Business Advice

At a recent lunch outing, I was taken aback when an employee of the Ike’s Love & Sandwiches shop asked me if I would like to add $.75 to my order so that they could get health benefits. I left a message on the company’s website because I thought that was an unusual question and moments later one of the company’s owners, Sam, called to explain. Sam described the difficulties in trying to attract employees to his small business. Health benefits are attractive to job seekers but often too expensive for small business owners. With minimum wage hikes of recent years, businesses with more than 26 employees are finding it tough to be competitive. But that’s not stopping them from finding clever ways to still offer health benefits - just make it part of the transaction by asking customers if they would like to add a surcharge. This enables Sam to avoid raising the prices of the sandwiches. Those who don’t mind the charge are helping Sam’s employees get health benefits they would not ordinarily receive. Small Business Hiring Trends A recent report from NFIB revealed that Small Business Optimism continues to trend positive. Small businesses are breaking a 45-year-old record in job openings, job creation and plans to hire. The report also reveals that nearly a quarter of small business owners are struggling to find qualified workers. With the continued rise in small business growth, 24% of those looking to hire report it’s even harder to find talent than just 5 years ago. Competition means that business owners have to be even more innovative to attract talent and afford candidate demands. Attracting Top Talent from Big Names Indeed’s 2018 Small Business Survey showed that 37% of small to medium businesses compete with big-name companies by offering higher salaries. Higher salaries can be challenging to business cash flow, so small businesses are being creative with offerings such as: The ability to grow with an advance quickly within the organization Telecommuting or working from anywhere Flextime Generous vacation policies Open or unlimited paid time off Younger job seekers and Millennials are also searching for meaningful work and authentic connections with co-workers. Small businesses have the edge when it comes to candidates looking for career potential instead of simply blending in with a large corporate structure. Employees want to feel like they’ll have an impact and a bright future with an employer that cares about them as individuals. Inventive, Low-Cost Perks While it was interesting to see how Ike’s sandwich shop paid for employee benefits, startups and entrepreneurs have discovered unique perks to attract job seekers at a low cost. These benefits provide employees with positive and happier feelings about their place of work as well as attracting new candidates. Pet-friendly - A 2018 study revealed that workplaces that allowed pets and/or offered pet insurance retained employees longer, employees took fewer sick days and they felt more engaged in their jobs. Summer hours - Four day work weeks during the summer allow employees to take advantage of vacation and travel plans. Fitness/Wellness - Offering to pay for part of a fitness program, gym membership or healthy choices in the break room, these perks can keep employees healthy and motivated. Telehealth options - Without the hefty cost of health insurance, telehealth offers healthcare services via a mobile device, typically through apps. Free food & drinks - Some businesses not only have a fully stocked kitchen, but they may also even provide beer for those post-work happy hours. Commuter benefits - A small monthly stipend to pay for public transportation or gas can also be attractive to help pay for the cost of getting to work. Online Career Training - Spotlighting career development dramatically improves employee retention and attracts job seekers. 401K plan - There are plenty of 401K plans for small business to offer as an employee benefit, with or without matching. Casual dress code - As simple as it seems, allowing employees to dress as they would like is almost expected from younger job candidates. Litzky PR, a small firm in New Jersey, offers extra time off for wedding planning. Columbus, OH marketing agency, Postali, give a monthly Starbucks allowance. The Catch Co, whose mission is to encourage more time outdoors, allows their employees more outdoor time with company outings and unlimited vacation. Successful entrepreneurs are competing for talent by re-imagining work/life balance and what coming to work should feel like in 2018. With a little creativity and a lot of heart, fostering an employee-friendly work environment can be the thing that sets your business apart from others who are competing for the same talent.

Failing to seek IP protection may put your small business at a competitive disadvantage, so in this guest post we include some basic IP tips.

