How to Start a Foreign Exchange Business

Friday, January 9, 2015

How to Start a Foreign Exchange Business

Foreign Exchange Business | Business Ideas

The exchange of money plays an important role in today's global marketplace. Without those who serve in the capacity of money ex-changers, buying and selling goods in foreign markets would be much more difficult. Currency exchange businesses must meet certain regulations and guidelines designed to prevent money laundering and other illegal financial activities.

Foreign exchange is everywhere. Anytime you want to buy a product or service in another country, your home currency needs to be exchanged for the currency of the country that sells the product or service. Thus, the help of a currency exchange service is necessary. Most of the time, consumers use their bank to do the exchange, which can be very expensive, 3 to 5 percent of the total transaction. Foreign exchange companies, however, can process the transaction at a lower cost.

If you are starting a foreign exchange business, you will have to work on your business plan. Regardless of your location, you can start this type of business. Determine the licensing requirements in your state or country.

Before making the final decision, make sure that you study the risks and benefits of the available options.

How to Open a Foreign Exchange Business

Many people want to start their own business but the most common hindrances are lack of money and knowledge. If you are interested in foreign exchange, you can earn great profits by starting your own foreign exchange business. Regardless of your location, you can start this type of business. Determine the licensing requirements in your state or country. You can visit the concerned government agency to inquire about the requirements. Comply with the necessary documents and paperwork to apply for the business license and pay the fees. Processing may take some time but it’s worth the wait.

Starting from scratch can be hard but a great idea to enter the industry is purchasing an existing company that is involved with trading. Set up costs are higher when you start from scratch. Before making the final decision, make sure that you study the risks and benefits of each option. If buying an existing company is better, then you can proceed. With the business license, you can operate the business with ease because everything will be legal. Here are the things that you need to do –

Things to Do for Starting a Foreign Exchange Business

Set your objectives beforehand. Your goals or objectives should be realistic enough and evaluate your skills. Since you are going to be the owner, you should have enough background in Foreign Exchange. Analyzing the competition is vital as well. By doing so, you can identify the weaknesses of your competitors and use it against them. The costing and expenditures will make up the financials. You will be making forecasts for the next 5years. If your business is viable, you can easily seek funding (when needed). Another consideration is the staff. How many employees do you need? Hire only the most competent and reliable staffs.

Choosing a good location is also important. The location of the existing company should be situated in the city center or anywhere where it is easily accessible. You also need to apply for utilities, internet, and phone lines. The business plan you create should have detailed financials and decide on the business structure. Overhead expenses should be kept low since you’re just starting out. With your knowledge in foreign exchange, you will surely succeed in this kind of business. So what’s it going to be – starting from scratch or buying an existing business? Choose the option that offers the best advantages. There will always be risks but with careful planning, you’re sure to become one of the most popular foreign exchange businesses.

Instructions:

Record-Keeping

One of the most important sets of rules and regulations regarding money exchange businesses revolves around the need for complete and accurate record-keeping. This is designed to prevent those in the money exchange business from engaging in money laundering. These rules vary by state. The state of Illinois, for example, requires that a daily cash sheet be kept, all check registers and bank statements be retained, and that all other types of related financial records be available for examination by public officials.

Licensing

Licensing is required to run a foreign currency exchange business. It's generally considered a criminal violation to run a currency exchange business without one. In Illinois, for example, anyone found guilty of running one of these businesses without a license is guilty of a misdemeanor. The licenses generally are obtained by going by your state's licensing department.

Fees

The fees that money exchange's charge are limited by state regulation. This prevents unfair trading practices by those that exchange currency by limiting the maximum amount they can charge per financial transaction. The amount that can be charged is generally dependent upon the amount of the check itself. For example, in Illinois, those cashing checks in excess of $100 only can be charged a maximum of 2.25 percent of the face value of the check.

Tax Reporting

Those engaged in a money exchange business are required by the Internal Revenue Service to report their earnings in U.S. dollars rather than in the foreign currency in which they conduct their business. The business owner can't use foreign currency for these reports. Instead, any exchange business located in the United States must use dollars only when reporting income. This is true even in cases where the business owner keeps financial records in a foreign currency.

Tips

Incorporate in your home state where you will operate your foreign exchange company.

Register your business with state and federal government. Contact your state's finance commission about registration; check under money exchange/transmitters. The business also needs to be registered with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury. Each state has its own set of registration filing fees.

Assemble your business' operations manual. The manual is required in order to be compliant with your state's rules for operating a foreign exchange business. FinCEN and your state regulators will provide information regarding this task. It is their objective to make sure your foreign exchange company has certain operational procedures in place when taking on new customers and expediting their foreign exchange requirements. Your regulators also will help you take the necessary precautions so that you do not innocently take part in money laundering or other illegal activities. These are known Know Your Customers (KYC) procedures.

