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Protecting Your Privacy as a Business Owner

Privacy is a conundrum for many biz owners. You want your business (or your professional self) to be famous, but that doesn’t mean you want your personal finances to be public.  Nor do you want to be inundated with spam or junk mail.

In a digital world where nothing that makes its way online ever disappears, protecting privacy is increasingly difficult.  But business owners are clamoring to reclaim a measure of privacy in their business and personal lives. Some of the same technology that is helping small firms compete – from social media to web-based software – is also putting privacy at greater risk.

And with big companies focusing more and more on the small business market, entrepreneurs are starting to react. Once largely ignored by corporate giants, small business owners have become belles of the ball. They’re constantly being pitched for one thing or another and now place a higher premium on their privacy than ever before.

Surveys show that respect for privacy has become a key deciding factor that influences business owners to select one vendor over another or to recommend a product or service provider to fellow entrepreneurs. In one recent survey that tested 60 different decision-making criteria, respect for privacy ranked second behind easy-to-use products or services.

Opening yourself to excessive sales pitches is only one of many small business privacy concerns.  Fear of fraud or identity theft due to availability of business information is also widespread.

So what can you do as a business owner to protect yourself, your business and your privacy? Here are five privacy protection ideas and resources for small business:

1)   Make your domain registrations private. When you register a domain name on the Internet, you’ll be asked to provide details such as your business name, address, phone number, email contact and other details. That information goes into a massive database and is often a reason your email address winds up on some spammer’s list. Most domain registrars – like GoDaddy, Network Solutions and others – let you protect your information with “private registration” services that mask your identity. Check out these Five Reasons You Need Private Domain Registration. It costs a small annual fee but can be worth it.

2)   Know your privacy rights. Start with guarding your personal Social Security number (SSN) more closely. When dealing with government or banking matters, your SSN may be required. But while many businesses request your SSN, you are not legally required to provide it unless it involves an IRS notification of some kind.  Whenever possible, use your business Employer Identification Number (EIN) instead.

3)   Fight back against telemarketers, spam and other unwanted and intrusive ads. When you do get a call, don’t just hang up. Ask who the caller represents and request that your name be place on their internal do-not-call list. Federal and state laws allow you to take legal action against telemarketers who do not add your number to their internal do not call list and who call you back within 12 months of requesting to be placed on that list.

4)  Privacy Rights Clearinghouse is a great place for privacy protection advice and information. Visit www.privacyrights.org and select from topics at the left that include identity theft, junk mail and email, online privacy, Social Security numbers and more.

6)  The Better Business Bureau’s “Understanding Privacy” service is available free at the BBB Web site. It offers great tips on protecting privacy, for individuals and businesses alike, both online and off. The consumer’s toolbox has good advice and the Privacy Manager’s Resource Center can help you create a privacy policy for your own business. Go direct to the page at: www.BBBonline.org/UnderstandingPrivacy.

Copyright © 2000-2011 BizBest Media Corp.  All Rights Reserved. 

Surviving the IRS Employer Tax Crackdown

As budget deficits go stratospheric, the federal “tax gap” is once again a hot topic in Washington. The tax gap is money the government believes should be paid in taxes, but isn’t.  So bureaucrats are beefing up enforcement of existing rules or implementing new ones created by Congress, forming a new gauntlet of compliance requirements for small employers – especially those who use freelance or contract help.

[BizBest Update:  Also see our followup to this story on a new SBA-sponsored report that says the IRS crackdown on small business has been bogus from the beginning!]

The bulls-eye is “worker misclassification.” Basically, that’s when you pay somebody as an independent contractor – thus avoiding the need to withhold payroll taxes – rather than as an employee.  Or perhaps you are paying someone a salary when they really should be hourly and subject to overtime pay.  Either way, if you get it wrong, it could cost you dearly.

The new federal budget hands the U.S. Department of Labor (DOL) an extra $25 million to pursue misclassification miscreants.  But according to MBO partners, a leading human resources consulting firm, the extra dough for DOL is nothing compared to an estimated $8 billion boost the feds are giving IRS to modernize and expand enforcement programs.

