A New Approach To Holiday Gift-Giving Cliff Ennico www.creators.com If you are like most business owners, buying holiday gifts for your best clients and other important business relationships is one of the most stress-inducing things you do each year. Here are some of the problems: You want to get a personalized gift for each recipient that shows you gave the matter some thought (not the usual pen-and-pencil set, fruit basket, or pocket calendar with your company name emblazoned on the cover), but you don#146;t have time to get an individual gift for each person. You are afraid the recipient won#146;t like the gift, won#146;t be able to use it, already has it, or (Heaven forbid) will be offended by the gift. You are afraid 10 other people have given the recipient the same gift, and you will appear unimaginative. December is your busiest time of year and you simply don#146;t have the time to shop or pore through a three-foot-high stack of gift catalogues to find the perfect gift.Wouldn#146;t it be a lot simpler if people could simply tell you what they wanted, so you could just give it to them, make them happy, and be done with it? Don#146;t laugh. One of the hottest trends is holiday gift-giving is something that#146;s been around for decades #150; the gift registry. If you think they#146;re just for weddings and baby showers, think again. #147;People are doing more and more gift registries for holiday gifts,#148; according to Hans Xu, founder of Felicite.com, Inc. ( www.felicite.com ), one of the nation#146;s leading online gift registries. #147;When you factor the price of gas, traffic congestion, and all that goes into the cost of buying gifts, to be able to make the purchase from an online gift registry is a real convenience for a lot of people,#148; says Hsu, who adds that #147;it#146;s also good for the environment#148;. A typical registry is limited to gifts from one merchant, so registrants have to set up, and gift givers visit, several different registries; Felicite.com enables recipients to set up one registry and register gifts from any merchant in the United States. They can also register cash gifts such as donations to charity, a scholarship fund, or a down payment on a new house. According to Xu, a lot of people who are environmentally conscious and oppose the materialistic concept of #147;we need more stuff#148; find online gift registries an excellent way to channel funds into their favorite charities. #147;Just be sure not to pick political causes only,#148; advises Xu, explaining that #147;while having people register for charitable gifts is a great way to tell people who you are and what you believe in, it#146;s better to give people a range of different types of charities, just in case their priorities are different than yours.#148; According to Xu, many gift registries on Felicite.com are for offbeat or one-of-a-kind things you can#146;t find in traditional retail outlets, such as works of art by individual artists. Hsu#146;s favorite gift-giving story is about a newly married couple who couldn#146;t decide whether to register for a big-screen television set (for him) or a luxury hot tub (for her). They registered for both, and they got both. Felicite.com has a network of about 120 merchants around the country. If a gift from one of these merchants is purchased, Felicite.com will send the order to the merchant for delivery. If the merchant is not part of Felicite.com#146;s network, then the gift is registered as a cash gift, and Felicite.com will send the contribution to the registrant so that they can pick up the gift themselves. Felicite.com is free to registrants. It makes money from commissions, product discounts and advertising. For example, when it places a physical order, it may get a commission or discount from the merchant it is sending the order to. On cash gifts, it charges a 4.9% transaction fee. Felicite.com also has a unique partial purchase feature (patent pending) that allows gift givers to share the cost of gifts. This way they can collaborate on a large gift. What about the element of #147;surprise#148; in gift-giving? Xu feels it is highly overrated: #147;Realistically speaking, do you really believe that if someone is surprised by a gift they don#146;t want or like, they are really going to keep it?#148; asks Xu, pointing out that the long gift return lines after the holidays are full of people who were, #147;surprised by a gift.#148; Yeah, well, okay, but what about the personalized aspect of giving? Doesn#146;t an online gift registry help make the world a colder place by making it easy for people to avoid taking the time and trouble to find the right gifts? Xu strongly disagrees: #147;Does it make you feel warm and cozy inside if your friend took 5 hours to get you the wrong gift, as opposed to 3 minutes to get you the right one? Of course not. If you were a true friend, you would try to save him some trouble.#148; Registering online, in Xu#146;s view, can be viewed as a compassionate and selfless act. Your friend gets to spend more time with family, and there is one less shopper to tie up traffic and parking. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. His latest book is #145;Small Business Survival Guide#146; (Adams Media, $12.95). This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com. More >>