  The Qualified Business Income Deduction is part of the recently revised business tax code. In this guest post,  leading author and tax expert, Barbara Weltman how business owners with multiple businesses can approach the QBI deduction. You can find more blogs by Barbara on her blog Big Ideas for Small Business.  The qualified business income (QBI) deduction provides a significant opportunity for business owners to slash their federal income tax bill. Designed to lower the effective tax rate on owners of pass-through entities, the write-off can be as much as 20% of QBI. But various limitations come into play that can reduce or bar the deduction.  For a basic primer on QBI, read my earlier post "Understanding The New Qualified Business Income Deduction."  If you are a business owner with an interest in multiple businesses,  you should read on. The good news is, you may be able to aggregate them to optimize their deduction. The bad news: certain businesses may not be able to break up in order to use the deduction, more on that part later. So here are some of the points to note in putting businesses together or taking them apart in order to get the biggest QBI deduction possible.   Aggregating businesses Usually, if you own businesses directly (a sole proprietorship or single-member limited liability company, or LLC) or have interests in S corporations, partnerships, or limited liability companies (LLCs), you figure the deduction for each business and then combine them for a single entry on your tax return. But you may be able to lump your business numbers together in figuring your QBI deduction. This may allow you to take a larger deduction than if you didn’t aggregate your business interests. If eligible, you can aggregate your interests, regardless of what your co-owners do with their interests. To qualify for aggregation, you must meet all 5 conditions: The same person or group of persons own (directly or indirectly) 50% or more of each business being aggregated. The 50% or more ownership exists for more than half the year. All tax items attributable to each business are reported on tax returns with the same tax year end (e.g., all businesses use a calendar year). None of the businesses are a specified service trade or business, or SSTB (any trade or business involving the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners). The businesses being aggregated satisfy at least 2 of these 3 requirements: (a) the businesses provide products and services that are the same (e.g., a restaurant and a food truck) or customarily provided together (e.g. a gas station and a car wash), (b) the businesses share facilities or significant centralized elements (e.g., personnel, accounting, legal, manufacturing, purchasing, human resources, or information technology services), and (c) the businesses operate in coordination with or reliance on each other (e.g., they have supply chain interdependencies). Other key points: Assuming eligibility, you can choose to aggregate some of your businesses and not others. The aggregation of businesses for purposes of the passive activity loss rules has no impact on aggregation for the QBI deduction. If one of the businesses being aggregated produces a negative QBI, each business with a positive QBI must be offset by a portion of the negative QBI. But W-2 wages and the unadjusted basis immediately after acquisition (UBIA) of qualified property from a business that has a negative QBI aren’t taken into account in figuring the QBI limitation. If there’s an overall negative QBI for the year, it is treated as a loss from a qualified business in the following year (the loss continues to haunt you). An election to aggregate businesses means they must continue to be aggregated in the future. New businesses can be added to the aggregated group. But if things change for businesses within the group (e.g., ownership drops below 50%), they may no longer qualify for aggregation. Each year you must attach to your return a statement identifying each business being aggregated. If you don’t, the IRS can “disaggregate” the businesses. Chopping up businesses Specified Service Trade Businesses's (SSTB's) with owners having high taxable income that would otherwise bar them from taking a QBI deduction may have thought they could separate out some functions in an attempt to qualify those separate parts as non-SSTBs. For example, it had been suggested to remove administrative functions or building ownership into a separate business to at least get the QBI deduction for this business. While having separate businesses is certainly allowed, the IRS has effectively killed the idea of chopping up businesses in certain situations in order to get the QBI deduction. An SSTB includes any trade or business with 50% or more common ownership that provides 80% or more of its property or services to an SSTB. If a trade or business has a 50% or more common ownership with an SSTB, to the extent it provides property or services to the commonly-owned SSTB, the portion of the property or services is treated as income from an SSTB. Even if a business would not otherwise be an SSTB but has 50% or more common ownership with an SSTB and shared expenses (e.g., wages, overhead expenses), it is treated as incidental to an SSTB if its gross receipts are modest. More specifically, the trade or business will be treated as an SSTB if its gross receipts represent no more than 5% of the gross receipts of the combined businesses. Bottom line The QBI deduction is a wonderful way to reduce your tax bill because it doesn’t cost you anything to get it (you don’t need to expend any money); it’s yours if you qualify. For the vast majority of business owners, the deduction is rather straightforward. But qualifying for the deduction becomes a complicated matter for anyone with taxable income over $315,000 on a joint return or $157,500 on any other return. Check with your tax advisor to learn more about how you can qualify for this write-off. Learn more about the QBI Deduction at our upcoming webinar with Barbara Weltman October 2nd.

