Print
Time To Startup!
Inspiration and Information for Starting Your Business

Archive for April, 2010

What Pulled the Trigger for You? Why Did You Incorporate Your Business?

Posted on April 30th, 2010 by Joey
Category: Form My Business, Incorporate a Business, Small Business

As a small business owner, you are most certainly aware of the benefits of incorporation with personal financial liability protection, credibility and tax advantages all making the top of the list.  

 But I’d like to unearth the motivation behind your decision to incorporate in the first place.

 Did you need to incorporate or form an LLC because:

  • You hired your first employee?
  • You hit a certain level of income? Or your profits ballooned?
  • You landed a big contract?
  • You made a life-changing purchase? Or perhaps you experienced a life-changing event?

Or did you just decide it was time to incorporate? What was that pivotal moment that spurred you to add that “LLC” or “Inc.” at the end of your business name? I’d love to hear from you!

2 Comments

LLC Elects S Corp Status — The Best of Both Worlds?

Posted on April 29th, 2010 by Joey
Category: Incorporate a Business, Incorporation, LLC, S-Corp

So you are ready to start a small business, eh? You have a wonderful vision for a unique new service or special product. Your business plan is a work of art. You are ready to cast off from the safety and security of your cubicle at the office and blaze a new trail of entrepreneurship. Congratulations!

Now, as you start, run and grow your new business, how do you intend to structure it so that it becomes an efficiently operating, thriving enterprise? Two of the most popular organizational forms today are the limited liability company (LLC) and the S corporation. But what if I told you that you could have the best of both worlds, so to speak, by establishing an LLC and then electing to be treated like an S corporation for tax purposes? Well, it can be done.

Business owners–even attorneys and accountants–often get twisted up in the debate over which is best, the LLC or the S corporation. But it’s not necessarily an either/or proposition. Rather, you can set up an LLC and, after setting it up, you can elect to have the LLC treated as an S corporation. If your LLC operates an active trade or business, and payroll taxes (SECA taxes) on the owner or owners are high, you may find that an S corporation election is the best choice.

Both organizational forms share the characteristic of “passing-through” their income to the owner(s). Both also provide their owner(s) limited liability protection. But each has some distinguishing features, too. You, as a new business owner, will want to consider the differences as you choose the form for your enterprise.

  • An LLC beats an S corporation for ease of operation and administration.
  • An LLC beats an S corportation for profit-sharing flexibility.
  • An S corporation beats a typical LLC for flexibility in paying its earnings to owners as either earned income in the form of salaries and wages or passive income in the form of distributions.
  • An S corporation beats an LLC for various tax planning purposes.

To learn more about the features of an LLC and the features of an S Corp, read the rest of this article at Toolkit.

BizFilings would like to thank guest blogger and Toolkit staff writer, Robert Steere, for his contribution. Robert has served as general counsel for a state tax department, as tax policy director for a state chamber of commerce, and as a tax specialist for two major CPA firms during his 30-year professional career. Bob holds a BS degree from Michigan State University and a JD degree from University of Michigan Law School.

5 Comments

Facebook Provides Another Opportunity for Small Businesses to Capture the ‘Oohs’ and ‘Aahs’ of Raving Fans

Posted on April 22nd, 2010 by Joey
Category: Grow a Business, Internet Marketing, Promote My Business, Small Business

A recent article written by the Associated Press announced that Facebook is enhancing users’ profiles to emphasize pages for bands, books and businesses (Hooray!) that millions have become enthusiastic admirers of through this enormous online social network.

Right now, users can list their likes and dislikes, hobbies, favorite music and TV shows as part of their profiles. Facebook is putting another foot forward with two new enhanced features designed to link your profile to pages about these hobbies, likes and dislikes and TV shows.

So as of April 19, Facebook nudges you to explore these two new features. Say you had Johnny Cash in the “favorite music,” section of your profile, the article cites. Now Facebook will automatically ask you to join his page – if you haven’t become a fan of it already. The option to hide this connection on your profile is available, but your name will still be listed on the Johnny Cash page as one of the 1.2 million “people who like this” formerly earmarked as “fans.”

