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Why You Should Hire Your Kids This Summer PDF Print E-mail


Why You Should Hire Your Kids This Summer



Wondering if there's another way out there to save money on income taxes? If you're like many small-business owners I know, you're ignoring a tax-saving strategy that's eating food at your dinner table -- and maybe plotting how to stay out late with friends.

Putting your children to work in your business, even if only for the summer, is one of the most underutilized tax-saving strategies today. I've found that many business owners simply don't realize placing children under 18 on the payroll, or even grandchildren or adult children, is an excellent strategy to minimize tax liability.

Beyond the tax savings, you'll teach your kids a work ethic, money-management skills and a concept of entrepreneurship.

So get them involved in the business.

By placing them on your payroll, you'll save money on taxes in two ways:

  1. You don't have to withhold any income taxes or payroll taxes if you're paying your children under 18 to work for you. This also applies to workers' compensation insurance programs. You don't need to cover your children -- the assumption being that your children won't sue you for getting hurt on the job. They're probably on your health-insurance plan anyway, so you already have them covered in case of injury.
  2. All of us including our children don't pay federal income taxes on the first $5,950 of income this year. It's called the Standard Deduction. Pay someone who isn't a relative to work for you, and they take that $5,950 of tax-free income home with them. Hire your child, and you keep it in the family. Plus, you can still claim your children on your tax return as a dependent and take the exemption, even the child tax credit.

Pay your children for services they perform for your business, and you'll actually generate an expense for your income taxes by pushing income to your children.

I want to be crystal clear that I'm not advocating you create some sham job for your kids to shield income from taxes. They have to be legitimately involved in the business. If the Internal Revenue Service audits you, you'll have to produce records of their time worked, and you'll have to demonstrate that the wages paid were reasonable. No $25 an hour store-clerk jobs allowed.

Related: Four Ways to Write Off Health-Care Expenses (Video)

There are specific procedures you need to follow if you hire your children, and it is important you follow the right procedure or it could backfire on you.

  • The IRS allows any sole proprietorship or partnership (LLC) that is wholly owned by a child's parents to pay wages to children under age 18 without having to withhold the payroll taxes. However, if you have an S- or a C-corporation you do not receive this benefit of avoiding payroll taxes when paying your children. If you pay your children out of a corporation, you'll have to withhold payroll taxes.
  • To sidestep the problem, I recommend you pay children out of a family management company paid a management fee from the corporation, or simply pay them out of a sole-proprietorship or LLC with independent income and operations.
  • Some business owners ask: "What about the "kiddie tax? Aren't the kids going to end up paying taxes on their income at our rates (the parent's) anyway?" The answer is no. The kiddie tax applies only to unearned or "portfolio" income.
  • Do not hire your children simply to do "family chores." The chores will not qualify as a valid deduction, and you could set yourself up for an audit.
  • If you are paying children over age 18 or grandchildren, you have the option of treating them as either as subcontractors or employees. You will have to withhold FICA and other typical payroll fees if they are employees.

I have seen this strategy not only save clients thousands of dollars in taxes, but literally change the lives of their families. Children begin to learn a work ethic, and it can draw a family together in ways never fathomed by small business owners. Talk to your accountant, and get your kids to work for you before it's too late.

Brand Journalism and How It Can Help Your Startup PDF Print E-mail

'Always Be Publishing,' Brand Journalism and How It Can Help Your Startup


As a business owner, you've probably heard the term: "Always be closing." Though the directive still rings as true as it did when Alec Baldwin trumpeted it in the 1992 salesman's opus Glengarry Glen Ross, "Always be publishing" may make more sense for today's young entrepreneurs.

That's the idea behind the new marketing concept of "brand journalism," which is the practice of covering your business and industry like a reporter. In other words, you're transforming your marketing efforts into publishing efforts.

The big guys in your industry are likely already fully entrenched. In fact, some are practicing this new style of content marketing so effectively you probably haven’t even noticed that their content is marketing driven.

Here are four tips on how you can get started:

1. Lose yourself. We’ve been bombarded with "me" messaging for decades: My service, my product, my company. So people today innately tune "me" out. It is imperative you evolve from the "me" business -- common in public relations efforts. Try storytelling to attract, engage, entertain and inform your audience.

