Faulty information costs you money! Which of these
popular business misconceptions do you believe?

Popular Misconception #1:
“We Only Need Our Books Done Once A Year For Tax Purposes.”
Are Your Accounting Records Adequate To Run Your Business?
———————————————————–

Although it is important to keep records for tax purposes,
it is not the only reason (or even the primary reason) good
accounting records should be kept. Another frequent reason
clients request financial statement preparation is to obtain
bank financing. Although important, this also is not the
primary purpose of keeping good records for your business.

Good recordkeeping will enable you to extract meaningful
financial information for your business that will help you
to manage it properly. If you can`t access this information,
you will not be able to manage your business properly. Bad
management leads to business failure.

Yes, the primary reason good accounting records should be
kept is to produce periodic (at least on a monthly basis)
financial statements for management information purposes.
Only with this current financial information can you properly
manage your business. This information can alert you to
declining sales, excessive expenses, tax opportunities,
cashflow problems, and many other vital concerns for your
business.

To be of value, this accounting system should be set up
with meaningful account categories and departments. It may
be cost-effective to have an outside accounting service do
the monthly bookkeeping. However, with accounting software
that is readily available, you don`t have to be an expert
bookkeeper to do your own books and extract meaningful
financial information.

If you do your monthly statements yourself, it would still
be prudent to have your accountant or business advisor help
you set up your system and, as well review such information
with you to discuss problems and opportunities.

Popular Misconception #2:
“Writing My Hobby Off As A Business Loss
Saves Me A Lot Of Income Tax!”
Is Your Hobby A Tax Write-Off?
——————————-

If your business has no reasonable expectation of profit, if it is a
hobby and not really a business, you will ultimately fail in your tax
objective. Since your losses are being incurred for a hobby and not a
true profit generating business, the tax authorities will take the
position that you aren`t entitled to any deductions. This is a double
blow. First, you`re losing money. Second, you`re denied tax deductions.

It is true, however, that if you enjoy what you`re doing, you`ll do
better at it. You`ll be willing to work longer hours and you`ll be
willing to put up with more hardships in order to make your business a
success.

Rather than attempting to have the tax system subsidize your hobby,
why not turn that favorite pasttime into a real, profit generating
business? This is a doubly rewarding. First, you make money at
something you love doing. Secondly, the tax authorities legally have to
allow your reasonable expenses to earn your now substantial business
income.

Prove that you`re running a business by running a business. Prepare and
follow a proper business plan. Keep good accounting records with at
least monthly financial statements to give you the information you need
to manage your business. Above all, make money from what you do.

Popular Misconception #3:
“I Don`t Make Enough Money to Incorporate!”
Will Incorporating Really Benefit You?
—————————————

Some persons resist the idea of incorporating themselves because
the tax savings may not justify the added costs of incorporation,
annual minutes, and extra tax returns. However, incorporation gives
advantages that go far beyond tax savings.

Insurance may give you some protection against loss. However, you
may suffer business losses and lawsuits that may not be covered. For
extra protection, consider incorporating yourself. The limited
liability of your own corporation alone may justify the additional cost
and complexity.

Corporations may also be used for income-splitting with your family,
as well as estate planning and retirement planning objectives.
Additionally, corporations lend some credibility to smaller businesses
and may enhance your image and prestige in the eyes of clients or
suppliers.

Lower corporate tax rates will generally apply on small business income.
Even in loss years, wages can be paid by the corporation to you so that
you may utilize personal tax credits available. If unincorporated, these
credits might be lost forever. The now larger corporate losses can be
carried forward to future (hopefully more profitable) years.

A full analysis of the advantages and disadvantages of incorporation is
beyond the scope of this report. However, being incorporated may give
you more flexibility and advantages than you originally anticipated.
Certainly, it is not prudent to reject it as an option simply because it
is more complicated and costly. In fact, it may be one of the best
investments you ever made.

Popular Misconception #4:
“I really need an office out.
Being home-based makes me look amateur!”
Is A Home Office REALLY Professional?
————————————–

Many times small business persons make the mistake of generating
unnecessary overhead in order to impress clients and prospects. Often
this attitude leads to escalating debt and business failure. One such
example is getting an impressive, but expensive, commercial office
space.

