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05/07/2010
IconSlamming The Gate On Internet Commerce Cliff Ennico www.creators.com "A number of 'gated communities' in my area are making new rules that prohibit people from buying and selling stuff on eBay out of their homes. Their argument is that there are too many UPS trucks going in and out of the development each day picking up the eBay parcels. Is it legal for them to do that?" While it sounds like these communities are going about it in a very heavy-handed way, the short answer is #147;yes#148;. It is perfectly legal for a gated community, condominium association, or residential subdivision to ban residents from engaging in commercial activities within its boundaries. And it#146;s not just #147;gated communities#148; that can do this. Prepare for a shock: every business that operates out of someone#146;s home is, technically, an illegal business. Now, you#146;re probably saying to yourself, #147;Wait a minute! There are at least five people on my block working from their homes. The IRS allows you to take a deduction if you operate a home-based business. How can you say they#146;re illegal?#148; They#146;re illegal because just about every city and town in the United States has adopted a zoning ordinance, dividing the community into residential, commercial, and other #147;zones#148;. Unless you live in a progressive community that allows #147;mixed use#148; zones, virtually every zoning ordinance prohibits the operation of a commercial business (with a few time-honored exceptions such as family dentists and visiting nurses) in a zone designated as #147;residential#148;. So why are so many people working out of their homes without getting into legal trouble? The answer has to do not with the law, but with its enforcement. Every community with a zoning ordinance has established a #147;Planning Board#148; or #147;Zoning Board#148; that oversees the zoning law, grants exceptions (called #147;variances#148;) from the ordinance and so forth. But I#146;m not aware of a single community that has adopted a special police force to make 100% sure people aren#146;t doing businesses out of their homes. You#146;ve never had any government official knocking on your front door asking you if you#146;re operating an illegal business, have you? As a practical matter, if you#146;re operating a business out of your home, you usually won#146;t get into hot water with your local zoning authorities unless . . . your neighbors turn you in. When will your neighbors turn you in? When you are conducting your business in such a way that you are #147;changing the residential character of your neighborhood#148;. The local kids can#146;t play stickball in the street because they#146;re too busy dodging the UPS trucks going to and from your home office. The neighbors are being kept awake all night because of the loud noises or foul odors emanating from your basement. You get the idea. What the #147;gated communities#148; are objecting to is not the operation of a home-based business per se, but rather the increased vehicle and truck traffic that that business is generating. The courts will probably back them up. So how can you operate an eBay, e-commerce or mail order business out of your home without getting into legal trouble? Simple. First, find out if there#146;s a UPS Store, Mailbox IT, Navis Pack #145;n Ship, or other franchise in your area offering #147;private mailbox service#148; #150; there almost certainly will be one. These franchises will provide you with a #147;private mailbox#148; #150; essentially a Post Office Box that has an actual street address (such as #147;123 Main Street, # 456#148;). Next, if you expect to have lots of inventory (more than a few items at a time), find the nearest #147;self-storage facility#148; (you can find the ones nearest you at www.selfstorage.org ) and rent some storage space for your inventory. Because the mailbox outlet and storage facility are both located within your community#146;s #147;commercial zone#148;, they do not violate your local zoning ordinance. Therefore, your business won#146;t, either. Sign your business up for a private mailbox (the average rental is around $300 per year), and use your mailbox address as your ONLY mailing address for all shipments and correspondence #150; your suppliers and customers should see only this address. Keep your inventory at the storage facility, and make sure all incoming shipments are dropped off there (or pick them up at the mailbox outlet and bring them to the storage facility). Use your home only as the #147;executive office#148; where you post your eBay auctions, keep your business records, and pack your boxes (most mailbox franchises will do that for you as well, for a fee). Then, once or twice a day (no more than that, please, especially if you live in a gated or other #145;closed#146; community), visit your storage facility, fill your car with your outgoing shipments, drive them down to your #147;private mailbox#148; address, and have the Postal Service, UPS or FedEx pick them up there. One last thing: don#146;t tell the neighbors what you#146;re up to. Every neighborhood has a Gladys Kravitz (for you #147;Bewitched#148; fans) or a Martha Huber (#147;Desperate Housewives#148;) that just can#146;t keep their noses out of your affairs. If your business is not too visible and isn#146;t interfering with their lives, most neighbors will adopt a #147;don#146;t ask, don#146;t tell#148; policy. After all, they probably don#146;t want you finding out about THEIR home-based business . . . at least, until you bump into them at the #147;private mailbox#148; outlet. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com More >>

