Women-Owned Business Atmosphere in Utah and Women’s Leadership LIVE

Women-Owned Businesses need help in Utah.

I got a unique opportunity this week to help some amazing women.  These women help other women, like me to start and operate businesses by giving them direct access to the tools they need to succeed.  I am so amazed by their accomplishments, and I look forward to their conference.

I started thinking about what the atmosphere in Utah looks like for the Woman-Owned Business.  Progress has been made, but I found the statistics disturbing and really see the need for mentors like the amazing women of Women’s Leadership Live (womensleadershiplive.com)

Women’s Leadership LIVE (WLL), creates a place for learning, collaboration, guidance and understanding called THE Different CONFERENCE©.  WLL’s attendees are business leaders who get things done.  Inspired and empowered women who are catalysts for change.  WLL has three great

women leaders:

• CEO Linda McMahon is the Co-founder and former CEO of World Wrestling Entertainment (WWE) and a former Republican Party candidate
• Stacey Schieffelin, is a former FORD model and founder of ybf (your best friend) beauty, #1 selling color cosmetics line offered on TV shopping channels worldwide
• Debbie Saviano, transformed herself from a former school principal to a social media strategist.  

THE Different CONFERENCE© is coming to Salt Lake City, Utah on October 13-15 and is the premium event for Women Business owners to attend.  The keynote speaker for THE Different CONFERENCE© is none other than Kevin Harrington.  

Kevin Harrington has been a successful entrepreneur for the last 40 years. He is an Original Shark on the ABC hit, Emmy-winning TV show, “Shark Tank.” He is also the Inventor of the Infomercial, As Seen On TV Pioneer, Co- Founder of the Electronic Retailers Association (ERA) and Co- Founder of the Entrepreneurs’ Organization (EO).

The  Women’s Leadership LIVE business leaders are ready and able to help Women-Owned Businesses in Utah.

The “Wasatch Front” has some amazing women business owners.  I have lived in Utah my entire life, born in a small town on a farm, in Morgan, and raised by my mother, who was a single mom raising four children.  In Morgan, Utah it is difficult to find diversity, and even more difficult to be different.  Morgan is a small, predominately Mormon, town, in which there are certain expectations of the role of a woman.  Men are regarded very highly in the Mormon religion.  Women in Morgan are expected to be a homemaker, handling all of the responsibilities of taking care of a loving home.  

On average, along the “Wasatch Front”, women own 36% of the businesses and make 29% of the earnings their male counterparts do.

Navigating to American Fact Finder, and utilizing a small learning curve allowed the metrics to be downloaded and aggregated.  "Wasatch Front" was not a census distinction, so Davis County, Salt Lake County, Summit County, Utah County, and Weber County were chosen.  I realize that the last Census was done in 2010 and these are just estimates for 2014 but in my mind are fairly accurate for estimates.   (See note below for more information about data)

	Male		Female		Percentage of Women Business Owners relative to Men Business Owners	Percentage of Women Business Owner Earnings relative to Men Business Owner Earnings
	Male Business Owners	Median Earnings (dollar) Estimate	Female Business Owners	Median Earnings (dollar) Estimate
Davis County, Utah	6,898	$96,248	4,326	$29,810	39%	24%
Salt Lake County, Utah	28,491	$87,029	15,428	$36,482	35%	30%
Summit County, Utah	2,228	$118,432	1,083	$66,950	33%	36%
Utah County, Utah	13,048	$89,463	7,709	$26,598	37%	23%
Weber County, Utah	5,208	$76,861	3,048	$31,579	37%	29%
Total	55,873	$468,033	31,594	$191,419	36%	29%

A bar graph of this data shows the following for the number of businesses in these counties:

2014 Census Data - Business Owners by County in Utah

The Women’s Leadership LIVE (WLL), in particular, The Different CONFERENCE© allows Women-Owned businesses to have access to tools and mentors that have been very successful in their business endeavors.  Please register for the conference now at womensleadershiplive.com.

