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Can Hiring Family Members Mean a Tax Break for Your Small Business?

November 23rd, 2010 :: Karen Axelton

By Karen Axelton

Keeping track of tax breaks available to small businesses—especially in the current political climate—can be a complex task. The good news is, there is one kind of tax break that just about every small business can take advantage of: the advantages gained by hiring family members to work in your business. Here’s a closer look at some of the options:

Hiring your spouse: In general, the IRS considers a spouse an employee as long as an employer/employee relationship exists. In other words, one spouse must truly control the business in terms of making key management decisions, and must direct the other spouse’s work duties and activities. Specific rules related to hiring your spouse depend on the business structure you’ve chosen for your company. Visit the IRS website for more detailed information about tax issues related to husband and wife businesses.

Hiring a parent: Hiring a parent is becoming more of an option these days with many seniors and retirees more interested in continuing to work—or needing to work to supplement retirement income. If you are hiring a parent, know your business will be subject to income tax withholding, Social Security tax, and Medicare tax; however, you are not subject to Federal Unemployment Tax Act (FUTA) tax.

Hiring your children: Having your children work for you in the business is a great way to transfer income from your higher tax bracket to your children’s lower one. This is also a way you can transfer wealth to your children without worrying about gift and estate taxes.

If your company is a sole proprietorship or partnership, wages paid to your children under age 18 are not subject to Medicare or Social Security taxes; wages paid to children under 21 are not subject to FUTA tax. At any age, their wages are subject to income tax withholding. If your business is a corporation, get more details about the tax issues of having your kids work in your business at the IRS website.

Before hiring any family member, discuss the issue with your accountant to make sure you follow all the rules. It’s especially important to maintain detailed records of the person’s duties and the hours he or she works to protect you from any questions of fraud. And, of course, be sure the person’s salary or wages is in line with what he or she actually does, or you risk raising red flags.

Tax savings aren’t the only benefit of hiring family members. Working with your spouse can build bonds as you feel that you’re working together for a goal. Children at any age can gain responsibility and learn from seeing their parents working hard to build a business. Children approaching adulthood can be groomed to take full-time roles in the business and be part of your succession plan. Start your children in the business at a young age, and you’re less likely to face resistance from other employees as your kids take on more important roles.

DISCLAIMER: The information posted in this blog is provided for informational purposes. Legal information is not the same as legal advice — the application of law to an individual’s specific circumstances. The information presented here is not to be construed as legal or tax advice. Network Solutions recommends that you consult an attorney or tax consultant if you want professional assurance that the information posted, and your interpretation of it, is appropriate to your particular business.

Is a PEO Right for Your Business?

November 16th, 2010 :: Karen Axelton

By Karen Axelton

Your business needs employees to run—but sometimes, managing employees can be a pain in the neck. I’m not talking about the personal issues, but all the regulations and paperwork that go along with having a staff—like benefits, insurance, taxes and vacation hours. There is a solution that can take some of these hassles off your hands: a Professional Employer Organization (PEO)

According to the U.S. Department of Labor Statistics, the number of companies using PEOs is growing; the DOL projects that by the year 2020, over 50 percent of American workers will be employed by a PEO.

How does it work? A PEO (also known as an employee leasing company) hires your employees (including you), then “leases” them back to your company. Since employees now work for the PEO, it handles human resource administration issues such as administering benefits and processing payroll.

There are some benefits-related pros and cons to a PEO. Pro: Since the PEO most likely has thousands of employees, your employees are now part of a bigger organization, so they can get better and cheaper insurance options. Con: Since you and your staff are now employed by the PEO, you may not have a choice in the health insurance and other benefits offered. Ask about this before you sign up.

The National Association of Professional Employer Organizations (NAPEO) offers some guidelines for choosing a PEO:

  • Start by making a list of what you need before you contact PEOs.
  • Ask to meet and talk to the specific people you will be working with at the PEO.
  • Get references and ask them how well the PEO handles problems and situations your business might face.
  • Check the company’s PEO’s history and reputation. Find out how long it has been in business, and talk to your networks of colleagues to see what people are saying about the company.
  • Find out how employee benefits are funded and what benefits are offered.
  • Make sure the company meets all the requirements set by your state.
  • Look over your terms of agreement. Are the respective parties’ responsibilities and liabilities clearly laid out? What guarantees are provided? Under what situations can you or the PEO cancel the terms of the contract, and are there fines or penalties for doing so?

Do your homework, and you just might find a PEO can be the ideal solution for your HR headaches.

DISCLAIMER: The information posted in this blog is provided for informational purposes. Legal information is not the same as legal advice — the application of law to an individual’s specific circumstances. The information presented here is not to be construed as legal or tax advice. Network Solutions recommends that you consult an attorney or tax consultant if you want professional assurance that the information posted, and your interpretation of it, is appropriate to your particular business.

