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TABLE OF CONTENTS

Introduction........................................................................................................... 1

A Business Plan...................................................................................................... 2

Suggested Outline of a Business Plan ...................................................................... 7

Business Start Up Checklist................................................................................... 10

Ways to Legally Structure a Business and Registering a Business Name .................. 14

Licenses, Permits and Other Regulations ............................................................... 18

Business Taxes .................................................................................................... 22

Being Self-Employed ............................................................................................ 26

Buying a Business ................................................................................................ 30

Hiring Employees ................................................................................................. 32

Financing a Business ............................................................................................ 39

Managing a Business............................................................................................ 49

Insurance ............................................................................................................ 55

Selling to Government and Exporting .................................................................... 57

Michigan Technical Assistance Centers .................................................................. 59

Now What?.......................................................................................................... 60

APPENDICES

Appendix A Michigan County Clerk Offices .......................................................... 61

Appendix B Information for Employers Hiring Employees .................................. 64

Appendix C Small Business Development Centers................................................ 70

Appendix D SCORE Workshops .......................................................................... 72

Appendix E Index of State and Federal Government Websites.............................. 77

Appendix F About the Small Business Administration (SBA).................................. 81

INTRODUCTION

Starting a business can be a complex and difficult process. It takes persistence and
diligence, and investments of time and capital. Knowledge about state regulations,
support programs for businesses and other opportunities can certainly aid and
accelerate the process of getting a business started.

A key activity of the Michigan Economic Development Corporation, and of state
government in general, is to help businesses open and grow. This guide is designed
to ease a person's entry into the business world, outlining as clearly as possible
many of the issues and questions facing prospective entrepreneurs.

Information included in this guide is both general and Michigan-specific; from
outlining the different forms of business organization and establishment of a basic
business plan to complying with federal, state and local tax obligations and
obtaining necessary licenses and permits. Though this guide is not a substitute for
legal counsel, it is an information source and quick reference designed to facilitate
and expedite the process of starting a business in Michigan.

Even though this information was current at the time of publication, it is subject to
change due to revisions in law and administrative policies. However, there are a
variety of sources available for starting a business in Michigan: the state's Small
Business Development Centers and the Service Corps of Retired Executives program
are good starting points.

Further, a wealth of information, assistance and counseling is available from local
economic development organizations, trade associations, local chambers of
commerce, schools, community colleges, universities and public libraries. To
overlook such an abundance of resources could be both foolish and, ultimately,
costly.

A BUSINESS PLAN

INTRODUCTION
Why should anyone go to the trouble of creating a written business plan? There are
several reasons:

ó The process of putting a business plan together, including the thought put in
before beginning to write it, forces one to take an objective, critical, unemotional
look at the business project in its entirety.
ó A business plan is an operating tool, which, if properly used, will help manage
the business and work effectively toward its success.
ó Lenders require one. A completed business plan communicates ideas to others
and provides the basis for a financial proposal.

The importance of planning cannot be overemphasized. Taking an objective look at
the business plan will identify areas of weakness and strength, pinpoint needs that
might otherwise be overlooked, spot opportunities early. One can then begin
planning on how best to achieve a business goal.

Your business plan is a working document, use it. Don't put it in the bottom drawer
of a desk and forget it. Going into business is rough-over half of all new
businesses fail within the first ten years. A major reason for failure is the lack of
planning. The best way to enhance chances of success is to plan and follow through
on that plan. Your business plan provides benchmarks and milestones for you to
use as measures of your success.

A business plan will help avoid going into a business venture that is doomed to
failure. If the proposed venture is marginal, the business plan will show why and
may help avoid paying the high tuition of learning about business failure. It is far
cheaper not to begin an ill-fated business than to learn by experience what a
business plan would have taught at the cost of several concentrated work hours.

The business plan also provides the information needed by others to evaluate a
venture, especially if seeking outside financing. A thorough business plan will
quickly become a complete financing proposal that will meet the requirements of
most lenders.

FRAMEWORK
Business planning does not offer solutions to business problems. Rather, business
planning is the framework in which to structure concepts and information about a
project. A well-written business plan will determine the feasibility of a project and
lay out the action necessary to complete it.

Several adjectives can be used to describe the business planning process: logical,
rational and regimented. A business plan organizes, directs, coordinates, controls
and facilitates the development of a project from its inception to its completion. No
matter how the process of the plan is described, basic business planning is a
systematic methodology for reducing risk and enhancing success for any type of
business operation.

There is no exact formula for putting a business plan together. There are, however,
a number of `specific' topics that should be covered:

* Executive Summary: This is an overview of the business plan. Even though it
will be at the beginning of the plan, write it after the rest of the plan is completed.
It brings together the significant points and should convey excitement.

General Description: Explain the type of company. If this is an existing
business, give its history. If it is a new start-up business, note some of the
qualifications to start this business. Why is this business needed and what is its
chance for success?

Products and Services: Describe the product and/or service. What are its
unique features? Why will customers come to this business?

Marketing: Identify your target market. There should be specific target
markets that will need your products or services and be willing to pay for them.
These have similar characteristics that can be identified and used in your marketing
efforts. Outline your marketing strategy a competitive edge to draw customers
to you rather than your competition. List your primary competitors and provide an
honest appraisal of their strengths and weaknesses and how you will compete
successfully against them.

Management: Identify the people who will be active in this business. Describe
their skills and experiences.

Legal: Describe the type of legal organization; sole proprietorship, partnership,
"S" corporation, limited liability company, corporation. Are patents or trademarks
involved?

Finances: State the business' financial requirements and where these funds will
come from. Project revenues, costs, and profits. Your efforts in developing the
financial statements will help you understand the cash flow of your business, your
break-even point and the sensitivity of your business to fluctuations in business
levels.

Operations: Explain any systems or processes that will be used. What facilities
will be used? What supplies will be needed and where can they be obtained? Who
will provide the labor and how will it be accessed? What are the hours of operation
of the business?

Remember that the summary, which starts your plan, is the single most important
part. Many people will not read past the summary. It must enthusiastically present
enough information so readers will continue. How long will the plan be? Probably
not much more than ten pages. The complexity of a business plan will vary with the
type of business, and the size will reflect that complexity.

Everyone needs help in putting a business plan together. There are several well-
written brochures and books available at libraries and bookstores for assistance.
Most large accounting firms have manuals available. If more assistance is required,
contact your local Small Business Development Center (see Appendix C) or visit their
web site at www.mi-sbdc.org. Various legal and financial consultants are listed in
the Yellow Pages.

A business plan is a prediction of the future based on current abstractions,
assumptions and estimates. This is unavoidable if you could see into the future,
there would be no need for a business plan. When a business plan is implemented,
the plan comes in contact with reality. This could be a nasty shock for many
business entrepreneurs causing a good deal of doubt about their business plan.
However, reality is the feedback necessary to reinforce or adjust the business plan
to achieve project completion. If a plan is not working, change items in the plan.
The plan itself will show what impacts a change will have on other areas of a
business. A business plan is never cast in stone it is a working document. Use it
as a management tool.

GOALS/OBJECTIVES
A business plan forces a business entrepreneur to establish written goals and
objectives:
* Achievable * Realistic
* Quantifiable * Both short and long term
* Prioritized * Action oriented
* Coordinated * Scheduled, i.e., time related
Once goals and objectives are set they must be translated into strategies and
paths of action.

INFORMATION
For a new business or operation, a business plan is the first piece of information
that is brought together in one document. The information contained in a
business plan will be the basis for both the entrepreneur's decisions and those of
lenders, creditors, etc., who will review the business. After implementing a
business plan, measure the performance against the facts and figures in the
plan. This will help evaluate where the weaknesses and strengths lie.

COMMUNICATIONS
One of the most important aspects of a business is communication. A business
plan is one of the easiest and most reliable communication tools you can
possess. The plan will relay to the reader information about the business.

A business plan can be used to communicate information to a variety of people.
Lenders and creditors will obviously want to read it. A decision on whether to
extend credit will be based on the information in the business plan.

Internally, the business plan can be used to communicate the goals of the
business and how the firm operates. This will help define the roles in the
business and may improve the efficiency of an operation. It could certainly
improve the coordination among various sections of a business.

MANAGERIAL SKILLS
Most business plans are written to acquire capital from lenders. However, a
business plan is a very useful management tool, and will help develop
managerial skills.

Developing a business plan provides a set of decisions and assumptions about
the business and the economy. Comparing actual events to your decisions and
assumptions provides the basis for a day-to-day decision-making process. The
plan will help evaluate the effects of alternatives before a decision is
implemented. It will assist in balancing important issues, and also give the
owner a sense of prospective relating one area of activity to another. The
business plan will also assist in fitting the skills of the employees to specific jobs.

PROBLEMS/OPPORTUNITIES
The business plan gives a structure within which unforeseen problems can be
solved.

Many problems can be avoided, as the business plan will bring them to your
attention before they become critical. If necessary, safeguards can be written in
the business plan to avoid unforeseen problems. The importance of avoiding
problems cannot be over emphasized. If a problem becomes serious enough
and impacts on the business balance sheet and income statements (i.e., the
track record of the company), this can have a disastrous impact on the business'
ability to raise funds and receive future credit.

RESOURCES
All businesses have limited resources, which can apply to competing business
operations. The business planning process will help differentiate among
competing operations and allocate resources to optimize profits.

When writing a business plan, concentrate on the amount of resources (i.e.,
capital, expertise, etc.) that will be required to bring a project to bear fruit and
not what can be collected. It is far better to postpone a project than have it fail
due to lack of resources.

ORIENTATION
A business plan should be oriented to creating a business, which will satisfy the
wants and needs of future customers, rather than producing a product or
providing a service. A market orientation will help avoid the pitfalls of opening a
business to satisfy the desire of owning a business. The best possible situation is
where skills and abilities mesh with the wants and needs of the customer to form
an efficient high demand business.

SUGGESTED OUTLINE OF
A BUSINESS PLAN

1. Cover Sheet
Name of business, address and telephone number and the name(s) of
principal(s). Include any pertinent contact information (cell phone, fax...)

2. Executive Summary Statement of Purpose
A summary of the business covering at least the following items: the name of
the business, its legal structure, the amount and purpose of a loan request, a
repayment statement, the business concept; product information; current
stage of business (start-up, developing or existing); and anticipated financial
results and other benefits.

3. Table of Contents

4. The Business
a. Description of business: What product or service will you provide?
b. Historical development: List the name, date of information, legal
structure, subsidiaries and degrees of ownership of your business.
c. Product/service lines: What is the relative importance of each
product/service? Include sales projections based on research conducted
to identify the market.
d. Market segment: Who will buy your product? How many of them are
there and why will they want what you are offering?
e. Competition: Describe competing companies and how your business
compares. Remember to include all substitute product/service providers.
f. Location: Where will you locate and why?
g. What will be your hours of operation?
h. Marketing: what marketing methods will you use?

5. Management
a. Business format: Is your business a sole proprietorship, partnership,
limited liability company or corporation? Explain why you chose this form
of business compared to others.
b. Organizational chart: What is the personnel structure? Who are the key
individuals and planned staff additions? How many and of which type will
you need at the different stages of the business cycle?
c. Personnel: What are the responsibilities and past experiences of partners
and employees? How will they contribute to the success of the company?

