Have You Considered Buying a Franchise?

Do you happen to be one of many who has dreamt about going into business for yourself but couldn’t put your finger on what kind of business to start? Perhaps you have an idea of what kind of business to start but fear has got in the way of taking the plunge. A degree of fear and trepidation are understandable, and maybe even a good thing, in the sense that they translate into being ultra-careful and not impetuous. In other words, becoming a business owner should not be taken lightly.

You might have many reasons for delaying the pursuit of your dream business, and you might have already analyzed your options. But have you ever considered owning and operating a franchise? Operating a franchise can give you a leg up toward being a business owner. The following information will shed light on why you should give the franchise option some serious consideration.

As noted by Market Watch, a franchise is basically a “business in a box.” It's a model for the operation of a business that has proven successful. This proven model includes the investment costs, a manual, and built-in support from the franchiser as well as a network of other franchisees who have experienced most of the challenges you will face while operating this business. The most attractive feature of buying a franchise, at least from the buyer's point of view, is simple: you can investigate purchasing a franchise more easily than purchasing a stand-alone non-franchised business.

Here are some additional advantages that go with buying a franchise, as stated by Entrepreneur:

1. Track Record of Success. Any good franchise company has developed a method of doing business that works well and produces successful results. 
2. Strong Brand. One of the biggest advantages of franchising is that the company is building a brand on a regional or national basis that should have value in the eyes of customers you're trying to attract.
3. Training Programs. A good franchise company has training programs designed to bring you up to speed on the most successful methods to run the business.
4. Ongoing Operational Support. Franchise companies have staff dedicated to providing ongoing assistance to franchisees. 
5. Marketing Assistance. The franchise company has marketing assistance to provide you with proven tools and strategies for attracting and retaining customers. 
6. Real Estate Assistance. Most franchises have manuals and other documentation, as well as staff, to help you find the right site and negotiate the best possible deal on your site.
7. Construction Assistance. Franchise companies can also provide a wonderful benefit in helping you design the layout of the business and select the right contractors to do your build out.
8. Purchasing Power. A good franchise can take advantage of the buying power of the entire system to negotiate prices for everything you need at significantly lower levels than you could achieve as an independent operator.
9. Risk Avoidance. The biggest reason to buy a franchise is that, if you're smart, it will help you avoid much of the risk of starting a new business. 
   

Okay, so far we’ve done a pretty good job of hyping the benefits of owning a franchise. But even a second-grader knows that it’s an imperfect world. Nothing is ideal. Certainly there must be some disadvantages to owning a franchise. Here are a few, as noted by Small Business:

1. Costly Investment. The start-up costs for franchises vary depending on the type of business, demand and industry. Start-up costs often are a disadvantage for franchises. Top franchises like McDonald's and Dunkin' Donuts could cost over $1 million, depending on location.
2. Access to a Limited Territory. Franchise agreements protect owners by not placing franchises from the same brand within a predetermined radius. While that's helpful in many ways, it also limits the number of customers a franchise can reach and service.
3. Strict Operations Guidelines. Owning a franchise does not offer the same freedoms as starting a company of your own. Each franchise gives franchisees a set of guidelines they have to follow or run the risk of losing the right to operate. 
4. Risk Reputation. While there's a benefit to running a business that's visible in the market, it can be a problem if the business has a bad reputation because of other locations. 
5. Limited Exit Strategy. No matter how small or large the business or how long it's been in operation, every operation needs an exit strategy. While most owners have several possible ways to exit their businesses without outside sources interfering, franchises have strict rules. 

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The Importance of Tax Planning

Many people use the term “tax planning,” but it is often misunderstood. It is the art of learning how to manage your affairs in ways that postpone or avoid taxes. Skilled tax planning means more money to save and invest, and it can make the tax season more of a financial boost instead of a financial burden. As explained well by Wealth Plan: “tax planning means either deferring or avoiding taxes by taking full advantage of the beneficial tax-law provisions, increasing tax deductions and tax credits, and by making good use of all applicable breaks that are available under the Internal Revenue Code.”

Strategies are typically designed and employed to achieve goals--a series of steps undertaken to accomplish an intended end. Of course, strategies within the realm of tax planning are undertaken to achieve financial goals primarily, but they are also employed to achieve business goals. If your tax planning strategies are effective, they should successfully accomplish, or at least address, the following goals:  

1. Lower your amount of taxable income

2. Reduce the rate at which you are taxed
3. Empower you to control when taxes get paid
4. Ensure you get all credits available to you
5. Put you in charge of the Alternate Minimum Tax

Note the following sample of strategies intended to reduce one’s tax liability, as noted by Cash Cow:

1.      Maximize Retirement Contributions: Deferral of taxation is one of the most common and useful tax strategies for individuals who are currently in a high tax bracket, but if you follow this path anticipate being in a lower tax bracket at some point in the future when withdrawals (distributions) are taken.

