GETTING STARTED – Part 1<\/p>\n
The one nice advantage to being a Computer Consultant is that you
\nare self-employed. To be self-employed you have to act self-
\nemployed. If you don’t believe it, no one else will either.<\/p>\n
CHOOSING A BUSINESS NAME:<\/p>\n
When you sit down to choose a Business Name think long
\n lasting and professional. First, try your name or initials
\n with the words “& Associates” by it. If you don’t like
\n that approach, then go through the yellow pages of your
\n your phone book and check the listings of “Computer
\n Stores”, “Computer Design and Consultants” and “Employment
\n Agencies” and look at names. Ask friends and relatives
\n for suggestions. Your Business Name makes a very
\n important statement about you, so take your time. It
\n will be worth it.<\/p>\n
BUSINESS ADDRESS:<\/p>\n
Most of us like to be home based. For those of you who
\n can afford the luxury of a private office, this section
\n is not for you. However, if you do plan to work from
\n your home, read on.<\/p>\n
I have friends who have used their apartment numbers as
\n “Suite” numbers. That is fine. But if you own a home or
\n have a mail box like mine which collects so much junk mail
\n that I usually take the whole pile, sometimes including
\n important bills, and throw it in the trash.<\/p>\n
So the answer for me was to check into P. O. Box’s. This
\n also protects you from having clients show up at your door
\n demanding work at strange hours.<\/p>\n
The United States Post Office Boxes are the most reasonable
\n cost wise. However, if you plan to receive items shipped
\n UPS, you will not be able to receive them at this P. O.
\n address.<\/p>\n
For those of you who don’t mind $10 to $12 a month, there is
\n another alternative. There are P. O. Box rental companies
\n which have a street address you can use. You then use the
\n Box number as your “Suite” number. Since this is a street
\n address, UPS will deliver parcels to you here. Check the
\n yellow page listing under “Mail Receiving Service”, to
\n find one of these service near you. This is also the
\n address that will go on your letterhead.<\/p>\n
*Excerpted from The Computer Consultant’s Consultant,
\ncopyright 1985 by Valerie Hood, all rights reserved<\/p>\n
GETTING STARTED – Part Two<\/p>\n
BUSINESS CARDS AND LETTERHEAD:<\/p>\n
The first step to take for networking with clients and
\n people you will be meeting is to have business cards and
\n letterhead stationery.<\/p>\n
If your budget is tight, there are printers listed in the
\n yellow pages who offer overnight “Starter Packages” which
\n consist of 500 letterhead, 500 envelopes and 500 business
\n cards for a reasonable fee.<\/p>\n
If you are more ambitious, you may want to go to a type-
\n setter and choose a print style and\/or a logo and have
\n “boards” prepared for custom designed stationery. Fees
\n vary so you should do some calling on quotes for typesetting
\n of your letterhead, envelopes and business cards.<\/p>\n
To save money on printing costs, when you use an
\n independent typesetter to design your own format, you can
\n buy your own paper for your stationery. In the yellow pages
\n under “Paper” you can usually find “Self Help Service
\n Centers”. By purchasing your own paper and envelopes from
\n these centers, you save a substantial amount of money. Plus
\n you get to choose what you want and not what the printer
\n gives you.<\/p>\n
If you wish to have your letterhead printed on continous
\n form paper there are printers listed under “Printers –
\n Continuous & Individual Form” in the yellow pages. However,
\n if you use the “Starter Package” as mentioned above you
\n probably will not receive the “die” used for printing
\n your stationery. The quick overnight jobs are ususally
\n done with paper “die”, so it’s life span is very short.
\n When you have your stationey set up by a typesetter, they
\n paste your information for letterhead, envelopes and
\n business cards on “boards”. The printer then uses these
\n “boards” to make metal “die” for printing your stationery.
\n These metal “die” can be used over and over provided you
\n store them in such a manner so they do not get scratched.