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05/07/2010
IconPlacing The Right Value On A Small Business Cliff Ennico www.creators.com #147;I am thinking about buying a specialty food store that has been operating in town for 30 years. The owner is willing to sell, and has provided me with copies of his financial statements and tax returns for the past few years, but has asked me to make him an offer. How can I figure out a fair price for a business like this?#148; There#146;s a science to putting a fair value on a small business, but you can also come up with a reasonable estimate on your own, according to business valuation expert Roger Winsby of Axiom Valuation Services in Wakefield, Massachusetts ( www.axiomvaluation.com ) and co-author of #147;What Every Business Owner Should Know About Valuing Their Business#148; (McGraw-Hill, $21.95). The first thing, Winsby advises, is to base the value on the future potential of the business, not its past performance: #147;the history is context, but you#146;re buying the assets of the business so you can hopefully get a better return than the current owner.#148; For a business like this one, Winsby says, estimating a value is a five-part process: first, you look at the financial statements and tax returns and determine how much profit the business is making each year before interest expense, and income taxes; be sure to adjust for #147;reasonable#148; compensation that the owner is taking out of the business (i.e., add back to profits if the owner takes a salary that is more than you would need to pay an experienced person to manage the business day-to-day; or vice versa --accountants call this #147;earnings before interest and income taxes#148; or EBIT; second, take the company#146;s EBIT for the last two to five years, add them up, and divide by the number of years (in other words, calculate the #147;average#148; EBIT); subtract from the average EBIT the expected income taxes (safe assumption is 40% of average EBIT); and then add the average depreciation expense; accountants call this #147;average free cash flow#148;. third, take the average free cash flow and divide it by your #147;discount rate #148; #150; Winsby says this should be somewhere between 18% and 35% depending upon the type of business and how stable it is (for example, you would insist on a high return rate for an Internet consulting business that could shut down tomorrow, and a low return rate for a grocery store in business for 40 years with a stable clientele) #150; you now have a possible #147;purchase price assuming no future growth in free cash flows; to estimate the value if you think the business could increase profits by 3% per year, then adjust the required rate of return by subtracting 3% from your original estimate of the required rate of return (18% - 3% = 15%); this will give you a reasonable range of values. fourth, divide your purchase price by the business#146; current sales #150; the resulting ratio is called a Price to Sales multiple; and fifth, compare that #147;multiple#148; to those of other similar businesses that have sold in the past year (for $17.50, a standard reference work, #147;Small Business Valuation Formula Multiples#148;, with a range of multiples for over 170 different small businesses based on recent sales figures, can be downloaded as an Adobe Acrobat file from http://valuationresources.com/Misc/ValuationMultiples.htm ). But be careful -- Winsby warns against simply using an average multiple from any source and then applying them to a particular business. #147;These figures are based upon statistical averages,#148; Winsby explains. #147;When you plot out the actual transactions from which the averages are derived, they are all over the map. Don#146;t ever assume that the business you are looking to buy is an #145;average#146; business #150; it may be at the high or the low end of the range depending upon a number of factors.#148; Customer attrition, for example. A solo law practice can be expected to have a high rate of attrition after it is sold, because many clients have a high degree of personal loyalty to the seller and will #147;go elsewhere#148; when the practice is sold. Such a practice should command a low multiple, unless the seller is willing to spend a long period of time #147;transitioning#148; the business to the new owner. A specialty food store that#146;s been in town for 30 years, on the other hand, can be expected to have a low rate of attrition after it is sold, because most customers have accustomed themselves to visiting the store regularly and will not change their habits just because there#146;s a new owner. Such a business should command a relatively high multiple . . . unless a major competitor is planning to open across the street in a few months! What if you really don#146;t want to do the valuation yourself? While many accountants will value a business for you, Winsby advises that you approach someone who specializes in valuations to get the best deals. A #147;certified valuation#148; (one that would be acceptable to the IRS or a court of law), Winsby says, will cost between $5,000 and $10,000, but for about $2,000 to $3,000 you can get an #147;estimated valuation#148; or a #147;robust estimate#148;, which should be acceptable to most sellers, SBA lenders, and private investors. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com More >>