Customers aren`t stupid. They can see when such outside space is
necessary or advantageous for them. They can also see when it is a
waste of money and designed to fuel your ego. What matters most to
clients is whether they are getting cost-effective results or not. If
your product or service delivers such excellent value, your customers
will be impressed and come back. In contrast, if one allows his ego to
get in the way of satisfying the customers` needs, they will go
elsewhere.

With the move to telecommuting, downsizing, networked communications,
and home-based businesses, operating from your home office is actually
smart and trendy. Can you think of a more appropriate location for a
consulting firm specializing in home-based businesses? They of all
businesses should set the example in cutting unnecessary expenses and
operating efficiently.

This is not to say that there aren`t any disadvantages to being
home-based. One certainly must be well organized, disciplined, and
willing to follow good time management principles. This alone could
mark you as more professional than other businesses, home-based or not.

Expensive office space is not the answer to reflecting a professional
image. If you are truly concerned about your image, offer quality
service. Make sure that all your corporate communications (telephone,
websites, printed materials, et cetera) reflect the professional nature
of your business.

Popular Misconception #5:
“Since we`re not seeking financing,
we don`t need a business plan.”
Do You REALLY Need a Business Plan?
————————————

To obtain financing, many persons will prepare a business plan.
Although entrepreneurs will go to great lengths to get their loan or
capital, these same business persons will not bother to plan ahead very
far or analyse their business. Even if you required no additional
money, preparing a business plan can help you to succeed in your
business.

Running a business without a plan is like going on a trip without a
map,sufficient gas, money, or even a destination. Just as you wouldn`t
go on a vacation without some planning, no business can be successful
without it. Putting that plan in writing helps you to think out a
strategy for successfully operating and growing your business.

Where is your business today? Where will it be tomorrow? What is your
mission statement? What product lines are profitable? Which ones
aren`t? What business do you think you are in? What business do your
clients think you are in? Should you be in a different business? Is
your product or service less attractive to your clients? How are
competition, global commerce, technological and social changes affecting
your company? What is your competitive strength? What are your
weaknesses? Who are your biggest competitors? What are their
weaknesses and strengths? What is your marketing strategy?

What are your projected income and expenses and cashflow for the next
year? How about the next five years? Do you have a capital budget?
What determines whether you buy an asset or not? Do you have an exit
strategy? How will you manage growth? Do you have a financial plan? Do
you have an operations plan? What definite sales and net profit targets
have you set for this year and the next five years? What factors could
interfere with the attaining of these goals? What contingency plans have
you made to deal with such problems?

The purpose of these questions is to get you thinking and planning.
If you fail to plan, you plan to fail. Although your accountant or
business advisor can help you prepare your business plan, only you can
set the appropriate goals and follow through on them. Yes, you
definitely need a business plan, not just for obtaining capital, but as
a roadmap for your business.

Popular Misconception #6:
“I like bartering with clients
because it saves paperwork and taxes.”
Are You Reporting Barter Transactions?
—————————————

Bartering is an excellent way of doing business. However, contrary to
popular belief, some barter transactions are taxable, both for income
and sales tax purposes.

Legally, you must maintain adequate financial records for your business.
Barter transactions made by your business must be reported to the
appropriate taxation authorities and taxes paid. However, transactions
between friends not engaging in business with each other may not be
taxable.

If you are an auto mechanic and I am an accountant and I swap accounting
services for your car repair services, the transaction in this case is
most likely taxable, even if we are friends. However, your accounting
fees should be deductible as a business expense and so should the
business portion of my car expenses. Note also that sales and similar
taxes may apply on this transaction.

On the other hand, if I trade accounting services for a vacation for my
family, I should really declare the value of such services as income.
The firm supplying the vacation would be able to deduct that value as
accounting fees. Any sales or similar taxes would have to be paid on
such transaction.

Many persons don`t record such transactions. For some, it may be a
matter of wanting to believe that you don`t need to be bothered with the
extra paperwork or taxes. Remember, though, that ignorance of the law
is no excuse. Legally, you must keep proper records and pay all taxes
due.

