Thinking About Going "Sub S"? Cliff Ennico www.creators.com #147;For some time now, I have been thinking about forming a limited liability company (LLC) for my small service business. I attended a seminar recently and learned that there#146;s a new law, just recently passed, that has made Subchapter S corporations a much more attractive option. What is this new law all about, and should I reconsider forming a Subchapter S corporation for my business?#148; Late last year, Congress passed the American Jobs Creation Act of 2004, the fifth major tax cut in four years. This law garnered a lot of attention in the press earlier this year because of its most dramatic change: a provision that enables taxpayers to deduct either their state and local sales taxes OR their state and local income taxes on their federal tax return, whichever is greater. If you live in a state (such as Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming) that has a state sales tax but no state income tax, that#146;s a big deal. But this same law made a number of significant (although, in the view of this writer, not terribly awe-inspiring) changes to the complex rules for Subchapter S corporations (essentially, a corporation that elects to be taxed as if it were a pass-through partnership). According to Diane Kennedy, a Phoenix, Arizona CPA and author of #147;Loopholes of the Rich: How the Rich Legally Make More Money and Pay Less Tax#148; ( www.taxloopholes.com ), the key changes are: the maximum number of shareholders Subchapter S corporations may legally have is now 100 persons (increased from 75); all members of a family who own shares in the corporation are treated as one shareholder for purposes of counting the number of shareholders; members of a family are #147;a common ancestor, lineal descendants of the common ancestor, and the spouses (or former spouses) of lineal descendants of common ancestors#148; (got that?); and if a shareholder of a Subchapter S corporation gets divorced, and the judge awards his or her spouse shares of stock in the Subchapter S corporation, any #147;suspended#148; losses attached to the shares can be transferred to the ex-spouse along with the shares themselves. The intent of the new law, according to Kennedy, is to make it easier for larger, family owned Subchapter S corporations to transfer assets to family members and engage in creative estate planning techniques without losing their Subchapter S status. For the vast majority of Subchapter S corporations, however #150; those having far, far fewer than 100 or even 75 shareholders #150; the new law will have little, or no, impact on the decision whether to form a Subchapter S corporation or an LLC for a new business. So what should this reader do with his or her small service business? Let#146;s review some basics. With an LLC, you get limited liability, pass-through tax treatment (the LLC is not a taxable entity, so everything passes through to the LLC owners and is taxed at their personal tax rates), and the LLC owners must pay both income and #147;self-employment taxes#148; (FICA, FUTA and Medicare) on everything the LLC earns. The same is basically true of Subchapter S corporations, Kennedy says, but with one significant difference: #147;if you have a Subchapter S corporation, and you put yourself on the payroll as a W-2 employee, withholding taxes from each paycheck as you take money out of the corporation, you can often save a significant amount of money in self-employment taxes.#148; True enough, but the question I would ask here is . . . is the tax saving worth the time and trouble of setting up a Subchapter S corporation? Like all corporations, Subchapter S corporations involve a lot of legal paperwork #150; you have to be fairly disciplined about keeping thorough records of business decisions you make (called #147;resolutions#148; or #147;minutes#148;). Forget to do the paperwork, and a judge or your state government may take your corporation away from you and expose your personal assets to the wolves. Also, Subchapter S corporations are subject to a fair number of rules designed to make sure only small businesses can take advantage of them #150; for example, Subchapter S corporations cannot issue preferred stock, or have shareholders who are not U.S. citizens or #147;Green Card#148; holders. Break any of these rules, and you lose the tax benefits of having a Subchapter S corporation. One possible solution, according to Kennedy, is to set up an LLC, and then elect to have the LLC taxed as if it were a Subchapter S corporation #150; the IRS allows you to do this by filing IRS Forms 8832 (to elect to have your LLC taxed as a corporation) and 2553 (to elect Subchapter S status), and you probably also will have to alert your state tax authorities so they don#146;t get confused. But be careful #150; as the ancient mariners used to say on their maps when things got a little imprecise, #147;here be demons#148;. When deciding whether to form an LLC or Subchapter S corporation for any small business, talk to your accountant first, and keep your life as simple as possible. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com More >>

