Contractor or Employee - an IRS View

Contractor or Employee?  An IRS definition on the relationship between owner and worker.

It is incumbent upon a business owner to correctly determine whether persons providing services are independent contractors or employees.  Generally, organizations must withhold income taxes, pay unemployment taxes, and withhold and pay SSN and Medicare taxes to an employee.  Generally, employers do not have to withhold or pay any taxes on payments to independent contractors and subcontractors.

The IRS states that three distinct facts from Common Law Rules define the nature of the worker's relationship to the company:

1. Type of Relationship - Does a written contract or employee benefits exist?  Is the relationship continual or for a defined period of time?

2. Financial - Who pays for the business aspects of the worker's job?  If the payer or employer, a worker might get reimbused for expenses.  Generally, unless otherwise agreed upon,  a contractor would supply the tools required for the job.  For instance, a contract carpenter would be expected to pay for his hammer, screwdriver or measuring tape, etc.

3. Behavioral - Does the company have a right to control the worker's job and how the work is performed?  If so, the worker likely falls into the employee class.

"Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.

The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination."

If an employer is still unclear about a worker's status after reviewing this information, a Form SS-8, Determination of Worker Status can be filed with the IRS for review and determination.  This process may take up to six months for resolution.


The full IRS article is here: http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

Something new - Amazon affiliate marketing

As I've said many times, we at thesmallbizpro believe that the best way for us to produce honest, valuable content is to try things ourselves, do our own research, and write about the experience.  Sometimes those will involve lessons learned the hard way, other times some may be put off by our content.  We accept and embrace that responsibility for our readers.

Another part of our goal is to offer transparency - we tell you the reasons behind certain decisions.  Today's news is the addition of Amazon affiliate marketing.  Simply, we want to test the affiliate marketing craze and determine if value exists for small business.  Similar to a prior post on get rich quick schemes with Google-mania, many sites claim to provide quick and easy money from affiliate marketing.  We can hardly state an opinion without trying this out for ourselves.

We will keep this Amazon link at least through the rest of the year and report results as they become available.  No promises of get rich quick schemes - much like Adsense, there are multiple factors involved, including the number of visitors to our blog, volume of buyers of featured products, commission rates, etc.  While we can't guarantee grand results, we can commit to providing you honest reports on our experiences.

As always, this experiment is simply that - our experience and our interpretation of the data.  We advise each of you to perform your own research and weigh the factors of advertising on a page vs. a clean look.  In the interim, we will continue to provide you with valuable content and ask for any feedback, positive or negative.  This blog and our home site - the-small-biz-pro.com - are as much yours as ours.

- AJ

ps: Take a look at the deals Amazon is offering - Christmas is 6 weeks or so away - you may find something good!

Making Money with Google Adsense

We are constantly bombarded with emails, tweets, and other links that try to convince that money can be made from various Google work-at-home programs.  The only legitimate program offered by Google is Adsense.  The link for this is www.Google.com/adsense and registration is free.

Adsense does work - our web site and this blog has proved the concept.  Granted, because we are still building a clientele base, the revenue is minimal - only a few cents per day - but real.  We are also not profit-motivated and always transparent, which is why we share this information.  We would gladly post a copy of last month's Google Adsense report, but it is a Google-copyrighted document and therefore not for general distribution.

First for the non-Google sites that imply a Google link. This can be verified by looking at the bottom of the page and noting the disclaimer of non-Google affiliation..  These packages may or not provide legitimate income - we haven't tried any to confirm or deny the claim - but these sites generally charge a fee and/or ask for your email address and name.  The only place to register for Google Adsense is at www.Google.com/adsense and you can register without any costs. There are a lot of websites scams trying to sell information on Google work at home or businesses that are not affiliated in any way with Google. Don't waste your money. (from Wiki.answers.com)

As for adsense, registration is free, and the amount of money made depends on several factors

• The level of traffic to the web site and/or blog
• Placement of Adsense ads on the page
• Frequency of add viewing
  