6. Finance
a. Description of the project.
b. Total estimated project cost. Do NOT expect the lender to tell you how
much money you can borrow. Explain how much money you need and
WHY.
c. Breakdown of the proposed uses of project funds. Consider presenting
the total project in stages or phases of development to better identify
cash requirements.
d. Lending institution participation, including terms and conditions.
e. Equity participation of the owners and investors.
f. Projections and assumptions for
(1) Two years of both Profit and Loss statements and Balance Sheets.
(2) One year of company Cash Flow, month-by-month.
g. Personal financial statement of owner.

7. Production
a. Description: How will production or delivery of services be accomplished?
b. Capacities: What physical facilities, suppliers, patents, labor and
technologies exist or will be used?
c. Capital equipment: What type and amount of machinery and durable
equipment is needed to operate the business?
d. Supplies: Where and how will you obtain your components and day-to-day
supplies and services?

8. Supporting Documents
Include personal resumes; personal financial statements; cost of living
budget; letters of reference; letters of intent; job descriptions; copies of
leases, contracts and other legal documents that help convey an accurate
picture of the business. Also include descriptive drawings to identify
proposed site plan of facility and floor plan of operations.

Contact the nearest Small Business Development Center (See Appendix
C) if you have additional questions about writing a business plan.

BUSINESS START-UP CHECKLIST

£ Have you determined the type of business structure your
organization will assume?

To learn more about the advantages and disadvantages of various legal
structures, refer to section "Ways To Legally Structure A Business and
Registering A Business Name." An attorney, accountant or business
counselor at the nearest Small Business Development Center (See Appendix
C) may be able to help determine which business structure is best for the
business.

£ Have you followed the appropriate procedures to register your
business name?

There is no central agency where all businesses must register. Depending on
the legal structure chosen, the business entity may be required to file with
the local county clerk's office (See Appendix A) or the State of Michigan. In
addition to checking with both agencies to determine if the name is available,
it is also advisable to check state and federal trademark registrations and
registered Internet domain names. To check on name availability for sole
proprietorships and partnerships, contact the county clerk's office. To check
name availability for corporations, limited liability companies or limited
partnerships, contact the Bureau of Commercial Services, Corporation
Division, Department of Consumer & Industry Services at (517) 241-6470 or
visit their web site at http://www.cis.state.mi.us/bcs/corp/home.htm.

An individual doing business as a sole proprietorship using a name other than
his or her own name must file with the county clerk the name under which
the person will do business, commonly referred to as a DBA (doing business
as). A general partnership must file a certificate of co-partnership with the
county clerk. Contact the local county clerk's office to check the availability of
sole proprietorship and partnership names and to obtain required forms.

To create a corporation, limited partnership or limited liability company,
contact the Bureau of Commercial Services, Corporation Division, of the
Department of Consumer and Industry Services. To check name availability,

you may call customer service at (517) 241-6470 or fax your request to (517)
334-8329. For information about filing requirements, please call (517) 241-
6400. Forms may also be obtained via the Corporation Division website at
http://www.cis.state.mi.us/bcs/corp/home.htm.

To obtain forms by fax call (517) 334-6905. To request that forms be mailed
to you, call (517) 241-6470, fax your request to (517) 334-8329, or mail your
request to Post Office Box 30054, Lansing, Michigan 48909-7554.

For information about how a corporation receives Subchapter S status,
contact the Internal Revenue Service at (800) 829-3676 or at their web site
http://www.irs.gov/ for specific forms and information.

£ Have you determined if the business or profession is subject to any
special licensing or permit requirements?

Some occupations, professions and business activities require certification or
licensing. You may access the licensing, certification and permit information
on-line at http://www.michigan.gov/license. Check with the county clerk
and/or your city clerk to determine if any local licenses or registrations are
required and obtain the necessary forms.

£ Have you registered for a federal employer identification number-
EIN?
Generally, an EIN number is required by the Internal Revenue Service if:
1. The business will have employees; and/or
2. The business operates as a corporation or partnership.

If operating the business as a sole proprietorship and you answered no to the
above questions, there is no need for an EIN number at this time. Taxes are
reported by using your Social Security number. You may apply for an EIN
either by faxing your SS-4 (Application for Employer Identification Number
EIN) to (859) 292-5760 or by calling (859) 292-5467. For more information,
visit the IRS web site at http://www.irs.gov/tax_edu/faq/faq12-5.html.

£ Have you registered with the IRS for payment of federal taxes?
All businesses are required to pay taxes to the federal government. The legal
structure, whether there are employees or one is self-employed, and the type
of business determines which taxes apply and time-line of payment. Most
businesses are required to make regular payments of estimated tax
throughout the year. For more information, visit the IRS web site. If you
have questions about determining your federal tax liability or your payment
schedule, contact the IRS at (800) 829-1040.

£ Have you registered with the Michigan Department of Treasury for
payment of state taxes?
Depending on the type of business conducted; whether or not there are
employees; the amount of gross receipts; selling or leasing a product, etc.,
the business may be required to pay Michigan taxes. To determine your
liability and to register for Michigan taxes, a Registration for Michigan Taxes
form 518 is required to be completed and returned to the Michigan
Department of Treasury. You may obtain form 518 and instructions for filing
online at http://www.treasury.state.mi.us/formspub/suwind.htm#Register.
Be aware that individuals with income from sources other than wages may be
required to make estimated tax payments on a quarterly basis to the
Michigan Department of Treasury as well as federal tax authorities. Contact
the Michigan Department of Treasury at (800) 367-6263 or (517) 373-0888
or access the forms and information online at
http://www.treasury.state.mi.us/formspub/frmindex.htm.

£ Will the business hire employees?
If employees are hired, there are responsibilities with both the state and
federal government. NOTE: If the business is a corporation, anyone who
performs services for the corporation or receives remuneration-including an
"owner"-is considered an employee. There are many tax, insurance and
regulatory requirements of which one must be aware. Refer to the "Hiring
Employees" section to learn more about an employer's obligations.

£ Have all environmental regulations been checked to ensure that the
business will meet all air, water, and solid waste standards?
To ensure that the business meets all of the environmental regulations that
apply to a specific type of business, contact the Michigan Department of
Environmental Quality at (800) 662-9278 or access the environmental permit
online at http://www.deq.state.mi.us/ead/permits.

£ Are you purchasing an existing business? Be aware of hidden
liabilities.
As the purchaser of even a portion of a business, you may be held
responsible for the previous owner's liabilities, regardless of any contractual
language to the contrary. As the purchaser of the business, you should make
sure that the seller of the business provides proof that there are no hidden
liabilities. The seller of the business should contact the Michigan Department
of Treasury at (517) 334-8189 to obtain form 514 to request a Tax Clearance
letter, or you may access the information online at http://www.treasury.state.
mi.us/formspub/tcind.htm. As the purchaser of a business, it is wise to
obtain a copy of this Tax Clearance letter from the seller prior to the closing
date or signing any purchase agreements. Also, contact the Unemployment
Agency at (800) 638-3994 or online at
http://www.cis.state.mi.us/ua/homepage.htm to obtain information on
successor liability.

£ Has careful consideration been given to the business location and is
the operation consistent with current zoning and building codes?
Make sure the location that has been chosen is zoned appropriately for your
type of business and that all state and local building codes and barrier free
design rules are met. A certificate of occupancy is also required from the
local government. Contact the local government authorities, including the
building department, for pertinent information. Some inspections and
alterations may be required to meet state and/or city codes. When operating
a business out of your home, check with the city clerk's office about a zoning
variance.

£ Have arrangements been made for utility service?
Check with the utility companies to ensure prompt delivery of service and to
obtain the cost of service extensions, the amount of any required deposits,
and written price and supply agreements.

£ Is the business adequately insured?
Contact an insurance agent to determine the types of insurance the business
should purchase. Shop around. Insurance rates and types of coverage vary
greatly among insurance carriers. Contact the nearest Small Business
Development Center (Appendix C) for additional information or
questions about starting a business.

WAYS TO LEGALLY STRUCTURE A
BUSINESS AND REGISTERING A
BUSINESS NAME

When starting a business, one must carefully choose the appropriate legal
structure and register the business name. First examine the characteristics of
each structure along with the needs and desires for the business.

CHOOSING A BUSINESS NAME
Filing your business name with a local county clerk's office or the Bureau of
Commercial Services, Corporation Division, creates no substantive rights to a
name. You may wish to exercise care in selecting a name, however, to avoid
infringing on names filed by other businesses or being used by another entity as
a trademark, service mark or trade name. To protect any rights a business
claims to its name, the business entity must police its name and respond to
anyone who infringes on its rights. To learn more about selecting a business
name, refer to the "Choosing a Business Name" publication of the Department of
Consumer & Industry Services online at
http://www.cis.state.mi.us/bcs/corp/pdf/8009.pdf or call (517) 241-6470.

SOLE PROPRIETORSHIP
A sole proprietor is an individual who owns and operates the business. There is
no legal separation between the individual and the business. A person benefits
from 100 percent of the profits and is personally responsible for 100 percent of
all the debts and liabilities of the business. A sole proprietor who wishes to
conduct business under a name other than the real name of the person must file
a Certificate of Assumed Name in each county where the business is located.
For more information about an assumed name or "DBA" (doing
business as) contact the local county clerk's office (see Appendix A).

GENERAL PARTNERSHIP
A partnership exists when two or more persons join together in the operation
and management of business for profit. Partnerships, like sole proprietorships,
are subject to relatively little regulation and are fairly easy to establish. A formal
partnership agreement is recommended in order to address potential conflicts

before they arise. Under a general partnership, each partner is liable for all
debts of the business. All profits are taxed as income to the partners based on
their percentage of ownership. A general partnership, like a sole proprietorship,
must file an assumed name certificate with the county clerk's office in the
counties in which the business is located. For more information, contact
your local county clerk (see Appendix A).

LIMITED PARTNERSHIP
Like a general partnership, a limited partnership has two or more participants.
In a limited partnership, there are two types of partners. A general partner has
the same rights, powers, and restrictions as a partner in a general partnership.
A limited partner is typically not liable for the obligations of the partnership.
General partners may receive cash or other assets as provided in the partnership
agreement and also incur unlimited liability. Limited partners can only receive a
share of profits based on the allocation in the partnership agreement, and they
do not have a voice in the management of the business. Limited Partnerships
are registered with the Bureau of Commercial Services, Corporation Division of
the Department of Consumer & Industry Services. To form a limited partnership,
contact the Corporation Division at (517) 241-6400 or refer to the on-line
information available at the Corporation Division web site at
http://www.cis.state.mi.us/bcs/corp/assist.htm.

"C" CORPORATION
A corporation is a legal entity having its own rights, privileges and liabilities,
apart from those of the persons forming or owning the corporation. It is the
most complex form of business organization and is comprised of three groups of
people shareholders, directors, and officers. The corporation can own assets,
borrow money, and perform business functions without directly involving the
owner(s) of the corporation. The corporation is subject to more government
regulation than proprietorships or partnerships. Corporate earnings are subject
to "double taxation" when they are passed through as stockholder dividends.
However, corporations have the advantage of limited liability. In order to form
either a profit or nonprofit corporation, "Articles of Incorporation" must be filed
with the Bureau of Commercial Services, Corporation Division, at (517) 241-
6400. Additional information and assistance is available at the Corporation
Division of the Department of Consumer & Industry Services web site at
http://www.cis.state.mi.us/bcs/corp/assist.htm. Copies of forms, statutes, and
publications are available at that site.

