Five "Uneasy Questions" For This Family Business Cliff Ennico www.creators.com #147;My husband, myself, and our two sons recently bought a small business. My mother and father used their house and other collateral to guarantee the bank loans we took out to purchase the business. Our two sons are operating the business. We are a corporation. My mother and father each have 26 shares (52 total), and our two sons have 24 each (48 total). Did we put this together the right way? How do we structure this business so that everyone#146;s happy?#148; A situation like this leaves me with more questions than answers, I#146;m afraid. Question Number One: do you and your husband have any stake whatsoever in this business? If you two took out a bank loan to finance the purchase of the business, and your Mom and Dad guaranteed the loan (since they appear to have the deep pockets in your family), you and your husband should have received shares in the business, since everything you own is probably collateral for the loan along with everything your parents own. What probably happened here is that your corporation borrowed the money directly from the bank, and your parents guaranteed the corporation#146;s loan in exchange for their stock in the corporation, so you and your husband did not get involved at all. That leaves us with a situation in which 52% of the company stock is owned by your parents, and 48% by your two sons. Under most state corporation laws, if your parents and your children ever disagree on how the business should be run, your parents (with 52% of the stock) would probably win the argument. But if your sons ever get frustrated and quit the business, that would leave your parents #147;holding the bag#148; #150; they would have to find someone else to run the business and preserve their investment so they can pay off the bank loan. Not a good thing. Question Number Two: who sits on your company#146;s board of directors? Since your Mom and Dad put up the bulk of the money to make this business happen, and since your two sons are the ones actually running the business, I would suggest a five (5) person board, structured as follows: your Mom, your Dad, your two sons, and either you or your husband as the fifth board member. That way if your parents and your sons ever disagree on the proper way to run the business, you and your husband can #147;run interference#148; and help solve the problem without creating too much acrimony within the family. Question Number Three: when your parents guaranteed the bank loan to buy this business, did your parents treat the guaranty as a #147;loan#148; to the corporation, or as their contribution to the corporation#146;s capital? I#146;m hoping that at least some of the guaranty was #147;loaned#148; to the corporation #150; that way, the corporation will have to repay them on a schedule, with interest, before your sons can take anything out of the corporation as their compensation. If your parents treated their guaranty as an #147;investment#148; in the corporation#146;s stock, they will be forced to accept whatever the corporation#146;s Board of Directors decides to pay them in dividends #150; if they don#146;t control the Board, they won#146;t see a return on their investment for a long, long time (see Question Number Two). Question Number Four: how much do your two sons take out in compensation each year? It sounds like your sons are the only two officers of the corporation. If I#146;m right about that, the corporation should enter into Employment Agreements with each of your two sons, spelling out their responsibilities to the company and saying exactly how much they can take out in salaries, bonuses, etc. each year before the shareholders can divvy up whatever#146;s left over. Question Number Five: have your parents and your two sons signed a Buy-Sell Agreement? This is an agreement that prohibits any shareholder from selling out to a stranger (somebody not in the family) without giving the other family members the right to buy his or her shares first. Without such an agreement, either of your sons could sell their shares to a total stranger, who then would have the right to help run the business and make your parents#146; lives miserable. Again, not a good thing. You need to talk to a lawyer #150; right now #150; and put these arrangements in place. And while you#146;re at it, ask the lawyer about forming a Family Limited Liability Company (FLLC) for this business. I assume your parents are #147;getting on in years#148;. If they both die within a short time period, their estate will have to pay federal and state death taxes on the full fair market value of their shares in your family corporation. Your family may be forced to sell the business in order to raise the cash necessary to pay the death taxes (I hate to be cynical, but that may be why the previous owners sold out to you in the first place). A FLLC will enable your parents to transfer a portion of their shares to you or your children each year while they#146;re alive, so that when your parents ultimately do die, they will hold only a minority of the shares, which should reduce the death tax burden considerably. 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 >>

Tips For Making Your Home Or Small Business Stand Out In Your Competitive 'Crowd!!' by copy; 2005 Priscilla Y. Huff While attending a women#146;s entrepreneur conference, I met an attractive young woman who was wearing a colorful red and black striped blazer that definitely caught my attention as compared to what most of the other women wear wearing in the meeting room#151;professional suits in assorted muted colors of blacks, browns and grays. When I commented on its attractiveness, she told me it had been her father#146;s who started the awning manufacturing business that she and her brother now co-owned and operated. "Feel it," she said as she encouraged me to touch the sleeve of her blazer. "It#146;s made out of the same canvas material that my father first used when he started this business in 1928." Her unique blazer and follow-up comment caught my attention and then piqued my curiosity to learn more about her family#146;s business. In addition, to our conversation, she handed out her business card along with a photocopy of an article in a regional business journal that had featured their company.. Now, this anecdote does not suggest you should go out and purchase a brightly colored and plaid blazer to bring attention to your business, but you can