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05/07/2010
IconYou Know A "Derivative Work" When You See One Cliff Ennico www.creators.com "I am a public relations consultant who works out of his home. To promote my firm, I have written several articles for my local business weekly newspaper, without charge, and posted them on my Website. Well, I must be doing a pretty good job at these, because a regional business magazine contacted me and asked me if they could reprint one of my articles in the magazine for $250. I said 'sure', of course, but then they hit me with a 10 page contract they want me to sign. It looks pretty harmless overall, but there's a clause in there that says I'm assigning to them all of my rights to this article and any 'derivative works'. Does that mean I can't write on this topic ever again? I would love the free publicity this article would provide, but I'm not willing to put limits on my writing activities for a mere $250." Whenever you look to publish an article or book with an established publisher, they will want you to sign their standard "publishing contract". Generally, you should not sign these without having your lawyer look at them first (most lawyers will do less for less than one hour of their time if you ask nicely), but in this case the fee you are being paid is so small it probably isn't worth bringing an attorney on board. Generally, when you write an article or any other "original work", you own the copyright to it from the moment it is created, even though you don't "register" your copyright with the Library of Congress in Washington. The only way you can lose that copyright is to sell or assign it to someone else. So in this case, even though your articles appeared in the local business newspaper, the copyright is yours and no one can reprint it without your permission (for which, of course, you will charge a fee). Most publishers will want you to "assign" your copyright to them in the contract. What the publisher doesn't want is to publish your article and pay you for it, only to have you then turn around and sell the same article to other publishers. When you think about it, that's a pretty legitimate concern, and the publisher is unlikely to strike the "assignment of rights" clause if you ask them to. If the publisher's contract requires you to assign your copyright to "the Work" (usually a defined term in the contract), you should look at the definition of "Work" very carefully. Usually, it refers only to the article you are submitting. You are not prohibited from writing articles on similar topics, or from taking pieces of your article and using them elsewhere, as long as you don't take the article verbatim, word for word, and sell it to someone else. When I negotiate publishing contracts, though, I always add a sentence clarifying that you may "copy or reprint the article, either in written or electronic form, and use it solely for promotional purposes." That way you can put the article up on your Website, along with the wonderful tagline "reprinted with permission of XXX magazine". In your contract, however, the definition of "Work" is slightly broader, and includes not only the article you are submitting to the magazine for publication, but also "derivative works" of that article. The term "derivative work" is defined in the federal copyright laws as "a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted." Not exactly a model of clarity, is it? A "derivative work" is a bit like the famous U.S. Supreme Court judge's description of pornography: you can't define it precisely, but you know it when you see it. Common sense will rule the day here. If the magazine publishes your article, and you change just a few words and sell it to another publisher, the magazine is likely to look at that as a "derivative work" of your article, and will be very upset. Likewise, if you read your article word for word into an audio recorder and post it as an "audio clip" on your Website, that is probably also a "derivative work". Generally, however, another article on the same topic - using entirely different words than your published article - will not be a "derivative work" and the magazine will have no rights to it, as under the copyright laws it will be considered a separate, "original" work. Likewise, taking just one paragraph from your article and including it in another, original article on the same topic, should not get you into hot water with your publisher. Still, since this is only going to be a one-time publication in the magazine, I would ask the publisher either (1) to clarify in writing that other works on the same general topic will not be considered "derivative works" under the contract, or (2) to make the assignment of copyright "nonexclusive" six months after the article appears in print in the magazine. That way, the publisher has the right to control publication that they want, while you have the peace of mind that you need. 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 >>

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05/07/2010