2. Listen, learn and lead the conversation. Now that you’ve decided to act like a reporter, do as they do: Listen. Learn the concerns and questions of your target audience. Then, instead of following the conversation and commenting on it, try leading it. You’ll be the one sparking engagement and identifying trends. After all, you know your business. Who better to comment on it than you?The idea is to focus less on "push" communications -- those are, e-mail marketing, direct mail and advertising -- and move toward "pull." You'll find that it's a better long-term strategy.

3. Drop the campaign speak, start talking. Campaign-style content -- where you proclaim the marvelousness of your products or services -- won’t cut it any longer. Create a story that looks and feels like a real news story. And you never know, that story could turn into a real news article if it catches the attention of a real journalist. Also by getting in the thick of your industry, you'll generate plenty of goodwill.

4. Invite others to participate. Ultimately, your end-goal should be to get people talking -- and sharing -- your content with others. In addition to engaging with readers through social media sites like Facebook and Twitter, you'll want to invite others to contribute to your brand journalism efforts. Accepting contributors to your blog, website and social media outlets will grow that audience exponentially.The more you share with others and the more often you invite others to participate and converse with you, the more likely your content will be shared.

Should the U.S. President Have Business Experience? PDF Print E-mail

Should the U.S. President Have Business Experience? (Opinion)


Mitt Romney thinks business experience should be a prerequisite for the American presidency. At a recent campaign rally, he said, “I’d like to have a provision in the Constitution . . . to say that the president has to spend at least three years working in business before he could become president of the United States.”

While I think Romney would make a good president, he is way off base on this one. Almost every president has had some business-related experience. Even Barack Obama, whom Romney sought to criticize with this statement, has worked in a law firm.

But having business experience doesn’t necessarily distinguish good presidents from bad ones. Sienna College Research Institute surveyed 238 presidential scholars to create a ranking of the top presidents. Of those the academic experts put in the top 10, six had some business experience. Abraham Lincoln started a general store, Harry Truman was a haberdasher, and James Madison, James Monroe, Thomas Jefferson and George Washington were planters.

Among those presidents with business experience, the successful ones don’t appear to be better at running the U.S. than unsuccessful ones. Both Lincoln and Truman ran businesses into the ground, but made it into the top 10. In fact, many of the presidents who were most successful in business don’t rank very high among the nation’s 43 chief executives. Consider Warren Harding, who ranked only two places from the bottom of the list. Yet before his 20th birthday, he borrowed money to buy a failing newspaper that generated income for the rest of his life. Herbert Hoover, a manager of a mining company, and George W. Bush, the first president with a master's in business administration degree and millionaire owner of the Texas Rangers, are both ranked in the bottom 10. And Jimmy Carter ranks only 32nd, even though he built a multimillion-dollar business from a family farm.

Fred Bernstein, emeritus professor of political science at Princeton University and author of numerous books on the presidency, says political and communication skills, organizational effectiveness, emotional stability and vision characterize successful presidents. While business experience can help develop these attributes, they can be formed in other ways, as well.

Consider vision, which presidential historian Arthur Schlesinger says is “the capacity to inspire.” Being an entrepreneur or manager might help develop the “vision thing,” but Ronald Reagan, Woodrow Wilson, and Theodore Roosevelt acquired it through other experiences.

Another key skill is the ability to organize, which Bernstein says includes the “ability to forge a team and get the most out of it, minimizing the tendency of subordinates to tell their boss what they sense he wants to hear, [and developing] proficiency at creating effective institutional arrangements.” Once again, this skill can be developed in the private sector, but it can be learned through other experiences, too, such as being a governor or running a university.

Romney’s justification for why presidents need business experience isn’t terribly persuasive. He said that those with substantial business experience “would understand that the policies they’re putting in place have to encourage small business, make it easier for business to grow.” While business experience could be valuable, it certainly is possible to understand how policies will help small business without having run a business, just as it is possible to understand how to defend the country without having served in the military.

To the extent that business experience does matter, the Republican challenger needs to be careful. Big business and small business are very different. Romney’s big business experience may have taught him little about what it takes to enhance small business performance.

