Business Information for Entrepreneurs by an Entrepreneur

Have you begun planning your tax strategies for 2009? Better yet, have you even begun thinking about them? If not, then perhaps you may want to put tax planning on the top of your to-do list – saving you from scrambling to implement your tax-saving strategies at the last minute.

Planning for Tax Savings in Advance

It is important to devote some time now to implementing your tax-saving strategies so that your tax liability will be reduced when it comes time to paying taxes. It is also important to remember that there are a number of tax provisions which are set to expire this year. Take advantage of them now to decrease your business’ tax liability.

For many businesses, 2009 has proven to be quite challenging, to say the least. Therefore, for many companies, the standard race to accelerate deductions and defer income at the end of the year may not work so well this year.

Special 2009 Tax Strategies

For example, in a typical year, small businesses may choose to record income when it is received, not when an order is made, in an effort to defer income at the end of the year. However, those businesses that struggled to make a profit in 2009 may find that this is not the best course of action, as they are hoping that next year will be more profitable than this year.

• One of the tax benefits set to expire this year includes a research tax credit and a provision that allows for a 15-year amortization on any leasehold, retail or restaurant improvements.

• Another deduction involves the $250,000 Sect. 179 deduction, which gives businesses the opportunity to write off up to $250,000 worth of qualified machinery and equipment purchases; this deduction has a few provisions, however, including the fact that the equipment and machinery must be up and running before the end of the year. Both of the above deductions may be extended.

• Don’t forget, of course, about making a charitable contribution before year’s end. Corporations can claim a deduction of up to 10 percent of their taxable income for charitable contributions.

• Finally, get your employee bonuses in order before January 1, but pay them out in the early part of next year, before March 15. If you have a business trip scheduled for the early part of next year, consider rescheduling it to take full advantage of your business travel deductions.

As the end of the year approaches, make sure all your tax ducks are in order to enjoy the most benefits before April 2010 arrives.

California businesses are the latest group to be targeted by scammers. This latest scam certainly shows us that: (a) there is no one that scammers won’t target, and (b) we must all be on high alert when it comes to giving or receiving any type of information or money.

$3 Million in Scams

The state of California is now in the process of suing six businesses and eight persons that are believed to have targeted and scammed business owners. The recently filed lawsuits, which were filed in the San Diego Superior Court, seek to recover more than $3 million dollars for the scammed businesses.

California Attorney General Edmund Brown Jr. explained that these scammers sent out official-looking documents to several California businesses that essentially convinced them to send money. Of course, these small businesses received nothing in return.

The Details of the California Scam

The lawsuits involve three separate cases, although all of the cases involved the same type of scam. The state of California accuses these six businesses and eight individuals of mailing solicitations to small business that appear to be government documents. The documents even included official-looking seals and citations to the Corporations Code. The letters stated that the businesses were in danger of losing their corporate or limited liability status unless they made a payment in a short period of time.

The first case against Anthony Williams and his fictitious company, the Compliance Annual Minutes Board, states that he sent out forms to businesses that demanded an annual fee of $150. The letters detailed that the businesses would risk losing their corporate status if they didn’t immediately send the fee.

The other cases were also similar in nature, as they demanded money and used scare tactics to get it. Some of the scammers convinced businesses that were in danger of receiving fines, penalties and suspension if the fees were not paid.

The California Attorney General’s Office is seeking civil penalties in all three cases, as well as injunction and other remedies and costs.

Since 2004, more than 5,000 complaints have been received the Attorney General’s Office regarding these type of business scams.

Protecting Your Business

As a business owner, it is up to you to always confirm the validity of any solicitation, emails, bills or correspondence if you don’t recognize it as a trusted source. If in doubt, contact your State Attorney General’s Office to check the validity of the correspondence and of the company.

Technology has certainly changed the way we do business. From social networking sites to email and websites, the Internet has allowed us to market our businesses far beyond physical boundaries. The internet has opened so many doors for business owners who were once limited to their hometown.

How Small Businesses are Benefiting Online

The latest statistics on Internet use among small business, which was recently released by Citibank Small Business, shows just how much businesses have come to rely on the power of the Internet to market and sell their businesses.

