Starting An Online Business From Home

Many people believe that starting an online business from home is difficult. In fact it is quite easy. If you are already familiar with what product you will sell you will need to create or hire someone to produce an online website for you. This website should list the product or products you have available. If you will be selling your own products, make sure that your online business has a name that reflects you and what you offer.

After this has been completed, you should inquire in your local state to learn the guidelines necessary for you to run a business from your home. Many states require that even an online business register with them and receive a business license. You will have to get the necessary forms to request this license.

After you have obtained you license, you should also find out how running an online business from home will affect you tax situation. You would still need to report any income you make from your business, even if you are working at home.

After all this paperwork is completed for you business, it is important to set up your home office for you new job. It is suggested that you have a separate space to conduct
your business affairs. A separate phone line that customers can call is also very necessary and I strongly suggest you get a fax machine. You will lose customers if you are not able to be reached by telephone, fax and e-mail. Having a separate phone line from the rest of the house is essential!

Other than a second phone line, it is also a good idea to purchase the necessary hardware and software for you home office. You will save lots of money if you have your own fax machine, scanner, and printer. Also it is probably wise to have the latest software additions for word processing and accounting. The accounting software is especially useful for you to keep track of all expenses and revenue for your online business.

When you have established the business and things are going well, it is a good idea to consider outsourcing. This would mean hiring someone to take care of the little jobs that
you would have to do such as email or letter correspondence or creating marketing brochures. By doing this, you will be able to focus on the more important areas of making money and marketing your business, which will be key to your success.

9 things you must do to maximize your chances of obtaining a small business loan

9 things you must do to maximize your chances of obtaining a small business loan

To get approval for your small business loan application, you must be able to meet the lending criteria set down. Some organisations are more risk averse than others, and will therefore have more stringent criteria.

To vastly increase your chances of a successful funding application, you will need to present the following information:

1. The reason for the loan. The lender will be looking for something that fits within the normal range and expertise of your business. The amount may cover a number of items, so you will need to cover each.

2. The amount required, and the repayment term of the small business loan you want. (e.g. $10,000 term 5 years, payable quarterly).

3. Details of how you will repay the amount borrowed. For example, “From the increase in profits of reduced running costs of the Whizzbang Go4It”

4. Details of security you will be able to offer to the lender. This will act as reassurance for the lender. If you’re not prepared to put up some aspect of security, then why should they?

5. You will need to include your business plan which will serve to answer essential questions relating to management capabilities, information about the market you operate in. What kind of business you are in etc.

6. 3 Years financial statements. You will need to present quality financial information from your accounting software, preferably signed off by your accountant or tax advisor.

7. Latest Set of Management accounts. Again produced from your accounting software.

8. Accounts receivables (debtors) and payables (creditors) ageing reports.

9. Principals financial statements. – Particularly required if some form of security is necessary.

If you are a new company, the emphasis is going to be on your business plan , and the security (also called collateral) you or your business can provide against the loan.

You must take the time to practice presenting your case to the bank or lender to iron out any glitches. Practice on your colleagues and family (you never know, they might be so impressed, they'll invest or lend!). It may help to role play the lender and come up with as many pointy questions as possible. The more time you take the better your chances will be. (But remember, don’t fall into the analysis paralysis trap!)

Good luck!

Taxing Overseas Firms for SOX Compliance

The Sarbanes-Oxley Act, also called the Public Company Accounting Reform and Investor Protection Act of 2002 was signed into law on July 30, 2002 by President Bush. In the aftermath of Enron, Arthur Andersen, Global Crossing, and WorldCom, SOX promises greater corporate accountability and transparency. Named after Senator Paul Sarbanes and Representative Michael G. Oxley, SOX focuses on the importance of ethical behavior in corporate governance-across the United States and now…overseas.

All countries have government-required laws like Sarbanes Oxley. In the UK, it’s the "Combined Code on Corporate Governance," in The Netherlands it’s the "Code Tabaksblatt," Germany has a "Bilanz Reform" and a "Bilanz Kontroll Gesetz." But then, why do we need SOX overseas since we already have the required laws? It’s because companies with U.S. headquarters must ensure that all foreign outposts meet federal standards. This is the major cause of concern in the management and accounting circles. According to some experts, the Sarbanes Oxley Act might have dictated convoluted rules and regulations on the U.S. businesses. While the rules are concrete ideologies that prevent accounting scandals, the constant flux in the policies confuses businesses around the globe.