SUBCHAPTER "S" CORPORATION
A special section of the Internal Revenue Code permits a corporation to be taxed
as a partnership or sole proprietorship, with the profits taxed at the individual
rather than the corporate rate. To qualify as a Subchapter "S" Corporation, a
business must meet certain requirements. For information about this status and
how to apply, contact the IRS at (800) 829-3676 or online at http://www.irs.gov/
for the appropriate forms. The Articles of Incorporation are filed with the Bureau
of Commercial Services, Corporation Division of the Department of Consumer &
Industry Services at (517) 241-6400 or online at the following web site -
http://www.cis.state.mi.us/bcs/corp/assist.htm.

LIMITED LIABILITY COMPANY
The Limited Liability Company may be treated as a partnership for U.S. income
tax purposes and also provides the limited liability of a corporation. This option
may be the preferred choice for certain new operations and joint ventures.
Owners of Limited Liability Companies are called "members." These are
comparable to stockholders in a corporation or limited partners in a limited
partnership. To create a Limited Liability Company, Articles of Organization are
filed with the Bureau of Commercial Services, Corporation Division, of the
Department of Consumer & Industry Services at (517) 241-6400. If the limited
liability company has two or more members, the members may wish to execute
an operating agreement, which defines the relationship between the company
and its members. Additional information and assistance is available online at the
Corporation Division web site along with copies of forms, statutes, and
publications.

NONPROFIT CORPORATIONS
Nonprofit corporations are a type of corporate entity that limits payment or
distribution of any part of its assets, income, or profit except in conformity with
the purposes of the corporation. Members of the corporation may only receive
profits in conformity with the purposes of the corporation. Generally, a nonprofit
corporation is created under the Michigan Nonprofit Corporation Act. However,
there are many special acts that permit the formation of a wide variety of
nonprofit corporations. Some purposes for which nonprofits are commonly
formed are those involving religious, educational, and charitable activities. To
create a nonprofit corporation, contact the Bureau of Commercial Services,
Corporation Division, of the Department of Consumer and Industry Services. To
check name availability, you may call customer service at (517) 241-6470 or fax
your request to (517) 334-8329. For information about filing requirements,
please call (517) 241-6400. Forms may also be obtained via the Internet at
http://www.cis.state.mi.us/bcs/corp/forms.htm. To obtain forms by fax call

(517) 334-6905. To request that forms be mailed to you, call (517) 241-6470,
fax your request to (517) 334-8329, or mail your request to Post Office Box
30054, Lansing, Michigan 48909-7554.

Some nonprofit corporations may be eligible for exemption from federal income
taxes. Contact the Internal Revenue Service at (800) 829-3676 or access
Publication 557 "Tax Exempt Status for your Organization" on-line along with the
accompanying package "Application for Recognition of Exemption" (Form 1023
and Form 872-C) at http://ftp.fedworld.gov/pub/irs-pdf/k1023.pdf.

An application for exemption from the Michigan sales tax may be obtained from
the Michigan Department of Treasury at (517) 373-0888. Please note that the
sales tax exemption, if approved, applies only to purchases made by the exempt
organization for their own use. Sales of products by the exempt organization to
the general public are NOT tax exempt. More information on nonprofits and the
sales tax exemption is available at the Department of Treasury web site at
http://www.treas.state.mi.us/. You may also wish to contact the Department of
Treasury, Single Business Tax Division, at (517) 373-8030 to determine if your
organization will be exempt from the state Single Business Tax.

If a nonprofit organization is soliciting charitable contributions from the public, it
may need to be registered with the Attorney General's Charitable Trust Division,
Post Office Box 30213, Lansing, Michigan 48909; telephone (517) 373-1152.
When contacted, the Attorney General's Office will mail you (at no charge) an
"Initial Charitable Trust/Charitable Solicitation Questionnaire," or you may
download it from the Attorney General's web site at http://www.ag.state.mi.us/.

The Accounting Aid Society (a private organization) has a start-up packet (for a
fee of $10.00 if picked up at the Detroit Office or a $15.00 fee if mailed for
shipping and handling charges) for nonprofit organizations. Contact the
Accounting Aid Society, 18145 Mack Avenue, Detroit, Michigan 48224, telephone:
(313) 647-9620, or order the packet online at
http://www.accountingaidsociety.org/GettingStartedForm.htm.

LICENSES, PERMITS AND OTHER
REGULATIONS

There is no such license as a "business license" with the State of
Michigan. Several "occupations" and "types" of businesses are required to be
licensed by the state. Michigan has several hundred licensed occupations and
services ranging from doctor to manicurist to wildlife exhibitor to consulting.
These occupations and the "types" of businesses connected with these
occupations often require specific regulations as well as legal, education, and
examination requirements. In several cases, there are also licensing fees that
are required for a specific occupation or profession.

Depending on the specific type of business or manufacturing operation, some
type of certification, license or permit may be required. Access the Licensing,
Certification & Permits information online at http://www.michigan.gov/license.
Check with the city and county clerk (See Appendix A) to determine if any local
licenses or registrations are required and to obtain the necessary forms.

ENVIRONMENTAL CONSIDERATIONS
Small businesses operate in an increasingly complex legal environment.
Concerns about consumer protection and environmental preservation have
received increased attention in recent years. As these concerns are brought
forth to be interpreted into laws and regulations by the government, it is often
translated into a maze of paperwork and restrictions for many business owners.
Take heart government provides a wide-range of assistance to businesses.
One key to surviving the "regulatory jungle" is to be aware of the environment in
which your business operates. No one is expected to become a legal expert.
However, you should know which laws affect the business.

A business involved in activities that may affect the environment (incinerators,
boilers, and other facilities which emit dust, organic compounds, or other
contaminants; discharging processed water, sanitary sewage and cooling water;
solid waste generated by the business) may need one or more permits issued by
the Department of Environmental Quality at (800) 662-9278 or online at the web
site http://www.deq.state.mi.us/ead/permits/chap1a.html. Of particular interest
are businesses that are involved in:

ó Air emission
ó Solid waste disposal/processing
ó Hauling of hazardous waste
ó Major alterations to the landscape
ó Building near waterways or wetlands.

Business owners should also check with county and local authorities about
permits and licensing. Even though the costs of adhering to regulations can be
burdensome for a business owner, the cost of noncompliance including fines,
penalties and even closures can be much greater.

ZONING AND BUILDING CODES AND ORDINANCES
It is important for start-up and expanding businesses to make sure that the
occupied facility is in compliance with all the local laws and regulations. Contact
the city assessor, township or village clerk to assure compliance with all the local
zoning codes. Also, contact the local building inspector to assure compliance
with regulations affecting construction (e.g., building, electrical, mechanical and
plumbing codes; rules about construction, alterations, demolitions, occupancy
and use of buildings).

A home-based business is subject to many of the same local laws and
regulations. There are some general areas to check out. You may wish to
consult an attorney.

Be aware of your city, county and village zoning regulations. If the business
operates in violation of the local government's laws and regulations, you could
be fined or closed down.

Certain products cannot be produced in the home. Most states outlaw the home
production of fireworks, drugs, poisons, explosives, sanitary or medical products
and toys. Strict rules apply to the processing of food/drinks and the
manufacturing of clothing.

For information about the laws and regulations at the city, county or village level
you should contact your local government agency.

BARRIER FREE DESIGN
A special part of the building code, Barrier Free Design, has been public policy in
Michigan since 1966. In 1992, the Americans with Disabilities Act mandated
federal requirements concerning barrier free design. These regulations are
intended to ensure that public facilities and facilities used by the public are
accessible to and usable by all citizens, including elderly persons, wheelchair
users and individuals with permanent or temporary conditions that reduce
coordination, mobility or make walking difficult or insecure. While local units of
government have the option of either enforcing the state construction code or
adopting and enforcing another acceptable code, businesses must conform to
the barrier free design requirements of the state code. No exceptions to the
state requirements can be made by a local unit of government or a state
department, agency or person, except the Barrier Free Design Board. The Board
has established guidelines that describe the conditions under which it may grant
exceptions. A person requesting an exception must demonstrate reason, either
technical or economic, to warrant the exception. For additional information and
a publication providing more detail about barrier free design requirements,
contact the Department of Consumer and Industry Services, Bureau of
Construction Codes, Barrier Free Design Division at (517) 241-9300 or online at
http://www.cis.state.mi.us/bcc/divisions/planrev/prdiv.htm.

TRADE AND SERVICE MARKS
A trademark is the "brand name" by which products are identified by a particular
manufacturer or distributor. A trademark is a word, phrase, symbol or device, or
any combination other than a trade name adopted and used to identify products
and to distinguish them from similar products made or sold by others. A service
mark is similar to a trademark and is used to identify and distinguish between
services sold or advertised by a person from similar services of others.

Registration of a mark used in Michigan gives the owner of the mark certain
limited legal protection. Trademarks and service marks adopted and used in
Michigan are registered with the Bureau of Commercial Services, Corporation
Division, of the Department of Consumer and Industry Services at (517) 241-
6400. The registration fee is $50 and is in effect for ten years. Trademarks and
service marks may also be registered for use throughout the United States with
the U.S. Patent and Trademark Office at (800) 786-9199 or online at
http://www.uspto.gov/.

COPYRIGHTS
A copyright enables its owner to exclude others from reproducing certain works,
such as books, musical compositions, technical drawings and computer
programs, for the author's life plus 50 years. A copyright may be obtained by
filing an application with the U.S. Copyright Office, Library of Congress, 101
Independence Avenue SE, Washington, D.C. 20559-6000; telephone (202) 707-
3000 or online at http://lcweb.loc.gov/copyright.

BUSINESS TAXES

Understanding your tax obligations and preparing taxes can be very confusing
and complicated. If returns are neglected or filed improperly, penalties and
excess payments may be levied. You may wish to consult with a tax advisor or
an accountant to help you understand your obligations and/or prepare your
returns.

EMPLOYER IDENTIFICATION NUMBER
An Employer Identification Number (EIN) identifies the business for federal and
state tax purposes. Many financial institutions will not open a commercial
banking account under an assumed name without the EIN. Sole proprietor-
ships with no employees DO NOT require an EIN. This type of business
uses the owner's social security number for tax purposes.

An EIN must be obtained if the business is set up as a partnership, corporation
"S" corporation, nonprofit organization, limited liability company, trust or estate,
or a sole proprietorship that pays wages to one or more employees. Remember:
if services are performed for a corporation, the owner is an employee of the
corporation and subject to all employment taxes. An EIN is required on any
return, statement, or other document if you are an employer. Individuals who
file Schedule C or I (form 2040) must use EINs when filing excise, employment,
alcohol, tobacco or firearms returns.

It is important to note:
ó Becoming the new owner of a business, you cannot use the EIN of the
previous owner.
ó An existing business adding, opening or acquiring a second operation of
similar type may use its current EIN for both the existing and the new
operations. However, the new establishment must obtain its own EIN if its
line of business is different from the existing operation.

An EIN form (SS-4) can be obtained at the IRS website at http://www.irs.gov/.
The application should be completed early enough to allow processing time for
an EIN number to be issued. To obtain an EIN immediately, call (859) 292-5467.

EMPLOYER TAXES
Any employer of one or more persons must withhold federal, state and possibly
local income taxes from the wages paid to employees. Employers are also
responsible for paying into the Social Security and Medicare systems as well as
withholding a matched amount from the employee's wages. State and federal
unemployment insurance payments must be paid entirely by the employer. No
deduction is allowed from an employee's wages. For detailed information about
hiring employees and your obligations, refer to the "Hiring Employees"
section.