For example, the survey – which was conducted over the phone with 500 small business executives (of less than 100 employees) across the country from August 20 through August 27 – showed that nearly 42 percent of small business have used their company’s website as a way to generate business leads and sales.

In addition, the survey showed that 28 percent of small businesses were employing email marketing, and nearly 25 percent of the businesses were using online advertising as a way of increasing their business sales and leads.

Social Media Sites still not Taking off Among Small Businesses

However, what came as a bit of a surprise is that social media sites, such as Facebook, LinkedIn and Twitter, are not being used very often for business use. In fact, the survey by Citibank Small Business showed that just one quarter of businesses have used these social media sites to market their business.

Many small business executives saw these sites as not being very helpful when it comes to generating business leads or expanding business.

The number of social networking sites used by small businesses to seek business advice or information was also very small, as more than 86 percent of the small businesses surveyed said they have not used social networking sites for this purpose. Only ten percent of business owners surveyed actually sought out business advice on social sites and blogs.

With the popularity of social media sites taking off over this past year, it came as quite a bit of a surprise to learn that few small companies used them. However, when given the state of the economy and the difficulty that many businesses have faced over the last year, it becomes clear that many businesses were simply too focused on running their businesses and managing their cash flow to capitalize on social media sites.

In the battle over healthcare reform, it seems like small businesses are caught in the middle – again.

Earlier in the year, Congress proposed a set of reforms that would heavily fine small businesses if they didn’t provide healthcare for their employees, sparing only those companies with a few employees. After small business advocates cried foul on these proposals and stated that the burden on small business owners would just be too great, the measure was dropped.

However, in its place came a new set of proposed reforms. The Senate Finance Committee decided to introduce a new healthcare reform bill that essentially rewards those small businesses that provide healthcare to their employees.

The main proponent of this bill, Senator Max Baucus (D) of Montana, is interested in creating nonprofit insurance exchanges, which will be offered to small businesses with less than 100 employees.

This current piece of healthcare reform has many aspects, much of which will greatly affect small business owners regarding how they pay for their employees’ healthcare:

• Tax credits will be rewarded to small businesses that provide health insurance to their employees, although only those employers with 25 or fewer employees will qualify for these tax credits. It is important to note, however, that more than 92 percent of small businesses have less than 25 employees. In addition, this new bill will only apply to small businesses whose average employee makes less than $40,000 per year.

• Small businesses with 50 or more employees will likely be fined if they don’t offer health insurance to their employees. It is also important to note than just four percent of small businesses have more than 50 employees. Employers with more than 50 employees will have to pay fines for each employee under this bill if they don’t provide health insurance, thereby imposing hefty fines on these employers.

• More taxes will be imposed on insurance policies with premiums above $8,000 for an individual and more than $21,000 for a family. These new taxes could be ultimately passed onto employers’ health insurance plans, thereby resulting in higher premiums. For many employers, these taxes could result in simply too much financial burden.

While the bill has yet to be finalized, the relationship between small businesses and healthcare will certainly change in the upcoming legislative sessions.

You start a small business and need easy access to short-term credit. Of course, you set your sights on a small business credit card, right?

Not so fast!

Many small business owners are quickly learning that a credit card labeled as a “small business “ credit card may not be what it seems. In fact, many experts point out that credit cards specifically designed and marketed for small business may come with extra liability – which small business owners may not want to take on.

Why Small Business Credit Cards May Not be Ideal

Although the Credit Card Holder Bill of Rights, which was signed into law by President Obama over the summer and is expected to go into full effect in February 2010, is designed to protect credit card holders, there are still ways for creditors to get around these reforms and tack another level of liability onto small business owners through their small business credit cards.

In fact, there is no specific offer of protection from the Credit Card Holder Bill of Rights for small business owners, leaving them quite vulnerable to the ploys of credit card companies.

This extra level of liability makes sure that BOTH the company and the cardholder remain responsible for the credit card debt. In other words, if your business is unable to pay the business credit card debt, the credit card company has the right to go after you, as an individual, for the repayment of the debt.

Better Financing Options

Subsequently, many industry experts have recommended that small business owners, in lieu of securing a small business credit card, simply secure a personal credit card for business expenses and pay the expenses from their business accounts.