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05/07/2010
IconSummer Sanity for Moms Juggling a Home-Based Career by Lesley Spencer, MSc; Founder President HBWM.com Inc. http://www.HomeBasedWorkingMoms.com The relaxed pace of summer is peeking just around the corner. And it is definitely welcome to many of us, but the challenge and sometime stressful moments of balancing motherhood and work is not always so welcome. Like much of motherhood, being flexible is key and planning in advance is a necessity. To help you make this summer the best it can be with as little stress as possible, here are some tips for balancing your many roles during the summer: If you don#146;t have a laptop, now is a great time to consider getting one especially with wireless Internet connection. You can work just about anywhere with your laptop and wireless connection. That means portability to work in any room in your home as well as work at locations in public with wireless connection #150; coffee shops, public parks, airports, shopping areas, skating rinks and more. Take convenience a step higher and make your laptop your desktop computer by using a docking station. A docking station allows you to still use your monitor and keyboard like a desktop without the hassle of using two computer and transferring files and emails back and forth. Laptop prices have dropped dramatically and some laptops are as low as $500 while docking stations start around $60. Now may be the time to make your business work around your busy life more than ever. If you know your workload is going to be overwhelming, start planning now what you can delegate. Perhaps, its time to hire a Virtual Assistant to help you in your business. There are many talented, capable VAs who can do anything from word processing to data entry, to answering calls to respond to email to much more. You can search for them and other talented home-based moms in a variety of professions at: www.HBWM.com/memberdir. Technology is a great thing. Look into what you can automate in your business. Perhaps you can set up autoresponders when someone purchases or requests something from your website. A few sites that offer automation solutions include: http://www.1automationwiz.com and http://www.autoresponseplus.com. Even with more portability, moms need some time to work, relax, rejuvenate or just catch a breath. So what to do with those sweet cherub-like children squealing and running underfoot? Check out the summer camps in your area. These days there are camps for just about everything from sports to art to acting to science. Check your local parenting publications. Many of them have summer camp guides. Kid Swap? No, this isn#146;t a bad, new reality TV series. It#146;s an opportunity to pre-arrange some play date exchanges with your trusted friends and neighbors. Kids get to play and have fun and moms get an opportunity to catch up on work or find a little time for relaxation. Consider a Mom#146;s Helper. They can be great playmates and keep your kids occupied while you work. You may hire someone once a week, every morning or whatever your schedule and work requires. With a little planning and forethought, you can make this summer not only less stressful but actually enjoyable and fulfilling. Take time now to get yourself ready. You and your kids will be glad you did. Lesley Spencer is founder and president of the HBWM.com, Inc. Network whichincludes: http://www.HomeBasedWorkingMoms.com , http://www.WorkAtHomeKit.com , http://www.edirectoryofhomebasedcareers.com , http://www.momsworkathomesite.com , http://www.HBWMconferences.com , http://www.HBWMcanada.com and http://www.HireMyMom.com (coming soon!). She has a Master's Degree in Public Relations and has been featured in numerous media outlets including CBS News, Forbes, Business Week, Parents, Wall Street Journal and USA Today. She has been working from home for over 10 years and has two children whom she absolutely adores! Permission granted for use on DrLaura.com More >>

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05/07/2010
IconThinking About Going "Sub S"? Cliff Ennico www.creators.com #147;For some time now, I have been thinking about forming a limited liability company (LLC) for my small service business. I attended a seminar recently and learned that there#146;s a new law, just recently passed, that has made Subchapter S corporations a much more attractive option. What is this new law all about, and should I reconsider forming a Subchapter S corporation for my business?