|
|||||
![]() ![]() ![]() ![]() |
|||||
|
_______________________________________________________________ IN THIS ISSUE _______________________________________________________________ 1. Welcome and Update from Elena 2. Home-Based Business Idea of the Week - Local Tour Guide 3. Feature Article - Incorporating You 4. Surveys and Trends 5. Success Quotes of the Week
|
||||
AHBBO Home Based Business Information Return to AHBBO Archives
|
_______________________________________________________________ 1. Welcome and Update from Elena _______________________________________________________________ Hello again and a warm welcome to all the new subscribers who have joined us since the last issue. This week's article concerns a serious topic, relevant to virtually anyone running a home-based or online business -- how to protect yourself from personal liability by forming a corporation. Too many people don't realize that their pleasant little hobby-business has the potential to cost them everything they own. If you haven't got around to thinking about the legal structure of your business yet, this week's article is essential reading. As always, thanks for reading and I hope you enjoy this week's issue. Remember, AHBBO is for YOU! If you have comments or suggestions for topics you would like to see addressed, or would just like to share your experiences with other subscribers, I want to hear from you. Please send comments, questions and stories to Contact By Email . _______________________________________________________________ _______________________________________________________________ 2. Home-Based Business Idea of the Week - Local Tour Guide _______________________________________________________________ Do you live in a city or town that attracts large numbers of tourists? If so, and you enjoy meeting new people, have you considered setting up shop as a personal tour guide? To start, you obviously need to have an intimate knowledge of the places of interest in your area as well as some knowledge of its history. Some cities or towns will lend themselves well to a walking tour of the city center while others will require some form of motorized transportation to ferry your guests to the various points of interest. Be prepared to recommend particular restaurants, hotels, theatres and the like. Your guests will see you as an authority on the area and will be likely to ask for your recommendations. To generate custom for your tour guide service, target visitor information bureaus in your area as well as relocation consultants. If you are aware of any major businesses in your area who frequently entertain overseas business colleagues, approach them with an outline of your services. Often, overseas businesspeople travel with their partners and your service would be a welcome complement to their itineraries. Also target convention organizers. Quite often, partners of convention delegates would prefer to spend their time sightseeing rather than hanging around the convention or the hotel pool. Design and have a brochure printed and leave copies in places you think people looking for tour guides will frequent including tourist information centers and hotels. Leave your brochures with the concierge. ----- There are many more ideas like this at the AHBBO Home Business Ideas page at free home based business ideas with more being added regularly. _______________________________________________________________ PUT YOUR COMPUTER TO WORK! Work from home from your PC Part-Time / Full-Time (U.S. Residents Only) Business can be run completely on the Internet Click to learn more FreeLife Business _______________________________________________________________ 3. Feature Article: Incorporating You _______________________________________________________________ © 2017 Elena Fawkner Running a business involves risk - the risk that the business may either succeed brilliantly or fail miserably. Or neither. The upside is high -- financial and (perhaps) time freedom; independence; unlimited earning capacity. The downside is equally steep, just in the wrong direction -- potential financial ruin if you've staked everything you own on your business's ultimate success and thrown your career down the proverbial to boot. If you're running your business as a sole proprietorship or a general partnership, make no mistake -- everything you own is on the line. There's a lot that can go right and wrong in a business. A lot of it out of your control. But the extent of your personal financial liability for what goes wrong is one thing you can and should control. The answer is to form an entity separate from yourself to run the business. WHICH BUSINESS ENTITY? As you probably already know, you have several choices when it comes to your business entity. The most basic is a sole proprietorship, followed by a partnership (general or limited), a limited liability company ("LLC") and a corporation (either a general "C" corporation or an "S" corporation - more about these later). Although sole proprietorships and general partnerships are relatively straightforward and inexpensive business entities to establish and maintain, hence their popularity, neither of them protects you from personal liability. If you're a sole proprietor, you've probably made this election by default - by doing nothing other than starting a part-time Internet business out of your spare bedroom, most likely. A limited partnership will protect the limited partners from personal liability beyond the extent of their capital contribution to the partnership, but limited partners cannot participate in the management and control of the business so that's not a good option for most of you reading this article. Needing to control and manage your own business is most likely non-negotiable. As an attorney, I generally recommend that small business owners, including (especially!) home-based and