NOTE ABOUT DATA:  Women-owned businesses, as defined by the U.S. Census, are businesses in which women own 51 percent or more of the equity, interest, or stock of the business. Men-owned businesses are defined as men owning 51 percent or more of the equity, interest, or stock of the business. Equally men-/women-owned businesses those in which the equity, interest, or stock of the business is shared 50-50 among men and women owners. Publicly held, foreign-owned, and non-profit businesses are not included in this data.

All calculations are based on the SBO 2012 classification of "all firms classifiable by gender, ethnicity, race, and veteran status" rather than "all firms." Therefore, "publically held and other firms not classifiable by gender, ethnicity, race, and veteran status" are not taken into account in the current calculations.

The data came from the S2408: CLASS OF WORKER BY SEX AND MEDIAN EARNINGS IN THE PAST 12 MONTHS (IN 2014 INFLATION-ADJUSTED DOLLARS) FOR THE CIVILIAN EMPLOYED POPULATION 16 YEARS AND OVER.  2010-2014 American Community Survey 5-Year Estimates.

Government Contractor Accounting Practices

So you have decided to get federal government work.  You may even have a contract already and are doing business.  You are a small business.  You are flying under the radar of the Defense Contract Audit Agency (DCAA).  But are you ready for an audit?  How do you set up your accounting system properly in preparation?  

DCAA is the big brother of government contracting, and they will eventually be in your business just like the Internal Revenue Service (IRS).

DCAA does not recommend any accounting software so you must separate your chart of accounts into three areas:  Direct Costs, Indirect Costs, and Unallowable Costs.  The complete explanation is located in the Far Cost Principles Guide on the DCAA website. 

The decision of whether a cost is direct or indirect is based on the ability to identify the cost associated with the contract, rather than nature of the goods and services specifically.  Indirect costs that cannot be directly tied to the project or ongoing operational expenses are not allowed.  

Expenditures for which it is often impractical to calculate dollar amounts and itemize as direct expenses, because while these expenses are necessary to support a contract, they are also shared across the organization and are therefore not easily identified with a specific contract.

Direct Costs

• Specifically identifiable to contract
• Directly related to performance of contract
• Identified in proposal as direct costs
• Billable to contract and customer
• Labor, Subcontractors, Equipment Cost, Materials
• Travel (Lodging, Mileage, Per Diem, Meals, Rental Car, and Parking)
• Other Direct Costs

Indirect Costs

•  Shared costs that apply to multiple contracts or activities
•  Cannot be identified to specific contract
•  Fringe, Payroll Taxes, Leave, Benefits
•  Facility Costs (Internet, Rent, Office Supplies, Postage, Telephone)
•  Overhead Costs (Labor, Bonuses, Travel, Consultants)
•  General & Administrative (G&A)
• Proposal Costs
• Legal Costs accrued for legal advice on proposals
• Executive Labor and Bonuses
• Bank Service Charge
• Accounting

Unallowable

• Payroll Expenses, Charitable Contributions, Advertising
• Interest Expense, Fines, and Penalties
• Legal Fees, Alcohol, Entertainment, Officer and Owner Insurance
• Federal Corporate Taxes

The following table is a quick lookup.  Remember I am not an accountant and your best resource is a DCAA familiar accountant.

