Taxes are an important part and issue in running small businesses.  Advocacy groups hope Congress will pass laws to simplify compliance and to lower taxes.  Such measures will help small businesses create jobs and improve the economy.  Much depends, too, on the outcome of the elections in 2012.  Barbara Weltman enumerated tax trends for 2012 in SmallBizTrends.com.

Can a discussion of the federal deficit, now in excess of $15 trillion, be separated from a discussion on taxes? Of course not! Therefore, taxes will continue to be an important topic on the federal level because of the dichotomy between raising taxes to address deficit concerns vs. keeping taxes low to help create jobs and improve the economy.

Which will win out in 2012? Much depends on what happens in the November elections. Until then, however, there are some important trends in taxes worth noting:

1. Taxes will remain a political football.
As a general rule, Republicans are against raising taxes, while  Democrats want to raise taxes on the so-called wealthy (many of whom are small business owners).

Taxes will surely be a key issue in the presidential race.

2. Tax audits are on the rise.
According to one KPMG survey, tax audits of businesses have increased. Corporate executives who were surveyed reported a 61 percent increase in federal tax disputes; 37 percent reported an increase in state tax audits.

What continues to be a popular audit topic is worker classification to determine whether a company is properly treating a worker as an independent contractor or whether the worker should be treated as an employee.

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When you decide to venture out on your own and start your very own business, it seems there are dangers awaiting at your every footsteps and risks to be taken at every single stage. In this respect, it’s not all too difficult (or uncommon, for that matter) for a start-up entrepreneur to make a mistake with the strategy and/or expectations of their small business’s performance. Mistakes can cover a whole variegated gamut of missteps, from choosing an unsuited location to open a restaurant, employing the wrong currency conversion rates when dealing with foreign business partners or simply expecting too much too soon. The key to mistakes in business is to identify them as quickly as possible, owning up to them, and then finding the proper way of turning them around. Once you’ve reached that stage when you can turn faults into assets, you can truly and safely say you have arrived on the business scene. But what are the most common mistakes made by small business owners?

Instant Gratification
Many small businesses start out based on a capital of frustration, dissatisfaction and disgruntlement with one’s corporate employment. As such, one sets out with lofty ideals, matched by unreasonable financial goals. Be aware of the fact that if you’re planning to invest in a field with which you’ve had no prior professional experience, it doesn’t really matter how passionate you are about you. The odds are against you getting rich too quickly—did you know that it can take anywhere between fifteen and twenty years to build a truly successful franchise? Don’t let this fact of life discourage you. As a matter of fact, don’t let pitfalls of any kind discourage you, be they financial or otherwise.

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Jeff Haden lists down the legal requirements or basic infrastructure an entrepreneur must accomplish before starting a small business.  He says there are people at the courthouse or local treasurer’s office willing to assist you.  It will only take two days tops in most areas to finish the list.  Below is the list published at CBSNews.com.

Here’s a quick-start guide to starting your own business:

Determine your business name. While branding, unique selling propositions and business-identity considerations are important, keep in mind there is no perfect company name. So don’t worry about selecting the ideal URL, dreaming up the perfect website design or roughing out your promotional literature. Pick a name. You can always operate your business under a name that’s different from your company name. (That’s what a DBA, or “doing business as,” is for.) And you can always change your company’s name later, especially if you end up doing something different than you originally thought.

Apply for an Employee Identification Number (EIN). An EIN is a federal tax number that is used to formally identify your business. Although you don’t need an EIN unless you plan to have employees or form a partnership, LLC or corporation, it makes sense to apply for one. The process only takes a few minutes and is free. If you don’t have an EIN your Social Security number is used to identify your business for tax purposes. An EIN allows you to keep your Social Security number confidential. All you have to do is go to the IRS website and apply.

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Are you looking to start a business today? Bob Voss at AllBusiness.com advises that you study the current social trends.  What target markets are rapidly and steadily growing?  You should also have a competitive edge over other similar businesses.  Previous experience and know-how in that industry are also advantages if you don’t want shaky surprises.