The Facebook blog has cited that these changes were spurred by them noticing more than three times as many of you have connected to Facebook pages, such as those for businesses, bands, non-profits, universities or anything else that trips your trigger (previously known as ‘fan pages’), as a way to express who you are. So to make it even easier to display these affiliations, Facebook has boosted the profile section. Now, certain parts of your profile, including your current city, hometown, education and work, and likes and interests, will contain “connections.” Profiles on Facebook will immediately connect to the things, experiences, places that comprise who you are. 

Here’s how the new tools work according to Facebook:

  • Opt-in to new connections: When you next visit your profile page on Facebook, you’ll see a box appear that recommends Pages based on the interests and affiliations you’d previously added to your profile.
  • Connect or not: You can then either connect to all these Pages—by clicking “Link All to My Profile”—or choose specific Pages. You can opt to only connect to some of those Pages by going to “Choose Pages Individually” and checking or unchecking specific Pages. Once you make your choice, any text you’d previously had for the current city, hometown, education and work, and likes and interests sections of your profile will be replaced by links to these Pages.
  • Free expression: If you would still like to express yourself with free-form text, you can still use the “Bio” section of your profile. You can also use features and applications like Notes, status updates or Photos to share more about yourself.

The second fold of this process involves Facebook’s Community Pages.

Community Pages are a new type of Facebook Page married to a topic or experience that is owned collectively by the community connected to it. Community Pages let you connect with others who share similar interests and experiences – similar to the functionality of official pages for organizations and businesses.

On each Community Page, you’ll be able to learn more about a topic or an experience—whether it’s sewing or cooking —and see what your friends and others in the Facebook community are saying about this topic.

Do you see that light bulb above your head yet?

So what does this mean to you, spirited entrepreneur, and go-getting small business owner? The potential for you is remarkable with these new Facebook features. You are able to peek into a promising customer’s thoughts. Say you are running a cookie business, and you discover a whole community who likes the freshly baked chocolate chip cookies with macadamia nuts that you just happen to bake and sell. Start getting involved with the chatter and zone in on that community. Have them link to your business.

This is why it is also so important to keep your small business information on your Facebook page current, interactive and fresh.

If you haven’t joined the ranks of Facebook junkies, take some time to develop a page. Cultivating a fan base also takes time, but it’s worth it. Considering you can reach new customers without opening your wallet, you should take a little bit of effort to update your page with fun elements and nuggets of wisdom. Keep track of what works and what doesn’t work. It’s all about experimentation

Does free advertising get any better than this? What other methods have you tried to successfully promote your business? Do you have personal experiences to share in promoting your small business on Facebook?

7 Comments

Study Reveals Small Business Owner’s Continue to Batten Down the Hatches

Posted on April 15th, 2010 by Heather
Category: Grow a Business, Infrastructure

The Discover Small Business services recently released their monthly update to their Business Watch Index, which measures the confidence of 750 randomly selected small-business owners based on their answers to six questions. The index is sort of a mini pulse check of the small business environment.

In a nut-shell, March saw a decline in the confidence of small businesses, leading to the lowest levels in more than a year. 53% said they feel the economic conditions for their own businesses will get worse in the next 6 months. (Only 37% felt that way in February).

In addition, 52% also said they planned to decrease the amount spent on investing in their businesses, 27% said they would make no changes, and only 18% said they plan to increase spending.

Tax Relief?

Perhaps contributing to the overall feeling that the economy as a whole is getting worse (58% of respondents), is the fact that 72% of small business owners said they were not able to take advantage of any tax breaks for themselves or their business in 2009.

This lead to only 24% saying that they expect a refund, whereas 39% said they expect to owe money for their 2009 return.

So even though we are beginning to see some sectors of the economy turn-around, it may be a while before this reaches the small business community as a whole.

As a small business owner, is your confidence rising or falling?

No Comments

How do I “go green” with my business; and do I really want to?

Posted on April 12th, 2010 by Heather
Category: Green Businesses, Grow a Business

greenbusinessIt’s all the rage to talk about green cities, green businesses, and green policies. It makes sense in the big picture to take care of the planet we’re on. But what does “going green” really mean to the average small business owner?