\n The printer can then use these metal”die” to print
\n continuous form paper.<\/p>\n
Of course, you can always pay the continous form printer
\n to prepare the proper “die” for you, in the event you
\n have not gone the custom typesetting route but want this
\n type of stationery.<\/p>\n
*Excerpted from The Computer Consultant’s Consultant,
\ncopyright 1985 by Valerie Hood, all rights reserved<\/p>\n
GETTING STARTED – Part Three<\/p>\n
FICTICIOUS BUSINESS NAME STATEMENT:<\/p>\n
If you are newly starting out as a Computer Consultant and
\n plan to be a one man operation, there is a very cost
\n effective way to being a legitimate business entity without
\n incorporating. This is done by filing a “Ficticious
\n Business Name Statement”. Most local newspapers offer this
\n service. The easiest way of obtaining the Ficticious Business
\n Name Statement form is to call whatever newspaper you decide
\n on and ask them to send you the appropriate information
\n needed for filing.<\/p>\n
Once you receive the form in the mail, fill it out. When the
\n form is completed, mail it back to the newspaper with the
\n proper filing fees (at this writing it was $40.00).<\/p>\n
A notice will run in the newspaper for four weeks.<\/p>\n
If there is no contesting of your business name from any
\n other proprietor in this period, then you will receive
\n a “Proof of Publication” form showing the dates your
\n notice ran. Your notice will be attached and a filing date
\n will be listed above the notice.<\/p>\n
At this point you are an official bonafide business.
\n Congratulations!<\/p>\n
Now, I’m sure some of you are asking, “But I want to
\n be on my own. I don’t need a business. I can still take
\n advantage of the tax benefits for being self employed. Why
\n should I want to do this?” The answer is you can take it
\n to the bank.<\/p>\n
BUSINESS CHECKING ACCOUNT:<\/p>\n
It is always a good idea to have a business checking account
\n for numerous reasons: 1) This is a very convenient way of
\n keeping your personal and business expenses separate; 2) If
\n you plan to sell products on a retail level, a business
\n account looks good when you are signing an agreement with
\n the distributor. It gives the air that you are an
\n established firm; and, 3) You create a business bank
\n reference, which never looks bad when you apply for loans.
\n There are many more reasons, but these are the ones that have
\n been important to me.<\/p>\n
Before you open a Business Checking Account, call around to
\n various banks and see what their requirements and fees are
\n for a business account. Some banks require a minimum
\n opening balance of $500 and some require $1,000. Don’t
\n hesitate to interview your bank. Make an appointment with
\n one of the chief officers and find out about lines of
\n credit towards outstanding invoices, loans and their
\n feelings about small businesses in general. If you cannot
\n get an appointment, then write them off. Your business
\n would mean nothing to them anyway.<\/p>\n
Do not open your account with a Savings and Loan. Even
\n though some advertise free checking accounts and will open
\n an account in your business name, you cannot borrow money
\n against business invoices. You may find yourself not
\n being able to get the proper help you need as your business
\n grows.<\/p>\n
So, now you have selected a bank. In order to open the
\n account you will need to take the “Proof of Publication”
\n form sent to you verifying that you are in fact a bonafide
\n business and the minimum deposit.<\/p>\n
The next step is to wait for the printed checks to arrive
\n in the mail. If you want, you can order continuous form
\n checks instead. This is not done through the bank but
\n from outside vendors and printers.<\/p>\n
*Excerpted from The Computer Consultant’s Consultant,
\ncopyright 1985 by Valerie Hood, all rights reserved<\/p>\n
GETTING STARTED – Part Four<\/p>\n
BUSINESS PHONES:<\/p>\n
Yes, getting a business line is more expensive than a
\n private line but there are very good benefits for you.<\/p>\n
Number one, you can be listed under your business name,
\n or if you have decided to stay solo, a business line lets
\n you be listed in the yellow pages as well.<\/p>\n
One word of caution…beware of the Yellow Pages Sales Reps.
\n They will do their darndest to make you feel your business
\n will not survive without a quarter page, five hundred dollar
\n a month ad. Keep in mind that you want your business to
\n support you! You do not want to support your business!<\/p>\n
For example, I chose two directories I wanted to be listed
\n in and selected a one line bold face print for the white
\n pages and took 5 different subject listings in the yellow
\n pages with the standard bifocal print and no frills. My
\n phone charges run about $30. a month with these two
\n directories. The most important thing is that you are
\n listed. In your business, networking pays off more than
\n advertising in the Yellow Pages.<\/p>\n
Los Angeles is serviced by two different phone companies.
\n One is General Telephone and the other is Pacific Telephone.