How To Write A Business Plan by Tammy Ames 2005 Writing a business plan isn't optional just because you consider this simply a home business. You are a small business owner. A written business plan is required to secure finances or investors in your new home business. Starting a home business with yourown funds and ideas doesn't mean you don't need a business plan. A written business plan is critical to every home business. The thought process and research involved in writing your businessplan will reveal the blue print for your home business. There are numerous paid and free business plan products that you can use to develop your own home business plan. Unless you areseeking investors in your small business, you can learn how to write a business plan that keeps your business working toward yourgoals. To have a well written small business plan, you will find your goals easier to reach and keep track of your progress both with building your customer base and sales. Starting a home business without a writing a well thought out business plan is like building a house without a blue print to guideyou every step of the way. Your home business foundation built on these eight areas will give your business a strong identity and focused sense of direction tohelp you plan and manage your business effectively. Business Summary. Write out a description of your business. What kind of company do you want to build? A well written description orsummary of your business often propels you through each step of how to write a business plan. Writing the summary first means you will always have the basic premise of your home businessidea at the top of everything you put in your business plan. Name your business. You may think that your direct sales business already has acompany name but that is not the name of YOUR business. Creating a distinct name for your business will help make your plan. Does your business name reflect what you offer? Is it easy to remember? Does it have strong branding potential? Should you reconsider your current business name if it not working with your product? Make sure the name of your business fits not only your product or services but your mission statement. Itemize your products or services. Write out descriptions of your products; how do they look, smell, taste,feel or how your services will help others reach their own goals in life. How will your offerings improve the lives of others? Sort through why others aren't already doing it and if they are offering exactly what you are going to offer then what prevents the competition from doing it better or more cheaply than you are. Mission Statement. Your mission statement is a concise clear summary of the goals of your business. In your mission statement, you will define exactly what your business does, the products or services offered and what makes your business unique above the competition.Writing the bottom line of your business goals into your missionstatement will guide the rest of your business plan. Business Assessment. A major portion of your home business plan is a detailed assessment of four areas: your strengths, your weaknesses orlimitations, business and marketing opportunities and threats or barriers to your potential success. At this stage of your business plan, you will be looking at your industry. Your work experience and talents that will add to your business would fall under your list of strengths. Your lack of knowledge or funds could be listed as your weaknesses. Take into account howbroad your industry is when you are looking at your strengthsand weaknesses. If you have little money for start up then you will need to be creative in your marketing and running your business.Will your weaknesses mean your opportunities for success arelimited? Will your talent surpass your lack of funds? Opportunities for business growth may be dependent on your networking contacts or website design. Every business owner should remain wary of all threats to business success. Planning for problems before they arise will make running a business easier and more successful in the long run. As you can see this aspect of businessplanning is critical to all of your vision, your mission statement, your goal setting and running your home business. Goal Setting. Write your vision for your business. Be specific. You can revise this as your goals and mission changes. How do you envisionyour business a year from now then five years from now? Write out your goals and objectives. Break down each product or service into their own set of goals. Plan for expansion as your business evolves. Goals are useless unless you can measure your progress towards them and plan to regularly assess which goals have been met or still need to be fulfilled. Make your goals specific and time sensitive. With each business goal, itemize what needs to be in place to reach eachof your goals. Outline what steps you will take to reach the goals for your home business. Mark your calendar when its time to re-evaluate your goals and re-align your vision for your businessto match the direction your business is going. Celebrate when you reach your goals and regroup when you realize you missed the mark. It's important to decide what you consider to be a major loss and what you will accept as unsuccessful. Knowing