More >>

When Your Business Crosses State Lines Cliff Ennico www.creators.com "We run a number of limited liability companies in New Jersey that provide financial services. We have a number of partners who live in New York, do business out of their homes, and see New York customers in their home offices. Just yesterday I read that New York is adopting a new law requiring LLCs in New York to publish a 'legal notice' in local newspapers or else lose their legal status. Does this apply to us?" It depends on whether you are legally "doing business" in New York. Generally, unless you have an actual office address in New York, you are not doing business there legally. As long as your New York clients get all their mail from New Jersey, and mail all their payments to New Jersey, and your employees' home addresses do not appear anywhere on your business cards and stationery, you're probably not "doing business" in New York. In this case, though, it's a close call, because it sounds like you've got employees working full-time in New York and using their home offices as local "branches" of your business - from a New York customer's perspective, you sure LOOK like you have an office in New York, even though you legally don't. New York and New Jersey have signed an "interstate compact" requiring companies in one state to collect the other state's sales, use and other taxes when dealing with customers in the other state, whether or not they are legally doing business there - you're probably not doing that. I also have to believe that New York's banking authorities will be concerned about the quality of financial advice your people are giving to citizens of New York, and may want to subject your New York personnel to whatever licensing requirements apply in New York. To be safe, I would register your New Jersey LLC as a "foreign" LLC in New York and publish the legal notice - the cost is only about $200 if your employees work in counties outside of New York City. And hire an attorney who's familiar with New York consumer protection laws relating to financial services. "I set up a business in Nevada thinking it's going to save me money on taxes, but doing more research showed that it's not true. Is there a way I can transfer it to my local state without having to pay all those set up fees? Or do I need to close business there and open a new one in my state?" The short answer is "no". There are two ways you can transfer your Nevada business to your home state - you can either register the Nevada business as a "foreign" entity in your state (see previous answer), or you can set up a new entity in your home state and merge the Nevada business into it. Either way, though, you will have to pay fees ranging from $200 to $1,000. The better solution may be to simply dissolve the Nevada business and set up a new one in your home state. In most states, the taxes and fees for setting up a local, or "domestic", legal entity are lower than they are for registering a foreign (out of state) entity, and you will save a couple of hundred bucks by doing this. "How would plans to relocate in another state in the future affect my decision to incorporate an LLC in New York now? Would I pay business taxes to both New York and the state I will eventually end up in? Are taxes based on the legal address of the business or where the LLC is, or is it where you operate regardless of where your clients are?" If you're planning to move to another state in the VERY near future (within the next year), then I would hold off forming an LLC until you are settled in your new location, and then form one under that state's law. Otherwise you will be paying taxes and filing tax returns in two separate states, which makes no sense. If your move to another state is sometime more distant in the future (say, the next two to five years), then you should form a New York LLC now to get the protection from legal liability. When you do eventually move, you would shut down your New York LLC (fairly easy to do) and set up a new LLC under the laws of your new state (see previous answer). That's the best and most efficient way. "I am a non-US resident living in a foreign country. I am thinking about forming an LLC in Delaware. The Registered Agent allows me to use his address in Delaware for legal documents, bank accounts and correspondence with the IRS, but cannot be used as a mailing address to be posted on my company Web site. I found three mail forwarding services, one in Nevada, one in Texas and one in Florida. If I use these mail forwarding services for my LLC in these states, does it mean I am doing business as a foreign company in those states? For example, if I use the Florida mail forwarding service, do I need to register in Florida as a foreign company?" The short answer is "yes". Your mail forwarding service would be a legal business address in the state where the mail forwarding service is located (see first answer). You would have to register your Delaware LLC as a "foreign" LLC in that state, and register for that state's state and local taxes. Be sure to get a good tax adviser here, as you (or your U.S. bank) may also have to "withhold" taxes on amounts you take out of the LLC checking account and remit to your home country - see the instructions to IRS Form W-8ECI and IRS Publication 519, "U.S. Taxation of Aliens". Also, be prepared to answer a few questions if someone from U.S. Homeland Security contacts you, as an overseas business with no legal presence in the U.S. other than a "private mailbox" might raise a few eyebrows in U.S. intelligence circles. 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 >>