Some Things To Be Thankful For Cliff Ennico www.creators.com Thanksgiving#146;s over, except for the leftovers, but it#146;s never too late to remind ourselves that, no matter how bad things get for business owners in this country, there are many things we entrepreneurs should give thanks for every day we#146;re alive. Here are some of the things every self-employed person should be thankful for: The Rule of Law . I#146;m not saying the U.S. Government is perfect by any means, or that our legal and tax system is always 100% fair to self-employed folks (it isn#146;t), but you should be grateful that you live in a country where people can set up their own businesses without having to pay #147;baksheesh#148; to corrupt officials or operate illegally because of outrageous regulations, taxes and policies that are designed to keep people from moving up the social ladder or challenging the status quo. If you think that#146;s too rosy a picture, ask any of the millions of legal and illegal immigrants living in America (they aren#146;t hard to find) what things were like where they came from. A Pro-Entrepreneur Culture . Fifty years ago, if you started your own business, you were perceived as a loser #150; too dumb or lazy to succeed at the #147;big company#148; game. Today, you are viewed as a hero. When you watch movies or TV shows, you rarely see entrepreneurs portrayed as the #147;bad guys#148; (come to think of it, they always seem to be lawyers . . . ) If you#146;re in a roomful of corporate people, watch their eyes light up when you say you run your own company, even if you#146;re not doing all that well. The Computer . While computers and software are often maddening to deal with, we should be thankful we live in an age where just about every human being can afford the technology and equipment necessary to start just about any kind of business. Not too long ago, if you wanted to start a business, you had to spend a fortune on machinery and labor (meaning lots of manual workers) before you could even open your doors. Now, you don#146;t need heavy machinery or labor (other than your own) to start most businesses, and if you do, you can always #147;outsource#148; your manufacturing, or buy secondhand equipment on eBay for pennies on the dollar. The Internet . There is really no such thing as a #147;small business#148; anymore. With the Internet, even a Mom and Pop business, or a one-person law firm, can reach a national or international marketplace at extremely low cost, and compete #147;head to head#148; with companies many times their size. You can access information online that not too long ago would have been available only to a privileged few in private libraries or in expensive training courses. Your Spouse and Family . You should be thankful if: your spouse did not shoot you (or file immediately for divorce) when you announced you were leaving corporate America to work in your pajamas out of your spare bedroom; your spouse actually encouraged you to get out and get started because he or she cares more about your happiness than your former paycheck; your kids truly don#146;t mind that you may not make enough money to send them to Harvard, and are willing to buckle down and get jobs (or maybe start their own businesses) to help finance their own educations; or one of your kids actually wants to start working with you so he or she can take over your business someday in lieu of going to Harvard. You Are Surviving . You should be thankful if you can say the following with a straight face every day: #147;I am not yet rich, but I am making a significant income, paying my bills and supporting my family by working out of the spare bedroom of my home. I am not entirely the #145;master of my fate#146; (no entrepreneur ever is), but I can say #145;no#146; to the wrong clients, and to projects that don#146;t make sense. I will never again work in a cubicle, put up with petty office politics, or kill myself to impress a boss who doesn#146;t deserve the power and authority he or she has been given. I will never again #145;pull an all nighter#146; at work so that someone else can spend a quiet evening with his or her family. If anyone is going to get rich from my labor, blood, sweat and tears, it is going to be me.#148; Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. His latest book is #145;Small Business Survival Guide#146; (Adams Media, $12.95). This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com. More >>

Can An LLC Member Put Himself On The Payroll? (Part 2) Cliff Ennico www.creators.com Can a member (owner) of a limited liability company (LLC) who doesn't want to pay estimated taxes be paid a regular salary with payroll deductions just like any other employee? According to Diane Kennedy, a Phoenix, Arizona CPA and author of the best-selling "Tax Loopholes" series of books and audio programs for business owners ( www.taxloopholes.com ), the short answer is "no". "Like a partnership, the owners of an LLC cannot take a salary; they can only take guaranteed 'draws' or distributions," says Kennedy ("guaranteed payments" to LLC owners were discussed in last week's column). But that's not the end of the story, according to Kennedy, whose most recent book is "Tax Loopholes for eBay Sellers" (McGraw-Hill, $24.95). Is the IRS likely to go after an LLC whose members pay themselves salaries and withhold taxes on each paycheck? Probably not. "The IRS is getting its tax money a lot faster if you pay yourself a salary than if you pay estimated taxes four times a year, and they're probably collecting slightly more in taxes than if you withhold regularly, so there's really no incentive for the IRS to spend a lot of time tracking down people who don't follow this rule," Kennedy explains. In other words, "no harm, therefore no foul." Still, Kennedy cautions, no one (including herself, or myself for that matter) is going to tell anyone that it's OK to ignore tax regulations just because the IRS doesn't vigorously enforce them, or doesn't have any real reason to do so. Murphy's Law says that if you ignore a rule because "everybody else does it and gets away with it", you are guaranteed to be the person the IRS chooses to audit as a "test case". Accordingly, Kennedy advises her LLC clients not to pay their members a salary and withhold payroll taxes. Instead, Kennedy says LLCs with working members who don't want to pay quarterly estimated