Although many creditors offer small business credit cards to entrepreneurs and tout them as more convenient and practical than standard personal credit cards, the reality is that you may be able to use a personal credit for your business just as easily as you can with a business credit card.

There are many special features that creditors offer to small businesses through small business credit cards, but the reality is that you often find these features on personal credit cards as well – without double the liability.

Despite the government’s efforts and stimulus, lending programs are suffering, and small business lending programs are no exception.

The Real Small Business Lending Numbers

The numbers are quite grim and indicative of the state of the recession and of the economy as a whole: small business lenders secured 25,000 fewer loans to small business entrepreneurs in 2009 than they did in 2008.

The Small Business Administration recently ended its 2009 fiscal year, and the numbers were sadly staggering: the Small Business Administration backed just 44,221 small business loans through banks, which was 36 percent less than the number of backed loans just a year prior.

Dollar volume for SBA-backed loans also fell sharply, as loans from the fiscal year 2009 totaled $9.3 billion, which was a 27 percent decrease from last year’s $12.7 billion.

SBA Loans and the Future

Even though the SBA backs small business loans, it is important to note that they back only a certain percentage of the loan – meaning that if the borrower defaults on his or her small business loan, the SBA pays the bank back just a portion of the loan amount. This is exactly why banks still need to be assured that they have secured a trustworthy borrower, even though the loan is backed through the SBA.

These numbers come at a time when the SBA and the Congress are taking steps to ensure that loans continue to circulate for small business owners. In fact, Congress allocated nearly $730 million of February’s stimulus package to the SBA to encourage new incentives, including waiving fees and increasing its guarantee to banks regarding the backed loans. Although this move helped more than 1,200 lenders get up and running again, it clearly didn’t solve the problem as a whole.

Throughout all of this grim news, however, is optimism that the worst is over. In fact, many lenders have begun to see numbers slowly growing again. Loan programs hit an all-time low in January, when loan amounts fell nearly 48 percent from the prior year. However, when the Recovery Act provisions began in April, the volume on small business loans began to immediately increase. By September, loan volumes, as reported by the SBA, were the highest they were all year, with nearly $1.3 billion loaned to business owners.

Mobile text messaging may very well be the newest marketing tool for businesses everywhere. In this age of text messaging, it only makes sense that businesses begin to take advantage of a wildly popular form of communication.

Tremendous Growth in Text Messaging Potential

Called Short Message Service, or SMS for short, this marketing channel seems to be a highly effective way for businesses to communicate with their customers. The Wireless Industry trade group, CTIA, reports that SMS has nearly tripled since 2007 and is now more active than cell phone calls! It is important to recognize that the largest increase in SMS involves people under the age of 30.

Industry analysts note that SMS is a much more effective form of communication than emails. Research on this subject revealed that a whopping 97 percent of SMS marketing messages were opened, and that 83 percent were opened in just one hour.

This is likely due to the fact that many consumers have their phones with them 24/7 and generally respond to them at any give time. It therefore only makes sense that text messages will then be read by most mobile phone users.

How to Use SMS for Marketing

There are a number of ways to begin using SMS to market your business:

1. Hire a text-messaging company, such as MobiQponsis and 8Coupons. These web-based services can perform a number of advertising strategies, from sending out text coupons when consumers are in the vicinity of a business, to allowing consumers to text themselves coupons as they desire.

2. Consider a custom approach that allows you to register your own proprietary short code, thereby allowing dialers to access your text marketing campaign. Companies such as Mobile Commons and HipCricket allow you to share a short code.

3. Use your traditional marketing resources to inform customers about your texting campaign.

4. Consider offering customers “exclusive” access to something in return for their mobile phone number.

5. Don’t irritate consumers by texting constantly; instead, focus on less than five times per month, or if you have a good reason for sharing information with them.

Indeed, you may be soon texting your way to more profits!

The fallout from the new credit card legislation has begun to show its face, and many small businesses received the short end of the stick. In February 2010, new credit card legislation will be implemented, and many credit card companies, have begun raising interest rates in an attempt to recoup future losses.

And it’s not just consumers who are being hit with rising interest rates.

Business credit card interest rates are soaring as well, leaving many small business owners, many of which who are already struggling in this difficult economy, with a great deal of frustration and exasperation.

