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Effective: September 2024
The following appendices contain resources, examples, and information that should be used throughout the self-employment process. Some of these appendices are referenced in the steps of the Self-Employment Business Startup Toolkit V3.0 policy.
These items as well as any additional ones that might not be listed here should be used as discussion points with the consumer regarding the advantages/ disadvantages of Self-Employment.
Any advantages or disadvantages not listed above that are specific to you?
Do you have any past experience in self-employment? If so, what did they learn from that experience?
Consumers receiving SSI and Medicaid should be aware that for Limited Liability Corporations (LLC), S Corporations, and C Corporations business assets may be considered as personal assets.
Working with a work incentives benefits specialist will assist consumers in making an informed choice on pursuing self-employment and if a consumer decides to proceed with self-employment, it will help them understand how Social Security evaluates work activity, available employment supports, and how to structure their business.
Information regarding Social Security Work Incentives provide an opportunity for individuals on SSI/SSDI to work. Some individuals may be interested in creating a PASS Plan through Social Security.
The ERQ is designed to help you think through some of the important roles a business owner plays in their business. The ERQ responses are used during the Business Assessment Scale (BAS) review meeting to help determine if DVR will support starting this potential business.
Purpose: To determine your ability to manage people and finances
When filling out this section please consider following: sharing information about your experience with planning, problem solving, meeting deadlines, communicating ideas, values, instructions, influencing employees and others, coping effectively with stress and demands and your experience with financial management and planning.
Purpose: To determine your level of experience and expertise in your proposed business field.
When filling out this section please consider following: sharing information about your experience, education and informal training related to your craft.
Purpose: To determine your ability to demonstrate a high enough FICO score to obtain additional funding for your business or have access to sufficient resources to meet future business and personal financial obligations.
Purpose: To determine your commitment of time and resources to the business and previous employment, your level of initiative taken towards your business and your persistence in resolving problems.
Purpose: To determine the level of support you have, both with running the business directly and indirectly and what time constraints that you have.
Within 3 Business Days of BAS Review:
Within 10 business days of BAS Review:
Title Page Includes: Business Name, Consumer Name, Address, Phone, Email, Date.
The executive summary is the first and most important section of a business plan. Its purpose is to convince the audience that this business is worthwhile. This “opening argument” must capture and hold the intended reader’s attention and direct it to a specific purpose. The executive summary should avoid industrial jargon – the reader may lose interest. Make the summery clear, concise, and convincing. Although the executive summary appears first in the plan, usually it is the last section written.
The Business. This section discusses the purpose of the business, form of ownership, ownership interest, industry trends, background information about the owners.
Visit the IRS website (irs.gov) to obtain a Federal Tax ID Number for your business. Industry Trends
This section discusses the current trends of the proposed business and the industry. It describes whether or not the demand for the product or service exceeds current supply.
This section describes the product or service, the currently unsatisfied market need or desire, and describes how the product or service will meet that need or desire.
Here are just a few:
This section should also contain an estimate of the potential market, the number of customers the business expects to serve immediately after opening, the rate of expansion, and possible expansion into other markets.
The operations plan explains how the work will be done and how the business will be managed and the business’s location. It also describes the manufacturing process including materials used in the process and employees and their duties. It also describes the business’s location.
This section discusses the investment required, sources of funds for the business, and financial statements. Developing these financial statements is one of the most difficult tasks facing a new business owner, because in most cases there is no history for reference. Unless you plan to purchase an existing business, these statements will be based on projections. Develop the Income Statement, Cash Flow Projections, and Balance Sheet statements for the first 2-3 years of business operation. First-year Cash Flow is projected monthly. Years 2 and 3 Cash Flow projections are quarterly rather than monthly. Need for and Sources of Cash. This statement lays out how much cash the business will need to open its doors and to operate until it is profitable. Most of this information will come from other parts of the business plan.
The cash flow statement has two sections. The top section shows how and when cash will be received by the business. The bottom section shows how and when the money will be used to pay bills. Unlike the income statement, the cash flow statement shows money coming in only when the business actually receives it and going out only when the business actually pays a bill.
