Happy Holidays to our Clients and

Friends from the Counselors of

SCORE Chapter 114

Satisfied Customers are Good for Your Business

This article was written by Carl Woodard, Chairman, SCORE Orange County

Keeping your current customers happy is as important today as ever….perhaps more so. Analyze the cost to gain 10 new customers and you will realize that keeping ten current customers is far cheaper. And, you already know their buying habits, preferences, payment history and how to attract their business. How do you keep them, given today’s business environment? First, keep supplying them with top quality products and personal service. And follow up with them to see how they think you are performing….but be careful how and when you ask for that opinion.

Recently, I entered my local bank and found the usual long line of customers waiting to be served. I became line member number 17. The line moved slowly and I noticed that there were eight teller windows at the long counter, but only three were occupied. After several minutes, a well dressed employee moved down the line and, with clipboard in hand and a smile on his face, asked me “How can we help you today?” I suggested that he count the number of people who were backed up, drop his clipboard, go behind one of the open windows and start serving customers. His response was, “I wish I could” ….and he moved to the next in line….and asked the same insincere question. The result was a few dozen customers being vividly reminded that they were not being helped very well.

Customers know good quality in products and services which they receive. It is expected, appreciated and leads to loyalty. Loyalty can give you the edge even though your price may be higher and your store smaller than competitors. And, when you ask your customer how you can help them, be ready to demonstrate that you mean it by taking some action. Now, that will impress them.

At SCORE Orange County, we like satisfied customers. We first try to determine exactly what help you need for running your business. Do you need a business plan, or tips on how to improve sales? Do you need to understand your cash flow or learn how to use social networking to introduce your business to an expanded customer base? SCORE offers workshops throughout the county, most at no charge. Then we follow with personal, confidential, one on one counseling either in person or via the internet, always at no charge. We are well stocked with experts on finance, marketing, sales, human resources and other specialties. And you can receive these services free. Simply call us at 714-550-7369 and arrange an appointment or visit us at www.score114.org and sign up for a workshop or reserve an exhibit table at our next Women in Business breakfast meeting.

You will find that, when SCORE asks you, “How may we help you?” we really mean it. Try us!

What's Involved in Changing a Business's Legal Entity?

This article was written by Dick Ginnaty, CPA

So you decided to change the legal form of your business.  That is, you've been operating as a sole proprietor (or partnership, or an LLC) and you've decided to change to a corporation (or LLC, or partnership). What are some of the considerations involved in converting legal entity types?

First, you need to recognize that in a lot of ways it is like starting a new business. New tax identification numbers must be obtained such as new federal identification number (www.irs.gov) new state employer number (see www.edd.cahwnet.gov) and new sales tax reporting number (see www.boe.ca.gov).

In addition, accounts receivable and accounts payable from the old entity (in our example a sole proprietorship) would not carryover to the new entity as they are an asset and liability of the prior entity, and do not represent income or obligations of the new entity.

This issue will cause some confusion, and some overlap of bookkeeping.  You will likely find that you have to keep track of the new entities receivables and at the same time wind down the accounts receivables of the old entity. In many cases, the money collected from the old entity will have to be used to fund the new entity until collections of the new entity catch up.  This will often create a need to "loan" the new entity money on a short term basis to fund this startup period.  So in our example, the sole proprietor may need to lend money to the new corporation (with appropriate documents including an interest charge) to be repaid when possible.

Other considerations include deciding which assets of the old entity to transfer to the new entity.  It is not always the best idea to transfer all the assets of the old entity to the new one.  Items such as rights to names, patents, or trademarks may be better "licensed" to the new entity but not transferred (title wise) to the new entity.  In addition, certain assets acquired by the prior entity such as buildings, machinery and other valuable assets may be better protected from creditors or the risks of the business by keeping them outside of the new entity.

Planning is the key here, and you should consult your advisors when contemplating an entity change.

Good luck and here's hoping it "all adds up" for you.

Employee vs. Independent Contractor – Ten Tips for Business Owners

This article was written by Bern Lefson, SCORE Orange County Management Counselor

All too often we find employers upset with the high cost of workers’ compensation and associated employee costs who decide to employ Independent Contractors. While the perceived incentive of lower cost is attractive, this decision can put an employer out of business. Both the State and the IRS are seeking revenue and this area is ripe grounds for additional revenue.

The most significant potential liability of worker misclassification is back federal, state and local payroll tax withholding (e.g., FICA and income tax). The IRS has made reviewing employee misclassification a priority when conducting audits. Other potential liabilities include overtime, benefits, and unemployment compensation.

The IRS does aid small and large businesses by posting the rules and tips on its website. Below is one of those tips that may assist you in avoiding fines, penalties and bad publicity.