Dramatic Rise in Interest Rates and Fees

Some credit card companies have raised interest rates so much that they have more than doubled for some business owners. For example, a small business owner with a Bank of America business credit card saw his interest jump from less than 10 percent to 27 percent.

Not only are credit card companies raising interest rates on their small business owners, but they are also demanding higher minimum payments, sometimes doubling minimum payments. This has left many small business owners with little to no options and a credit rating on the brink of disaster.

Many banks, including Bank of America, contend that they raise interest rates or minimum payments on customers after periodically reviewing their external credit risk, and that they provide customers with notification of a pending increase. Customers then have the option of “opting out” of this increase. They can then pay off the balance with the lower interest rate (although their account would then be closed).

How You Can Fight Against Interest Rate Hikes

If you are a small business who has been notified of an increase in your card’s interest rate and/or minimum payment, there are a number of things you can do:

• Call the lender and negotiate a reduction in your interest rate. Many lenders are willing to lower interest rates for a set period of time if you request this.

• Consider opting out of your credit card. This will involve closing your credit card account, but it will also afford you the opportunity to pay off your existing balance under your old interest rate.

• Consider transferring your balance to a new card, if possible. Beware, however, of balance transfer fees, as these can often outweigh the benefits of transferring to a card with a lower interest rate.

Carefully monitoring the fine print of your credit card statements will help you ensure that you are not victimized by surprising credit card rate hikes.

For those late on making tax penalty payments, small business owners can breathe a little easier. The Internal Revenue Service just announced through 2009, it shall extend a grace period granted to small business owners regarding payment of particular tax-shelter penalties.

The original September 30 deadline was quickly approaching while Congress worked towards passing legislation to shield small business owners from some of those tax-shelter penalties. The IRS then took measures to extend the deadline to the end of the year to give Congress time to pass the needed legislation.

Congress has yet to come to an agreement on the terms of the legislation, thereby holding up the passage of the legislation.

However, in an attempt to find a resolution to this problem, any efforts to collect these penalties will be temporarily suspended by the IRS, thereby allowing many small business owners to breathe a little easier.

Temporary Suspension of Collection Efforts Helpful to Small Business Owners

Efforts to collect any tax penalties will be suspended until December 31, 2009, at which time Congress should have the necessary legislation passed, provided they can work through a bipartisan bill in that period of time.

Many committees through the House and Senate have already indicated that they plan to pass legislation that will protect small business owners, and now it’s just a matter of time. In the meantime, small business owners can get a bit of relief, even if only temporary, until Congress can come together to shield them from some of the penalties imposed by the IRS.

The tax shelter penalties in question involve “listed” transactions. For example, many small business owners bought employment retirement plans that were listed by the IRS. These plans would cost small business owners thousands of dollars in penalties, which they contend are unfair.

Although the IRS has not suspended all collection efforts regarding these listed transactions, they are suspending it for businesses that received a tax benefit of less than $200,000, or $100,000 for individuals.

Have you been operating a business from your home with great success? Does it seem like you are outgrowing your space? When is the right time to move into a corporate office?

These are questions that many small business owners face. The following signs are indications that you might need to take your home-based business into a full-fledged corporate venture.

Normal family functions are beginning to interrupt business functions

If you are conducting a high volume of work from home, it might interfere with some things that would be considered “normal” family functions. For example, if your child is in high school and needs to use the computer to do homework, they may need to interrupt you in the home office to accomplish this. This indicates a need for a separate family computer and a business computer. It might also be a sign that you are outgrowing your home space and need to go corporate.

You have numerous employees working from your home

This is a sign that you may be ready for a corporate office. Employees need their own space and the flexibility to get work done as needed. It might be uncomfortable or inconvenient to have them dropping by your house at all hours of the day and night. The number of employees you have, as well as the volume of work they are handling, will influence this factor. When it starts to become disruptive or inconvenient, now may be the time to move into a corporate office.

You have an excess of supplies and inventory cluttering up the house

Depending on the nature of your business, you may be ordering supplies and inventory items on a regular basis. If your home does not feature adequate storage for such items, it might be time to consider getting into a more feasible work space. This means a corporate office with adequate storage for your supplies and inventory items.

The transition from home-based work to a corporate office may be intimidating, but in the long run, it might actually improve the productivity of your work and the quality of your results.