Philadelphia Minority Business Development CenterTM

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The PMBDC Quarterly Newsletter
Providing Information, Ideas and Resources to the Delaware Valley Entrepreneur
Winter

Happy New Year! Happy New Millennium

friends and to the minority entrepreneurs who through their efforts, create job opportunities, increase tax revenues and provide economic stimuli to Philadelphia's local economy. Because the challenges, which face minority entrepreneurs, continue, the PMBDC is committed to providing professional technical service and high quality work products for our clients and helping them access the needed capital to grow their businesses.

Milligan & Co., LLC is a recipient of the MBDA's 2001 Financial Assistance Award

The US Department of Commerce, Minority Business Development Agency (MBDA) announced that Milligan & Co., LLC will continue to manage the Philadelphia Minority Business Development Center TM (PMBDC) under a new contract!
The use of technology was the primary driving force emphasized by the MBDA's RFP and the significant dollars spent by the firm over the past year growing our internal technological capacity paid off by helping us win the new MBDA contract.
All of the 2001 Financial Assistance Awards winners were posted in mid-January on the MBDA's website: www.mbda.gov. Please visit the website to view all of the contract recipients who will provide technical assistance throughout the United States within designated geographic service areas. Congratulations to all of the winners!

A New Vision

The new contract guidelines set by the MBDA emphasize different areas for providing technical assistance to minority entrepreneurs. The PMBDC is poised to confront these new challenges. Most notable is the emphasis on the development of alliances with strategic partners. There are several organizations throughout the Philadelphia region, which provide technical assistance to entrepreneurs. Our staff shares information and resources with them to meet the needs of our local minority entrepreneurs. However, The PMBDC endeavors to promote a new level of partnership that is executed on a more formal basis and that seeks to facilitate synergy over competition. Through this strategic partnership, the existing technical assistance centers can expect an increase in the number of entrepreneurial success stories. This new vision of mutual promotion is bold, yet necessary. It will avoid the duplication of efforts, which may frustrate entrepreneurs who are confused by the processes and eliminates fractionalized assistance from the various centers.
The PMBDC is committed to this endeavor and will host a breakfast meeting with our strategic partners in the near future to unveil our commitment plan and to formalize the partnership. Our strategic partners will be introduced in the PMBDC spring quarterly newsletter.

Choosing A Business Structure

Once a product or service is selected, one of the most important decisions a business owner must make is which business structure best addresses his business needs. As the needs of the business change, so may the choice of business entity. It is, therefore, critical that owners periodically review whether their current form of business is still beneficial. Each form of business has its advantages and disadvantages. The primary forms of doing business are C-corporation, S-corporation, partnership and Limited Liability Corporation.

A C-corporation is taxed as a separate entity from its shareholders and its income may therefore be subject to double taxation. There is generally more flexibility with regards to fringe benefit plans and the choice of a tax year-end. Owner liability is limited to the owner's investment in the corporation. The IRS however, more closely reviews c-corporations.

S-corporations generally pay no tax. Instead, income flows to the shareholders, who are limited to 75, and includes individuals, estates, some trust and tax exempt organizations. There is limited liability and income from the corporation retains its character when passed through to shareholders.

Partnerships like S-corporations are pass through entities and therefore avoid double taxation. There are no restrictions on the number or type of partners and income may be allocated by means other than the partner's capital account. The partner or partners that are designed general partner, however, have unlimited liability exposure.

Limited Liability Corporations have been viewed as the best of all worlds. They have the flow through nature and flexibility ownership structure of partnerships and the limited liability of a corporation. They also have more flexibility with respect to equity participation and income distribution than S-corporations.