A Mystery Partner, and Tony Manero's Boss Cliff Ennico www.creators.com "I recently made an offer to buy a small business in my town. The seller seems like a great guy, and has been very co-operative so far in opening his books to me. The seller has been traveling a lot lately, though, so when I visit the store I find myself dealing with a guy named 'Joe'. I had assumed that Joe was just an employee or manager of the store, but yesterday when I was chatting up one of the other store employees she referred to Joe as the seller's business partner. I checked the Secretary of State's office, and Joe is not listed as a member of the seller's limited liability company (LLC) that runs this business. Should I be concerned about this, and what is the most tactful way to bring it up with the seller?" As readers of this column know, one of the biggest problems facing new businesses is the inadvertent or accidental partnership - a situation where two or more people are working so closely together that the law treats them as partners whether or not they intended one. Although Joe may not legally be the seller's business partner, there's a good chance Joe may have some real partner-type rights if the business is sold. Whatever you do, make sure you buy the "assets" of the seller's business, not his ownership interest in the LLC - just because Joe is the seller's "accidental" partner doesn't mean he's going to become yours after the deal closes. Then, speak to both Joe and the seller (preferably not at the same time), and ask each of them what their business relationship is. If Joe says he's a partner, point this out to the seller and insist that both Joe and the seller sign non-compete agreements before you buy the business. Otherwise if Joe's not happy with the deal there's a good chance Joe will quit the day after you buy the business and open up a competing operation down the street. "I run a small pack-and-ship store, and frequently have to hire college kids to pack the boxes and load the trucks because it's really hard in my area to find people willing to work for $20,000 a year without benefits. There's this one kid working for me who really gets under my skin. He's a good employee overall - he always shows up on time, he always dresses appropriately, he's polite and courteous, and the customers love him. The problem is that when he needs time off for something, he doesn't ask me - he TELLS me he's taking the afternoon off and just walks out of the store, leaving me in the lurch. I really like this kid, and I don't want to lose him - at least until he graduates -- but I also want to show him who's boss. How do I do that?" Simple. Go to your local video store and rent a DVD of "Saturday Night Fever" - that's right, the 1977 movie about discos, John Travolta, the Bee Gees and white polyester suits. Readers of a certain age will recall that Travolta plays Tony Manero, a wisecracking Brooklyn kid who works in a paint store by day and dances his heart out at the local disco on Saturday nights (hence the movie's title). What many readers - even disco buffs - probably don't remember is a scene in which Tony needs the afternoon off on a Saturday to help his girlfriend-slash-dance-partner move into a Manhattan apartment. Tony's boss, who's normally very supportive, refuses to give him the afternoon off on such short notice, explaining (quite rightly) that Saturday is the busiest day of the week and he needs every pair of hands he can get. Tony flies off in a rage and exchanges some extremely harsh words with his boss, who fires him on the spot. Nothing unusual about that, except that the following Monday Tony goes into the store to pick up some personal items he left behind, and his boss offers him his old job back as if nothing had ever happened, saying "we both got a little hot about this. Let's just put it behind us, Tony, because you've got a real future here. The customers love you." There's a lot of wisdom in that scene about dealing with employees, especially young people who are "wet behind the ears" when it comes to business skills. You need lots of patience, and have to be willing to forgive the occasional outburst of emotion, in order to do what's right for your business. It sounds to me like your employee sincerely cares about doing a good job, but hasn't learned the discipline of keeping regular hours. And you can't really blame him -- many colleges today have thrown fixed schedules out the window, and allow students attend classes when they want so they can engage in internship and other work-study programs. Some, like this kid, probably assume the "real" world of business will be just as flexible. I would sit down with this kid and say something like "I'm happy to give you time off when you need it, without pay of course, but I'm setting a strict policy from now on that any employee who needs time off has to give at least 24 hours' notice so that I can make sure the store is properly staffed". Be sure to make it clear that this kid is not being singled out -- this is a policy that will apply to all employees, and he won't be penalized unless he fails to give the required notice. If he storms off in a huff, be prepared to "forgive and forget" if he shows up next week asking for his job back. If he doesn't come back, there's always another nice college kid who needs a part-time job. As for Tony Manero, it's a good thing he turned down his boss' offer and went into dancing - he'd probably be wearing an orange apron at Home Depot today instead of that wonderful white polyester suit. 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 >>