In the business world, if your customers reject what you are selling, you need to move on quickly to something better. Romney might want to draw on his business experience and make that shift here.

Recent Franchising Stories Focus On Funding And Incentives PDF Print E-mail

Recent Franchising Stories Focus On Funding And Incentives

At the beginning of 2012, the big story in franchising appears to be the same one that we have seen for the last several years: money.  Franchisors are still looking for answers to questions about growth in a time when it is difficult for prospective franchisees to find funding.  Are banks willing to lend money for small business?  What kind of qualifications does a prospect need to have to get a bank loan?  Are there good alternative sources for funding?  How can we attract new franchisees and support existing ones in a slumping economy?

There are a couple of good articles this week that demonstrate possible answers to these questions.  Yesterday's Wall Street Journal had an article relating to some of the creative incentives being given by franchisors to assist their franchisees in a continued down economy.  Papa John's and Denny's are establishing programs to lend money to their franchise owners, cut back on royalty fees, and assist owners in challenged or growth markets.  These are good examples of the types of programs that a franchisor can implement to help franchisees during challenging economic times. An article on restaurant-focused site MonkeyDish highlights the ways that small business owners can find funding in challenging capital markets.  This includes finding lending sources through relative newcomer (often called the "" for small businesses), which has over 1500 participating lenders, and using middlemen such as Franchise American Finance and American Association of Government Finance, which can assist small business owners in wading through the red tape associated with Small Business Administration loans. 

Most prognosticators predict that in 2012, we will start to see economic growth.  One thing is certain: if more small business loans are made, the economy will get better.

Laid Off: Get Motivated to Succeed as a Franchisee! PDF Print E-mail

Laid Off: Get Motivated to Succeed as a Franchisee!

by Pamela Gold

I was laid off during the recession in the early 90's. I job-hunted in an extremely tight job market, and decided I didn't want to start over. I looked into franchising because the benefits outweighed doing a start-up business. I purchased my FASTSIGNS store in 1996 and have enjoyed owning my own business. I'm able to make money, enjoy the ownership aspect, and have the support of a strong system, stated Shane Beard, owner of a FASTSIGNS franchise in Naperville, IL.

Down Times are Survivable

With the economy and job market in a down swing, many executives are receiving pink slips. Not comfortable with retirement, these ex-employees are finding new careers as entrepreneurs. And one of the most stable business endeavors is franchising. With a high rate of success, franchises are surviving financial hardship because in hard times, people want familiar brands, services, and products and franchises offer just that. The franchise community generated approximately $1 trillion in retail sales in 2001 and brought franchisees independence from their corporate careers. Franchises are not just about serving fast-food. There are opportunities for everyone, from the seasoned public relations pro to the experienced retail associate. In fact, the franchise community is made up of businesses in over 75 industries. From home computer tutoring to bottled water retailers, there's a franchise to fit every taste and interest. Fees and liquid capital necessary to open a franchise vary as well. Almost every franchise offers at least one thing in common: They allow people to control their careers and their lives.

Who's Best Suited?

Those best suited to own their own franchise, include sales and marketing executives and those with management experience. The individual must have the motivation to drive their own business, but they must also respect and follow the business plans set forth by their franchisor. If you desire to own a business where you make all the decisions and create your own original ideas, from the decor to secret recipes for success, franchising is probably not for you. If you want to take advantage of a proven business plan and a successful product, then owning a franchise might be a smart choice.

Investing Wisely

When executives get laid-off, they typically get severance pay. Instead of investing in the stock market, where many people no longer feel they have any control, people are investing directly in their own future: Investing in a franchise. No longer job-less, franchisees are able to control their own future and career, by investing as much time and interest in their own business as they can and want. The franchise community is staying on top, as the economy slows down, and as the stock market plummets franchisees are watching their investments grow.

The Franchise Community

There are approximately 320,000 individual franchise units, according to the International Franchise Association (IFA). Franchising is a cross between starting your own company and working for a corporation. Every franchisee pays an initial franchise fee, which averages $30,000. From there, investments can vary, but the average initial investment, minus real estate, is less than $250,000. The franchise community continues to grow at alarming rates, approximately 15% this year. Today there are more than 5,000 different franchise concepts to choose from. It is truly a wonderful time to join the franchise community!

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