Business Structure For A Home Business

January 21, 2011

I blogged the other day about the new small side business venture I’m planning on exploring: Selling photographs I’ve taken in Europe, at Niagara Falls, in California, etc. I also stated that I would document this unfolding process for your information and mine.

My most recent contact was with my long time accountant, “Tom.” I assumed the correct form of business structure was a sole proprietorship and asked Tom if this form allowed deductions for assorted expenses. Please see below for my question and Tom’s answer:

Q: I am considering a side business selling photographs taken in Europe and Niagara Falls.
Should I consider any business structure other than a sole proprietorship? Estimated income is from a few hundred dollars per year, to perhaps a thousand or two.

If using the sole proprietorship option, can I deduct expenses: Craft show costs, framing, etc? What paperwork do you need me to maintain? Am I missing anything else I need to provide for either you or the IRS?


A: For your business you can deduct direct supplies and materials, and selling expenses such as craft shows mileage to get there advertising etc.


Simple process: Ask a qualified expert about options, document any expenses, and market the product to your chosen niche. With a little planning, fair pricing, and a desirable product, I can make a little extra money on the side. My plan is to sell primarily from a web site with a few craft or art shows added for more exposure. Once again, if I can do this, you can too. Use your talents and contacts, look for opportunity, and follow through!

Best of all, a sole proprietorship structure costs nothing for my venture.

A sole proprietorship, also known as a sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. The owner receives all profits (subject to taxation specific to the business) and has unlimited responsibility for all losses and debts. Every asset of the business is owned by the proprietor and all debts of the business are the proprietor’s. This means that the owner has no less liability than if they were acting as an individual instead of as a business. It is a “sole” proprietorship in contrast with partnerships.1

By Dion D Shaw

Dion Shaw is the founder and owner of Homepreneurs.



5 Budgeting Ideas for Every Small Business Owner

January 20, 2011

Scott Allen
Jan 17, 2011 –

Managing cash flow is one of the most challenging aspects of being a business owner. Learning to budget, however, can help you overcome this challenge.

Many entrepreneurs leave a secure job to run a business. When you do this, you move from earning a regular income to earning a more haphazard income, which can make personal budgeting difficult. The haphazard nature of business income is one of the risks of running a small business. The following tips will help any entrepreneur or small business owner reduce the risks by creating a workable budget for the business.

1. Create a Realistic Cash Flow Projection

Don’t assume your sales will live up to your projected market potential in your first year or two of operation. Your dream business may be terrific, but reality is often quite different. While it can be difficult to project income since you don’t know exactly how sales will go in any month, be as realistic in your projections as possible. It’s better to underestimate your potential business income than to overestimate when you come to budgeting.

2. List Your Essential Expenses

Essential expenses incurred in running a business include wages, taxes, rent or mortgage payments on the business property, and operating expenses such as power, water, Internet and telephone bills. You may also have legal obligations that incur a cost, such as registering your business name. When you estimate your initial startup costs, include all the essential expenses for the first six months, as this will give you some time to get your business up and running. Even if you work from home, there will be essential services and costs you’ll need to pay for your business.

3. List Discretionary Business Expenses

Discretionary expenses for a business could include buying some supplies, especially in the initial startup of a business. Do you really need to purchase new plants for the office in the first month? Or to provide free coffee or sodas for your employees? Decide which items you want, but could live without until your business can afford to purchase the items without going into debt.

While people trying to sell you advertising may tell you otherwise, expenditure on marketing is not a required cost of doing business. If your business is self-funded, or any time cash flow is tight, focus on marketing strategies that are either free — networking, public speaking, media outreach, and even cold calling — or pay-for-performance, such as affiliate marketing or referral programs. For budgeting purposes, it’s best to set your marketing expenses as a percentage of sales. Exactly what percentage depends on your industry and business model, but 2-10 percent is the starting range recommended by both SCORE and the SBA. Note, though, that it may need to be as high as 20 percent or more in certain industries, particularly during the critical brand-building stage.

4. Reduce Debt Quickly

While it may be difficult to start a business without incurring some debt, you’ll want to reduce the debt as quickly as possible. Debt costs the business more in interest repayments, so having a budget that has the business operating in the black sooner is always a good idea. If you do take out a debt for your business, ensure you will be able to make the repayments every month.