Beware of "Wolves In Partner's Clothing Cliff Ennico www.creators.com "I have spent the last two years of my life building a specialty publishing business. I'm a pretty creative person, and have developed some ideas for a line of e-books on various types of hobbies. I've interested a number of large corporations in providing marketing support for these projects, and am in the process of negotiating some big-figure 'strategic alliances' with these companies. Despite what I've accomplished so far, I feel the need to partner with someone who really understands the business of publishing to help me make this company the success it should be. For the past couple of months, I've been in discussions with an ex-publishing executive. He seems to be a lovely person, and he really knows his stuff. I've invited him to a couple of 'pitch meetings' with some big companies to discuss sponsor deals. I've paid his expenses, and he reviews and critiques the PowerPoint presentations I prepare before each meeting. His suggestions are very helpful, and I usually end up following his advice. But during the actual sessions he doesn't contribute much. When I ask him to contribute more to the effort, he says he will do more as soon as we 'work out a suitable arrangement' for him to come on board. Last week he finally sent me a written offer to join my management team. He says he can't put any money into my company right now, but is willing to provide 'sweat equity' as the Chief Operating Officer and Chief Financial Officer of my company, with 50% of the stock in my company, a seat on my board of directors, and the right to purchase my 50% of the company he is not happy with my performance in running the company. To be fair, I would also have the right to buy out his 50% stake if I am not happy with him down the road. Also, he insists his attorney, who is also his brother-in-law, draft the documents to make this deal happen. I'm not wild about this, of course, but I am worried that I need somebody like them on board to attract the type of investors and partners I will need to make this business a success. What should I do?" First of all, I agree with your conclusion that as the "creative genius" of this company you need to balance your management team with some "business types" who can communicate well with the corporate "suits" who will be making the big sponsorship decisions. That shows real maturity on your part, as investors - particularly venture capital types - will look at your management team very closely to make sure you've got someone who "worships the numbers" on board before they will part with their money. Also, investors are very reluctant to put money behind "one man bands", because if something bad should happen to that one man, the music stops playing. You will definitely need to bring on one or more partners to make this business realize its full potential. The gentleman you describe in your e-mail is not, however, the right person, and you should not make him your business partner on the terms he has recommended. Make no mistake: this guy is out to steal your company. People like this gentleman are a bit like Wimpy in the old "Popeye" cartoons - they will "gladly pay you Tuesday for the price of a hamburger today." That is, they promise you everything, but they won't agree to do anything until you give them a significant chunk of your business up front. Right now, this person has given you only a few hours of his time that he can easily write off. He is refusing to put money into your company, and you have reimbursed his expenses so far, so he has no "skin in the game" - he has taken no risks, he has nothing to lose, and he hasn't really shown any real commitment to your business. What recourse will you have if you bring him on as your 50% partner and he doesn't deliver what he promises? Once you make someone your partner, there is only one way you can get rid of him - you must buy him out at whatever price he considers fair. Once this company takes off and becomes successful, that will be a significant chunk of change. I especially don't like his asking for the right to boot you out if he's not happy with your performance - you could end up working like a dog building this business only to have him pull the trigger and force you out in the cold for a pittance just as you're becoming successful. And with his brother-in-law drafting the documents, you just KNOW the terms will not be favorable to you. If you really feel this person is worth serious consideration as a partner, here's my advice: don't make him your partner until he proves himself. Offer him a "finder's fee", where he gives you his time and gets a percentage (5% to 10% is customary) of any cash you receive from any sponsorship, strategic alliance, or other deal he helps to make happen for your company. That keeps you in control of the business, compensates him generously for his time, and gives him a stake in your success. It also gives you a chance to look at him very closely and determine if he's worth "bringing on board" as a partner down the road. If he freaks out at this offer, and accuses you of acting in "bad faith", don't let it get to you - he has shown you his true colors, and you don't want him in your life under any circumstances. Tell him (professionally) to enjoy the rest of his life, and start looking for other candidates. As your Mom told you back when you had your heart broken in high school, there's plenty of fish in the sea. 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 >>

