The Small Business Tax Help Blog

Owning a business is the American dream, and buying a successful franchise can be far less risky than trying to reinvent the wheel by striking out on your own. But is franchising right for everyone? It is right for you?

Carlos Marquez Founder of Tri Tax, is a man in position to know what makes a good franchisee. Over the past two years, his company has blossomed from a single office in Wilmington, Calif., to more than 50 offices—all during the toughest economic climate since the Great Depression. “Many of our first-year franchisees are now on the path to opening their second office,” he says. “As we wrap up this second tax season, it’s amazing to see how far they’ve come.”

Indeed, as other businesses are spiraling downward, some Tri Tax offices have increased their client lists by as much as 130 percent. “This last year has truly been amazing. We’ve seen several franchisees add locations, move to larger offices, or go from a kiosk location to a full-service office,” Marquez states. “Tri Tax refuses to participate in the recession. I truly believe that this recession has helped our company grow.”

The enthusiastic embrace of the Hispanic community has certainly contributed to the company’s success, he notes, as has the way in which Tri Tax coaches its franchisees. “We’ve discovered that franchisees need more than a system to follow; they need continuous training and coaching, and this is where we stand out,” he says. “Every elite athlete knows the power of having a great coach to put them at the top of their game, and as we coach our franchisees, we focus on closing the gap between where they are today and where they ideally want to be one year from now.”

It’s not only the right thing to do, but it increases profits all the way around, Marquez explains. “A common misconception is that we generate our income by selling franchises. But our franchise fee only recovers some of the cost we incur by setting up our franchisees to succeed. Our income largely comes from royalties, so if our franchisees aren’t making money, we aren’t making any money. It’s our goal to get our franchisees profitable quickly.”

Thanks to some high-profile publicity, word is spreading like wildfire about the opportunities for Tri Tax Franchisees—and why it’s a recession-proof business. “We were featured recently in the prestigious Spanish-language newspaper, La Opinion, and our phone has been ringing since then. Everyone knows that old Benjamin Franklin saying about death and taxes, which is why this opportunity makes sense. Many taxpayers now have to deal with the tax consequences of losing their home, losing money in stocks, or cashing out retirement accounts. Add to that all of the recent changes to the tax laws, and you can see why tax preparers are needed now.”

But should potential tax preparers follow the franchise route? That depends, Marquez says. “I remember one of our operations managers telling me, ‘Carlos, you can document your systems and make them available to your franchisees, but you cannot duplicate yourself.’ That was a lesson for me. I want all of my franchisees to be successful, but there’s only so much we can do on the corporate side. We can’t follow them home and make sure they wake up on time to open their office.”

One key to a good fit is that franchisees need to have similar objectives as the franchise company. “I’ve learned that personal goals drive business goals, so it’s very important for us that someone interested in joining Tri Tax has clear goals. We educate an individual on what a franchise is. This isn’t a get-rich-scheme, but a systematic way of running a business, and it takes a particular type of person to follow the system.”

Those with regimented personalities are particularly successful, Marquez says. “We learned that people who have followed a structured schedule and instruction tend to be great franchisees. We’ve had wonderful experiences with customer services representatives, teachers, students, and food industry employees, for example, but we have franchisees from all walks of life.”

Ironically, an entrepreneurial spirit may not be an asset. “A person needs to see value in what we do,” he maintains. “Unfortunately, some franchisees want to do things their way, and that’s unfair for other franchisees who respect their franchise agreements. Ultimately, the franchise agreement is meant to protect the customer, and we, along with our franchisees, are expected to follow it. Entrepreneurial personality types tend to want to do things their way. We like doing it the way that works.”

The other critical element in a successful franchisee is a solid work ethic. “I hear and read lots of business opportunity advertisements telling people that starting their own business will allow them to live their ideal lifestyle,” Marquez says. “Ultimately that’s true, but people still need to work. Being in business for yourself is rewarding, and certainly being in the tax preparation industry gives you lots of flexibility year round. But people need to realize that starting and operating your own business is a daunting task. That’s why having the support of a franchise is so important: it takes two.”

TurboTax Gives Sneak Peek into the Future of Tax Prep

Filing your taxes could be as simple as point, shoot and submit with a new iPhone application from TurboTax®, the nation’s best-selling, No.1-rated tax preparation software from Intuit Inc. (Nasdaq: INTU). Consumer technology enthusiasts can test drive the company’s latest mobile offering for the upcoming tax season at the Intuit booth at the 2010 ShowStoppers @ CES show in Las Vegas.

Palomar Tax & Business Management accounting tax return

Question: Maryland and IRS tax for online business?

I live in maryland and would like making an online shop (commissoning costume) as part time to help pay for school.

I know i have to pay 15.3% to irs for SE tax but:

1. what is the income tax i have to pay to the irs if i make about 12,000$ a year (net income)?

2. What the percent or amount of tax do i pay to the state of Maryland for the net income in #1?

3. Since it is part time, do i need a business license/permit/tader license or other legal document to sell online or at all?

4. When i pay estimate tax to the IRS, does the amount payed to the IRS cover both IRS and Maryland tax owed or do i have to pay sepereatly to IRS and MAryland?