      The IRS recently released more details about the Qualified Business Income Deduction, a new tax regulation that will impact small business owners. In this guest post,  leading author and tax expert, Barbara Weltman shares first impressions on the regulation and potential impact for small businesses. You can find more blogs by Barbara on her blog Big Ideas for Small Business.    If you own a pass-through entity—sole proprietorship, partnership, limited liability company, or S corporation—you may be eligible for a new tax deduction. It is a significant tax reduction for business owners who qualify for it. But it isn’t simple because numerous limitations and acronyms come into play. The following is a brief introduction to the qualified business income deduction.   Overview Referred to as the Section 199A deduction (the section in the Tax Code for it), the qualified business income (QBI) deduction runs from 2018 through 2025. You don’t have to expend any capital or take any special action; if you qualify for the deduction you get it. But the bad news is that there’s new terminology and calculations for limitations on the deduction which can be daunting. The deduction does not reduce your business income and does not reduce your net earnings for self-employment tax if you’re self-employed. It does not reduce your gross income as does other business-related expenses, such as retirement plan contributions on your behalf, health insurance for yourself, and one-half of self-employment tax. The deduction comes off your adjusted gross income in the same way as the standard deduction or itemized deductions (there’s a special line for the QBI deduction on Form 1040), effectively reducing the tax rate you pay on your business profits. For example, if you are in the 32% tax bracket and qualify for the deduction without any limitations, the effective tax rate on your QBI becomes 25.6%. What is QBI? The deduction is based on the amount of your qualified business income. This is essentially your profits from a pass-through trade or business. However, QBI does not include certain items that you do factor into your net income for determining what you pay income tax on. Items excluded from QBI are: Capital gains and losses (including Section 1231 gains) Dividend income Interest income Reasonable compensation paid to S corporation owner-employees Guaranteed payments to partners for services rendered to the business What is the QBI deduction? If your taxable income is no more than $157,500 if single or $315,000 if married filing jointly, then your deduction is 20% of QBI. The deduction cannot exceed your taxable income minus any capital gains. For example, if you are a sole proprietor with a net profit of $90,000 (and no excluded items) on your Schedule C and your taxable income is $100,000 (no capital gains), your QBI deduction is $18,000 ($90,000 x 20%). What limitations apply? Once your taxable income is higher than the taxable income threshold for your filing status, then various limitations come into play. The exact formula for determining the deduction (there are special rules for income from REITs and publicly traded partnerships that is not explained here) is the lesser of: 20% of your QBI, or The greater of (a) 50% of W-2 wages or (b) the sum of 25% of W-2 wages plus 2.5% of the unadjusted basis immediately after acquisition (UBIA) of qualified property. In addition to the W-2 limitation and the property limitation, there is a special limitation for a specified service trade or business (defined below). Only a percentage of QBI, W-2 wages, and the unadjusted basis of property can be taken into account. Once an owner of a specified service trade or business has taxable income over $207,500 if single, or $415,000 if married filing jointly, then this limitation means no deduction can be claimed. What are the special terms to know? There are a number of special terms you need to know in order to figure the deduction: W-2 wages. These are wages reported on W-2s to employees (including wages to S corporation owner-employees), plus elective deferral contributions to 401(k)s and similar plans and certain deferred compensation. Specified service trades or businesses (SSTBs). These are any trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners (a catchall category). Architecture and engineering are specifically not included in the list of fields. Fortunately, the IRS has narrowly construed the meaning of the catchall category so that the skill or reputation of an owner will be an SSTB only if the person receives payment for endorsing products or services, licensing the taxpayer’s images, or receiving fees for media appearances. For instance, a chef who owns restaurants and also endorses a line of cookware, only the income from the endorsement will be treated as an SSBT; the income from the restaurants