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Which Tax Form Should You File? Schedule C or the (Easier) Schedule C-EZ?

By Caron_Beesley, Contributor
Published: March 25, 2013 Updated: July 19, 2016

Schedule CIf you are a sole proprietor, any earnings you make or expenses you incur as a business owner are included as part of your individual annual tax return (Form 1040). To calculate exactly what to report on Form 1040, you must itemize all operational income and expenses on one of two forms – Schedule C or Schedule C-EZ.

But which one should you use and how do you file? Here’s what you need to know.

Who Should Use Schedule C?

Schedule C (Form 1040) Profit or Loss from Business is the federal tax form filed by most sole proprietors or one owner businesses. The form is used to report both income and losses during tax season.

Sole proprietorships are often considered new to business ownership. However, the truth is that over 70 percent of U.S. business are owned and operated by sole proprietors or sole traders.

Business owners who make very little, or even those who are trading at a loss, can also use schedule C.

What is Schedule C-EZ?

Schedule C-EZ is a simplified and abbreviated version of Schedule C (hence the “EZ” in the title) and can save eligible business owners time and trouble when reporting business income and expenses on the 1040 federal income tax form.

Should You File a Schedule C or Schedule C-EZ?

Businesses that are eligible to use the simpler Schedule C-EZ must meet the following criteria:

  • Your expenses are not greater than $5,000
  • You have no employees
  • You have no inventory
  • You are not using depreciation or deducting the cost of your home you can use Schedule C-EZ.

If you can check all these boxes, then Schedule C-EZ can make tax season a lot easier.

If you run a home-based business, to take advantage of the home office deduction you’ll need to use Schedule C. It may take longer, but the tax savings will be worth it.

What is the Process for Filing a Schedule C?

Start with good records – something you should be doing as a business owner from the get-go. Every expense, payment, receipt, tax form and loss needs to be recorded and kept separate from your own personal financial records (separate credit cards, for example, will ensure you can easily identify and track business costs).

Schedule C itself is filed annually as an attachment to Form 1040 – Individual Tax Return. The quickest and safest way to file is by IRS e-file—either online with commercial tax preparation software or through a tax professional who is an authorized IRS e-file provider.

Don’t Forget to Make Quarterly Estimated Payments

As a Schedule C filer, you also need to make quarterly estimated tax payments to cover your income tax (federal and state), social security and self-employment tax. This article explains the process: How To Calculate and Make Estimated Tax Payments.

Additional Information

These tips were drawn from the SBA Small Business Learning Center video series on financing topics (specifically Schedule C Profit or Loss from Business). Check out the Center for more free self-paced online training courses, quick videos, web chats and more to help small business owners explore and learn about the many aspects of business ownership.

Also check out SBA’s Filing and Paying Small Business Taxes Guide and the IRS Small Business and Self-Employed Center for more advice on tax matters.

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

Webinar on Cash Flow Management for 8(a) and HUBZone Firms

By TiffaniC, SBA Official
Published: March 21, 2013 Updated: March 21, 2013

 

Are you a small business certified in the U.S. Small Business Administration’s (SBA) 8(a) Business Development or Historically Underutilized Business (HUB) Zone program interested in learning how to better manage your business relationships? 

If so, you’ll be happy to know that the SBA is teaming up with Experian’s Business Information Services, the leading global information services provider, to launch BusinessIQ ExpressSM, an online cash flow management tool for small businesses certified in SBA’s 8(a) Program and HUBZone certified-firms.

The webinar will take place on April 2, 2013, from 2:00 – 3:00 p.m. EST, to help educate firms in SBA’s 8(a) Business Development and HUBZone programs on how can help to manage business relationships. 

All 8(a) and HUBZone firms can register for the event at:  http://event.on24.com/r.htm?e=592082&s=1&k=9EBFCA1FFEF608DF520915F788868AE7.

BusinessIQ Express is an online cash flow management tool that provides small businesses with the resources to make quick and informed decisions on prospective customers’ ability to pay by providing insight on the financial health of the business.

The online tool will help small business owners to: 

  • evaluate prospective customers’ and suppliers’ ability to pay;
  • monitor business relationships with alerts and notifications of key changes; and
  • collect outstanding debts and avoid future losses. 