what you will accept and absorb as a business loss before it happens will help prepare you for when it actually happens. Target Market. Research your desired target market. Identify who you expect to buy your products or services. Write a profile of your average customer. You need to know your target before you are able to aim. Study yourpotential customer's behavior. Where do they shop? What do they read?Do they move in specific social circles? Who wants or needs your business? Who will benefit from your product? What type of people will find your business a necessity? You cannot expect to fill a need or desire of a customer if you do not know what makes your offer unique and necessary. Look at those that offer similar products with success. Write out how you can rise above and differentiate yourself from the competition. At this stage of yourbusiness plan, describe how you can stand out from the crowd. Write down how and why your company is better than the competition. Study the competitions latest marketing strategies then outline here how you plan to counteract their business moves to give you the edgeyou need to stay unique and effective. While studying your customers and competition, take the extra time to identify complementary products or services that may fit yourcurrent business plan that may give the edge you need to compete in the future. Sales and Marketing Strategies. How will anyone know your business exists? What steps will you taketo make your business known? How will your customers find you? What can you do to ensure that you attract the customers you seek? How will you track your efforts? How much money do you have to putthese strategies in place? List your strategies - press release, printed catalogs, business cards,open house, craft fairs, business, conventions, virtual expos, sales letters, etc. Determine whether you will market exclusively online, locally to your warm market or a combination of both. If online marketing is part of your business plan then include an internet marketing plan to include your domain name and host, whether you will hire a professional website designer or do it yourself, your business logo and e-commerce set up. Business Start Up. Determine what equipment and services you will need to run your business to include setting up your home office, equipment, supplies, product inventory, customer record keeping, and bookkeeping. Create a checklist of professionals you need to secure for legal and financial advice, advertising expertise, office assistance or tax expertise. Starting a home business can be exciting and scary because it is Your dream that you are working towards with each work day. To write a business plan, means a great deal of commitment to the process. The process of writing a business plan will bring you closer to understanding yourself, your business goals, your company identity and reaching yourpotential customers. Although these areas are critical to writing a business plan, there is muchmore that will be added to your plan over time. Each time you reach a goal or discover a barrier to making the sale ~ you will return to your businessplan and revise your goals, strategies and techniques. Home business success is in the plan and implementation but also in theability to adjust and redefine your business goals to meet your customersneed or desire while letting you design your home business your way! WAHM Connections strives to bring solid, effective business tools and resources for the home internet business. WAHM - Work at Home Connections E-zineOnline Business Start Up Promotion Resources http://www.wahmconnections.com/ Create Your Own Homemade Joy Today! http://www.homemade-joy.com/ Permission granted for use on DrLaura.com. More >>

In Praise Of "Quiet Competence" Cliff Ennico www.creators.com It#146;s summer reading time. And while most folks are out reading the latest Harry Potter installment, or chilling with a dog-eared murder mystery from the local library#146;s used book sale, a few of us are catching up on the latest books of #147;business wisdom#148;, looking for something that hasn#146;t been said 10,000 times before. Now, readers of this column know that I#146;m not a big fan of the type of business book that might be called #147;Some Obscure Historical or Literary Figure You Vaguely Remember from High School, and What He or She Can Teach You About Running a Business#148;. But for every rule, there are a few exceptions. How I missed this one I don#146;t know, but the next time you#146;re in your local bookstore#146;s Business section, you might want to pick up a copy of #147;Soldier, Statesman, Peacemaker: Leadership Lessons from George C. Marshall,#148; by Jack Uldrich (AMACOM, $24.95 paper). Don#146;t remember who George C. Marshall was? Well, don#146;t feel badly. Back in 1967, when I was all of 13 years old, I was an avid stamp collector. That was the year the Postal Service released a 20-cent stamp (very damaging to my weekly allowance, I can tell you) commemorating George Catlett Marshall, someone I never heard of before. Checking my Grolier#146;s encyclopedia and learning he was one of America#146;s top generals during World War II, I asked my Dad, a decorated U.S. Navy veteran, #147;what battles did Marshall win?