Cost	Description	Type
Advertising	Advertising, brochures, and displays.	Unallowable
Alcoholic Beverages	Alcoholic beverages are unallowable as a direct or indirect cost.	Unallowable
Bad Debts	Losses from uncollectible accounts, collection costs and related legal costs.	Unallowable
Books, Journals, and Subscriptions	Books, journals and subscriptions to professional and technical> publications.	Direct – books, journals, and subscriptions specifically related to a contract.  Indirect – books, journals, and subscriptions that benefit research in general or the researcher in general.
Charitable Expenses	Charitable Expenses	Unallowable
Consultant	An individual hired to perform professional, short- term services.	Direct – if specifically related to a contract Otherwise, indirect.
Delivery	Service Overnight delivery service or special shipping services, other than routine postage costs.	Direct – shipping of samples, receiving goods for contract use or other delivery of items directly related to the contract work. Indirect – submitting proposals or other administrative purposes.
Depreciation	The cost of an asset (building or equipment) spread over the asset’s useful life.	Indirect
Donations and Contributions	Includes gifts, memorials and purchase of tables.	Unallowable
Entertainment	Amusement, social activities, and related costs (tickets, meals, lodging, and gratuities).	Unallowable
Equipment	Tangible personal property with a useful life of more than two years and a unit cost greater than or equal to $5,000.	Direct – if specifically related to a contract. Otherwise, indirect.
Federal Corporate Tax	Federal Income Tax	Unallowable
Fines and Penalties	Costs resulting from violations of laws and regulations.	Unallowable unless directly related to compliance with specific provisions of the contract.
Fringe Benefits	Medical Insurance, Dental Insurance, Workers' Compensation, FUTA, SUI/DI ER Expense, SS Tax ER Portion, Med Tax ER Portion, PTO, Holiday Pay	Indirect
Goods or Services for Personal Use by Employees	Items or services are providing direct personal benefit to employees.	Unallowable
Insurance	Insurance coverage for normal business purposes, whether provided by an external company or through a self-insurance program.	Direct – if specifically related to the contract. Otherwise, indirect.
Interest	Interest payments on business loans, credit card balances, or other business debt.	Unallowable
Investment Management	Costs of investment counsel.	Unallowable
Legal Costs of Defense, Prosecution, Claims and Appeals	Generally unallowable. Depends on whether the claim is civil, criminal, involves contracts or is against the Federal government.	Unallowable
Lobbying	Attempts to influence outcomes of elections or other political actions.	Unallowable
Losses on Contract Agreements	Costs in excess of available funding are unallowable as a direct cost on another contract.	Unallowable
Maintenance and Repair Costs	Maintenance and Repair Costs to keep the property in efficient operating condition. Not including costs that increase property value.	Direct – if specifically related to the contract. Otherwise, indirect.
Meals	Meals are allowable if associated with a staff travel, conference or symposium where technical information is presented.	Direct – meals directly related to contract performance in the case that per diem rates are not utilized. Otherwise, indirect.
Meeting Refreshments	Meeting refreshments, site visit meals and guest meals.	Unallowable
Memberships	Memberships and dues to belong to a professional or technical> organization.	Direct – memberships and dues required exclusively for a particular contract. Indirect – memberships and dues that benefit the employee, in general, are a professional development cost.
Office Supplies	Office supplies are those items usually maintained in a departmental stock for general use by all staff. Such items would include pens, pencils, writing a paper, file folders, departmental letterhead, envelopes, staples, staplers, and rulers. Office supplies generally support multiple activities of contract> personnel.	Direct – lab-related office supplies or office supplies purchased for specific contract use. Otherwise, indirect.
Officer and Owner Insurance	Insurance expense for officers and owners that exceed a general insurance benefit for rank and file employees.	Unallowable
Payroll Expenses	The cost of payroll services.	Unallowable
Photocopy	Photocopying of documents.	Direct – photocopying of technical material related to a particular contract.  Indirect – routine photocopying of a general business nature (employee timesheets, professional materials, proposals).
Postage	Routine postage costs.	Direct – postage costs for large mailings or surveys related to the contract. Indirect – routine postage costs, including general agency correspondence and mailing of proposals.
Pre-award Costs	Costs incurred prior to the effective date of the contract.	Unallowable
Professional	Services Professional contractual services, consulting and external legal counsel. Retainers require evidence of service.	Direct – if specifically related to the contract. Otherwise, indirect.
Proposal Costs	Proposal preparation, including typing, copying and mailing costs, for new and renewal applications.	Indirect
Public Relations and Marketing	Public relations, marketing, and related advertising cost intended to promote the organization or improve community relations.	Unallowable
Recruiting	Recruiting costs to select a new employee.	Indirect.
Rent	The cost to lease building space or equipment.	Direct – Building rent is a direct cost to the extent if related to contract Equipment – in proportion to use on the contract. Indirect – administrative equipment rental (fax, copier) are normally indirect costs.
Salaries and Fringe Benefits- Administrative and Clerical Personnel	Departmental administration, including professional and clerical staff, and central administration staff are serving the entire organization.	Direct – administrative and clerical cost incurred for a technical purpose or related to the contract.  Indirect – routine, the base level of administrative support provided to all organizational activities.
Salaries and Fringe Benefits- Technical and Programmatic Personnel	Personnel performing services related to a contract.	Direct – work performed must specifically relate to the contract. The direct cost charge must be based on the percentage of effort devoted bythe employee.
Specialized Service Facilities or Service Center	Operating units that use specialized equipment or technical expertise to provide goods or services for a fee.	Direct – appropriate billing rates and charging practices must be followed.
Supplies and Materials – Technical	Purchased materials and supplies consumed in the performance of the contract. The cost to the contract should be net of credits, discounts, and rebates. Freight costs are part of supply and material costs.	Direct – All Cost should be accounted for against a particular contract.
Telephone and Facsimile	Equipment and service cost for telephone and fax service.	Direct – Long distance telephone, if the charge can be specifically identified with a contract. Indirect – Local telephone and fax service.
Termination Costs	Additional costs incurred due to early termination of a contract.	Direct
Transportation	Freight, express delivery and other transportation related to goods purchased.	Direct – if associated with a contract. Otherwise, indirect.
Travel	Transportation, lodging, subsistence and related costs for official business, in accordance with organizational policy.	Direct – travel expenses directly related to contract performance. Otherwise, indirect.
Tuition	The cost of classes at an educational institution for employees.	Indirect