IconSome Taxing News From France For Ebay Sellers Cliff Ennico www.creators.com #147;When I sell stuff on eBay to people outside the United States, do I have to be concerned at all about paying taxes in foreign countries?#148; For most eBay sellers, who sell only occasionally to buyers in other countries, the short answer is #147;no#148;. Most foreign countries tax their citizens on goods they bring into the country #150; these taxes are commonly called #147;value added taxes (VAT)#148; or #147;general sales taxes (GST)#148; #150; but sellers who reside in the United States are not required to collect the tax or add it to the purchase price of the goods sold. It#146;s the buyer#146;s problem. As an honorable member of the eBay community, though, you should include a statement in all your auction pages as follows: #147;Buyers living in countries outside the United States may be required to pay value added tax (VAT) and other taxes on their purchases on eBay. Please consult your tax advisor for advice before bidding on this item.#148; Once you start selling lots of goods outside the United States, and especially once you start selling regularly on eBay#146;s overseas Websites (such as eBay France, eBay Italia or eBay UK), you have to start being concerned about foreign taxes, laws and regulations. A recent case out of France highlights the kind of legal hassles a serious eBay seller can encounter when his or her selling activities cross national boundaries. In this case, a professional art dealer in the United States was clobbered with thousands of Euros in fines because he was operating a business in France illegally without registering to obtain a commercial vendor#146;s license, as French businesses are required to do. The record showed that the dealer sold more than 470 statuettes, vases, and other art objects to French citizens on eBay France. The defendant claimed he was not a professional seller, having acquired his art objects from flea markets and personal relatives, and that he sold the items on eBay #147;to appease his girlfriend who threatened to move out if he did not get rid of the clutter#148;. The French court did not buy that argument. Under France#146;s commercial code (and those of some other European nations), whether or not you are a #147;professional#148; depends largely on whether or not you are selling things on a regular basis while taking measures to make profits and using the proceeds to make a living. For example, someone who buys rock concert posters in the United States with the sole purpose of reselling them in France for a profit would be considered a #147;professional#148;, even if he is not based in France or conducting his business from a physical location there. While the French case should not lead U.S.-based eBay sellers to #147;block#148; citizens of other countries from bidding in their auctions, eBay sellers need to be aware that many countries are likely to require them to pay their income, sales and other taxes #150; and comply with their commercial laws and licensing requirements -- if some of the following conditions apply: the seller is clearly engaged in business online and is not selling on eBay merely as a #147;hobby#148;; the seller posts its auctions directly on the local eBay platform (for example, eBay France), rather than on the U.S. Website; the seller#146;s auction pages are in the local language and currency, and are clearly #147;targeting#148; citizens of the host nation; and the seller is selling significant quantities of goods to citizens of the host nation on a regular basis (in other words, not just occasional sales of items the seller thinks might generate local interest because of their subject matter or content). If you find yourself in this situation, the best advice is to hook up with another eBay seller who is a citizen of the host nation, and either (1) have that person act as your local #147;agent#148; and #147;distributor#148;, hosting your eBay auctions in that country, collecting the winning bids, and dealing with the local laws and taxes, or (2) have that person act as an #147;advisor#148; to help you comply with whatever laws, taxes, regulations and other requirements the host nation may impose. For a fee, of course, or a percentage of your winning bids in that country. You can find eBay sellers in other countries on the #147;eBay International Board#148; chat room (pages.ebay.com/community/chat/index.html, click on #147;eBay International Board#148;). Be sure to check their feedback thoroughly before doing business with them, especially if they are located in a country that is prone to fraudulent online activity #150; a list of such nations is maintained and updated by the international Merchant Risk Council ( www.merchantriskcouncil.org ). 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 2006 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com. More >>

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05/07/2010