#148; Dad#146;s answer: #147;None, Cliff. He wasn#146;t a battlefield general; he was more of a behind-the-scenes guy.#148; A whopping 20-cent stamp to commemorate a behind the scenes guy? It just didn#146;t compute. So here#146;s a quick history lesson. Subject: George Catlett Marshall. As head of logistics for the U.S. Army during World War II, Marshall almost single-handedly transformed 175,000 poorly trained, poorly armed men into more than 8 million soldiers strong in the frantic months after the Pearl Harbor attacks in December 1941; A leading strategic advisor to Generals Eisenhower, Patton, et al. during the Second World War, Marshall became the chief architect of the #147;Germany first#148; approach that focused on defeating Adolf Hitler in Europe before concentrating on the Japanese threat in the Pacific; As Secretary of State under President Harry Truman after the war, he introduced the European Recovery Program, which became known as the #147;Marshall Plan#148; for its leading role in #147;winning the peace#148; and securing America#146;s superpower status; Ultimately, after serving as the president#146;s emissary to China, head of the American Red Cross, and Secretary of Defense, Marshall became the first professional soldier ever to be awarded the Nobel Peace Prize. Clearly, Marshall was someone who knew how to operate and manage one of the biggest enterprises in world history #150; someone who probably could teach you a thing or two about running your business better. I#146;m not going to reveal any of the #147;business#148; lessons of Marshall#146;s life #150; you#146;ll have to buy and read Uldrich#146;s book yourself. But in my mind, Marshall#146;s biggest #147;business lesson#148; comes not from what he did during his life, but what he didn#146;t do. The very fact that we struggle today to remember his achievements is, paradoxically, one of his greatest achievements. Years ago, when I was writing a book for lawyers on how to improve their people skills, I interviewed several dozen law firm partners and asked them what they valued most in a young lawyer. It was amazing to me how often the same two-word answer came back: #147;quiet competence#148;. Competence #150; the ability to get jobs done consistently right and on time #150; coupled with #147;quiet#148; #150; not drawing undue attention to yourself or how important your project was to the firm. If you had to describe Marshall in just two words, they would be #147;quiet competence#148;. Marshall#146;s place in history cannot today be questioned, yet it is amazing how little he tried to gain media attention or cultivate #147;superstar#148; status, unlike some other military figures from World War II. His achievements spoke for themselves, and consistently led to ever greater achievements. The point: to win a war, or succeed in business, you need heroes. But not all heroes are, or are meant to be, famous. In our media saturated world, it is possible to become a world famous celebrity without having achieved anything of lasting value. Given the choice, the better of us choose quiet competence over visibility-for-its-own-sake. In the long run, as Marshall knew, it#146;s the better choice. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com More >>

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I Got Those College Reunion Blues Again Cliff Ennico www.creators.com Just got back from my 30th college reunion (sob), and was amazed by the number of my 50-something classmates who have abandoned the corporate track to start their own businesses. Must be a trend, no? Anyway, here are some interesting questions I was asked during the reunion #147;keggers#148; (at least, the ones I remember . . . ) #147;I live in State A but want to open a business in State B. I don#146;t want to open an actual office in State B, but I want to be incorporated in State B for tax reasons. Is there any way to do that legally?#148; Generally, you don#146;t have to be a citizen of a state in order to set up business there. You do have to be a little bit disciplined, though. When you set up your company in State B, you will need to hire a #147;registered agent#148; to collect important mail from State B government agencies and forward it to you. A number of corporations, such as The Company Corporation ( www.incorporate.com ), offer this service for about $200 a year. I would also recommend opening a #147;private mail box#148;, such as those offered by The UPS Store, PakMail and other franchises, using that as your business address in State B, and having the franchise outlet forward all mail from your box to you on a weekly basis. Now for the tough part. When doing business, only your State B address must appear on all your business stationery, correspondence, advertising and address labels. If anyone sees that you are really operating out of State A, you will be subject to all of State A#146;s laws, taxes, etc. I would even suggest forwarding all of your outgoing mail to your #147;private mail box#148; in State B each week, and having them post it there so the return postmark is a State B postmark. #147;I#146;m employed full-time now, but am likely to be laid off in the next year or two. I#146;m thinking of starting a consulting practice in my field, and want to write and publish a book right now so I can #145;hit the ground running#146; when the time comes. How can I do this legally?