SBA Final Rule concerning Woman-Owned Small Business (WOSB) and EDWOSB

My company is DynaGrace Enterprises (DGE).  We are a certified 8(a) (Small Disadvantaged Business (SDB)) as well as 8(m) (Woman-Owned Small Business (WOSB) / Economically Disadvantaged Woman-Owned Small Business (EDWOSB)).  We have been in business since 2006 and the 8(a) is a great program but DGE will eventually graduate. 

The U.S. Small Business Administration (SBA) issued a final rule authorizing federal agencies to award sole-source contracts to women-owned small businesses eligible for the WOSB Federal Contract Program. It was published in the Federal Register September 14, 2015, and was effective October 14, 2015.  The rule levels the playing field for WOSB across the federal contracting marketplace.

Here is a link to the rule as it appears in the Federal Register on September 14, 2015. https://www.federalregister.gov/articles/2015/09/14/2015-22927/women-owned-small-business-federal-contract-program

It appears that for now, the current list of applicable North American Industry Classification System (NAICS) codes published by SBA for WOSB and EDWOSB contracting set-asides will remain in force, and will be used to facilitate sole source awards until superseded by new data.  This NAICS code list can be found here:

2012 WOSB-EDWOSB NAICS Codes

DGE has past performance in the following NAICS codes:

237130	EDWOSB	Power and Communication Line and Related Structures Construction
238210	EDWOSB	Electrical Contractors and Other Wiring Installation Contractors
238990	EDWOSB	All Other Specialty Trade Contractors
541330	EDWOSB	Engineering Services
541511	EDWOSB	Custom Computer Programming Services
541512	EDWOSB	Computer Systems Design Services
541519	EDWOSB	Other Computer Related Services
541990	EDWOSB	All Other Professional, Scientific, and Technical Services
561621	EDWOSB	Security Systems Services (except Locksmiths)
561990	WOSB	All Other Support Services
811310	EDWOSB	Commercial, Industrial Machinery/Equipment (except Automotive & Electronic) Repair & Maintenance

This new regulation is great news and represents an opportunity for woman-owned firms.  If you are interested in working with DGE, please contact us.

What is the System for Award Management (SAM)?

The System for Award Management (SAM) located at www.sam.gov is the data repository necessary for doing business with the federal government.  The website is free to the public and users of SAM include contracting officials, contractors, and the public. 

To be awarded a contract by the federal government, contractors are required to register in SAM.  The one-time registration provides basic information for both procurement and financial transactions.  The information must be validated annually by updating and renewing the entity registration. 

