Vol. 13 No. 10

October 2014

"No man will make a great business who wants to do it all himself or get the credit for doing it."

~ Andrew Carnegie (1835 - 1919), Industrialist and Philanthropist

Budgeting for 2015

It's that time again when most businesses start to create their budgets for the coming year. To do this, you need to estimate where you think various costs are heading.

Here are some projections to help you.

Wages. How much of a raise can you expect to give your staff? Obviously this depends on how your company is doing. However, if you want to keep up with your competitors, expect to increase salaries by about 3%, the projected increase for most employee categories in just about every industry. This is about the same increase rate that was used for the prior year. If the economy heats up, pay raises could follow suit. Caution: As your payroll increases, so does your tab for employment taxes.

Insurance. Not all insurance coverage is expected to rise at the same rate, so make a list the types of insurance coverage you have, and then make a projection on each one.

Health insurance rate changes for small businesses vary dramatically from state to state, but almost all can expect a rate increase (I've seen projections approaching 10%, but some small businesses may see double-digit rate increases). Rates for 2015 on the SHOPs should be available soon if they are not already posted.
Business owner policies (BOPs) could rise by about 3%, which is less than last year's rate increase.

Keep Reading...

Key Person Life Insurance: Who, What, Where, When, and Why

Many small businesses depend greatly on a particular individual. This may be a key salesperson, a designer, or someone else with unique talent and ability. When this person dies, it can cause serious disruption to the business. Revenue may fall off. And the company will incur costs to recruit and train a replacement. Life insurance proceeds to cover the financial losses resulting from the death of a key person can certainly come in handy.

How key person coverage works
If the person consents, the company can take out a life insurance policy on him or her, naming the business as beneficiary. The company owns the policy, pays the premiums, and receives the proceeds when the key person dies (assuming the policy remains in effect).

Employee consent to being insured was not required for policies issued before August 18, 2006, but consent is now essential. If the company fails to obtain consent before the policy is issued, then the proceeds that would otherwise be tax free become taxable. This can result in the loss of as much as about 40% of the proceeds in taxes.

Keep Reading...

5 Business Practices That Make You Look Small

Even though you're a small business, you don't want to act small. If you want the public to view you as one of the big boys, act like it by avoiding poor business practices.

Here are five business practices that you should avoid (this article is adapted from one I wrote for Big Ideas for Small Business® in 2002).

1. Not replying to correspondence
Whether customers, clients, vendors, and other business associates try to contact you by phone, email, or text, not replying promptly is a bad business practice. Not only is this rude, it's also unprofessional and a big turnoff to senders. Don't let your lack of time or an incomplete answer prevent you from responding promptly. You can always follow up later on with more information. Just let the sender know you've received the communication and that you're attending to matters.

2. Whining about your personal problems
Your personal problems -- health, marital discord, bad weather, or the loss of key personnel -- can make it difficult to keep up with your business. You may be distracted and fall behind on a job or need to delay payment to your suppliers or vendors. Recognize that everyone has a sob story, but most people don't want to hear yours.

If you've been stiffed by a customer and are having difficulty paying your bills, don't use your woes as an excuse for late or nonpayment. Instead, give your vendors a prompt heads-up that you will be making a late payment. Alternatively, request new payment terms if you need even more time to meet your obligations.

Keep Reading...

It's a Fact!

Hispanic-Owned Businesses Are Growing

Hispanic Heritage Month runs from September 15 to October 15, 2014. In recognition of this, here are some stats about Hispanic-owned businesses:

Currently, there are 3 million such businesses;
The number is expected to grow by 41.8% in the next six years to 4.3 million;
Their revenue is expected to grow by 39% to more than $539 billion.

Source: HispanicBusiness.com

Our Readers Ask

Q: My business is an S corporation. If I run the business from my house, can I take a home office deduction?

A: If you take a home office deduction (assuming you are eligible), you can only deduct your expenses as miscellaneous itemized deductions (subject to the 2%-of-adjusted-gross-income threshold and the phase-out of itemized deductions for high-income taxpayers). Shifting the cost of the home office to the corporation is possible, but it has to be done the right way. Renting the space to the corporation won't help because the law bars a deduction for the expenses of a home office rented to the homeowner's corporation and you'd have to treat the rental income as taxable. However, the corporation can set up an accountable plan to reimburse an employee (including an owner-employee) for expenses related to a home office on a tax-free basis. Find rules about an accountable plan in Chapter 6 of IRS Publication 463.

Book Review

Capital for Keeps: Limit Litigation Risk While Raising Capital

Russell C. Weigel, III. ~ Paperback ~ Self-published: $14.99

As my readers know, I usually don't review self-published books, but due to the lack of credible information on the subject of raising capital in light of equity crowdfunding opportunities, I'm making an exception.

To paraphrase what Arthur Levitt, Jr., former chairman of the SEC, said: Capital for Keeps provides valuable guidelines to help capital raisers to navigate the complex rules that will help them avoid the risk of litigation. Written by an attorney who formerly worked for the SEC and who currently provides legal counsel to public and private capital raisers, the content provides solid information for small business owners who want to raise capital from the public.

The book provides an overview on the government regulation of investment offerings and the risk of non-compliance. It explains the terminology that capital raisers need to master, such as "general solicitation" and "advertising." It also outlines what you can and cannot say, and you who can and cannot communicate with.

There are sample forms that you'll want to use in connection with raising capital (and a link where you can download them).

I'm delighted to be named a Top 100 Small Business Influencer for 2014 -- many thanks for your votes and support!

In This Issue

Budgeting for 2015

Key Person Life Insurance: Who, What, Where, When, and Why

5 Business Practices That Make You Look Small

It's a Fact!

Our Readers Ask

Featured Book Review

For critical, year-round tax advice and important planning, this Self-Employment Guide is exactly what you need!
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