taxes should elect to be taxed as if they were subchapter S corporations. Unlike LLC members, shareholders of a subchapter S corporation who work in the business can take a "salary" and withhold payments from each paycheck, as well as receive a "distribution" of their percentage share of the corporation's profits, usually at the end of the calendar year. Kennedy explains that "the portion of the LLC member's compensation that is treated as a 'distribution' for tax purposes is not subject to self-employment taxes, so you save money, while the portion that is treated as 'salary' is fully deductible to the LLC." Kennedy warns, though, not to be too aggressive in maximizing the amount of compensation that is treated as a "distribution". If you do, you may run afoul of IRS rules requiring employees to receive "reasonable compensation" for their services. Keep in mind also that by electing to be taxed as a subchapter S corporation, your LLC will be subject to all of the legal limitations imposed on subchapter S corporations and their shareholders. So, for example: your LLC cannot have more than 100 members; all LLC members must be 'natural persons' (no corporations or other LLCs allowed); and all LLC members must be U.S. citizens or "green card" holders (no foreign nationals or illegal aliens). An LLC can elect to be taxed as a subchapter S corporation in two steps. First, your LLC should file IRS Form 8832 (and any comparable state tax form) electing to be taxed as if it were a corporation. Then, within 75 days of filing Form 8832, your LLC would file IRS Form 2553 (and any comparable state tax form) electing "subchapter S corporation" tax treatment. Kennedy adds that if you live in a community property state (such as California), the spouses of all LLC members will have to sign IRS Form 2553 even though they will not be playing a role in the LLC business. The bottom line: having your LLC elect to be taxed as a subchapter S corporation will enable the members to draw salaries and withhold taxes just like any other employee, without violating any tax laws, but you will probably need the help of a good CPA or tax advisor before you consider setting up an arrangement like this. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. His latest book is 'Small Business Survival Guide' (Adams Media, $12.95). This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2006 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com. More >>

You Mean, You're Really Not My Lawyer? Cliff Ennico www.creators.com It happened again last week. I had just returned to the office from a trip to the West Coast. In addition to the usual West-to-East jet lag, my flight passed through some pretty heavy weather in the Midwest. We were on the ground at Chicago#146;s O#146;Hare airport for about two hours while the plane was buffeted with 50-mile-per-hour winds. I arrived back home at 2 a.m. and slept until about noon the next day. It was only then that I checked my e-mails, and found a message from a company I#146;d never heard of, addressed to all of the company#146;s shareholders, announcing the company#146;s annual meeting the following week. For some reason I was copied, or #147;cc#146;d#148;, on the message. I responded politely to the message, saying #147;thank you for inviting me to your annual meeting of shareholders; unfortunately, I can#146;t attend due to a prior commitment.#148; Which was true #150; I had to speak somewhere that evening. The e-mail response was immediate: #147;Cliff, you#146;ve got to attend our meeting! You#146;re our lawyer, and we need you to run the meeting!#148; My first response was shock #150; how could I have been so dumb as to forget a client#146;s annual meeting? But when I checked my calendar and waded through my #147;active client#148; list, I couldn#146;t find any reference to this company. I finally called the company president (who had sent the e-mail), apologized for my poor memory, and asked how we knew each other. It turned out that we had met several months earlier at a trade show in New York City. The president had mentioned something about needing a corporate lawyer, and I had given him my card with an invitation to call me at his convenience. We had had no communication at all since that time, but the President assumed that I had agreed to act as the company#146;s lawyer. Since the company always held its annual meeting on the first Friday in December, he simply sent his usual notice and copied me. Needless to say, it was a pretty long call while I explained to him the legal consequences of sending an e-mail with a #147;cc#148; to an attorney. Not only did I have to send him a letter by certified mail disclaiming the existence of any lawyer-client relationship (what lawyers call a #147;nonrepresentation letter#148;), but I had to send e-mails to all of the company#146;s shareholders explaining that I had not at any time provided legal services to the company. I tried to do it in as nice and positive a way as possible, but it had to be embarrassing to the company president to admit to his shareholders that he sent out an annual meeting notice without retaining legal counsel. The irony is . . . I get e-mails like this every few months or so. It is simply amazing to me how many entrepreneurs #150; sometimes very successful ones, as was the case here #150; do not know how to go about hiring a lawyer, accountant or other professional. Here are some tips for those of you out there wondering if you have a lawyer or not: If you don#146;t have a written fee agreement with an attorney, and have never received a bill from that attorney for legal services, that person is not your attorney. You will have to sign an agreement, and possibly pay an upfront fee (called a #147;retainer#148;), before you will get on his or her calendar. If you take any action that might have legal