take note of some of this woman#146;s promotional techniques and apply them to your own marketing strategies: Catch your potential customers#146; attention. Try to have something visible that is related to your business that will be a conversation-starter. A successful author I know had her new book#146;s cover painted on her van along with the toll-free ordering number when she launched a book tour that took her to a number of big cities. Once you get people#146;s attention, be ready with a business card AND other promotional materials that people can carry with them. I heard the suggestion that you should not hand out only one business card at a time, but rather two or three at a time to a person so your card can be passed on to even more potential customers. Encourage conversation so you can determine how your business#146; services and/or products might solve a potential customer#146;s problem. Generally, people do not seek out a new service or product unless they have a need that must be met. The more you know about another person, the more you will be able to suggest a solution that (hopefully) your business can offer. And if your business cannot help them, then freely suggest the name of another business owner who can. That business owner who obtains paying clients from your referrals may very well return that favor down the line. Look for networking opportunities with other business owners. Attending an industry or entrepreneurial conference or local business card exchange can be a great way to meet other entrepreneurs to share tips, information and of course, referrals and possibly partner with them on future projects. Look for free opportunities to meet potential customers. One New Year#146;s Eve my husband and I went to our local video rental store where I noticed a man wearing a baseball cap with lights on it flashing "Happy 2000!." When questioned, the man explained his business creates custom-made clothing with blinking-light designs for companies, clubs, and organizations. He followed-up our conversation by handing me his business card along with his company#146;s brochure that featured his flashing products and ordering information. Now, what can you do to make your business stand-out from your competitors to make a good first and memorable impression so that people will come to your company instead of your competitors because they cannot forget you?! Suggested Marketing Resources: Brag Your Way to Success by Rochelle Be. Balch www.rbbalch.com ; great little guide book with marketing and success tips. Uncommon Marketing Techniques by Jeffrey Dobkin, marketing expert www.dobkin.com . 101 Ways to Promote Yourself by Raleigh Pinskey, "Viz-Ability Marketing consultant and speaker" www.promoteyourself.com . -30-Priscilla Y. Huff is the author of 101 Best Home-Based Businesses for Women , 3rd ed., and The Self-Employed Women#146;s Guide to Launching a Home-Based Business . She offers a free listing of resources for women entrepreneurs and welcomes business-related questions and comments. Send them to BestBiz4Me@earthlink.net . Permission granted by author for use on www.DrLaura.com. More >>

Breaking Up Is Hard To Do... Without An Agreement Cliff Ennico www.creators.com #147;I am the 80% owner of a limited liability company (LLC) that runs an Internet marketing and Website design firm. I basically do all of the work; my 20% partner only functions as a secretary or administrative assistant. We recently mutually agreed that we should go our separate ways. I have five questions about the breakup.#148; Before we answer them, I have to ask: why, oh why, did you give your secretary 20% of your company? As I#146;ve said before in this column, you should never, EVER give a #147;piece of the pie#148; to someone unless they have something unique and significant to contribute to your business success. While not unimportant, #147;admin people#148; should be put on salary, paid a fair wage with benefits when you can afford them, and given a W-2 at the end of the year. Yes, it hurts to use your precious cash to pay their salary and payroll taxes, but it#146;s cheaper in the long run than making them partner, because even a small percentage ownership gets really expensive once your business takes off and becomes successful, as yours clearly has. Would you pay a part-time secretary $200,000 a year? Well, that#146;s what 20% of a service business is worth once it makes $1 million a year. Not bad for 10 hours of typing a week! Okay, now that I#146;ve got that off my chest, let#146;s turn to the five questions: #147;My partner mentioned that she wants to keep our company logo and Web address (URL). Who owns these?#148; Your LLC owns all assets of the business, including any #147;intellectual property#148; such as a logo, company name or Website. Under no circumstances should your partner get ANY of your LLC#146;s intellectual property if you are going to continue the business. As a condition to your buying her 20% interest, you should get your partner to agree (a) to assign to the LLC all of her #147;right, title and interest#148; to any property she may have developed for your LLC, (b) to keep all of your trade secrets confidential, (c) not to solicit your customers or otherwise unfairly compete with you after she leaves, and (d) not to disparage or #147;bad mouth#148; your business to others. #147;With 80% of the LLC ownership, can I just #145;fire#146; her and continue running the LLC business myself?#148; Yes, but unless you buy her out she will remain a 20% owner of the business, and will be legally entitled to 20% of your profits at the end of each year, even though she didn#146;t lift a finger to help you. Not a good idea. #147;Should I just dissolve the LLC altogether and just start a new business?#148; With 80% ownership of the LLC, you probably could do that legally, but then you would have to figure out which 20% of the LLC#146;s assets your partner is entitled to when the LLC is liquidated. That could get sticky. #147;How do I value the business? We each put $1,200 into the business, there#146;s $3,000 in the LLC checking account, and about $4,000 in accounts receivable.#148; I would keep this very simple, since you#146;re too small to have a professional valuation done. Find out what your partner took out of the business in cash distributions last year, and offer her twice that amount. If that comes to less than $1,400 (20% of $7,000), offer her $1,400. If you can#146;t afford to pay a lump sum, offer to pay in monthly installments over the next year at 6% annual simple interest (0.5% per month). #147;What do I do about new projects? Can I do these on the side, or form a new LLC?