#148; Late last year, Congress passed the American Jobs Creation Act of 2004, the fifth major tax cut in four years. This law garnered a lot of attention in the press earlier this year because of its most dramatic change: a provision that enables taxpayers to deduct either their state and local sales taxes OR their state and local income taxes on their federal tax return, whichever is greater. If you live in a state (such as Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming) that has a state sales tax but no state income tax, that#146;s a big deal. But this same law made a number of significant (although, in the view of this writer, not terribly awe-inspiring) changes to the complex rules for Subchapter S corporations (essentially, a corporation that elects to be taxed as if it were a pass-through partnership). According to Diane Kennedy, a Phoenix, Arizona CPA and author of #147;Loopholes of the Rich: How the Rich Legally Make More Money and Pay Less Tax#148; ( www.taxloopholes.com ), the key changes are: the maximum number of shareholders Subchapter S corporations may legally have is now 100 persons (increased from 75); all members of a family who own shares in the corporation are treated as one shareholder for purposes of counting the number of shareholders; members of a family are #147;a common ancestor, lineal descendants of the common ancestor, and the spouses (or former spouses) of lineal descendants of common ancestors#148; (got that?); and if a shareholder of a Subchapter S corporation gets divorced, and the judge awards his or her spouse shares of stock in the Subchapter S corporation, any #147;suspended#148; losses attached to the shares can be transferred to the ex-spouse along with the shares themselves. The intent of the new law, according to Kennedy, is to make it easier for larger, family owned Subchapter S corporations to transfer assets to family members and engage in creative estate planning techniques without losing their Subchapter S status. For the vast majority of Subchapter S corporations, however #150; those having far, far fewer than 100 or even 75 shareholders #150; the new law will have little, or no, impact on the decision whether to form a Subchapter S corporation or an LLC for a new business. So what should this reader do with his or her small service business? Let#146;s review some basics. With an LLC, you get limited liability, pass-through tax treatment (the LLC is not a taxable entity, so everything passes through to the LLC owners and is taxed at their personal tax rates), and the LLC owners must pay both income and #147;self-employment taxes#148; (FICA, FUTA and Medicare) on everything the LLC earns. The same is basically true of Subchapter S corporations, Kennedy says, but with one significant difference: #147;if you have a Subchapter S corporation, and you put yourself on the payroll as a W-2 employee, withholding taxes from each paycheck as you take money out of the corporation, you can often save a significant amount of money in self-employment taxes.#148; True enough, but the question I would ask here is . . . is the tax saving worth the time and trouble of setting up a Subchapter S corporation? Like all corporations, Subchapter S corporations involve a lot of legal paperwork #150; you have to be fairly disciplined about keeping thorough records of business decisions you make (called #147;resolutions#148; or #147;minutes#148;). Forget to do the paperwork, and a judge or your state government may take your corporation away from you and expose your personal assets to the wolves. Also, Subchapter S corporations are subject to a fair number of rules designed to make sure only small businesses can take advantage of them #150; for example, Subchapter S corporations cannot issue preferred stock, or have shareholders who are not U.S. citizens or #147;Green Card#148; holders. Break any of these rules, and you lose the tax benefits of having a Subchapter S corporation. One possible solution, according to Kennedy, is to set up an LLC, and then elect to have the LLC taxed as if it were a Subchapter S corporation #150; the IRS allows you to do this by filing IRS Forms 8832 (to elect to have your LLC taxed as a corporation) and 2553 (to elect Subchapter S status), and you probably also will have to alert your state tax authorities so they don#146;t get confused. But be careful #150; as the ancient mariners used to say on their maps when things got a little imprecise, #147;here be demons#148;. When deciding whether to form an LLC or Subchapter S corporation for any small business, talk to your accountant first, and keep your life as simple as possible. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com More >>

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05/07/2010
IconHow To Write A Business Plan by Tammy Ames 2005 Writing a business plan isn't optional just because you consider this simply a home business. You are a small business owner. A written business plan is required to secure finances or investors in your new home business. Starting a home business with yourown funds and ideas doesn't mean you don't need a business plan. A written business plan is critical to every home business. The thought process and research involved in writing your businessplan will reveal the blue print for your home business. There are numerous paid and free business plan products that you can use to develop your own home business plan. Unless you areseeking investors in your small business, you can learn how to write a business plan that keeps your business working toward yourgoals. To have a well written small business plan, you will find your goals easier to reach and keep track of your progress both with building your customer base and sales. Starting a home business without a writing a well thought out business plan is like building a house without a blue print to guideyou every step of the way. Your home business foundation built on these eight areas will give your business