consequences and fail to solicit input from your attorney before doing so, an attorney is not obligated to assist you #150; they can say #147;no#148;, just like I did. The time to get an attorney on board is BEFORE you take any action that might have legal consequences. No attorney I know will call you #147;out of the blue#148; just to find out if you need their services or remind you of important dates #150; there are rules of ethics prohibiting them from doing so, they are just too darn busy, and let#146;s face it, you really don#146;t want to pay your attorney for #147;social calls#148;. If you need legal help, the responsibility is yours to initiate contact with an attorney. Always remember that your attorney is working for multiple clients at any given time. While you may be an important and valued client (and I believe an attorney should never have any UN-important clients), you cannot assume that your attorney will be able to drop everything else they#146;re working on and focus their attention on your immediate problem. Give them as much notice as you yourself have, and be sure to let them know when you absolutely must have an answer, or a document, or a meeting. Communication is the key to all successful relationships; if you don#146;t communicate well with your attorneys and other key advisors, you can#146;t really blame them if they don#146;t communicate well with you, or fail to show up at your annual meeting. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. His latest book is #145;Small Business Survival Guide#146; (Adams Media, $12.95). This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com. More >>

Ten Things To Look Out For When Buying A Business [Part 2 of 2] Cliff Ennico www.creators.com Here are several more points that purchasers, and their lawyers, frequently overlook when negotiating to buy a small retail or service business. Negotiate a #147;Letter of Intent#148;. Also called a #147;term sheet#148;, a letter of intent (or LOI) is a short, two or three page letter agreement between the buyer and seller of a business that spells out all of the important terms and conditions of the sale. For example, the purchase price, how and when the purchase price will be paid, the assets that will be sold to the buyer (and those the seller will keep for his own use), the terms of the seller#146;s noncompete agreement, and so forth. While LOIs are technically not binding on the parties, it is well worth the time and effort to hammer out as many of the business issues involved in an LOI before the lawyers begin drafting the #147;definitive#148; legal contracts that will document the sale. A well-drafted LOI helps the lawyers get the sale documents right on the first (or possibly the second) draft, since most of the important terms and conditions will already have been dealt with in the LOI and are not subject to further negotiation. Without a LOI, you will end up negotiating the business deal and the #147;legalese#148; of the definitive documents at the same time, requiring multiple drafts of the sale documents and tons of money in legal fees. Watch Out for Bulk Sales Laws. Most states have done away with these, but many states still require the buyer of a business to notify the seller#146;s creditors that the transaction is going on. Failure to get a list of the seller#146;s creditors and send #147;notices of sale#148; to them may give the seller#146;s creditors a shot at undoing (or #147;rescinding#148;) the transaction in order to prevent the seller#146;s assets from being sold out from under them. Even if the seller has no creditors at all (a rare occurrence), the state tax authority generally wants a copy of the #147;bulk sales notice#148; so it can determine if the seller owes any sales, use or other business taxes. If the seller does, he will have to pay them before the closing takes place. Get an Indemnity from the Seller. Even if you and your advisors have torn apart the seller#146;s books and records, sometimes things get overlooked, and you find yourself getting sued because of something the seller did (or failed to do) before defend the lawsuit and pay all judgments and fees if that should happen. Likewise, you should be prepared to give the seller an indemnity if he gets sued because of something you do (or fail to do) after the closing takes place. Make Sure the Seller Sticks Around for a While. In many retail and service businesses, the customers have a personal as well as business relationship with the owner. Make sure the seller sticks around for a couple of weeks after the closing to introduce you to customers, help you figure out the books, and #147;ensure a smooth and orderly transition of the business#148;. Consider paying the seller for his time so he has an incentive to stay off the golf course, at least until you are comfortable you know what you are doing. Get to Know the Employees. Likewise, before you buy a business, make sure the #147;key employees#148; are willing to stick around, since they#146;re often the ones who see the customers day to day, operate all the tricky machinery, and know #147;where the bodies are buried#148;. Many sellers will be reluctant to let their employees know the business is up for sale, for fear they will quit en masse. In that case, put a provision in the sales contract as follows: #147;Seller and Buyer will announce the proposed sale to all employees of the Business within forty-eight hours before the Closing, and Buyer will be given a reasonable opportunity to meet with each employee individually before the closing date to determine, to Buyer#146;s reasonable satisfaction, the employee#146;s willingness to continue working for the Business.#148; Then add a provision allowing you to walk from the deal if you are not totally satisfied that the key employees will stay on board at least long enough for you to learn what they already know. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. His latest book is #145;Small Business Survival Guide#146; (Adams Media, $12.95). This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com. More >>