This section includes other documents needed to support and validate the business and business plan. These include a cost-of-living budget and personal balance sheet for the business owner(s), resume(s), credit reports, contracts, legal documents, leases, job descriptions, letters of support and reference, letters from potential customers stating they will buy from the business when started, contracts, and other documents that bolster confidence in the proposed business.
Attachments:
DVR Staff Member Responsibilities:
Accounting - The recording, classifying, summarizing, and interpreting of events of a financial nature. These events include income, expenses, and cash flow.
Accounts Payable - Trade accounts of businesses representing amounts owed for goods or services received.
Accounts Receivable - Trade accounts of businesses representing amounts due for goods sold or services rendered.
Amortization - Paying off debt in regular installments over a period of time, or deducting certain capitalized expenditures over a specified period of time.
Asset - Anything that an individual or an entity owns that has value. Cash, equipment and stocks are all considered assets.
Balance Sheet - A financial statement that includes a company’s assets and liabilities. A company's net worth is equal to its assets minus its liabilities.
Business Plan - A planning document that describes a company, its market, management team, potential, competitors and all other relevant information about how it will do business and future prospects.
Capital – (1) Assets less liabilities, representing the ownership interest in a business, (2) a stock of accumulated goods, especially at a specified time and in contrast to income received during a specified time period, (3) accumulated goods devoted to the production of goods, and (4) accumulated possessions calculated to bring income.
Capital Expenditures - Business spending on additional plant equipment and inventory.
Cash Flow - An accounting presentation showing how much of the cash generated by a business remains after both expenses (including interest) and principal repayment on loans are paid. A projected cash flow statement indicates whether the business will have cash to pay its expenses, loans, and make a profit. Cash flow can be calculated for any given period of time, normally done on a monthly basis or yearly basis.
Collateral - Something of value pledged to support the repayment of an obligation or loan. Examples include real estate and certificates of deposit.
Corporation - A form of organization that provides its owners and shareholders with certain rights and privileges, including protection from personal liability, if proper steps are followed. Corporations may take a number of forms, depending on the goals and objectives of the founders. Types include C, S and nonprofit corporations. Corporations are regarded as “persons” in the eyes of the law and may thus sue and be sued, own property, borrow money and hire employees.
Cost of Goods Sold - This term represents the cost of buying raw materials and producing the goods that a company sells. It also includes the cost of the company’s labor force and overhead costs.
Credit Score - A statistical summary of the individual pieces of information on a credit report. A credit score predicts how likely it is that a company or individual will repay debts. Lenders use credit scores to determine whether to extend credit and at what interest rate.
Depreciation - An accounting procedure that spreads the cost of purchasing an asset over the useful lifetime of the asset.
Direct Marketing - The process of sending promotional messages directly to individual consumers, rather than via a mass medium. Includes methods such as direct mail and telemarketing.
Doing Business As (DBA) - A situation in which a business owner operates a company under a different name than the one under which it is incorporated. The owner typically must file an assumed name certificate with the county in which it is located. Sole proprietorships are often DBA’s (e.g., Sam Jones DBA Sam’s Landscaping).
Employer ID Number (EIN) - An identification number assigned to businesses for taxpaying purposes by the IRS or state taxing authorities. An Employer ID Number is required for partnerships, corporations, and trusts, and it may be required for sole proprietorships that have employees. Also called a Federal ID Number or Taxpayer ID Number.
Entrepreneur - One who assumes the financial risk of the initiation, operation, and management of a given business undertaking.
Equity - An ownership interest in a business. For example, stock in a corporation represents equity in the corporation.
Feasibility Study - A preliminary study undertaken to assess whether a planned project is likely to be practical and successful and to estimate its cost.
Financial Statements - There are 3 main financial statements. They concern the financial aspects of a business:
Financing - New funds provided to a business, either by way of equity infusion, or loans.
Fixed Costs - Costs of doing business, such as rent and utilities that remain generally the same regardless of the amount of sales of goods or services.