a strong identity and focused sense of direction tohelp you plan and manage your business effectively. Business Summary. Write out a description of your business. What kind of company do you want to build? A well written description orsummary of your business often propels you through each step of how to write a business plan. Writing the summary first means you will always have the basic premise of your home businessidea at the top of everything you put in your business plan. Name your business. You may think that your direct sales business already has acompany name but that is not the name of YOUR business. Creating a distinct name for your business will help make your plan. Does your business name reflect what you offer? Is it easy to remember? Does it have strong branding potential? Should you reconsider your current business name if it not working with your product? Make sure the name of your business fits not only your product or services but your mission statement. Itemize your products or services. Write out descriptions of your products; how do they look, smell, taste,feel or how your services will help others reach their own goals in life. How will your offerings improve the lives of others? Sort through why others aren't already doing it and if they are offering exactly what you are going to offer then what prevents the competition from doing it better or more cheaply than you are. Mission Statement. Your mission statement is a concise clear summary of the goals of your business. In your mission statement, you will define exactly what your business does, the products or services offered and what makes your business unique above the competition.Writing the bottom line of your business goals into your missionstatement will guide the rest of your business plan. Business Assessment. A major portion of your home business plan is a detailed assessment of four areas: your strengths, your weaknesses orlimitations, business and marketing opportunities and threats or barriers to your potential success. At this stage of your business plan, you will be looking at your industry. Your work experience and talents that will add to your business would fall under your list of strengths. Your lack of knowledge or funds could be listed as your weaknesses. Take into account howbroad your industry is when you are looking at your strengthsand weaknesses. If you have little money for start up then you will need to be creative in your marketing and running your business.Will your weaknesses mean your opportunities for success arelimited? Will your talent surpass your lack of funds? Opportunities for business growth may be dependent on your networking contacts or website design. Every business owner should remain wary of all threats to business success. Planning for problems before they arise will make running a business easier and more successful in the long run. As you can see this aspect of businessplanning is critical to all of your vision, your mission statement, your goal setting and running your home business. Goal Setting. Write your vision for your business. Be specific. You can revise this as your goals and mission changes. How do you envisionyour business a year from now then five years from now? Write out your goals and objectives. Break down each product or service into their own set of goals. Plan for expansion as your business evolves. Goals are useless unless you can measure your progress towards them and plan to regularly assess which goals have been met or still need to be fulfilled. Make your goals specific and time sensitive. With each business goal, itemize what needs to be in place to reach eachof your goals. Outline what steps you will take to reach the goals for your home business. Mark your calendar when its time to re-evaluate your goals and re-align your vision for your businessto match the direction your business is going. Celebrate when you reach your goals and regroup when you realize you missed the mark. It's important to decide what you consider to be a major loss and what you will accept as unsuccessful. Knowing what you will accept and absorb as a business loss before it happens will help prepare you for when it actually happens. Target Market. Research your desired target market. Identify who you expect to buy your products or services. Write a profile of your average customer. You need to know your target before you are able to aim. Study yourpotential customer's behavior. Where do they shop? What do they read?Do they move in specific social circles? Who wants or needs your business? Who will benefit from your product? What type of people will find your business a necessity? You cannot expect to fill a need or desire of a customer if you do not know what makes your offer unique and necessary. Look at those that offer similar products with success. Write out how you can rise above and differentiate yourself from the competition. At this stage of yourbusiness plan, describe how you can stand out from the crowd. Write down how and why your company is better than the competition. Study the competitions latest marketing strategies then outline here how you plan to counteract their business moves to give you the edgeyou need to stay unique and effective. While studying your customers and competition, take the extra time to identify complementary products or services that may fit yourcurrent business plan that may give