#148; Unless there is a noncompete clause built into your LLC Operating Agreement, there is nothing to prevent either of you from doing things #147;on the side#148;, with or without the other#146;s knowledge. If you form a new LLC and start running a #147;parallel business#148;, though, your partner might sue you for improperly diverting assets and business from your old LLC or illegally #147;freezing her out#148;. Talk to your lawyer before taking a drastic step like that. I would strongly prefer that you buy her 20% interest, even if you have to pay more than it#146;s worth. You will sleep better at night. Lesson: once you make someone your business partner, there is only one way you can get rid of them legally, and that is to buy them out for a price the two of you can agree on. Before making ANYONE a partner, make sure you get an agreement (called a #147;buy-sell agreement#148;) from them spelling out precisely how much they will be entitled to receive for their ownership interest if you decide they are no longer adding value. A good attorney can draft one of these for you for under $1,000. 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 >>

If You're In Business And You Know It, Clap Your Hands... Cliff Ennico www.creators.com #147;Earlier this year I started selling stuff on eBay, mainly to clean out my attic. I ran out of attic stuff a while back, so I#146;ve started selling stuff for some of my friends and relatives. So far I#146;ve made about $50,000 after expenses and splitting the proceeds with the people who give me stuff to sell. I don#146;t really look at this as a business, but I#146;m being told that I have to pay taxes on what I#146;m making. Is that right?#148; Let me get this straight . . . you#146;ve made $50,000 in 8 months and you#146;re not sure if you have a business? ARE YOU KIDDING???? A lot of people are surprised to find out that their cherished hobbies have somehow #147;morphed#148; into real businesses overnight without their knowledge. Your good-faith belief that what you are doing is #147;only a hobby#148; doesn#146;t count for much when it comes to the Internal Revenue Service and your state and local tax authorities. Under current law, if you are making even as much as One Dollar doing ANYTHING, the tax authorities will view you as being self-employed, you will have to report your earnings as income, and you will have to pay taxes on that income (if you are losing money, that#146;s a different story). You need to talk to an accountant right away to determine your total tax liability, but based on your e-mail, I#146;m pretty sure that: you will have to pay federal, state and local income taxes on the full $50,000 in earnings from your business on eBay; you will have to pay #147;self-employment tax#148; (roughly 15.3%) on everything you#146;ve earned from eBay sales over $400; you will have to pay these income and self-employment taxes in quarterly #147;estimated#148; installments on April 15, June 15, September 15 and January 15 of each year; and if you have received more than $600 in fees from any one of your friends and relatives this year, he or she may have to send you a Form 1099 next January. But that#146;s not all. It sounds from your e-mail that you are taking consignments of stuff to sell on eBay. A growing number of states (mostly in the Midwest) are requiring eBay consignment sellers to obtain #147;auctioneer licenses#148;. If you live in one of these states, you will have to pay a fee ranging from $200 to $500, and will also have to take an evening course in #147;auction practices#148; at your local community college, before you can get the license. Since it sounds like you have started a business, whether you knew it or not, and will have to pay taxes on your income, whether you like it or not, why not go the extra mile and set it up as a legal retail business? That way you can deduct your business expenses (most of them anyway), as well as certain of your household expenses if you claim the #147;home office deduction#148;. The steps involved are quite simple for a business like yours: you will have to obtain a federal Tax Identification Number (or EIN) from the IRS (go to www.irs.gov and download Form SS-4, the application for a tax ID number); you will have to register for your state#146;s sales, use and other business taxes #150; your accountant can help you with the necessary paperwork; if you have a cute name for your business, you probably will have to file a #147;trade name certificate#148; with your county clerk#146;s or town clerk#146;s office; and you will have to file Schedule C (#147;income or loss from a trade or business#148;) with your Form 1040 each year. Welcome to the wonderful world of self-employment! You have already passed the most difficult hurdle any new business faces #150; you are actually making money! The only businesses that are tax-free (other than charities) are businesses that don#146;t make money. So set yourself up right, keep up the good work, and may you always regard your business as a #147;hobby#148; that#146;s both fun and profitable. 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 >>

Is It Possible To Work From Home? By Jill Hart www.cwahm.com Have you ever wished that you could work from home? According to the Bureau of Labor Statistics, over 19 million people worked from home (either part-time or full-time) in 2001. It#146;s a growing trend in our society with the number steadily rising as many people are leaving the workplace in favor of a work-at-home career. There are four main ways to make working from home possible: Telecommute for your current employer #150; Many employers are beginning to see the benefits of allowing their employees to work from home. If you have a job that would be possible to do from home ask your employer to consider it. More and more employers are allowing employees to telecommute. This is an easy way to work from home while maintaining the security of a stable career. You must realize, though, that working from home may limit you in terms of advancing in your company. It#146;s important to think through the sacrifices that you may need to make in your situation to work from home. Telecommute as an independent contractor #150; There are many companies that hire independent contractors to do work such as