Read Start Your Own Business Online
Authors: Inc The Staff of Entrepreneur Media
Start Your Own Business (20 page)
Namestorming
Final Analysis
Begin brainstorming, looking in dictionaries, books and magazines to generate ideas. Get friends and relatives to help if you like; the more minds, the merrier. Think of as many workable names as you can during this creative phase. Professional naming firms start out with a raw base of 800 to 1,000 names and work from there. You probably don’t have time to think of that many, but try to come up with at least 10 names that you feel good about. By the time you examine them from all angles, you’ll eliminate at least half.
The trials you put your names through will vary depending on your concerns. Some considerations are fairly universal. For instance, your name should be easy to pronounce, especially if you plan to rely heavily on print ads or signs. If people can’t pronounce your name, they will avoid saying it. It’s that simple. And nothing could be more counterproductive to a young company than to strangle its potential for word-of-mouth advertising.
WARNINGMake sure your business name clearly conveys what you do. A flower shop named Stargazers, for example, probably won’t be the first place customers think of when buying flowers, since they’ll probably expect you to sell telescopes or New Age products. Your name can even affect your ability to recruit employees. Someone interested in working at a flower shop might not call Stargazers to ask about jobs since they might not expect it to be a florist.
Other considerations depend on more individual factors. For instance, if you’re thinking about marketing your business globally or if you are located in a multilingual area, you should make sure that your new name has no negative connotations in other languages. On another note, if your primary means of advertising will be in the telephone directory, you might favor names that are closer to the beginning of the alphabet. Finally, make sure that your name is in no way embarrassing. Put on the mind of a child and tinker with the letters a little. If none of your doodlings makes you snicker, it’s probably OK.
Naming firm Interbrand advises name seekers to take a close look at their competition: The major function of a name is to distinguish your business from others. You have to weigh who’s out there already, what type of branding approaches they have taken, and how you can use a name to separate yourself.
Testing, TestingAfter you’ve narrowed the field to, say, four or five names that are memorable, expressive and can be read by the average grade-schooler, you are ready to do a trademark search.
Must every name be trademarked? No. Many small businesses don’t register their business names. As long as your state government gives you the go-ahead, you may operate under an unregistered business name for as long as you like—assuming, of course, that you aren’t infringing on anyone else’s trade name.
But what if you are? Imagine either of these two scenarios: You are a brand-new manufacturing business just about to ship your first orders. An obscure little company in Ogunquit, Maine, considers the name of your business an infringement on their trademark and engages you in a legal battle that bankrupts your company. Or envision your business in five years. It’s a thriving, growing concern, and you are contemplating expansion. But just as you are about to launch your franchise program, you learn that a small competitor in Modesto, California, has the same name, rendering your name unusable.
To illustrate the risk you run of treading on an existing trademark with your new name, consider this: When NameLab took on the task of renaming a chain of auto parts stores, they uncovered 87,000 names already in existence for stores of this kind. That’s why even the smallest businesses should at least consider having their business names screened. You never know where your corner store is going to lead. If running a corner store is all a person is going to do, then there’s no need to do a trademark search. But that local business may become a big business someday if that person has any ambition.
Enlisting the help of a trademark attorney or at least a trademark search firm before you decide on a name for your business is highly advisable. After all, the extra money you spend now could save you countless hassles and expenses further down the road. Try to contain your excitement about any one name until it has cleared the trademark search: It can be very demoralizing to lose a name you’ve been fantasizing about.
TIPAfter you have thought of potential names, compile a list of your competitors’ names. If some of your name ideas are too similar to your competitors’, remove them from your list.
If you’re lucky, you’ll end up with three to five names that pass all your tests. How do you make your final decision?
Recall all your initial criteria. Which name best fits your objectives? Which name most accurately describes the company you have in mind? Which name do you like the best?
Every company arrives at a final decision in its own way. Some entrepreneurs go with their gut or use personal reasons for choosing one name over another. Others are more scientific. Some companies do consumer research or testing with focus groups to see how the names are perceived. Others might decide that their name is going to be most important seen on the back of a truck, so they have a graphic designer turn the various names into logos to see which works best as a design element.
Use any or all of these criteria. You can do it informally: Ask other people’s opinions. Doodle an idea of what each name will look like on a sign or on business stationery. Read each name aloud, paying attention to the way it sounds if you foresee radio advertising or telemarketing in your future.
Say It LoudProfessional naming firms devote anywhere from six weeks to six months to the naming process. You probably won’t have that much time, but plan to spend at least a few weeks on selecting a name.
Once your decision is made, start building your enthusiasm for the new name immediately. Your name is your first step toward building a strong company identity, one that should last as long as you’re in business.
chapter 9
MAKE IT LEGAL
Choosing a Business Structure
O
f all the decisions you make when starting a business, probably the most important one relating to taxes is the type of legal structure you select for your company.
f all the decisions you make when starting a business, probably the most important one relating to taxes is the type of legal structure you select for your company.
Not only will this decision have an impact on how much you pay in taxes, but it will affect the amount of paperwork your business is required to do, the personal liability you face and your ability to raise money.
The most common forms of business are sole proprietorship, partnership, corporation and S corporation. A more recent development to these forms of business is the limited liability company (LLC) and the limited liability partnership (LLP). Because each business form comes with different tax consequences, you will want to make your selection wisely and choose the structure that most closely matches your business’s needs.
TIPIf you operate as a sole proprietor, be sure you keep your business income and records separate from your personal finances. It helps to establish a business checking account and get a credit card to use only for business expenses.
If you decide to start your business as a sole proprietorship but later decide to take on partners, you can reorganize as a partnership or other entity. If you do this, be sure you notify the IRS as well as your state tax agency.
Sole ProprietorshipThe simplest structure is the sole proprietorship, which usually involves just one individual who owns and operates the enterprise. If you intend to work alone, this structure may be the way to go.
The tax aspects of a sole proprietorship are appealing because the expenses and your income from the business are included on your personal income tax return, Form 1040. Your profits and losses are recorded on a form called Schedule C, which is filed with your 1040. The “bottomline amount” from Schedule C is then transferred to your personal tax return. This is especially attractive because business losses you suffer may offset the income you have earned from your other sources.
As a sole proprietor, you must also file a Schedule SE with Form 1040. You use Schedule SE to calculate how much self-employment tax you owe. In addition to paying annual self-employment taxes, you must make estimated tax payments if you expect to owe at least $1,000 in federal taxes for the year after deducting your withholding and credits, and your withholding will be less than the smaller of: 1) 90 percent of the tax to be shown on your current year tax return or 2) 100 percent of your previous year’s tax liability. The federal government permits you to pay estimated taxes in four equal amounts throughout the year on the 15th of April, June, September and January. With a sole proprietorship, your business earnings are taxed only once, unlike other business structures. Another big plus is that you will have complete control over your business—you make all the decisions.
There are a few disadvantages to consider, however. Selecting the sole proprietorship business structure means you are personally responsible for your company’s liabilities. As a result, you are placing your assets at risk, and they could be seized to satisfy a business debt or a legal claim filed against you.
Raising money for a sole proprietorship can also be difficult. Banks and other financing sources may be reluctant to make business loans to sole proprietorships. In most cases, you will have to depend on your financing sources, such as savings, home equity or family loans.
“Success seems to be
connected to action.
Successful people keep
moving. They make
mistakes, but they
never quit.”—J. WILLARD MARRIOTT,
FOUNDER OF MARRIOTT
INTERNATIONAL INC.
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