The 8(a) Business Development program is a nine-year program which provides socially and economically disadvantaged firms access to government contracting opportunities and specialized business training and counseling to help them become viable competitors in the federal marketplace. 

The HUBZone program helps small businesses located in economically depressed areas and urban and rural communities with high unemployment get contract assistance and promote job growth and economic development in their communities.   

 

About the Author:

Tiffani Clements

SBA Official

I'm a Public Affairs Specialist in the Office of Communication & Public Liasion and the media liaison for SBA's Office of Government Contracting.

Communication Converts Leads

By bridgetwpollack, Guest Blogger
Published: March 21, 2013

Honesty is the best policy. Adopting an attitude of being clear and upfront has many benefits in life, from reduced stress to better relationships, but it can also be valuable in your business and key to converting leads into real customers. SCORE mentors will tell you that developing an open and honest relationship with your leads is important for several reasons: - Honesty creates trust. If a lead feels comfortable sharing their needs and concerns, you can address them directly. - An honest dialogue will determine if your business is well suited for addressing their needs. - When choosing from multiple providers, a lead will choose the one that makes them feel most comfortable and capable of fulfilling their needs. If you are able to honestly communicate your business’ capability to the leads, it brings you much closer to closing the sale and gaining a customer. Converting leads into sales is really about being a good match for client needs and effectively communicating that pairing. Here are some tips for effectively communicating your business to your potential customer: KNOW YOUR COMPETITION AND KNOW WHERE YOU STAND If you’ve positioned your business correctly, then you offer something different than your competitors. But it’s important to stay on top of how your competitors are changing and evolving their products and services. Check out their websites, follow them on social media and stop by their retail location. This will allow you to communicate your uniqueness to your customers in an informative way. SEE WHAT YOUR CUSTOMERS SEE Remember – you are a consumer too. Put yourself in your customers’ shoes and think about things like “What’s the first thing I would want to see upon walking into a specific business?” If you’re having trouble seeing from that perspective because you are too close to your business, ask your friends, family and colleagues for their opinions. TAKE ONE STEP FURTHER If you’ve effectively communicated your business to a lead and their needs align with what you can offer—but they are still hesitant, you must nurture that lead. If this is your first time in sales, and for many small business owners it is, this can be an uncomfortable proposition. Think of lead nurturing efforts as friendly reminders. Here are some tactics for lead nurturing. See which works best for your customer base and your personality. 1. Be concerned 2. Be persistent 3. Remind of benefits GET FEEDBACK It is crucial to take stock of how your lead conversion efforts are working and modify as necessary. Solicit feedback from both successful and unsuccessful conversions to see what you’re doing right and where there’s room for improvement. For unsuccessful conversions, ask questions like, “Did we effectively communicate how we could meet your needs?” and “What caused you to choose another provider for this product/service?” For successful conversions, ask questions like, “What made you choose our business as your product/service provider?” As with most things in life, honesty about you and your business is the best policy.

About the Author:

bridgetwpollack
Bridget Weston Pollack

Guest Blogger

Bridget Weston Pollack is the Vice President of Marketing and Communications at the SCORE Association. She is responsible for all branding, marketing, PR, and communication efforts. She focuses on implementing marketing plans and strategies to facilitate the growth of SCORE’s mentoring and trainings services. She collaborates with SCORE volunteers and develops SCORE’s online marketing strategy.

Is Your Business Moving? 6 Tips for Attracting Customers To Your New Location

By Caron_Beesley, Contributor
Published: March 21, 2013 Updated: September 20, 2016

Businesses move for all sorts of reasons. Existing rents may be too high; neighboring anchor tenants may have left; or perhaps you just need a bigger premise for your growing business!

But how can you ensure your existing customers move with you and how can you go about attracting new customers to your new location? Here are six tips:

1. Communicate Pre-Move and Post-Move

First, be sure to use every available touch point to communicate with existing customers about your impending move—and well in advance. Utilize e-mail lists, your website, direct mail, flyers, blog, social media, advertising, press releases, in-store signage—the works. Be sure to include directions, information about what else is going on in that neighborhood and, if your move is for positive reasons, be bold and share those details. For example, if you are expanding, include a message that thanks your customers for their patronage and stresses your commitment to providing top notch service.