5. Never Spend All of Your Profits

Always keep some of your profits in reserve to cover contingencies. Work out a spending budget that spends less than you expect to make. Even if you are operating a small business from home, do not pay yourself all of the business profits each month. Instead, work out a reasonable wage for yourself and pay it regularly, as part of the budgeted expenses of the business. If your sales are higher than you expect in one month, don’t be tempted to splurge in the next month. Keep to your written budget and keep the additional profits aside. That way, if the sales fall unexpectedly in one month, you’ll have reserve funds available to cover the shortfall.

Write out your business budget and ensure that your expenditure is less than your actual (not projected) income. A successful business is one where both business profits and personal income for the business owner and founders continue to rise. Good budgeting techniques will help you achieve both.

Scott Allen is Vice President of Marketing for OneCoach, a business growth coaching and consulting firm that helps successful entrepreneurs achieve even more. He is coauthor of The Virtual Handshake: Opening Doors and Closing Deals Online, The Emergence of The Relationship Economy, and a contributor to over a dozen books on entrepreneurship, marketing and social media.


What is Innovation?

January 18, 2011

When I’m out on the road speaking to audiences about innovation, it is reinforced again and again that innovation has become a buzzword, and much in the same way that people struggle to define love – there is no commonly accepted definition for innovation. Try asking someone:

“What is love?”

And then see if their definition matches your own. Chances are it will be completely different. Then ask them:

“What is innovation?”

Try this with a group of people and then the fun really begins.

In many cultures people talk about a language of love, mostly because the subject baffles most of us and we are always failing to truly communicate our love to the special people in our lives. And, if you think about it, often the most successful love language is non-verbal. I’m afraid this won’t work for innovation.

From the Language of Love to the Language of Innovation

So, let’s examine the importance of the language of innovation, or to be specific, the importance of creating and sharing a common language of innovation in your organization. This begins with actively defining in cross-functional groups (multi-level if possible) what you want innovation to mean in your organization. It may sound like a silly or pedestrian exercise, but my experience working with organizations looking to commit to innovation has shown repeatedly the necessity of getting everyone speaking the same language before an innovation effort begins. And you know what?

Most organizations skip this step.

You may think that everyone in your organization knows what innovation means, or that it should be obvious what you want your innovation efforts to achieve and that you can just skip this step. But, how many of you would build a product without at least a business, marketing, product or technical requirements document?

An Exercise in Perspective

I don’t want to give away the exercise I do in my speeches, so here is a new one for this article. Imagine that you work for an automobile manufacturer and I were to task you with the solving the following technical challenge, and think about what your approach would be:

“How would you make our automobiles use less gasoline?”

Now, some of you might focus on making the automobile lighter, others might focus on making the engine more efficient, still others would focus on making it more aerodynamic, and a few of you would think about ways to make an automobile that ran on something other than gasoline altogether.

Ask the innovation question in the wrong way and you will get different innovation results than you expect.

While it may be good sometimes to have people going off in lots of different directions, that needs to be a conscious choice, otherwise the innovation energy of your organization will dissipate and little will be achieved. You must focus the innovation energy of your organization and that is done by defining what innovation means to your organization and what the common language around innovation will be.

Getting Started

As I described in Innovation is No Accident, a formalized approach to innovation begins with defining what innovation means for your organization and by creating a common language for the organization . So, how will you define innovation in your organization?

As a thought-starter, here is my definition of innovation:

“Innovation transforms the useful seeds of invention into solutions valued above every existing alternative – that are then widely adopted.”

For me, value is the key. To truly be successful at innovation, you must increase the value enough to overcome the pain of switching from their existing solution (even if that is the ‘no solution’ solution).

But, you must decide with those in your organization what innovation means to you, what your common language of innovation is, and make a plan to communicate these things out to the entire organization. Creating a language of innovation is more than just defining what innovation means to your organization. It also requires you to agree how you are going to talk about innovation in your organization and often it is wise to combine these with communications of your innovation vision, strategy and goals – but that’s a topic for another day.

For now, I leave you to explore the important work of creating your own shared innovation language.

Parlez vous innovation?

Braden Kelley is the author of Stoking Your Innovation Bonfire from John Wiley & Sons. Braden is also the editor of Blogging Innovation and founder of Business Strategy Innovation, a consultancy focusing on innovation and marketing strategy, and @innovate on Twitter.


Creating My Own Successful Start Up: Opportunity Knocks

January 16, 2011

At the most basic level, small business creation is a simple process: 1) Identify a problem; 2) Develop a solution for that problem; 3) Make that solution cost-effective, useful, and profitable.  What follows is my attempt at the first two steps: Stop back to learn if the third step happens and why or why not.  You’ll know when I know – literally!