“What is the best business to start right now?”

The meaning behind this question is clear. The person asking the question is looking for the perfect business based on current growth trends and economic issues.

I answer this question two ways. I usually start by explaining that various social or cultural trends can provide opportunities for business startups and even “recession-proof” businesses. For example, businesses that provide services to help aging seniors live more independent lives are a smart bet because the target market is growing rapidly.

Similarly, “green” businesses are being positively received right now. (The problem with “green” businesses is that many don’t have a sustainable business model and can require a lot of start-up capital: just look at Solyndra!) Pet-related businesses also seem recession-resistant. For some reason, people will continue to spend money on their pets even when they are in financial trouble.

But be warned: Trends are important, but they can change rapidly.

The second way I answer the question is to explain that any business can be a good business to start if it has three particular traits:

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During this period of economic downturn, people who lost their jobs or are uncertain about holding onto their jobs usually cannot find new employment. Alisa Harrison of the International Franchise Association said, “They tap home equity, severance packages and sometimes retirement plans to start a new business that they can own so they can have some control over their future”.  They go into franchising.  This year, there is a 2.5% growth in franchises compared to 2010, she added.  The State reports that fast-food restaurants top the list of franchises followed by personal services.

Altogether, there are about 785,000 franchised businesses across the nation, according to Alisa Harrison, spokeswoman for the Washington, D.C.-based International Franchise Association. That’s about 2.5 percent more than in 2010, but still shy of the roughly 792,000 in 2008, when financial markets collapsed in the fall and funding for start-up businesses all but disappeared.

By far, quick-service restaurants account for the highest number of franchised establishments at about 153,000, with personal services trailing at about 131,000. Franchises provide 7.8 million direct jobs and pump about $740 billion into the economy.

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Small businesses are having a difficult time borrowing money for expansion from big banks, says the Los Angeles Times.  Big banks are reluctant to lend to small businesses and are more comfortable lending to large corporations. In October, small banks and other lending institutions approved 46.3% of loan applications compared to 9.3% from big banks.

Despite ads by Bank of America and others touting their records of helping small businesses, some merchants say their loan applications are routinely rejected. They have more success with small banks and non-bank lenders.

Paul Boettcher, the co-owner of Ye Olde King’s Head pub in Santa Monica and four other L.A.-area restaurants, said he wants to open more restaurants but has had difficulty getting a bank loan. (Genaro Molina, Los Angeles Times / October 27, 2011)

“The smaller banks are the only ones who will even entertain the idea,” said Boettcher, a slim man with Clark Kent-style glasses and a graying soul patch.

Economists have put forth many reasons the nation’s economy isn’t creating many jobs. They say that businesses aren’t hiring because there’s not enough consumer demand, because jobs have been outsourced, because regulations or “uncertainty” are killing businesses’ interest in expanding.

But business owners such as Boettcher say they’re not hiring for another reason: They can’t get the money to expand. The very same banks that had loose lending practices before the recession are now too hesitant to lend.

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Brett Palmer, president of the Small Business Investor Alliance, credits SBA’s Sean Greene for shortening wait times for SBIC licenses to less than 6 months and as a consequence, the annual rate of new licensees has more than doubled over recent years.  The SBA grants licenses so private entities can provide money to small businesses.   In the year ending September, a total of $2.59 billion was distributed, a rise of 69% from the previous year, as reported at BusinessWeek.com.

Tonka Bay Equity Partners, a private equity firm in Minnetonka, Minn., applied for a license from the federal government in early July to create a fund to funnel capital into private businesses. Last week the U.S. Small Business Administration granted that license, enabling the firm to start investing $150 million in promising ventures.

The four-month turnaround time doesn’t sound remarkable. But just a couple years ago, licensing times were so unpredictable that the wait could be up to 15 months, spooking investors and delaying the distribution of vital funds to waiting companies, says Molly Simmons, a principal at Tonka Bay who has worked in private equity for 15 years.

