The Juggling Entrepreneurs

Currently, a business which is owned and operated by both the husband and wife must file their taxes as a partnership.

Starting with this tax year, the husband and wife can elect to report incomes or losses as a sole proprietorship in proportion to his and her vested interest in the business.

The husband and wife must be the only sole owners of the business and both must materially participate.

Source: Section 8215, Family Business Tax Simplification of the Small Business and Work Opportunity Tax Act of 2007.

NPR reported yesterday that only 72 percent of domestic flights were on time in the first four months of 2007. This is the lowest percentage in the 12 years this statistic was tracked.

Of the delayed flights only 3.6% were due to weather. 2.8% of all flights were canceled.

The number of flights and passengers are back to pre 9/11 and dot.com bust levels. But is this the cause of most of the delays?
25.8% of the delays were due to the airlines. 29.8% were due to planes arriving late. Common practices such as overbooking passengers, scheduling more flights than an airport can handle and reducing their workforce contribute to this problem.

Airlines are not changing because the demand is out there. Even though airlines are increasing the prices, people are still purchasing tickets. There is no reason for airlines to change how they do business.

Are Any Airlines Better Than Others?

Delays by major airlines for the past 12 months ending April 30, 2007.

• Southwest 84.1%
• Delta 81.1%
• Skywest 81.6%
• Northwest 73.8%
• Continental 72.7%
• United 72.7%
• American 69.8%
• JetBlue 64.2%
• USAir 63.1%

Sources:

• NPR, “Flight Delays in Early 2007 Are the Worst in 12 Years“.
• Bureau of Transportation Statistics, “Airline On-Time Statistics“
• Bureau of Transportation Statistics, “Air Travel Consumer Reports for 2007“

Thirty years ago, today, the first practical computer went on sale, the Apple II. This successful computer stayed on the market until October 1993. How’s that for product longevity?

In 1977, the standard Apple II came with 4 kilobytes of memory (could be expanded up to 48K). The computer introduced a graphic display, the BASIC language and expandable memory.

A 4 kilobyte memory chip cost about $500 back then.

Sources:

• “From a Little Apple a Mighty Industry Grows,” Wired, June 5, 2007.
• “Chapter 3: Apple II” from Apple II History.

A phenomenal increase of broadband Internet can be found amoung African American families.  40% of African American families have broadband compared to 47% of the general population.

30% of households making $30,000 or less have broadband compared to 76% of households with incomes of $76,000 or greater.

This increase in African American families is not just related to lower prices and new technology - it has to do with the appeal of music, videos and other entertainment.  This type of media cannot be viewed through dial-up.

African Americans are using the Internet for more than entertainment.

• 73% of African Americans (54% of whites) have used the Internet for school projects
• 67% of African Americans (39% of whites) have use the Internet to search for jobs.

These statistics are important if you are marketing on the Internet.  It is not just a niche for white families with a high income.

Source: “Equal Opportunity Speedway,” Roger O. Crockett and Spencer E. Ante, Business Week, May 21, 2007.

It’s all over the papers.  Daimler is parting with 80.1% of Chrysler (automotive and financial arm) and it’s paying about $700 million for the splitoff to happen.

The new owners of Chrysler is an investment company called Cerberus Capital Management.  Cerberus owns Air Canada and a large part of GMAC (General Motors financial arm).

Chrysler, like other US auto firms, had an operating loss.  The hope is that the private equity firm - which will not have to answer to stockholders, will be able to make the drastic structural changes to make Chrysler profitable once more.

Source:

• NPR, “Q&A: Under the Hood of the Chrysler Deal“, Eric Werner, May 14, 2007.
• Business Week, “Daimler Gives Chrysler to Cerberus“, Gail Edmundson, May 14, 2007.
• Associated Press, “Cerberus-Chrysler, Labor Leaders to Meet“, May 15, 2007.
• NY Times, “In Deal, a Test for the U.A.W,” Micheline Maynard, May 15, 2007

As of today, it will cost you 41 cents to send a letter domestically.

For more information on postage rates and how to save money, see Entrepreneur’s “Making the Postage Increase Work For You” (April 27, 2007).

Below is an overview of the economic indicators released by the SBA, Office for Advocacy for the 1st quarter of 2007.

Although the economy continues to grows, the rate that it is growing is slowing down due to a weak housing market.  The GDP is at an annualized rate of 1.3%, down from 2.5% in the fourth quarter.

Small businesses are less optimistic about the economy which results in less investment in expanding their businesses.  Incorporated self-employment is slightly up.
Consumers and employment opportunities continue to be bright.  Unemployment rate continues to stand at 4.4% - the lowest rate since May 2001.  Core inflation (excludes energy and food) is lower and private sector salaries have increased by 3.5% and benefits by 2.3% since first quarter 2006.

Interest rates are virtually unchanged since last year.  The rate for the smallest loans has risen over 2% since 2005 which affects the demand for small business loans.  Venture capital investments has increased to $7.1 billion recently.

You are not alone, millions of Americans are forging their own career paths by changing jobs, becoming independent consultants and building their own businesses.

• In 2006, 54 million Americans (40%) left their jobs. (Labor Department)
• The average person born in the later years of the baby boom, held 10.5 jobs between the ages 18 and 40. (Labor Department)
• New York Professionals expect to change their careers on average 3 times. 26% expect their job to be a lifelong career. (study conducted by NYU)

Source: “When It comes to Careers, Change is Constant.” Marci Alboher. The New York Times. May 1, 2007.

According to NASE, the proposal to fix the tax gap, puts more burden on micro businesses.  Some of the proposals are:

• Withholding tax payments from non-employee contractors.  (Yikes!)
• Obtaining and verifying TIN numbers of independent contractors.
• Requiring credit and debit card companies to report to the IRS the gross total receipts a business made.

Source: NASE Press Release, “Tax Gap Proposal Will Hinder Micro Business, Says NASE National Tax Advisor,” April 27, 2007.

NASE’s testimonial to Congress: “Fairness in Tax Compliance.”

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In my opinion, the most costly and time consuming is if we need to start withhold tax payments for independent contractors.  It would be hard to manage this task without a payroll service of some kind which means less money in the owners pockets.

Many micro businesses operate as sole proprietors or LLC and do not have employees; they use independent contractors such as web designers, virtual assistants, accountants, etc.  They use personal income tax returns and estimated tax payments rather than payroll services.

For those companies with employees, the cost of payroll services would increase because a larger number of transactions need to occur.

The other methods, verifying EIN numbers and having credit and debit companies report transactions to the IRS do not affect the tax gap.  The tax gap is mostly due to cash transactions with no receipts.  Many companies and individuals that earn tips and take cash for services rendered do not report all of their earnings.

On May 14, the US Postal Service will increase its rates.  It will cost you 41 cents to send a letter first class.

You can purchase “Forever Stamps” for 41 cents per stamp which you can use even if there is another price hike in the future.  Unfortunately, Forever Stamps do not come in rolls of 100.  =-P