SAM allows government agencies, contracting officials, and other contractors to search for your company based on your ability, size, location, experience, ownership, and more. SAM allows users to search for firms certified by the Small Business Administration (SBA) under the 8(a) Development and HUBZone Programs. SAM also incorporates the Online Representations and Certifications Application (ORCA) system.  ORCA is a web-based system where the contractor provides required information about the company (e.g., accounting procedures; travel policies).  ORCA verifies that the firm meets certain Federal requirements (e.g., complies with equal opportunity legislation).

SAM validates the contractor’s information and electronically shares the secure and encrypted data with the Federal agencies' finance offices to facilitate paperless payments through Electronic Funds Transfer (EFT). Additionally, SAM shares the data with Government procurement and electronic business systems. A contractor only needs to input business information in one database), which will then automatically populate the SBA Dynamic Small Business Search (DSBS) database.

As a contractor to register in SAM you need to have the following:

• Dun & Bradstreet Data Universal Numbering System (D-U-N-S®).  See my previous blog Dun & Bradstreet (A Necessary Evil)
• Taxpayer Identification Number (TPIN) is an identification number used by the Internal Revenue Service (IRS).  The TPIN will be verified by the IRS so it must be entered EXACTLY like the paperwork from the IRS.  The TPIN will be either the Employer Identification Number (EIN) for the contractor company or in the case of a Sole Proprietor the number will be the Social Security Number (SSN).  Keep in mind activating a new EIN with the IRS takes 2-5 weeks.
• Bank Account information for EFT
• North American Industry Classification System (NAICS).  The NAICS codes will inform the public what kind of industry work you can perform.

Once your registration is submitted for processing, information from SAM is routed to Defense Logistics Information Service (DLIS) in Battle Creek, Michigan for Commercial and Government Entity (CAGE) Code assignment.  Once the CAGE code is approved it will be sent to SAM to update the registration.  Government contracting requires a CAGE code.   The code may be used for a Facility Clearance, a Pre-Award survey, automated Bidders Lists, pay processes, source of supply, etc. In some cases, prime contractors may require their sub-contractors to have a CAGE Code also.

For further information please visit the DGE web site.

As a Woman-Owned Small Business (WOSB) who should I market?

Government contract awards need to meet socioeconomic goals.  The fact that DynaGrace Enterprises (DGE) is both a Woman-Owned Small Business (WOSB) as well as an 8(a) makes DGE count in multiple socioeconomic categories for these objectives. Formal goals are in place by the Small Business Administration (SBA) to ensure small businesses, like DGE, especially those with socially and economically disadvantaged individuals, get work from the Government. Marketing the socioeconomic advantage to customers as a way for them to meet their SBA goals is an important marketing strategy. DGE utilizes several places to determine socioeconomic marketing targets:

1. The SBA produces a scorecard for 24 agencies required to report the socioeconomic goals of their procurement activities. For Fiscal Year 2014 the document is titled FY 2014 Scorecard Summary by Prime Spend with Sub K and Plan Progress Document and is represented in the following graphic. 



FY 2014 SBA Scorecard Summary

According to the data, DGE should market the following agencies:

Agencies that did not meet their WOSB goals

• Department of Defense
• Department of Energy
• Department of Veterans Affairs
• National Aeronautics and Space Administration
• National Science Foundation
Agencies that did not meet their SDB goals

• Department of Energy
• Department of Education
2. DGE utilizes the Small Business Dashboard to analyze potential marketing targets. The data can be up to 90 days delayed in posting, but it still gives a visual picture of socioeconomic percentage trends. The following represents a partial listing of this data. According to the Small Business Dashboard, DGE will target the following agencies:
Agencies that did not meet their WOSB goals

• Department of Defense
• Department of Energy
• Department of Veterans Affairs
• National Aeronautics and Space Administration
• Agency for International Development
• Executive Office of the President
• Federal Energy Regulatory Commission
• Railroad Retirement Board
• Equal Employment Opportunity Commission
• Federal Trade Commission
• National Gallery of Art
• Agency for International Development
• National Transportation Safety Board
• Recovery Accountability and Transparency Board
Agencies that did not meet their SDB goals