The Small Business Investment Company program Tonka applied to participate in, commonly known as SBIC, was created in 1958. SBICs are for-profit venture capital firms, privately owned and managed but licensed and regulated by the SBA. The program has been setting a blistering pace, distributing a record $2.59 billion in the 12 months ended in September, up 63 percent from the previous year.

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UPS Store, in a move to support IFA’s “Operation Enduring Opportunity”, announced in BizJournals.com, that it will waive franchise fees for ten first-time veteran franchisees.  This amounts to $300,000 in financial incentives.  Prospective franchisees should sign a Letter of Intent between January and June 2012, said Tim Davis, a former U.S. Marine and now UPS Store Vice President of Operations.

The UPS Store wants to enlist 10 military veterans to open locations as part of an Obama administration effort to get more vets into jobs.

The UPS Store’s franchise network reported Thursday $300,000 in financial incentives to help up to 10 qualified U.S. military veterans open their own locations.

Tim Davis, vice president of operations for The UPS Store franchise network and a former U.S. Marine, said the franchise fee of $29,950 will be waived for up to 10 qualified veterans who are first-time franchisees wishing to open a new location. The incentive is valid for prospective franchisees who sign a letter of intent between Jan. 1, and June 30, 2012.

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The National Federation of Independent Business reports that the October level of small-business optimism index is the highest since June. “Owner optimism improved a smidge, mostly because the outlook for business conditions and real sales growth became less negative,” said the NFIB report. However, the new-jobs subindex weakened in the same month as there was a reduction of 0.1 employees per firm. The following data were reported by The Wall Street Journal early this month.

Small-business owner confidence increased in October but still hovers just above recessionary levels, according to data released Tuesday. The National Federation of Independent Business‘s small-business optimism index edged up to 90.2 in October, from 88.9 in September. The October level is the highest since 90.8 posted in June. During the last recovery, the index often ran near or above 100. In October, “owner optimism improved a smidge, mostly because the outlook for business conditions and real sales growth became less negative,” said the NFIB report. The subindex of expected business conditions in the next six months rose 6 percentage points, to -16%, and the expected higher real sales subindex increased 2 points, to -4%. The new-jobs subindex weakened, falling 1 point, to 3% in October. Last week, the NFIB said small-business owners reported an average reduction of 0.1 employees per firm last month. That is better than September’s net decrease of 0.3 employees per firm, but still extremely dismal.

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There should be no surprises after you buy a business if you thoroughly studied and investigated the business.  What you should do now is to smoothly go through the transition phase as the new owner, and with the right decisions and actions, the business will thrive.

After You Buy a Business …

1.  Maintain the status quo for now.  Avoid disruptive changes that may confuse the staff or customers alike.  Gradually introduce changes and see how the employees and customers react. 

2.  Hire the former owner to stay for a pre-determined period during the transition phase as your adviser or consultant.  He or she can guide you through the daily operations of the business.  Observe, listen and ask questions.  The seller can introduce you to the employees, customers, suppliers and the landlord.  The presence of the former owner adds the much-needed stability, especially as far as the employees and suppliers are concerned.

3.  Learn the ins and outs of the business.  Talk to the employees, customers, suppliers and business executives in the same industry.  Know how the company is currently run.  Review the policies and systems in place so you can make amendments or revisions if needed.

4.  Meet with the employees about the future of the business.  Seek their support and assure them of their job security.  Get their feedback and suggestions on how to improve the products or services that the company offers and how to build the business.  They will be more effective workers if you involve them in drafting policies or improvements.  They will feel they have something at stake in the company. Let them get to know you and vice versa.  Be available to answer their concerns.

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You have dreamed of owning a business.  Now that you have found the right one for you, negotiate to buy the business.  You do not want to end up with terms that can ruin your opportunity before you even take over the business.  Negotiations will evolve so you must have an open mind and a “can-do” attitude to produce a deal.  Think about the points to be negotiated, what your position is and what to say to counter the seller’s comments.  Here’s how to make sure you get the best deal when buying a business.

Prepare for the negotiation. 
Study market dynamics, the competition, raw materials market, and industry statistics of comparable businesses that have sold to come up with the proper valuation.  Shop around for interest rates, loan terms, penalties, etc.