Fast Fun Ways To Raise Money To Start Your Home Business By Liz Folger, Home Biz Start-Up Expert It might seem begging, borrowing and stealing are the options you have tofunding your home business. However I suggest you not go through route. At first begging might seem like a good idea. The more pathetic you soundthe better your chances of getting what your want, right? It works for threeyear olds usually, why not a 43 year old? It usually doesn't work for the threeyear old and it certainly isn't going to work at all for the 43 year old. Borrowing...yes but if your credit isn't as beautiful as you would like it tobe, most banks will look at your loan application and all of a sudden you'llthink you're a comic. Because whatever you wrote on that loan application hascaused this individual reading it to get the best belly life of their life. Stealing just isn't something that is looked on too favorably in most if notall countries of the world. Depending on where you live you could have fingersand limbs cut off, you could be killed or you could spend some time in a verysmall cell giving you a lot of time to think that stealing probably wasn't thebest idea you've ever had. There has GOT to be a better way to raising money to start your homebusiness and me being the good news fairy that I am I'd like to tell you - you're right!Not only is there better ways to raise money, but there are fun ways to do it too andit doesn't have to take you all that long to raise the money you need. CUT THE EXTRAS To start most home businesses, it doesn't cost a lot of money. Many homebusinesses can be started for under $500.00 and some can be started for much less. One idea is to look at your current spending habits. Cable, phone/cellbills, going out to eat, daily coffee at the coffee shop. Let's take that last example of buying a daily coffee. Most specialty coffees you're paying on average of about $3.00 a cup. If you were to pass on that coffee five days a week for a month you will have saved $80. Do that for a few months and you could be very close to raising the money you need. What about your cable bill? Average cable bills are $50 to $75 a month. Whatif you were to cut out the cable? Not only would you be saving money and reachingthe goal to finance your home biz, but think of all the time you can put into yourhome business idea? It's amazing the time we waste sitting in front of that little box. MAKE THE MONEY Maybe you don't like the idea of cutting anything out, or maybe you want tocombine the above and raise the money yourself to put yourself on the fast track togetting your business started. The goal is to raise your money in just one to three months. The sooner thebetter. It's amazing what you can do for a few months if you want something badenough. Think about something you already know a lot about. Gardening Art Music Health/Fitness Cooking Finance These are just a few ideas. Think about what you like to do and have a lotof knowledge in. Remember, just because you know a lot about this area, others will notand they would love to pay you for your knowledge. Think about teaching a 4 week workshop on your area of expertise. Offer aHealth/Fitness program. It could be geared towards women who want to be ready to wear that itsy bitsy teeny weenie yellow polka dot bikini for the summer. Create for them a work-out plan along with a healthy diet. You could meet with them as a group or individually in their home and help motivate them to reach their goals. If you're thumb can be described as the color of deep forest green you couldthink about putting in gardens and maintaining them through the summer for thosepeople who will enjoy the fruits and vegetables of YOUR labor. Kids are always raising money with car washing, why can't adults? Thinkabout offering a mobile spring cleaning car service. If cleaning is your thing you coulduse that same theme and offer to spring clean or organize peoples home, kitchens orclosets. If it's around the holidays there are lights to be hung on houses (And takendown), there are homes and businesses to be decorated, parties to plan and money to bemade. Everyone is born with special gifts, talents and interests. Use them to makethe money you need to get your home business off the ground. TELL EVERYONE WHAT YOU'RE UP TO People naturally like to help each other. At least most people I don'trecommend asking any ex's. What your about to do is not begging either. You will betalking to your friends and family in a non-whinnying, very confident manner. Explain to them what your goal is and how you plan to reach your goal. Askthem if they would like to help you reach your goal and this is what you can do tohelp them. It's a win win situation for everyone. Whether your friends or family decide to help you reach your goal, ask themfor referrals. This way you don't EVER have to make a cold call. You can contact thesepeople, tell them so and so said to give them a call because they might be interested in theproduct or service you're offering. Again, give them your pre-practiced spiel. HAVE FUN Be sure you pick a way to make money that you naturally enjoy doing. Once you reach the goal you've set for yourself you will have such a renewed sense ofconfidence for yourself. To create for yourself a goal, and reach, is such a wonderful way to give a personal power boost of good feelings. If you would like a free worksheet that gives you additional help infinancing your home business visit: www.bizymoms.com/money.html 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 >>

