Fed- Ex has informed their more than 12,000 independent contractor drivers that they need to incorporate their businesses instead of operating as sole proprietors or organizing as partnerships. 

State law provides corporations and LLCs the liability and asset protection closely-held companies need to guard themselves against auditing nightmares and attacks from litigious individuals. In today’s business climate, a new lawsuit is filed every 2 seconds, so although some business owners may not rejoice at the inital cost of forming an entity for their business, in the long run incorporating is a very wise decision.

For these Fed-Ex drivers operating as sole proprietors, they are responsible for setting aside 30-40% of their income to account for both Federal and State self-employment taxes. Although the paperwork required for tax preparation may be lighter for a sole proprietor, so is any legal protection offered for the company. Though these drivers may think they don’t have a high-liability business where there assets would be on the line, the sad truth is that in today’s world, anyone can be out there in search of what you have.

Incorporating is a solid decision for anyone operating a sole proprietorship. Fed-Ex drivers will also receive holiday and sick pay along with any other benefits contracted full-time employees would receive at the company.

To read more about Fed-Ex’s incorporation mandate for their drivers go to http://www.articlesbase.com/business-articles/fedex-imposes-new-standards-on-its-us-parcel-delivery-drivers-2801566.html.

Now that the Obama Administration has finally prevailed in turning its Health Care Reform initiative in to law, it is time to focus on what this really means to small business owners. And here it is…YOU’RE GONNA NEED TO MAKE MORE MONEY!

Regardless of which side of the debate you were on a couple weeks ago, the reality is that changes are coming and those will include increased taxes for businesses and many business owners. Not only are your taxes going to increase, but so is the level of tax enforcement by federal and state governments. In President Obama’s Fiscal Year 2010 budget delivered last May, it was noted that the IRS stood to receive an overall increase in funding of $764 million, including a $400 million increase in tax enforcement funds. This represented a 13 percent increase for IRS enforcement activities. Among the primary targets of this increased wave of audits will be sole proprietors, single member LLCs, and other closely held businesses. I have personally talked with a number of people who are terrified to take common deductions such as those associated with:+++++++++

They have reason to be fearful. All of these are red flags to the IRS and can trigger an audit. While the thought of an audit is scary, the only thing to really fear is being unprepared for an audit. If you don’t have your records in order then you will have a miserable and expensive experience. If you do have your records in order, odds are that you will zip through the process. I want to be clear about what these records include. In addition to your financial records, receipts, mileage log and so on, in a business audit you must have your corporate record book up to date. If you are a corporation or LLC and your record book does not show that you have been respecting the corporate veil, I guarantee you that the IRS auditor will not respect it either. Every year we hear stories of valuable corporate deductions being disallowed because the corporate record book did not indicate that the shareholder was treating the business like a separate entity. Instead of enjoying the tax deductions and protections afforded by a corporation or LLC, the business formalities were ignored and the shareholder managed the business like it was a sole proprietorship. These are expensive mistakes and hard lessons to learn.

As you navigate in this increasingly challenging environment, you will need every possible advantage you can employ. As a business owner, one of the most obvious and trusted protective shields available is a corporate entity. Using such a shield can keep you and your family safe from all kinds of attacks. But if you don’t take care of your armor as you should, you will find it rusted and worthless when it comes time to go to battle. There is no reason that this should ever happen.

The ride is about to get more turbulent for many small business owners as the government doubles its efforts to exact funds from our bruised and shrinking private sector. Those of us that are committed to being in business for ourselves will have to deal with working more days each year for Uncle Sam. However, the number of days that each one of us works for him will differ based on our thoughtful preparation and targeted plan of action. It’s all up to you.

Laughlin Associates, provides consultation, education and hands on help to thousands of business owners every day to ensure that their corporate records are in order and ready when they need them most.

Author Aaron Young maintains his own blog at http://www.smallbusiness411.com

The other day as I was having a conversation with my aunt who is a hair stylist, she was telling me how she pays to rent the space she uses to cut hair.  She also has to pay for her own supplies and pays a percentage of her services to the owner of the salon. She was a little surprised when I said, “Congratulations on running your own business.” She never made the connection between her work and being a business owner. She was so focused on the service that she never took the time to understand what being a business owner could mean to her.

In our business, we talk to many people in the same situation.  They don’t give themselves credit for running their own business. They work in a variety of professions; independent contractors, consultants, day care providers, technicians, multilevel marketers, or they might even work for someone else but also run a part-time business.  Well, if you have income coming from other sources beside W-2 income, you might be a business owner with all the benefits that come with it.

“You would be brain dead not to start your own business,”  says Sandy Botkin, CPA, Esq.

The IRS wants to give you credit for running your own business. As a business owner you get all sorts of tax deductible benefits from the government.  If you take it one step further and incorporate your business, then you really start to see some savings…no more self-employment tax, 100% tax deductible medical reimbursement plans, paid life insurance, not to mention the liability protection a corporation can provide you.

So go ahead…admit you’re a business owner. Now take the time and really understand what that means to you and the best way to structure your business to take the greatest advantage of being a business owner.