choose does not contain the owner’s surname, a request to use a fictitious name, or DBA (doing business as) is required in most places. If the name of your business includes your last name, you might not be required to file a fictitious name approval. The cost for registering your fictitious name varies from country-to-country. In the United States, it is about
$20.00. There is also a requirement to publish that name in a newspaper for several days. The U.S. cost for this is usually about $30 to $40.
Business Organization
Next, decide how your business will be organized. The three common legal forms are sole proprietorship, partnership, and corporation. Most start-up import /export businesses begin as proprietorships or partner- ships. They find little need to take on the extra paperwork and report- ing requirements of a corporation in the beginning. Select the form of your business based on the intent, complexity, tax implications, and lia- bility requirements of the business. If you’re in doubt, consult a lawyer.
Partnership agreements and incorporation papers can be expensive, ranging from as little as a few hundred dollars to several thousand.
Business License
Some countries require licenses to do international trade, but in the United States there is no licensing requirement; that is, there is no regu- latory body that requires you to show special qualifications in order to present yourself as an importer or exporter. However, like any other busi- ness, you probably must meet local and state business licensing require- ments. It is possible that the foreign country you are doing business with will require a license as well. Check with your freight forwarder.
Seller’s Permit
Most nations and states have a sales tax. In order to ensure collection, a seller’s permit is often required. These permits are usually state controlled, so as you begin your own import /export business, you should investigate your local laws.
Financial Records
Open a separate bank account in the name of your business. Keep accu- rate records, and pass all business income and expenses through your business account. Do not pay personal expenses from this account or otherwise mix personal income or expenses with business income and expenses. You may list personal “capital contributions” and “capital withdrawals,” but keep these infrequent and in reasonably large sums—
don’t take out money in dribs and drabs.
Accounting
From the beginning, learn to keep a simple set of books to feed into your Internal Revenue Service (IRS) forms at tax time. Keep a careful record (and all receipts) of all business expenses, and invoice all work on your company letterhead. At a minimum, you will need a general ledger organized into four sections: expenses, income, receivables (sales invoiced), and payables (bills received). For example, your expenses, like the cost of your trip to Hong Kong or Paris, should be listed chrono- logically, by month, down the left margin of the expense section. Across the page, the categories should correspond to tax categories. Check current IRS publications and tax software.
What kind of expenses should you expect in your own import /export business? Here are the most common ones:
• Stationery and business cards
• Telephone, answering machines, computer, calculator, copier, facsimile
• Internet Web site
• Rent, utilities, office furniture
• Inventory
• Business checking account
• Salaries and other staff expenses
• Travel
Table 6.1 offers an example of the categories of expenses shown in the expense section of your general ledger. The other sections of your ledger should be set up similarly.
The Office
You can set up an office in your home or elsewhere. The location and outfitting will be determined by the volume and complexity of your firm. In the beginning, you may do business by letter and/or use e-mail and fax and part-time employees only occasionally. However, as your import /export business grows, you may need warehouse space for inventory and a larger office for a growing staff.
Employees
As your office and trading staff grows, the complexity of paperwork and record keeping will also grow. Prior to hiring anyone, you must obtain an employer ID number from the IRS. You should also consider worker’s compensation and benefits insurance.
Business Insurance
Other kinds of business insurance that you should consider on a case-by-case basis are liability, disability, an FCIA (Foreign Credit Insurance Association) umbrella policy, and a customs bond.
Support Team
Early in the establishment of your import /export business, you should develop a relationship with your international support team. After a brief period of shopping around, settle on a long-term relationship with Table 6.1 Categories of Expenses
Telephone/ Travel Travel Office
Date Utilities Fax Air Auto Expense
January February March
(1) an international banker, (2) a freight forwarder, (3) a customs house broker, (4) an international accountant, and (5) an international attorney.
Also, consider contacting the Small Business Administration (SBA) if you run into problems. Members of the SBA’s Service Corps of Retired Executives (SCORE) are often available to provide free advice.
The 10 Commandments of Starting an Overseas Business
1. Limit the primary participants to people who not only can collaborate and contribute directly, but also are experienced in some form of international business.
2. Define your import /export market in terms of what is to be bought, precisely by whom, and why.
3. Concentrate all available resources on two or three products or objectives within a given time period.
4. Obtain the best information through your own industry.
5. Write down your business plan and work from it.
6. “Walk on two legs.” Pick a good freight forwarder or customs house broker to walk alongside your banker.
7. Translate your literature into the language(s) of the country(ies) in which you will do business.
8. Use the services of the Departments of Commerce and Treasury.
9. Limit the effects of your inevitable mistakes by starting slowly.
10. Communicate frequently and well with your international contacts, and visit the overseas markets and manufacturers.