LILIANA MARSDEN

Benjamin Franklin said there were only two things certain in life: death and taxes. So it applies universally to try to minimise the cost of tax since we cannot do much about death.

In many countries the term fiscal year is used to indicate the year to which companies prepare their accounts, in the UK it is sometimes used to refer to the tax year, the year used by statute for tax reporting by individuals and is not commonly used for accounting years used by companies.

The official fiscal year varies from country to country

USA – 1^st October to 30^th September

UK – 6^th April to 5^th April

Australia – 1^st October to 30^th September

In Canada, New Zealand, India, Hong Kong, and Japan,the government’s financial year runs from April 1 to March 31

I will use the term fiscal year as the year when your profits are charged to income tax.

1. Time your withdrawal

If you are taxed on cash withdrawn from the business, as it is the case for a director of a limited company in the UK, delay your withdrawal if you do not require the cash until the following fiscal year.  Payment of tax is then delayed for a full year.

2.   Keep your business cash and private cash separate

Do not mix business receipts and expenditure with personal receipts.  Always bank cash takings and set up a standing order to a separate account for your personal expenditure.

3.   Keep your business records neatly

Give your accountant properly filed and sorted paperwork.  You can provide them with copies – this will save money in your accountancy bills as normally accountants charge on time spent.   You will also be less vulnerable to tax investigations.

4.   Give yourself a tax free gift

In the UK you can reward an employee by a “long service award” to any employee with over 20 years service.  If you trade with a Limited Company you are an employee and you can reward yourself with this tax free lump sum.

Make enquiries with your advisor to see if the same applies in your country of residence.

5.   Ask for advice

Ask your Accountant or Tax Advisor about the records you need to keep.  More people suffer interest and penalties as a result of inadequate record keeping than from outright dishonesty!

6.   Avoid unnecessary penalties

Do not forget to inform the Tax authorities that you have started trading.  In the UK it is within 3 months of the first day of trading.

 7.   Make an election

If you get married or enter into a Civil Partnership and both partners each own a property, do not forget to decide as to which of the two residences is to be classed as your main residence.  In most countries the profits from the sale of main residence are exempt from Capital Gains Tax or equivalent.

 8.   Pre trading expenditure

Do not forget to keep all receipts from expenses prior to starting trading as most of the expenditure will be deductable once you start trading

 9.   Are you feeling guilty?

If you have not declared all your income or have underpaid tax, you will be leniently treated if you disclose it voluntarily before you are found out!

10. If you have a doubt ask

Tax authorities prefer to answer questions rather than you making a mistake because you are not sure what to do.

Warning:  Some of the tips above are simplifications of complex tax planning techniques and you must take advice for them to work for you.

Until next time …

One of the most common areas of business failure is lack of skills of the owner.  This applies both to online and offline business models.

The time you spend preparing for your new business is the most important time.  You should ensure you have all the skills necessary.  It will pay in the long run.  This does not mean you have to sign for courses and spend your valuable time learning new skills.  It means to delegate if you have in-house staff or as it is the case in most situations:  Outsource the skills you need!

There are many misconceptions about outsourcing.  One we must clear straight away is that outsourcing involves sending work to people in other countries who work for cents and perform the work below standard.  Outsourcing means finding an expert on the field and delegating the work.

What benefits will outsourcing bring to your business?

-          You will become more accomplished in your business as outsourcing will enable you to have more done in the areas that your business needs and that you have the skills already.

-          You will save time not only by getting more done by having assistance but you will save the learning curve associated with learning a new skill.

-          You will save money, this at first seems impossible.  How can you save money when you will be paying a professional?  Simply by saving your time.  If you are charged out for say $60 an hour you might find someone skilled in the task that only charges $30 per hour.  You will also save money as you no longer will need to purchase new software for the new task.

-          You will be more focused in your business.  Simply focus your own time in the areas you are skilled in and I guarantee your business will benefit

-          Your business will experience growth and increased profitability as a result.  Especially when you hire someone to do a task that you know needs doing but you don’t enjoy doing and keep putting it off.