IconWork-at-Home Scams #150; Don#146;t Become a Victim By Liz Folger, Work-at-Home Mom Expert The ads are so tempting, and just think -- what if you could make hundreds of dollars a day working from home? Unfortunately, people are losing money every day to work at home scams. Don't become a victim. Here are some ways to make sure you don't become scammed! You know you're just about to get scammed by a work-at-home ad when... The very first line states you can make hundreds of dollars a week working from home. There is no experience needed. You can work just a few hours a week and still make a bundle of money. There is lots of CAPITALIZATION AND !!!!!! used in the ad. You read an extremely vague ad. You haven't a clue what the business is about; but boy, could you be making the bucks. You're asked to call a 900# for more information. For a fee, a company will send you a list of businesses that are looking for home workers. You are forced to make a decision immediately and are made to feel stupid if you say no to their offer. How to Check A Company Out Whether you have those funny feelings about the claims of a company or not, do some background research on them. Hire a lawyer. This may seem like a waste of money, but in the long run it could really save you some financial heartache. Call the Better Business Bureau (in the state the company resides in) to see if there have been any complaints against the company. Ask the company if you can talk to any of their happy customers. Please be aware that companies can and will give you false customers to talk to. If these people sound way too happy, I would be a little leery. Questions You Should Ask If You Are Thinking About Buying A Business Opportunity Find out from your sponsor, in writing, what is involved with this business; such as: Are you able to return merchandise if it doesn't sell? Is there a money back guarantee? How long have they been in business for? (if it's under a year, I would again be very leery). What is your total cost of this business opportunity, including fees, supplies, and equipment? Will you be paid on salary or commission and how often and who will pay you? Ask the program sponsor to write down every step of the business. What To Do If You Become The Victim Of A Scam First you need to write the company that you feel has ripped you off telling them you would like your money back. If they don't agree with you, then you need to let them know you plan to notify officials. The following people should be notified: If you read about this work-at-home scheme in a magazine, let the editor know you've been ripped off by these people and you're not happy about it. The Attorney General's Office in your state or in the state where the company is located. National Fraud Information Center. Call them if you feel you are a victim of a "get-rich-quick" or an "easy money" scheme. Check out their web site for daily alerts or new scams. 1-800-876-7060 Your local Consumer Protection Offices. Your local Better Business Bureau (BBB) and the BBB in the state of the scammer. Postmaster. Notify if you received the information through the mail. The Federal Trade Commission. While the FTC cannot resolve individual disputes, the agency can take action if there is evidence of a pattern of deceptive or unfair practices. To register a complaint, write to: Correspondence Branch, Federal Trade Commission, Washington, DC 20580. Liz Folger is the founder of www.bizymoms.com . Bizymoms.com is the leading online resource for work-from-home ideas. The site offers home-based business start-up kits, online classes, e-books, chats and enthusiastic support for moms who want to have it all - a family and a career. Visit www.bizymoms.com for more information. * The author gives permission for the use of this article on DrLaura.com. More >>

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05/07/2010
IconWhen The "Three Musketeers" Ain't Nuthin' But A Candy Bar Cliff Ennico www.creators.com #147;I#146;m the founding member of a limited liability company (LLC). Over two years I let in two other members, and ended up resigning my majority ownership (stupid move). I trusted these guys. You know, we were supposed to be #145;The Three Musketeers#146;. Over the years I developed a ton of great marketing materials and created many educational, television and documentary film products for the LLC. Now I#146;ve been isolated, voted out as Manager, been completely taken out of the loop (they have a current court order against them for now showing me financial documents I#146;ve been asking for for nine months) and they#146;re trying to hold me to a broad noncompete agreement which says that any member won#146;t undertake any transactions which may be considered to be competitive with the LLC. Yet, they won#146;t let me out of the LLC either, unless I turn over to the LLC all rights that I may have in every product created by me over the past eight years. Crazy situation, huh?#148; Crazy, yeah, but not all that uncommon, as readers of this column know. Don#146;t you now wish you had a lawyer representing you when you brought in these two guys? It could have saved you a ton of grief. You#146;re obviously in litigation with your old LLC and have a lawyer representing you; I#146;m not going to say anything here to second guess his or her judgment because I don#146;t have all the facts. But it sounds like you never assigned to the LLC your copyrights in the television programs, film scripts, and other materials you created for the LLC (if you had done so, your former partners wouldn#146;t be asking you to do that now). If that#146;s the case, you probably still own these rights, and that gives you some real leverage over the other LLC members. Works created by an LLC member, unlike