the edge you need to compete in the future. Sales and Marketing Strategies. How will anyone know your business exists? What steps will you taketo make your business known? How will your customers find you? What can you do to ensure that you attract the customers you seek? How will you track your efforts? How much money do you have to putthese strategies in place? List your strategies - press release, printed catalogs, business cards,open house, craft fairs, business, conventions, virtual expos, sales letters, etc. Determine whether you will market exclusively online, locally to your warm market or a combination of both. If online marketing is part of your business plan then include an internet marketing plan to include your domain name and host, whether you will hire a professional website designer or do it yourself, your business logo and e-commerce set up. Business Start Up. Determine what equipment and services you will need to run your business to include setting up your home office, equipment, supplies, product inventory, customer record keeping, and bookkeeping. Create a checklist of professionals you need to secure for legal and financial advice, advertising expertise, office assistance or tax expertise. Starting a home business can be exciting and scary because it is Your dream that you are working towards with each work day. To write a business plan, means a great deal of commitment to the process. The process of writing a business plan will bring you closer to understanding yourself, your business goals, your company identity and reaching yourpotential customers. Although these areas are critical to writing a business plan, there is muchmore that will be added to your plan over time. Each time you reach a goal or discover a barrier to making the sale ~ you will return to your businessplan and revise your goals, strategies and techniques. Home business success is in the plan and implementation but also in theability to adjust and redefine your business goals to meet your customersneed or desire while letting you design your home business your way! WAHM Connections strives to bring solid, effective business tools and resources for the home internet business. WAHM - Work at Home Connections E-zineOnline Business Start Up Promotion Resources http://www.wahmconnections.com/ Create Your Own Homemade Joy Today! http://www.homemade-joy.com/ Permission granted for use on DrLaura.com. More >>

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05/07/2010
IconIn Praise Of "Quiet Competence" Cliff Ennico www.creators.com It#146;s summer reading time. And while most folks are out reading the latest Harry Potter installment, or chilling with a dog-eared murder mystery from the local library#146;s used book sale, a few of us are catching up on the latest books of #147;business wisdom#148;, looking for something that hasn#146;t been said 10,000 times before. Now, readers of this column know that I#146;m not a big fan of the type of business book that might be called #147;Some Obscure Historical or Literary Figure You Vaguely Remember from High School, and What He or She Can Teach You About Running a Business#148;. But for every rule, there are a few exceptions. How I missed this one I don#146;t know, but the next time you#146;re in your local bookstore#146;s Business section, you might want to pick up a copy of #147;Soldier, Statesman, Peacemaker: Leadership Lessons from George C. Marshall,#148; by Jack Uldrich (AMACOM, $24.95 paper). Don#146;t remember who George C. Marshall was? Well, don#146;t feel badly. Back in 1967, when I was all of 13 years old, I was an avid stamp collector. That was the year the Postal Service released a 20-cent stamp (very damaging to my weekly allowance, I can tell you) commemorating George Catlett Marshall, someone I never heard of before. Checking my Grolier#146;s encyclopedia and learning he was one of America#146;s top generals during World War II, I asked my Dad, a decorated U.S. Navy veteran, #147;what battles did Marshall win?#148; Dad#146;s answer: #147;None, Cliff. He wasn#146;t a battlefield general; he was more of a behind-the-scenes guy.#148; A whopping 20-cent stamp to commemorate a behind the scenes guy? It just didn#146;t compute. So here#146;s a quick history lesson. Subject: George Catlett Marshall. As head of logistics for the U.S. Army during World War II, Marshall almost single-handedly transformed 175,000 poorly trained, poorly armed men into more than 8 million soldiers strong in the frantic months after the Pearl Harbor attacks in December 1941; A leading strategic advisor to Generals Eisenhower, Patton, et al. during the Second World War, Marshall became the chief architect of the #147;Germany first#148; approach that focused on defeating Adolf Hitler in Europe before concentrating on the Japanese threat in the Pacific; As Secretary of State under President Harry Truman after the war, he introduced the European Recovery Program, which became known as the #147;Marshall Plan#148; for its leading role in #147;winning the peace#148; and securing America#146;s superpower status; Ultimately, after serving as the president#146;s emissary to China, head of the American Red Cross, and Secretary of Defense, Marshall became the first professional soldier ever to be awarded the Nobel Peace Prize. Clearly, Marshall was someone who knew how to operate and manage one of the biggest enterprises in