January 17, 2002
Table of Contents
Quote of the Week
Staff Article - Selected Tax
Considerations for Small Business
Technology Tip of the Week
Guest Article - Four Dynamite
Marketing Tactics in Action
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Quote of the Week
In youth we learn; in age we understand.
- Maria Ebner-Eschenbach
We have added seven terrific new ebooks to our
site that are free for you to download. These are outstanding books that you
can also freely distribute to whoever you like. Download yours today at:
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Selected Tax Considerations for
by SBC Staff
Given the inevitability of
certain approaching tax deadlines, we have seen an increase in questions
from visitors to our website about several tax issues that we feel are
worthy of discussion here. We'll review each of them briefly now. If you
have any questions or want to explore a particular issue in more detail,
please contact us with your specifics and we'll be happy to help.
S CORPORATION ELECTION DEADLINES
If you transact business through a corporation you can choose to make an
election to be taxed as an S Corporation. If you are not familiar with this
election, this may sound like we're getting into complicated territory here,
but relax. It's not that bad.
An S Corporation doesn't pay tax. Its earnings are passed through to the
shareholders who pay tax as if they had earned the income directly. The
earnings of a corporation that has made this election prepares a separate
form for each shareholder of the company that lists the items of income or
deduction that the shareholder must report on his or her individual income
tax return. The corporation's S Corporation income tax return, Form 1120S,
is filed with the IRS along with the Schedules K-1 that list the income to
be reported by the shareholders.
The whole purpose of this scenario is to avoid double taxation of the
earnings of your business; once at the corporate level and a second time
when you withdraw the earnings. This election can save you quite a bit in
In order to be effective for a given tax year, the election must be made by
the 15th day of the third month of the corporation's tax year. So if your
corporation is a calendar year tax filer and you want the election to be
effective for 2002, you need to file the election by March 15, 2002. If you
file later than that, the election will be effective for the following tax
year (2003) and your corporation would still be a regular corporation for
If you create a new corporation during the year, you must file the election
within two months and fifteen days of the first day of the corporation's
taxable year. So if you created the corporation on June 1, 2001, you would
have to make the election by August 15, 2001 for it to be effective for
WHAT HAPPENS IF YOU MISSED THE DEADLINE?
If you have an existing corporation with an established tax yearend, you'll
simply have to wait until the following year for your election to take
effect. You can simulate the same tax results by making sure you pay out all
the corporation's earnings to yourself and the other shareholders before
yearend. This would leave you with zero taxable income in the corporation so
it pays no tax and all of the earnings would be taxed to the individual
owners. However, you might open yourself to an unreasonable compensation
claim by the IRS if your corporation's earnings are very high. Also, you
will have to be able to estimate your corporation's taxable income very
accurately before yearend in order to do this.
If you have a new corporation, you do have another option. A new corporation
can adopt any fiscal yearend it chooses with its first tax return.
Continuing the example above, if you started your corporation on June 1,
2001 and realized on August 16 that you missed the deadline for filing your
S Corporation election, make June 30 your corporate fiscal yearend. File a
return for the short period June 1, 2001 to June 30, 2001 and work with your
accountants to try to make your expenses and income equal for that one
month. There are many accounting methods you can use to do this.
Next, make your election on August 16 for the tax year beginning July 1,
2001 and ending June 30, 2002. Assuming you and the other shareholders are
all calendar year taxpayers, you'll have to agree to change the yearend of
the corporation to December 31 in order to have your election approved. So
you will have a short S Corporation yearend for the period July 1, 2001 to
December 31, 2001. Starting in 2002, your corporation will be a full-fledged
calendar year taxpayer again.
There is a complete article that deals with this issue in more detail on our
website on the Business Articles page.
HOW DO I PAY MYSELF FROM AN S CORPORATION?
Many people believe that since they are taxed on the earnings of the S
Corporation anyway, they don't need to pay themselves a salary. This is not
true. You may get away with it but you are merely playing the audit lottery.
What's the difference you may ask? Employment taxes.
The IRS wants you to pay yourself and the other shareholders regular
salaries and withhold the required taxes just as though the corporation was
a regular corporation. If you are audited, the IRS will assess the taxes you
should have withheld based on what they believe reasonable salaries should
have been. They will also impose severe penalties for failure to withhold
and failure to pay along with hefty interest charges.
Bottom line? Pay yourself and other shareholders who work in the business a
salary. You have a lot of leeway as to how much the salaries should be as
long as you pay something that you can support as reasonable. The IRS isn't
going to be unreasonable with you unless you fail to pay salaries at all.
We hope this information is helpful to you. If you have other questions or
require more details, please do not hesitate to let us know.
Copyright © 2001, all rights reserved
Technology Tip of the
You probably have plenty of protection from
viruses and hackers at your office, but what about at home? Both can cause
tremendous destruction to your data if you don't have adequate backups. Even
with backups you can waste a lot of hours cleaning up the mess.
Well, you can bulletproof your home computers with two free downloads.
Get the AVG antivirus system at
It works extremely well and will cost you nothing.
Next, get the Tiny Personal Firewall from
This will keep the hackers away. To outsiders who might have found their way
into your system before, your computer will appear to be turned off. You can
test how well it works by going to the Gibson Research Corporation website
http://grc.com/default.htm Use their Shields Up!! test to check the
security of your connection to the Internet.
Dynamite Marketing Tactics in Action
by Joe Gracia
One of our most favorite activities while on vacation is eating! Here are a
few marketing observations related to that universal need, during a recent
1. WHICH HOT DOG VENDOR?
After completing a morning tour, we were ready for a quick bite to eat
before moving on to our next destination. We saw a row of street food
vendors a short distance away.