If you haven’t been keeping a record of your customer emails and mailing addresses, use the news media and other avenues (see below) to spread the word about your move.

Don’t forget to leave flyers with your neighbors after you’ve moved and request that they display them in their windows or at the point of sale.

2. Update Your Online Listings

Search engines are increasingly locally-centric in their search results. For example, if you enter “Italian restaurant” into a Google search, it will automatically display local businesses in your area first. So update (or create if you don’t have them) your online listings, whether they are on Google+ Local, Yelp, Yellow Pages, Facebook, Trip Advisor or others. And, of course, don’t forget to update your own website “Contact Us”, “About Us” or “Find Us” page.

Google Search

3. Use Location-Based Services to Attract Passersby

Don’t forget to take advantage of mobile technology. Promoting your small business to passersby using mobile apps that target consumers in the vicinity of your business isn’t that difficult. Groupon, Living Social, FourSquare and ThinkNear, among others, let you post information about your latest offers and limited-time deals to consumers within a certain distance of your business. You can also schedule deals to get delivered during key hours—for example, if you’re looking to boost foot traffic during off-peak times.

4. Give Existing Customers an Incentive to Visit You at Your New Location

Your customers are your livelihood, treat them that way. Offer them incentives to stop by your new location. Make sure the offer is time-bound so they have a reason to check out your new digs soon!

 5. Host an Event to Attract New and Existing Customers

Give customers a reason to fall in love with your store—not just for its products, but as a place to get together. Retail stores, bars, restaurants and other food service businesses, in particular, can benefit from hosting events. These can be educational in nature (bring in a guest speaker from a vendor or supplier if you don’t have much to say yourself) or appreciation events (offer a sneak preview of your new location to your top customers). Events can also be tied to themes (date night or wine night) or holidays.

6. Don’t Forget Customers That May Not Have Checked You Out for a While

Your new location might be more convenient to some of your older customers. So consider running a campaign that targets not only your active customer base, but those who may not have purchased from you in a while. Special offers or other incentives specifically targeted at that group and paired with a, “we’d love to see you again,” message may just do the trick.

For more tips about attracting customers to your new business location read: 7 Ways to Increase Foot Traffic to your Small Business.

Useful Resources

  • SBA SizeUp Tool – Want to know how your business stacks up against the competition? Where your potential competitors are located? Where the best places are to advertise your business? Use SBA’s SizeUp tool to help you crunch millions of data points and get customizable reports and statistics about your business and its competition. Just enter your industry, city, state and other details. SizeUp then runs various reports and provides maps and data related to your competition, suppliers and customers. It also highlights potential advertising opportunities.

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About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

Creating Customer Loyalty Programs

By Rieva Lesonsky, Guest Blogger
Published: March 19, 2013

 

These days, loyal customers are hard to come by. So when you do have customers who are faithful to your business, returning day after day and year after year, you want to reward them. But how? There are many ways to reward your loyal customers, from simple paper-based methods to mobile apps and more. Here’s a look at some different options to consider.

Rewards cards: Depending on your customer base, your budget and how sophisticated you want to get, you can start at the basic level with paper punch cards (“Buy 10, get one free”). You can also use plastic loyalty cards that you swipe to track customer purchases and other data, which can be more useful in helping gather information for your future marketing programs than are paper cards.

Discount programs: Consider rewarding loyal customers by giving them a discount when they reach a certain purchasing level or if they buy a certain number of items within a specified time.

Give a gift: One great way to encourage loyalty is simply by tracking a customer’s relationship with you and other important data. For instance, if you record the date of first purchase, a customer’s birthday or other relevant dates, you can give them a gift on those “anniversary” dates. You can also offer gifts with purchase (like cosmetics companies do, with great success) when customers buy a certain dollar amount or volume of product.

Create a VIP program: Allow customers to sign up for a VIP program where they get some type of reward relevant to your business. This could include discounts on purchases, special sale days just for them, advance notice of sales or access to special information such as a VIP email newsletter.