those created by an employee, are not considered #147;works made for hire#148; under the federal copyright laws. They have to be actually assigned to the LLC in writing. Ask your attorney if it#146;s possible to get a court order, called an #147;injunction#148;, prohibiting the LLC from using any of your creative works without your permission until the lawsuit is resolved or settled. That should get your former business partners to the bargaining table real fast. Next time you set up an LLC with someone, make sure your Operating Agreement clearly spells out that (1) you are the only Manager, (2) you can only be removed as Manager by a vote of 100% of the members (including yourself), and (3) all decisions relating to the LLC business are to be made by you alone. And if anyone ever talks about #147;Three Musketeers#148; again, offer them a candy bar. #147;I am in a rock band with some other guys, and we currently have a tax ID number. Well, our manager got a tax ID number for the band in order for us to open a business checking account at the bank. Now we have a problem because he is not going to be managing us anymore. I will be handling all of the banking transactions from now on. How do I go about getting a new tax ID number? Or, can our old manager just transfer that tax ID to be under my name?#148; It sounds like you may have a bigger problem here than just tax ID numbers. If your old manager filed for your tax ID number as a #147;partnership#148; (which is what your rock band is, legally) and named himself as a partner, he is technically your business partner, and you cannot legally get rid of him without buying him out for whatever he considers a fair price. You need to get to a lawyer, pronto, for some legal advice. If your old manager is willing to be #147;bought out#148;, make sure he assigns over to you all rights he may have in any songs or other copyrighted material you may have developed. Otherwise he owns a piece of your music going forward, and you don#146;t want that. I#146;ve said it before -- never, ever, ever form a music group without (1) a clear written partnership agreement among the members saying who#146;s in the band, who owns what songs, how band members can withdraw, and how band members can be forced out, and (2) a clear written #147;representation agreement#148; between the band and any agent, manager, promoter, or similar person who gets paid for doing anything to help the band. Without agreements, the wrong people tend to get a lot more powerful than they deserve to be. For a scary look at how one rock band really fouled up its relationship with its agent/manager, read #147;Got a Revolution!#148;, Jeff Tamarkin#146;s biography of the 1960#146;s psychedelic rock band Jefferson Airplane. These guys needed #147;Somebody to Love,#148; and they didn#146;t get one for a long, long time. 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 2006 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com. More >>

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05/07/2010
IconSome Tricky Issues When you Sell Stuff On Consignment Cliff Ennico www.creators.com #147;I am the owner of an antique mall. I sometimes sell items for others on consignment, while some others pay me rent to place their items in my store. I sell the items and collect the sales tax, which my store mails in to the state quarterly. I then keep a consignment fee, and pay the excess over to the seller. The money the sellers make on their items is given to them through my business checking. My accountant claims I am to issue each of my consignment sellers a 1099 form at year's end if I#146;ve paid them more than $600.00 during the year. I am only the middleman for the transactions from seller to buyer. The individual sellers do not in any way work for me, nor do they invest time in the process of these transactions. I am told by many people in this same business that she is wrong. She insists she's right.#148; And so she is. Even though you are a #147;middleman#148;, you are legally required to prepare and send a 1099 to each consignment seller, because they have no incentive to report their receipts to the IRS. According to CPA and tax expert Joseph Sweeney ( joe_sweeney@att.net ), if you sell an antique (for more than $600) to a business, the business is required to send a 1099 to you; you then have to issue a 1099 to the original seller to establish that he or she has the ultimate liability to pay income tax on the sale. If the buyer is an individual consumer, he or she does not have to send a 1099 to you, but you must send a 1099 to the consignment seller if the #147;net#148; to the seller exceeds $600. If you pay less than $600 (total) to a seller during the year, or if your seller is a corporation or nonprofit organization, you do not have to send a 1099 at year#146;s end. If your seller is a partnership or limited liability company (LLC), you still have to send the 1099, according to Sweeney. #147;I am a very successful eBay Trading Assistant. I am trying to get some type of insurance on the items I sell/store for my client's. I currently store these items in a climate controlled storage unit separate from my office. Many of the insurance companies do not understand eBay nor offer me a suitable policy to cover this. The longer I go without the insurance the more vulnerable I feel I am as a business. Any help or advice would be appreciated.