In a previous blog, I discussed a  business opportunity for photographers.  I’ve recently decided to follow this advice and attempt to sell photographs I’ve taken.  I am not a trained, professional photographer with expensive equipment, SLR cameras or a studio, but simply an amateur with a Canon PowerShot point and click camera.  I’ve been fortunate to travel and take some interesting – in my opinion – photos in Europe, Niagara Falls, California, etc.

Why Do This?

Taking an inventory of my creative abilities, I know I can’t draw worth a darn, sing especially well or write music.  I do however, take good photographs: Of landscapes, architecture, kids playing ball, animals, etc.  Not only would I like to share some of these pictures with others, but I want to “create art”, in a way that I enjoy.   If I can make a little side money from this hobby, great; if not, the memory of my travels will surround me in framed format.  If the hobby-business transition works out well, perhaps I can develop a second income stream and, long-term, an eventual retirement career.

An Opportunity! (or the ‘problem’)

Recently, I was at my doctor’s office for a routine exam and I noticed the reception room wall was conspicuously empty and a big white block of space.  Previously, beautiful paintings covered the wall, presumably gifts or exhibited products from his patients.  I took a chance and asked the Doctor about the wall and missing artwork.  He indicated another physician left the practice and took most paintings (by his wife) with him.

I decided to take a chance and asked the Doctor if he would consider replacing the artwork with some photos of Europe, framed of course.  Surprisingly, he immediately agreed, providing an opportunity to display my product for the thousands of patients that visit his office.  As previously blogged, this is an example of creative marketing at little cost to me and a win-win scenario for all parties.  The office will pay me nothing, yet gains attractive and professionally framed artwork, while the artist (me) receives a permanent display of his work and a sales opportunity.  In addition, this opportunity provides a personal level of satisfaction and pride in crossing off an item on my bucket list.  (A solution for the problem)

Building my Team with Partners

Previously, I’ve used a professional to frame other photos or paintings either purchased or created by friends.  Julie is remarkably gifted in color matching, framing presentation, and offers unique creativity.  An independent, she works from home with corporate and private clients.  Following the opportunity above, my first instinct was to contact Julie and set up a meeting.  We’ll sit down at my kitchen table on Monday for a few hours and brainstorm ideas, sizes, pricing, and if needed, a contract for more work stemming from this project.  I’m thrilled that one so talented as Julie will be part of the team.  Contact Julie at

What’s Next?  (make the solution cost-effective, useful, and profitable)

Much is accomplished, yet the heavy work remains: Product selection, confirming the Doctor’s commitment, pricing models, a web site, business cards, accounting, inventory control and others I’ve not considered.  I will continue to document this process and share my experiences on Homepreneurs.  Check back for updates and learn from my mistakes or good ideas.  Please feel free to add comments or ask questions.

Lessons Learned

A good project manager – I have functioned as one many times – always documents lessons learned, good or bad, throughout a project’s life-cycle.  Here are some of mine:

–          Watch for and seize opportunity when possible.

–          Follow through on opportunities; a “next time” may never occur.

–          Maintain old contacts and relationships.  These are extremely valuable in the right circumstances.

–          Take a chance and don’t be afraid to ask:  Nothing ventured, nothing gained.

–          Ask for assistance when needed.  Most people are happy to help; if not, you don’t want them around anyway!

* A Monday update: The previously scheduled Monday meeting with Julie (framer) was postponed until Saturday because of client conflicts.  This minor setback provides another key lesson:

– Be flexible.  Forcing or insisting on maintaining schedules can cause bad feelings and is counter-productive.

By Dion D. Shaw

Dion Shaw is the founder and owner of Homepreneurs.

How to find microfinance groups in your area

January 14, 2011

By Karen E. Klein

January 10, 2011

Dear Karen: I recently graduated from USC, where I started the first chapter of a microfinance organization on campus. Are there other microfinance organizations in Los Angeles?

Answer: Microenterprise development aims to provide financial services to the poor. Microfinance, a frequent component of microenterprise development, involves lending small amounts to entrepreneurs who probably would not qualify for conventional loans.

There are seven professional microfinance organizations operating in Los Angeles, including CHARO Community Development Corp. and the Pacific Asian Consortium in Employment.

Contact information for all seven programs is available through Microenterprise Fund for Innovation, Effectiveness, Learning and Dissemination, a nonprofit that tracks the nearly 700 microenterprise development programs in the United States, at Hover over “publications” and then click “microenterprise program directory” to search for programs by state.