won’t be tainted and subject to the SSBT limitation. Unadjusted basis immediately after acquisition (UBIA) of qualified property. This is essentially the cost of depreciable tangible property as of the date it’s placed in service. So if your sole proprietorship buys a $10,000 machine and begins to use it on March, 1, 2018, you have UBIA of $10,000, even if you write-off the entire cost on your 2018 return. Conclusion If you think the QBI deduction sounds complicated, then you are correct. Fortunately, the actual computation of the deduction is done automatically by software. The important concepts to understand are the overall landscape of the deduction and the new terms that come into play. An upcoming post will provide more guidance on grouping and splitting businesses and other aspects of this complicated but very important deduction. Stay tuned! Attend our webinar

  News of the General Data Protection Regulation (GDPR) has been floating in our peripherals since it was passed by the European Parliament back in 2016, but as of May 25, 2018, the privacy-focused piece of legislation will finally go into effect. And, though it’s specifically designed for those in the EU, American business owners are not exempt from impact. As an American business owner with your own set of privacy rules and regulations to contend with, the GDPR may not seem like much of a concern. However, since the regulations impact all organizations that process or hold EU customer data, any American business that falls into that category (i.e., businesses that have a web presence and/or sells their products to citizens within the EU) will need to comply. You’ll note that “web presence” was included, not just the notion of selling products or services. That’s specifically because of stipulations that focus on the collection of personal data, not just monetary transactions So, any organization that collects identifiable information (PII), which includes social security numbers, phone number, salary, race, marital status, military rank or civilian grade, age, medical records etc., from EU citizens will need to be in compliance. Top GDPR Takeaways for Small Businesses You know what the GDPR is, generally, but what specific things will be required of businesses? Here are a few of the most significant regulations and considerations that you’ll need to take into account if you want to be in compliance. Seventy-two-hour breach notification:  Just like it sounds, any organization or company that detects a customer data breach must notify the national authorities within seventy-two hours of that breach, and in some cases, customer notification must also take place. Consent for data is a must: Companies and organization must obtain explicit and informed consent when collecting and/or processing data from individuals, even if it’s something as simple as an email list. Explicit consent should be used if an organization wants to validate the sensitive data for use. Additionally, the consent must be achieved with a clear affirmative action, which means that those companies can no longer use “opt-out” or pre-checked boxes to achieve that consent. Further, consent requests must be separate from terms and conditions; cannot, in most cases, be a contingency for signing up; must be granular or designed in such a way that consent is specific to each type of processing; and named, meaning the individual must be made aware of what organizations or third-parties rely on that consent. Finally, organizations must document the aforementioned consent, including the specific consent requested/provided and when that consent took place, individuals must have the right to withdraw their consent at any time, and organizations must provide information about how an individual can withdraw their consent as well as an easy path to do so.   The right to be forgotten: organizations and businesses must comply with a request by an individual to “be forgotten” or to have a copy of their data.  Though simplistic in theory, the right to be forgotten will require that all organizations be able to delete not only primary data but also any data duplications, be they due to operational processes (i.e., cloud storage backup) or unspecified employee lead duplication.  This will require universal conversations and policies among all departments and employees who can access, copy or otherwise maintain customer data. Any data processed for a child under sixteen is considered unlawful if there is no prior parental consent; however, states within the EU can opt to reduce that age, with 13 years of age representing the cutoff. The aforementioned are just a few of the more specific requirements that business owners must meet if they want to become compliant with the GDPR.  