\n When I first started my business, I wanted to be listed in
\n the Beverly Hills phone directory also. So the infamous
\n Yellow Page Sales Rep gladly took my request. When I
\n received the directory, I found out it was a Neighborhood
\n Phone Book directory. I was never told this. When I called
\n asking why I wasn’t in the main directory for Beverly Hills,
\n I was told that Beverly Hills was covered by Pacific
\n Telephone and I would need a Pacific Telephone line to be
\n listed. That was $46 down the drain.<\/p>\n
Do some research if you live in a metropolitan area with
\n more than one phone company. Stay within the areas your
\n phone company services. Again, I will repeat…much of your
\n success will be through networking, not a phone listing.<\/p>\n
Don’t forget a good answering machine or service either.<\/p>\n
*Excerpted from the Computer Consultant’s Consultant,
\ncopyright 1985, by Valerie Hood, all rights reserved<\/p>\n
GETTING STARTED – Part 5<\/p>\n
BUSINESS PERMIT:<\/p>\n
If you are going to conduct a business, and advertise as
\n one, at least in the state of California, you are required
\n to obtain a “Business Permit” from the city you are
\n conducting your business in.<\/p>\n
You can obtain the Permit from the “City Clerk – Tax and
\n Permit Division”. You must go and apply in person.<\/p>\n
The initial Business Permit cost me $30. My white cash
\n register receipt was proof of my business until I received
\n the permit in the mail. It is called a “City of Los
\n Angeles Tax Registration Certificate”.<\/p>\n
Due to zoning laws, in California, you are not allowed to
\n conduct business with clients in your home. This is due
\n to foot traffic and fire laws. So, use your home address
\n as a “Business Address For Mail Purposes Only”. I did not
\n use my P. O. Address as a business address just in case the
\n Fire Marshall or someone else showed up at my 3″ by 5″ box
\n to post “Maximum Occupancy Allowed”. I was told by the clerk
\n that I was supposed to pick and deliver any materials from
\n clients.<\/p>\n
Each year you will be sent an “Annual Tax Renewal” form to
\n retain your Business Permit. The more you earn through
\n your business the more your Business Tax will be. However,
\n this tax can be deducted as a business expense on the
\n “Schedule C – Profit or (Loss) From a Business or
\n Profession” which is filed with your 1040 Federal Income
\n Tax Return.<\/p>\n
One word of caution is to remember that the Business
\n Permit is valid from January 1st to December 31 of each
\n year. If you file for a Business Permit in December and
\n pay your $30, don’t be surprised in January, one month
\n later, when you are billed for another $30. That’s how
\n the system works.<\/p>\n
*Excerpted from The Computer Consultant’s Network,
\ncopyright 1985, by Valerie Hood, all rights reserved<\/p>\n
GETTING STARTED – Part Six<\/p>\n
RESALE NUMBER:<\/p>\n
If you are planning to provide clients with supplies, plan
\n to set up computer systems, sell software or anything else
\n relating to your business, you need to apply for a Resale
\n Number.<\/p>\n
To obtain a Resale Number check for the nearest “Board of
\n Equalization” to you under “State Government Offices –
\n California State of” in white pages of your phone
\n directory. Remember I am writing in regards to procedures
\n for Los Angeles, California. Check with other retailers
\n in your area and ask what the requirements are to obtain
\n a Resale Number.<\/p>\n
You will have to apply in person. The best time to go and
\n apply is when the office first opens. Otherwise, the wait
\n can be quite lengthy. When you arrive, ask for the proper
\n papers to fill out to apply for a new Resale Number.
\n After you have filled out the questionaire and returned it
\n to the receptionist, it will be forwarded to an interviewer.
\n The interviewer will call your name and go over your
\n questionaire and ask you questions. It is at this point
\n that you will be denied or permitted to obtain a Resale
\n Number.<\/p>\n
One of the questions will be how much you estimate in sales
\n for the upcoming year. Depending on the amount, you may be
\n required to put up a deposit against future taxes to
\n establish your account. Be honest with them…if you cannot
\n estimate the yearly sales, then tell them so.<\/p>\n
Additionally, before you can obtain a Resale Number you must
\n have already had made a sale. Otherwise, you will not be
\n permitted a Resale Number until you do.<\/p>\n
Once you have been approved, every quarter you will receive
\n a “State, Local and District Sales and Use Tax Return”.