Internet entrepreneurs, incorporate at least as soon as they are generating sufficient profits from the business that the amount of tax payable on such profits equals or exceeds the minimum franchise tax payable in the state in which the business is being conducted. In California, for example, one of the most onerous states in the U.S. when it comes to taxes, the annual minimum franchise tax is $800 per year. Therefore, as soon as you're generating profits the tax on which is $800 or more in a year, there is no tax disadvantage to incorporation and every advantage. HOW DOES INCORPORATION PROTECT AGAINST PERSONAL LIABILITY? Quite simply, when you form a corporation (or an LLC), you're forming a separate legal entity. This separate legal entity has the power to enter into contracts, own and dispose of assets, hire and fire employees and generally do anything that a sole proprietor could do. The difference between the corporation and the sole proprietorship, however, is that only the corporation's assets are at risk, not the owner/shareholder's (beyond the shareholder's contribution to share capital, that is). Let's take an example. You run a part-time Internet business. You're still working a day job and this is really just a way to make a little money on the side to save for your annual Hawaiian vacation and even more expensive spa stay for your dog while you're away. To you, this is only a pocket-money venture and so you don't really think of it as a business at all, really. So you don't give a second's thought to the fact that you're running a business as a sole proprietor. You register a domain name that, unbeknown to you, violates a Macrohard trademark. You create a website for that domain and, lo and behold, overnight (of course, because this is the Internet) your business becomes successful beyond your wildest dreams due, in no small part, to site visitors mistakenly believing they are doing business with Microsoft's arch-rival. Macrohard, meanwhile, sees all of this and figures your gain is its loss and sues you for an account of profits based on your misuse of its trademark. And wins. It gets a judgment for $100,000. Then it executes on its judgment. And you lose your house, your savings and your business. Now let's look at a slightly different scenario. You're fortunate enough to have read this article before you established your business and formed an S-corporation, Hawaii Here We Come, Inc. The only asset of HHWC, Inc. is the domain name and website. So, when MarcoHard gets its judgment against HHWC, Inc., the only asset it can touch is the domain name and website. That's bad enough, of course, but you did, after all, violate their trademark. But get this. Because they're in your name, not HHWC, Inc.'s, you still have your house and your savings. HOW LIMITED PERSONAL LIABILITY CAN BE LOST Merely incorporating is not enough to avoid personal liability, however. As a director and shareholder, you must run your corporation or company (if an LLC) as a separate legal entity, NOT your alter ego! This means you can't just siphon off cash from the corporation's bank account to pay your house mortgage. Do that, and the court will "pierce the corporate veil" in a heartbeat, thereby exposing you to full personal liability on the grounds that the corporate structure is nothing but a sham designed to unfairly protect you from personal liability. It is also particularly important that you follow all corporate formalities such as those set out in the by-laws, passing board and/or shareholder resolutions for major decisions and holding annual meetings of the shareholder(s) to elect the directors and directors' meetings to elect the officers. Also, don't think the "corporate veil" will protect you from criminal acts such as filing a false income tax return, because it won't. SO HOW DO I GET MONEY OUT OF THE BUSINESS? You are paid by the corporation as an owner/shareholder in the form of dividends and/or as an employee in the form of a salary. CORPORATION OR LLC? While both corporations and LLCs limit your personal liability, there are differences between states when it comes to how other states' LLCs are treated in this regard. By contrast, corporations are treated uniformly when it comes to personal liability. Especially if you're operating an Internet-based business where you can be transacting with people from pretty much anywhere, for the greatest certainty concerning your personal liability, a corporation is preferable to an LLC. One of the advantages of an LLC as a business entity is that the profits and losses of the LLC "flow through" to the personal income tax return of the members. However, if you make a "subchapter S" election when forming the corporation (thereby forming an S-corporation), you can achieve the same result. S-CORPORATION or C-CORPORATION? Although the S-corporation's profits and losses flow through to the shareholders (rather than the S-corporation being taxed as a separate entity as in the case of a C-corporation), S-corporations are limited to 75 shareholders and, generally, those shareholders must be U.S. citizens or resident aliens. You would therefore not be able to have foreign shareholders with an S-corporation (but you can with a C-corp), which may be an issue, particularly for Internet-based businesses with shareholders from various countries. Also, you cannot have multiple classes of shares with an S- corporation so this will not work if you want to issue preferred shares, for example. You'd need to form a C-corporation instead. WHAT'S INVOLVED? Forming a corporation is a relatively straightforward matter (at least for an attorney) and shouldn't cost you more than a few hundred dollars depending on the complexity of the corporate structure. Most attorneys would charge between $500 and $1,000 for a straight C or S-corporation. At its simplest, a corporation can have a single