Franchising - A relationship in which the franchisor provides a licensed privilege to the franchise to do business and offers assistance in organizing, training, merchandising, marketing, and managing in return for a consideration.
GIG Economy – A labor market characterized by the prevalence of short term contracts or freelance work as a opposed to permanent jobs.
Guarantor - A person who makes a legally binding promise either to pay another person’s obligation or to perform another person’s duty if that person defaults or fails to perform.
Income Statement - A record of the financial performance of a company over a period of time. It records all the income generated by the business during the period and deducts all its expenses for the same period to arrive at net income, or the profit for the period.
Independent Contractor - A worker who works on a specific project for a specified period of time. Independent contractors are not subject to tax withholdings and usually don’t receive benefits granted to full-time employees.
Inputs. – A section in the business plan. It refers to materials, suppliers, and arrangements with suppliers. This section describes them and lists prices, volume discounts, and payment options that might influence the decision to trade with a higher-priced vendor.
Interest - An amount paid to a lender for the use of funds, or the cost of using credit or another person’s or company’s money. Interest is usually calculated as a rate per a period of time, typically a year.
Joint Venture - An agreement between two or more partners to pursue collaboratively a particular project or business, with a sharing of profits or losses.
Lease - A contract by which a tenant takes possession of office space, furniture, equipment or other property for a specified rent and specified amount of time. At the end of a lease, the property reverts back to its owner.
Letter of Credit - A document issued by a bank guaranteeing payment of a customer’s debt up to a set amount over a set period of time. Letters of credit are used extensively in international trade.
Liability - Any debt or obligation due now or potentially in the future. Liability is synonymous with legal responsibility.
Limited Liability Company (LLC) - A flexible business structure, popular with small businesses, offering owners the advantage of limited personal liability and the choice of being taxed like a partnership or a corporation.
Limited Liability Partnership (LLP) - A type of partnership that protects individual partners from personal liability for negligent acts committed by other partners and employees not under their direct control.
Loan Agreement - An agreement for the borrowing of money, typically containing pertinent terms, conditions, covenants and restrictions.
Long-Term Debt - Obligations or liabilities that a company owes in one year or more.
Market Analysis - Marketing research that yields information about the marketplace relative to the service or product.
Marketing Plan - A company plan for marketing products and services and increasing sales.
Market Share - The percentage of a product category’s sales, in dollars or units, that a particular brand, product line or company controls.
Nonprofit Corporation - A form of corporation in which no stockholder or trustee shares in profits or losses and which usually exists to accomplish some charitable or educational function. These organizations are exempt from corporate income taxes, and donations to these groups may be tax deductible.
Operating Expenses - The costs of maintaining a business. Examples include utility expenses and property taxes.
Partnership - A legal relationship existing between two or more persons or entities contractually associated as joint principals in a business.
Pre-Venture Exploration - Involves working with an individual to help them gather information about their general readiness to be an entrepreneur. It requires the entrepreneur to assess their own skills, strengths, weaknesses as well as opportunities and threats in the marketplace.
Prospecting - The process by which a business owner determines whether or not a business or an individual could qualify as a potential customer.
Return on Investment - The amount of profit based on the amount of resources used to produce it. The ability of a given investment to earn a return for its use.
SBA - The US Small Business Administration, created to help entrepreneurs form successful small business enterprises. A common misconception is that the SBA makes loans to small businesses. Generally, they don’t. Banks make loans that are guaranteed by the SBA.
Sales Tax - A tax on retail products based on a set percentage of retail cost.
Sole Proprietorship - A sole proprietorship is a one-person business that is not registered with the state as a corporation, partnership or LLC.
Sole proprietorships are so easy to set up and maintain that you may already own one without knowing it. For example, if you are a freelance photographer or writer, a craftsperson who takes jobs on a contract basis, a salesperson who receives only commissions, or an independent contractor who isn't on an employer's regular payroll, you are automatically a sole proprietor.