\n When you make a sale, you charge the client sales tax. It
\n is with this Return that you pay the State the sales tax
\n you have collected for that quarter.<\/p>\n
The advantage to having a Resale Number is that you are
\n allowed to purchase merchandise at “Wholesale Prices” from
\n distributors of products. This discount is usually anywhere
\n from 20% to 50% depending upon the quantity of merchandise
\n purchased. You, the Reseller, are not charged sales tax
\n on the wholesale price of your purchase. However, you are
\n required to charge the appropriate Sales Tax on the “Retail
\n Price” of the merchandise upon sale to a customer. The
\n difference between your wholesale price and your retail price
\n is your “Profit Margin”. On top of your consulting fees,
\n the additional profit can be a nice enhancement to your
\n financial status especially if you are setting up computer
\n systems and obtaining them at a discount from the distributors.<\/p>\n
If you plan to do this, most companies have you sign an
\n agreement and complete a credit application as a “VAR”
\n (Value Added Reseller). If you are interested in being a VAR,
\n a business checking account and a resale number are a must.<\/p>\n
*Excerpted from The Computer Consultant’s Consultant,
\ncopyright 1985 by Valerie Hood, all rights reserved<\/p>\n
ADVERTISING<\/p>\n
I have found one very reasonable ways to go. It costs $55.
\nas of this writing.<\/p>\n
“MIS WEEK Consultants Directory”. The directory is printed twice
\na year. There is a Spring Directory and a Fall Directory. The
\ndirectory is an alphabetical listing of consulting firms and
\nservices and also has a geographic listing of consulting firms by
\nregions served.<\/p>\n
My ad has always paid for itself. To be honest, from that
\nlisting one company alone has sent me business for two
\nyears. It is the only sure fire avenue I have seen pay off
\nimmediately.<\/p>\n
To inquire for advertising in MIS WEEK, you can contact the New
\nYork office directly at (212) 741-4010 (for an ad counselor) or
\n741-4014 (for space reservations) or write to Classified
\nAdvertising Department, MIS Week, 7 East 12th Street, New York,
\nNew York 10003.<\/p>\n
Or contact:<\/p>\n
615 South Flower Street
\n Suite 200
\n Los Angeles, California 90017
\n (213) 612-0725<\/p>\n
MIS Week also features a special “Consulting Services” section
\nwhich runs every fourth issue of each month. One column inch is
\n1-15\/16″. The rates as of this writing are as follows:<\/p>\n
Open rate $55.00 per column inch
\n 3 consecutive times $51.00 ” ” ”
\n 6 times in one year $49.50 ” ” ”
\n 12 times in one year $48.00 ” ” ”<\/p>\n
I honestly cannot say if this every fourth week advertising
\nactually works. I asked for some samples and I received one year
\nold issues and the consultants section was very sparse. I would
\nhighly recommend just sticking to the bi-yearly directories.<\/p>\n
*Excerpted from The Computer Consultant’s Network,
\ncopyright 1985 by Valerie Hood, all rights reserved<\/p>\n
PUBLICATIONS<\/p>\n
One of the major secrets to success is to be well informed. With
\nall the publications on the market today, it is easy to be
\noverwhelmed with literature.<\/p>\n
When I decided to delve into this new electronic world, I admit,
\nI knew nothing. I was a newly reformed computer phobic. I knew
\nthere was something fascinating to this whole area but I didn’t
\nknow how to find it. At this stage, I was only as far as Valdocs
\nand my QX-10. The infamous A> at the CP\/M system level scared me
\nhalf to death. But, I was going to make a living at this.<\/p>\n
I have found the longer we are in the industry, the lazier we get
\nabout staying on top of even the littlest detail. I mean, it has
\ngot be such an impactful piece of news such as “NEW UNIX 5
\nMEGABYTE BUBBLE MEMORY PORTABLE TO HIT THE MARKET FOR $1,000” to
\ncatch out attention. I admit I am finding myself falling into
\nthat.<\/p>\n
Eventually, the day will come when you will be found by every
\npublication possible. Most of them will look worthy. Some of
\nthem will be reasonable in price and some will be quite
\nexpensive. These expensive publications try to make you feel how
\n“elite” you will be if you subscribe. There are the many
\nsoftware directories that are very valuable to have. In my
\nresearch and in actually subscribing to one with a 30 day trial
\noffer, I found a very impressive subscription service. For me,
\nit paid for itself within one week. It is called DATA SOURCES.<\/p>\n
I found this one quite by accident. Contrary to what I said
\nabove about being found, I found Data Sources. It was a tiny ad
\nin one of the OEM newspapers. It had a 30 day trial offer so my
\ncuriosity said, “Why not?”<\/p>\n
About six weeks later a package arrived. It was about 8 1\/2 by
\n11 by 4 inches and weighed about 10 or more pounds. I opened it
\nand found 2 large directories. One labeled “Software” and one
\nlabled “Hardware – Data Communications”. Of course, there was
\nthe invoice staring at me…AMOUNT DUE – $159.00. Gasp! So I
\nstarted looking through all of the information and was sold in
\nfive minutes. I do not know what the price will be at the time
\nof this writing. A regular subscription rate is $210.00 for the
\nyear.<\/p>\n
Data Sources updates these directories 4 times a year.