• Start-ups, be ready to adapt

Dear Karen: I want to start a business this year. What advice can you give me?

Answer: Be flexible and creative. Even the best business plans can be sidetracked in unexpected ways. “Business conditions change and the original idea can’t be executed in the ‘planned’ way. Stock markets crash, credit is tight, customers disappear and so on,” said Bryan Janeczko, founder of Wicked Start, a website resource for start-up entrepreneurs.

“To adapt, you must be flexible and willing to change the business model or your approach,” he said. “Overcoming challenges is the only way to drive your business success.”

Small-business questions? E-mail Karen at


7 Ways to Make Extra Money in 2011

January 13, 2011

by Kimberly Palmer
Monday, January 10, 2011

Job security might be out, but freelance, contract, and temporary work is in, which makes it easier than ever to moonlight as a graphic designer while you spend your days as a public relations rep. Slimmer staffs mean companies often need the extra help, and new websites offer free tools that match potential employers with workers. And earning extra money beyond your steady paycheck, if you’re lucky enough to have one, can provide a big boost to your financial security.
Here are seven ways to make extra money off the new economy in 2011:

Launch a Brand
When Kimberly Seals-Allers, former senior editor at Essence magazine, was expecting her first child, she discovered that black women face higher risks during childbirth and pregnancy. “I realized we were a special group, and I wanted to write a book about everything in black women’s lives. Not just pregnancy, but money, men, and myths in our community. [I wanted] to create a new way forward.”

Her first book, “The Mocha Manual to a Fabulous Pregnancy,” turned into a series as well as an online magazine, maternity line, and consultancy. Seals-Allers also licensed use of the Mocha Manual name to create an instructional DVD sold at Walmart and supermarkets.

Start a Blog
The anonymous blogger behind Lazy Man and Money defies his site’s name. He works about 14 hours a day on weekdays and then puts in nine hours on Saturday and Sunday. But his hard work is paying off — his blog earns him enough to support his lifestyle; back in 2008, he estimated his annual earnings at around $30,000. But it’s tough for part-time bloggers with full-time jobs to keep up with all the demands of a lucrative blog. “There’s simply a lot more [to do] than what the average reader sees,” he says.

Even if the blog itself doesn’t generate a six-figure salary, it can lead to other money-making opportunities, such as consulting or speaking gigs. Silicon Valley Blogger at The Digerati Life has carved out a successful niche as the expert on personal finance and technology in Silicon Valley. While she says she didn’t earn much during the first six months of her blog’s life, she received her first $100 check from Google AdSense shortly after that point, when she was getting around 600 unique visitors a day. She now earns money from her blog-related consulting, as well.

Sell Your Skills
Whether your expertise lies in social networking, editing, or web development, several new websites can help you find potential clients willing to pay you for your work.,, and make it easy to advertise your skills and find work, which you can do from the comfort of your home at all hours of the night. To get started, explore the websites to see what might be a good fit. You can also stick with a more traditional approach and use, which allows users to post advertising for their services, ranging from household labor to music lessons.

Sell a Wacky Service
For those interested in a more unusual approach, the innovative website allows users to sell (and buy) services for $5. Current offerings include sketching a stylized portrait, writing a name on a grain of rice, and digitally restoring a photograph. It’s one of the trendiest ways to make a quick buck for the internet-savvy; dozens of videos, websites, and blogs offer advice on how best to earn money off the site. The best advice? Since you’re only going to make $5 a pop, sell a service that you can do easily and quickly.

Talk and Teach
Colleges, organizations, and companies are constantly on the lookout for new experts that can inspire an audience. If you’ve built up an expertise on a subject, perhaps through your blog, then consider branching out with some speaking gigs. Offer to talk for free at first to build up your reputation, and then a speakers’ bureau can help connect you to paying gigs (for a cut of your fee).

Design T-Shirts
Companies such as allow people to design and sell their T-shirts for a cut of the profits. According to the company’s website, some users earn over $100,000 a year. But it’s not always easy: Jen Goode, who earns enough through CafePress to pay her mortgage each month, found success after a year and a half of long, sometimes 16-hour days. Her time is spent creating designs and then uploading them. She has uploaded about 2,500 designs, many of which are cartoon oriented, including the popular penguin series. For her, she says, the secret has been to make many different images that are steady sellers, as opposed to creating one or two megahits. Now, she says she doesn’t need to put as much time into her shop because she has such a large inventory of designs.