Examples of outsourcing:

Bookkeeping: this would avoid you to have to purchase accounting software such as QuickBooks, Sage or any other.  You would avoid the time spent in the learning curve that such a task involves.

Graphics: For all your online mini sites and eBooks there is no one better in my opinion than Planet Divinity.  They really understand the internet business and in my experience they are one of the most honest internet marketers around.  They actually refunded to me my purchase and said not to waste my money having a website makeover when I just needed some retouching.

Website Design and Maintenance: For mini sites my recommendation as above.  For other type of sites ask for recommendations from other businesses, your local Chamber of Commerce or similar organisation.

There are many areas where your business can benefit from outsourcing.  For further ideas and resources about this topic I found that Outsource Weekly is a great place to start

Other places that I have used successfully for finding professionals in any discipline are http://www.elance.com and http://www.guru.com.  Websites and freelance directories are another good source of outsourcing professionals.

I have given here the basic ideas about outsourcing but before you rush to either outsource or investigate the topic further some words of warning:

Do not rush to outsource because it seems to be the in thing, you must have a plan of action. 

Do not outsource a loss maker because outsourcing it will not make it profitable.  But in contrast if you have a money maker idea that you don’t have the time to dedicate to it, outsource it!

Do not outsource a task that can be automated instead.  For example, do not outsource the submission of your article marketing instead consider using sites such as: Easy Article Marketing or Submit Your Article

Well I hope now you are ready to start outsourcing to increase your profitability.

Until next time….

A business without a brand is like a product without a name.  It needs to be the focus of any business trying to create customer loyalty and retention.

Brands are a form of consumer protection.  They know exactly what they are buying regarding its reliability and quality and customers know exactly where to go if they need to complain.  Brand popularity changes due to fashion and change of interests.  Kellogg’s was the second brand in the world a decade ago, now it is 34th.   New brands are introduced with change of technology:  IBM, Microsoft, Google, Amazon and many more.  The number one brand is Coca Cola (source: Interbrand)

That, in a nutshell, is what a brand means in the offline business world.

Now, how brands affect online marketing?

People are still wary of buying through the internet. Why? Unfortunately, the many scams around attract more publicity than the honest sellers.

EBay made a success using the principle of community and that most people are trustworthy.  When you purchase in eBay you are actually sending money to someone you don’t know and they will send goods in exchange for your money.

So what is the usual way of branding for successful online entrepreneurs?

They use their name – John Thornhill, Jim Cockrum, Kevin Riley – just to name a few.  It is the way of having a brand and also assists to change the impersonal nature of the Internet.

How did they establish their brand and now grow and nurture it?

-      They created a sense of loyalty and pride of their brand

-      They are authentic.  They do not claim to be something they are not.  Remember whatever is written in the internet stays forever and lies and deceptions have a greater chance of coming back and you will regret it.  I already said that I have bought many information products about online businesses over the last 5 years.  I am amazed at how many of them, when I tried to re-visit the websites, were no longer there.

-      They managed to differentiate themselves by their styles and by giving exceptional value and service to their customers.

 -      They adapted to changes.  Any business needs to adapt to changes but an online business needs even more adaptability.  I read once a book about Business techniques and the author kept repeating “remember the dinosaurs” as his way of reminding his readers how necessary change and adaptability really is.

 -      They identified their target market or niche and they keep expanding on the niche by bringing in new products that give added value to their list (prospects).

My conclusion is that basic business is the same wherever it is an online business or a traditional business.  Businesses have always had to cope with change, the only difference is that change is a lot faster nowadays but the basic principle remains:  build your brand and give exceptional value and you will be successful.

Until next time….

A portfolio career is when a series of paid activities are carried out simultaneously or, if not simultaneous, with fixed period of time for each activity.

There are long term forecasts that indicate that people just having a long term full time career will be in the minority.  It does not matter if this activity is carried out under employment or self employment basis or a mixture of both.