#148; First, you should make sure that you haven#146;t signed an agreement with your present employer giving them ownership of any creative work product you generate while working for the company. If you have, then all the royalties and other income from your book legally belong to your employer; of course, they may let you keep it out of the goodness of their hearts . . . Your book should not make use of any confidential information you received only because you are a corporate employee, and please, please avoid using actual company employees in your examples and #147;war stories#148;. If you do, be sure to change their names and enough other details so that they (and you) won#146;t be embarrassed. Finally, realize that corporate employees rarely write books as a way of advancing within the corporate hierarchy. Once your book is published, your bosses will wake up to your plans to #147;strike out on your own#148;, and your future there may well be nasty, brutish and short. #147;I have been working as office manager for a private investigation firm for the past 8 years. There are two partners who started the company 10 years ago, but I am just an employee, and have been looking for #145;greener pastures#146; for some time. The partners got wind that I was thinking about leaving the company, so they recently offered me an equity stake of 1% of net profit (about $4,000 before taxes last year). I declined politely (I was actually insulted, but I didn#146;t let them see that), but then they asked me to make them a counteroffer. What should I do? I made about $111,000 last year, and generate approximately $280,000 in billable hours, while the company#146;s gross revenue is about $2.8 million.#148; You#146;re generating about 10% of the company#146;s gross revenue, but you have absolutely no control over the amount of profits the company makes each year. That all depends on your bosses#146; ability to keep costs under control. I would ask for a percentage of the company#146;s #147;pretax earnings#148; (gross revenue less operating expenses, but before taxes and compensation to owners) in a service business like this. Keep in mind, of course, that your bosses don#146;t have any legal obligation to give you any sort of equity compensation, and may well consider 1% of profits to be quite generous. Since the company has only $400,000 in profits to divvy up at the end of each year, each additional $1,000 you ask for is asking the partners to cut back their standard of living . . . something all of us are reluctant to do these days. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com More >>

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If You've Got The Money, Partner, I've Got The Time Cliff Ennico www.creators.com #147;My wife is starting a limited liability company (LLC) with a friend. My wife will work in the business full time, while her partner will not. Her friend, however, is putting up a significant amount of cash for the business, which my wife can#146;t do. What is the fairest way to divide the ownership of the LLC in a situation like this?#148; This is a tough one, and you will need the help of a really good tax adviser because the LLC tax laws are very tricky. Here#146;s one possible way to set up the LLC, according to tax lawyer Joseph Sweeney of Fairfield, Connecticut ( joe_sweeney@att.net ): First, your wife and her friend will need to sign an Operating Agreement (similar to a partnership agreement) when they form the LLC #150; make sure this is drawn up by a good lawyer; The Operating Agreement should provide that for management purposes, your wife and her friend will always be 50/50 owners of the LLC #147;regardless of their respective capital accounts#148;; and The Operating Agreement should also provide that your wife shall be entitled to #147;up to $XXX#148; in compensation each year for her services to the LLC, #147;or such greater amount as shall be approved by 100% of the LLC members from time to time#148;. So, for example, if your wife is entitled to take up to $50,000 as compensation, and the LLC earns $75,000 in net income this year, your wife would take her $50,000 #147;salary#148;, and the $25,000 balance would be divided 50/50 ($12,500 each) between your wife and her friend. Your wife would report $62,500 ($50,000 + $12,500) as income on her tax return for 2005, and her friend would report the remaining $12,500. Because your wife has only 50% of the LLC membership interests, she will need to obtain her friend#146;s consent before making any major business decisions, and if the LLC is later sold or goes out of business, your wife and her friend would share the proceeds 50/50 after paying off the LLC#146;s debts. Another possibility: your wife and her friend could be 50/50 owners of the LLC for management purposes, but with a provision giving your wife #147;preferred distributions#148; instead of a salary over a period of time while the business is growing. Example: the LLC would agree to pay your wife 80% of the LLC#146;s profits