supplier can meet a new, tough specification which will give a quick market advantage, but does not want anyone else to use the same specification. In both of these examples the prototype and the new specification must pass out of the owner’s hands, but the owner will of course wish to retain control.

The solution is to get the company to which the confidential information is to be disclosed to sign a Confidentiality Agreement, sometimes called a Non-Disclosure Agreement (NDA)

Model Non-Disclosure Agreements.

A simple example of an NDA is annexed and can be used as a model. Again it is valid in English law, and readers in other countries are advised to take local advice on the law which applies in their country -but the principles set out in the example are used in many countries.

The Agreement names the owner of the information (Owner), the company receiving it (Recipient), and there is a space to fill in the reason for handing over the information – the Permitted Purpose. It briefly defines what the information is, and it says that records of the information (which may be documents or drawings or software) should be marked “Confidential” or “Proprietary”.

The definition of what the confidential information consists of is followed in clauses 1.1 to 1.3 by what are known as Releases from Confidentiality, i.e. a list of events which put the secret into the public domain, so that the Recipient no longer needs to comply with the NDA conditions. But of course the Recipient must not be the person that publishes the information in the first place.

The NDA goes on to set out how the Recipient must look after the information, what the Recipient is allowed to do with the information (use it only for the Permitted Purpose), and what the Recipient is not allowed to do (tell anyone who does not need access to the information).

The Agreement says how long the information must be kept secret – this can be set as the length of time the secret will give the owner a market advantage, plus a little bit of leeway. Two or five years are common periods.

Once the Recipient has signed the NDA, the Owner can pass over the confidential information with improved peace of mind.

Two-way NDAs

Sometimes the flow of information is two-way, with both parties disclosing confidential information to the other, such as when a joint venture is being set up between them. A few changes to the model one-way NDA can cover such an arrangement.

Which law applies?

The model states clearly that English law applies. An advantage of English law is that, if there has been misuse of the confidential information, the English courts are willing to act very quickly – within a few days – to hear the arguments and to stop any repeated misuse. Of course the information cannot be “made secret” again, but at least the misuse can be quickly stopped so that the company misusing does not continue to profit from it.

In other countries such a rapid response may not be available, and as always local checks of the applicable law must be made. In the USA, the law which applies is the law of a named State and the speed of response of the courts in that state must be considered.

In a cross-border disclosure, often the owner of the secret will provide the text of the NDA and will suggest use of the law applying in the owner’s home country. This is not essential; if the parties can agree, the law of any country could apply.

When to use an NDA

Companies should not use a Non-Disclosure Agreement too often. The best way to keep a secret will always be: don’t tell anyone. If a secret really must be shared, tell as little as necessary to achieve the commercial objective; sometimes a general outline is all that is needed, although for a technical appraisal the full detail of the knowhow will need to be passed over for review.

Sometimes an NDA sets out a period of time so that information disclosed, say within a defined year, falls within the agreement. This is useful for complex technical deals, such as joint ventures (JV), although a separate JV agreement will eventually be needed.

Also, choose the recipient very carefully – are you as sure as you can be that a promise of secrecy will really be kept?

One weakness of legal protection for secrets is that once they have been published in some way they cannot be “made secret” again.


Even if the owner of the secret goes to Court and wins a payment for the damage suffered, this will not be as good as having the information kept confidential.


Your competitors will be free to use your hard-won secrets.


So the best practice is to make sure that the secret is kept in the first place.

Annex: Model Non-Disclosure Agreement

[From:]

http://www.wipo.int/sme/en/documents/disclosing_inf.htm

World Intellectual Property Organization

***

THIS AGREEMENT is dated 200[ ] and made

BETWEEN

(1) [Name and address]…………………… (“Owner”) and

(2) [Name and address]…………………… (“Recipient”)

WHEREAS

(A) Owner possesses certain Proprietary Information which Owner is willing to disclose to Recipient on the terms set out below

(B) Recipient is willing to accept the Proprietary Information on those terms and to use the Proprietary Information only for the purpose of……………….. (“the Permitted Purpose”).

NOW IT IS AGREED AS FOLLOWS

1. “Confidential Information” means any and all information whether commercial or technical relating to the business of Owner, including without limitation, know-how, data, processes, designs, photographs, drawings, specifications, software programs, and samples, which is marked with an indicator such as “Confidential” or “Proprietary”, but excluding information which:

1.1 is or comes into the public domain otherwise than by disclosure or default by the Recipient;

1.2 was or is lawfully obtained or available from a third party who was lawfully in possession of the same and free to disclose it; or

1.3 was already known to the Recipient as evidenced by written record pre-dating such disclosure.

2. In consideration of Owner disclosing Proprietary Information, the Recipient hereby undertakes for a period of [five] years from the date of this Agreement

2.1 to keep confidential all Proprietary Information that it may acquire in any manner;

2.2 to use such Proprietary Information exclusively for the Permitted Purpose and not to use the Proprietary Information for the Recipient’s own purposes or benefit;

2.3 not to disclose such Proprietary Information to anybody, except to authorised employees or other agents of the Recipient who need to have access to the Proprietary Information for the purpose of carrying out their duties in connection with the Permitted Purpose ;

2.4 to inform everybody to whom it discloses Proprietary Information that it is confidential and obtain their agreement to keep it confidential on the same terms as this Agreement;

2.5 to keep safe any drawings, documents, samples or materials provided on loan by Owner, not to reproduce, part with possession of, modify or otherwise interfere with such items, to return them immediately upon Owner’s request and in any event spontaneously when no longer required for the purposes of this Agreement;

2.6 to notify Owner immediately upon becoming aware of any breach of confidence by anybody to whom the Recipient has disclosed the Information and give all necessary assistance in connection with any steps which Owner may wish to take to prevent, stop or obtain compensation for such breach or threatened breach.

3. Nothing in this Agreement shall be deemed to grant to the Recipient a licence expressly or by implication under any patent, copyright or other intellectual property right. The Recipient hereby acknowledges and confirms that all existing and future intellectual property rights relating to the Proprietary Information are the exclusive property of Owner. The Recipient will not apply for or obtain any intellectual property protection in respect of the Proprietary Information. All intellectual property rights relating to any drawings, documents and work carried out by the Recipient (whether past, present or future) using the Proprietary Information will belong to and will vest in Owner. The Recipient will do all such things and execute all documents necessary to enable Owner to obtain, defend or enforce its rights in such drawings, documents and work.

4. This Agreement is governed by and will be construed in accordance with English law and is subject to the non-exclusive jurisdiction of the English Courts.

For and on behalf of Recipient: For and on behalf of Owner:

Signed:__________________ Signed:________________

Name: __________________ Name:_________________

Position:_________________ Position:_______________

***

[from- ]

Annex: Model Non-Disclosure Agreement

http://www.wipo.int/sme/en/documents/disclosing_inf.htm
World Intellectual Property Organization

***

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