SELF-EMPLOYMENT TAXES
Just as employers must withhold tax and report it to various government
agencies, so must individuals who work for themselves or are self-employed.
You are self-employed if you operate a trade, business, or profession, either by
yourself or as a partner. To learn more about your obligations, refer to the
"Being Self-Employed" section.

PERSONAL INCOME TAX
As a sole proprietor or a general partner, the owner pays taxes on the income
from the business on a personal income tax return with the state and federal
governments. You will also file an additional schedule that identifies income and
expenses of the business. Partners file a partnership return in addition to the
personal income tax return which distributes profits and losses between the
partners according to the partnership agreement. Corporations pay taxes on the
business income at corporate tax rates. Shareholders and employees (including
paid corporate officers) pay individual income tax on any salary and dividends
received from the corporation.

Most businesses are also required to make "Estimated Tax" payments on a
quarterly basis for Michigan income tax, federal income tax and self-employment
tax. Michigan income tax estimate information can be accessed online at
http://www.treasury.state.mi.us/formspub/forms/indtax/m1040esi.pdf.

For more information about your tax obligations and the proper forms, contact
the Michigan Department of Treasury at (800) 487-7000 or access the tax
information online at http://www.treas.state.mi.us/formspub/tcind.htm, and the
IRS at (800) 829-1040 and online at http://www.irs.gov/.

STATE BUSINESS TAXES
In Michigan, it is easy to register for taxes. Fill out one form-Registration for
Michigan Taxes (Form 518). This form allows a business to register for sales,
use or withholding taxes, the single business tax, motor fuel or tobacco products
tax. It can be obtained by contacting the Michigan Department of Treasury,
(517) 373-0888 or (800) 367-6263 or access the tax information online.
Questions and answers about registering a business can also be accessed online
at http://www.treas.state.mi.us/faqs/bustaxes/faqreg.htm.

SALES, USE AND WITHHOLDING TAXES
Anyone who engages in the retail sales of tangible personal property (defined as
any good that one can possess or exchange) from a Michigan location needs a
sales tax license. The Michigan sales tax is 6 percent of retail sales receipts.

When selling or leasing tangible personal property to a Michigan customer from
an out-of-state location and the business has no retail location in Michigan one
must register for use tax, which is also 6 percent. Also, register with the
Michigan Department of Treasury if a Michigan resident buys or rents tangible
property from an out-of-state source or when selling telephone, telegraph or
other leased wire communication services.

Every business in this state that employs one or more employees is required to
withhold federal income tax under the Internal Revenue Code. Businesses must
also withhold Michigan income tax from wages paid to employees.

When liable for sales, use or withholding tax, an application should be filed with
the Michigan Department of Treasury. This application for registration can be
accessed online at
http://www.treasury.state.mi.us/formspub/forms/registra/518.pdf. The license
fee is $1. For further information about sales, use and withholding taxes,
contact the Department of Treasury at (800) 367-6263 or (517) 373-0888 or
access the business tax information online.

SINGLE BUSINESS TAX
The Single Business Tax (SBT) is a modified value-added tax administered by the
Michigan Department of Treasury. It was enacted to replace several business
taxes, including a corporate net income tax, franchise tax, personal property tax
on business inventories and others. While the SBT is Michigan's only general

business tax, 70.4 percent of Michigan businesses pay $1,000 or less in SBT, and
59 percent of all businesses pay no SBT. A business with annual gross receipts
of less than $250,000 has no liability under the SBT.
Questions and answers about the Single Business Tax can be found online at
http://www.treas.state.mi.us/faqs/bustaxes/faqsbt.htm or by calling Michigan
Department of Treasury at (517) 373-8030.

MOTOR FUEL TAXES
Motor fuel tax is levied on highway, marine, and aviation fuel. IFTA/Intrastate
Motor Carriers should contact the Department of Treasury at (517) 373-3180, or
email at TreasMFD@state.mi.us. For additional information, review the Michigan
Trucking Frequently Asked Questions online.

LOCAL TAXES
Local governments in Michigan levy property taxes. Recent reforms have
slashed business property taxes by an average of 33 percent. Since property tax
rates vary by locality, it is important to consult your local city, township or village
treasurer's office. The local treasurer's office can also provide information about
other local taxes that may apply along with information about registration and
payment requirements.

BEING SELF-EMPLOYED

The majority of people who pay into Social Security work for someone else.
Their employer deducts Social Security taxes from their paycheck, matches that
contribution, and sends wage reports and taxes to the Internal Revenue Service
and Social Security. But self-employed people must fill out the forms and pay
the taxes directly to the government.

You are self-employed if you operate a trade, business, or profession, either by
yourself or as a partner. You report your earnings for Social Security when you
file your federal income tax return. If your net earnings are $400 or more in a
year, you must report your earnings on schedule SE.

PAYING SOCIAL SECURITY AND MEDICARE TAXES
The Social Security tax rate for 2001 is 15.3 percent (the same as 2000) on self-
employment income up to $80,400. If your net earnings exceed $80,400, you
continue to pay the Medicare portion of the Social Security tax, which is 2.9
percent, on the rest of your earnings. There are two income tax deductions that
reduce your tax liability. The deductions are intended to make sure self-
employed people are treated in much the same way as employers and
employees for Social Security and income tax purposes.

First, your net earnings from self-employment are reduced by an amount equal
to half of your total Social Security tax. This is similar to the way employees are
treated under the tax laws in that the employer's share of the Social Security tax
is not considered income to the employee.

Second, you can deduct half of your Social Security tax on the face of the IRS
Form 1040 line 25. This means the deduction is taken from your gross income in
determining adjusted gross income. It cannot be an itemized deduction and
must not be listed on your Schedule C.

If you have wages as well as self-employment earnings, the tax on your wages is
paid first. But this rule is important only if your total earnings are more than
$80,400. For example, if you have $20,000 in wages and $30,000 in self-
employment income in 2000, you pay the appropriate Social Security taxes on
both your wages and business earnings. However, if your 2001 wages are

$70,000 and you have $20,000 in net earnings from a business you do not pay
dual Social Security taxes on earnings above $80,400. Your employer will
withhold 7.65 percent in Social Security and Medicare taxes on your $70,000 in
earnings. You must pay the 15.3 percent in Social Security and Medicare taxes
on your first $10,400 in self-employment earnings and 2.9 percent in Medicare
tax on the remaining $9,600 in earnings

EARNINGS CREDITS
You need earnings credits to qualify for Social Security benefits. The number of
credits you need depends on your date of birth, but no one needs more than 40.
You can earn up to four credits per year.

If your net earnings are $3,320 or more, you earn four credits--one for each
$830 of earnings. (If your net earnings are less than $830, you still may earn
one or more credits by using the optional method described later.)

All of your earnings covered by Social Security are used in figuring the amount of
your Social Security benefit. So, it's important that you report all of your earnings
up to the maximum as required by law.

FIGURING YOUR NET EARNINGS
Net earnings for Social Security are your gross earnings from your trade or
business, minus all of your allowable business deductions and depreciation.
Some income does not count for Social Security. Do not include the following in
figuring your net earnings:

1. Dividends from shares of stock and interest on bonds, unless you receive
them as a dealer in stocks and securities.
2. Interest from loans, unless your business is lending money.
3. Rentals from real estate, unless you are a real estate dealer or regularly
provide services mostly for the convenience of the occupant.
4. Income received from a limited partnership.

OPTIONAL METHOD
If your actual net earnings are less than $400, your earnings can still count for
Social Security under an optional method of reporting. The optional method can
be used if your gross earnings are $600 or more or when your profit is less than
$1,600. You can use the optional method no more than five times. Your
actual net must have been $400 or more in at least two of the last three years,
and your net earnings must be less than two-thirds of your gross income.
Here's how it works:
If your gross income from self-employment is between $600 and $2,400, you
may report two-thirds of your gross or your actual net earnings if $400 or more.
If your gross income is $2,400 or more and the actual net earnings are $1,600 or
less, you report either $1,600 or your actual net.

Special Note for Farmers: If you are a farmer, you can use the optional
method every year. You do not need to have had actual net earnings of at least
$400 in any preceding year.

HOW TO REPORT EARNINGS
You must complete the following federal tax forms by April 15 following any year
in which you have net earnings of $400 or more:
Form 1040 (U.S. Individual Income Tax Return)
Schedule C (Profit or Loss from Business)
Schedule SE (Self-Employment Tax)

These forms can be obtained from the Internal Revenue Service web site at
http://www.irs.gov/ and most banks and post offices. Send the tax return and
schedules along with your self-employment tax to the Internal Revenue Service.
Even if you do not owe any income tax, you must complete Form 1040 and
Schedule SE to pay self-employment Social Security tax. This is true even if you
already get Social Security benefits.

FAMILY BUSINESS ARRANGEMENTS
Family members may operate a business together. A husband and a wife may
be partners or joint venturers. If you operate a business together as partners,
you should each report your share of the business profits as net earnings on

separate schedules, even if you file a joint income tax return. The amount each
of you should report depends upon your agreement.

MORE INFORMATION
For more information about being self-employed, visit Social Security online at
http://www.ssa.gov/SSA_Home.html or call them at (800) 772-1213. To speak
with a representative, please call between 7:00 a.m. and 7:00 p.m. any business
day.

BUYING A BUSINESS

Buying a business can give a person a head start over starting a new business.
It provides an established market, trained employees, proven profit potential,
and on and on. But, are there any "hidden liabilities?"

Obtaining sound professional assistance, from an accountant, an attorney, and
even a local Small Business Development Center (SBDC) (see Appendix C), can
be helpful in identifying pitfalls to be avoided when buying a business.
Remember, professional help will not necessarily make a purchase free of
obstacles. If you know what to look for, and how to protect yourself, an
educated buyer can save time and money.

Many experts will advise the purchaser to require a statement from the seller
stating that all taxes have been paid and that the buyer assumes no liability for
any unpaid taxes. As the purchaser of even a portion of a business, you may be
held responsible for the previous owner's liabilities, regardless of any contractual
language to the contrary. You should also make sure that the seller of the
business provides proof that there are no hidden liabilities. The seller of the
business should contact the Michigan Department of Treasury at (517) 334-8189
to obtain a form to request a Tax Clearance letter or access the information
online at http://www.treas.state.mi.us/formspub/tcind.htm. The Department of
Treasury will only provide the Tax Clearance Letter to the existing business
owner. As the buyer, you may not request the letter yourself. However, it is
wise to obtain a copy of this Tax Clearance letter from the seller prior to the
closing date or signing any purchase agreements. If you are in a hurry to
purchase the business, request that the seller obtain the Tax Clearance Letter
and escrow sufficient monies to cover any potential tax liability until the letter is
received.

Does the business have employees? Has the business had employees (payroll)
at any time over the last two years? If there are or were employees, the
purchaser may soon encounter, "successorship." What does this mean to an
entrepreneur? MONEY...potentially, a lot of money over the next FIVE YEARS.
New employers (those who do not buy an existing business) pay an
unemployment tax rate in their first two years of liability of 2.7 percent of the
first $9,500 of every employee's wages in a year-except for a new construction
employer, which may be higher. A successor employer (one who buys an
existing business), however, "inherits" the account of the predecessor (or former
owners). If benefits have been paid over the last five years, or if the account

has a "negative balance," chances are the successor will have a rate in excess of
2.7 percent-in fact, as much as 10 percent. Since the annual rate is based on
the benefits charged over the last five years, and the balance in the account, it is
possible that the rates will be high for five years.