data entry, transcription and customer service from home. This can be an incredible opportunity as long as you#146;re willing to keep track of your own taxes and aren#146;t relying on the employer for insurance and other perks There are many benefits to the company also, such as lower wages, not needing to provide insurance, or being able to offer a commission based position. The company may also choose to hire home workers so that they do not need to pay for space to house an office full of employees. Own a direct sales/MLM home-based business #150; Many times these types of home-based businesses are overlooked, but they truly can bring an income and allow you to work from home. However, doing your research before joining a company is very important. Look for representatives of the company to speak with and, if possible, try to find someone who has been a representative for the company, but is no longer. They may be able to share some of the negative aspects of the business with you. Also check with the Better Business Bureau and make sure that the company that you are considering has a good reputation. You can also go to websites such as cwahm.com and sign up to speak with current work at home moms ( cwahd.com for dads) who can answer your questions about owning a home-based direct sales/MLM business. Begin your own home-based business #150; It can seem overwhelming to start your own business, but if you start small and have a good business plan it can be a very rewarding decision. You are able to be your own boss, have a very flexible schedule and work only when it is convenient for you. When considering beginning your own business, make sure that you have found a niche that will allow you to serve customers that no one else is serving. When I began searching for a way to work from home, I spent time researching the different work at home websites available and realized that there was not a place for Christians to network and help one another work from home. I filled this niche with my website, cwahm.com , and the response has been amazing. If you take your time and find a niche or unique product, you will have a much higher chance at success. If you decide to begin your own business, you must also check your state and city about zoning laws, licensure requirements, etc. Contact an accountant to find out what percentage of sales you need to set aside for taxes as well as whether or not you#146;ll need to make quarterly tax payments. Working from home is a big commitment and it can take some time to get started. It#146;s important to take the time to research what type of at-home position will work best for you. If you would like to telecommute, speak with your employer to see if it is a possibility. If you are looking into a home-based business, speak with others from the company or find a niche that you can fill with your own business. Working from home can be a rewarding choice and it IS possible. ABOUT THE AUTHOR: Jill Hart is the founder and editor of Christian Work at Home Moms, CWAHM.com, and the author of the e-book, The Two Week Devotional Journey for Christian Work at Home Moms. The CWAHM.com website is dedicated to providing moms with free resources to aid them in their work at home search. The site also provides current 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 . Permission granted for use on DrLaura.com. More >>

Slamming The Gate On Internet Commerce Cliff Ennico www.creators.com "A number of 'gated communities' in my area are making new rules that prohibit people from buying and selling stuff on eBay out of their homes. Their argument is that there are too many UPS trucks going in and out of the development each day picking up the eBay parcels. Is it legal for them to do that?" While it sounds like these communities are going about it in a very heavy-handed way, the short answer is #147;yes#148;. It is perfectly legal for a gated community, condominium association, or residential subdivision to ban residents from engaging in commercial activities within its boundaries. And it#146;s not just #147;gated communities#148; that can do this. Prepare for a shock: every business that operates out of someone#146;s home is, technically, an illegal business. Now, you#146;re probably saying to yourself, #147;Wait a minute! There are at least five people on my block working from their homes. The IRS allows you to take a deduction if you operate a home-based business. How can you say they#146;re illegal?#148; They#146;re illegal because just about every city and town in the United States has adopted a zoning ordinance, dividing the community into residential, commercial, and other #147;zones#148;. Unless you live in a progressive community that allows #147;mixed use#148; zones, virtually every zoning ordinance prohibits the operation of a commercial business (with a few time-honored exceptions such as family dentists and visiting nurses) in a zone designated as #147;residential#148;. So why are so many people working out of their homes without getting into legal trouble? The answer has to do not with the law, but with its enforcement. Every community with a zoning ordinance has established a #147;Planning Board#148; or #147;Zoning Board#148; that oversees the zoning law, grants exceptions (called #147;variances#148;) from the ordinance and so forth. But I#146;m not aware of a single community that has adopted a special police force to make 100% sure people aren#146;t doing businesses out of their homes. You#146;ve never had any government official knocking on your front door asking you if you#146;re operating an illegal business, have you? As a practical matter, if you#146;re operating a business out of your home, you usually won#146;t get into hot water with your local zoning authorities unless . . . your neighbors turn you in. When will your neighbors turn you in? When you are conducting your business in such a way that you are #147;changing the residential character of your neighborhood#148;. The local kids can#146;t play stickball in the street because they#146;re too busy dodging the UPS trucks going to and from your home office. The neighbors are being kept awake all night because of the loud noises or foul odors emanating from your basement. You get the idea. What the #147;gated communities#148; are objecting to is not the operation of a home-based business per se, but rather the increased vehicle and truck traffic that that business is generating. The courts will probably back them up. So