Ten Things To Look Out For When Buying A Business [Part 1 of 2] Cliff Ennico www.creators.com #147;I#146;ve been working on and off with a local building contractor for 17 years. Last week he told me he#146;s thinking about selling his business, and asked if I would be interested in making an offer. I did, and he accepted. Now, what do I do?#148; Well, first off, you should get a good business lawyer and accountant to help you with the paperwork, because even with a small business like this, there#146;s going to be a ton of it. Frankly, it sounds like you should have asked lots of questions before you made your offer, but it#146;s not too late since your deal with the seller is only a #147;handshake#148; at this point. Here are some things you should insist on before you close on the deal. Buy the Assets, Not the Business. If the seller is a corporation or limited liability company (LLC), under no circumstances should you buy stock in his business. Instead, offer to buy the assets of the business, and form a separate company to act as the purchaser. Why? Two reasons. First, you get better tax treatment, since your #147;tax basis#148; in the assets will be the amount you paid for them, rather than the amount your seller paid for them long, long ago. Second, if he owes money to people, or is being sued by someone, you will not assume any of those liabilities if you buy the assets. Ask About Sales Taxes and Payroll Taxes. In many states, even if you buy a business#146; assets, the state tax authority can come after you if they find out the seller owed sales, use, payroll and other business taxes. If the seller has employees (other than himself), ask if he was using a payroll service, and make sure he is current in his employment tax payments. Then, ask the state tax authority to issue a #147;clearance letter#148; saying the seller is current in his sales and use taxes on the closing date. This may take a while, but will save you tons of heartache down the road. Who Deals with the Accounts Receivable? Chances are, some of the customer will owe the seller money on the closing date. Who will be responsible for collecting these overdue debts? There are only two ways to handle this: either you purchase the accounts receivable at closing (for a discount, to reflect the fact that some of these folks won#146;t pay up), or you let the seller collect them at his leisure. My vote is for you to buy the accounts receivable at closing #150; that way if the delinquent customer wants additional work done after the closing, you#146;re in a stronger bargaining position. Can You Assume the Seller#146;s Lease? Is the seller leasing the premises where he conducts his business? If so, you should find out (1) how much time remains on the lease term, and (2) whether the landlord is willing to let you assume the seller#146;s lease #147;as is#148;, without an increase in rent. If the lease has only two years or less to run, you might want to spend the money now to negotiate a brand new lease with a five to 10 year term. Also, find out if the landlord is holding a security deposit (usually two month#146;s rent, but sometimes more) #150; your seller probably will want you to purchase his Security Deposit on top of the agreed-upon purchase price for the business assets. If the seller is including the Security Deposit in the purchase price, make sure that is spelled out in writing somewhere. Are There Prepaid Expenses? Take Yellow Page advertising, for example. When you buy a Yellow Pages ad, you normally pay for a whole year in advance. Chances are your closing will take place sometime during the year, and the seller will want to be reimbursed for the portion of the year when you are running the business and benefiting from the Yellow Pages ad. Prepaid expenses (like the seller#146;s Security Deposit) are usually not included in the agreed-upon purchase price, but are tacked on at the closing. Ask the seller now for a list of #147;closing adjustments#148; #150; amounts the seller has prepaid that will have to be #147;pro rated#148; #150; so you can budget for them accordingly and there will be no nasty surprises at the closing. More next week . . . Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. His latest book is #145;Small Business Survival Guide#146; (Adams Media, $12.95). This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com. More >>

Some Tough Questions From The Top Ebay Sellers Cliff Ennico www.creators.com Last week I had the privilege to attend the annual meeting of the Professional eBay Sellers Alliance, or PESA ( www.gopesa.org ), a non-profit trade association of top eBay merchants. These are the #147;Imperial Stormtroopers#148; of the eBay community, folks, and they do not ask easy questions. Here are some that came up during my presentation on #147;Business Taxes for eBay Sellers#148;: #147;I sell out of my home in New York but I #145;drop ship#146; on eBay for several large out-of-state distributors. If I sell to a buyer located in the same state where one of these distributors is located, do I have to charge that state#146;s sales tax?#148; When you #147;drop ship#148; for someone else, you are selling that person#146;s stuff, but the goods never leave that person#146;s warehouse. They ship the goods directly to the buyer once you#146;ve notified them you#146;ve made a sale. Technically, if the #147;drop shipper#148; is using its own address labels on the packages, and is accepting returns of damaged or defective items, then they, not you, are the real seller of the items, and should be charging sales tax to buyers living in any state where the #147;drop shipper#148; has manufacturing, warehouse or office facilities (not just the location you are dealing with). Ask if the #147;drop shipper#148; will use your address labels with your New York address, and let you accept returns for credit. If they won#146;t do that for you, then make sure your #147;drop shipper#148; agrees in writing to pay all sales taxes that may be due on sales you generate for them. #147;I run an eBay consignment shop. Do I have to pay any sort of taxes on the items I take from people for sale on eBay?