Implications for small business are immense. “Minimum wage and overtime laws can be confusing, and not paying the proper wage to an employee can quickly turn into an expensive headache,” says Karen Harned, executive director of the NFIB Small Business Legal Center.  “DOL is hiring more agents to investigate and charge businesses with overtime and other wage violations,” says Harned.  To avoid penalties or claims from disgruntled employees, make sure your business hasn’t fallen into these common traps.

1. Letting hourly employees waive their right to overtime pay. Overtime pay is mandatory. Employees can’t opt out.  Even if an employee is instructed to only work 40 hours per week, any hours actually worked over 40 hours in a seven-day workweek are subject to overtime pay.

2. Averaging hours worked over two weeks. Even if you use a two-week pay period, the Fair Labor Standards Act (FLSA) treats each work week as a single unit.  An employee who works 42 hours in one week must be paid two hours of overtime, even if the same employee only works 20 hours the next week.

3. Giving time off instead of cash. The law is highly biased in favor of cash compensation rather than “comp time.” Neither the employer nor employee can agree to or insist on comp time in lieu of overtime pay.

4. Treating all salaried employees as exempt from overtime rules. Just because someone is salaried or carries a fancy job title doesn’t make them exempt from FLSA overtime requirements. Employers must be careful to ensure that employees are properly classified. Exempt employees must meet a certain minimum salary and fall under a certain exemption category specified by the FLSA.  You can find details of the law at the DOL website (www.dol.gov/elaws).

5. Docking the pay of an exempt employee. An exempt employee must be paid on a salary basis. This means the employee receives a predetermined amount of pay which is not subject to reduction.  Here’s the danger:  If you make improper deductions from an exempt employee’s salary, the salaried basis of payment is destroyed and the exemption is lost. Don’t jeopardize the exemption. Make sure exempt employees are paid the same each pay period, regardless of hours worked.  In other words, if an exempt employee shows up for part of a workday, you must pay him or her for the whole day.

Copyright © 2000-2011 BizBest Media Corp.  All Rights Reserved. 

7 Profit-Boosting Pricing Secrets

Profit margins and pricing are often misunderstood.  Many entrepreneurs assume that price increases put them at an automatic competitive disadvantage. But pricing consultant Rafi Mohammed argues that small, strategically targeted price increases can actually give a company a competitive edge.  The key is to bridge the profit disconnect.  Business owners often view pricing as a mix of markups, margins and matching the competition – plus a modicum of “gut feeling.”

But such an approach has no relevance for the most important component of all:  What customers are actually willing to pay.  As a result, most businesses leave profits on the table daily, argues Mohammed. Better pricing can be the quickest path to bigger profits. “In many cases, prices can be changed on Sunday night and new profits will start rolling in on Monday morning,” says Mohammed. Here are seven tips for proper pricing:

  1. Avoid the markup mistake: The most common pricing pitfall is setting your price based merely on a set markup.  Such cost-plus plans often forego potential profits because they never account for what customers are willing to pay.
  2. Price for value: Take a lesson from street vendors who understand better than anyone the principle of value-based pricing. Umbrella prices go up the moment it starts raining. It has nothing to do with the cost of the goods, and everything to do with the value the customer places on the product.
  3. Avoid one-size-fits-all: Pricing is more personal than you might think.  Customers have different needs, preferences and expectations. Some prefer package pricing, while some like a la carte. Use pricing tactics that serve those different needs.
  4. Let customers choose how much to pay:  Most businesses can boost profits by offering “good, better and best” type choices for a wide range of products and services. Think about creating different versions of what you offer at different price points.
  5. Create a different offering for your most price-sensitive customers:  For any given product or service, some customers are willing to pay more than others. Offer a spectrum of prices based on customer actions.  For example, those who line up to be “first to own” (think Apple iPad) are willing to pay a premium price.  Those who drive an hour to shop at outlet malls aren’t. Each new pricing tactic you create has the potential to add another customer segment to your mix.
  6. Focus on profit, not margin: Many businesses equate “high margin” with pricing success.  Maybe so, but a high margin can also point to opportunities to serve more customers by using discount tactics as well. Profit is your goal, not margin.
  7. Don’t discount across-the-board: Discounting can be damaging if handled badly. Mohammed recommends this: “Hold steady on prices to maintain current purchases, and then implement pricing tactics — such as discounts, lower versions or financing – to keep and attract new price-sensitive customers.”
Copyright © 2000-2011 BizBest Media Corp.  All Rights Reserved. 