how can you operate an eBay, e-commerce or mail order business out of your home without getting into legal trouble? Simple. First, find out if there#146;s a UPS Store, Mailbox IT, Navis Pack #145;n Ship, or other franchise in your area offering #147;private mailbox service#148; #150; there almost certainly will be one. These franchises will provide you with a #147;private mailbox#148; #150; essentially a Post Office Box that has an actual street address (such as #147;123 Main Street, # 456#148;). Next, if you expect to have lots of inventory (more than a few items at a time), find the nearest #147;self-storage facility#148; (you can find the ones nearest you at www.selfstorage.org ) and rent some storage space for your inventory. Because the mailbox outlet and storage facility are both located within your community#146;s #147;commercial zone#148;, they do not violate your local zoning ordinance. Therefore, your business won#146;t, either. Sign your business up for a private mailbox (the average rental is around $300 per year), and use your mailbox address as your ONLY mailing address for all shipments and correspondence #150; your suppliers and customers should see only this address. Keep your inventory at the storage facility, and make sure all incoming shipments are dropped off there (or pick them up at the mailbox outlet and bring them to the storage facility). Use your home only as the #147;executive office#148; where you post your eBay auctions, keep your business records, and pack your boxes (most mailbox franchises will do that for you as well, for a fee). Then, once or twice a day (no more than that, please, especially if you live in a gated or other #145;closed#146; community), visit your storage facility, fill your car with your outgoing shipments, drive them down to your #147;private mailbox#148; address, and have the Postal Service, UPS or FedEx pick them up there. One last thing: don#146;t tell the neighbors what you#146;re up to. Every neighborhood has a Gladys Kravitz (for you #147;Bewitched#148; fans) or a Martha Huber (#147;Desperate Housewives#148;) that just can#146;t keep their noses out of your affairs. If your business is not too visible and isn#146;t interfering with their lives, most neighbors will adopt a #147;don#146;t ask, don#146;t tell#148; policy. After all, they probably don#146;t want you finding out about THEIR home-based business . . . at least, until you bump into them at the #147;private mailbox#148; outlet. 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 >>

Placing The Right Value On A Small Business Cliff Ennico www.creators.com #147;I am thinking about buying a specialty food store that has been operating in town for 30 years. The owner is willing to sell, and has provided me with copies of his financial statements and tax returns for the past few years, but has asked me to make him an offer. How can I figure out a fair price for a business like this?#148; There#146;s a science to putting a fair value on a small business, but you can also come up with a reasonable estimate on your own, according to business valuation expert Roger Winsby of Axiom Valuation Services in Wakefield, Massachusetts ( www.axiomvaluation.com ) and co-author of #147;What Every Business Owner Should Know About Valuing Their Business#148; (McGraw-Hill, $21.95). The first thing, Winsby advises, is to base the value on the future potential of the business, not its past performance: #147;the history is context, but you#146;re buying the assets of the business so you can hopefully get a better return than the current owner.#148; For a business like this one, Winsby says, estimating a value is a five-part process: first, you look at the financial statements and tax returns and determine how much profit the business is making each year before interest expense, and income taxes; be sure to adjust for #147;reasonable#148; compensation that the owner is taking out of the business (i.e., add back to profits if the owner takes a salary that is more than you would need to pay an experienced person to manage the business day-to-day; or vice versa --accountants call this #147;earnings before interest and income taxes#148; or EBIT; second, take the company#146;s EBIT for the last two to five years, add them up, and divide by the number of years (in other words, calculate the #147;average#148; EBIT); subtract from the average EBIT the expected income taxes (safe assumption is 40% of average EBIT); and then add the average depreciation expense; accountants call this #147;average free cash flow#148;. third, take the average free cash flow and divide it by your #147;discount rate #148; #150; Winsby says this should be somewhere between 18% and 35% depending upon the type of business and how stable it is (for example, you would insist on a high return rate for an Internet consulting business that could shut down tomorrow, and a low return rate for a grocery store in business for 40 years with a stable clientele) #150; you now have a possible #147;purchase price assuming no future growth in free cash flows; to estimate the value if you think the business could increase profits by 3% per year, then adjust the required rate of return by subtracting 3% from your original estimate of the required rate of return (18% - 3% = 15%); this will give you a reasonable range of values. fourth, divide your purchase price by the business#146; current sales #150; the resulting ratio is called a Price to Sales multiple; and fifth, compare that #147;multiple#148; to those of other similar businesses that have sold in the past year (for $17.50, a standard reference work, #147;Small Business Valuation Formula Multiples#148;, with a range of multiples for over 170 different small businesses based on recent sales figures, can be downloaded as an Adobe Acrobat file from http://valuationresources.com/Misc/ValuationMultiples.htm ). But be careful -- Winsby warns against simply using an average multiple from any source and then applying them to a particular business. #147;These figures are based upon statistical averages,#148; Winsby explains. #147;When you plot out the actual transactions from which the averages are derived, they are all over the map. Don#146;t ever assume that the business you are looking to buy is an #145;average#146; business #150; it may be at the high or the low end of the range depending upon a number of factors.