Here are the top ten things every business owner should know about hiring people as independent contractors versus hiring them as employees. 1. Three characteristics are used by the IRS to determine the relationship between businesses and workers: Behavioral Control, Financial Control, and the Type of Relationship. 2. Behavioral Control covers facts that show whether the business has a right to direct or control how the work is done through instructions, training or other means. 3. Financial Control covers facts that show whether the business has a right to direct or control the financial and business aspects of the worker's job. 4. The Type of Relationship factor relates to how the workers and the business owner perceive their relationship. 5. If you have the right to control or direct not only what is to be done, but also how it is to be done, then your workers are most likely employees. 6. If you can direct or control only the result of the work done -- and not the means and methods of accomplishing the result -- then your workers are probably independent contractors. 7. Employers who misclassify workers as independent contractors can end up with substantial tax bills. Additionally, they can face penalties for failing to pay employment taxes and for failing to file required tax forms. 8. Workers can avoid higher tax bills and lost benefits if they know their proper status. 9. Both employers and workers can ask the IRS to make a determination on whether a specific individual is an independent contractor or an employee by filing a Form SS-8 – Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding – with the IRS. 10. You can learn more about the critical determination of a worker’s status as an Independent Contractor or Employee at IRS.gov by selecting the Small Business link.  Additional resources include IRS Publication 15-A, Employer's Supplemental Tax Guide, Publication 1779, Independent Contractor or Employee, and Publication 1976, Do You Qualify for Relief under Section 530? These publications and Form SS-8 are available on the IRS Web site or by calling the IRS at 800-829-3676 (800-TAX-FORM).

Women’s Breakfast, January 15 at the Center Club

How to Stay Positive and Focused in Uncertain Times

We had a very successful Women in Business breakfast, with 95 persons sign up. Please join us for the next Women’s breakfast on Jan 15. We promise you a exciting program with Santa Maybin as our featured speaker.

Sarita Maybin is a high energy speaker whose clients include Hewlett Packard, NASA, Nokia, Kaiser Permanente, WD-40, Los Angeles County and the Las Vegas Convention Center among others.

Sarita has spoken at conferences and companies in 48 states, Canada, England, Asia, Mexico and Iceland.

She is a former university dean of students with a Masters degree in Counseling, a Toastmasters Humorous Speech Contest winner and a past president of the National Speakers Association, San Diego chapter.

,Sarita will share:

• 7 strategies for thriving on change

• How to cope with situations that are beyond your control

• 3 P's for staying positive

• How to use "resiliency resources" to bounce back from adversity

• 5 ways to rekindle passion for your career

For reservations, go to www.score114.org

Currency Weak or Strong?

This article was written by Bob Bradley, Score Orange County Management Counselor

I admit that I have written similar articles in the past but it is always important to keep things in perspective. Most of the news we receive about the dollar has a political agenda. One party blaming the other for a "weak" dollar or another party taking credit for a "strong" dollar. We write, comment and take sides as if the dollar was the "home team" and we have to root it to victory. When another currency gains in value against the dollar we put it in terms that suggest the "home team" is being challenged and our national pride is at stake. As one economist says, " we should label them 'competitive' and 'non-competitive."

Markets around the world are based on relative strengths of economies. Currencies are no different. When markets are in a panic, which they were a year ago, investors and speculators seek safe havens and that is usually buying US Treasuries. Buyers need dollars which pushes the "market price" of dollars higher because there is great demand for them. The so called "strong" currency that results serves to inhibit exports (our products are more expensive overseas) which is a factor in determining this country's GDP, which measures the growth of the US economy.

Panics always end and investors always seek higher returns when they feel a degree of normalcy has returned. This has happened as investors have marched back into the stock market seeking better returns which has reduced the demand for dollars and thus the "price" to buy dollars. This decrease is what we affectionately refer to as "weak". However, this "weak" currency is actually "competitive" currency as it makes our products more attractive to other countries to buy because they are cheaper. This increases our exports which favorably contributes to GDP growth.

A quick look at the Bureau of Economic Analysis shows that the GDP grew by approximately $150 billion from the 2nd Qtr. 2009 to the 3rd Qtr. 2009. During prior periods, the excess of imports over exports was around $700 billion which is a subtraction from the GDP number. In the 3rd quarter of 2009 this number was reduced to approximately $350 billion, which means we had to subtract less than half the amount from GDP that we did in the past periods. If our excess of imports over exports had continued at the same rate as prior periods there would not have been any GDP growth. In fact there would have negative GDP growth which is a positive way of saying our economy would have shrunk (again).

So before you root too much for the "home team" please consider that you may get the win, but it may not be the victory that you thought it would be.