Food for Thought: 15 Restaurant Predictions for 2011

November 10th, 2010 :: Karen Axelton

By Rieva Lesonsky

Do you own a restaurant, catering business, food boutique or other food business? Then you’ll want to know about 15 hot food trends for 2011 as predicted by restaurant consultancy Joseph Baum & Michael Whiteman Co. Inc.

While the report, Food  And Dining Trends in  Restaurants  and  Hotels   for 2011, focuses on restaurants and hotels, the information is valuable for any food industry business. I won’t reveal all 15 trends here, but here’s some of the good news—and bad news—the report found.

Good news: Upscale restaurants will see business customers return as the financial sector recovers and its employees have more money to spend on meals and entertainment.

Bad news: Non-food retail competition continues. With food now being sold everywhere from drugstores to department stores to food trucks, traditional restaurants have to keep an eye on competitors in unexpected places.

Good news: Cheap to make and profitable to sell at all price points, sandwiches will continue to make news. Whether inspired by Mexican, Cuban, Vietnamese or French concoctions, creative sandwiches can offer consumers the irresistible combination of a comfort-food format packed with adventurous ingredients.

Bad news: Restaurants that are too focused on cutting costs will suffer if they make customers feel “unwelcome.” Consumers who have money to spend on dining out have many options—so tactics such as not taking reservations, not-so-subtly discouraging diners from lingering, or charging outrageous prices for alcohol will backfire on some restaurant operators.

What’s in: Korean food, which has been brought to the foreground by trendy taco trucks, will continue to grow in popularity. No longer just for Korean restaurants, Korean specialties will be interpreted at all types of restaurants, from fast food to white tablecloth.

What’s out: Artisanal hotdogs, gourmet burgers, bacon everything and cupcakes are a few of the trends the report deems yesterday’s leftovers. And while I’m not a food expert, I’m not sure I’d bet against cupcakes. They’ve been declared dead before, and Americans are still gobbling them up.

Read Food  And Dining Trends in  Restaurants  and  Hotels   for 2011 to get the full scoop.

Image by Flickr user Dan Perry (Creative Commons)

Employee Management Lessons From the Military

November 9th, 2010 :: Karen Axelton

By Karen Axelton

Would your employees rather be working for a drill sergeant than for you? Quite probably, according to the results of a new survey of the “10 Most Blissful Workplaces” by CareerBliss, a website that helps people find joy at work.

The results of CareerBliss’s study showed that despite multiple ongoing engagements, lengthy deployments, and lower pay, the U.S. military is among the most blissful places to work in America.

Military personnel were more satisfied at work than many in the private sector. All four major branches of the military and the Army National Guard outranked well-known companies such as Disney, Johnson & Johnson and Microsoft in overall happiness.

Drilling down to specific aspects of happiness, The U.S. Army and the Army National Guard ranked number one and number two, respectively, out of all places of employment in career advancement, topping corporations such as Google and PricewaterhouseCoopers. CareerBliss also found that, on average, military members are happier with their benefit packages than employees in companies such as General Electric and Qualcomm.

What are some reasons military members love their jobs—and how can a small business owner emulate the military?

Security. Job security is a key reason U.S. military members valued their workplace. If you’re in danger of having to lay off employees, try everything you can to avoid it – whether it’s cutting hours, cutting pay or cutting overhead. Employees who know you’ll do everything you can to stick by them will be more loyal to you in return.

Development. The military places a high priority on personal and professional development for employees. Offer your workers chances to improve their skills, whether by cross-training them, giving them flexible schedules to take college courses or further their business training, or signing them up for online webinars and industry training events.

Camaraderie. The bonds forged in the military enable members of the armed forces to do the impossible. Foster an environment of teamwork, friendship and caring in your business, and you’ll create the same kinds of strong ties. When you and your employees truly trust and care for each other, there’s nothing you won’t do to get the job done.

What Your Hiring Process Says About Your Company’s Brand

November 4th, 2010 :: Karen Axelton

By Karen Axelton

As the economy shows signs of picking up, more small businesses are considering hiring employees. If yours is one of them, take some time to think about your hiring process and what it says about your firm.

While many of us think of the hiring process in terms of how our businesses can be hurt (for instance, if we neglect to do a background check, we might hire a criminal), few of us think about the point David Lee makes in this ere.net article: Creating a poor hiring experience can permanently hurt your business brand.

When you’ve weeded down job applications and resumes to a precious few, what do you do before you contact those candidates? You probably go online and search their names. Well, you can be certain that job candidates are doing the same thing with your company. And if anyone they know has had a bad experience applying or interviewing at your company, they’re likely to share those thoughts.

