Wyospace.com

Pay Attention to the Factors Impacting the Value of Your Business

By Leonard Holler, WSBDC Region 3 Director

The value of a business is impacted by many factors which may change from year to year.  They might include several of the following:

1) Financial performance of the business – If the business has been growing and earnings are increasing, the value of the business is positively impacted.  The converse is true, if the business has poor earnings, the value may be negatively impacted.  To maximize your company’s value minimize those discretionary expenditures and work on developing increased sales.

2) Growth prospects for the company – Revenue growth drives most of the opportunities for a business to expand.  Just as too low a growth rate may have a negative impact on the business and its ability to be profitable, an exceptionally high a rate of growth may lead to negative operational and financial consequences.  Growth rates should exceed industry benchmarks for a better valuation.  Look for opportunities to expand into related markets.

3) Competition in the industry – The business’s competitive position can impact the value of the business.  If the industry in which the business is operating has become more competitive due to entrance of new competitors or the strengthening of existing competitors, the value of a business may be impacted from a loss of market share, lower revenue growth, shrinking margins and lower profits.  Positioning the business to maintain or increase the company’s market share without negatively affecting its profitability will have a positive impact on the value of the business.

4) Effective management – The individuals managing the business also influences the value of the enterprise.  A highly experienced management team or an organization with depth in managerial staffing is valued higher than an organization with only one manager or key executive that influences the direction of the company.  Help develop your management team to reach their highest potential.

5) Economic and industry conditions – The conditions in the industry and the strength of the economy impacts all businesses within that industry one way or another.  If adverse conditions exist, it might indicate lower long-term growth potential and the profitability for a business, negatively impacting its value.  Industry conditions are impacted by the state of the economy, but are also influenced by technological changes, demographic trends, social views, and competition to name a few.  Staying on top of industry trends, customer demands, sustainability issues and your competition’s business will help you maintain your business’s value.

The WSBDC is a partnership of the U.S. Small Business Administration, the Wyoming Business Council and the University of Wyoming. To ask a question call 1-800-348-5194, e-mail wsbdc@uwyo.edu, or write 1000 E University, Dept. 3922, Laramie, WY 82071-3922. Additional help is available at the WSBDC Web page www.wyomingentrepreneur.biz.

Business Startup Costs - Deductible or Not?

By Leonard Holler, WSBDC Region 3 Director

Generally, business start-up costs are the expenses you incur before you actually begin business operations.  Business start-up costs can vary depending on the type of business you are starting.  They may include costs for advertising, travel, surveys, and training.  These costs are generally capital expenses that would otherwise have been deductible for an existing business.  Organizational costs are generally those costs incurred to set up a business entity (i.e. corporation, partnership or LLC).   

Start-up costs are amounts paid or incurred for creating a business or investigating the creation or acquisition of a business.  Start-up costs could include amounts paid for surveys of potential markets, advertisements for opening the business, salaries and wages for employees while being trained, travel and other costs for securing distributors, suppliers, or customers and fees for consultants or similar professional services.  Amortizable start-up costs for purchasing an existing business include investigative costs incurred in the general search for or investigation of the business. These are the costs that help you decide whether to purchase the existing business.  Organizational costs could include the cost of temporary directors, organizational meetings, incorporation fees and legal services.

When starting a business, you will treat all eligible costs you incur before you begin operating the business as capital expenditures.  Generally, you recover capital costs through depreciation deductions and you usually cannot recover any other costs until you sell the business or otherwise go out of business.  However, you can elect, in the year the business starts, to amortize certain costs for setting up and organizing your business.   For costs paid or incurred after October 22, 2004, you can elect to deduct a limited amount of both start-up and organizational costs.  The costs that are not deducted then, with the election, can only be amortized ratably over a 180-month period (15 years).  The amortization period starts with the month you begin actively operating your business.
As stated above, for costs incurred after October 22, 2004, you can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs in the year the business starts operations, for costs regardless of which year they were incurred.  The $5,000 deduction is reduced by the amount your total start-up or organizational costs that exceed $50,000.  Any remaining cost must be amortized.  For more information about amortizing start-up and organizational costs, see IRS Publication 535.

The WSBDC is a partnership of the U.S. Small Business Administration, the Wyoming Business Council and the University of Wyoming. To ask a question call 1-800-348-5194, e-mail wsbdc@uwyo.edu, or write 1000 E University, Dept. 3922, Laramie, WY 82071-3922. Additional help is available at the WSBDC Web page www.wyomingentrepreneur.biz

So you’ve decided to hire an employee… Now what?

By Margie Rowell, CPA,
Director Wyoming Small Business Development Center, Region 6

Once you decide to hire an employee, you will need to file and keep various forms and documents.

IRS:
1. Employers will need to have an Employer Identification Number (EIN#) and you can apply online. 
2. Each employee will need to fill out a W-4 form, an I-9 form, and in some instances a W-5 form. You, the employer, will need to keep these in your payroll files.

State of Wyoming
1. Employers will need to fill out an Unemployment Insurance and Workers'
Compensation coverage joint application.
2. Once employees are hired, employers will also need to fill out a Wyoming New Hire Form.
Although, sometimes overwhelming, the paperwork needs to be filled out and filed in a timely manner. The IRS provides an excellent publication, Circular E, Employer's Tax Guide, which answers many payroll questions. 

SBDC and Wyospace.com Partner Up For Wyoming Entrepreneurs!

By Brandon Marshall

Thanks to our partners at the Wyoming SBDC, Wyospace.com will now feature weekly postings by various WYSBDC regional directors focusing on topics of interest to Wyoming's entrepreneurs.  The articles will closely mirror "SBDC Business Tips", featured in newspapers all over the State. 

This new partnership will allow readers of the hard copy tips (and everyone else on earth) to access wyospace.com and comment on the same article that is printed in the local paper.  This presents a unique opportunity for entrepreneurs to share ideas with other entrepreneurs.

The first of these postings appeared in November written by Diane Wolverton.  This week's posting is directly below this.

Enjoy and share, Wyoming entrepreneurs! 

Employee or Contractor? Get It Right to Avoid Penalties

By Margie Rowell, CPA
Director Wyoming Small Business Development Center, Region 6

A common and costly mistake employers make is to incorrectly classify an employee as a contractor. Take care not to make this mistake because if you do, you can be held liable for employment taxes for the worker in question as well as a penalty. To make the correct determination, consider that, in general, whether a worker is an employee or an independent contractor depends upon how much control you have as a business owner. If you have the right to control or direct not only what is to be done, but also how it is to be done then your workers are most likely employees. If you can direct or control only the result of the work done, and not the means and methods of accomplishing the result, then your workers are probably independent contractors.  Sometimes, it is difficult to determine the status of a worker. In these instances you can have the IRS make a determination by filing Form SS-8 (Click Here for form), “Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding,” If you have established that your worker is an employee, the IRS provides a helpful guide, Circular E (Click Here for info).