instead of 20% until such time as the LLC#146;s annual profits reach a specified target amount (basically, an amount that will enable your wife to live on 50% of the profits). At that time, the #147;preferred distributions#148; (the additional 30% of profits paid to your wife) would cease and the two owners would share in all future distributions 50/50, the same as their management split. This arrangement may make sense if you have no idea how much money the LLC will make (i.e. whether or not there will be sufficient income to pay your wife a fixed salary) in the early years. Yet another possibility: have your wife be the sole owner of the LLC, and have her friend loan the money to the LLC. Your wife would promise to repay the loan over the next 10 years, with simple interest at 6% per annum (a good commercial rate right now, and easy to calculate) plus an #147;equity kicker#148; of X percent of the LLC#146;s net income each year. That will give her friend a share in the LLC#146;s success, and your wife will have sole control over the LLC#146;s business. However, this arrangement has some disadvantages, according to Sweeney: this arrangement might overtax the cash flow of the LLC in any given year; your wife#146;s friend will not enjoy any of the capital appreciation if the business is sold or liquidated; your wife#146;s friend will not enjoy a deduction for any losses the business may incur.; and if the business doesn#146;t succeed, the loan will be a writeoff for the LLC, triggering #147;forgiveness of indebtedness#148; income that would pass through to your wife, creating a nasty tax surprise for her (and you). Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com More >>

How to Deal with Angry Customers By JoJo Tabares "I am tired of YOU PEOPLE sending me this dumb invoice every month!" Sounds pretty scary, doesn't it? You may be thinking...He sounds angry and I don't like talking to angry people. Well, would you believe me if I told you that you could learn some techniques that would turn this person in to a happy customer? It's true! Many times what an angry person really wants is someone who will listen and do their best to help. They don't necessarily need someone to say the "right thing" or someone who will "solve all their problems". They just need you to listen and do your level best to help them get what they feel they deserve. Now we interrupt this communication advice for a message from reality: *BIG DISCLAIMER* Nothing in communicating with human beings is certain because every person is different and their moods change from day to day or even minute by minute. Nothing works 100% of the time, but these tips will help you increase your chances of creating a connection with this person and enable him walk away feeling that you honestly did you utmost to help him! Don't take it personally. Understand that most angry customers aren't angry with you personally, but rather with the situation in which they currently find themselves. They may be frustrated and, until you hear them out, you have no idea why. Let them vent. Part of being good at customer service is letting the customer feel that he has the floor. Let him tell you the entire story. Take notes if it is long or involved. Only after the customer has felt like he has said his peace should you attempt to solve his problem. Make sure you are actively listening to what he is saying and what he is not saying. Sometimes you can tell more about what would satisfy a customer by paying attention to what your customer didn't say or by the nonverbal cues your customer gives out -than you can by the words he chooses. Ask for clarification if there is something that you do not understand. Better to ask what may seem like a dumb question then to start off on the wrong path to solve his problem. If you begin by answering a question he didn't ask, the anger will only intensify. Make sure you know what it is that happened and perhaps what he wants done about it before you begin. Validate your customer. Sympathize and empathize with your customer as much as possible. Tell him you are sorry that he is so frustrated. This is not the same as admittingfault or accepting blame for the situation. It just further lets your customer know that you are there to help him and are interested in his welfare and not just the company's bottom line. Otherwise your reactions to his anger or your responses to his statements may serve only to fuel the customer's anger. State back to the customer what you heard him say. To make sure you didn't misunderstand, state back to the customer what you heard him say is the problem. This way you can clear up any last minute details before you get into the answer with him. You don't have to have all the answers. Saying "I don't know." may be the correct answer to the customer's question. One of the worst things you can do is to pretend to know the answer only to find that it won't work for the customer. Be honest and tell the customer you will have to find out for him and call him back. Ask him if he can hold if the answer is within reach. Make sure you follow up with the customer when you said you would! Share your commonalities with your customer instead of focusing on the differences. Identify