Breaking Into The "Big Boxes" Cliff Ennico www.creators.com "I'm in the process of launching a specialty food product. I've lined up a contract manufacturer to make the first batch of 5,000. What's the best way for a small business like mine to get into the big retail chains?" No doubt about it, "big box" retail chains such as Targetreg; and WalMartreg; are taking over retail distribution channels for most consumer products. People want the convenience of "one stop" shopping, and they love the discounted prices. But it's tough for small businesses to break into the supply chain when retail is dominated by only a handful of players. First, you have to find the right buyer for your product among the retailer's hundreds of employees. Then, you have to get on the buyer's "radar screen" to review your product. Then, you have to make the pilgrimage to the retailer's corporate headquarters (Bentonville, Arkansas, in the case of WalMart(r)). As a small supplier, you will have to be prepared to grovel, beg and plead to get your product considered, and your pitch will have to be perfect. But here's the kicker. Let's say you do all that, the buyer is absolutely wild about your product, and (surprise!) the buyer actually has the authority to buy your product right then and there without "going up the corporate chain" for further approvals. Here's what she's going to say to you when you're done pitching: "You've really got something here; we're definitely interested. We'll place an initial order of 100,000 units, we need delivery next week, we're going to mark it up 300% and pay you $1 per unit (or less) over your cost, and we want you to take back all unsold inventory if it hasn't sold out in three months." Okay, hotshot, NOW what are you going to do? Is that a sufficient price to pay to get nationwide recognition for your product? A manufacturing run of 5,000 units is simply going to be too small for a large nationwide retail chain. My advice would be to launch the product on a smaller scale, using local retailers, specialty mail-order retailers and online retailers to start with. That way, you can charge a higher price for your product, get valuable market feedback, and recoup at least some of your investment before you gear up for the "mass production" a national chain is going to require. Talk to some of the high-end gourmet grocery stores in your area and get them to carry the product. Not only will the stores generate sales for you, but remember, they're being visited every day by representatives from the larger specialty food distributors. If a "rep" sees your product in a local store and likes what she sees, she probably will want to "rep" your product as well (for a fee, of course). These days to sell any kind of consumer product you have to generate "buzz" among the "early adopter" buyers who always want to be "the first on the block" with the latest new thing. Look for specialty retailers that target these "early adopters". For example, since you have a specialty food product, you simply must do everything you can to get it into Zabar's supermarket chain in New York City ( www.zabars.com ). The people who write articles for the important trade publications in the specialty food industry are always looking to see "what's new at Zabar's", and if they see your product there . . . Don't overlook online retailers. These days if someone has a specialized or "niche" interest the first thing they do is "Google" the Web, and a number of clever Internet entrepreneurs are creating "information clearinghouse" Websites for people with a common interest. Thinking about a line of baked goods for people with food allergies? You couldn't ask for more than a mention on AllergyGrocery.com ( www.allergygrocery.com ). Specialty mail order and online retailers are less likely to order large quantities, and are more likely to negotiate generous price and return conditions, than the big nationwide chains. Some will even "drop ship" your products - they will list them in their catalogues or online, and will order from you only when they receive an order from a customer, so you can maintain control of your inventory. So how you do find specialty retailers? The online "Chain Store Guide" ( www.csgis.com ) publishes several high-priced directories of specialty retailers (expect to pay $200 and up for access to these). Sadly, the classic publication "The Catalog of Catalogs" has been out of print since 1999, but you can find an out-of-date copy at most libraries and it's still pretty good. You can also find specialty distributors through your industry trade association. The National Association for the Specialty Food Trade ( www.specialtyfoodmarket.com ) offers several publications and resources for its members that are not available to the general public. If nothing else, by finding out where other members are looking to source their products, you will know where you need to be to generate the "buzz" necessary to get this product off the ground. 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 >>

Deducting Your "Peanuts" And "Bubbles" Cliff Ennico www.creators.com "I just began selling stuff on eBay last year, and am in the process of filling out my first tax return (ugh). I have a question about whether or not I can deduct the cost of postage, duct tape, packaging materials such as 'plastic peanuts' and Bubblewrap, and other supplies. I pay for these items out of my own pocket, but I don't pass the actual cost on to the buyer because they're too difficult to track. Instead, I charge each buyer a 'shipping and handling fee' of $10 for each auction, regardless of the amount involved. Does the $10 'shipping and handling fee' wipe out any deduction I might have for my packaging and shipping materials?" When selling on eBay, it's often hard to come up with deductible business expenses when tax time rolls around. You probably have a computer or laptop that you use in your business (and which you probably share with your videogame-playing teenagers), a couple of eBay "how to" books, and maybe some paper clips. But that's about it. Unless you are selling so much on eBay that you need to rent a warehouse, buy forklifts and hire guys with tattoos to run them, you really don't have a lot of expenses in a selling business on eBay. The one exception, of course, is "postage, packing