Self-Employed Tax Traps

Self-employment is a terrific opportunity to be your own boss, do something you love and build value over time. Being your own business also brings with it a unique set of tax advantages and tax pitfalls that you need to know about.  For example, you’ll need to pay your own FICA taxes and take charge of your own retirement plan, among other things.

Here are some tax tips and traps for the newly self-employed:

Avoid a Self-Employment Tax Surprise. Self-employment first-timers often trip on this one.  When you have a job, your employer pays half of your social security taxes and you pay the other half. When you’re self employed, however, you pay it all – making both Social Security and Medicare payments (jointly known as FICA taxes) through the self-employment tax.

According to the California Society of CPAs, if you file a Schedule C as a sole proprietor, the net profit listed on your Schedule C (or Schedule C-EZ) is self-employment income and must be included on Schedule SE, which is filed with your federal Form 1040. Schedule SE is used both to calculate self-employment tax and to report the amount of tax owed.

Pay your own “Withholding.” Instead of having taxes automatically withheld from your paycheck, you’ll now be responsible for pay-as-you-go taxes in the form of “estimated tax.” You’ll need to make quarterly estimated tax payments using Form 1040-ES to cover your federal income tax and self-employment tax liability. You might have to make state estimated tax payments, as well. If you don’t make estimated tax payments, you may be subject to penalties, interest, and a big tax bill at the end of the year.

Hire Family Members to Save Taxes. Hiring a family member to work for your business can create tax savings for you; in effect, you shift business income to your relative. Your business can take a deduction for reasonable compensation paid to an employee, which in turn reduces the amount of taxable business income that flows through to you. Be aware, though, that the IRS can question compensation paid to a family member if the amount doesn’t seem reasonable, considering the services performed. Also, when hiring a family member who’s a minor, be sure that your business complies with child labor laws.

If your business is a sole proprietorship and you hire your child who is under age 18, the wages that you pay your child won’t be subject to FICA taxes.

As is the case with wages paid to all employees, wages paid to family members are subject to withholding of federal income and employment taxes, as well as state taxes.

Set up a Self-Employed Pension Plan. The ability to set up a generous, tax-advantaged retirement plan is one big benefit being self employed. Possibilities include: Keogh plans; Simplified Employee Pension (SEP); SIMPLE IRA; SIMPLE 401k or an Individual (solo) 401k.

Enjoy all Your Business Deductions. You can deduct a wide range of business expenses, including rent or home office expenses, and the cost of office equipment, furniture, supplies and utilities. “To be deductible, business expenses must be both ordinary (common and accepted in your trade or business) and necessary (appropriate and helpful for your trade or business),” says the California Society of CPAs.  If expenses are part-business and part-personal, you can still deduct the business portion. You can also deduct the business expenses associated with your motor vehicle, using either the standard mileage allowance or your actual business-related vehicle expenses to calculate your deduction.

Deduct Health Insurance Costs. You can also benefit from the self-employed health insurance deduction, which lets you deduct up to 100 percent of the cost of health insurance that you provide for yourself, your spouse, and your dependents. This deduction is taken on the front of your federal Form 1040 when computing your adjusted gross income, so it’s available whether you itemize or not.

Copyright © 2000-2011 BizBest Media Corp.  All Rights Reserved.