#148; You should check with your local accountant, but in most states you will not have to pay sales or inventory taxes on goods you take on consignment. Also, they are not considered part of your #147;inventory#148; for income tax purposes, as you do not have legal title to them, so you shouldn#146;t have to pay income taxes on them either. If you sell something on consignment to a buyer in your state, however, you will have to charge the buyer sales tax and remit it to your state tax authority. #147;I started selling on eBay part-time last year and made about $20,000. I expect to do slightly better this year. Do I have to pay estimated taxes on the income from my eBay business?#148; Absolutely. If you make more than $400 in #147;self-employment income#148; in any calendar year, you must pay your income taxes in quarterly estimated installments. Welcome to the club. #147;I buy all my packaging, such as boxes, labels and plastic peanuts, in large quantities, and I pay a fortune for them. Should I be charging my buyers sales tax on these items, since they are really being sold along with the goods themselves?#148; No. Packaging materials are considered #147;supplies#148; for income tax purposes, not part of your inventory. If you buy them from a local supplier, you will have to pay sales taxes on them since you are #147;consuming#148; them in your business, not buying them for resale. If you buy them from an out-of-state supplier, you may have to pay #147;use tax#148; on these purchases. Many eBay sellers try to cover these costs by imposing a #147;handling fee#148; on each sale in addition to the shipping and other charges. The handling fee would cover the cost of any supplies you consume in fulfilling a buyer#146;s order, as well as your time in processing the order. But don#146;t be greedy #150; eBay buyers hate it if they think they#146;re being #147;gouged#148; on your shipping and handling charges. #147;I am currently operating a Subchapter S corporation for my eBay business. My accountant is telling me I should convert to a C corporation, but hasn#146;t really explained why. Is this a good move for me taxwise?#148; Generally, regular or C corporations can deduct a ton of stuff that Subchapter S corporations can#146;t. While C corporations are taxable entities, they usually (not always) pay tax at a lower rate than Subchapter S corporations, where everything is taxed at your personal tax rate. Ask your accountant to prepare a #147;pro forma#148; tax return for your corporation showing you what the tax savings would be if you had been a C corporation for all of the 2005 calendar year. If the tax savings are significant, it will be easy for you to convert to a C corporation. Just remember that if you convert to a C corporation, you will have to wait three years before you elect Subchapter S status again. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. His latest book is #145;Small Business Survival Guide#146; (Adams Media, $12.95). This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com. More >>

Organizing Your Home Office Jill Hart CWAHM.com It can be a real challenge as a work at home parent to maintain an organized home office. Many times, the office or desktop is the last of our worries as we strive to raise our children, support our spouses and run our home-based business. However, keeping up with the clutter and chaos of your office may be just what you need to get you in a working mindset and help you to be more efficient while working. There a few simple things that you can do on a regular basis that will help to de-stress organizing process: Address your home office/desktop chaos in blocks of time. You may need to set aside just a few hours, or you may need an entire day. Decide what will work for you and stick to it. If it#146;s not possible for you to set aside a block of time, consider using a headset while you are on the phone and be de-cluttering, too! Have the necessities on hand: a trash can, pen, file folders, mail baskets and other organization items that will enable you to sort, throw out and find a place for each item. Envision your goal and purchase the supplies necessary to create that environment. Clear the space you want to organize (the desk surface, one of the drawers, etc.). Then make a pile of all the paper. Begin to evaluate each piece of paper, sorting it by importance. Throw out as much as possible and find a place for each of the other items. If you start to feel stressed, take a break. Make a goal of how far you#146;d like to get during the time you have available and set an incentive for yourself if you reach your goal. It#146;s always easier to complete a task when you know you#146;ll be rewarded. Once you#146;ve organized your office, it#146;s important to take small steps everyday to keep the room clean and tidy. It#146;s very easy to fall back into the routine of piling things on your desktop and around the room. There are five simple tasks that you can do daily to help maintain your organized space: Clean out your #147;Inbox#148;. In today#146;s world this can apply to postal mail or email. Create a special basket for postal mail that needs to be taken care of right away, and another for items that can wait a day or two. To keep your email inbox under control, create folders within your email program. Keep what needs to be done immediately