with him by bringing out something that you both have in common. Perhaps share a short story about something similar that happened to you. Tell your customer what you can do for him. If you can do exactly what your customer wants, fantastic! If you can't, have another proposal ready that would be a good fit for your customer. If you feel it is warranted (and if you can), offer a freebie or a discount on another product to show good faith. If your suggestion doesn't appeal to the customer, ask him what he would like you to do and see if you can accommodate him. Sometimes your customer may not even know what he wants from you. Stating this may help your customer realize that they are being unreasonable. Or perhaps your customer will come up with a way that will work for him that you would never have thought of on your own. Explain why you may be limited in what you can do. If it simply isn't possible to do what he wants or if it is just too costly for your company to do this, explain that openly and honestly with your customer. Thank your customer for bringing this to your attention. If they have brought an issue to your attention that will allow you to better meet the needs of your other customers, this is a good thing for you to know! Thank your customer for allowing you to provide better service or a better product to your customers. They will appreciate knowing that not only did you help them with their problem, but that they were the catalyst for a positive change in your company. JoJo Tabares holds a degree in Speech Communication and has over 20 years of experience in the field. She is the author of the Say What You Mean series of studies on effective communication skills. If you would like more information on how to effectively communicate in small business, please visit www.artofeloquence.com . Permission granted for use on DrLaura.com. More >>

When Family And Friends Become Investors Cliff Ennico www.creators.com #147;I am trying to raise $500,000 for my limited liability company (LLC). So far I have verbal commitments totaling $200,000. My attorneys are telling me that because this is a #145;private placement of securities#146; under the federal securities laws, I have to prepare a detailed prospectus and other disclosure documents and give them to my investors before I can take their money. These attorneys are quoting me between $10,000 and $15,000 to do the necessary paperwork. Do I really have to comply with the securities laws, when all of the investors will be friends and family members who are exceedingly wealthy and can easily afford to lose their entire investment if my company goes under?#148; Just because your investors are friends and family members does not exempt you (or them) from complying with any law #150; federal, state or local #150; that regulates a company#146;s capital raising efforts. Whenever you hit up a friend or relative for seed capital, you are engaged in an offering of your company#146;s #147;securities#148;, and sadly, you have to at least consider whether or not you are required to comply with federal and state securities laws. If you were raising more than $1 million for your business, you would have to file paperwork with the federal Securities and Exchange Commission (SEC) to register your offering as a #147;private placement#148; under the SEC#146;s Regulation D. The good news is that you#146;re looking for only $500,000, so you shouldn#146;t have to deal with the Feds. The bad news is that each state has its own securities law #150; known as a #147;blue sky law#148; #150; regulating offerings of securities that are less than $1 million. These laws are literally #147;all over the place#148; #150; just about every state has adopted its own unique rules about what you have to do before you can take investment capital from a resident of that state. In most states, you will have to prepare a legal disclosure document called an #147;offering statement#148; (similar to a stock prospectus), and give it to your investors at least several days (the exact number varies from state to state) before you can legally take their money. In some states, you may be required to file a draft of your #147;offering statement#148; with the state securities agency and have it approved by the agency before you can give it to any of your investors. Special rules apply if you are raising capital for real estate development, oil and gas drilling, and other tax-advantaged investments. You will need to identify the state in which each of your investor friends and family members resides, and find out what you have to do before you can legally take their money. Here#146;s a way to save money #150; count the number of investors you think you will have in each state, and ask your attorney to tell you what the #147;de minimis#148; rule is in each state. Each state has such a rule (#147;de minimis#148; is Latin for #147;really small#148;), which when translated into plain English says #147;if you#146;re selling your securities to fewer than X residents of our great State, it#146;s not big enough for us to care about, so you don#146;t have to prepare or file any particular paperwork here.