As we walked past the first hot dog vendor, I noticed that he was absorbed
in reading his newspaper. He didn't even notice us walking by. I knew that
there were a few more hot dog vendors along the path so we continued
As we approached a second hot dog vendor, he looked directly at Maria and I
and asked with a big smile, 'How are you today?'
'Fine,' we said.
Then he said, 'Are you ready to try one of the best hot dogs you've ever
I smiled and looked at Maria, she nodded her head enthusiastically, and a
sale was made.
Why did we walk past the first hot dog vendor, and why didn't we walk past
Because the second knows a lot about effective marketing, and the first
knows very little -- or is independently wealthy and doesn't need the money.
The hot dog marketer knows something about Give to Get -- our marketing
philosophy and strategy. He gave a little bit of attention to us and made us
feel important. The first one made us feel -- invisible.
Were they the 'best' hot dogs we've ever eaten? Probably not. But when
you're hungry, and they're served with a smile, they sure taste good.
People buy things they want from people they know, like and trust! If you
want your customers to like you, and buy from you, then treat them as though
they are the most important people in the world. You don't have to go an
extra mile. Sometimes just an inch will do.
2. HOW ABOUT A PRETZEL?
Now, this didn't happen, but I wish it would have. Our savvy hot dog
marketer still has room for improvement.
Also available at his hot dog stand were delicious looking hot pretzels. But
he never asked us if we would like one to go with our hot dogs.
Now, you may say, he probably assumed that if we wanted a pretzel, we would
have asked for one. Or you may think he would have been pushy suggesting
Folks, if you have such thoughts, please listen carefully, because those
thoughts are costing you thousands of dollars in lost sales.
The only way you can know if a person wants something you have is by making
an offer. Then they will have to make a decision -- yes, or no. You are not
being pushy by offering your customers something else that you know they
will enjoy or benefit by. Customers want you to suggest.
Your customers are not always thinking of your products. They have a million
other things on their minds.
For instance, once I had ordered our hot dogs, I had to think about what we
wanted on our hot dogs; what we wanted to drink and how I was going to hold
everything and pay him at the same time. Plus, I had to think about a place
for Maria and I to sit down to enjoy our meal. I wasn't thinking about his
pretzels at that time.
But, I can guarantee you, that if he had said to me, 'I can give you a
special price on pretzels today -- fifty cents off! How many would you like
-- one or two?' I would have said, 'Sounds great! Give me two!'
Maria and I would have been happy, and he would have been happy.
But he didn't offer, so I didn't buy. Oh well, nobody's perfect. There's
always room for improvement.
There is no better time to sell your customers something more, than when
they are already in a buying mood. Give your customers a special offer on
another related product or service that will benefit them, when they are
already in the process of buying something from you.
You may wonder, 'Why should I give them a discount on this second product or
service? Shouldn't I make them pay full price?'
You can test it and see. But, more often than not, by giving your customers
a 'special' deal for the moment, you will get many more accepting your
offer. Keep in mind, that the profit on this additional sale is profit that
you wouldn't have had.
3. DO YOU KNOW OF A GOOD RESTAURANT?
On another day, at the end of a tour of a colonial home, we asked our guide
if she could recommend a local restaurant.
She did better than that. In addition to her hearty recommendation, she gave
us two coupons for the local eatery.
Pretty impressive. This is called a Joint Venture.
The local restaurant owner obviously knows something about Give to Get and
knew that tourists get hungry after a morning tour. So he approached the
tour guides and asked if they would like a supply of discount coupons to
pass on to their tour groups who might be looking for a casual, but
comfortable dining experience.
And why wouldn't the guides want to provide their guests with
recommendations and coupons to a restaurant that they enjoy themselves?
Perhaps the guides get a free meal once a week for their recommendations.
Joint Ventures, where two or more companies help one another, are an
excellent way to attract business that you would not have otherwise gotten.
4. YUMMY! YUMMY! GOOD FOR YOUR TUMMY!
I'm not making that line up. We must have heard the owner of a Cajun Chicken
franchise repeat that line a hundred times as he handed out samples of his
delicious Bourbon Chicken.
We've mentioned in past articles that a bourbon chicken vendor at one of our
local malls attracts the lion's share of lunch customers by simply handing
out free samples of his bourbon chicken. It is so delicious, that it is
difficult to keep walking past his stand without buying.
Well, apparently, bourbon chicken vendors across the country are aware of
the power of samples too. Because as we searched for a place for lunch in
the huge mall food court, we could hear in the distance, 'Yummy! Yummy! Good
for Your Tummy!'
We were so hungry by this time that we were drawn like a magnet to this
unusual and hilarious chant.
It was difficult to see where this chant was coming from because there was
such a large crowd surrounding the stand. You can imagine our surprise as we
edged our way through the crowd to see a smiling, enthusiastic bourbon
chicken vendor passing out sample after sample of bourbon chicken while
repeating his slogan.
I feel sorry for the other vendors in his vicinity, because they hardly
stand a chance. The only bigger crowd than the one around him and his
samples, was the one at his cash register ordering the full meal.
Samples help you sell. Give people what they want. Think of how much easier
it is for a person to decide if they want your product of not, when they can
We provide hundreds of marketing samples on our Web site and in our
Newsletter so our potential customers can get to know, like, and trust us.
Ice cream stands provide free samples, America Online provides hundreds of
hours of their service for free so you can sample it.
How are you using free samples to help sell your products and services? With
a little creative thought, you can use this powerful technique to explode
Copyright (c) 2002, Joe Gracia
Give to Get Marketing
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