world history #150; someone who probably could teach you a thing or two about running your business better. I#146;m not going to reveal any of the #147;business#148; lessons of Marshall#146;s life #150; you#146;ll have to buy and read Uldrich#146;s book yourself. But in my mind, Marshall#146;s biggest #147;business lesson#148; comes not from what he did during his life, but what he didn#146;t do. The very fact that we struggle today to remember his achievements is, paradoxically, one of his greatest achievements. Years ago, when I was writing a book for lawyers on how to improve their people skills, I interviewed several dozen law firm partners and asked them what they valued most in a young lawyer. It was amazing to me how often the same two-word answer came back: #147;quiet competence#148;. Competence #150; the ability to get jobs done consistently right and on time #150; coupled with #147;quiet#148; #150; not drawing undue attention to yourself or how important your project was to the firm. If you had to describe Marshall in just two words, they would be #147;quiet competence#148;. Marshall#146;s place in history cannot today be questioned, yet it is amazing how little he tried to gain media attention or cultivate #147;superstar#148; status, unlike some other military figures from World War II. His achievements spoke for themselves, and consistently led to ever greater achievements. The point: to win a war, or succeed in business, you need heroes. But not all heroes are, or are meant to be, famous. In our media saturated world, it is possible to become a world famous celebrity without having achieved anything of lasting value. Given the choice, the better of us choose quiet competence over visibility-for-its-own-sake. In the long run, as Marshall knew, it#146;s the better choice. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com More >>

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05/07/2010
IconI Got Those College Reunion Blues Again Cliff Ennico www.creators.com Just got back from my 30th college reunion (sob), and was amazed by the number of my 50-something classmates who have abandoned the corporate track to start their own businesses. Must be a trend, no? Anyway, here are some interesting questions I was asked during the reunion #147;keggers#148; (at least, the ones I remember . . . ) #147;I live in State A but want to open a business in State B. I don#146;t want to open an actual office in State B, but I want to be incorporated in State B for tax reasons. Is there any way to do that legally?#148; Generally, you don#146;t have to be a citizen of a state in order to set up business there. You do have to be a little bit disciplined, though. When you set up your company in State B, you will need to hire a #147;registered agent#148; to collect important mail from State B government agencies and forward it to you. A number of corporations, such as The Company Corporation ( www.incorporate.com ), offer this service for about $200 a year. I would also recommend opening a #147;private mail box#148;, such as those offered by The UPS Store, PakMail and other franchises, using that as your business address in State B, and having the franchise outlet forward all mail from your box to you on a weekly basis. Now for the tough part. When doing business, only your State B address must appear on all your business stationery, correspondence, advertising and address labels. If anyone sees that you are really operating out of State A, you will be subject to all of State A#146;s laws, taxes, etc. I would even suggest forwarding all of your outgoing mail to your #147;private mail box#148; in State B each week, and having them post it there so the return postmark is a State B postmark. #147;I#146;m employed full-time now, but am likely to be laid off in the next year or two. I#146;m thinking of starting a consulting practice in my field, and want to write and publish a book right now so I can #145;hit the ground running#146; when the time comes. How can I do this legally?#148; First, you should make sure that you haven#146;t signed an agreement with your present employer giving them ownership of any creative work product you generate while working for the company. If you have, then all the royalties and other income from your book legally belong to your employer; of course, they may let you keep it out of the goodness of their hearts . . . Your book should not make use of any confidential information you received only because you are a corporate employee, and please, please avoid using actual company employees in your examples and #147;war stories#148;. If you do, be sure to change their names and enough other details so that they (and you) won#146;t be embarrassed. Finally, realize that corporate employees rarely write books as a way of advancing within the corporate hierarchy. Once your book is published, your bosses will wake up to your plans to #147;strike out on your own#148;, and your future there may well be nasty, brutish and short. #147;I have been working as office manager for a private investigation firm for the past 8 years. There are two partners who started the company 10 years ago, but I am just an employee, and have been looking for #145;greener pastures#146; for some time. The partners got wind that I was thinking about leaving the company, so they recently offered me an equity stake of 1% of net profit (about $4,000 before taxes last year). I declined politely (I was actually insulted, but I didn#146;t let them see that), but then they asked me to make them a counteroffer. What should I do? I made about $111,000 last year, and generate approximately $280,000 in billable hours, while the company#146;s gross revenue is about $2.8 million.