SOX compliance by vendors and business partners outside the U.S. is a frightening task. The risks and complications involved in enforcing the regulations for multiple firms around the world are enormous. The U.S. firms should keep themselves abreast of the data operations and data management followed by overseas vendors. This complicates the case further as the data should be integrated in financials or entered in balance sheets. Cumbersome processing of data would step up IT-related expenses.

The global impact of SOX is tremendous. At the moment, the UK Big Four firms are feeling SOX repercussions in their consulting sectors. http://www.big4.com -a website for global Big4 alumni - receives periodic updates on the latest news and trends at the Big Four firms. The Big Four in UK reportedly lost GBP250 million in consulting fees since 2002-a direct outcome of Sarbanes-Oxley Act. Among the Big Four firms, PricewaterhouseCoopers faced a huge decline in their consulting fees. Causes for this decline can be attributed to:
·The increased cost of compliance that usurped consulting budgets.
·Independence restrictions in Sarbanes-Oxley have restrained companies from utilizing their auditors for many consulting services.

There is an apparent role reversal in consulting fees and audit services. If consulting fees have declined, audit fees have considerably increased. A whopping 30% increase in Big Four audit fees has been observed over a period of two years. This spike does not compensate for the revenues lost for consulting. Consulting was the major strength of the Big Four in the UK. But, in the present conditions, the significant decline in consulting fees clearly demarcates the performance of the Big Four in the UK.

According to a survey by an European firm, many overseas firms with their shares listed in the U.S. were not ready to meet the deadlines of Sarbanes-Oxley. Since European firms already have specific regulations, SOX compliance is extremely difficult. Some overseas firms have been attempting to get delisted from the U.S. stock markets since SOX’s inception. Foreign firms about to get listed on overseas exchanges are also resisting to get listed in the U.S. These problems would take toll on the U.S. market performance and economy. But, the exit of foreign firms from the U.S. exchanges is not that easy. As per SEC guidelines, foreign firms holding 300 or more shareholders in the U.S. cannot delist from the U.S. exchange where they trade.

In the light of these problems, the Securities and Exchange Commission-in its bid to offer sustained flexibility-started modifying rules for overseas firms listed in the U.S. The SEC would facilitate foreign firms to delist their securities that are traded on the U.S. exchanges. Modifying SEC rules to accommodate European firms would create a state of unrest among the American managements.

The SOX compliance should be an “all-encompassing” formula-that which enables governments and managements worldwide to function efficiently and in rhythm. A level headed approach to weed out this disconcert would improve the situation.

3 Essential Tools for Starting and Maintaining a Small Business

We believe that there are 3 factors that drive the success of small businesses.

1) Acquiring start-up capital
2) Finding customers
3) Accounting for, budgeting and controlling sales and expenses



The following resources will help your small business achieve these success factors.

Acquiring Start-Up Capital


An adequate supply of capital is essential as many profitable businesses fail because they don’t have enough cash to pay their employees and suppliers. But what is an adequate supply of capital? The only way to tell is by doing a significant amount of research on your potential market and formally documenting this in a business plan. I’m sure you know that a business plan is a very important document that is crucial to convincing your banker to lend you money.


There are two ways to obtain a business plan.


1) Do it yourself by amending a business plan template, or
2) Hire a professional to do it for you.


Obviously obtain 1) will be a great deal cheaper.


Our research led to a website that has over 60 high quality and free business plan templates. We also found a directory that you can use to easily find a business plan writer in your city – where ever you live in the world.


Finding Customers

Finding customers is a difficult and expensive task for service business owners such as accountants, lawyers and plumbers. We believe that a cost effective marketing strategy for service business owners is to simply give all their personal contacts a few business cards.


Our research led to a few websites that have pre-designed business card templates. We felt that the diversity and quality of these designs was outstanding. In addition, we found that you can obtain a significant saving by finding a printing service on the Internet. We found that you could get 2,000 full color business cards for as little as US $150.


Accounting For, Budgeting and Controlling Revenue and Expenses

Accurate accounting is very important for small business owners. It’s essential that you have timely access to information that could make or break your business. If stocks are running low – you need to know about it. If a large proportion of your debtors haven’t paid – you need to know about it. If you do not react to these situations quickly you may have a situation where you don’t have enough money to pay your employees – or worse still someone is stealing cash out the till.


Our research led to a website that compares and reviews top accounting software for small businesses. The cheapest software cost US $89.99 and the most expensive software cost US $1,499. It was interesting to note that the top 3 ranked websites were not the most expensive and cost between US $250 - US $300.


Hopefully you now have an idea of some of the tools that you can use to grow and maintain your small business.

