To start a business means to initiate and actively develop a new company or enterprise by creating a product or service, securing funding, legally registering the business, and then actively engaging in operations to generate revenue and profit; essentially, it's the process of taking an idea and transforming it into a functioning commercial entity.

But not every business starts with an idea. Sometimes a new business is formed when two entities merge for form a new organization. But in the case of an acquisition, where one company takes over another company, no new business is formed.

Ok, so what exactly does count as a true new business start? In this FAQ we will attempt to highlight the various scenarios and show you how to record the scenario in Neoserra.

• Business Start: Entrepreneur starts new business
• No Business Start: Entrepreneur buys existing business
• No Business Start: Existing business buys another existing business
• Business Start: Existing business merges with another existing business
• Business Start (Maybe): Existing business opens second location

Entrepreneur starts new business

This is probably the most typical type of true new business start. A prospective entrepreneur approaches your program for help starting their business where no business exists yet. In Neoserra, you will initially create a pre-venture client record:

You will log all your counseling sessions under this pre-venture client record. When the client starts their business, you will want to:

• Update the Company Name;
• Change the current Company Status to "Start-up" and enter date of business filing;
• Check the Verified to be in business checkbox assuming you are able to verify that they have completed local/state/federal registration(s) and have either started to generate revenue; acquired debt; hired staff; and/or have incurred business expenses;
• Indicate the date of the Reportable Business Start which is the date when you, as the counselor want to take credit for helping start the business;
• Add the employee information;
• Update any of the additional fields such as Business Type, NAICS codes, ownership structure, etc.

Your updated Neoserra record will look like this:

And you will get credit for a new business start in the period that encompasses the date of the Reportable Business Start Impact.

Entrepreneur buys existing business

What if your prospective entrepreneur is not looking to start a new business from scratch but rather they are looking to buy an existing business? In this case, the business is already in business but the ownership structure is potentially changing. In Neoserra you would create a client record in Neoserra for the existing business:

You will record your counseling, as appropriate, under the existing client record. Once the acquisition has been finalized, and the entrepreneur successfully takes over the existing business, then you will update the record as appropriate without changing the company start date and without logging a reportable business start impact date.

Your updated Neoserra record(s) will look very similar to the original record with possible changes to staffing levels, gender and or vendor ownership, etc.:

Existing business buys another existing business

In the scenario above, we assumed that the buyer was an entrepeneur, but what if the buying entity is an existing business, and they are looking to buy another existing business? Per the SBA website: "...acquisitions do not result in the formation of a new company. Instead, the purchased company gets fully absorbed by the acquiring company." Thus, in the scenario where company A acquires company B, no new business start will be reported.

In this case, it is assumed that you are counseling, as a minimum to buyer. You may optionally also counsel the seller, in which case, prior to the acquisition, both records would look like this:

However, after the acquisition, the buyer incorporates the operations of the entity purchased within its own operations. There may be an increase in sales, as the two companies consolidate and there may be an increase in staffing levels, but there is no separate new business created. The seller's operations are absorbed into the existing buyer's operations. Post-acquisition the two record will look like this:

No new business will have been started and no Reportable Business Start Impact can be claimed.

Existing business merges with another existing business

A less common scenario might be where company A and company B merge together to form company C. Mergers combine two separate businesses into a single new legal entity. True mergers are uncommon because it?s rare for two equal companies to mutually benefit from combining resources and staff to form a completely new business. However, if you encounter this scenario, then you will want to create a pre-venture record in Neoserra for the newly formed entity and record all of your counseling under this one record. You may, or may not, also have client records in the database for the two companies to be merged. However, in order to record the business start, a pre-venture record will be necessary, thus your database could have the following records:

If company A and company B don't exist in your database yet, then you don't necessarily need to create a record for them. In other words, the only critical record from Neoserra's perspective is the TBD pre-venture record which is where you will record the business start once the two companies complete their merger. And, once the merger is complete, your database should include, as a minimum the newly formed business, and you will inactivate the two merged companies that no longer exist:

Again, this scenario is rare. In most instances, company A will absorb company B in its operations.

Business Start (Maybe): Existing business opens second location

Lastly, there is one more scenario to consider, and that is when company A decides to open a second location or second business. Perhaps the flower shop is looking to open a coffee shop next door; or the flower shop opens up a second location across town.

If the second location or second business is wholely separate and distinct from the primary business, with its own financial statements, its own staff and its own operating expenses, then there is a business start as per the first scenario in this FAQ: Business Start: Entrepreneur starts new business. You can ask the entrepreneur to log into eCenter Direct and click on "My Information" and then click the "Add a new company" link, as discussed here.

However, if the second location or the second business is run as part of the original business, then no new business start is created. In other words, if the coffee shop is staffed with the same people that also sell the flowers in the flower shop; and if the coffee shop revenues and expenses are reflected on the financial statements of the flower shop then essentially the two businesses are run as one. The client may be experiencing business expansion, but no new business start should be recorded.

Want more? Browse our extensive list of Neoserra FAQs.