Popular Misconception #7:
“All My Workers Are Self-Employed, So I Don`t Need
To Bother With Payroll Or Workers` Compensation.”
Do You Need To Pay Payroll Taxes?
———————————-

To save on payroll taxes and workers` compensation premiums, many
employers arrange their affairs in such a way that those working for
them are self-employed, independent contractors. This is good tax
planning.

On the other hand, some employers take the position that all those
working for them are self-employed, whether they are or not. Although
it is tempting to eliminate payroll taxes and workers` compensation
premiums, care should be taken to do so legally.

Whether those working for you are employed or self-employed is a
question of fact (which can be determined by the Courts). Do you supply
the tools and vehicles? Do you determine the working hours? Do you
have the right to control how the job will be done? Do you pay a
flat-rate or by-the-hour or a salary? Does your worker have other
clients?

By asking several such questions, a pattern will emerge as to whether
your worker is employed or self-employed. If it turns out that your
worker fits all the criteria of an employee, don`t say he`s
self-employed. On audit, you would still be responsible for the payroll
taxes (and penalties and interest as well).

Even if your workers are considered independent contractors by the
Income Tax Department, it is still possible that they will be considered
to be “workers” for purposes of Workers` Compensation legislation.
Thus, it is the responsibility of the employer to determine whether such
coverage is necessary or not. Failure to obtain proper coverage could
subject you to substantial (and unnecessary) costs.

In review, calling someone self-employed, doesn`t necessarily make them
self-employed. If you have a dog, call it a dog. Your position that
your dog is really a cat will not be successful. Likewise, make sure
that your position regarding your workers is legally correct.

Popular Misconception #8:
“My Accountant Charges Too Much.
I Can`t Afford It Anymore.”
Is Your Accountant Worth His Fee?
———————————-

Many business persons view bookkeeping, accounting, and tax preparation
as necessary evils. In their view, accounting fees are an expense to be
reduced, deferred or even completely eliminated.

A good accountant, however, can give you benefits far in excess of the
fees charged. Well-designed accounting systems will enable you to
extract meaningful financial information for your business that will
help you to manage it properly, avoid business failure, and alert you to
declining sales, excessive expenses, tax opportunities, cashflow
problems, and many other vital concerns for your business.

Your accountant can save you lots of money with the advice you receive
on tax and other business matters. As well, a competent accountant can
be a valuable resource in discussing business problems and opportunities
with you.

Popular Misconception #9:
“Nobody Makes Money On The Internet.”
Can You REALLY Profit From The Internet?
—————————————–

Many people feel that the internet is all hype. Many others feel that
it is overrated. Still others are of the opinion that it may be good
for some types of business, but not theirs.

Typical comments heard include: “I`ve lost money on the internet…Major
corporations have lost millions…Do you personally know anyone who has
made money from the internet?”

However, if you check out the list of recent billionaires, a high
proportion of these are internet-related, and many of them under
forty years of age. As well as the very rich, you can find many cases
of more modest financial prosperity resulting from internet commerce.

It is true that many are losing money on the internet. It is also true
that many don`t know what they`re doing. However, with the proper
assistance, you, too, could profit from the net.

RESOURCE BOX

J. Stephen Pope, President of Pope Consulting Inc.,
http://www.popeconsultinginc.com/ has been helping
clients to earn maximum business profits for over twenty years.

For valuable Work at Home Small Business Ideas, visit:
http://www.yenommarketinginc.com/

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Intellectual Property Law can be quite confusing at
times. Copyrights, trademarks and patents all have a role in protecting
your hard earned content and knowing their role is half the battle.

Intellectual property in itself refers to the creations of the mind, including
such things as: artistic works, literary works, inventions, names, images, symbols,
and designs used in commerce. In other words, the intellect that is the
possession of an organization or an individual is considered intellectual
property.

Intellectual property is divided into two categories, copyrights and industrial
property.

Copyrights give the authors of an exclusive work, exclusive rights to that work
for a limited amount of time. Copyrights cover such literary and artistic works
as novels, poems, plays, films, songs and other musical works, artistic works
(drawings, paintings, sculptures and photographs) and architectural designs.
Copyrights, which must be renewed periodically, allow the creators of a piece
of work, the opportunity to benefit from that piece of work.

Industrial property includes patents, trademarks, industrial designs and
geographic indications of source.