How can you avoid this? You can request from the seller a "disclosure of
account" and then contact the Unemployment Agency at (800) 638-3994 and ask
for the amount of the benefits charged over the past five years and the reserve
balance (positive or negative). The request should be in writing and should be
accompanied by some form of commitment to purchase the business (a purchase
order contingent on the report from the Unemployment Agency, for example).
Once the purchaser has received the information from the Unemployment
Agency, what do they do? If the report is bad, should you look for another
business? Not necessarily. The higher costs should be included in the cash flow
and profit projections. If the business still looks like a winner, buy it! But, you
may want to offer less since the purchaser will be assuming a long-term liability.

Is successorship always bad? No. In some cases, the purchaser may be able to
inherit an unemployment account with a tax rate of .2 percent in 2000 and
phasing by 2002 to .1 percent tax rate (instead of starting a new business with a
2.7 percent tax rate).

One more note-any benefits currently being paid, or those resulting from the
sale, will be charged to the successor's account. Find out from the seller if any
employees are, or will be, collecting benefits. If possible, hire these employees!
The purchaser will get employees who already know the job and will save
money. For further assistance, call the Unemployment Agency at (800) 638-
3994 or a local Small Business Development Center (See Appendix C). Both of
these agencies have information and advice that can be very valuable in buying
a business.

HIRING EMPLOYEES

Employees add another layer of complexity to your business that requires careful
consideration and planning. It is important to hire the right people, train them
well, keep them happy so they will stay, and be aware of taxes and legal
requirements. It is wise to consult an accountant and attorney to ensure that
good record keeping systems are in place, all the necessary paperwork is
completed and legal requirements are met before hiring employees. Hiring
outside contractors or temporary help is also an option. However, be sure to
satisfy IRS requirements for contractors.

EMPLOYEES VERSUS CONTRACT LABOR
Individuals may provide services to a business as either an employee or a
contractor. Whatever status an individual has as an employee affects the taxes,
liability, benefit costs and many other areas of a business. The question of an
employee vs. contractor is a very critical issue and is NOT a simple task. There
are many different tests the IRS may apply to determine whether an individual is
an employee or contractor. Improperly classifying someone whom the IRS
considers an employee as a contractor can result in very stiff penalties. When
using contractors instead of employees for your business, it is important that you
consult with a competent tax advisor prior to making a decision.

PLAN YOUR HIRING
Hiring employees is expensive and should not be approached casually. Make
sure your decision to hire employees fits in with your goals as outlined in the
business plan. Write out a job description that indicates exactly what is expected
of each employee. Interview several people and select the one you feel has the
best qualifications. The majority of employers consider attitude of potential
employees as the number one trait in their hiring decision. It is a good idea to
have a 30- or 90-day trial period before taking someone on permanently. The
wrong employee can cause a great deal of damage to your business. You may
wish to order a copy of the publication, "Employees: How to Find and Pay Them"
available through the federal Small Business Administration's On-Line Library at
http://www.sbaonline.sba.gov/library/pubs.html.

TRAINING AND WORKING WITH EMPLOYEES
Training is expensive but necessary. You want well-qualified employees who will
do things the way you need them done. A well-defined company policy
handbook plus a job description outlining duties, responsibilities, ethical
standards, and criteria for success will be valuable. You may want to invest in
your employees by sending them to special training. Small business owners
should pay special attention to cross-training employees in areas other than
those specifically defined in their individual job descriptions. Open lines of
communication are necessary to keep employees motivated and involved with
the business. Many business owners find it beneficial to allow employee
participation in the goals setting process of the business. They then follow up
with employees with constructive feedback positive as well as negative on
the employee's progress toward those goals.

Employers have a legal as well as ethical obligation to provide a safe and
equitable workplace. You may wish to contact the Department of Consumer and
Industry Services, Bureau of Safety & Regulation, Consultation, Education and
Training Division (CET) at (517) 322-1809 or online at their web site
http://www.cis.state.mi.us/bsr/divisions/cet/home.htm. Listed below is
additional information about other programs:

AMERICANS WITH DISABILITIES ACT (ADA)
The ADA protects people with disabilities from discrimination in employment,
government services and public accommodations. For information publications,
call (800) 669-3362 or online at http://www.usdoj.gov/crt/ada/adahom1.htm.

DRUG-FREE WORKPLACE
Many employers are becoming interested in issues involving employees' use of
drugs and alcohol and its relationship to work. For additional information about
programs to make the workplace drug and/or alcohol free, contact the Substance
Abuse and Mental Health Services Administration at (800) 967-5752 or online at
http://www.samhsa.gov/.

AFFIRMATIVE ACTION AND EQUAL EMPLOYMENT OPPORTUNITY
The goal of these programs is to provide equal opportunities for all qualified
people in employment. To learn more contact the Michigan Department of Civil
Rights at (313) 226-7636 or (313) 961-1552 (TDD) or online at
http://www.mdcr.state.mi.us/.

WELLNESS PROGRAMS
Programs that encourage mental and physical health such as exercise, stress
reduction, personal counseling, smoking cessation, etc. are becoming popular as
a way to keep employees healthy and working. Participating employers have
seen many benefits including, higher morale, reduced workers' compensation
costs and less on-the-job accidents. To learn more about worksite wellness
programs, including grants that may be available to get started, contact the
Michigan Department of Community Health at (800) 537-5666 or online at
http://www.mdch.state.mi.us/.

PAYROLL TAXES
Any business with employees of any type must comply with federal and state
payroll requirements. This is true even if you are the sole employee of a
corporation that you own. It is critical that you understand the various deadlines
and requirements, or that you use the services of someone who does. The
major types of payroll taxes in Michigan are:

ó Income Tax Withholding (federal, state, and, if applicable, local)
ó Federal Social Security Tax (FICA)
ó Federal Unemployment Tax (FUTA)
ó Michigan Unemployment Tax

UNEMPLOYMENT INSURANCE
Unemployment insurance protects workers who lose their jobs through no fault
of their own. The funds used to pay workers who are covered under this type of
insurance are accumulated from taxes on the wages of employees during their
employment. Both state and federal unemployment taxes are paid by
employers. No deductions can be made from an employee's wages to cover
these taxes.

Any business that employs one or more persons in Michigan is required to
register with the Unemployment Agency (UA) at (313) 876-5146, (800) 638-3994
by the end of the month following the month in which it becomes an employing
unit. All employers must register, although not all employers are liable under the
law. Liable employers are required to pay state unemployment taxes quarterly
at a rate based on a "required reserve" balance and any unemployment
insurance benefits paid to employees. A new business will pay 2.7% of the first
$9,500 of every employee's wages for the first two years of liability (new

employers in the construction industry may pay a higher rate). When buying a
business, or buying the assets of an existing business, the rate may be
significantly higher.

The Unemployment Agency (UA) produces an Employer Handbook with
information about a variety of subjects. To obtain a copy of this publication, mail
a $15 check or money order made payable to the State of Michigan (UA) to:
Unemployment Agency Handbook, 7310 Woodward Avenue, Room 606, Detroit,
Michigan 48202 or you may call (313) 872-1458. All orders must be prepaid. A
handbook order form can be found at the Unemployment Agency website at
http://www.cis.state.mi.us/ua/form-toc.htm.

FEDERAL UNEMPLOYMENT INSURANCE
Federal Unemployment Insurance (FUTA) is collected by the Internal Revenue
Service (IRS) for the U.S. Department of Labor to pay administrative expenses of
operating the state unemployment systems. When filing an "Application for
Employer Identification Number" with the IRS, indicate that employees will be
hired. The IRS will mail a packet of information there will be coupon forms for
FUTA tax deposits and an Annual Report form. For more information about the
FUTA tax, forms and deposit requirements, contact the IRS at (800) 829-3676 or
online at http://www.irs.gov/.

INCOME TAX WITHHOLDING
Any employer of one or more persons must withhold federal and state income
taxes from wages paid to employees. A city income tax may also apply.

Each employee should complete the following forms: a withholding exemption
certificate (W-4) from the Internal Revenue Service (800) 829-3676 and a MI-W4
from the State of Michigan Department of Treasury (800) 367-6263. Based on
the certificate's information, a certain amount of taxes are withheld from the
employee's wages.

You may be required to deposit the federal taxes collected. One must file
quarterly returns with the IRS and file an annual reconcilement of the quarterly
returns. If returns are neglected or filed improperly, penalties and excess
payments may be levied. For more information about federal income tax
withholding, contact the IRS at (800) 829-1040 or online at
http://www.irs.gov/bus_info/sm_bus/pub-xtract.html.

In addition to federal income taxes, federal law also requires that employers
withhold (and deposit) Social Security taxes from employees' wages. The
employer must also pay an equal amount. Tax rates and maximum earnings
subject to tax may vary from year-to-year, so employers should contact the IRS
at (800) 829-1040 for the latest information.

State filing requirements may vary based on the amount of state taxes withheld.
An employer must file form 518, an "Application for Registration" with the
Michigan Department of Treasury if employees are hired. They will then notify
the employer of filing deadlines and provide the needed forms. An annual return
is also required. Michigan's withholding tax tables are available from the
Michigan Department of Treasury at (517) 373-0888 or online at
http://www.treas.state.mi.us/formspub/withind.htm.

Contact the City Treasurer to determine if a city income tax is applicable for the
new employees. If the City does have an income tax, the City Treasurer can
provide the required registration forms and any information that is needed.

WORKER'S COMPENSATION
There are a number of organizations involved in workers' compensation. It is
important to understand who they are and what they do. First of all, workers'
compensation benefits ordinarily are not paid by the State of Michigan.
Workers' compensation is the responsibility of an employer. Benefits are paid
either directly by an employer or through an insurance company on behalf of an
employer.

All employers that regularly employ three or more part-time employees at one
time, or employed one or more persons for at least 35-hours per week for at
least 13-weeks during the preceding 52-weeks, are required to have workers'
compensation insurance.

The majority of employers in Michigan obtain workers' compensation through
policies sold by commercial insurance companies. Self-insurance is an alternative
for large companies that have been granted the privilege of paying workers'
compensation benefits from general company operating funds. Companies with
$200,000 or more in an annual premium program frequently investigate the self-
insurance approach as a possible coverage alternative.

The premium rates for workers' compensation insurance are competitively
determined. Insurers use about 500 different rating classifications based on the
type of business an employer operates. Since premium rates for a given
classification vary widely among insurers, it pays to shop carefully.
Insurers also have different merit and experience rating plans, schedule-rating
plans, and premium discount tables, which can affect an employer's final
premium cost.

There are two excellent publications available to help new business owners
understand Michigan's workers' compensation system. The "Michigan Business
Guide to Workers' Compensation" and "General Information Regarding Rights
and Responsibilities Under the Act" provide an easy to understand overview of
Michigan's workers' compensation system. Additional information and assistance
is also available at the Bureau of Workers' Disability Compensation of the
Department of Consumer & Industry Services at (888) 396-5041 or online at
http://www.cis.state.mi.us/wkrcomp/bwdc/.

ALIEN EMPLOYEE
The Immigration Reform and Control Act of 1986 not only makes hiring or
recruiting "unauthorized aliens" illegal, but it also places the responsibility for
enforcing the law on the employer. The law applies to ALL employers, no
matter what the size of the business. Under the law, an employer is required to
check the citizenship status of every employee and to have proper
documentation for those employees with temporary residency. Contact the
Immigration and Naturalization Service http://www.ins.gov/graphics/index.htm
at (800) 375-5283 for more information or (800) 870-3676 to obtain
forms.