#148; You#146;re generating about 10% of the company#146;s gross revenue, but you have absolutely no control over the amount of profits the company makes each year. That all depends on your bosses#146; ability to keep costs under control. I would ask for a percentage of the company#146;s #147;pretax earnings#148; (gross revenue less operating expenses, but before taxes and compensation to owners) in a service business like this. Keep in mind, of course, that your bosses don#146;t have any legal obligation to give you any sort of equity compensation, and may well consider 1% of profits to be quite generous. Since the company has only $400,000 in profits to divvy up at the end of each year, each additional $1,000 you ask for is asking the partners to cut back their standard of living . . . something all of us are reluctant to do these days. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com More >>

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05/07/2010
IconIf You've Got The Money, Partner, I've Got The Time Cliff Ennico www.creators.com #147;My wife is starting a limited liability company (LLC) with a friend. My wife will work in the business full time, while her partner will not. Her friend, however, is putting up a significant amount of cash for the business, which my wife can#146;t do. What is the fairest way to divide the ownership of the LLC in a situation like this?#148; This is a tough one, and you will need the help of a really good tax adviser because the LLC tax laws are very tricky. Here#146;s one possible way to set up the LLC, according to tax lawyer Joseph Sweeney of Fairfield, Connecticut ( joe_sweeney@att.net ): First, your wife and her friend will need to sign an Operating Agreement (similar to a partnership agreement) when they form the LLC #150; make sure this is drawn up by a good lawyer; The Operating Agreement should provide that for management purposes, your wife and her friend will always be 50/50 owners of the LLC #147;regardless of their respective capital accounts#148;; and The Operating Agreement should also provide that your wife shall be entitled to #147;up to $XXX#148; in compensation each year for her services to the LLC, #147;or such greater amount as shall be approved by 100% of the LLC members from time to time#148;. So, for example, if your wife is entitled to take up to $50,000 as compensation, and the LLC earns $75,000 in net income this year, your wife would take her $50,000 #147;salary#148;, and the $25,000 balance would be divided 50/50 ($12,500 each) between your wife and her friend. Your wife would report $62,500 ($50,000 + $12,500) as income on her tax return for 2005, and her friend would report the remaining $12,500. Because your wife has only 50% of the LLC membership interests, she will need to obtain her friend#146;s consent before making any major business decisions, and if the LLC is later sold or goes out of business, your wife and her friend would share the proceeds 50/50 after paying off the LLC#146;s debts. Another possibility: your wife and her friend could be 50/50 owners of the LLC for management purposes, but with a provision giving your wife #147;preferred distributions#148; instead of a salary over a period of time while the business is growing. Example: the LLC would agree to pay your wife 80% of the LLC#146;s profits instead of 20% until such time as the LLC#146;s annual profits reach a specified target amount (basically, an amount that will enable your wife to live on 50% of the profits). At that time, the #147;preferred distributions#148; (the additional 30% of profits paid to your wife) would cease and the two owners would share in all future distributions 50/50, the same as their management split. This arrangement may make sense if you have no idea how much money the LLC will make (i.e. whether or not there will be sufficient income to pay your wife a fixed salary) in the early years. Yet another possibility: have your wife be the sole owner of the LLC, and have her friend loan the money to the LLC. Your wife would promise to repay the loan over the next 10 years, with simple interest at 6% per annum (a good commercial rate right now, and easy to calculate) plus an #147;equity kicker#148; of X percent of the LLC#146;s net income each year. That will give her friend a share in the LLC#146;s success, and your wife will have sole control over the LLC#146;s business. However, this arrangement has some disadvantages, according to Sweeney: this arrangement might overtax the cash flow of the LLC in any given year; your wife#146;s friend will not enjoy any of the capital appreciation if the business is sold or liquidated; your wife#146;s friend will not enjoy a deduction for any losses the business may incur.; and if the business doesn#146;t succeed, the loan will be a writeoff for the LLC, triggering #147;forgiveness of indebtedness#148; income that would pass through to your wife, creating a nasty tax surprise for her (and you). Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com More >>

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