Your business needs protection

You pay to insure your home. You pay to insure your car. If you can, you pay to insure your health. However, many small business owners fail to attain insurance to protect themselves and their business from worse case scenarios. Business insurance, like home insurance, can be purchased to protect your business from fire, theft and other losses. Although neither of us have the time to review every type of business insurance, we will review five of the most common types: Liability, Property, Key Man, Automobile and Home Office.

• Liability insurance for businesses is a protection against liabilities that you may incur during your day to day business activities. This type of insurance is especially helpful if you are manufacturing a product because of the risk that can be associated with someone becoming harmed while using your product. Many small business owners do not have the capital in their business to protect against such a catastrophic injury.
  
• Property insurance is used to protect the physical assets of your building whether you rent or own your space. This is helpful in the event of a fire, flood or other disaster because it can offset some of your replacement and repair costs.
  
• 'Key Man' insurance is a policy taken out on a key employee of the business to hedge against the financial losses that the business would incur in the event of that employee's death or illness. Many banks or loan programs may require this type of policy if the revenue stream of the business is dependent upon a key person.
  
• Automobile insurance is necessary for your personal liability but if you use your vehicle for business purposes, you may need a special insurance – non-owned automobile coverage. Additionally, many small business owners have begun using car magnets to advertise their business; however, you should make sure your car is insured as a business vehicle if you are doing so because you may not be covered under your personal policy when traveling.
  
• If you are operating your business from your home, you may not need a special type of policy; however, you should take an inventory of all of your home office equipment and insure that it is covered under your home owner's/ renter's policy as office equipment.
  

When purchasing insurance for your business, consult a reputable insurance agent that specializes in insurance for businesses. Don't be afraid to visit with two or three agents and get quotes. Warning: don't try to price match because an agent may try to meet or beat another agent's quote by adjusting your liabilities and deductibles. You want to compare apples to apples so decide on the level of insurance that you need - go home, compare the information and ask more questions if you need to. This is a key component of minding your business.

Dunn and Bradstreet has your (business) number

Many small business owners do not understand why they have a difficult time establishing credit for their business. They are confused when credit applications ask for their Dun & Bradstreet number. They wonder who is Dun & Bradstreet (D&B) and why would they have my number?

Dun & Bradstreet is a provider of credit information on businesses. Just as your social security unlocks the vault to your personal financial information, a D&B number will do the same for your business. The reports are used by businesses and financial institutions seeking to extend credit to your business. Much like a personal credit report, the lender will submit updates on your payment history and terms of their agreement so that other lenders can make informed decisions about your business.

So, why would you get a D-U-N-S Number rather than continuing to use your social security number or tax identification number? It’s not because it is free because there is a fee to create a D&B credit profile. I believe this is done, not as a primary means of generating income, but because it creates a barrier to entry. Not all businesses have the cash flow to purchase the number, which means they are probably not in a position to take advantage of credit opportunities.

Dun & Bradstreet also allows businesses wishing to extend credit the opportunity to purchase reports of varying degrees about the potential client. This method of qualifying reduces the assumed risk because there is a history of the business’ ability to handle credit. Additionally, the business owner is able to separate their personal credit from the business, which could prove advantageous for businesses with high inventories or those needing to lease equipment. Tying these purchases to your personal credit will reduce your ability to make personal purchases without seeming overextended.

Mind your business and research how a D-U-N-S Number can increase your business’ credit and creditability.

How long will you stay retired?

Ever wonder why some people retire and then a few years later they are back at work? It's because the average American does not have enough money to retire and stay retired. Therefore, they must find additional employment to supplement their shortfall. I've seen people reaching the age of retirement with $200,000 in their retirement account and they feel good about their prospects of a happy life after work. What they fail to consider is that they are currently living a $40,000 per year lifestyle. The probability that you will cut back more than 20-25% of your annual lifestyle is not realistic. Let's do some simple math - $40,000 divided by $200,000 equals about five years of retirement. So, what do you do?

As you near or plan for retirement, there are some decisions that you have to make:
What do you want to do during retirement? Some people like working and want to continue working but doing what they choose to do rather than what they have to do. In this case, research how much that job would pay and factor that as part of your income during retirement. It will reduce the amount that you will have to draw from your retirement account. If you want to sit home and watch TV everyday, that will also effect your monthly retirement income. Your electric and cable bill may increase but your driving expenses may be lower. Whatever you plan to do, develop an idea of how much that is going to cost you per month and per year so that you will know how much you need to live comfortably then multiply that by a realistic live expectancy and you will have a ball park of how much you need to have in an account when you make your retirement toast.

What about social security? It is a personal decision to consider social security in your retirement income. For most people, the amount they will receive from social security will not be enough to sustain their lifestyle and you may want to retire before the age that will allow you to draw full social security. Therefore, you should base that decision upon the annual statements that you receive from the government detailing the expected amount that you will receive based upon the year you retire.