• Department of Energy
• Department of Education
• Consumer Financial Protection Bureau
• Peace Corps
• Millennium Challenge Corporation
• Federal Energy Regulatory Commission
• Railroad Retirement Board
• Equal Employment Opportunity
• National Gallery of Art
• National Transportation Safety Board





Small Business Dashboard

Once marketing targets are identified DGE queries the Federal Business Opportunities, FedBizOpps (FBO) and discovers procurement opportunities by Agency and then further defined by North American Classification System (NAICS) code. DGE can approach the procurement official about utilizing WOSB or 8(a) set asides for their procurement effort to meet their socioeconomic goals. Also, physical visits or digital email by DGE business development personnel and attendance at agency conferences is a must for the socioeconomic marketing plan to succeed.

For further information please visit the DGE web site.

Dun & Bradstreet (A Necessary Evil)

A necessary evil is defined in the Cambridge Dictionary as “something unpleasant that must be accepted to achieve a particular result.”  Yes, a Data Universal Numbering System (D-U-N-S®) number is just that, unpleasant.  You must have one to do business with the federal government.

From the D&B website:

“Created in 1962, the Data Universal Numbering System or D-U-N-S® Number is D&B's copyrighted, proprietary means of identifying business entities on a location-specific basis.  Assigned and maintained solely by D&B, this unique nine-digit identification number has been assigned to over 100 million businesses worldwide.”

“The D-U-N-S® Number is widely used by both commercial and federal entities and was adopted as the standard business identifier for federal electronic commerce in October 1994.  The D-U-N-S Number® was also incorporated into the Federal Acquisition Regulation (FAR) in April 1998 as the Federal Government's contractor identification code for all procurement-related activities.”

A real mix of commercial and federal government usage is what this appears to be.  To do business with the federal government, you have to register with a commercial company first to obtain an identification number.  This process has never made sense to me and every time I have had to register either a joint venture or new company it is painful. 

It used to be worse.  Back in the day it could take three weeks to get a D-U-N-S®.  If you had any trouble, it amounted to talking to about ten different people before you got to the department.  Then you were placed on their sales list for them to try and sell their products and services to you. 

According to this article, “Is GSA stuck with proprietary numbering system?” the current contract for D-U-N-S® numbers is an eight-year, sole-source contract awarded to Dun & Bradstreet in 2010. The contract now totals up to $154 million, according to GAO.

Noted in this 2012 letter sent to Senator Ben Nelson (D–NE) the Government Accountability Office (GAO) identified challenges.  I believe D&B has a monopoly on the numbering system for the federal government.  Regardless you will need a D-U-N-S before you can register your business in sam.gov to obtain your Commercial and Government Entity (CAGE) code.  The link to establish a D-U-N-S® number for the federal government is http://fedgov.dnb.com/webform, and you will need the following:

• Personal Point of Contact Information (Name, Email, Address, Phone)
• Business Information (Legal Name, Address, Structure, Date Started, Ownership Demographic

The last time I got a D-U-N-S® I was in a hurry.  They do not notify you that you have received a number.  You will need to call them.  It took four days.  Once you have the number, you can proceed to register your business in sam.gov.  It is part of the process to start doing government contracting.  Yes, a necessary evil but in government contracting you must get used to doing exactly what is needed to obtain work.

Choosing a Business Bank Account

So you have incorporated, and that is a significant step in the right direction.  All is well in the world, but now you need a place to do financial transactions.  Part of registering your business to do work for the federal government involves having a bank account to transfer money back and forth.  Choosing a business bank account is harder than choosing a personal bank account because of all the options.

The choice of business bank accounts boils down to whether you are going to carry a large balance and how many transactions you have each month.  That will determine your monthly fees. 

To establish a bank account you need the following:

• Articles of Incorporation for Corporation or LLC
• If a Sole Proprietor or Partnership you will need one of the following:
• Fictitious Name Certificate or Statement
• Certificate of Assumed Name
• Business License
• Registration of Trade Name
• Employer Identification Number (EIN)

You have choices between banks.  You can choose a big nationwide Bank, a community bank, a credit union or an internet bank.  I wanted a nationwide bank because of my business with the federal government.  Currently, I have contracts in several states, and I needed the ability to have a bank that was not local.  To compare all options, including local credit unions, NerdWallet provides an extremely handy tool called “Compare Business Checking Accounts.”  I provided my experience in the table below of three nationwide banks.