It should be noted that many of the visas that authorize entrance to the United
States do not authorize the holders of those visas to accept employment here.
Usually these visas must be obtained from the U.S. State Department in the
country of origin, though in some cases an application for a change in status can
be secured from within the United States. The visas vary in eligibility
requirements and in the duration of their viability. It is the employer's
responsibility to ascertain whether employees are legally entitled to work.
Consult an attorney who specializes in immigration matters or call the
Immigration and Naturalization Service for assistance at (800) 375-5283.
Additional information may also be found at Michigan's Alien Labor Certification
Program web site at http://www.michalienlaborcert.org/.

NEW HIRE REPORTING
A provision of the Federal Welfare Reform Act requires employers to report to
the Michigan Department of Treasury basic information on all newly hired or
rehired employees within 20 days of hiring. The purpose of collecting the
information is to build a strong partnership between employers and child support
programs across the country, with the intent of obtaining better compliance with
child support orders. Employers may report electronically or by mail. Required
information includes: the business name, address and Federal Employer
Identification Number; employee name, address and Social Security number. For
further information or to obtain forms, contact the Michigan New Hire Operations
Center at (800) 524-9846 or online at http://www.minew-hires.com/.

Refer to Appendix B for a quick list of employer information and information
regarding required workplace posters.

FINANCING A BUSINESS

When starting a business or expanding an existing business, the owner needs
money to pay rent and utilities; acquire inventory, equipment, and fixtures; pay
employees' salaries; make payments for vehicles; market/advertise products and
service; pay taxes and needed insurance; and most importantly to pay his or her
own salary.

There are several options available for obtaining money to start a new business
or expand an existing one. Most businesses begin with the owner's own capital
or loans from friends and family. Some are successful in obtaining bank
financing or using a government sponsored loan program. Regardless of the
path you choose, it is wise to take time out to put together a credible business
plan.

SHORT-TERM DEBT FINANCING
Short-term financing/credit sources are usually grouped into two basic
categories: unsecured and secured.

Unsecured credit is obtained without the borrower's pledge of specific assets to
serve as collateral. Examples include:

ó Personal credit cards, savings, stocks and bonds, and/or cash value of life
insurance policies. Funds borrowed from family members and/or friends.
ó A short-term, unsecured transaction loan is a direct, single payment financing
arrangement with a bank. The maturity on this type of loan is usually
between one and six months, but may extend up to a year.
ó A company's line of credit is a commitment from a bank to its regular credit
worthy business customers to provide a stated maximum amount of short-
term financing for a specified time period. The credit line is often granted
with a compensating balance requirement, and the floating or variable-rate
method of interest payment is used.
ó Trade credit is credit extended by one firm to another in conjunction with the
sale of goods or services that are used in the normal course of business. For
the purchasing firm, using trade credit is the equivalent of a consumer charge
account at a department store goods are purchased but payment can be
delayed to the extent of the specified credit terms.

ó Accruals are services that are provided for a business on a continuing basis
but are not paid for at the time the services are rendered. For example,
employees provide services to the business each day they work, however,
they are not paid until some specified future payroll date.

Secured short-term credit for new/existing businesses, businesses with a
marginal credit rating, or businesses that have exhausted unsecured collateral
may offer a financing opportunity that would otherwise not exist.

The primary sources of secured short-term financing for business borrowers are:

ó Commercial banks
ó Commercial finance companies
ó Factoring accounts receivables
ó U.S. Small Business Administration (SBA) "guaranteed" loan obtained through
a private lending institution, (The SBA rarely makes a "direct" loan to an
individual or company.)

STATE LOAN PROGRAMS
There are a variety of financing programs available to aid Michigan businesses
with growth and expansion. These programs are generally used to provide the
private sector with tools for financing and to encourage the formation of new
types of private institutions to address unmet financing needs. This "private
institutions" approach makes it possible to use limited public resources to
leverage large amounts of private capital.

Bank financing is usually the least expensive source of funds therefore you
should begin your search for financial assistance with your local bankers.
However, you should not approach your banker or any other financing
organization for assistance until you have developed a business plan. For
information about putting together a business plan refer to "A Business
Plan" section. There are also Small Business Development Centers located
throughout the state that may be of assistance in preparing a business plan.

Factoring is a financial institution that purchases "at a discount" the accounts receivables of a business,
assumes the title and risk of those receivables and in return provides that business with funds.

INDUSTRIAL DEVELOPMENT REVENUE BOND PROGRAM (IDRB)
IDRB's are tax-exempt bonds issued on behalf of the borrower by the Michigan
Strategic Fund and purchased by private investors. These loans can be made for
manufacturing and not-for-profit corporation projects and solid waste facilities.
Bond proceeds can only be used to acquire land, building and equipment.
Working capital and inventory are not eligible for this type of financing. These
bonds are generally used when financing of $1 million and higher is required.
The company for which the bond is issued must be credit worthy enough to
attract a buyer for the bonds, because the state does not guarantee the bonds.
For more information call the Michigan Economic Development Corporation at
(517) 335-4417.

U. S. SMALL BUSINESS ADMINISTRATION COMMONLY USED
PROGRAMS
The U. S. Small Business Administration (SBA) offers a variety of loan guarantee
programs to businesses when financing is unavailable on reasonable terms
through normal lending channels. The SBA does not provide direct loans or
grants to start or expand a business. For more information about SBA
programs, contact a commercial lender, or call the SBA at (313) 226-6075 or
(800) 827-5722 and also online at http://www.sbaonline.sba.gov/.

SBA 7(A) GUARANTY PROGRAM
The 7(a) Loan Guaranty Program is one of SBA's primary lending programs. It
provides loans to small businesses unable to secure financing on reasonable
terms through normal lending channels. The program operates through private-
sector lenders that provide loans that are, in turn, guaranteed by the SBA. The
agency has no funds for direct lending or grants. Most lenders are familiar
with SBA loan programs. Interested applicants should contact their local lender
for further information and assistance in the SBA loan application process.

Loan proceeds from the 7(a) Program may be used for business start-ups,
expansion, equipment purchases, working capital, inventory and real estate
acquisition. The maximum amount the SBA can guarantee is generally
$1,000,000 and the maximum loan is limited to $2,000,000. The maximum
guarantee percentage is 85% for loans $150,000 or less and 75% for loans over
$150,000. Interest rates are negotiable with the lender and may be fixed or
variable, but cannot exceed SBA that range from 2.25% to 4.75% over the
prime-lending rate. Loan maturities range from 5 to 7 years for working capital
and up to 25 years for fixed assets. The maturity of the loan is primarily based
on the life of the asset being purchased and the cash flow of the business.

LOW DOCUMENTATION LOAN (LOWDOC)
The LowDoc Program was designed to increase the availability of loans to start
or grow a business. It offers a simple, one-page application form and rapid
turnaround on loans of up to $150,000. The SBA processes completed
applications within 36 hours of receipt from the lender. The loan decision
process relies heavily upon the strength of the principals' character and credit
history. Interest rates range from 2.25% over prime for loans of less than 7
years, and 2.75% over prime for loans of 7-25 years. Loans under $50,000 may
be subject to slightly higher rates. The SBA guarantee is 85%.

PRE-QUALIFICATION LOAN PROGRAM
The Pre-Qualification Loan Program use intermediaries to assist prospective
minority, women, and disabled business owners in developing viable loan
application packages and securing loans. Once the loan package is assembled, it
is submitted to the SBA for expedited consideration; a decision usually is made
within three days. If the application is approved, the SBA issues a letter of pre-
qualification stating the SBA's intent to guarantee the loan. The maximum
amount for loans under both programs is $250,000, and the SBA will guarantee
up to 85 percent for loans up to and including $150,000 and 75 percent for loans
over $150,000. The intermediary then helps the borrower locate a lender
offering the most competitive rates. Intermediaries may charge a reasonable fee
for loan packaging.

WOMEN PRE-QUALIFICATION LOAN INTERMEDIARIES:
Center for Empowerment & Economic Development (Statewide)...(734) 677-1400
Community Capital and Development Corporation (Flint area) ......(810) 239-5847
Cornerstone Alliance (Benton Harbor area)..................................(616) 925-6100
Project Invest (Traverse City area)..............................................(231) 929-5000
Saginaw County Minority Business Development Center
(Saginaw area) .....................................................................(517) 752-6693

MINORITY PRE-QUALIFICATION LOAN INTERMEDIARIES:
Center for Empowerment & Economic Development (Statewide)...(734) 677-1400
Community Capital and Development Corporation (Flint area) ......(810) 239-5847
Cornerstone Alliance (Benton Harbor area) .................................(616) 925-6100
Saginaw County Minority Business Development Center
(Saginaw area) .....................................................................(517) 752-6693

DISABILITY PRE-QUALIFICATION LOAN INTERMEDIARY:
Project Invest (Statewide) ..........................................................(231) 929-5000

CAPLINES
CAPLines is the umbrella program under which the SBA helps small businesses
meet their short-term and cyclical working capital needs. In most cases, a
CAPLines loan can be for any dollar amount. There are five short-term working
capital loan programs for small businesses under the CAPLines umbrella,
including Seasonal Line, Contract Line, Builders Line, Standard Asset-Based Line,
and Small Asset-Based Line.
As a 7(a) Program, CAPLines is a guarantee of a bank loan with a maximum
amount of $1,000,000. Each of the five lines of credit has a maturity of up to
five years, but, because each is tailored to an individual business's needs, a
shorter initial maturity may be established. Interest rates are negotiated with
the lender and can be up to 2.25% over the prime rate.

SBA EXPRESS
SBAExpress loans are designed to help small businesses start, build and grow.
This loan program provides additional incentives to lenders to make small
business loans. Participating banks use their own forms and processes to
approve loans in amount up to $150,000, and are required to provide minimal
paperwork to the SBA to obtain a 50% guarantee on each loan. Loan maturity
generally is 5-10 years and up to 25 years for fixed-asset loans. Lenders and
borrowers negotiate the interest rate. Interest rates may be fixed or variable
and range from 2.25% over prime for loans of less than 7 years and 2.75 % over
prime for loans of 7 years or longer.

EXPORT WORKING CAPITAL PROGRAM (EWCP)
The Export Working Capital Program (EWCP) provides pre- or post- shipment
working capital financing for export activities. It is transaction based and can be
a revolving line of credit or structured for each purchase order, shipment, or
contract. The loan funds may be used for pre-sold inventory, materials, labor,
financing foreign receivables, and standby letters of credit used for performance
bonds, bid bonds, or payment guarantees to foreign buyers. The loan may not
be used for refinancing, fixed assets, marketing, or setting up operations abroad.
SBA can guaranty up to 90% of the loan amount up to $1,000,000. The
maturity is typically 12 months or less.

INTERNATIONAL TRADE LOAN
This program provides short- and long-term financing to small businesses
involved in exporting, as well as businesses adversely affected by import

competition. The SBA can guarantee up to $1.25 million for a combination of
fixed-asset financing and working capital. Loans for facilities or equipment can
have maturities of up to 25 years. The working capital portion of a loan has a
maximum maturity of three years. Interest rates are negotiated with the lender
and can be up to 2.25% over the prime rate.

SBA 504 PROGRAM
The SBA 504 Program provides healthy small- and medium-sized businesses with
long-term, fixed-rate financing for the acquisition or construction of fixed assets.
The SBA has certified the Michigan Certified Development Corporation (MCDC) to
offer SBA 504 financing throughout Michigan. Projects are financed through a
unique public/private partnership that involves private lenders financing 50% of
project costs, the MCDC covering up to 40% of project costs, and small
businesses investing at least 10% of project costs. By taking a secondary
collateral position on project assets, SBA provides a "collateral cushion" for the
primary lender and reduces the amount of equity normally required of the
borrower.

