Monthly Archive for November, 2012

Small Business Advocate Poll:Federal Government and Natural Disasters

The Question:
Do you think Americans count on the Federal government too much to bail out regional natural disasters with taxpayers’ money? For example, should the taxes of Iowa residents be used to help hurricane victims?

62% - Yes

29% - No

8% - Undecided

My Comments
One of the areas that will be addressed in the near future will be how American property owners should prepare for natural disasters, especially those who live in storm-prone areas on the Atlantic and Gulf coasts. What kind of insurance should they be required to have and should the tax dollars of all Americans be used repeatedly for storm recovery?

We wanted to see what our audience thought about this debate just days after Hurricane Sandy, aka Frankenstorm, made landfall at New Jersey and New York. In our online poll last week we asked this question: “Do you think Americans count on the Federal government too much to bail out regional natural disasters with taxpayers’ money?”

Almost one-third, 29%, said “No, with 8% “Undecided”. But the big number, 62%, chose “Yes”.

Whether hurricanes on the east coast, earthquakes on the west coast, tornadoes in the plains or floods along the Mississippi, it would seem most of our audience thinks property owners and their state and local governments should be prepared to take care of their own. And as the U.S. government struggles with deficits and looks for budget cutting opportunities, this may be the message FEMA sends to local folks in the future.

Check out more great SBA content HERE!

Take this week’s poll HERE!

Redefining the title “Military Veteran”

America’s first military, the “Minutemen” militia, were shopkeepers, craftsmen, farmers, etc. Today we call them small business owners, but they were our first veterans.

Defining a veteran today is more complicated because there are multiple uses of the term. The Veterans Administration understandably has a strict, technical definition because it’s responsible for dispersing VA benefits. The classic definition is someone who has served on active duty for more than six months. But what about the volunteer service of the National Guard and Reserves?

For decades, National Guard members and Reservists have been comprised of two groups – those who deploy for an extended period and those who prepared themselves for a deployment. And since the Minutemen, America’s small business owners have been included in these ranks. But the past 20 years have required an extra degree of commitment from them because of the increased likelihood that they may have to leave their businesses for a deployment, possibly more than once.

Since 1990, two developments have created new expectations for America’s Guard and Reserves: 1) Three Middle East conflicts – Desert Storm, the Iraq War and the Afghan War – have combined for 20 years of deployments, so far; and 2) The increasing deployment expectations of Guard and Reserve units to augment declining regular armed forces numbers.

In Iraq and Afghanistan, the Guard and Reserves have accounted for one-third of U.S. forces, and a comparable percentage of casualties. Many of these patriots have been deployed two, three or more times. The Rand Corporation reports, “Use of the Guard and Reserve has steadily increased since the first Gulf War and this trend is likely to continue.” Indeed, you can expect the efficiency of Guard and Reserve assets to figure even more heavily in America’s national security plans in the face of impending budget cuts.

So on this Veterans Day let’s honor all who have proudly volunteered to wear the uniform. This includes members of the Guard and Reserves who have deployed alongside the regular military, as well as those volunteers who weren’t deployed, but who trained and made themselves available to be deployed for years as their country needed them.

In the modern age of American national defense, if you wore the uniform of any of the armed forces you deserve to be called a veteran and receive the gratitude and recognition of a grateful nation.

It’s time to expand our definition of a veteran.

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Today on The Small Business Advocate Show I talked more about the role of National Guard and Reservists in preserving and protecting America’s liberty. Click here to download or listen.

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Take this week’s poll HERE!

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Small business ownership has stealth benefits

The classic financial benefits derived from business ownership typically fall under two categories:

  1. Earned income – salary and bonuses as reported on your W2 form each year.
  2. Unearned (investment) income – distribution of profits from the operation and/or sale of the business.

But there are other ownership advantages that I call “stealth benefits,” because they’re not as evident as operating opportunities. The stealth benefit that is not only the most generally accepted, but which has the most wealth creation potential is to personally own the real estate in which you operate your business.

Here’s an invariable: Every business is a tenant of a landlord under a commercial lease. There are many financial and strategic reasons to lease property from someone else. But this arrangement offers only tax advantages – deducting expenses associated with the lease – no direct investment benefits.

Now let’s consider a lease relationship that includes stealth benefits. As long as your business is legally structured as a tax reporting entity, like an S Corp or LLC, you can accrue those stealth benefits by personally owning the real estate your business operates in, and becoming the landlord of that legal entity. For example: Smith Enterprises, Inc., tenant of Tom Smith, property owner and sole shareholder of tenant.

The first stealth benefits are your business doesn’t have to worry about prohibitive rent increases, or getting kicked out because the landlord won’t renew the lease. Other stealth benefits are tax and investment related:

  • As with any lease, the business deducts lease expenses before net profit passes through as income to shareholders.
  • As owner and landlord, you personally deduct expenses necessary to deliver on the lease agreement, including mortgage interest and depreciation.
  • Profits arising from this venture are taxed as unearned (investment) income, subject to income tax, but not payroll tax. And unlike your business sometimes, most profits – and even some losses – usually come with distributable cash.
  • Upon the ultimate sale of the property, basis-adjusted profit is taxed at the current capital gains rate, typically lower than income tax.
  • Over time, as rents rise against constant mortgage payments, monthly cash distribution is possible.
  • When the mortgage is paid off, you property becomes a cash-producing annuity.