How much should I be saving toward retirement? My advice is to save as much as possible but you should consult a financial advisor about where to save your money. Most employers offer a retirement plan such as a 401k and may even offer a percentage match. If you employer offers a match, then you should take advantage of that. For example, if your employer matches 50% of the first 6%, then they will match 3% of your 6% which would be a total savings of 9%. If you are nearing the age of retirement and don't feel as though you have saved enough, there are catch up provisions that will allow you to save more.

What if I can't save more? Some people are in a position where they have no more to save. If this is you then you should plan to work longer at your current job, work part time during retirement or plan to spend less. It is important to make these decisions before you retire rather than getting to year four and seeing the money begin to run out and panic because you don't know what you are going to do.

Retirement is a privilege. It is something that you earn by having a plan and making good decisions. Traditionally, Americans were able to retire comfortably because they bought a home in their 20s or 30s with a 30 year fixed mortgage, didn't spend more than they earned and kept a little nest egg tucked away. By the time they were ready to retire, the kids were out of the house, the house was paid for and they had a little money in the bank. Some sold their homes and lived off the equity while others enjoyed living rent free with minimal expenses and collected a little check every month. Today, we are so debt ridden and upside down in our mortgages, we can't afford to save without withdrawing the money the next week and the prospect of a comfortable retirement is an illusion that may never be attainable.

Your money matters and you need a plan to deal with your current situation so that you can make the good decisions that will lead to a comfortable retirement. Don't think that one day you will wake up, be 65 and able to walk away from your job. If that's your strategy, you may be 75 in a work force competing with 25 year olds.

Do You Deserve Credit?

One of the main complaints that we all have with credit card companies sending cards to teenagers is that they don't deserve it. The theory is that they haven't earned the right to have access to thousands of dollars that they may not be able to repay. However, how many of us deserve credit?

It wasn't until the prosperity years of the '90s that credit became widely available. Before then, you had to have excellent payment history or lots of cash in the bank to access credit. Creditors were leery of allowing the common man access to its stash. This all changed when they realized that we are consumer society. Studies have consistently shown that Americans spend more than they earn. It doesn't take a rocket scientist to figure out that credit keeps us in that flux. We take no issue with buying a home that we can't afford, driving a car we can barely maintain or wearing clothes that we never should have bought. Credit has allowed us to create a lifestyle that may be enviable on the outside but no one realizes the strain that paying these bills puts on our lives which essentially makes us a slave to our jobs. We can not enjoy the freedom of doing what we want to do rather we are forced to stay at jobs in which we are unhappy or defer our dream job which may not pay as much as we would like because we have so many bills.

Credit alone is not the culprit instead it is the fact that creditors realized that the people wanting credit didn't deserve it so they figured out a way to punish them for their selfish desires – interest. Interest is a complicated beast that can take over a balance and have it whooping your butt before you even realize what's happened. If you are only paying the minimum payments each month, then you are essentially feeding the beast (interest) and starving the monster (principal). It may seem that the monster is being held off but the beast is growing and taking over your life.

I have nothing against credit, when used responsibly. It's almost like a gun, in the wrong hands it can be deadly. Credit is actually necessary in our society. If you want to make a significant purchase, like a home or a car, then your lender will want to know how you have handled your credit in the past. They will be looking for your monster and your beast to be tamed in a nice little cage called low/zero balance.

Every person should have at least one credit card, preferably a universal card like Visa, Master card or American Express, for emergencies. However, opening your wallet and displaying a credit card collection like newborn baby pictures is not impressive. The more accounts you have open the more leery a creditor may be about lending to you regardless of the their balances. Imagine you have six cards with $30,000 in available credit and an annual salary of $40,000. You may only have a total outstanding balance of $4,000 but imagine some traumatic event happening in your life, a creditor's worst nightmare is you going on a $36,000 shopping spree and never be able to repay your debts.

Not many of us deserve credit because we are selfish and materialistic. Rather than using credit cards for emergencies, buying the best house with an affordable mortgage and choosing an economic car; we choose to be slaves. Free yourself, pay down your debt and so that you can enjoy life. Having a low or no debt lifestyle allows you take advantage of jobs that you enjoy, allows you to save extra money for vacations and keeps you from dreading to open your mail.

Your money matters – its not about how much you make, but how much you keep.

Does your business have a social security number?

If you are a business owner, that number is called your tax identification (TIN) or employer identification number (EIN). This number is used to identify your business just as your social security number identifies you as an individual. If you have any employees, this number will also show up on their tax records as the identifier for your business. You will use this number to open bank accounts, apply for credit and on any other application that requires your business's identity to be verified.

Because many small business owners are often sole proprietors, they forgo establishing an EIN and use their social security number. Although your assets and liabilities are one and the same, the problem is - you have to use your personal social security number more often. By now, we have all heard about the dangers of identity theft so can imagine that each time you use your personal social security number you are increasing your chances of having your identity compromised. All business owners are allowed to apply for an EIN through the Internal Revenue Service (IRS) at no charge. If you are a sole proprietor, you may only have one (1) EIN no matter how many businesses you have. The application is called an SS4 and can be filled out online (http://www.irs.gov/) or you can print and mail it.