• The number of times a visitor clicks on an add

Some important terms to know

• PPC or Pay-Per-Click - as is implied, the amount earned when an add is clicked
• Web Analytics - simply the measurement, collection, and reporting of Internet data for purposes of understanding and optimizing web usage.
• SEO - or Search Engine Optimization - a process of improving the volume and quality of traffic to a web site from search engines such as Google, Yahoo or Bing.
• In-Text-Advertising - a form of contextual advertising where specific keywords within the text of a web-page are matched with advertising.  This form of advertising has drawn criticism from journalists for confusion created in a reader's mind as to what is 'news' and what is advertising.
  

Adsense will likely not be a sole source of income, on average a blogger or web site owner may make a few hundred dollars per month.  And bear in mind, this is also taxable income, further eroding any net profits.  Finally, in order to gain and maintain an income stream, a site must have 150 visitors per day to be approved by Adsense.  For return traffic and to generate new visitors, web/blog content must be fresh and unique.  This requires constant updating and new articles.  In summation, income can be generated from Internet advertising, but typically it is minimal and requires a substantial time commitment.


- AJ

More information about Google Adsense here: https://www.google.com/adsense/static/en_US/AfcOverview.html

A Confession...

If you are a frequent visitor to this blog, you've probably noticed that most of the posts are written by myself, AJ.

While the above totally accurate, I have a confession to make.  My name is not really AJ.  I've taken that as a nom de plume or pseudonym for TheSmallBizPro.  The issue of anonymity is one the team has debated on several occasions and none of us are comfortable with the lack of privacy in cyber-space.  No, we are not felons or have any evil or malicious intentions.  Simply, some of us have been in the technology industry for many years and are well-aware of the nature of the Internet and the possibility of abuse.

The idea of fake names is, of course, quite old.  Mark Twain used one and some argue that Shakespeare may have (though this is conjecture).  Stephen King has written as Richard Bachmann in the last 25 years and many authors of adult-oriented sites and blogs use names other than their real ones.  Each individual must decide on a comfort level and whether real names are advisable or not.  Search the Internet sometime and see how many hits come up with your real name.  This may help in your decision one way or another.

Yes, I realize that a potential employer - and I am still unemployed - may like my writing and won't be able to contact me because of my name choice.   We have email for this purpose - thesmallbizpro@gmail.com . 

I am not advocating the use of a pen name one way or the other.  Much has been written and blogged on this topic; do some research and make an informed decision for yourself.  As for me, as Shakespeare famously penned: "What's in a name?  That which we call a rose by any other name would smell as sweet."

Food for thought


- AJ

Future Plans for Thesmallbizpro

Last night we had a monthly team meeting to discuss our situation.  As always, we are believers in transparency and I will relate some of our discussion in this blog.  We learn as we go along and try to pass that knowledge along to those inclined to pursue their own business interests.

Snickers bars seem to be preferred over Milky way, but M&M's top them all. (Bmac brought leftover Halloween candy).

Water is the preferred beverage in the evening - used to be Jack Daniels - guess we're getting old, but that's another blog...

We reviewed analytic reports for the sites and were quite pleased to see that for the 10 days this blog has been up, we've hit almost 100 visitors and stay for about 7 minutes.  Something in the range of 400 page views.  Pretty darn good, we think, and we thank all our visitors for dropping by, commenting, and reviewing our content.  We want to be a go-to source for you - tell us what you need.  We are quite pleased by the response from the Twitter community.  In a little over 3 weeks, we've built a following of over 800, received valuable feedback, and established ongoing relationships with several.  Thank you.

We are going to re-work our primary web site - the-small-biz-pro.com - to make it more content rich, easier to navigate, and improve the user friendliness.  We also want to include a forum that is easier to deal with than the one provided by Website Tonight.  The product is fine for those interested in an inexpensive, robust, and low-cost way to run a web business.  We want and need more and still use GoDaddy - their support and stability is outstanding - but instead create our own web pages without using GoDaddy templates.  Expect this effort to take a few months; in the interim, www.the-small-biz-pro.com will remain up and running with minor changes and added content.