2.      Harvest Investment Losses: You can offset unlimited investment gains, and up to $3,000 of ordinary income each year by selling your investments that have lost value. If your losses exceed your gains and the $3,000 of ordinary income, you can carry them over to be used in future tax years.

3.      Consider Charitable Gifts: This strategy is only useful if you can itemize your tax deductions (most often due to mortgage interest deductions), and plan on making donations. Appreciated assets are some of the most tax-efficient charitable donations. Donating these assets will allow you to avoid paying capital gains on the appreciation.

4.      Invest In Municipal Bonds: Some high income earners are now subject to the 3.8% Medicare surtax on all investment income. Municipal bonds avoid this additional tax, and typically avoid all Federal and State income taxes. That means the tax equivalent yield (the yield an investor would require from a taxable bond) has increased for those taxpayers, making muni-bonds more attractive.

There are other creative ways to achieve effective tax planning, including these two tips from My CPA Team:

1.      Gifting Assets to Your Children: You can gradually take money out of your estate by giving it away. If your estate is larger than the normal exclusion amount, you can reduce its value by giving away $14,000 per year to each of your children, grandchildren, or anyone else without paying federal gift taxes. Your spouse can gift money as well, thus allowing a total $28,000 gifting capability between the two of you each year per recipient.

    2.  Deduct a Home-Based Office When Used for  Your Employer: People who work for  companies whose headquarters or branch offices  are not located in the same city as the employee,  or outside salespeople who often use their home  office as a base, can often use these deductions.  There are rules that must be followed in these  cases, however, and it is wise to consult a  professional before diving into the details.

In conclusion, you might be able to see that the tax planning process is not something that can be done in one day at the last minute. Time must be invested throughout the year to identify opportunities for savings as well as effective solutions to accomplish your tax planning goals.

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Deducting Self-Employment Expenses

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With the amount of taxes the IRS already collects from taxpayers—as well as the ever-increasing cost of living self-employed—tax payers can ill afford to overlook claiming as many deductions as the IRS makes available. The income and expense situation of self-employed taxpayers are widely recognized as fertile hunting grounds for a wide variety of deductions. This article will highlight a number of potentially significant deductions available to the self-employed taxpayer as well as some of the most commonly over-looked deductions by the self-employed.

Home Office Deduction, as explained by the IRS: If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The IRS provides two methods for calculating this deduction, the “Simplified” approach and the “Regular” approach. The difference between the two approaches is that the Regular approach requires the taxpayer to determine the actual home office expenses. This approach could result in a higher deduction at the expense of more extensive record keeping.

Regardless of the method chosen, the basic requirements for your home to qualify as a deduction are:

• Regular and Exclusive of your home for conducting business, and
• You must show that you use your home as your principal place of business.

Investopedia recommends these additional deductions for the self-employed:

Internet and Phone: Regardless of whether you claim the home office deduction, you can deduct your business phone, fax and Internet expenses. The key is to only deduct the expenses directly related to your business.

Health Insurance Premiums: If you are self-employed, pay for your own health insurance premiums, and were not eligible to participate in a plan through your spouse's employer, you can deduct all of your health, dental and qualified long-term care insurance premiums.

Meals: A meal is a tax-deductible business expense when you are traveling for business or entertaining a client. The meal cannot be lavish or extravagant under the circumstances.

Entertainment: The IRS has numerous restrictions on claiming the business entertainment tax deduction. For starters, you must conduct business with the person you are entertaining during, immediately before or immediately after the event. If your entertainment expense meets all the tests, it’s still only 50% deductible.

            And according to ZipBooks.com:  

Educational expenses: If you go to seminars, take web-based classes, pay professional dues or subscribe to business publications, you can deduct all of those expenses.

Vehicle: If you use your personal vehicle for business purposes, you can deduct a standard mileage charge that is currently 54 cents per mile. Be sure to keep extremely detailed and accurate records. If you have a vehicle that you use exclusively for business, you can depreciate it over its useful life, which will possibly provide a much greater deduction.

Purchase/depreciation of computer and other office equipment: Depending on the price of the things you purchase, you may be able to write them off completely in the year that you put them into service with your company, or you may have to depreciate the cost over the item's useful life.

Retirement plan(s): Even though you do not have the opportunity to participate in an employer's 401(k) plan, there are several ways you can set aside money tax-free for your own retirement. Every dollar that you put into one of these plans comes off your taxable income, and you can put a very large amount into some of these plans.

The IRS does tend to target self-employed and small business owners at a greater rate than ordinary job-holding individuals. This is because there is far more room for “fudging” numbers when you are self-employed than when you receive a paycheck. The legal advice site, Nolo.com, offers the following two rules for the self-employed:

Claim all of your income.

Don't claim expenses for which you didn't actually pay.

To these two rules can be added a third: Keep amazingly accurate records. One way to do this is to use an accounting app designed for small businesses. In addition, a smartphone-based app ensures that you always have the ability to note and detail your expenses, no matter where you are. For more information about Accounting Services Arizona visit https://www.compasspointcpa.com.

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