Bank	Monthly Fee	Minimum Opening Deposit	No Charge Transactions and Deposits	Interest Bearing	Online and Mobile Access
Wells Fargo (Simple Business Checking)	$10	$50	Includes 50 transactions and $3,000 in cash deposited monthly	No	The have both.  However, their online system is not as friendly as other banks.  It is somewhat difficult to use. They have online statements and access to check images.
Chase (Total Business Checking)	$10 when you are enrolled in Paperless Statements (or $12 for paper statements); waived when you maintain a $1,500 minimum daily balance	$25	Includes 200 transactions per month without a fee and $7,500 in cash deposits each month without a fee	No	Chase has the best online banking and mobile access system.  If this is important to you, then choose them.
Bank of America	No monthly fee first two months, then $17/month	$100	500 transactions per month at no cost. Additionally you can deposit up to $25,000 cash to the account without a fee.	No	I have not used their online or mobile access, but they do provide it.

If you know me, Linda Rawson, I am commonly called she-geek.  So the relatively small difference in cost made me want the high-quality online banking.  We use Quickbooks Online, and it synchronizes with Chase.  Don't make the decision for a business bank account quickly but analyze your true needs as a business owner.

Choosing a Corporate Structure (One size does not fit all)

DISCLAIMER:  I, Linda Rawson, am not an attorney or accountant.  I am merely giving you my opinion and lessons learned from my experiences.

 

Okay.  Pay attention to that disclaimer as I will be referencing it again.  The proper way to choose a corporate structure is to consult an expert such as an attorney or accountant.

One of the first and most important choices when starting a business is the selection of the type of legal entity your company will be.  This decision will affect how much you pay in taxes, how much paperwork you will need to do, determine personal liability and impact the ability to raise money through the sale of equity.

I reviewed C Corporation, S Corporation and Limited Liability Company (LLC) when I started my business. 

C Corporation and S Corporations require a corporate return, corporate minutes and give you the option to establish shares to sell for equity.  It sounded like a lot of high-cost record keeping work that I wanted to avoid.  Nobody likes to do paperwork. 

When I started, it was just me.  I didn’t imagine I would be anything else other than a consultant.  I thought I would be claiming all my income on my individual tax return Schedule C.   I wanted simpler taxes, so I incorporated as an LLC without consulting an attorney or accountant.  The State of Utah makes it so easy to incorporate.  It even generates the articles of incorporation for you.  Why would I want to do all that extra bookkeeping?

Then the next thing is filing with the IRS.  Here is where I made a critical error that almost prevented me from obtaining my 8(a) status when I first applied.  They classified me with my Employment Identification Number (EIN) as a Single-Member LLC.  Single-Member LLC was great until the SBA said an LLC is defined as one or more people and we cannot approve your application unless you get this changed.  I had ten days, I added my daughter as the other member, expedited the articles of incorporation, and our 100 percent Woman-Owned Small Business (WOSB) expanded to two people.  That was in 2009 when our 8(a) application was approved by the SBA.

Later, after participating in the Mentor-Protégé Program, we used a lawyer to convert DynaGrace Enterprises to an S Corporation to have the option to sell shares if we needed to raise capital.  Payment for government work can be delayed up to 90 days and as a company you have to carry that money and wait for the government to catch up.  You will get paid, but it may take some time. 

The main advantage to switching to an S Corporation was to minimize Social Security and Medicare taxes for myself and to limit my personal liability.  The profit and losses are still passed to me utilizing a K-1 form and reported on my individual return.   I didn’t choose to experience the double taxation that is the downside of the C Corporation.

When I started my business, Sole Proprietorship wasn’t talked about much but it is my understanding if you own 100 percent of your business this may be the option for you.  Again please consult an attorney or accountant to figure out the best choice.  

Remember in business, as in life, one size does not fit all.  

It can be expensive to convert to a different corporate structure later, but it is not a critical mistake, and change can mean growth but know the facts and make the best decision at the time.