Assess your finances and structure payment accordingly. 
Know the maximum price that you are willing to pay for the business.  Offer the minimum amount that you reached through your own valuation.  Provide supporting reasons and proof on how you derived this figure.  Ask “what if …” questions to lower the confidence of the seller regarding his or her asking price. Use market fluctuations and economic factors to your advantage.  If a third party will finance the sale, make sure the sales deal is contingent on obtaining financing. 

Get as close as you can to the seller’s down payment figure but negotiate for some concessions in return.  You can ask for reduced interest on the balance of the purchase amount, a grace period of 3 to 6 months on the first payment, no interest for the first year, no penalties on early payments, and the like.  When you give something to satisfy the seller, you should get something you need in return.

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After meeting with Vice President Joe Biden, major lenders are increasing loans to small businesses. According to American Banker, Biden met with executives from 13 banks including Citigroup, KeyCorp and M&T Bank.  Citigroup pledged $24 billion in loans to small business in the U.S. over the next 3 years.

 President Barack Obama has said that small-business lending is a key element in the economic recovery, and several banks have announced initiatives to increase their lending. Vikram Pandit, Citi’s chief executive, said in a press release, “We recognize the vital role small businesses play in our economy.”

Citi said it committed $7 billion in loans to small business this year, $8 billion next year and $9 billion in 2013. Last year, the company made $6 billion in small-business loans, and in 2009 the amount was $4.5 billion.

U.S. Vice President Joe Biden and Small Business Administration Administrator Karen Mills met with 13 banks in Cleveland on Tuesday. After the meeting, KeyCorp, a big regional bank in the Midwest and Alaska, said it would provide $5 billion to small-business owners over the next three years; M&T Bank Corp. of Buffalo, N.Y., said it would increase small-business lending by $50 million from 2010′s level in each of the next three years.

J.P. Morgan Chase & Co. pledged in April to provide $12 billion in small-business loans this year alone — 20% more than last year’s commitment.

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With today’s rising unemployment, there is a corresponding rise in the number of prospective buyers looking for businesses for sale.  Most people dream of owning their own business, being the boss, setting the rules, controlling their lives, and earning for themselves.  Starting a business can be difficult.  You have to spend a lot of time and money coming up with an idea or service; testing it; developing its production or operation, marketing and selling it; hiring people; finding a location; sourcing equipment and vendors, and attracting customers.  Many of these start-up frustrations are bypassed when you buy an existing business.  There is no better time than today to pursue your dream of owning your own business.

Why should you buy a business?

1.  The business has immediate cash flow from day one.
You start earning as soon as you sign the purchase contract.

2.  Existing customers are already in place.
Start-up ventures sometimes fail because customers do not come for some time despite the initial investment and the work you put in.  Contrast this with an established business that has a loyal customer base.  You should keep your customers by maintaining the status quo for some time before introducing any changes.

3.  The risk of business failure is lower.
Buying an established business with ongoing cash flow, proven systems, a known brand, existing customers, and a good reputation is less risky than starting a new business.

4.  People know the business brand and logo.
You do not need to introduce the product or service because the public is already familiar with the brand or image of the company. The company name and logo are integral to the value of the business. 

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There are some steps in the business for sale process that benefit both the seller and you, the buyer.  These steps protect the seller from “time-wasting” buyers, and the buyer from acquiring lemons.  One of the most important questions when buying a business is “Can I see your financial statements?”  Numbers provide vital information to help you decide if you should buy a business.  Even if a seller has placed the business on the market, he or she remains reluctant to share highly confidential and sensitive records to any potential buyer.  If the seller thinks you are a credible prospective buyer, he or she will let you sign a business non-disclosure agreement before the company’s proprietary information will be opened to you.

What is a Non Disclosure Agreement?

This is a standard legal agreement presented by the seller to the buyer to protect the former’s business if a potential sales deal falls through.  This agreement gives both parties room for an open and honest atmosphere that may lead to a successful transfer of ownership of the business.  The NDA is solely for the purpose of selling and buying a business, respectively. 