Sell Other People’s Products
Make-up companies such as Avon and Mary Kay are always looking for new sales representatives, as are other companies such as kitchen products seller Pampered Chef. “If you don’t have to make a big investment to get into it, it’s probably not a bad idea,” says Marcia Brixey, author of “The Money Therapist.” But she warns people to stay away from businesses that require sellers to make significant up-front purchases that they might not be able to unload.

The bottom line: The new economy offers plenty of creative ways to earn extra money; to find the best fit for you, consider your skills, lifestyle, and ambitions.

Full Article Here:

6 Common Money Mistakes Small Business Owners Make

January 12, 2011

We’ve all known businesses that appear to be doing well, but end up going out of business because they’ve made major mistakes in pricing, cost control or financial management. Here are some of the areas where these problems arise and some suggestions for how to avoid making the same mistakes.

1. Pricing Strategy

Pricing is probably the most important decision you make every day. If your prices are too high, you won’t get enough volume. If you set them too low, you might get a lot of sales, but you will lose money. So how do you find the right price?
If you’re in a business where your prices can be directly compared to your competitors’ (shoes, for example), your flexibility is limited. You can always run specials and have sales, but your competitors may follow. You’re better off trying to create a sense of immediacy so that your customers buy as much as possible at full price. This is where good marketing makes all the difference. Try different approaches, track customer behavior, and make adjustments as you learn what works.
On the other hand, many non-retail businesses and businesses with patented products have more flexibility in their pricing. It’s common here for entrepreneurs to actually under-price their products. Most advisors recommend starting a little high and monitoring the response — it’s easier to lower a price than to increase it.

2. Accounting for Cost of Goods Sold and Tracking Gross Profit

Many small businesses do not correctly account for the full cost of their products or services. It’s much more complex than many realize. For example, if you are a clothing retailer, the cost of the freight to your store is part of the cost of the clothes. You also need to track and factor in shrinkage, damages, and unsalable returns — all of those costs that can eat up your profit margin.
If you’re a service provider, the wages that you pay the employees providing the service — including payroll taxes, insurances, and benefits — should be considered “cost of services provided.”
Accurately accounting for cost of goods sold is important so that you can control those costs and also so that you can easily monitor gross profit, which is the difference between sales dollars and the cost of goods or services sold. It’s not enough to just monitor sales volume — what matters is the profitability of those sales.
If your gross profit percentage starts to slip, you need to immediately find out why and fix it. It could be caused by a cost issue, a pricing problem, or both. Don’t wait until the end of the month to look at your gross profit numbers — put a system in place where you can monitor them weekly or even daily.

3. Credit and Collections

Many small businesses do a poor job of credit and collections. In many industries, customers expect to buy on credit, and in many service businesses, fees are billed after services are performed. This means that your business is making an investment in your customer or client’s company. Treat this with the seriousness it deserves! Use a solid credit-checking process, set realistic credit limits, be very clear about what your credit terms are, and stick to those terms. You can also ask for a deposit up front, or a retainer if you are providing services. You may lose a sale or two, but it’s better than never getting paid.

4. Budgetary Controls

Every business has overhead expenses, which can get out of control. These are things like rent, utilities, administrative employees, insurance, and office supplies. You should prepare an annual budget for these. Have your accountant load it into your accounting software and then run a “budget vs. actual” report each month. This will show you where spending is creeping up.

5. Necessary Business Infrastructure

Small businesses often skimp on the personnel, resources, and infrastructure needed to run a business effectively. You need top-notch accounting help to track your day-to-day activity as well as a good CPA. You also need a robust accounting system, a great attorney and insurance broker, good computer systems and a responsive IT firm to keep your systems running, Make sure these are in your budget.

6. Taxes

You need to be informed on tax issues in order to make good business decisions. These taxes include income taxes, sales and use taxes, payroll taxes, and business property taxes. Don’t be afraid to ask questions of your tax advisor when you need to. The cost of non-compliance, especially with payroll taxes, can be staggering, and knowing how to manage your business decisions with income taxes in mind can leave more money in your pocket.
Even if you’re already doing a good job in these six areas, you may be able to enhance your profitability by making small improvements to your current procedures. If you’re not doing these things, I encourage you to start implementing them. You’ll be amazed at the results.

JoAnne Berg, CPA is the founder/CEO of Peer Coaching Network, Inc. in Carlsbad, California. She is a trusted business advisor with over 30 years of experience as an entrepreneur, CFO/COO, and CPA/advisor to closely held businesses. Read her blogs at The Art of Small Business. You can follow her on Twitter @JoAnneBerg and on Facebook.


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