New business owners should obtain this number after you decide on a name and legal structure of your business. If you are an existing business and currently using your social security number as an identifier, you can still apply for an EIN but you will need to change the number on all of your bank accounts, credit accounts and accounting paperwork. Although this may seem like a tedious task, imagine the consequences of someone stealing your identification because you didn't take the time to mind your business.

Discover your inner wine expert

It took me a LONG time to develop a 'sophisticated' wine palate. I believed that wine began and ended with White Zinfindel. As I grew older, I began stepping outside of my food and wine comfort zone and discovered a whole world outside of Soul Food and White Zin. The food part was easy because I discovered that no matter how the fancy the restaurant – everyone serves chicken and it's hard to mess up chicken. The wine, on the other hand, was a bit more tricky. While hanging out with my more cultured friends, I would notice them ask for a wine menu and read it with great interest. I, not wanting to feel left out, would also request a wine menu; however, as my eyes glazed down the extensive list, I had no idea what I was looking at or what I was looking for. Sometimes I got lucky, but sometimes I wanted to ask for a refund and a Crown and Coke. I knew that I had to do better. After some trial and error, I have found a few reds and a few whites that are staples on most menus and allow me to be considered 'the cultured friend.'

Let's start with the white wines.
The classic is a chardonnay because it is one of the more versatile wines and goes well with seafood. It generally has a fruity flavor that can range from apple and lime to tropical fruit depending upon where its produced and in what type of container. Some people find it a little dry when compared with White Zin. Riesling, my favorite, has a sweeter taste and goes well with spicy foods, poultry and pork. As the wines age, they embody more of a honey flavor coupled with their natural green apple, pear or lime flavor. The sauvignon blanc also goes well with seafood, poultry and vegetable dishes because of its grapefruit and grassy flavors.

Red wines tend to be more of an acquired taste because they are very dry and served at room temperature rather than chilled like white wines.
Merlot wines are the softest and generally better to start your red wine experience. Their flavors range from blackberries to plum and chocolate. Cabernet Sauvignons have a stronger flavor than the merlot and can embody flavors of vanilla, cedar, chocolate or coffee. Cabernets and merlots are best with beef because of the strength of their flavors. Pinot Noirs, on the other hand, have a cherry, raspberry or strawberry flavor and are best paired with salmon, poultry and vegetable dishes.

You may have noticed that I didn't mention any brands in describing these wines because each distributor has a different methodology of developing their wines thus the differences in tastes. The most important thing to note is which wines are best paired with which foods and to have a general idea of what they will taste like before you order.

I recommend hosting a wine tasting. Invite a few friends over that also have an interest in developing their wine palate. Each person can bring one bottle of wine. You can mix whites with reds or focus on white wines during one event and reds during the next. Wine is meant to be enjoyed not chugged so take your time, sniff the aromas and see if you can tell what flavors are present and begin sipping away. Be careful because wines can get your drunk pretty quick. If you get started now, you may find yourself introducing your family members to your favorite wine during the holiday season. Then, you can be considered 'the cultured family member.'

Choose Your Business Legal Structure

Three out of four businesses fail in their first three years. Not because they are lazy or have no desire to succeed but often because they have not done the proper planning or acquired a toolbox for success. It is my desire that I can help at least one of those three businesses become a success story.

Let's start with the first decision that you should make as a business owner. What will be the legal structure of your business? Some of you may be established business owners, new business owners or thinking about starting a business. Regardless of your status, it is important to understand the different legal structures to ensure that have chosen wisely. I am not an attorney so this article is for information only. You should consult an attorney that specializes in working with business owners as well as a certified public accountant (CPA) regarding the legal structure of your business. No matter which option you choose, there will be legal and financial consequences that you must consider.

Sole proprietorship – this is a very common structure for smaller businesses. Essentially, the business and the individual operating the business are sharing assets and liabilities. All of the profits from the business are taxed as income for the owner. Although the owner has complete ownership of the assets, the owner is also personally liable for all of the debts incurred by the business.

Limited liability corporation (LLC) – this form of corporation allows business owners to protect their personal assets by creating a legal entity that is not associated with their personal assets. The business is able to incur debt and acquire assets separate from the business owner.

General partnership – this exists when two or more people come together and decide to share in the profits and losses of a business. A partnership agreement should be created to document the responsibilities and liabilities of each partner as well as a contingency plan in case a partner dies or wants to exit the partnership. Each partner is liable for the debts incurred by the business and the profits are taxed to each partner based on their percentage of ownership in the business.

Limited partnership – this is essentially the same as a general partnership except there are two types of partners: a general partner who has greater control over the business and limited partners who share in the profits and liabilities based on their investment percentage.

'C' Corporation – this form of a corporation establishes the business as a separate entity with its own rights, privileges and liabilities. The corporation is made up of a board of directors, shareholders and officers. You must file articles of incorporation with your local probate office and State of Alabama to be legally recognized as a corporation. Although this legal structure provides more legal protection for the owners, it is subject to more government regulation and profits can be taxed on the corporate and individual level.

'S' Corporation – this form is very similar to a 'C' Corporation except it allows the corporation's shareholders to only be taxed once - as a partnership or as a sole proprietor.

I hope this information was helpful. Don't forget, call your attorney if you have any questions.