in your inbox and distributed the rest into your folders. You can also use "rules" to help separate email and make it easier to manage. Make sure all notes are transferred to your calendar, palm pilot or day planner. It is very easy to pile up a desktop full of paper by writing every note on a Post-it. You can also create an #147;Idea Book#148; to catalog all of your business ideas for future reference. Remove all mail, catalogs magazines from your desk. Put them in their proper place as you receive them. This will considerably cut down the amount of clutter on your desktop. File as you go. This is the most basic and most important tip of all. If you file as you go your records will be in order, your desktop will be clear and you will feel like a professional. Clean off your desktop each evening. There's nothing better than sitting down at a clean workspace each morning. It helps to keep your mind focused on your business and makes finding important documents a snap. By following these easy guidelines you will have a clean and organized home office in no time. Having a clutter-free workspace is the first step in creating an organized and professional home-based business. ABOUT THE AUTHOR: Jill Hart is the author of the e-book, 2 Weeks Devotional Journey for Christian Work at Home Moms, and the founder and editor of Christian Work at Home Moms, CWAHM.com . This site is dedicated to providing work at home moms with opportunities to promote their businesses while at the same time providing them spiritual encouragement and articles. E-mail Jill at jill@cwahm.com for additional information or stop by her site at CWAHM.com . This article is free to reprint if the Author's Bio remains in tact. For additional articles, please contact Jill Hart. Permission granted for use on DrLaura.com More >>

"Desperate Housewives" vs The Newsboys Of America Cliff Ennico www.creators.com We all have our guilty pleasures. Watching #147;Desperate Housewives#148; on Sunday evenings is one of mine. Now, I realize that the show is not meant to reflect the real world. It#146;s a tongue-in-cheek satire of certain suburban lifestyles. But there was a scene in last week#146;s #147;Desperate Housewives#148; that caught my attention -- as a sign, if nothing else, of how those overpaid TV writers and producers in Hollywood view us poor, struggling entrepreneurs. The scene in question was a confrontation between one of the #147;Desperate Housewives#148;, a sexy, somewhat ditzy single mother named Susan, and her newspaper delivery boy, a bratty kid named Danny. The voiceover at the beginning of the show says #147;all of the women on Wisteria Lane viewed Danny as the enemy . . . #147; Mainly because his aim when throwing the newspaper isn#146;t that good #150; he destroys people#146;s rose bushes, leaves newspapers in rain puddles, that sort of thing #150; and it doesn#146;t seem to bother him very much (Danny has no issues with self-esteem). Danny confronts Susan over the fact that she hasn#146;t paid for her newspaper delivery in some time. Susan admits that she owes Danny money, and says she will pay Danny soon. But Danny refuses to take #147;no#148; for an answer, reminding Susan he has asked her to catch up on her payments several times before. When Susan apologizes again, Danny refuses to let go and starts berating Susan, saying things like #147;listen, lady, I#146;m providing a service here . . . I don#146;t work for nothing#148;. I should mention at this point that all the neighbors are in their front yards watching Susan and Danny argue. Finally, Danny breaks off the conversation by riding off on his bicycle, calling Susan a #147;deadbeat#148; over his shoulder in a voice loud enough for the entire neighborhood to hear. Susan#146;s response? She hurls her newspaper after the fleeing Danny. The camera follows the newspaper in slow-motion (Susan#146;s aim with the newspaper is far better than Danny#146;s ever was), as it flies through the air, end over end, and lands in the spokes of Danny#146;s bicycle wheel, bringing it to a sudden stop, flinging Danny face-first onto the pavement in the middle of the street, and knocking him out cold. And what do Susan#146;s neighbors think of that? Far from being horrified by what any civilized legal system would call a #147;criminal assault on a minor,#148; they all smile and give Susan an enthusiastic #147;thumbs up.#148; Now, it#146;s silly to get hung up on something you see on TV, especially a show like #147;Desperate Housewives#148; that is supposed to push the envelope. Clearly, if Danny were a nicer kid and provided better service, we (and the neighbors) would side with him against Susan. But there are two sides to every argument, and I think Danny#146;s got one heck of a case here. Let#146;s forget how obnoxious Danny is, and review the facts: Susan admits she owes Danny money for his services, and has ignored repeated demands for payment, yet Danny does not cut off her service as he clearly is entitled to do; Susan is herself self-employed (she works out of her home doing illustrations for children#146;s books), and should know what it feels like to have to wait to get paid; Danny is obviously frustrated that his efforts to collect from Susan haven#146;t succeeded, and probably feels that resorting to #147;hardball tactics#148; is the only way to get through Susan#146;s thick head and make her cough up the money he is rightfully owed; Sure, Danny#146;s service is not great, and his attitude doesn#146;t help matters, but he#146;s only engaging in effective #147;time management#148; -- it doesn#146;t make economic sense for him to spend three hours or more every day (cutting into homework and soccer practice) walking each newspaper up to the front door of every house when he#146;s only netting $20 or $30 a week from his paper route (if that sounds harsh, ask yourself #150; would you provide that level of service for $1 to $2 an hour?); Even if Susan is right to withhold payment because of Danny#146;s poor service, Danny doesn#146;t deserve to be assaulted physically for what was after all only mild verbal abuse on his part #150; he is, after all, only a kid. So what message do we take away from the Susan-Danny episode? Answer: that it#146;s okay, even commendable, to blow off your creditors and occasionally resort to physical violence when they demand payment, as long as they#146;re not cute, cuddly, and 100% politically correct in the way they do business. Let#146;s hope the people that owe you money don#146;t watch #147;Desperate Housewives#148;. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. His latest book is #145;Small Business Survival Guide#146; (Adams Media, $12.95). This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com More >>

When Sales Taxes Blow Across State Lines, Small Businesses Shiver Cliff Ennico www.creators.com #147;I buy a lot of stuff on the Internet for my business. Recently I bought something in an online auction, and when the seller sent me his invoice, he added my state#146;s sales tax to my winning bid. I thought this was odd, because the seller is located in another state, and I didn#146;t think you had to charge sales tax on interstate sales. Is there something going on here I should know about?#148; Generally, when you are selling stuff (online or otherwise), you charge sales tax only when the buyer is located in the same state as you. Under current law (which may be changing soon #150; see below), you are not supposed to charge sales tax on sales to buyers who live in other states. There are two exceptions, though, and your seller probably fell into one of them. First, if the seller has an office, warehouse, distribution facility or retail location in your state, the seller may have to charge you sales tax because he is legally #147;doing business#148; in your state. This is why, when you buy something from a mail order catalogue, the invoice form sometimes says #147;residents of States A, B and C, please add sales tax to the total#148;. The mail order company has its retail or warehouse outlets in States A, B and C, and is required to collect sales tax from buyers located in each of those states, regardless of the actual location your order is shipping from. Second, a growing number of states are entering into #147;compacts#148;, or agreements, encouraging in-state sellers to collect sales tax from buyers in neighboring states. New York and Connecticut have such an arrangement ( www.tax.state.ny.us/pdf/memos/sales/m88_12s.pdf ), while eight Midwestern states have banded together to create the Midwest Border Tax Compact ( www.ksrevenue.org/pdf/forms/edu126.pdf ). The idea is that by charging your buyer state sales tax, you are helping the buyer avoid liability for #147;use taxes#148; on stuff they buy from out-of-state vendors (in just about every state, the sales tax and use tax are the same rates, and are calculated the same way). How thoughtful of them! If you live in a state that has a reciprocal sales tax agreement with another state, you are required to collect the other state#146;s sales tax, pay it to your state#146;s Department of Revenue (with a special tax return form), and then hope and pray they remit the tax to the other state government (of course they will, won#146;t they?). So why haven#146;t you heard about this before? Up until recently, most states that have sales tax agreements with other states haven#146;t been too aggressive about enforcing them. Why, you ask? Now, I#146;m not a politician, but I suspect it#146;s hard to convince voters their tax dollars should be spent to help another state collect its revenue. There are also a couple of U.S. Supreme Court rulings that prohibit states from imposing sales taxes on interstate commerce, whether directly or indirectly, and no state official wants to be accused of violating federal law. But the law may be changing soon. Every couple of years, a bill is introduced in Congress which would permit states to levy taxes on sales made over the Internet, among other things. A majority of states have signed onto the Streamlined Sales Tax Project or SSTP ( www.streamlinedsalestax.org ) #150; basically a national #147;reciprocal tax agreement#148; -- and are awaiting the #147;green light#148; by Congress to put the SSTP into effect. The bill is being reintroduced in Congress this fall, and stands a better than average chance of passage this time around. If the SSTP passes Congress, then Internet sellers of all kinds (including people putting stuff up for sale on eBay and other Internet auction sites) will have to charge state and local sales taxes at the rates in effect wherever their buyers are located. With over 7,500 sales tax jurisdictions in the United States, complying with SSTP will impose a crippling paperwork burden on many small e-businesses that can#146;t afford to hire teams of people or buy expensive software packages to help them comply. A number of e-commerce companies and grassroots organizations are lining up to fight SSTP. For example, eBay#146;s Government Relations department has set up a special Website at www.ebaymainstreet.com , where you can sign up for e-mailings notifying you of the bill#146;s progress. You can also sign up to receive #147;form letters#148; you can send by e-mail to your elected officials to let them know the impact SSTP will have on you. Of course, your seller may simply have been mistaken in charging you sales tax. Call him and find out. Also, if the stuff you bought from him is inventory you are planning to resell, you shouldn#146;t be charged sales tax #150; give your seller a #147;resale certificate#148; and he almost certainly will back off. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com More >>