The potential buyer cannot talk about the business to anyone, except to the parties included in the NDA, use gathered information, steal customers and employees of the business, nor use the information for commercial advantage.  The seller can control the flow of information and protect its confidentiality. 

What are the Benefits of a NDA to the Seller?

The seller avoids sharing operating and financial data with any potential buyer.

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One of the latest emerging trends for businesses in today’s market is the ability to let customers “check-in” at your business.  In essence, you’re giving customers the chance to announce to their social networks that they’ve stopped in.  There are a number of these new geolocation services giving you a chance to try some truly unique and completely FREE marketing if you do it right.  Now what company wouldn’t like that?

How do I take advantage of this?
A number of companies are offering this “geo-tagging” but only two really stand out.  Foursquare and Gowalla are the industry leaders.  Until recently, Facebook was also a big player in this arena.  They decided to shut down their location-based check-in service due to lack of interest among Facebook users.  Both of these companies allow you to register your business for free and they offer mobile apps for your customers to use when checking in.  You simply need to claim your business and then let your customers know they can start checking in using whatever service you chose (hopefully both!).

Giving it a Boost
Each company offers various incentives for using them.  Gowalla allows users to award companies with various virtual awards that grab the attention of other Gowalla users.  Get enough awards and your business gets featured on their respective city pages.  Another feature of Gowalla is the ability to promote events to different users.  Gowalla also allows you to customize a welcome message for those who check in, plus the ability to add some kind of promotion for stopping by.

Foursquare provides a similar user experience with a few changes with how they handle promotions.  It allows you to create custom promotions for those who stop in and check-in.  You can create coupons, group discounts, first time discounts among many other things.

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Perform any search on any engine about how many computer viruses are in existence and you will get the same answer… too many to count.     Most computer viruses are targeted to attack computers running Microsoft’s Windows operating system, while Apple computers running Mac operating systems experience drastically fewer attacks.   Considering most businesses and home users choose Windows over Mac, hackers have a greater area to toss their nets and pull in a catch. 

Just as with any battle or even sports game for that matter, you have the offence and you have the defense.   In this ongoing war over privacy and security you are on the defensive and the hackers are on the offensive.  

For any business, the threat of online attacks and hacks are a daily reality.   All it takes is one point of weakness in their infrastructure – just one open accessible port, one faulty firewall, one employee unintentionally downloading a virus – or a single network engineer incorrectly configuring the private network– and all hell could break loose. 

There are a few steps a business owner can take to at least keep a minimum level of security.  

Internet and email use policy.  Instituting a companywide policy which outlines all the details about what is and is not acceptable internet in the office is a good practice.   Examples of some guidelines are as follows:

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Three years ago marked the beginning of the recession. And, although the country is not entirely healed, signs of progress are visible. Americans have begun to trust in the economy again and spend. An industry that is experiencing financial growth and promise is used car dealerships.

Sales within the car industry grew over 10% from 2010 to 2011. If this increase continues, by the end of 2011 almost 40 million used cars will be sold. If you’ve always wanted to start your own business and have a passion for the automotive industry, a used car dealership is full an opportunity showing prosperity for the future years.

What are the steps to start your own car dealership?

1. Find locations in your area to start your shop. The area should be a commercially zoned, flat lot.
2. Should you not already have one, secure a dealer’s license from your state Department of Motor Vehicles. Typically this consists of passing a written test, completing an application, and paying a fee before receiving a license.
3. Obtain a used car dealer bond to meet state surety requirements. This will ensure your customers are protected from cars with hidden problems.
4. Supply your inventory. Determine whether you will buy and trade used cars from community members.
5. Find a bank to become the lender for your dealership.
6. Hire staffers. You’ll need mechanics and salesmen to help you take the load of your shoulders.

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What is a payroll service and how does it work?