Let’s examine the types of portfolio careers:

-          Working full time as a contractor for a fixed length of time and then another career

-          Have a full time job / contract and introduced a part –time different activity

-          Having a multitude of part-time activities carried out at the same time

This trend has been popular for the over 45 for a few years.  It is believed that it is the future for the 20s to 30s age group.

Nobody will hang you a portfolio career, you have to search and decide what you want to do.  In my case, I secured a part time job with that aim.  The only problem you might encounter, if you set up to do what I did, is that you feel contented with the income the “part-time” job brings and procrastination sets in.

For example if you are in a full time job you might look at your skills and abilities to set up a blog in something  that interests you or related to your profession/skill and this blog could be the spring board to your part-time activities that, if done right, might become full time.  Another departing point could be “what skills you have, people paid money in the past?”

Especially in these times of economy downturn, portfolios careers offer the added advantage that all the eggs are not in one basket, if the company goes into liquidation or you are made redundant, you are not relying in one income stream alone.

Also it is easier to move with the trends and offer new things easily, think about the large corporations that take years to change procedures as various committees have to approve the change.

Remember also that a portfolio career might be the first stone to an entrepreneurship career; you might find a niche or gap in the market as you are carrying out the various activities.

The perception has always been that the 20s to 34s age range where the more likely entrepreneurs, but this is not true, the Kauffman Foundation in a recent study found that the 20s to 34s were the most unlikely to start a company.  They found that the highest ages of 55 and 64 were the group where the highest rate of entrepreneurial activity.

A portfolio career is a natural progression for the advice given to companies to diversify.  If diversification is the key for large corporations why it cannot be for the individual?

Why a portfolio career?  It would give you freedom to choose the areas of your skill set that you enjoy most.  I have a friend that has a part time job as a bookkeeper and she enjoys the interaction it gives her will her clients but she also loves illustrating and graphics so she taught herself Photoshop and then she did a course on it and now she offers graphics and illustrations through her website.

My portfolio career constitute my accountancy work for American Essentials and then I do a few tax returns and accounts for friends and family (I stopped advertising for clients when I realised that I did not want to do it full-time) and my e-commerce or internet marketing.  I trade for all these activities under my limited company banner.    For me, my portfolio career was intentional as I had left my full time career in 2004 and had gone to live in Argentina for two years and when I came back I actually looked for a part time Financial Controller/Financial Director work.

Until next time….

The three letter word is TAX.

It is advisable to plan the structure of your business from the earliest opportunity, changing the structure later will cost you money and time.

I will use the wording used in the UK throughout for different business structures but for my US readers it is a case of changing sole proprietor for sole trader and corporation for Limited Company.  Click here for a simple explanation of the US System.

In the UK and most of the western world you have four main choices: sole trader, partnership, limited company and limited liability partnership.

The main factor for most people will be the tax savings to be had in the choices but it should not be the only reason.  You should also consider other factors just as important:

a)   Personal risk

b)   The amount of record keeping

c)    How your business will be perceived

d)   How you plan to develop in the future and exit strategy

Remember you can still be employed and also have self employed income.

Sole trader:

Obviously this is the easiest way of running your business, involves registering with HM Revenue and Customs via form CWF1 or by ringing 0845 9 15 45 15.  You are taxed on your profits whether you take them out of the business or not and you are taxed under the income tax rules.  You will be fined if you do not register within three months of starting a business.

This is the structure that gives you more freedom initially and has less record keeping.  You are personally liable for any debts of the business.  You have total freedom with the choice of name but as I will explain later it is not necessarily the most tax efficient way of running your business.

Partnership:

The freedom is similar to above and the partners are responsible for the business debts.  Therefore if a partner cannot meet the business commitments the remaining partners are liable. Also remember that a partner can enter into binding contracts on behalf of the Partnership.  Please seek professional advice and have a very good Partnership agreement drawn up by a solicitor.

This is a good choice in the case of partners in life as the full tax free and rate allowances can be used for the stay at home partner.  The partners are “sole traders” in their own right and are taxed individually on their partnership share of profit.  The partners must register individually.