Understanding Depreciation: It May Be More Simple Than You Think

Depreciation is defined as a portion of the cost that reflects the use of a fixed asset during an accounting period. A fixed asset is an item that has a useful life of over one year. An accounting period is usually a month, quarter, six months or one year. Let’s say you bought a desk for your office on January 1, for $1000 and it was determined that the desk had a useful life of seven years. Using a one year accounting period and the “straight-line” method of depreciation, the portion of the cost to be depreciated would be one-seventh of $1000, or $142.86.

Most non-accountants roll their eyes and shudder when the topic of “depreciation” comes up. This is where the line in the sand is drawn. Depreciation is far too complicated to try and figure out, or so it seems to many. But is it really? Surely the definition of depreciation mentioned above is not that difficult to comprehend. If you look closely you will see that there are five pieces of information you must have in order to determine the amount of depreciation you can deduct in one year. They are:

-The nature of the item purchased (the desk).

-The date the item was placed in service (Jan 1).

-The cost of the item ($1000).

-The useful life of the item (seven years).

-The method of depreciation to be used (straight-line)

The first three are easy to figure out, the second two are also easy but require a little research. How do you figure out the useful life of an item? Let me regress for a moment. There is “book depreciation” which is based on the real useful life of an item, and there is the IRS version of what constitutes the useful life of an item. A business that is concerned with accurately allocating its costs so that it can get a true picture of net profit will use book depreciation on its financial statements.

However, for tax purposes the business is required to use the IRS method. The IRS may have shorter or longer useful lives for fixed assets causing a higher or lower depreciation write-off. The higher the write-off, the less tax a business pays. The long and short of it is that you end up having to create a book financial statement and a tax financial statement. So, most small businesses that aren’t concerned with a precise measurement of their net profit use the IRS method on their books. This means that all you have to do is look in IRS Publication 946 to find the useful life of a particular item.

The last piece of information you need is found by determining the method of depreciation to use. Most often it will be one of two methods: the “straight-line” method or an accelerated method called the “double-declining balance” method. Let’s briefly discuss these two methods:

Straight-line
This is the simple method mentioned in the definition above. Just take the cost of the item, divide it by the useful life and you’ve got the answer. Yes, you will have to adjust the depreciation for the first year you placed the item in service and for the last year when you removed the item from service. For instance, if your depreciation for one year was $150 and you placed the item in service on April 1 then divide $150 by 12 (months) and multiply $12.50 by 9 (months) to get $112.50. If you removed the item on February 28 then your deduction will only be $25.00 (2 x $12.50).

Double-declining balance

The idea behind this method is that when an item is purchased new, you will use up more of it in the earlier years of its life, therefore, justifying a higher depreciation deduction in the earlier years. With this method, simply divide the cost of the item by the useful life years as in the straight-line method. Then, multiply that result by 2 (double) in the first year. The second year, take the cost of the item and subtract the accumulated depreciation. Next, divide that result by the useful life and multiply that result by 2, and so on for each remaining year.

But, wait! You don’t have to do this. The IRS provides tables that have the percentages worked out for each year of the two different methods. Not only that, they have set up special first year “conventions” that assume you purchased your depreciable fixed assets on June 30. This is called the one-half year convention. The idea behind this is that you may have bought some items earlier than June 30 and some after that date. So, to make it easy to figure out, they assume the higher and lower depreciation amounts will all average out.

Actually, the IRS doesn’t even call it depreciation anymore. They call it “cost recovery”. Let’s face it. This is a political tool. Congress giveth and taketh away. They have been playing with this system for years. If they want to stimulate growth in business they will shorten the useful life of assets so businesses can attain a higher write-off. If they are not in the mood, they will extend the useful life of an item. A good example is the 39 years set for the useful life of commercial property. This means that if you lease a building for your business and make improvements, those improvements have to be depreciated over 39 years. Now congress is working on a bill to drop that down to 15 years for leasehold improvements.

Before December 31, 1986 we had ACRS or Accelerated Cost Recovery System. Currently, we have MACRS or Modified Accelerated Cost Recovery System. Every time congress tweaks the rules they give it a different name.

Keep in mind there are different schedules for different properties. For instance, residential real property is depreciated over twenty-seven and one-half years and non-residential real property is depreciated over thirty-nine years. In addition, if more than forty percent of your total fixed asset purchases occurred in the last quarter of the year, then, you must use a mid-quarter convention. This convention assumes that your purchases made in the last quarter of the year were made on November 15. This prevents you from purchaseing a big expensive piece of equipment on December 31 and treating it as though it were purchased on June 30 and gaining a larger depreciation expense.

Understanding how basic depreciation works can be valuable to the small business owner because it helps to know the tax implications when planning for capital equipment purchases.