#148; According to business insurance expert Susan Krasnow ( susan.krasnow@nicholsonassoc.com ), it#146;s very difficult to get property/casualty insurance for goods you hold on consignment for others. #147;People in this type of business normally carry lots of different inventory, everything from estate jewelry to automobiles, so it#146;s difficult for insurance companies to assess the risks and write a policy that makes sense,#148; she explains. One possibility, according to Krasnow, is to contact Lloyd#146;s of London ( www.lloyds.com ), which has long been famous for underwriting risks no other insurance company will touch. Another possibility is to consider warehouseman#146;s, or bailee#146;s, insurance. While you probably don#146;t consider your business a #147;warehouse#148;, that is technically (and legally) what you are when you accept goods on consignment. If you have companies in your area that conduct estate auctions, pay them a visit, pretending to be a customer. Tell them you are very concerned about the goods being damaged while they are being held for sale, and ask them who they use for coverage. If two or more companies use the same insurance carrier, contact them and get a premium quote. When doing business on a consignment basis, it#146;s important to have a written agreement with the people who consign stuff to you (called #147;consignors#148; in legalese). A good attorney can draft one of these for you (in plain English, and no more than two pages in length) for under $500. Here are three provisions that should be in every contract for the consignment of goods: a provision that prohibits the consignor from selling the goods to someone else while you are trying to sell the goods on consignment; a provision requiring the consignor to pay you a fee (sometimes called a #147;breakage fee#148;) if they withdraw an item from consignment before the contract term ends; and a #147;successors and assigns#148; clause that keeps the contract alive if the consignor dies or becomes permanently disabled during the contract term. 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 2006 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com. More >>

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05/07/2010
Icon10 Ways To Market Inexpensively and Reap Big Rewards By Liz Folger, Work-at-Home Mom Expert If you#146;re in business for yourself, you have probably noticed you don#146;t have the same marketing budget as Coca Cola or Proctor Gamble. However, you still need to get the word out about our businesses. You just have to do it with a few less million dollars. Usually the first thing that pops into the mind of a new self-employed person is, #147;I have to place an ad.#148; However this can cost money. Place just a few ads and soon your marketing budget is dry as a bone. Also keep in mind that a person has to see your ad six times in the same publications before they even think of using your business. Now if that is a monthly publication, I#146;m telling you it will take you six months till a person actually thinks about picking up the phone to call you. Now that isn#146;t good news. Especially if you would like to get customers a bit sooner than that. So what#146;s a home business mom to do? Many of the self-employed moms I talk to say most of their business comes from one simple source -- word of mouth. It comes from that one happy customer who liked what they did for them and started to spread the word. What would make you want to shop somewhere? A friend telling you about a great service or product, or an ad in the paper telling you the same thing? Here are a few suggestions on getting the word out about your business in the quickest and cheapest way possible. Send out a press release, and not just when you open your business. You need to tell the world if you#146;ve added some new service or product or if you#146;re business is involved in a charity event. Be sure you give the release a human slant. Don#146;t just talk about how wonderful your business is, talk about what your business can do for your future customers. Join Organizations. Chamber of Commerce, women in business organizations, and any type of organization your target market belongs to. Put your service or product for sale in a charity auction. As soon as you start your business write every single person you know a postcard announcing your new business venture. Although they may not need your business, they just may tell someone who does. Ask for referrals from other happy customers. Cold calling will never be the same again if you use this approach. Write articles for web sites. You don#146;t need to push your product in the article. But write about your area of expertise. Then include a nice byline at the end of the article. Go to chats and visit message boards on the Internet. Make friends in cyberspace. Once again, don#146;t push your product or service on people. That will only turn them off. Instead go out of your way to help people and answer their questions. Before you know it you#146;ll be ask what type of work you do. Use those sig files at the end of your e-mails and posts to message boards. Keep them short (4-6 lines). Use all those Internet sites that offer FREE Classified ads. Host chats, and give talks at your local Rotary Clubs. Once again #150; talk about your area of expertise. Liz Folger is the founder of http://www.bizymoms.com . Bizymoms.com is the leading online resource for work-from-home ideas. The site offers home-based business start-up kits, online classes, e-books, chats and enthusiastic support for moms who want to have it all - a family and a career. Visit http://www.bizymoms.com for more information. Permission granted for use on DrLaura.com. More >>