director and shareholder with that same individual holding each of the three required offices (president, secretary and treasurer). (If a corporation has three or more shareholders it must have a minimum of three directors but if it has fewer than three shareholders, it may have the same number of directors.) Your attorney will prepare and file articles of incorporation with your State's Secretary of State, and then prepare by-laws and organizational minutes. You'll need a Federal Employer Identification Number (SS-4) from the IRS and, if you have more than one shareholder, a buy-sell agreement to ensure that the shares do not pass to shareholders unacceptable to the other shareholders. Your attorney will also attend to annual filings with the state (a statement of officers and directors is usually required to be filed every one or two years) and make sure you stay in compliance with state corporate requirements (such as annual minutes etc.). Taking the time and trouble to think about the legal structure of your business may seem like overkill when all you're doing is running a fun little business out of your spare bedroom in your spare time. But fun little businesses have a way of becoming very unfunny major headaches when things go wrong. No matter how small or fledgling your business is, do yourself and your family a big favor and at least think about incorporating. What may seem like a pleasant past-time today could be anything but tomorrow. ------ ------ Elena Fawkner is an attorney and editor of A Home-Based Business Online ... practical business ideas, opportunities entrepreneur. She offers discounted, fixed-rate legal services to her ezine subscribers and site visitors within the United States. AHBBO home business online _______________________________________________________________ "How to Get A Web Site for Less Than $1,000" For a limited time only, I am offering you my web writing services at a *reduced* rate. Ten pages of copy for ONLY $997! That's over 50% off the regular rate! FREE CONSULTATION! Your satisfaction is GUARANTEED or your money back. Contact Linda Alexander TODAY to discuss your web site project. Sale ends soon! _______________________________________________________________ 4. Surveys and Trends _______________________________________________________________ © 2017 Ryanna's Hope ===================== Advertising Time Line ... 1892 - The Ladies Home Journal announces it will no longer accept patent medicine advertising. ===================== ADVERTISING REALITIES ===================== Age plays a key role in whether people use or don't use the Net. The Pew study found that the older a person, the less likely he is to use the Internet. While only 35 percent of adults age 18 to 29 are not online, 83 percent of those over age 60 don't use the Net. ===================== Advertising Time Line... 1890s - Advertising manuals increasingly recommend the use of post cards as a low cost means of direct communication with consumers. 1892 - Sears, Roebuck & Co. mails out 8,000 post cards with imitation handwriting across the country. 2,000 orders are received directly from this promotional campaign. ===================== How Teenagers Are Influenced by Advertising 1. Give-aways offering such things as CD's or posters of popular bands 50.1% 2. Use of brand names 49.2% 3. Use of popular musical groups that appeal to teens 37.6% 4. Use of upbeat lyrics in a commercial's music 34.8% 5. Promotional events offering reduced prices 32.4% (American Research) ===================== Advertising Time Line ... 1891 - Nathan Fowler, in Advertising Age, recommends that because women make most of the purchasing decisions of their household, manufacturers would do well to direct their advertising messages to them. ===================== Top Advertising Turnoffs 1. The ad contains vulgar language. 2. The fine print is too small to read. 3. The ad sells "sex" instead of the product. 4. No prices are shown. 5. Ad presentation is jumbled and hard to understand. 6. Discounts are not believable (70 percent range and up). 7. The ad does not include a customer satisfaction guarantee. (America Research) ===================== Ernst And Young Tell You What Customers Want More Of In Their Internet Shopping: Lower shipping costs 63% Lower/more competitive pricing 61% Easier to find Internet site 22% More choices/selections 21% Guarantee of credit card security 20% More information about products 16% Faster shipping 16% Toll-free telephone support 14% ===================== Where Will Americans See Your Ads? By 2004, Americans will spend more hours each year playing video games (161 hours) and using the Internet (228 hours) than they spend reading daily newspapers (147 hours), books (92 hours), and magazines (77 hours). ------ _______________________________________________________________ TAKE CONTROL OF YOUR OWN FUTURE! Join the team of highly focused successful women who have designed the ultimate plan for internet marketing. Sound business for the serious business woman! _______________________________________________________________ 5. Success Quotes of the Week _______________________________________________________________ "Success usually comes to those who are too busy to be looking for it." -- Henry David Thoreau "Prosperity is only an instrument to be used, not a deity to be worshipped." -- Calvin Coolidge "Genius begins great works; labor alone finishes them." -- Joseph Joubert _______________________________________________________________ _______________________________________________________________ 7. Subscription Management _______________________________________________________________ To SUBSCRIBE to this Newsletter:
To UNSUBSCRIBE from this Newsletter:
If you find this newsletter valuable, please forward it
Copyright 1998-2017, AHBBO.com. All rights are reserved. Wednesday, 20-Jan-2021 13:33:11 CST |
||||