Hold events: Events for loyal customers can be a great way to reward them. Consider opening your store or business at a special time for them to shop; holding a special dinner at your restaurant that only your “regulars” are invited to; or holding a seminar or training session for your faithful service business customers. The ideas are limited only by your business.

Mobile apps: Applications such as Belly, Spendgo and Womply streamline loyalty by enabling customers to enter or swipe their account information, using smartphones or tablets, to win prizes, get store credits or free products, or get cash-back rewards for making purchases. You can customize the rewards programs to work with your goals.

Get personal: Sending a handwritten thank-you note or making a phone call are very meaningful ways to thank your loyal customers that they won’t soon forget. In fact, in today’s digital world, these old-fashioned methods just might be the most memorable and effective customer loyalty tools of all.

About the Author:

Rieva Lesonsky
Rieva Lesonsky

Guest Blogger

Rieva Lesonsky is CEO and President of GrowBiz Media, a media company that helps entrepreneurs start and grow their businesses. Follow Rieva at Twitter.com/Rieva and visit SmallBizDaily.com to sign up for her free TrendCast reports. She's been covering small business and entrepreneurial issues for more than 30 years, is the author of several books about entrepreneurship and was the editorial director of Entrepreneur magazine for over two decades

June 29, 2004  - Final rule, Control of Emissions of Air Pollution From Nonroad Diesel Engines and Fuel, published in the Federal Register

August 20, 2003  - Letter to Jeffrey R. Holmstead, Assistant Administrator for Air and Radiation, Environmental Protection Agency, regarding the Proposed rule Control of Emissions of Air Pollution From Nonroad Diesel Engines and Fuel.

January 5, 2004 - Final rule, National Emission Standards for Hazardous Air Pollutants for Lime Manufacturing Plants, published in the Federal Register.

December 20, 2002 - Proposed rule, National Emission Standards for Hazardous Air Pollutants for Lime Manufacturing Plants, published in the Federal Register.

August 23, 2004 - Final rule, Effluent Limitations Guidelines and New Source Performance Standards for the Concentrated Aquatic Animal Production Point Source Category, published in the Federal Register.

September 12, 2002 - Proposed rule, Effluent Limitations Guidelines and New Source Performance Standards for the Concentrated Aquatic Animal Production Point Source Category, published in the Federal Register.

Need Financing to Buy or Grow a Franchise? New Franchise Industry Programs Can Help

By Caron_Beesley, Contributor
Published: March 18, 2013 Updated: September 20, 2016

The franchise industry, like all businesses, was not immune to the economic crisis of 2008 and the ensuing credit crunch. But the vital signs of a recovery are there. According to the International Franchise Association (IFA), many of the country’s business sectors currently starting to show growth mirror those sectors expected to be the leading drivers of employment in franchising this year. These include food service, health care, hospitality and construction—all sectors with a high concentration of franchise businesses.

“For those Americans dealing with long-term unemployment or a lack of growth opportunities in their current jobs, franchise ownership offers a viable way to be in business for yourself, but not by yourself,” said IFA President & CEO Steve Caldeira.

The Franchise Industry Tackles the Credit Crunch Head-on

Despite these indicators, financing remains a problem for potential franchise owners.  According to Entrepreneur magazine (January 2013), there’s still an 18 percent lending shortfall in the franchising industry. In a bid to boost franchise ownership, many franchisors are taking matters into their own hands and offering financing programs of their own. Meineke, The UPS Store, Gold’s Gym, Masasge Envy and Instant Imprints are just a few examples of franchisors now offering financing to qualifying first-time and multi-store franchise owners.

Want to know more? IFA President and CEO, Steve Caldeira offers the following tips (courtesy of Entrepreneur magazine) to would-be or existing franchise owners looking for an alternative to traditional financing options.

Which Franchisors Are Offering Financing Programs?

Approximately 75 to 100 franchisors are offering or working on offering creative financing programs for start-up franchise owners or those looking to expand. Programs range from zero-percent financing for a limited-term, lower license fees, reduced royalties and minority stake ownership by franchisors in multi-unit outlets. Each brand has its own offering, so down payments and collateral requirements will vary.