and shipping". Whenever someone buys something from you on eBay, you've got to get it into their hands somehow. How should you deal with these on your tax return? Well, believe it or not, there are two ways. The first (and better) method - and what the IRS really wants you to do - is to "inventory" your postage, packing and shipping costs by adding them to your "cost of goods sold" or "COGS". "Cost of goods sold" (COGS for short) is basically the total of everything you spent to acquire your inventory -- the stuff you sell on eBay. Whatever you paid for your inventory is part of the COGS of your inventory, but COGS also includes such things as postage and packaging materials. The COGS method requires you to keep track of the COGS of each item of inventory you sell on eBay, because you cannot deduct your COGS for inventory until it is actually sold. When you sell an item on eBay, you record the winning bid amount as income, and deduct the COGS for that item to offset the income. The COGS method works well when you are selling only a relatively few high-priced items on eBay. But what if you are like the vast majority of eBay sellers, who are selling lots and lots of low-priced items? In that situation it is difficult, if not impossible, to track the COGS of each item you sell unless you have lots of discipline and patience, too much time on your hands, and some sophisticated accounting software. You probably will not get into too much hot water with the IRS if you take the total cost of your postage, packaging and shipping materials as a current deduction on Schedule C of your federal tax return (that's the Schedule on which you report your income and deductions from a "trade or business"), especially if the total amount of these expenses is relatively small such that it would be "too much of a pain" to track them precisely. What complicates the situation here is the "shipping and handling fee" you charge your eBay buyers. You will have to keep close track of the amount you actually spend on postage, packaging and shipping materials, total them all at the end of the year, and then compare them to the total "shipping and handling fees" your charged your eBay buyers during the year. If your total shipping and handling expenses exceeded the total shipping and handling fees you received from eBay buyers, you can deduct the excess expenses on your tax return. If the total shipping and handling fees you charged your eBay buyers exceeded your actual shipping and handling costs, you must report the excess as income on your tax return. Keep in mind that charging a flat shipping and handling fee regardless of your actual costs, while legal, may violate certain eBay policies (see pages.ebay.com/help/policies/listing-shipping.html). If your eBay buyers find out you are making money on your shipping and handling fees, they will feel cheated, and will find a way to let the eBay community know about it, either by giving you "negative feedback" on eBay's Feedback Forum, or by "flaming" you on the many chat rooms, bulletin boards and other "community" features on eBay's Website. If you value your reputation as an eBay seller, you will find a way to make sure your shipping and handling fees reflect your actual postage, shipping and packaging costs. And while you're at it, start using the COGS method, which will help you keep track of what these actual costs are. You will make both your customers, and the IRS, very happy indeed. 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 >>

More >>

Choosing The Right Way To Account For Sales Cliff Ennico www.creators.com "Last year I started a business selling on eBay. I'm doing my taxes now, and my accountant is telling me I have to choose between the 'cash' and 'accrual' methods of accounting. Frankly, I haven't been doing any accounting as such. When people pay me, I just deposit their checks or money orders into my business checking account (I'm not using PayPalReg; yet, though I plan to next year). Could you please explain the difference between these two accounting methods in language I can understand?" As Curly Joe Howard of the Three Stooges used to say, "soitenly." The IRS allows small businesses to use two different accounting methods - the cash method and the accrual method. Under the cash method of accounting, you report sales when, and only when, you actually receive the "cash" from your winning bidder. So, if someone buys something from you on eBay and pays with a check money order, you do not report the sale until the check or money order has arrived. If you hold onto the check for a few days before depositing it in your account (as many folks do, especially in late December when they're trying to 'push' income into the next tax year), it doesn't matter - you record the sale when the buyer's check hits your mailbox. EXAMPLE: Joe sells laptop computers on eBay. Joe puts a laptop computer up for sale on eBay using a 7-day "traditional" auction format, closing on Sunday night. At the end of the auction Mary is the winning bidder at $500. Mary elects to pay by personal check, and mails the money order to Joe on Monday morning. Joe receives Mary's check on Thursday, deposits it in his business checking account on Friday, and the check clears the same day. Using the cash method of accounting, Joe records the $500 sale on Thursday, when he receives the check from Mary. Under the accrual method of accounting, you report sales when you have the legal right to payment, even if you haven't received the cash yet. So, if someone buys something from you on eBay and pays with a check or money order, you can report the sale as having occurred the moment the auction ended, even though it will be a few days yet before you