Patents give the inventors of a new product, a certain (limited) amount of time
in which he/she may prevent others from making, selling or using the invention
without authorization.

A trademark is an intellectual property protection which is used to protect the
distinctive features that distinguish one product from another. Those features
can include such things as: symbols, colors, brands, names, sounds, smells,
shapes, and signs.

Fortunately, Intellectual property laws benefit the creator of a property, by
rewarding that creator for his/her innovation and creativity. Also, society as
a whole benefits from intellectual property laws, by the fact, that these laws
encourage creativity, therefore allowing the rest of us to benefit from the
wide range of products and services that are produced.

Any violation of a trademark, patent or copyright could constitute the grounds
for an intellectual property lawsuit. If you feel that you have been victimized
it would be wise to consult a qualified attorney in your area. Find an attorney
or law firm, which specializes in intellectual property law. Know your
rights and protect them accordingly.

About the author:

Joe Regan writes articles for many major websites including but not
limited
to: www.hugesettlements.com , www.nurseuniverse.com ,, Intellectual Property Law
and www.bubbajunk.com . Joe can be
contacted
at jregan@verticalag.com.

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Your web site has been up for a few months and you are making money hand over foot. While surfing sites one evening, you are shocked to find a competitor using your design. You find out your designer sold them the same design. They must be breaking the law, right? It all depends on whether you own the copyright to your web site design. Many site owners are shocked to find out they do not.

What is Copyright?

Copyright is a method of protection for authors of original works such as literature, computer programs, music, artistic pieces and photographic images. The protection provided by copyright arises under Title 17 of the United States Code. A copyright gives the owner the exclusive right to do or authorize others to: reproduce, prepare derivative works, distribute copies, publicly display and generally use the material that carries the copyright in exchange for something, typically a royalty or fee. The copyright owner often grants this use through a license agreement, but can sell it outright.

Who Can Claim Copyright?

Copyright protection is created IMMEDIATELY upon the creation of a fixed form of the material in question and granted to the person that created the material. For instance, I automatically own the copyright to this article upon completing it. I am not required to file for an official copyright with the US Copyright Office to prove that I am the owner of the content. However, if I want to sue a person for using my article without permission, I must first register it.

What If I Hire Someone To Create A Web Site For Me?

If you hire a person or company to handle the design of your site, the complexities of copyright become a major issue for you. Specifically, the issue of “work for hire” is critical in determining whether you own the design.

“Work for hire” refers to the relationship between your business and the person creating your web site. If this person is an employee of your business and creates the material within their scope of employment, then your business owns the copyright. However, what happens when the designer is not an employee? In such a situation, the following must occur for the copyright to automatically transfer to you. The work must be specially ordered or commissioned for use as:

1. A contribution to a collective work,
2. A part of a motion picture or other audiovisual work,
3. A translation,
4. A supplementary work,
5. A compilation,
6. An instructional text,
7. A test,
8. Answer material for a test, or
9. An atlas.

It is my opinion that the design of a web site does not fall into any of the above categories. As a result, you do not own the copyright to the design and can do nothing about the fact that one of your competitors is using the design. Obviously, this is not the answer that most site owners want to hear. So, what can you do to protect your business?

When you hire an outside party to design, alter, amend or improve your site, you must have them sign a written contract. The contract must include a clause clearly establishing that the copyright to the material produced is vested with you, not the designer. You should then file the contract with your important documents as some designers “forget” that assigned the copyright to you. Presenting a copy of the contract and noting that it allows for the recovery of attorney’s fees usually solves the problem.

The issue of copyright ownership of a web site or aspect of a site pops up often. Finding your design being used on another domain is bad enough, but it can get worse. If you sell your business, the attorney for the party purchasing your business will always ask about the copyright of the site as part of the due diligence process. More than a few business deals have fallen apart when the lack of copyright ownership is discovered. Obtaining copyright at the outset of your business effort will avoid serious problems in the future.

About The Author

Richard Chapo, Esq., is with SanDiegoIncorporate.com. He can be contacted at Richard@sandiegoincorporate.com.

This article is for general education purposes and does not address every facet of the subject matter. Nothing in this article creates an attorney-client relationship.

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