5. What percent i shoud withhold to pay the IRS and Maryland tax? (15.3% SE tax + Income tax % + maryland tax % = ?)

I don’t have an accountant now since i’m plannign to only have a part time shop but if i must i will find one. If i need one, how much will they chrage for questioning service or service in general for me?

Answer: 1. This depends on your TOTAL income and filing status. Get the instructions to form 1040-ES to calculate this. If you are single, no dependents and this is your only income, you are in the 10% tax bracket. Tax on $12000 is $305 after exemptions and standard deduction.

2. Maryland has a nice estimated tax calculator at https://interactive.marylandtaxes.com/percentage/502.asp

3. see link below

4. Separately

5. see above

You also need to charge sales tax on sales to Maryland and New York.

Tax-preparer rules in the works

As taxpayers get ready for the tax filing season, the Internal Revenue Service is advising those who use paid tax preparers to choose carefully as the federal agency sets out to regulate the tax preparation industry for the first time to prevent filing errors and fraud.

JCCC Board of Trustees 5-21-2009

Company registration requirements and procedures vary across different countries. This article provides a summary of the company formation requirements in Singapore versus Indonesia including minimum statutory requirements, foreign ownership policy, incorporation procedure and time-line, compliances etc.

FOREIGN OWNERSHIP
Singapore does not impose any restrictions on foreigners who wish to do business in the country. It allows 100% foreign ownership (i.e. shareholding) of a Singapore private limited company. In other words, foreign entrepreneurs do not need a local partner to register a private limited company in Singapore. The company can engage in any lawful business activity.
In Indonesia, the foreign entrepreneurs can set up a foreign direct investment company with 100% ownership but with the following restrictions:
* The business activities are restricted to only those that are open to foreign investment.
* Within 15 years from the commencement of commercial operations, the foreign shareholder is required to divest at least 5% of the shares to an Indonesian citizen or legal entity.

MINIMUM INCORPORATION REQUIREMENTS
In Singapore, the minimum incorporation requirements include: a local registered address; at least 1 local resident director (a Singapore Citizen, a Singapore PR, or a foreigner holding a valid work visa or Dependent Pass); a local resident and qualified company secretary (must be a natural person); a minimum of 1 and maximum of 50 shareholders (natural persons or corporates); and a minimum paid up capital of SGD 1.00 (no authorized capital required).
Foreigners who wish to register a company in Indonesia must comply with the following requirements: a local registered address; at least 1 director (need not be a local resident); minimum of 2 and maximum of 50 shareholders (natural persons or corporates) and a commissioner. Although there is no mandatory minimum share capital requirement, authorities normally approve companies with a minimum share capital of USD 100,000 – USD 250,000.

INCORPORATION PROCEDURE
Company registration in Singapore is fully-computerized and can be completed within 1 day via electronic means. There are only two major steps involved in company formation – name approval and filing incorporation documents.
By contrast, company incorporation in Indonesia is tedious, time consuming and can take up to 12 weeks to complete all formalities. You must submit a company incorporation application along with supporting documents to the Capital Investment Coordinating Board (BKPM). Application processing takes around 5 weeks, upon which the BKPM will issue an in-principle business license valid for 3 years.

INCORPORATION TIMELINE
Company incorporation in Singapore can be completed in a record time of less than 24 hours, with minimal formalities. In Indonesia, it can take anywhere between 3-6 months to incorporate a company.

ANNUAL FILING REQUIREMENTS
In Singapore, an Annual Return must be filed with Companies Registrar and Income Tax Return with the Singapore tax department each year. In minimize the administrative burden on small companies; they are exempt from filing audited accounts.
In Indonesia, companies must submit Annual Return along with audited annual accounts to the Companies Registry. Income Tax Return along with audited accounts must be filed with the Indonesian tax authority each year.

CORPORATE TAXES
In Indonesia, according to the latest tax amendments, the corporate tax rate has been reduced to a flat corporate tax rate of 28% for 2009 and will be further reduced to 25% from 2010. Dividends paid to individuals, interest, rents and royalties are subject to 15% withholding tax.
Taxes in Singapore are significantly lower than Indonesia. Singapore charges a corporate tax rate of approximately 8.5% for profits up to S$300K and a flat 17% for profits above S$300K. There is no dividend tax in Singapore.

ON A FINAL NOTE
Setting up a company in Singapore is significantly easier than incorporating a company in Indonesia. Unlike Indonesia, Singapore does not impose any restrictions on foreign ownership nor does it limit the business activities that are open to foreign investment. Most entrepreneurs prefer Singapore as an investment destination, as Singapore company registration can be completed in 1 day’s time with minimal formalities. Given Indonesia’s 3-6 month time line for company incorporation, which is hampered by bureaucratic delays and the complicated visa approval process, investors usually rank Indonesia as an undesirable offshore business destination.

2nd UPDATE: IRS Unveils Plan to Regulate Tax Return Preparers

(Updates with comment from H&R Block, enrolled agent.) WASHINGTON -(Dow Jones)- The Internal Revenue Service said Monday it will require registration and competency exams for legions of tax return preparers that now largely escape regulation.

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In economic terms, 2009 was one of the most calamitous years in the nation’s history. I suppose it is fitting that forecasters should have shared in this misery, professionally as well as personally.

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