receive the buyer's check or money order. EXAMPLE: Mary sells Barbie Dolls on eBay. On Monday, Mary puts a genuine 1971 "Malibu Barbie" (the one with the sunglasses sewn to her head) up for sale on eBay for a fixed price of $1,000 using eBay's "Buy It Now!" feature. On Wednesday, Alphonse clicks the "Buy It Now!" button and buys the Malibu Barbie doll for $1,000. Alphonse chooses to pay for the doll by personal check, and mails the check to Mary on Thursday morning. Mary receives the check on Monday and waits until Tuesday to deposit the check to her business checking account, which means the check doesn't clear the bank until the following Friday. Because Mary uses the accrual method of accounting, Mary must record the $1,000 sale on Wednesday - the day Alphonse buys the doll on eBay and becomes legally obligated to purchase the doll - even though Mary doesn't actually receive "good funds" until the following Friday, when Alphonse's personal check clears her bank. Under either the cash or accrual method of accounting, holding onto a check or money order for several days before depositing it does not affect in any way the recording of the sale. You record the sale either when the check or money order arrives in your mailbox (cash method), or when the eBay auction closes and the winning bidder has been identified (accrual method). If you have a PayPalreg; account and use the cash method of accounting, you record a sale when the buyer's payment hits your PayPalreg; account. Still not sure what to do? When in doubt, select the "accrual" method of accounting. Just about all eBay selling businesses have inventory, and the accrual method of accounting gives a more accurate picture of sales and income for a business that has inventory. Besides, when you find yourself selling more than $1 million worth of stuff on eBay each year (you should be so lucky, right?), the IRS is going to require you to use the accrual method of accounting anyway, so you might as well get familiar with accrual accounting now. Hey, you never know . . . 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 >>

10 Marketing Ideas to Grow Your Candy Wrapping Business - Part II By Liz Folger, Work-at-home Mom Expert The business of candy wrapping (and it's far more than just wrapping chocolate bars) is getting more and more popular. Personalized gifts and favors are always well received. Once your personalized gifts are seen at a wedding or being sold at a fundraiser, you're going to start to get calls from other people and companies who will want to put in their order. Your candy/favor wrapping business just needs a little marketing so your business can get moving. Below you'll find 10 ways to market your candy wrapping business. Use one, five, or all the ideas that you need. One thing I do recommend is that you have a fun and use the marketing ideas that you enjoy the most. Because the more marketing ideas that sound like fun to you, the more you'll work at it and the more business you will find. Business Cards With any business you have it's key to have some type of business card. Making your business card unique is also a great way to get a future customer's attention. With a Candy wrapping business you can do this very easily. Take a small chocolate bar or a Lifesaver roll and print your business card on a wrapper to fit the candy. This is sure to make a tasty impression. Get Your Yummy Business Cards Into The Right Hands Now that you have your cards created, think about who you'd like to market your business to. You could start with event and wedding planners and specialty gift shop owners. Wedding Trade Shows Throughout the year there are several wedding trade shows. Think about booking a table at one of these shows to display your wedding favor ideas. Fundraising Organizations Your children's school might be the perfect place to start. What's great about this business is you can create some wonderful samples to show your potential client. Other groups might be daycares, sporting teams, and hospitals. Local Shops Is there something special about your town? Do you get a lot of tourists? What attracts them? Create a special wrapper for your particular area. For more options offer seasonal themes like Halloween, Christmas, Easter and the Fourth of July. Press Releases Get the word out on your business by writing a press release for your local newspapers and local TV news stations. To help them remember you even more, create a special candy bar with the reporters name on it. Online Marketing Ideas Website Have a website so your customers can check out your work 7 days a week 24 hours a day. Include that website URL on all your marketing materials like your business cards. eNewsletter Get the email address of all your customers. This way you can send them a monthly or quarterly enewsletter that tells them about your specials and new products or ideas that you have. Include some freebie ideas like new party trends and ideas. Make the enewsletter something your customers are going to want to receive. Network Network with those who have similar businesses. With the Internet you can do business with a wedding planner in another state. You no longer have to do business just with the people who are in your local town. This is especially good news for those who live in very small towns. Post On Message Boards and Mailing Lists. Find wedding and fundraising idea sites. The key here is not to promote your business blatantly. Just answer questions, be helpful, and then include a nice signature line that includes your name, name of business, URL and email address. 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. * The author gives permission for the use of this article on drlaura.com More >>