#148; Customer attrition, for example. A solo law practice can be expected to have a high rate of attrition after it is sold, because many clients have a high degree of personal loyalty to the seller and will #147;go elsewhere#148; when the practice is sold. Such a practice should command a low multiple, unless the seller is willing to spend a long period of time #147;transitioning#148; the business to the new owner. A specialty food store that#146;s been in town for 30 years, on the other hand, can be expected to have a low rate of attrition after it is sold, because most customers have accustomed themselves to visiting the store regularly and will not change their habits just because there#146;s a new owner. Such a business should command a relatively high multiple . . . unless a major competitor is planning to open across the street in a few months! What if you really don#146;t want to do the valuation yourself? While many accountants will value a business for you, Winsby advises that you approach someone who specializes in valuations to get the best deals. A #147;certified valuation#148; (one that would be acceptable to the IRS or a court of law), Winsby says, will cost between $5,000 and $10,000, but for about $2,000 to $3,000 you can get an #147;estimated valuation#148; or a #147;robust estimate#148;, which should be acceptable to most sellers, SBA lenders, and private investors. 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 >>

Summer Sanity for Moms Juggling a Home-Based Career by Lesley Spencer, MSc; Founder President HBWM.com Inc. http://www.HomeBasedWorkingMoms.com The relaxed pace of summer is peeking just around the corner. And it is definitely welcome to many of us, but the challenge and sometime stressful moments of balancing motherhood and work is not always so welcome. Like much of motherhood, being flexible is key and planning in advance is a necessity. To help you make this summer the best it can be with as little stress as possible, here are some tips for balancing your many roles during the summer: If you don#146;t have a laptop, now is a great time to consider getting one especially with wireless Internet connection. You can work just about anywhere with your laptop and wireless connection. That means portability to work in any room in your home as well as work at locations in public with wireless connection #150; coffee shops, public parks, airports, shopping areas, skating rinks and more. Take convenience a step higher and make your laptop your desktop computer by using a docking station. A docking station allows you to still use your monitor and keyboard like a desktop without the hassle of using two computer and transferring files and emails back and forth. Laptop prices have dropped dramatically and some laptops are as low as $500 while docking stations start around $60. Now may be the time to make your business work around your busy life more than ever. If you know your workload is going to be overwhelming, start planning now what you can delegate. Perhaps, its time to hire a Virtual Assistant to help you in your business. There are many talented, capable VAs who can do anything from word processing to data entry, to answering calls to respond to email to much more. You can search for them and other talented home-based moms in a variety of professions at: www.HBWM.com/memberdir. Technology is a great thing. Look into what you can automate in your business. Perhaps you can set up autoresponders when someone purchases or requests something from your website. A few sites that offer automation solutions include: http://www.1automationwiz.com and http://www.autoresponseplus.com. Even with more portability, moms need some time to work, relax, rejuvenate or just catch a breath. So what to do with those sweet cherub-like children squealing and running underfoot? Check out the summer camps in your area. These days there are camps for just about everything from sports to art to acting to science. Check your local parenting publications. Many of them have summer camp guides. Kid Swap? No, this isn#146;t a bad, new reality TV series. It#146;s an opportunity to pre-arrange some play date exchanges with your trusted friends and neighbors. Kids get to play and have fun and moms get an opportunity to catch up on work or find a little time for relaxation. Consider a Mom#146;s Helper. They can be great playmates and keep your kids occupied while you work. You may hire someone once a week, every morning or whatever your schedule and work requires. With a little planning and forethought, you can make this summer not only less stressful but actually enjoyable and fulfilling. Take time now to get yourself ready. You and your kids will be glad you did. Lesley Spencer is founder and president of the HBWM.com, Inc. Network whichincludes: http://www.HomeBasedWorkingMoms.com , http://www.WorkAtHomeKit.com , http://www.edirectoryofhomebasedcareers.com , http://www.momsworkathomesite.com , http://www.HBWMconferences.com , http://www.HBWMcanada.com and http://www.HireMyMom.com (coming soon!). She has a Master's Degree in Public Relations and has been featured in numerous media outlets including CBS News, Forbes, Business Week, Parents, Wall Street Journal and USA Today. She has been working from home for over 10 years and has two children whom she absolutely adores! Permission granted for use on DrLaura.com More >>

Thinking About Going "Sub S"? Cliff Ennico www.creators.com #147;For some time now, I have been thinking about forming a limited liability company (LLC) for my small service business. I attended a seminar recently and learned that there#146;s a new law, just recently passed, that has made Subchapter S corporations a much more attractive option. What is this new law all about, and should I reconsider forming a Subchapter S corporation for my business?