\nPresently my 1st Quarter 1985 issue is marked up with notes,
\nindexed and coded. The software volume looks like I’ve used this
\nfor 10 years already and it’s only one month old. Am I going to
\nhave to do this again in the 2nd Quarter?<\/p>\n
Data Sources contains approximately 21,000 software packages, for
\nhundreds of business and vertical market applications and are
\nindexed by function compatiblility, package name and company.
\nThere are approximately over 18,000 hardware and data
\ncommunications products, from micros to mainframes, printers to
\ncomm processors and everything inbetween, are categorized and
\ndescribed for instant reference. Approximately 9,000 companies
\nare profiled with complete contact information and pertinent
\ndetails for vendor qualification.<\/p>\n
I used Data Sources to locate all of the companies listed in
\nChapter 2 which are consulting houses and handle personnel. This
\nsaved me a lot of time in research.<\/p>\n
Once you subscribe to Data Sources there is a Hotline to answer
\nany questions you may have. Third party maintenance companies
\nand dial-up security equipment companies have been recently added
\nto the directory. Check it out at your local library.<\/p>\n
It is a must for the serious computer professional.<\/p>\n
*Excerpted from The Computer Consultant’s Consultant,
\ncopyright 1985 by Valerie Hood, all rights reserved<\/p>\n
P.S. Details, details….the address is:<\/p>\n
Data Sources
\n P.O. Box 5845
\n Cherry Hills, NJ 08034<\/p>\n
Editor: Kathy Thompson<\/p>\n
Is approximately $179 a year, updated quarterly and well worth it.<\/p>\n
CONTRACTS AND FEES<\/p>\n
You probably think this is going to an answer to all of your
\nquestions regarding Contracts and Fees. Wrong. There is really
\nno right answer or perfect form agreement that is going to work
\nfor everyone…the truth is, everyone is different. My advice is
\nto seek a reputable attorney in computer law and spend an hour
\ntalking to him\/her.<\/p>\n
If you are consultant being hired through a personnel agency or
\nthrough another consulting house, they usually will carry their
\nown agreements for you to sign.<\/p>\n
I would also suggest to talk with other consultant’s about their
\nagreements. Ask if they have encountered any problems and how
\nthey handled the situation. Ask for tips or tricks of the trade
\nthey have learned. For example, one of my electronic pen pals,
\nFrank, is a consultant. I asked him what he could suggest for
\nother consultants. Since he does programming, he makes sure that
\nit states in the contract that all programs developed by him
\nremain his sole property until paid in full. He further suggests
\nto find out through various contacts as much as you can about the
\ncompany, who they deal with, how they conduct business and pay
\ntheir bills.<\/p>\n
Fees are another world of inconsistencies. What do you charge?
\nHow do you decide? Well, from my experience I have seen a
\nprogrammer making $8 to $10 an hour while an ex-Burger King
\nEmployee comes in at $12.50 an hour just to sit down and play
\nwith a piece of software and give a novice point of view. I have
\nseen people with years of mainframe experience making $25 an hour
\nwhile another person makes $40 an hour teaching off-the-shelf
\nword processing programs to individuals.<\/p>\n
I have spoken with head hunters who chuckle telling me of people
\nwho come out of aerospace with one to two years experience and
\nwant $30 to $35 dollars an hour. He goes on laughing. Then I
\nsay, “Well I’ve only been in microcomputers for one and half
\nyears and I’m making $30 to $40 an hour, depending on the job.”
\nHe chokes and patronizingly says, “Well, honey, that’s because
\nyou’re smart.” And I say, “Aren’t they?”<\/p>\n
In my opinion, go for what you feel you are worth. The worst
\nthat can happen is to hear, “We don’t want to pay that much”.