The SBA 504 Program is a "take out" financing program. The SBA offers an up
front commitment to finance a project. The participating private lender provides
interim financing, advancing the full amount of project funds during the
construction/acquisition period. After the project is completed, the SBA
reimburses or "takes out" the participating lender by the amount of the original
loan commitment. MCDC loans are actually funded by the sale of 100% federally
guaranteed debentures on the open market.

Preferred projects range from $300,000 to $2,000,000. Generally the maximum
SBA may contribute to any single project or borrower is $1,000,000, and projects
must create one new job for each $35,000 of debenture. The interest rate is
fixed and is determined at the time the debentures are sold. Loan terms are
offered for 10 to 20 years, depending on the type of assets financed.

The Michigan Economic Development Corporation administers this program at
the direction of the Board of Directors of the Michigan Certified Development
Corporation. For more information, call (517) 373-6378.

MICRO LOAN PROGRAM
The MicroLoan Program was developed to increase the availability of very small
loans to prospective small business borrowers. Under this program, the SBA
makes funds available to nonprofit intermediaries, who in turn make loans to
eligible borrowers in amounts that range from under $100 to a maximum of
$35,000. The average loan size is $10,000. Loans may be used to finance the
purchase of machinery and equipment, furniture and fixtures, inventory, supplies
and working capital, but not to pay existing debts. Start up, newly established,
and growing small businesses are eligible.

The intermediary can usually process completed applications in less than one
week. Depending on the earnings of the business, the loan maturity may be as
long as six years. Interest rates may not be higher than 4% percent over the
prime rate.

For more information about the program, contact one of the following approved
lenders:

CENTER FOR EMPOWERMENT & ECONOMIC DEVELOPMENT
2002 Hogback Road, Suite 12
Ann Arbor, MI 48105
Phone: (734) 677-1400
Fax: (734) 677-1465
Service Area: Washtenaw County, Livingston, Macomb, and Wayne (except the
City of Detroit) counties

DETROIT ECONOMIC GROWTH CORPORATION
211 West Fort Street, Suite 900
Detroit, MI 48226
Phone: (313) 237-4629
Fax: (313) 963-8839
E-mail: tgcarmody@degc.org
Service Area: City of Detroit

COMMUNITY CAPITAL & DEVELOPMENT CORPORATION
Walter Reuther Center
316 West Water Street
Flint, MI 48503
Phone: (810) 239-5847
Fax: (810) 239-5575
E-mail: ccdc@tir.com
Service Area: Genesee County

NORTHERN INITIATIVES
228 West Washington Street
Marquette, MI 49855
Phone: (906) 228-5571
Fax: (906) 228-5572
E-mail: ni@northerninits.com
Service Area: Upper Peninsula

RURAL MICHIGAN INTERMEDIARY RELENDING PROGRAM, INC.
121 East Front Street, Suite 201
Traverse City, MI 49684
Phone: (231) 941-5858
Fax: (231) 941-4616
E-mail: mhaddad@timbc.com
Service Area: Emmet, Charlevoix, Antrim, Leelanau, Benzie, Grand Traverse,
Kalkaska, Maninstee, Wexford, Missaukee, Cheboygan, Presque
Isle, Otsego, Montmorency, Alpena, Crawford, Oscoda, Alcona,
Roscommon, Ogemaw, Iosco, Osceola, Mason, Lake counties

SAGINAW ECONOMIC DEVELOPMENT CORPORATION
301 East Genesee, 3rd Floor
Saginaw, MI 48607
Phone: (989) 759-1395
Fax: (989) 754-1715
Service Area: Saginaw County

KENT AREA MICROBUSINESS LOAN SERVICES
233 East Fulton, Suite 101
Grand Rapids, MI 49503
Phone: (616) 771-6880
Fax: (616) 771-8021
Service Area: Kent County

MANAGING A BUSINESS

PROFESSIONAL ASSISTANCE
The importance of professional assistance cannot be overstated. There is no
substitute for professional services to keep a business going and growing. There
are professionals available to assist with every aspect of a business and able to
determine what will best serve specific business needs. The costs incurred in
hiring professional consultants often discourage business people from obtaining
professional assistance, which can be a fatal business mistake. The expense of
using skilled professional consultants is insignificant when compared to the costly
after effects of poorly prepared or incomplete documents. Listed below is a
"core group" of professionals most business people need.

PROFESSIONAL SERVICE PROVIDED
Accountant Bookkeeping, taxes, cash flow

Attorney Legal form of business organization,
contracts, agreements, general
consultation.

Banker Loans, billing services, credit systems

Insurance Agent Needs evaluation and packaging of
insurance.

RECORD KEEPING
Accurate and complete records help monitor the business and plan for the future
based on factual financial knowledge rather than guesswork. There are a variety
of records and record keeping systems a business can maintain. Trade
associations can often provide guidelines or simple accounting records tailored to
a particular business.

Professional accountants can be indispensable to a new or growing business. An
accountant not only provides a record keeping service for a business, but can

also provide important advice on taxes, cash flow, credit and systems
management. Every business should have up-to-date records, which provide the
following information:
ó Accurate and thorough statements of sales and operating results, fixed and
variable costs, profit or loss, inventory levels and credit and collection totals;
ó Comparisons of current data with prior years' operating results and budget
goals;
ó Financial statements suitable for use by management or submission to
prospective creditors and investors;
ó Tax returns and reports to regulatory agencies; and
ó A method of uncovering employee theft, material waste or record keeping
errors.

Have a formal accounting system that produces monthly reports. Compare the
reports to the finance plan and adjust the business activity accordingly. If the
business is more profitable than the business plan predicts, adjust the business
plan.

MARKETING
The best product or service in the world will not guarantee success for your
business. Potential customers must purchase your product or service in order for
you to survive and grow. Developing and implementing a marketing strategy is
a necessary process for a successful business. This process begins as you start
your business, and it must remain an ongoing process throughout the life of your
business.

Marketing is neither sales nor advertising, although both of these may be part of
a marketing strategy. Instead, marketing is the thought process by which you:

ó Identify the product or service you really sell
ó Identify potential customers for your product or service
ó Identify your competitors in selling to these customers
ó Understand the basis on which those potential customers make buying
decisions
ó Know why customers will choose to purchase your product or service instead
of your competitor's

ó Determine the most efficient and effective methods to reach these buyers
before they make their purchasing decisions
ó Identify methods to deliver your product or service
ó Develop an action plan

IDENTIFY THE PRODUCT OR SERVICE
The key is to identify your "market niche," not only in terms of the services
provided, but in terms of needs fulfilled. For instance, a residential lawn service
provides lawn cutting, fertilization, etc. One need this business fills is for
convenience on the part of "time poor" homeowners.

IDENTIFY POTENTIAL CUSTOMERS
A potential customer is one whose needs may be filled by your product/service,
and who may reasonably be expected to consider your business as a source of
this product/service based on price, location and other factors. Everyone in the
world is not a potential customer; you must focus on an attainable and realistic
portion of the market.

IDENTIFY YOUR COMPETITORS
A competitor is a business who does the same service, or sells the same product
as your business; they may or may not have a similar business. For instance,
companies providing guard services to warehouses and those selling alarm
systems to warehouses are to some extent competitors, even though they are
not in the same industry.

UNDERSTAND WHY CUSTOMERS BUY YOUR PRODUCT OR SERVICE
Customers buy different products or services for several reasons, including:

ó Price
ó Quality
ó Convenience
ó Prestige

Also, understand the basis on which customers make buying decisions related to
your type of product or service.

KNOW WHY CUSTOMERS WILL CHOOSE YOUR BUSINESS
Based on why customers buy your product or service, you must determine the
nature of your competitive advantage. If your potential customers buy solely on
the basis of price, are your prices the lowest? If not, how will you compete? Be
cautious in this analysis. Your potential customers probably have established
buying patterns which do not include your business. You must give them
sufficient reason to break these established patterns and buy from you if your
business is to succeed.

DETERMINE THE MOST EFFICIENT METHODS TO REACH BUYERS
Having determined why potential customers buy your type of product or service
and why they will choose you, you are in a position to identify how they make
their buying decisions. Do they typically buy because they've seen an
advertisement in the telephone book or because they have driven by your place
of business? Is this type of product or service generally purchased on the
recommendation of another individual? Knowing how people "will" find you
ensures that your marketing dollars are spent in the most productive way
possible.

DETERMINE EFFECTIVE DELIVERY METHODS
The most enthusiastic purchaser is unlikely to become a repeat customer if the
product or service does not live up to his/her expectations or if it is not delivered
in a timely fashion.

DEVELOP AN ACTION PLAN
You know what you need to do. Now you must develop specific, deliverable
steps that will enable you to do it. For assistance in developing your own
marketing plan, contact your local Small Business Development Center (see
Appendix C). You may wish to request a copy of the "Small Business Guide to
Effective Marketing Communications."

GETTING FREE PUBLICITY
Carefully read the publications in your area from front to back every day for a
week. (Don't forget the magazines, newsletters, throwaway papers and other
publications that cross your desk.) After a while you will begin to see a pattern
of reporting that repeats on some periodic basis.

For example, Internet on Monday, stocks on Tuesday, franchise information on
Wednesday, staff promotions on Thursday and so on. Select those sections in
which you feel your business information might fit and start a collection. Ask
yourself questions like: "Why is this here?" Or "For what audience is this
written?" Or "Why is this important to the reader?" (While doing this, note how
much space is given to each section and the length of each article or bit of
information.)

Write a submission: Don't try to write the article for the publication, you're not
in that business. Write information that fits the publication and leave the rest to
the editor of the publication. Be sure you tell: who, what, when, why, where,
how and how much.

Use a paragraph for each: Include one or more quotes from you, the president
of your company, the person you are writing about or an authority in the field.
Make sure their comment is relevant, and keep it short and simple. This way,
the editor can pick and choose.

Format: Double space everything and leave at least a one-inch margin on both
sides. Number the pages, and center the word "more" at the bottom of each
page. Put "end" at the end. At the top of the page write the name of the
person from whom more information can be gathered, and be sure you let your
staff know to notify that person immediately if they get a call.

If the information is time-dependent, put the date and time of the event at the
top. Write today's date there as well. Don't forget the company name, address
and phone. When you meet with the editor for the first time ask how he/she
would like the information presented, and follow their guidelines to the letter.

Newspapers have very tight deadlines, and if a critical bit of information is
needed and you're not available, your article may not get published. Don't
bother to include photos unless they are dynamic action photos. Most

publications have a staff photographer that will visit your place of business if a
photo is required.

SMALL BUSINESS ADMINISTRATION RESOURCES
The United States Small Business Administration (SBA) has a wealth of
information and services for the small business owner. The SBA Website has the
"Small Business Classroom" which has several classes on starting and managing
a business available for free. These classes are designed to be easy to use and
available 24 hours a day with topics on most in demand by small business
clients. SBA's On-Line Library provides nearly 60 downloadable publications
covering a variety of business topics including starting a business and business
plans. The SBA Website also maintains a "Calendar of Events" listing training
and other programs by state with details and contact information. For more
information regarding the SBA, please refer to Appendix F.