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05/07/2010
IconTime To Clean Out Santa's Mail Bag [Part One] Cliff Ennico www.creators.com At year-end, I always clean out my e-mail #147;in box#148;, and there#146;s always a few e-mails from readers I didn#146;t get a chance to address during the year. Some people dream of sugar plums, others just want their two front teeth, but these folks want answers. So here goes . . . #147;I#146;m starting a auto repair shop with two friends. We#146;ve agreed to share profits equally (one-third each), but we also agree that I will run the business. How can we do that without my having 51% of the ownership?#148; Simple. You form a #147;manager managed#148; limited liability company (LLC). You would be the sole #147;manager#148;, with authority to run the business and make the day to day decisions. The three of you would be the #147;members#148;, or owners, and would split the ownership one-third each. Be sure your LLC operating agreement (similar to a partnership agreement) contains the following provisions: you cannot be removed as Manager unless all 3 Members agree (including you); each year the three of you will meet to determine how much you can take out of the LLC checking out as compensation for your management services #150; if you can#146;t agree by March 31 of any calendar year, your compensation will remain the same as it was in the previous year; and any decision requiring the vote of the Members (such as mergers, asset sales or bankruptcy) must be made by 100% vote. #147;My friend is in a partnership with two other people for a dance studio. My friend owns 60% of the partnership. In the past few months, her other two partners have forced her out of the business #150; first they changed the locks on the doors, then they refused to schedule students for her. Is there anything she can do to keep this business from being stolen out from under her?#148; Oh, the joy of partnerships! It sounds like your friend has been a #147;doormat#148;, letting the other partners walk all over her, as is common in these situations. With 60% ownership, though, she is someone who #147;must be obeyed#148;, whether the other partners like it or not. Let#146;s just hope there#146;s something in writing somewhere saying she does indeed own 60% of the partnership. If there is, then your friend should have a lawyer write a letter to the other two partners (send it by registered or certified mail), which will read something like this. #147;As we near the end of the calendar year, I need to know how much I will be making from our partnership. As a 60% partner, I am legally entitled to 60% of the profits from this business. As soon as you receive this letter, please render an accounting of the revenue, expenses and profits of this business since January 1, 2005, and be prepared to write me a check for 60% of the profits on December 31. If any of you have taken out more than your percentage share of the profits (40% for the two partners combined) in compensation, the excess must be promptly returned to the partnership checking account to avoid legal action.#148; That ought to get their attention; if they don#146;t respond, then your friend should call a #147;partners#146; meeting#148; to discuss the conduct of the business. At this meeting, your friend should be prepared to offer to sell her 60% share in the business to the two other partners. They obviously want to move forward without your friend, and that#146;s okay as long as they pay your friend something for her contribution to the business thus far. #147;I#146;m thinking of starting a business with a software programmer. Are there any special rules about doing business with programmers?#148; Not really #150; partnerships are partnerships no matter who you have them with. Still, I would be wary about giving a programmer ownership of a company unless he has developed the software product you are selling, and is prepared to work 24/7 to keep that product up to date. If you own the software, and he#146;s just providing labor, don#146;t make him a partner until he proves to you just how indispensable he is to the product#146;s success. 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 >>

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05/07/2010
IconA 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 >>

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05/07/2010
IconSome 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 >>

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05/07/2010
IconCan 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 >>

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