To a business there is perhaps no more important part of its infrastructure than its payroll service. The purpose of a payroll, simply put, is to make sure that each and every single person in a company’s employment is financially compensated for their work to the correct degree and on time. To many employers, who simply are happy to receive their check at the end of the month, the system would seem straightforward, invisible or effortless. However, the system is anything but and, were an employee to receive a mistake in payment, they would soon realise that payroll management can sometimes be harder to manage than they envisioned. Also if an employee does not get the money that they have earned on time and in the full amount, they may refuse to work or cause a whole host of legal problems for a company.

Payroll services have been changing quite a bit in the last few years; previously they could be undertaken in house with rudimentary equipment such as a calculator and a typewriter. However, as payroll maintenance has become more sophisticated and complicated over the years the procedure has become more time consuming to the degree that a large number of specialist members of staff, there simply to deal with payroll, would have to be hired to maintain accuracy. As these members of staff would have no means to create profit for the company it has become the case more and more often that companies and businesses will outsource their payroll to a third party. This means the company no longer has the time consuming burden of running their payroll and can ensure more time is spent in creative or productive areas of their business.

Another alternative has been to look for computer software to help run this area of business. Many companies have tried to move on to electronic payroll processing systems.

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There are few things that deplete an employee’s morale more than, having worked hard for a month, receiving an inaccurate wage which does not reflect their own levels of commitment. Be it late, or too little, wages not paid properly can make workers question all areas of their business; not least the competency of those who provide his checks. Similarly, an employee could wonder if perhaps he was paid incorrectly due to the fact that the company could be in financial bother or, perhaps, maybe the employee is about to receive some bad news regarding his own position within the organization.

With this in mind businesses do their utmost to maintain a high level of accuracy in respect to their payrolls. They can do this in a number of ways either in house or by outsourcing their payroll to a company who specialises in this field. Outsourcing is undertaken for a number of reasons; firstly to avoid the worker dissatisfaction described above but also to steer clear of legal ramifications for inaccurate accounting and also to clear up more time within a company’s schedule to concentrate on creativity and productive areas of business. For all these reasons and more it is highly important that a company’s infrastructure is based around an accurate and fair payroll.

The importance of compensation based pay
Whilst, as mentioned before, few things are more likely to demoralize a client than inaccurate pay the opposite is also true. After a month’s hard work if an employee is fiscally rewarded for his hard work they will, in turn, be provided with motivation and incentive to carry on their hard work. This, ultimately, can only do a company good in terms of the bottom line. Payroll management is an essential ingredient in catapulting a company’s top employees to the highest positions in the company which, further still, provides long lasting benefits for the organization.

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For many of us, it could be triple the value of what it is now. Meaning: Your company could be earning 3 x as much money. (We’ll assume your compensation stays the same!)

Ask a CEO or Small Business owner how he divides his time between CEO work, Managing work and “Chief Employee” work (where he actually does work an employee could do.) Most will say “10%, 40%, 50%..” It’s likely that many of us spend even more than half our time on work we could and should delegate. But, taken at face value, in a 10 hour day, many spend:
1 hour on CEO Time (planning, thinking ahead, etc.)
4 hours on Managing – asking/telling others what to do.
5 hours on “Chief Employee” work – doin’ it, doin’ it, doin’ it.”

If you’re a sole proprietor, then, of course, you have an excuse. Or do you???
• “It would take me twice as long to train someone to do it as to do it myself!”
• “No-one can do it as well as I do!”
• “No-one seems to get how big a job this is!”
Right. And how are you going to grow your business?

Let’s suppose that the value of CEO work to the company is $300 an hour, you could hire a manager for $50 an hour, and an employee for $15 an hour. Another CEO does the opposite – spends 50% of his time as a CEO and 40% as a Manager, only 10% doing employee work.. Hires others to do work he doesn’t have time for. Which one brings the most value to his company and himself? And which one are you?

How CEO’s use their time each day!

CEO #1
% Time Day Hours $/hr. Delivered Value
CEO work 10% 1 300 300
Manager work 40% 4 50 200
Employee work 50% 5 15 75
Total 100% 10 575

CEO #2
% Time Day Hours $/hr.

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