\nThen you’re open to negotiate.<\/p>\n
If an offer comes along, talk to other consultants and see how
\nthey feel. But get more than one opinion. You do not want to
\nsell yourself short. For example, I have one friend who makes
\n$25 an hour programming on a certain mainframe. I have another
\nfriend who swears that kind of job is not worth more than $9 an
\nhour.<\/p>\n
So…bottom line, go for what you feel you are worth. If that
\ndoesn’t work and you honestly want that particular job or
\ncontract, negotiate. There is such a thing as a raise, even in
\nconsulting.<\/p>\n
Another area which is important is what to charge as a retainer.
\nA retainer is put into effect when a client may need you on call
\nbut doesn’t know when. So he pays you a monthly retainer to be
\navailable for a day or so many days a month.<\/p>\n
Dr. Jeffrey Lant, in his book, “The Consultant’s Kit”, which I
\nhighly recommend, suggests that you take your daily rate and
\ntimes that times four and that is your monthly retainer fee.
\nHowever, this is for only being available one day a month. He
\nsuggests you charge your hourly fee over and above the day used.<\/p>\n
Then again, I have seen proposal’s cross my desk where the person
\ncharges only their daily rate as the monthly retainer rate.
\nNaturally, I much prefer Dr. Lant’s suggestion.<\/p>\n
Sometimes, for those of you who also do software training and
\neducation, client’s want to remain very cost effective and have
\nyou come in for only one or two hours. Somehow they are always
\nthe ones 50 miles away. After gas, car maintenance, the time of
\ngetting ready, one to two hours does not quite seem worth it. I
\nwould advise you to state up front that you charge a 4 hour
\nminimum and milage. The usual response I get is, “Oh. Ok. What
\ntime can you be here?”<\/p>\n
There are no set rules. Do research. Talk to an attorney. Most
\nimportantly, Network.<\/p>\n
*Excerpted from The Computer Consultant’s Consultant,
\ncopyright 1985 by Valerie Hood, all rights reserved<\/p>\n
BUSINESS EXPENSES AND WRITE OFFS<\/p>\n
I was caught off guard at all of the consultants I would run into
\nwho did not realize the benefits they were entitled to as
\nindependent contractors. When I was working permanent full time,
\nI still had a business on the side earning additional income.
\nUnder the law this is considered self-employment. I was able to
\ndeduct certain allowable expenses for that business, even though
\nI was employed full time by a permanent employer. These
\nallowances were taken on the “Schedule C – Profit or (Loss) From
\na Business or Profession (Sole Proprietorship)”. This Schedule is
\nan addendum to your “1040 – U.S. Individual Income Tax Return”.<\/p>\n
Yes, I am going to tell you to speak with an accountant, or take
\na tax course, but this is an area where it is the same for
\neveryone, so examples can be given. The IRS also has booklets
\nyou can order which explain in detail your rights to being self-
\nemployed.<\/p>\n
If you are a Partnership or a Corporation you cannot use Schedule
\nC and should consult with an accountant. But, for the purposes
\nof this book, we are concentrating on the individual self-
\nemployed consultant.<\/p>\n
Below I will list the areas which are considered to be allowable
\ndecuctions that are imprinted on Schedule C and try to explain
\nthem. Again, I stress to order booklets from the IRS and\/or
\nspeak to an accountant. Allowable deductions are:<\/p>\n
1. Advertising – You are allowed to deduct any expenses you
\nincur for advertising as long as it pertains to promoting your
\nbusiness to the public for purposes of generating income. This
\nwould cover ads in any media (i.e. newspapers, magazines, radio
\nor television).<\/p>\n
2. Bad debts from sales or services – Since we work on what
\nthe IRS calls a “Cash Method” you are not allowed to deduct any
\nbad debts as of this writing unless you had previously reported
\nthe amount as income.<\/p>\n
We, the Cash Method Taxpayers, have to deal with collection
\nagencies, small claims court and attorneys to handle our money
\nmatters.<\/p>\n
3. Bank service charges – These can be bank charges on
\nbusiness checking accounts (i.e. monthly fee plus per check
\ncharge) or business credit card erroneous bank charges (i.e. the
\ncharges the bank charges for using the automated teller).
