New hires, expansion, growing demand, increasing sales. According to this article in the Boston Globe last week, all signs are pointing to renewed growth for small businesses.
Sixty-five percent of all new jobs are created by small businesses, according to the Small Business Administration and have added almost 1.3 million jobs over the past year.
Although Hurricane Sandy was a disaster for Nassau County, Long Island and the surrounding areas, it has spurred on growth by small businesses tied to the housing market—home repairs, remodeling, landscaping. Nationally, home sales have reached their highest level in years.
Great news for all of us!
The elevator speech, so named because you should be able to describe your business and get the listener to want to hear more in the time an elevator ride takes, is a skill every small business owner needs to know.
There are numerous articles on the internet about how to best craft a short statement. One such article, How to Tell Your Business Story in 60 Seconds or Less, appeared last month on Enterpreneur.com. The author suggests a four-step approach to your pitch, by answering the following questions:
1. What do you do?
2. What problem do you solve?
3. How is your product or service different?
4. Why should I care?
The elevator speech comes in handy at any networking opportunity–conferences, business meetings and casual conversation with everyone you meet.
Yours truly was quoted in the most recent edition of Long Island Business News on the importance of business succession planning and partnership agreements. Read it here.
When you first form your corporation, it comes into existence as a C Corporation. If you do nothing more, your corporation will remain a C Corporation.
A C Corporation becomes an S Corporation only when special tax treatment is sought by filing Form 2553 with the IRS.
Although a small business lawyer can advise you on the choice of entities, choosing whether to elect S Corporation status is best discussed with your accountant. This is a tax decision, and a tax professional should review your entire financial picture before you make this decision.
New York State S Corporation Status
New York State also requires you file a form to be treated as an S Corporation under State Rules. This form CT-6 Election by a Federal S Corporation to be Treated as a New York S Corporation.
New York City S Corporation Status
However, New York State does not exempt S Corporations from all NYS corporate taxes. Again, you should check with your accountant prior to making this decision
Interestingly, New York City does not recognize S-Corp status at all. If your small business has income from New York City, you will need to pay New York City’s General Corporate Tax.
What is the Four Corners Rule?
The “Four Corners Rule” states that if the language is not found within the written words of the contract, then outside evidence will not be considered. This includes any oral agreement you’ve made.
How Does this Work?
So, for example, you’ve agreed to buy widgets from a manufacturer. Your contract states that you will buy 100 widgets for $100, and the company must deliver those widgets to you within 30 days. Before the 30 days is over, however, you find widgets for $80. You call the manufacturer to complain, or renegotiate, and the manufacturer verbally agrees to lower the price to $80. Widgets delivered, you pay $80, and then you get sued for the remainder. Your phone conversation will not change a written contract. It can change an oral agreement, but not a written one. If it is not written within the four corners of the contract, you lose.
Get it in Writing!!
Any renegotiation of any of the terms of a written contract must be in writing.
Frequently asked questions about becoming a 501(c)(3) foundation
Why Should Our Club Become a 501(c)(3) foundation?
I have recently had the pleasure of both incorporating and applying for 501(c)(3) non-profit status for a New York Lions and a New York Kiwanis Club. One club had been in existence for more than 50 years but had just recently chosen to apply for not-for-profit status. The Club realized that in order to attract large donations and grants, it would need to create a foundation and apply for 501(c)(3) status.
But Our Club Already is a Non-Profit, Isn’t it?
When a New York Lions or Kiwanis or Rotary Club receives its charter from the parent organization, it is granted 501(c)(4) status under the parent clubs’ group exemption. All 501(c)(4) organizations are also non-profits.
What is the difference between a 501(c)(3) and a 501(c)(4)?
Both kinds of 501(c) entities are tax exempt, which means that they are exempt from paying federal and New York (and even local Long Island) taxes. However, 501(C)(4) organizations do not allow for tax deductible donations. When people give money to charity, while they love being charitable, they also love taking the donations as deductions on their tax returns. Unless your Kiwanis or Rotary or Lions Club has applied for 501(c)(3) status, donors cannot deduct their donations to your organization.
What is the next step?
Once a New York Kiwanis or Lions or Rotary Club decides to establish its club as a charitable entity, it must do so by creating a foundation, then incorporating in New York as a not-for-profit corporation, then applying to the IRS for a determination letter by filing Form 1023.
I confess, I only incorporated my business this past year. For a solo attorney such as myself, there aren’t as many reasons to incorporate as there are for other businesses. I have malpractice insurance that covers most of my liability, and a corporation or LLC formation would offer little in the way of additional protection. So, I was quite surprised when my accountant sent me a form and invoice for the MTA tax.
The tax is formally known as the Metropolitan Commuter Transportation Mobility Tax (MCTMT). Besides the cost of paying the tax, there is no simple way of tacking on the tax to your other tax filings. Aside from the usual federal and New York state tax forms, these additional forms must be filed quarterly.
This tax is imposed on certain employers and self-employed individuals engaging in business within the Metropolitan Commuter Transportation District (MCTD). Specifically, the tax applies to (1) employers required to withhold New York state income tax from employee wages and whose payroll expense exceeds $2,500 in any calendar quarter, and (2) individuals with net earnings from self-employment allocated to the MCTD that exceed $10,000 for the tax year (according to the Department of Taxation and Finance, this includes partners in partnerships and members of a limited liability company (LLC) treated as a partnership).
The small business owner cannot withhold any of the tax from the employee’s compensation.
The recently elected Governor Cuomo has come out in opposition to this tax, calling it “onerous.”
Small businesses on Long Island pay $3.40 for every $1,000 of payroll. If you are a small Long Island business, you are probably not using the LIRR to commute, and your customers are probably not taking the MTA to see you.
This tax is burdensome to Long Island small businesses and is not proportional to their use of the MTA.
Why do so many small businesses fail? According to this blog post, one of the main problems is that entrepreneurs themselves are the least likely to understand what has gone wrong with their businesses. As Jay Goltz opines, if business owners understood why their business was failing, they’d be able to fix it.
Some of the top ten problems: operational inefficiencies, out of control growth, poor accounting and owners who cannot get out of their own way.
Check out Goltz’ Top Ten Reasons Why Small Businesses Fail and see if any of the top ten apply to your small business.
According to the NY Times, new legislation aimed at providing loans and tax breaks to small businesses is almost certain to pass the Senate this week. The House is also expected to approve the bill quickly, while President Obama has already given it his strong support.
The new $30 billion lending program is designed to allow banks to make low-risk loans to small businesses with government backed financing. Easier loans would allow small business the growth necessary to spur new hires.
A new video series “Your Guide to an IRS Audit” follows three hypothetical small business taxpayers step-by-step through the audit process.