Sole proprietors may have to comply with local registration, business licensing, or permit laws to make the business legitimate. These business owners are personally responsible for paying both income taxes and business debts.
S-Corporation - A form of corporate organization where the profits of the entity pass through to shareholders and are taxed on their personal returns under subchapter S of the Internal Revenue Code.
Target Market - A specified audience or demographic group that an ad, product or service is intended to reach.
Telemarketing - Using the telephone to sell, promote or solicit products and services.
Trademark - A name, phrase, logo, image or combination of images used to identify and distinguish a business from others in the marketplace. The term is often used to include service marks, which apply to businesses providing services as opposed to selling products. Trademarks can be either registered or unregistered, with different levels of protection.
Venture Capital - Money used to support new or unusual commercial undertakings; equity, risk or speculative capital. This funding is provided to new or existing firms that exhibit above-average growth rates, a significant potential for market expansion and the need for additional financing for business maintenance or expansion. Venture Capital is extremely difficult to secure for a variety of reasons.
Working Capital - The difference between current assets and current liabilities. Working capital finances the cash conversion cycle of a business - the time it takes to convert raw materials to finished products to sell and receive cash.
* If the business plan would be fully funded by DVR, per DVR Self-Employment Fee Schedule, this step may be skipped.
If the start-up costs will require the consumer to financially participate, the consumer should begin submitting the plan to potential investors to secure funding to cover the start-up costs identified in the business plan. Once funding is secured this should be documented through notarized letters to DVR. This can occur simultaneously while the business plan is being submitted and reviewed by the Business Plan Review Committee (BPRC). If outside funding has not been secured prior to the BPRC review, this would be an action item for completion under initial approval.
Potential funding sources can include family, friends, banks, micro loan programs, and Social Security Administration Plans for Achieving Self-Support (PASS). See Appendix 2 for information on Social Security Administration (SSA) Plans for Achieving Self-Support, Individual Development Accounts, or Assets for Independence Act.
If potential funding is available and documentation of DVR’s potential contribution is needed to secure this funding, the consumer should proceed with submitting the business plan to the BPRC. The BPRC will need to complete their initial review prior to a collateral letter being written.
This appendix includes resources that might be helpful during the self-employment process. This list of resources is not meant to be all inclusive.
Credit Score and Report:
Self-Employment FICO Score Request
Introduction: This guidance is intended to describe DVR's policy and scope of services related to individuals wishing to pursue work as an independent contractor. An independent contractor typically does not need to market their skills or abilities to obtain outside contracts. An independent contractor is hired to render goods or services to another entity. Sometimes independent contractor work can be considered part of the "gig economy".
For individuals wishing to pursue employment as an independent contractor, DVR may support:
There can be many benefits to Independent Contractor work, along with considerations.
Benefits:
Counseling Considerations:
Consumer wants to drive for Uber as an independent contractor. The consumer may require technical assistance related to filing taxes and/or bookkeeping and may need assistive technology. The consumer already owns a vehicle and has insurance that meets Uber's requirements. The consumer does not have to advertise and will get all riders from Uber.
Consumer wants to work in a nail salon as an independent contractor. The consumer may require technical assistance related to filing taxes and/or bookkeeping. They may require training and licensure, face masks, a lamp, and occupational tools per the DVR fee schedule (e.g. air brush, files, clippers, nail brushes, small fan, etc.). The consumer will not advertise, and all customers will come through the salon.
Staff are encouraged to work with their supervisors when these cases arise to assist in determining the appropriate process to be used.
Consumer offers craft or antique resale on Facebook Marketplace, eBay. They do not have a sole source contract or contracts and need to advertise and promote on these platforms to acquire sales and business.
Consumer wants to work as a massage therapist and must lease a building space, has to purchase table, tools and equipment, requires marketing and advertising, maintain licensure and insurance.
Note: Occupational Tools and Equipment and Computer Purchase fee schedules should be used for gig work
DWD Contact Information
201 E. Washington Ave
P.O. Box 7946
Madison, WI 53707
(608) 266-3131
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