\nRemember, these are only for those charges used in connection
\nwith your business.<\/p>\n
4. Car and truck expenses – This is a touchy area. It always
\nseems to change every year. So vaguely this allows you to deduct
\nthe percentage of the monthly payment of your car used for
\nbusiness. For example, you may need your car for 50% personal
\nand 50% business. Your monthly payment is $250. Considering the
\ncar has been used for the business for the entire year you take
\n$250 x 12 = $3,000 x 50% = $1,500 as your allowable deduction.<\/p>\n
You are also allowed to deduct the cost of maintenance and
\nrepairs as well as gas and car washes. Parking fees and tolls
\nwould be applied here also.<\/p>\n
As I said, this is one of those touchy areas. Do your homework.<\/p>\n
5. Commissions – This could be a deduction when you hire an
\nadvertising agency and they place your advertising for you.
\nUsually the standard agency commission is 15%. Since this is
\nconsidered to be the agencies income, on which they will pay
\ntaxes, you are allowed to deduct it.<\/p>\n
Additionally, this could also be sales commissions you have paid
\nto personnel or other contractor’s working with you.<\/p>\n
6. Depletion – This does not apply to us.<\/p>\n
7. Depreciation and Section 179 deduction from Form 4562 –
\nYou can deduct a certain percentage of the cost of assets you buy
\nto use in your business to hold or produce investment income.<\/p>\n
Since your car is a business expense, you may be able to
\ndepreciate the business portion. Seek the advice of an
\naccountant. Please make note that if you lease your car you are
\nnot entitled to a depreciation deduction.<\/p>\n
Our obvious depreciation expense would be our computers. You
\ncannot depreciate software. The law is getting sticky about
\ncomputers. You must be able to prove over 50% business use at
\nthe time of this writing.<\/p>\n
Some of the assets depreciated may also qualify you to take an
\ninvestment tax credit. Again, you know, talk to an accountant.<\/p>\n
This is not used when you include any depreciation amounts in
\nPart III of Schedule C – Costs of Good Sold and\/or Operations.<\/p>\n
8. Dues and publications – Your subscription to business
\nrelated publications (books, magazines, newspapers, newsletters)
\nif needed for business are deductible.<\/p>\n
Additionally, any dues paid for membership in professional
\nassociations are deductible (i.e. dues to join the Independent
\nComputer Consultants Association).<\/p>\n
9. Employee benefit programs – Amounts go here that are
\nnot included in pension and profit-sharing plans mentioned later.
\nContributions to insurance, health and welfare programs go here.
\nFor example, even though we are not, but if we were Writers Guild
\nMembers, we would be required to pay 10% on top of our salary to
\nthe Pension, Health and Welfare Fund. This amount would be
\ndeducted here.<\/p>\n
10. Freight – If you do not include this in the Cost of Goods
\nSold and\/or Operations section, charges you incur for freight
\nshipping costs would go here. For example, your computer goes
\ndown, the warranty has expired, the store you purchased it from
\nis out of business and you are forced to ship it to the
\ndistributor for repair. The cost of shipping would be deducted
\nhere.<\/p>\n
11. Insurance – Auto Insurance, Renters\/Business Insurance
\npremiums would be deducted here.<\/p>\n
12. Interest on business indebtedness – If you have loans
\nincurred for business reasons, the interest you pay is deducted
\nhere.<\/p>\n
13. Laundry and cleaning – Does not apply to us.<\/p>\n
14. Legal and professional services – Legal costs incurred
\npertaining to your business can be deducted here. This also
\nwould allow for other consulting fees, accountants, etc.<\/p>\n
15. Office expense – This is a strange one. Expense amounts
\ngo here that don’t fit anywhere else. There is a place for
\n“Other expenses”, so this is up in the air. Talk to an
\naccountant. Things I put here can go in the “Other expenses”, so
\nI suppose it’s up to you, as long as you can verify it being an
\nexpense.<\/p>\n
16. Pension and profit-sharing plans – You should enter
\namounts here made as an employer on your behalf (but not
\nvoluntary contributions you made as an employee on your behalf).
\nYou will have to file form 5500-C or 5500-R if you fill this in
\nwith less than 100 participants. This is another area where you
\nwill need advice.<\/p>\n
17. Rent on business property – This is where Uncle Sam gets
\nreal sticky. Since for the purposes of this book we work from
\nour homes read this one with caution. You are only allowed to
\ndeduct that percentage portion or square footage of the home used
\nstrictly for business. You better be able to prove this too.