Limited Liability Partnership:   

This is a registered Partnership with Companies house where the partners limit their liability for business debts.  The partners are liable to income tax as self-employed.  Income tax is paid on the total profits of the partnership.

This is the preferred form of trading of certain professions where previously they were not allowed to have a limited company or limited liability and when their associations relaxed the rules it could be too expensive to re-structure the business as a limited company, especially if the partnership had accumulated a lot of business assets.

Annual accounts must be filed with Companies House and are publicly available.

Limited Companies:

Personal risk is limited to the share capital introduced to the company (unless personal guarantees are given for the company borrowings)

The profits are taxed under corporation tax and the directors are taxed as employees and on any dividends taken out of the business.

You must register your company with Companies House before starting trading.  In the web there are many organisations that specialise in setting up companies.

Normally you have greater administrative costs as annual accounts must be filed with Companies House.  Small companies with a turnover of less than £5.6m do not need to have their accounts audited.

Your customers perception is higher when you are trading under a limited company.

It is easier to reward your employees and family by issuing shares in your company.

Also as it can be seen on the following example, there can be tax savings to be made.

My favourite form of tax planning involves having both a sole trader or partnership and a Limited company, to enable the directors of the Limited company to run their motor cars through the self-employed entity and move enough profits to cover the sole trader or partners’ allowance.  This also allows the directors to pay Class 2 National Insurance that counts towards their basic state pension, as well as incapacity, bereavement and maternity benefits.  This requires professional advice as it is not suitable for every trade or profesion.

I hope the above has provided you with food for thought in how to structure your business either online or offline.

Until next time …

Information contained in the above posting is intended to inform on current choices about business structure and it is not intended to be a statement of current law and practice, I accept no liability for any errors of fact contained herein and in particular I accept no liability for any loss caused by any person acting or otherwise upon such material.  Please take full advice from an accountant if you are in any doubt whatsoever regarding your accounting or taxation matters.

Hello everyone

Computers and then the Internet have been a passion of mine for years.  I have always loved reading.  I used to spend all my pocket money buying books.  At one time I had a personal library of over 1000.  I taught myself English mainly by re-reading books that I had previously read in Spanish.

I had books about everything.  In fact, one of the ongoing jokes at work was whenever a subject was discussed I would pipe up:  “I have a book about that subject”

My main passion was channelled into 5 broad categories:

* Small Businesses/Entrepreneurship online and traditional

* Marketing – online

* Health and Nutrition,

* Alternative Medicine

* Cookery – especially Foods from  Around the World.

In 2005 I discovered eBooks / information products.  Soon after my discovery I purchased 90 days Power Seller Challenge by John Thornhill.  I had toyed with the idea of having an online business but life and other distractions seemed to get in the way.  I had an eBook website which I never promoted therefore it attracted very little traffic.

My passion for books continued to greater heights when I discovered the digital form and I purchased hundreds of information products.  It didn’t take long before I came through the idea of making a living through selling information products.  After three months or so, I made the decision that I would follow John Thornhill’s methods and you guessed it! I finished up purchasing more e-books about marketing on line from some obscure authors that promised you the earth and came across a few that simply were copying what John Thornhill was doing but not offering the support or the proof that John provides.  What a waste of time and money!

I already had the “secret”, what I lacked was direction and a plan.  Perhaps you are wondering why I, with all my business training (see about), I did not see the light before.  Well in my defence I will say that it is so much easier to see the picture when you are advising a client and you see the business through your professional eyes.

I subscribed to John’s newsletter through an email from my eBook website and when I formatted my computer last year I did not set this account through Outlook thus losing the newsletter and the information it contained.  About a month ago I started receiving the newsletter again and to my amazement I noticed that John was offering advanced coaching.  Without any hesitation I signed up for the coaching and now, for the first time, I believe I am on track to be an online marketer.

Before I close my first ever Blog entry I would like to give a special thanks to Dan Thompson and Paula Brett of D9 hosting who has restored my confidence in hosting companies and I without any reservation will be recommending her hosting company to my online and offline clients.

Until next time…