INSURANCE

It is prudent for any business to purchase a number of basic types of insurance.
Some types of coverage required by law, others 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 own business.
To learn more about the coverage that is best for your specific business, please
contact an insurance agent who writes business insurance. Insurance is a very
competitive business. Be sure to contact more than one agent. Shop around to
get the best coverage for the lowest price.

LIABILITY INSURANCE
Businesses may incur various forms of liability in conducting their normal
activities. One of the most common types of liability is product liability, which
may be incurred when a customer suffers harm when 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.

WORKERS' COMPENSATION
Most employers are required to provide workers' compensation coverage for their
employees. This coverage applies to injuries incurred by workers in the course
of their job duties. A workers' compensation policy is purchased from a private
insurance company.

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. Banks or government loan programs frequently
require this type of insurance. It can also be used to provide continuity in
operations during a period of ownership transition caused by death or
incapacitation of an owner or other "key" employees.

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 certain circumstances, 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
homeowner's insurance company to update your policy to include coverage for
office equipment. This coverage is not automatically included in a standard
homeowner's policy.

SELLING TO GOVERNMENT
AND EXPORTING
Obtaining government contracts can be the key to expanding both the marketing
and income potential of any business. Government agencies at all levels contract
for the majority of goods and services needed.

To become eligible for state contracts, a business must complete a vendor payee
registration packet with the Department of Management and Budget. To obtain
a packet, call (517) 373-4111 or visit online at http://www.state.mi.us/dmb/.

The vendor registration packet includes a list of commodities and services
required by state government. When completing the vendor registration form,
indicate which products or services you are interested in providing to the state.
Once the registration information is processed, the business will appear on
bidder's lists for those commodities/services indicated.

MICHIGAN TECHNICAL ASSISTANCE CENTERS
The Michigan Economic Development Corporation provides support to Michigan
Technical Assistance Centers (MTAC) located throughout the state. This network
of twelve locally based offices provides government contract and export
assistance. Highly skilled professionals assist businesses in acquiring federal and
state government contracts, as well as identifying international product or service
markets for exporting.

GOVERNMENT CONTRACT SUPPORT
The federal government is a multi-billion dollar buyer of goods and services-
more than $150 billion is spent annually. State and local governments are also
major purchasers of products and services. MTAC support includes, but is not
limited to, the following:

ó Orientation to the procurement system
ó Bid preparation assistance
ó Targeting government markets
ó Daily listings of government bids

ó Subcontracting opportunities
ó Government specifications for bidding
ó Training seminars and conferences
ó Procurement resource library
ó Bid history and contract award results
ó Placement of your firm on vendor lists
ó Electronic Data Interchange (EDI) assistance.

EXPORTING SUPPORT
In today's competitive worldwide economy, many companies have found that
exporting improves its competitive position. MTAC supports the export needs of
businesses through the following:

ó Export counseling and marketing planning.
ó Analysis of your firm's readiness to export.
ó Identifying countries that buy your product or service.
ó Listings of export trade leads.
ó Assistance preparing export documents.
ó Payment and finance options.
ó Government regulations necessary for exporting.
ó Training seminars and trade show opportunities.
ó Extensive export resource library.

To learn more about selling to the government or exporting abroad, call your
nearest MTAC center.

MICHIGAN TECHNICAL ASSISTANCE
CENTERS

1. N.W. MICHIGAN COUNCIL OF 8. JACKSON TAC OF SOUTH CENTRAL
GOVERNMENTS MICHIGAN
Traverse City Jackson
(231) 929-5036 (517) 788-4680
FAX (231) 929-5042 FAX (517) 782-0061

2. N.E. MICHIGAN CONSORTIUM 9. DOWNRIVER COMMUNITY
Onaway CONFERENCE
(989) 733-8548 Southgate
FAX (989) 733-8069 (734) 362-3477
FAX (734) 281-0301
3A. MICHIGAN WORKS! WEST
CENTRAL 10A. WARREN/CENTER LINE/
Big Rapids STERLING HEIGHTS CHAMBER OF
(231) 796-4891 COMMERCE
FAX (231) 796-8316 Warren
(810) 751-3939
3B. MICHIGAN WORKS! WEST FAX (810) 751-3995
CENTRAL
Muskegon 10B. ECONOMIC DEVELOPMENT
(800) 528-8776 ALLIANCE OF ST. CLAIR COUNTY
(231) 722-7700 Port Huron
FAX (231) 722-6182 (810) 982-9511
FAX (810) 982-9531
4. MICHIGAN WORKS!
Marlette 11. SCHOOLCRAFT COLLEGE
(989) 635-3561 BUSINESS DEVELOPMENT CENTER
FAX (989) 635-2230 Livonia
(734) 462-4438
5. SAGINAW FUTURE, INC. FAX (734) 462-4439
Saginaw
(989) 754-8222 12. WAYNE STATE UNIVERSITY (CITY
FAX (989) 754-1715 OF DETROIT)
Detroit
6. FLINT GENESEE ECONOMIC (313) 577-2241
GROWTH ALLIANCE FAX (313) 577-4354
Flint
(810) 238-8364
FAX (810) 238-7866
7. S.W. MICHIGAN TAC
Kalamazoo
(616) 387-2004
FAX (616) 387-2149

NOW WHAT?

You've taken the time to read this information and probably learned a lot about
starting a business, but where should you go from here?

Take the time to prepare a comprehensive business plan. Think about what you
want out of your business. How do you intend to meet your goals? What will you
need to get started-tax advice, financing, management assistance, legal advice?
Then use your business plan when you meet with your banker, lawyer, or
accountant.

Don't hesitate to contact your local Small Business Development Center (see
Appendix C), or other resources listed. Helping you get your business off to a good
start is our number one priority.

APPENDIX A
MICHIGAN COUNTY CLERK OFFICES

Alcona, Post Office Box 308, Harrisville, MI 48740 ...............................(989) 724-5374
Alger, 101 Court Street, Munising, MI 49862 ........................................(906) 387-2076
Allegan, 113 Chestnut Street, Allegan, MI 49010.................................(616) 673-0450
Alpena, 720 West Chisholm, Alpena, MI 49707.....................................(989) 356-0115
Antrim, Post Office Box 520, Bellaire, MI 49615 ...................................(231) 533-6353
Arenac, Post Office Box 747, Standish, MI 48658..................................(989) 846-4626
Baraga, 16 North Third Street, L'Anse, MI 49946..................................(906) 524-6183
Barry, 220 West State Street, Hastings, MI 49058 ................................(616) 945-1285
Bay, 515 Center Avenue, Bay City, MI 48708 ........................................(989) 895-4280
Benzie, Post Office Box 377, Beulah, MI 49617.....................................(231) 882-9671
Berrien, 811 Port Street, St. Joseph, MI 49085............................(616) 983-7111x8241
Branch, 31 Division Street, Coldwater, MI 49036 ..................................(517) 279-4306
Calhoun, 315 West Green, Marshall, MI 49068 .....................................(616) 781-0718
Cass, 120 North Broadway, Rm. 123, Cassopolis, MI 49031-1301 ..........(616) 445-4464
Charlevoix, 203 Antrim Street, Charlevoix, MI 49720 ...........................(231) 547-7200
Cheboygan, Post Office Box 70, Cheboygan, MI 49721 ........................(231) 627-8847
Chippewa, 319 Court Street, Sault Ste. Marie, MI 49783 ......................(906) 635-6300
Clare, Post Office Box 438, Harrison, MI 48625.....................................(989) 539-7131
Clinton, Post Office Box 69, St. Johns, MI 48879 ..................................(989) 224-5140
Crawford, 200 West Michigan, Grayling, MI 49738 ...............................(989) 348-2841
Delta, 310 Ludington, Escanaba, MI 49829...........................................(906) 789-5105
Dickinson, Post Office Box 609, Iron Mountain, MI 49801.....................(906) 774-0988
Eaton, 1045 Independence, Charlotte, MI 48813 .......................... (517) 543-7500x225
Emmet, 200 Division Street, Petoskey, MI 49770..................................(231) 348-1744
Genesee, 1101 Beach Street, Flint, MI 48502 .......................................(810) 257-3282
Gladwin, 401 Cedar, Gladwin, MI 48624 ..............................................(989) 426-7351

Gogebic, 200 North Moore, Bessemer, MI 49911..................................(906) 663-4518
Grand Traverse, 400 Boardman Avenue, Traverse City, MI 49684 ........(231) 922-4760
Gratiot, Post Office Drawer 437, Ithaca, MI 48847 ...............................(989) 875-5215
Hillsdale, 29 North Howell, Hillsdale, MI 49242 ....................................(517) 437-3391
Houghton, 401 East Houghton, Houghton, MI 49931 ...........................(906) 482-1150
Huron, 250 East Huron, Huron Co. Bldg., Rm. 201, Bad Axe, MI 48413..(989) 269-9942
Ingham, Post Office Box 179, Mason, MI 48854 ...................................(517) 676-7204
Ionia, 100 Main Street, Ionia, MI 48846...............................................(616) 527-5322
Iosco, Post Office Box 838, Tawas City, MI 48764 ................................(989) 362-3497
Iron, 2 South 6th Street, Crystal Falls, MI 49920....................................(906) 875-3221
Isabella, 200 North Main, Mt. Pleasant, MI 48858 ........................ (989) 772-0911x259
Jackson, 312 South Jackson Street, Jackson, MI 49201 ........................(517) 788-4268
Kalamazoo, 201 W. Kalamazoo Ave., 1St Fl., Kalamazoo, MI 49007 .......(616) 383-8840
Kalkaska, Post Office Box 10, Kalkaska, MI 49646................................(231) 258-3300
Kent, 300 Monroe Avenue, NW, Grand Rapids, MI 49503 ......................(616) 336-3550
Keweenaw, HC1 Box 607, Eagle River, MI 49950.................................(906) 337-2229
Lake, Post Office Box B, Baldwin, MI 49304..........................................(231) 745-4641
Lapeer, 255 Clay Street, Lapeer, MI 48446...........................................(810) 667-0356
Leelanau, 301 East Cedar Street, P. O. Box 467, Leland, MI 49654 .......(231) 256-9824
Lenawee, 425 North Main Street, Adrian, MI 49221..............................(517) 264-4594
Livingston, 200 East Grand River, Howell, MI 48843 ............................(517) 546-0500
Luce, 407 West Harrie, Newberry, MI 49868.........................................(906) 293-5521
Mackinac, 100 South Marley Street, St. Ignace, MI 49781 ....................(906) 643-7300
Macomb, 40 North Main, Mt. Clemens, MI 48043 .................................(810) 469-5120
Manistee, 415 Third Street, Manistee, MI 49660 ..................................(231) 723-3331
Marquette, 234 West Baraga, Marquette, MI 49855 .............................(906) 225-8330
Mason, 304 East Ludington Avenue, Ludington, MI 49431.....................(231) 843-8202
Mecosta, 400 Elm Street, Big Rapids, MI 49307 ...................................(231) 592-0784
Menominee, 839 10th Avenue, Menominee, MI 49858 ..........................(906) 863-9968
Midland, 220 West Ellsworth, Midland, MI 48640 .................................(989) 832-6739
Missaukee, 111 S. Canal Street, P.O. Box 800, Lake City, MI 49651......(231) 839-4967

Monroe, 106 East First Street, Monroe, MI 48161.................................(734) 240-7020
Montcalm, 211 West Main Street, P.O. Box 368, Stanton, MI 48888......(989) 831-7339
Montmorency, 11265 M 32, Post Office Box 789, Atlanta, MI 49709.....(989) 785-4794
Mu