Before you place your next want ad or start networking for candidates, take some time to assess your hiring process with an outsider’s eye. Here are some basic questions to ask:

  • Is it easy to apply for a job? Your ad should clearly state the process by which people should apply. Specify who to contact and what to do (and not to do). This saves time on their end, and on yours.
  • Are requirements clearly explained? Any applications, tests or projects that applicants need to fill out or complete before a live interview should be clearly explained. The applicant should be able to contact a specific person at your business with any questions.
  • Are interviewees treated courteously? The environment of the interview gives applicants a glimpse into what it’s like to work for you. I’ll never forget one job interview where I was kept waiting for two hours in a chair next to the office copier while my future boss kept postponing the interview because she was swamped. That should have been a sign to me not to take the job.
  • Do applicants receive a response? It’s simple to set up an automated response by e-mail. Everyone who applies should get at least this courtesy. But you’d be surprised how many companies take employees through several interviews, then never contact them again. One of my friends recently traveled to another state at her own expense for a second interview with a major company. After an intense series of interviews with a team of executives, the firm never contacted her again. Not only that, but her voice mail messages and e-mails went unanswered.

No matter how busy you are, taking time to treat job applicants properly pays off for your business’s brand. More than that, it’s simply the right thing to do.

Why Does Gen Y Buy? To Show Off Status

November 2nd, 2010 :: Karen Axelton

By Maria Valdez Haubrich

While there’s lots of data showing that Generation Y consumers are more socially conscious and less susceptible to advertising than many other generations, when it comes down to making purchasing decisions, they’re still motivated by an age-old factor: showing off their status.

According to new data from online advertising company Resonate Networks, the 18-to–34 age group is more passionate about social issues like energy (36 percent more than the population age 35 and over), climate change (48 percent more) and animal rights (24 percent more). However, in general Gen Y consumers are 15 percent to 25 percent less likely to make purchase decisions based on the social issues that they care about.

Instead, Gen Y looks to products for external validation, buying products that convey their success and personal achievements. Compared to the 35-plus population, 18-to– 34-year-olds are more likely to buy based on the following brand attributes: innovation, looks, popularity and prestige. They are five times more likely than older consumers to purchase a product that is considered prestigious, and more than twice as likely to buy a product considered popular or aesthetically appealing.

Like older consumers, Gen Y does buy products based on considerations like value, function and quality. But at the same time, they want these products to help them project the desired image.

Going forward out of the recession, Gen Y is an increasingly important target market, as many of them are affluent and have discretionary income to spend. How can you target them successfully? Here’s what Resonate recommends:

  • Align your brand’s values with the values of the various subsegments of Gen Y.
  • Your primary messaging should focus on personal achievement attributes and value, not price point
  • If possible, your secondary messaging should mention socially responsible values and actions of your company.

Retailers Plan to Expand Mobile Commerce

October 26th, 2010 :: Karen Axelton

By Karen Axelton

While only 8.8 percent of retailers currently have a mobile commerce site, 75.9 percent expect to launch one, reports a survey by Internet Retailer conducted in August. Of those who plan to create an m-commerce site, 31.9 percent expect to have it up and running in the next six months and 52.6 percent in under one year.

There’s good reason retailers are moving so quickly: According to the report, mobile commerce could generate sales of $23.4 billion in the U.S. by 2015, up an astounding 875 percent from an estimated $2.4 billion in 2010.

“If online retailers haven’t developed a sense of urgency about mobile commerce yet, they need to,” says Mark Beccue, a senior analyst with Allied Business Intelligence Inc.

Sucharita Mulpuru, a vice president and principal retail research analyst with Forrester Research Inc., agrees. “The age of mobile commerce we are in now is akin to the business-to-consumer e-commerce market of 1997,” she says. “These are still the ‘Wild West’ days of mobile commerce and there’s plenty of room for experimentation.”

Building an m-commerce site doesn’t have to cost a lot, according to the report. Only 25.8 percent of those surveyed have an annual mobile commerce budget of more than $200,000. The majority (61.3 percent) expect to spend $50,000 or less building their site.

The research cites one expert’s estimate that if your business already has an e-commerce site, a version optimized for smartphones and the iPad can be launched in 30 days for about $20,000 to $30,000; a mobile app for iPhones takes about 60 days and costs $50,000 to $150,000.

For those who already have an m-commerce site, sales are also modest. Some 64 percent of merchants have annual mobile retail sales of $250,000 or less; of those, 50 percent report sales under $50,000. But 5.9 percenthave annual mobile sales of over $10 million—and as the number of consumers using smartphones to shop grows, so will mobile sales.

Why are retailers planning to add mobile commerce? Their goals include:

  • 39.1 percent of companies want to attract more visitors and generate more sales.
  • 13.5 percent want to increase sales conversions
  • 12.8 percent want to improve marketing and merchandising
  • 12.2 percent want to increase multichannel sales
  • 10.1 percent want to improve customer service

The key to success in developing an m-commerce site? Take time to assess how your customers want to shop. What devices do they use? What are they looking for? What are their key issues?

Says Mulpuru, “Whoever winds up being the next Amazon of mobile retailing will do so because they developed a strategy that’s based on a clear understanding of how their mobile phone shoppers want to interact with [their] brand.”