Some of these requirements may take a few weeks (or months) to plan and execute, and so, as mentioned above, it’s best to start as soon as possible if you haven’t already. To get started, or make sure your efforts are aligned with expectations, considering the following steps. Analyze your current data processes; this includes how you obtain data as well as how you process and maintain that data. If you don’t have one already, you should have a Personal Information Assessment (PIA), and in some cases, you may need a Data Protection Impact Assessment. Work with your legal department to fully understand and address the GDPR requirements (like the DPIA; however, efforts should extend past legal departments or consultants and include contact with multiple departments, including IT, Marketing, and Finance, as many are directly involved or involved. Create a plan, not only for immediate compliance, but for long-term data procurement, management, and processing.  The end result should be a data privacy and security plan that can act as guidance for the future operations as well as documentation for compliance. Companies that don’t comply (or document that compliance) with the GDPR face substantial fines of up to four percent of global revenues. And while that amount can be damaging to any organization, small businesses that depend on every cent may suffer the most from non-compliance. During the next little while, your time will be especially precious as you work to ensure your business is compliant. The average business owner spends 33 hours applying for credit, you can save that time by checking with Nav. If you’re not currently compliant and the May 25th date is giving you anxiety, take a deep breath. Garnter, Inc. suggests that by the end of 2018, more than fifty percent of American businesses will be non-compliant.  Of course, that doesn’t mean that herd mentality will protect you from non-compliance in the event of a data breach – we all know how frequent they are these days.  For that reason, it’s important to address the issue immediately and take the steps required to meet GDPA requirements More from Nav The Best Small Business Checking Accounts Your Ultimate Guide to Small Business Loans What Is Cash Flow This article originally appeared on Nav.com. Jennifer is a alum of the University of Denver. While in the graduate program there, she enjoyed spending time identifying ways in which non-profits and small businesses could develop into strong and profitable organizations that while promoting strong community growth. She also enjoys finding unique ways for freelancers and start-up businesses to reach and expand their goals. More by Jennifer Lobb

In this post, Experian takes a closer look at specific challenges women business owners face gaining access to capital for their business.

With the Tax Cuts and Jobs Act of 2017 making dramatic changes in new tax law, business owners should be asking themselves how to plan for the future.

Consumers are being urged to monitor and lock or freeze their credit profile, but how should small business owners respond? Will a freeze impact a business?

When a small business is damaged by a natural disaster — be it a hurricane, flood, earthquake or tornado — recovery presents its own set of hazards. There is, of course, the immediate cost of lost business. There are both short- and long-term physical dangers posed by weakened walls and ceilings, exposed power cables and mold. And then there are the threats posed by skilled disaster recovery scam artists who see small business owners as easy prey. Kenneth Citarella, CFE, knows all about these post-disaster scams. A former New York state prosecutor, Citarella now works for Guidepost Solutions LLC, which provides investigations, compliance, monitoring, and security and technology consulting solutions for clients in a wide range of industries. In the wake of Super Storm Sandy, which devastated large sections of coastal New Jersey, Brooklyn and Staten Island in 2012, Citarella served as a Guidepost Solutions “Integrity Monitor,” making sure contractors were in fact performing the work for which they were being paid. “The days and weeks following a natural disaster are times of great stress and confusion,” Citarella said. “This is the perfect breeding ground for scams of all kinds. Small business owners need to be aware of how they may be targeted and how to avoid being a victim.” How Fraudsters Find Their Marks While natural disasters are horrific events, they’re great for contractors and restoration companies for whom such events are their bread and butter. As soon as a disaster occurs, it’s not unusual for construction companies to descend on the affected site, blanketing the area with pamphlets and brochures, and stuffing mailboxes with business cards. While many contractors are legitimate, there can be a good number of storm chasers who are just out to make a fast buck. At a time when construction labor is at historic