#148; Late last year, Congress passed the American Jobs Creation Act of 2004, the fifth major tax cut in four years. This law garnered a lot of attention in the press earlier this year because of its most dramatic change: a provision that enables taxpayers to deduct either their state and local sales taxes OR their state and local income taxes on their federal tax return, whichever is greater. If you live in a state (such as Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming) that has a state sales tax but no state income tax, that#146;s a big deal. But this same law made a number of significant (although, in the view of this writer, not terribly awe-inspiring) changes to the complex rules for Subchapter S corporations (essentially, a corporation that elects to be taxed as if it were a pass-through partnership). According to Diane Kennedy, a Phoenix, Arizona CPA and author of #147;Loopholes of the Rich: How the Rich Legally Make More Money and Pay Less Tax#148; ( www.taxloopholes.com ), the key changes are: the maximum number of shareholders Subchapter S corporations may legally have is now 100 persons (increased from 75); all members of a family who own shares in the corporation are treated as one shareholder for purposes of counting the number of shareholders; members of a family are #147;a common ancestor, lineal descendants of the common ancestor, and the spouses (or former spouses) of lineal descendants of common ancestors#148; (got that?); and if a shareholder of a Subchapter S corporation gets divorced, and the judge awards his or her spouse shares of stock in the Subchapter S corporation, any #147;suspended#148; losses attached to the shares can be transferred to the ex-spouse along with the shares themselves. The intent of the new law, according to Kennedy, is to make it easier for larger, family owned Subchapter S corporations to transfer assets to family members and engage in creative estate planning techniques without losing their Subchapter S status. For the vast majority of Subchapter S corporations, however #150; those having far, far fewer than 100 or even 75 shareholders #150; the new law will have little, or no, impact on the decision whether to form a Subchapter S corporation or an LLC for a new business. So what should this reader do with his or her small service business? Let#146;s review some basics. With an LLC, you get limited liability, pass-through tax treatment (the LLC is not a taxable entity, so everything passes through to the LLC owners and is taxed at their personal tax rates), and the LLC owners must pay both income and #147;self-employment taxes#148; (FICA, FUTA and Medicare) on everything the LLC earns. The same is basically true of Subchapter S corporations, Kennedy says, but with one significant difference: #147;if you have a Subchapter S corporation, and you put yourself on the payroll as a W-2 employee, withholding taxes from each paycheck as you take money out of the corporation, you can often save a significant amount of money in self-employment taxes.#148; True enough, but the question I would ask here is . . . is the tax saving worth the time and trouble of setting up a Subchapter S corporation? Like all corporations, Subchapter S corporations involve a lot of legal paperwork #150; you have to be fairly disciplined about keeping thorough records of business decisions you make (called #147;resolutions#148; or #147;minutes#148;). Forget to do the paperwork, and a judge or your state government may take your corporation away from you and expose your personal assets to the wolves. Also, Subchapter S corporations are subject to a fair number of rules designed to make sure only small businesses can take advantage of them #150; for example, Subchapter S corporations cannot issue preferred stock, or have shareholders who are not U.S. citizens or #147;Green Card#148; holders. Break any of these rules, and you lose the tax benefits of having a Subchapter S corporation. One possible solution, according to Kennedy, is to set up an LLC, and then elect to have the LLC taxed as if it were a Subchapter S corporation #150; the IRS allows you to do this by filing IRS Forms 8832 (to elect to have your LLC taxed as a corporation) and 2553 (to elect Subchapter S status), and you probably also will have to alert your state tax authorities so they don#146;t get confused. But be careful #150; as the ancient mariners used to say on their maps when things got a little imprecise, #147;here be demons#148;. When deciding whether to form an LLC or Subchapter S corporation for any small business, talk to your accountant first, and keep your life as simple as possible. 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 >>

How To Write A Business Plan by Tammy Ames 2005 Writing a business plan isn't optional just because you consider this simply a home business. You are a small business owner. A written business plan is required to secure finances or investors in your new home business. Starting a home business with yourown funds and ideas doesn't mean you don't need a business plan. A written business plan is critical to every home business. The thought process and research involved in writing your businessplan will reveal the blue print for your home business. There are numerous paid and free business plan products that you can use to develop your own home business plan. Unless you areseeking investors in your small business, you can learn how to write a business plan that keeps your business working toward yourgoals. To have a well written small business plan, you will find your goals easier to reach and keep track of your progress both with building your customer base and sales. Starting a home business without a writing a well thought out business plan is like building a house without a blue print to guideyou every step of the way. Your home business foundation built on these eight areas will give your business a strong identity and focused sense of direction tohelp you plan and manage your business effectively. Business Summary. Write out a description of your business. What kind of company do you want to build? A well written description orsummary of your business often propels you through each step of how to write a business plan. Writing the summary first means you will always have the basic premise of your home businessidea at the top of everything you put in your business plan. Name your business. You may think that your direct sales business already has acompany name but that is not the name of YOUR business. Creating a distinct name for your business will help make your plan. Does your business name reflect what you offer? Is it easy to remember? Does it have strong branding potential? Should you reconsider your current business name if it not working with your product? Make sure the name of your business fits not only your product or services but your mission statement. Itemize your products or services. Write out descriptions of your products; how do they look, smell, taste,feel or how your services will help others reach their own goals in life. How will your offerings improve the lives of others? Sort through why others aren't already doing it and if they are offering exactly what you are going to offer then what