Set up your business' accounting system. It advisable to speak with your accountant about your foreign exchange business. She can help with consolidating your various multicurrency accounts and prepare the necessary Internal Revenue Service forms that apply to foreign exchange companies.

Locate banks in various countries with which you intend to clear your foreign exchange transactions. Start with a large bank that has an office or branch in that particular country. For example, the U.S. dollars account will be held at the New York branch, the British pound account will be held at the London, England, branch and the Canadian dollar account will be held at the Toronto, Ontario, branch. A clearing bank that provides online banking displaying all your multicurrency accounts is a major advantage.

Hire a good web developer who can provide live feeds for currency quotes and other financial information. Have him optimize your website so that your prospective customers can find you quickly on the Internet.

Reference:

1 comment:

Foreign ExchangeDecember 17, 2013 at 10:35 AM
Foreign Exchange, Foreign Exchange Business, How to Start a Foreign Exchange Business
ReplyDelete
Replies

Add comment

Please don't spam. Spam comments are not approved

Subscribe to: Post Comments (Atom)

Easy Tips and Ideas to Start Business

Although anyone can start a business, many people fail because of a bad product or improper research. If you want to start your own business, you can improve your chances for success before you even begin. In order to make your business successful, start strong and make sure that your idea will hold out for the long haul.

Have a Good Product

Ensure that you plan to sell something useful. Although you may think that your product is important or special, that doesn't mean the general public will agree. Ask friends, family and strangers what they think of your product. If they don't seem that interested, ask them why. With their suggestions, you can either improve the product or scrap the idea completely. According to Brad Sugars of Entrepreneur magazine, most small businesses fail because they sold a product that didn't have an adequate market. This also applies to small businesses that provide a service. A lawn-care business might be useful for part of the year in a northern state, but it is in-demand year-round in the south. Consider whether people will actually want to use your service and get constructive advice from those not afraid to give their opinion.

Research Local Businesses

Research local companies before starting up your own business. This will not only give you an idea of the amount of competition you will have, but it will also help you price your product or service. If you're looking to start a wedding photography business, you may find during your research that the market is over-saturated in your area. If not over-saturated, you should contact each business and ask them for a price list. Alter your prices so you can stay competitive with the competition in town. Researching similar local businesses will also help you decide where to locate your business location. Try not to start up a store or office close to another business of your type. If your small business is located away from similar business types, this will cause locals to choose you over businesses that are farther away from where they live.

Get Professional Advice

You may know someone who has started their own successful business. Ask him for advice and listen to his stories of how he started his company. You may gain useful advice on the good and bad ways to start a business. Local entrepreneurs can also introduce you to local product providers or advertisers that you may not have met without their help. Accept any advice with open arms, especially if the advice is coming from someone successful in the area.

How to Calculate Business Start Up Costs

Starting a business in no easy endeavor. It takes a great deal of research, perseverance and hard work. While sweat equity will make your small business more successful, you will most likely need real capital to get the business started. Before you start raising capital and/or investing your own funds, the first thing you need to do is determine the total start-up costs.

Step 1

Determine your costs of sales. For most small businesses this means inventory, the cost of raw materials, manufacturing equipment, shipping, packaging, and warehousing. However, not all businesses sell products. In this case, the cost of sales is primarily the direct labor involved in making the sale. For example, to open a small shoe business entails purchasing enough inventory ($10,000) to stock the store.

Step 2

Determine professional fees. Planning your business structure, i.e., limited liability corporation or general partnership, means hiring an attorney. There may also be the need to pay an attorney for help with establishing trademarks, copyrights, and patents. In this scenario, that puts total professional fees at an estimated $20,000.

Step 3

Determine technology costs. Technology can greatly reduce the cost of labor for small business if used effectively. Most small businesses require computers, printers, cell phones, website development, Internet access, software applications, information security, data storage, and outsourced information technology (IT) consulting. If the cost of technology is $10,000 to start, add an additional $5,000 a year for maintenance (hint: maintenance is not included in start-up costs).

Step 4

Determine administrative costs. This varies with business types and may include items such as business insurance, office supplies, product packaging, parking, rent, express shipping, desks, chairs, fax machines, phones, or anything else necessary to operate the business daily. A good estimate for start-up administrative costs would be $5,000 for the first six months.

Step 5

Determine initial sales and marketing costs. Now that you have your product, you need to let folks know about it. Sales and marketing costs generally include marketing materials for presentations, printing stationery, business cards, advertising, trade show events, and public relations. These initial sales and marketing costs can add up to $3,000.

Step 6

Determine the wages and benefits needed to secure a staff. This includes employee salaries, benefits, workers compensation, and payroll taxes. Let's put the cost of wages and benefits estimated at $20,000 for the first three months of business.

Step 7

Add all costs associated with starting the business for a total. Be sure to only include business start-up costs that will be incurred in the first three to six months of operations. For this example, the calculation is: $10,000 + $20,000 + $10,000 + $5,000 + $3,000 + $20,000 = $68,000.

Pages

Friday, January 9, 2015