#148; The X, of course, varies from state to state. So, for example, in Connecticut you don#146;t have to do anything if your company has fewer than 10 investors total (including you), while in neighboring New York you can have up to 40 New York investors and an unlimited number of investors in other states. It may cost you a few hundred dollars to get this legal advice, but as long as you stay below the #147;de minimis#148; ceiling in each state where your investors reside, it may save you tens of thousands of dollars in compliance costs. I#146;ve said it before in this column and I#146;ll say it again now #150; when borrowing money for your business from friends and family members, do not treat them as #147;friends and family#148;. Treat them the same way you would treat total strangers, and give them all the paperwork the law requires. Good contracts make for good business relationships. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com. More >>

Real Estate Is Great, But Remember, It's A Business Cliff Ennico www.creators.com Looking for evidence that the current speculative #147;bubble#148; in real estate is just about ready to burst? Read this week#146;s e-mail: #147;I am buying two properties (condo units) in Florida. Both will be in the same building, which is pre-construction, so I am essentially buying just the contract, no real property. I hope to sell the properties before construction of the building is completed and they close in early 2008. I am buying the first unit 50% from my personal savings and 50% with money from my regular IRA, which I plan to convert to a Roth IRA with the expectation that the profits on that half of the investment will then be tax-free to the Roth IRA. Since I#146;m told only one investor can buy each unit, I plan to set up a limited liability company (LLC) to own the second unit. My Roth IRA would invest in the LLC, which would then purchase the second unit. My question is: will the profits on this second unit be tax-free because they will #145;flow through#146; to my Roth IRA?#148; Wow, did you get all that? Basically, this person is so desperate to cash in on the real estate #147;boom#148; that he or she is tapping an Individual Retirement Account (IRA) to buy two units in an apartment building that hasn#146;t even broken ground yet! The questions raised by this e-mail are extremely technical in nature, and should be answered only by a tax professional who is intimately familiar with the complex rules governing IRAs. If a Roth IRA cannot legally invest in a pre-construction contract like this one, you will be clobbered with taxes, interest and penalties for making a premature #147;distribution#148; from your IRA if you are younger than 59-1/2. But I do have some common sense advice for anyone thinking about making this kind of investment: DON#146;T DO IT! Inspired by a number of best-selling books describing the cash flow benefits of investing in real estate, such as Robert Kiyosaki#146;s #147;Rich Dad, Poor Dad#148; series, a lot of inexperienced suckers #150; er, I mean investors #150; are putting everything they#146;ve got in speculative real estate schemes that make this one look tame. Investing in real estate now is like buying stock in a #147;dot com#148; startup circa 1999. Frankly, I wouldn#146;t buy ANY investment real estate right now, especially real estate that won#146;t be ready to generate income until 2008, and I certainly would not use my retirement money to do so. Wait for the bubble to burst and then, if this builder is still around (I doubt they will be), you can pick up these units at a bargain price, without having to hit your retirement savings, assuming you think the location will still be desirable in three to five years#146; time. What about real estate that is ready to generate income today, such as a two-family home that you can rent out to families just getting started in life? Always remember that when you own a rental property, you are a #147;landlord#148;, just like Snidely Whiplash, complete with top hat and handlebar moustache. Everyone I know who does it says it#146;s a part-time job, and you have to look at it that way. Be prepared to devote at least 20% or 30% of your total available time to managing your #147;investment#148;. After all, when the toilet overflows in one of your apartments at 3 a.m. Sunday morning, whom do you think your tenant will call to fix it, right away? The #147;Rich Dad, Poor Dad#148; books, while generally accurate in their explanation of how #147;the rich get richer and the poor get poorer#148;, don#146;t talk about the joys of dealing with insane tenants who trash your properties, refuse to pay their rent on time, and sue you for discrimination or some other trumped-up legal violation if you try to evict them. If you haven#146;t already, take a professional real estate management course before making any sort of investment in rental properties. Your local community college probably offers one. If it really were as easy as the #147;Rich Dad, Poor Dad#148; books make it sound, everybody would be getting filthy rich investing in real estate. Trust me, it ain#146;t, and they aren#146;t. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2005 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com. More >>