Let’s start with definitions. “Going green” refers to using the Earth’s resources more efficiently and reducing the negative impact of human activity on the environment and its ecosystems. The mantra “reduce, reuse, recycle” (reduce waste, reuse what you can, and recycle what you can’t) provides a good summary of what a business needs to do to “green up.”

With a few notable exceptions, small business owners were initially slow to embrace the green movement because adopting green technologies was an expensive prospect with very little benefit to the bottom line. If it was all about windmills and solar panels, there might still be little chance of small business taking on even a tinge of green, since few can even consider spending significant sums of money without any prospect of recovering the costs.

But as environmental concerns have increased and the costs of green technologies have decreased, more and more businesses owners have begun adopting green technologies and practices.

Despite frequent gee-whiz coverage of fancy gizmos that convert A into B, or power X with Y, going green is not just about costly conversions. Many green practices are just about using what we have more efficiently. And greater efficiencies translate into reduced costs and an improved bottom line.

Suddenly the small business owner has something to get excited about!

For most small businesses, going green probably means taking small steps initially, which can be supplemented once the first steps prove their economic value. Other factors may play a role in your decisions. For example, if energy costs continue to rise, small businesses may be more motivated to look to green options. If green technologies continue to drop in price, small businesses may be more willing to consider them. If green choices become more widely adopted by the business community, those businesses more averse to risk may be more likely to embrace them. And, of course, weak overall economic conditions tend to motivate all business owners to look for cost-cutting measures, some of which may involve green choices.

Going green means doing a better of job of conserving energy, conserving water resources, and recycling waste. If your business can pursue one or all of these goals and actually save money in the process, it might be time to think about a greener future.

What have you done to “green up” your business? And has it helped you save time and/or money?

No Comments

Corporation or LLC?

Posted on April 1st, 2010 by Heather
Category: C-Corporation, Incorporate a Business, LLC, S-Corp

Perhaps the most common advice a new small business owner hears is to incorporate. There are advantages as well as complications. But even if you decide to go ahead with incorporation, that’s only the first of many choices you’ll need to make. The next step is deciding whether to form a corporation or a limited liability company, or LLC.

The two are similar in many ways. Both are legally a bit like individuals. It’s as if you’ve given birth – suddenly there’s this new entity with rights of its own. Like that new baby, the new entity is NOT equivalent to you, and you’ll get yourself in hot water if you pretend otherwise. Even if you are the only employee, writing a check for Billy’s braces out of the company account is just like writing it out of your next door neighbor’s checkbook.

So long as you are in compliance with state law, both types offer full limited liability to all of the owners of the business in every state. But neither a corporation nor an LLC will protect you in the event of your own malpractice or malfeasance. In both cases, you’ll want business insurance to protect yourself.

Neither will take on your own personal debts—nice try—but in most states and industries, both will protect your personal assets in cases such as legal malfeasance by an employee.

So if they’re similar in all those ways, how are they different? Most of it comes down to the way they’re treated at tax time.

An LLC is a pass-through type of business. Profits and losses of the organization go straight through to the owners. Business income equals personal income, so the owner pays the tax on his or her personal return, and it’s taxed at the individual rate.

Corporations are separate businesses entities with profits and losses taxable to themselves, not to the owners. As a result, corporations are taxed at the corporate rate.

LLCs are generally simpler in structure and in reporting requirements, but in some circumstances, proprietors can earn a substantially increased tax bill through the addition of the self-employment tax, currently at a painful 15.3 percent.

In some situations, corporations can bring their own tax headaches. As mentioned above, the corporation is taxed on its profits, but the owner is also taxed on any dividends and salary from the company. It’s a double tax, and it can seriously cut into the real dollars earned in the end.

This is the beginning, not the end, of a branching tree of decisions. Your attorney or tax accountant can help you find the right path to making your entrepreneurial dream a reality.

See additonal info in our Learning center on both:
Starting an LLC
Starting a corporation

3 Comments