In addition, the franchise industry is also experiencing a growth in companies dedicated to helping franchise owners secure financing. Two such firms are BoeFly (which matches borrowers to lenders online) and Franchise America Finance (who provides custom lending solutions for franchisees and works with franchisors such as The UPS Store, Popeyes, and Jersey Mike’s).

Always Do Your Franchise and Financing Due Diligence

If you are new to franchise ownership, be sure to do your research and due diligence about the franchise system you’re interested in. Study the Franchise Disclosure Document (required by law) and speak to other franchisees about the brand and the financing program on offer. Next, try to understand what your financial responsibilities as a franchise owner will be. This blog offers some pointers on this: Buying a Franchise – How to Determine What it’s Going to Cost You.

Other Franchise Financing Options

Many banks and credit unions offer financing for franchise purchases, so be sure to compare any franchisor lending rates and terms with these. When you approach a bank, be prepared to disclose all your financial information. While your credit rating is important, you’ll also need to provide a personal financial statement, copies of tax returns and information about the source of your down payment funds.

You should also be aware that your choice of franchise will influence a bank’s decision to fund you. Franchises with strong brand names, a track record of consistent profits and cash flow—plus an ability to perform well across a variety of diverse locations—are going to stand you in good stead when you meet with your bank manager.

If your bank is hesitant about a particular franchise system’s performance, or your finances aren’t as strong as they could be, you might want to consider an SBA loan. SBA doesn’t lend to business owners directly; it provides a repayment guarantee to banks and lenders for money they lend to small businesses, making it less risky for the banks. Use this search tool to find the right SBA loan for you.

 

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

What is the Best Small Business Credit Card for Establishing Creditworthiness?

By Marco Carbajo, Guest Blogger
Published: March 14, 2013

With fast access to cash, convenience and all the perks that come along with it, a business credit card is a standard tool used by business owners.

But did you know that less than 50% of the credit cards obtained by business owners nationwide are actually in the company’s name?

It’s a shocking reality, to say the least, but the good news is there are plenty of business credit cards that cater to savvy business owners like you who understand the importance of establishing business credit.

The majority of cards one can obtain for a business also have a great deal of benefits such as cash back rewards, rewards points, travel rewards and detailed reports.

Those aiming to strengthen the credit of a business must understand that it’s vital to obtain cards that report payment activity to a business credit agency.

When applying for credit, one of the ways to identify a non-reporting issuer is by what’s required on the application. If all that is required is to supply personal information, a social security number and business name, then this card issuer in most cases will solely report to a consumer credit agency.

Take it a step further and simply read the disclosure section on the application. It will read something like, ‘I Authorize the receipt and exchange of credit information on the business signer, including the exchange of information between XYZ credit card issuer and its affiliates.’

Nowhere here does it disclose that the ‘Business’ will be included in the receipt and exchange of credit information it just states the business signer. (That’s you!)

If this is the case, then be aware that you will be personally liable for all debt your company incurs on this card and all payments and any revolving debt will be reported to a consumer credit agency. This type of business credit card is nothing more than a glorified personal credit card with your company name on it.

Now don’t get discouraged, because there are cards that may require a personal credit check. But the good news is payment activity is reported to both consumer and business credit reporting agencies.

While credit cards that fall right into this category may not be my first recommendation, at least it helps establish company creditworthiness because it reports to several business credit agencies.

The downfall is that your company’s revolving credit card debt is still reporting on your consumer credit reports, resulting in a negative impact on your personal credit scores.

Ideally, the best small business credit card is one that reports only to business credit reports. Thankfully, there are issuers offering these types of cards despite the challenges in the economy.

But before you get too excited, know that most issuers will require a personal and business credit check. The most important thing to remember with these cards only your business credit reports will reflect your revolving debt, therefore protecting your personal credit scores.

About the Author:

Marco Carbajo
Marco Carbajo

Guest Blogger

Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in 'Fox Small Business','American Express Small Business', 'Business Week', 'The Washington Post', 'The New York Times', 'The San Francisco Tribune',‘Alltop’, and ‘Entrepreneur Connect’.

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