\nThe law will not allow the deduction if there is any personal
\nactivity affiliated in this area. A separate bedroom is better
\nfor an office, that way the deduction is more solid.<\/p>\n
18. Repairs – Since your warranty was up on the computer you
\nhad to pay for the cost of the repair. That amount goes here.<\/p>\n
19. Supplies – If you don’t include in Cost of Goods Sold
\nand\/or operations, amounts for ribbons, disks, paper, pens and
\nwhatever else would go here.<\/p>\n
20. Taxes – Taxes reimbursed to the state with your Resale#
\nand local Business permit taxes would be deducted here. If you
\npaid cash for an item, the sales tax could be deducted here also.<\/p>\n
21. Travel and entertainment – Amounts are allowed here only
\nfor expenses incurred in connection with your business. Airline
\ntickets, dinners\/lunches with clients, hotel accomodations, etc.
\nTread lightly on those conventions held in the Bahamas or on
\nCruise ships. Make sure you can prove this is legitmate without
\na doubt.<\/p>\n
22. Utilities and telephone – This is self explanatory. This
\nis where it is a nice idea to have a business line so there will
\nbe no questions as to what were personal calls and what were
\nbusiness.<\/p>\n
23. Wages – Any amounts you paid for outside help would be
\ndeducted here. This does not allow for amounts paid to yourself.
\nIf you pay an individual person over $1,000. you are required by
\nlaw to file a 1099 form to Uncle Sam.<\/p>\n
24. Windfall profit tax – This does not apply to us.<\/p>\n
25. Other expenses – Now this is where I may put what is an
\noffice expense. It gets confusing to me. But items I deduct
\nhere are items like Business Gifts, P.O. Box rental, Postage,
\nXeroxing, Typesetting, and other subscription services needed for
\nthe business like CompuServe, MCI Mail, Telex, etc.<\/p>\n
This is where we would add up all of our deductions and subtract
\nthem from our Gross receipts\/sales amount. This amount would be
\nour profit or (loss) from the business and would be carried over
\nto the proper line on the 1040 form.<\/p>\n
There is a part three which I have mentioned a few times but
\nbasically applies to those of you who are going to be carrying an
\ninventory.<\/p>\n
State returns will vary from state to state so you know what to
\ndo. Yes, speak with an accountant.<\/p>\n
SELF-PUBLISHING<\/p>\n
How to publish your software\/books without a high overhead:<\/p>\n
1) Get it copyrighted. Call the Federal Building (213-688-3800)
\n and request the proper copyright filing forms for software
\n programs\/books.<\/p>\n
2) Next step is to get your IBSN #.<\/p>\n
Send a letter requesting a block of ISBN numbers to Emery I.
\n Koltay, Director, U.S. IBSN and SAN Agency, R.R. Bowker
\n Company, 205 East 42nd Street, New York, New York 10017.
\n The block (amount) of numbers you receive depends on the
\n amount of items you want to publish within the next year.<\/p>\n
Request a SAN number at the same time. You can also
\n request “The IBSN System’s User Manual” and Bowker’s
\n brochure describing its products and services for
\n publishers.<\/p>\n
I’ll explain the SAN number later. It just makes everything
\n easier for stores and distibutors to order material from
\n you.<\/p>\n
3) Write the CIP Division, Library of Congress, Washington,
\n D.C. 20540 and request a Publisher’s Response Form and
\n “Cataloging in Publication: Information for Participating
\n Publishers.”<\/p>\n
4) Now write Beverly Palacio, ABI Department, R.R. Bowker
\n Company, 205 East 42nd Street, New York, New York 10017
\n and request information on getting listed in “The
\n Advance Book Information” (ABI) Program.<\/p>\n
This is free. This gets you listed on the Books in Print
\n database available to libraries and book sellers\/
\n distributors on line.<\/p>\n
5) Then write Jaime Ariza, Sales Representative, R.R. Bowker
\n company, 205 East 42nd Street, New York, New York 10017
\n for a media kit for a listing in the PTLA (The Publishers
\n Trade List Annual.<\/p>\n
This does cost. As far as you are concerned you can pay
\n only $30 to get a single title listing. This directory
\n is used by thousands of libraries and bookstores. You have
\n to have your IBSN number first.<\/p>\n
6) And last but not least write, Rosemary Catoggio, R.R.
\n Bowker Company, 205 East 42nd Street, New York, New York
\n and request a media kit on getting listed in the
\n “Microcomputer Market Place”.<\/p>\n
No, it doesn’t stop here. But for $31.00 plus some, you will be
\nable to reach thousands of potential buyers. You can receive
\nadvance sales from these listings and take them to the bank if
\nyou need publishing capital.
\n\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd\ufffd<\/p>\n