Take advantage of the business owner’s stealth benefit of owning the real estate your business operates in.

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Last week on The Small Business Advocate Show I talked more about the benefits of owning your business’ real estate with Chris Hurn, CEO and co-founder of Mercantile Capital Corp. based in Orlando, FL and author of The Entrepreneur’s Secret to Creating Wealth: How the Smartest Business Owners Build Their Fortunes. Click on one of the links below to hear what he had to say.

Real estate as part of a small business retirement strategy

Get financing for your commercial real estate acquisition

Check out more great SBA content HERE!

Which candidate is best for small business?

As a leading voice for small business success, one of the factors I track and report on is public policy. In my advocacy role, I support those issues that benefit small business and oppose those that don’t, regardless of party origin.

Every four years since 2000 I have compared the policies of the two presidential candidates with regard to their alignment with small business success. Here are comparisons for the top small business issues:

Jobs = customers
President Obama’s economic recovery plan – including spending hundreds of billions on a government approach to economic growth – has failed as a jobs creator. And yet he continues to advocate more government “investment” in the economy. Mitt Romney has stated that the best way to grow the economy is to support small businesses in their efforts to grow jobs and thus create more customers for everyone.

Taxes
The largest drain on a small business’s precious working capital is taxes. President Obama thinks of tax reform as a way to redistribute wealth from “millionaires and billionaires,” but small businesses will become collateral damage. Mitt Romney proposes tax reform where job creators pay higher taxes based on their success, plus a broader tax base so more Americans have a vested interest in our country’s future.

Health care
Obamacare will cost double the initial estimate, plus impose new fines, new taxes and onerous compliance requirements on small businesses – without benefiting them. But perhaps the worst of this law is it puts small business owners in conflict with their employees and their own growth plans.

President Obama is committed to his namesake law. Mitt Romney promises to repeal Obamacare. When we polled small business owners about Obamacare, 78% agreed with Romney.

Fuel prices
Gasoline costs small businesses and their customers almost twice what it did when Barack Obama took office.

All of the increase isn’t Obama’s fault, but presidents can influence oil prices. When crude topped $140 a barrel in 2008, President Bush simply announced he wanted to remove the offshore drilling ban and oil prices dropped like a stone.

President Obama has taken no steps to reduce oil prices – rejecting the Keystone pipeline, for example – because his alternative energy policies only work when the cost of carbon fuel is high. Mitt Romney has promised to pursue the full potential of America’s domestic energy sources.

Mitt Romney is the only presidential candidate who knows what it takes to make a payroll every Friday.

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On my radio program, The Small Business Advocate Show, I talked more about my comparison of the two Presidential candidates based on issues important to the future of small business. Click here to download or listen.

Check out more great SBA content HERE!

Take this week’s poll HERE!

Watch Jim’s videos HERE!

Small Business Advocate Poll: Presidential debates and NASCAR

For most of the history of televised presidential debates, we’ve watched them with the anticipation of auto racing fans - waiting for the next wreck. In the case of debates, a “wreck” is some kind of a “gotcha” by one candidate over the other, or a misstep by a candidate.

Presidential debate wrecks are the thing of legend: Richard Nixon sweating profusely in the 1960 debate with Jack Kennedy; Ronald Reagan’s “There you go again,” comment to Jimmy Carter in 1980; Reagan again in 1984 telling Walter Mondale he wouldn’t “hold his youth and inexperience against him”; and George H.W. Bush looking at his watch during a debate against Bill Clinton was considered a wreck to some in 1990. But perhaps the mother of all debate wrecks was when Dukakis’ 1988 running mate, Lloyd Benson t-boned Bush 41’s running-mate, Dan Quayle with the infamous, “You’re no Jack Kennedy” collision.

But all of the foregoing examples must now be considered penultimate presidential debate wrecks, because none of them approach the wipeout represented by the entire performance of Barack Obama in the first 2012 debate against Mitt Romney. In NASCAR terms, Obama’s 90 minute slow-motion wreck created what surely will become the Talladega Class of presidential debate wrecks. Not just because the President basically phoned-in his participation, but because of the way it reversed the momentum of the race like the leader of a NASCAR contest running out of gas a quarter-mile short of the checkered flag, handing the race to a driver who had previously never led a lap.

We wanted to know what our audience thought about race momentum after the first debate, so a couple of weeks ago, we asked this question in our online poll: “With less than a month before the presidential election, regardless of who you plan to vote for, who do you think will win?”

Those who chose Obama/Biden came in at 17%, and 20% said the race was “Still too close to call.” But the big group - 63% - projected that the Romney/Ryan ticket will prevail.

For generations to come, when political pundits handicap an impending presidential debate, any reference to whether debates matter - or the potential for a wreck by either of the candidates - the first reference will be to President Obama’s debate debacle on October 3, 2012 in Denver, Colorado.

The funny thing about momentum is it doesn’t belong to a political party or subscribe to an ideology. The good news for the President is that he still has one more debate to get back in the race. And if you’re like me, you’ll be watching. Because you never know when there could be another Talladega Class, presidential debate disaster.

Check out more great SBA content HERE!

Take this week’s poll HERE!




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