lows, small business owners may find themselves working with a firm with less than stellar credentials “The more enterprising scam artists will take the time to go door-to-door, offering low-ball prices or even offering to cut the business owner in on the fraud,” Citarella said. “For example, they’ll offer to do the $75,000 worth of restoration work that is actually required, bill the business owner’s insurance company for $100,000, and then split the difference. This is an obvious solicitation of fraud and should be reported immediately to the local police.” Common Types of Post-Recovery Fraud In addition to the insurance scam described above, Citarella discussed other forms of fraud a small business owner might encounter following a major disaster. “The most common type of recovery fraud involves a contractor who shows up to do the first two or three days’ worth of work, and then just disappears. Another type involves the use of lower-grade or otherwise substandard materials,” Citarella said. Citarella also noted that otherwise well-meaning contractors may buckle under the pressure a natural disaster creates, leaving the business owner out thousands of dollars and still unable to operate. “A small contractor can easily get in over his head,” Citarella stated. “He may not be able to get enough workers, have problems with his supply line, or be managing too many projects at once. There may be no criminal intent here, but the outcome is the same.” How to Avoid Contractor Fraud Find reliable, licensed contractors and validate their businesses before hiring them to help you rebuild. Experian’s ContractorCheck.com/Hurricane is being offered as a free resource to those affected during this time of recovery. This website enables you to find contractors and easily check the critical components of a contractor’s business background, including license, bond and insurance data (if an when available from state licensing boards). Click here to see a sample report. Also, the Better Business Bureau (BBB) offers a list of recommendations to business owners and anyone else looking to hire a construction contractor, among their recommendations: 1. Ask for Recommendations. Ask friends, relatives and fellow business owners to recommend contractors they have previously hired. 2. Check Their Track Record. Use bbb.org or other business review websites to get customer reviews, complaints and any notices of criminal violations. 3. Verify the Business License. Make sure the contractor under review has a valid license to do business in your state. 4. Get Multiple Quotes. Always get at least three quotes for any particular job. Any quote that is unusually low is probably one to avoid. Remember the old adage, “If something seems too good to be true, it probably is.” 5. Look for Signs of “Professionalism.” A reputable contractor will arrive in a vehicle that is clearly marked and branded, and may wear a uniform bearing his/her company name. 6. Request References. Ask the contractor for a list of previous customers you can contact and discuss their satisfaction with the contractor’s service. 7. Check Professional Affiliations. Ask if the contractor belongs to any trade organizations. Such companies are usually bound to operate according to a strict code of ethics. 8. Avoid Large Up-Front Payments. Pay by check or credit card for added protection. Avoid paying in cash. 9. Get Everything in Writing. Demand a written contract, and make sure to read it carefully, especially the fine print. Make sure the contract includes the contractor’s name, street address, telephone number, email address and state license number. Fill in any blank spaces. Don’t sign anything you don’t understand. “Document every step of the reconstruction progress,” Citarella added. “Take pictures every day to record the contractor’s progress. Smartphone pictures can be invaluable in the event of contractor misbehavior or if there is a challenge by your insurance carrier.” Citarella described four “gears” that run any reconstruction machine. “There’s the business owner, the adjuster, the carrier and the contractor. All four need to work together to get a job done right. However, the only one who has a stake in effective cooperation is the business owner. So if you have a business that needs post-disaster repair, take the time to make sure it’s done right.” If you are in the process of rebuilding following Hurricane Harvey or Irma and need to check the contractor you are working with, go to www.contractorcheck.com/hurricane to receive up to 15 free reports. Also, Sam Fenerstock of Credit Manager’s Association published an excellent article titled “How To Assist Your Customers To Stay In Business After Natural Disaster“, it contains lots of great information about disaster preparedness and working with your customers if they are impacted by a natural disaster.