There are various factors that should be considered when determining the appropriate structure. The decision to form a C-corporation, S-corporation, partnership, limited liability corporation or simply operate as a sole proprietorship may rest on such items as:

Tax rates (individual rates range from 15% to 39.6% while corporate rates range from 15% to 35%)
imited liability for owners (If owners have determined that it is important that the owners personal assets be insulated from potential lawsuits, a C-corp., S-corp. or LLC will generally be preferred over a partnership or sole proprietorship)
Tax Year of business (C-corps can generally choose any year-end while other entities have restrictions)
Double taxation (C-corps are taxed on their income and shareholders are taxed on any dividends issued by the C-corp.).
State tax treatment (May or may not be consistent with federal Treatment)
Flexible ownership and capital structure (There are restrictions on the type and number of S-corp. shareholders)
Special allocation of tax items (Flexible allocations of income and deductions is allowed for LLC's & Partnerships. S-corps must allocate income based upon ownership)
Degree of administrative complexity (C-corps need bylaws, a board of directors, a charter, stock certificates etc., other entities are less complex)
Unreasonable compensation issues (IRS may reclassify C-corp.'s excess compensation as non-deductible dividends)
Pass through of losses (LLC, S-corp. and Partnership losses may pass through to owner and offset owner's compensation from other sources)

Mayor Announces Economic Development Agenda

According to the Five-year Financial Plan release by the Honorable Mayor John F. Street on January 23, 2000, "the goal of the City's economic development strategy is to create and maintain jobs within the City of Philadelphia". Through the Office of Neighborhood Transformation Initiatives (NTI), blight elimination and neighborhood revitalization efforts were established with the intent of creating opportunities for government and the citizens to work together to recover civic pride and community spirit. The City is projected to provide $160 million in funding from the General Fund over the next five years. $32 million has been pledged this year alone to support the issuance of $250 million in Blight Remediation Bonds. The City's economic development agencies will also better market the financing tools available (city mortgage and loan guarantees, 10-year residential real estate abatement program, tax increment financing, the Keystone Opportunity Zone) as well as advocate and develop new programs and incentives.

We will monitor this activity to see if the Mayor's agenda will help to stave off threats to the City's economic development such as declining neighborhoods, the third highest business tax burden in the country, and the complexity of Permits and Zoning, all of which helps to diminish the successes of the small business entrepreneur.

Call the PMBDC to Register with MBDA Phoenix Database

The Minority Business Development Agency's (MBDA) "Phoenix Database" is a listing of minority-owned enterprises doing business in the United States. MBDA uses the "Phoenix Database" in conjunction with its "Opportunity Database" to match listed minority companies with contracts and other business opportunities via email and fax. A business must be listed in Phoenix and have an email and/or fax number to participate in the contract opportunity matching program. This is a FREE service provided by the U.S. Department of Commerce's Minority Business Development Agency.

While the website is user-friendly, and there is an on-line help tool, we have found that the service is under-utilized. Call Tony Mina at (215) 569-3500 to arrange a free consultation session that will walk you through the process of the on-line registration. Tony has a special form, which will capture all of the information required, and he also has access to the various industry code books that will identify your type of business. After meeting with Tony for just one brief session, you will have direct access to thousands of business and procurement opportunities to help develop and expand your business.

PMBDC has Exclusive Rights to Business Analyst Software

A picture speaks a thousand words! Instead of trying to persuade potential lenders and investors that you have researched the market by developing countless reports and sophisticated written strategies which may never be read, give them a Business Analyst map and watch their amazement at the simplicity of a visual picture of your targeted market. Available only through the PMBDC, the software is a geographical information system using Dun & Bradstreet along with CACI demographic data to:

Identify customers in your area
Identify best location for your operation
Study the demographics of an area
Perform a market penetration study
Create drive time maps and more!

Who is Eligible for PMBDC Services?
Under the terms of the contract, individuals who are eligible for assistance from the PMBDC are: African Americans, Asian-Pacific Americans, Asian Indians, Eskimos, Hasidic Jews, Native Americans, Puerto Ricans, and Spanish-speaking Americans. No service will be denied to any member of the eligible groups listed above.

PMBDC