prevents the competition from doing it better or more cheaply than you are. Mission Statement. Your mission statement is a concise clear summary of the goals of your business. In your mission statement, you will define exactly what your business does, the products or services offered and what makes your business unique above the competition.Writing the bottom line of your business goals into your missionstatement will guide the rest of your business plan. Business Assessment. A major portion of your home business plan is a detailed assessment of four areas: your strengths, your weaknesses orlimitations, business and marketing opportunities and threats or barriers to your potential success. At this stage of your business plan, you will be looking at your industry. Your work experience and talents that will add to your business would fall under your list of strengths. Your lack of knowledge or funds could be listed as your weaknesses. Take into account howbroad your industry is when you are looking at your strengthsand weaknesses. If you have little money for start up then you will need to be creative in your marketing and running your business.Will your weaknesses mean your opportunities for success arelimited? Will your talent surpass your lack of funds? Opportunities for business growth may be dependent on your networking contacts or website design. Every business owner should remain wary of all threats to business success. Planning for problems before they arise will make running a business easier and more successful in the long run. As you can see this aspect of businessplanning is critical to all of your vision, your mission statement, your goal setting and running your home business. Goal Setting. Write your vision for your business. Be specific. You can revise this as your goals and mission changes. How do you envisionyour business a year from now then five years from now? Write out your goals and objectives. Break down each product or service into their own set of goals. Plan for expansion as your business evolves. Goals are useless unless you can measure your progress towards them and plan to regularly assess which goals have been met or still need to be fulfilled. Make your goals specific and time sensitive. With each business goal, itemize what needs to be in place to reach eachof your goals. Outline what steps you will take to reach the goals for your home business. Mark your calendar when its time to re-evaluate your goals and re-align your vision for your businessto match the direction your business is going. Celebrate when you reach your goals and regroup when you realize you missed the mark. It's important to decide what you consider to be a major loss and what you will accept as unsuccessful. Knowing what you will accept and absorb as a business loss before it happens will help prepare you for when it actually happens. Target Market. Research your desired target market. Identify who you expect to buy your products or services. Write a profile of your average customer. You need to know your target before you are able to aim. Study yourpotential customer's behavior. Where do they shop? What do they read?Do they move in specific social circles? Who wants or needs your business? Who will benefit from your product? What type of people will find your business a necessity? You cannot expect to fill a need or desire of a customer if you do not know what makes your offer unique and necessary. Look at those that offer similar products with success. Write out how you can rise above and differentiate yourself from the competition. At this stage of yourbusiness plan, describe how you can stand out from the crowd. Write down how and why your company is better than the competition. Study the competitions latest marketing strategies then outline here how you plan to counteract their business moves to give you the edgeyou need to stay unique and effective. While studying your customers and competition, take the extra time to identify complementary products or services that may fit yourcurrent business plan that may give the edge you need to compete in the future. Sales and Marketing Strategies. How will anyone know your business exists? What steps will you taketo make your business known? How will your customers find you? What can you do to ensure that you attract the customers you seek? How will you track your efforts? How much money do you have to putthese strategies in place? List your strategies - press release, printed catalogs, business cards,open house, craft fairs, business, conventions, virtual expos, sales letters, etc. Determine whether you will market exclusively online, locally to your warm market or a combination of both. If online marketing is part of your business plan then include an internet marketing plan to include your domain name and host, whether you will hire a professional website designer or do it yourself, your business logo and e-commerce set up. Business Start Up. Determine what equipment and services you will need to run your business to include setting up your home office, equipment, supplies, product inventory, customer record keeping, and bookkeeping. Create a checklist of professionals you need to secure for legal and financial advice, advertising expertise, office assistance or tax expertise. Starting a home business can be exciting and scary because it is Your dream that you are working towards with each work day. To write a business plan, means a great deal of commitment to the process. The process of writing a business plan will bring you closer to understanding yourself, your business goals, your company identity and reaching yourpotential customers. Although these areas are critical to writing a business plan, there is muchmore that will be added to your plan over time. Each time you reach a goal or discover a barrier to making the sale ~ you will return to your businessplan and revise your goals, strategies and techniques. Home business success is in the plan and implementation but also in theability to adjust and redefine your business goals to meet your customersneed or desire while letting you design your home business your way! WAHM Connections strives to bring solid, effective business tools and resources for the home internet business. WAHM - Work at Home Connections E-zineOnline Business Start Up Promotion Resources http://www.wahmconnections.com/ Create Your Own Homemade Joy Today! http://www.homemade-joy.com/ Permission granted for use on DrLaura.com. More >>