Persfi

People start a business for many reasons. For some, it’s a life dream. For others, it’s the thrill of entrepreneurship. And for some, it’s a way to escape management bureaucracies, set their own hours and boost their incomes. Whatever the reasons, if you’re seeking to start your own business, you should perform a thorough self-assessment and consider the financial ramifications of such a decision. Evaluate Your Skills and Commitment. First, make sure the business fits your lifestyle, values and personality. Typically, ideas for a business come from past or current careers, hobbies, or special skills and talents. Building on interests or skills, you already have may increase the likelihood of success. In addition to your skills and familiarity with a particular industry, you’ll also need to become knowledgeable about a wide range of business issues including accounting, insurance, payroll, taxes, legal matters, licensing, purchasing, and marketing, for starters. Test the Market. Find out if there is a market for the product or service you want to sell. Speak to people who sell similar or allied products, look at purchasing and other trends, identify potential customers, and examine the competition. Then get a sense for the price that customers might be willing to pay for what you are selling by making some cold calls. Determine the best legal structure. An important decision you’ll need to make is whether you want to structure your business as a proprietorship, partnership, limited liability company or corporation. Each form has advantages and disadvantages. The type of business you are starting will narrow your choices somewhat. Other factors that need to be considered in selecting an organizational structure are the tax implications, number of owners, financial and legal liability of owners, and how you plan to manage the company. Your business adviser can help you evaluate your options. Develop a financial plan. One of the most common reasons small businesses fail is that the owners underestimate how much money they will need to start the business and keep it going. A detailed financial plan can help ensure that you’re prepared to meet the costs of setting up and running a business, as well as the challenges presented by uneven cash flow and seasonal peaks and valleys. Find financing. Finding the money you need to start a new business is probably the most frustrating hurdle new owners face. If you’re just starting out, you should be aware that most banks don’t like to lend to start-ups, and those few that do will expect you to put up a significant amount of your own money. Some small loans may be available through the Small Business Administration (SBA) or economic development authorities in your state. However, in most instances you’ll need to invest some of your own savings or borrow from yourself, through, for example, a home equity loan. You also might consider turning to family and friends. Do Your Homework. Take advantage of the various resources that exist to help you get into business. The federal and state governments print publications on a wide range of small-business topics. Organizations like the SBA and Service Corps of Retired Executives (SCORE) provide counsel, workshops and seminars that cover many aspects of starting and running a business. To learn more about your particular industry and business environment, study trade publications and interview other entrepreneurs and business owners. Such research will prove invaluable once you open for business. Get Advice. Don’t try to do everything yourself. Put together a trusted team of professional advisors who can provide guidance on legal, tax, computer, accounting and insurance issues. New IRA Options in 1998 As a result of the Taxpayer Relief Act of 1997, individual retirement accounts (IRAs) are offering the means to save for much more than just retirement. Beginning this year, they can also be used to help offset the cost of paying for a college education or buying a new home. However, there are limits to how much you can contribute, how much you can deduct and who can make penalty-free withdrawals for qualified expenses. The following explains some of these new rules to help taxpayers make the most of their IRA savings. Contribution and deduction limits. For 1997, if you and your spouse have compensation and neither of you are active participants in a qualified retirement plan, you may each contribute to separate IRA plans and deduct up to $2,000. If one spouse works and the other doesn’t work, each of you may deduct up to $2,000 in separate IRAs as long as you file a joint tax return. For the 1997 tax year, married couples with at least one spouse active in a qualified retirement plan and who file jointly can still claim a full deduction up to $2,000 each if their adjusted gross income (AGI) is less than $40,000. If neither is an active participant, the full $2,000 deduction is available no matter how much income they earn. Single taxpayers participating in qualified plans can claim a full deduction if their adjusted gross income (AGI) is below $25,000. Partial deductions are allowed for singles who are active participants with AGIs between $25,000 and $35,000 or married couples filing jointly with AGIs between $40,000 and $50,000. Starting this year, the AGI ranges over which the $2,000 IRA deduction limit is phased out will be gradually increased, so that more people may qualify for the deduction. For 1998, the AGI ranges will be $50,000-$60,000 for joint returns and $30,000-$40,000 for single filers. The new law also changes the deduction limits for spouses of individuals who participate in employer-sponsored retirement plans. Starting in 1998, if one spouse actively participates in a qualified retirement plan and the other does not, the spouse who does not participate may make a deductible IRA contribution of up to $2,000 as long as the AGI on a joint return does not exceed $150,000. Roth IRAs. Starting in 1998, taxpayers who won’t qualify for deductible IRA contributions may benefit from the new, non-deductible Roth IRA. As with all IRAs, your savings will earn interest tax-free. But here is the bonus: Taxpayers can withdraw their funds completely tax-free once they reach age 59 1/2 as long as the account has been open for five years. Up to $10,000 in tax-free withdrawals is allowed for a principal residence of a first time homebuyer who is the taxpayer or his or her spouse, child or grandchild. You may make a tax-free withdrawal for qualified higher education expenses for a taxpayer, his or her spouse, child or grandchild. The maximum amount that may be contributed to a Roth IRA is the lesser of $12,000 or your compensation. This IRA’s availability starts phasing out for individuals with AGIs over $95,000 and for married couples with AGIs over $150,000. Mel Poteshman is a certified public accountant and president of Poteshman Consulting International & Co., a West Los Angeles-based business consulting firm