business questions

Ask Gene: Small Business Owner Questions Answered

Gene Marks

Gene Marks is an author, columnist, keynote speaker and owner of the Marks Group. Through his writing and collaboration with The Hartford’s Small Biz Ahead blog and podcast, Gene gives advice and resources to help business owners, executives and managers they need to run a successful company.

Q: My husband and I file as a qualified joint venture as owners of a gift shop. We want to officially hire our 16 year old. After one of us applies for an EIN, do we still split the expense of our child’s wages on our year-end Schedule Cs? Also, what is a Roth IRA and how do we open one for her?

A: You can hire your child and pay wages out of your business, assuming that wages are reasonable and market competitive. The expense would be treated like any other expense of your gift shop and would be included on either your individual or joint Schedule C, depending on how you file.

A Roth IRA is a special retirement account where you pay taxes on money going into your account, and then all future withdrawals are tax-free. That’s because the money you’re contributing is after-tax money, which is different from a traditional IRA or 401K. You can open up a Roth IRA with any financial services firm – many banks also provide these too.

Q: How do you add retail inventory to balance sheet?

A: Whether you’re a cash basis or accrual basis filer, you still need to account for inventory on your balance sheet. It should be done the same for tax purposes as book purposes. You can’t just write off inventory as you purchase even if you’re on the cash basis. You would capitalize your inventory – maybe as supplies or materials – and then write them off as they’re sold. Inventory on hand at the end of the year must be capitalized and shown on your balance sheet.

Q: I was chasing a 90-day outstanding invoice when the epidemic hit. I sent a polite email understanding that these were difficult times, but explained that we needed to collect on a situation that was dated before our worlds shuttered. I eventually got a “we’ll look into it” response weeks ago. We’re a small business, they’re not. Any advice?

A: This is a problem that many small businesses face and it’s not reported on enough: big companies flexing their muscle and stretching out payments to their smaller vendors. It’s frustrating. The fact is that larger companies have all the leverage and even if you were to (and I hope not) go to court they have more resources to fight. So you have to do everything you can do without going legal.

My recommendation is to go on LinkedIn and find the names of every person that would have some involvement in your transaction. Find out their email addresses and email them. In a professional manner, you should make yourself known to all parties involved. The next time you do work with this company – and there’s no reason not to if the work is profitable – then make sure you get some cash up front.

Q: Do you have any workers compensation advice/suggestions/concerns regarding employees working remotely?

A: YES! Talk to your worker’s comp provider immediately. Why? Because I’m finding that many clients are overpaying for their remote workers. Remote workers should be classified as the least risky level for WC purposes so if you’ve moved workers that were classified at a higher risk to working from home then you’re likely paying too much worker’s comp. You can get a retroactive refund and adjust rates going forward.

Q: How do you form an LLC as a non-US resident and get accounting services for it?

A: Best place to go is a legal site like legalzoom.com or nolo.com – there are others too that you can Google. You’ll have to pick a state and depending on that state visit the state’s local CPA society (my home state is www.picpa.org) and ask for a referral.

Q: What tips do you have for running a blog?

A: Many, but I’ll offer 3 quick ones:

  1. Lean on your website provider’s blog hosting tools. WordPress, for example, has excellent capabilities.
  2. Commit to posting 1-2 times per week. Google search likes an active blogging site with current, educational information. Keep your posts around 1,000 words if possible (can’t be too short or too long).
  3. It’s all about the headline. If you want to be noticed make sure your headline is catchy, educational and information. Use a good keyword search tool to help sprinkle relevant words in your headline and your article.

Leave a comment or question below for a chance to win Gene’s latest book: “Want More Cash?: 100+ Ideas and Strategies For Increasing Your Company’s Cash Flow This Year

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