We want to create a true forum for the small business community.  A place where all can weigh in on topics, provide suggestions, ask questions, or muse on a subject.  We strongly reiterate our basic mission: Shared Vision - Shared Resources - Shared Success.  The true strength, success, and future of small business involves many components and moving parts.  Our goal is to help that effort.

Also discussed was the need to link to other sites to increase visibility and traffic to our site.  This is part of the search engine optimization effort (SEO).  We intend to conduct interviews with various local small business owners and ask their opinions about running successful operations.  We hope to have others from all over (via Twitter, Facebook, LinkedIn) contribute to the effort - if interested, please email us at thesmallbizpro@gmail.com.

Finally, as always, we greatly appreciate your continued support and visitation.  Thesmallbizpro looks forward to providing answers to your questions, writing (or referring to) useful content, and helping you learn as we do.

Best wishes to you all,

- AJ, Caspar, Bmac & Molly

Finding Inexpensive Staff

Finding Inexpensive Staff

On occasion, even the smallest of business needs additional staff, perhaps to meet seasonal demand, for a new product launch or a major event. 

Direct hires are expensive, sometimes don't work out, and in some states, are difficult to terminate.  Contractors can be costly and for simple tasks, overqualified and less than motivated.  How then to find those willing to work at reasonable rates or for nothing? 

Here are some suggestions:

1) Interns - don't think Monica Lewinsky here, but rather a college student that needs business experience and resume filler.  This can be a win-win scenario where the business gets an enthusiastic student in marketing and the student can gain valuable career insight.

2) Retirees - like the intern, the business gains someone with experience in a field, and the retiree can make a few extra $$ in a flexible position.  Seniors also tend to be very reliable and willing to share knowledge.

3) High-school work programs - many local high schools sponsor juniors and seniors in work programs as part of their coursework.  These students will need to perform adequately to pass, and are usually paid at minimum wage.

4) The local state unemployment office - post a notice of your need or talk to a office staff member.  They will be more than willing to help you find a capable and willing worker.

5) Local churches and community organizations - talk to the pastors or directors of these concerns and inquire about the skill set you are looking for.  They can publish in their newsletter or on their job boards.

6) Craigslist - most larger cities in the US and Canada have a Craigslist.org website.  In this case, a little more of a risk is assumed with an unknown person, but I've personally found roofers and other workers with no problems on Craigslist.

7) Twitter - use the local job hashtag (#) or create a new one for your area.  See how many people respond to your inquiry.  I'd guess quite a few during this period of high unemployment.

People are always looking for a primary job, a second job or a part-time position.  Take advantage of this by exploring some of the options above.  The location and needs of your business will dictate which option is most appropriate.


- AJ

Why Work from Home?

Many businesses can be launched from home or performed remotely instead of in an office.  Ideas include freelance writing, website programming, crafting, mid-level-marketing (MLM), consulting, and many others.

So why start a home-based business?  Here are several reasons and justifications:

1) Freedom and choice - for night owls, early risers or those who prefer casual dress for comfort and productivity.

2) Cost - no rent for office space, no fuel costs, and lower vehicle expenses.  Use the savings for other expenses such as marketing or investing in new products.

3) Domestic reasons - be home for the plumber, a sick kid, older parents or a spouse with medical issues.  Use local organizations such as churches and coffee shops to network and meet.  Be available to coach your son's baseball team or attend your daughter's dance recital.

4) Workforce - build a virtual business team using the Internet and social networks.  Hire marketing experts, web designers, accountants, and other professionals as contractors not staff.

5) Technology - use DSL, cable or satellite for Internet connection.  Most of these services are less than $50 a month and many are bundled with phone and television.  Look for deals online for computers and any software needed.  Use Webex, Skype or Yahoo for tele-conferencing.

6) Be Green - less driving means less air pollution.  No heating or cooling an office saves energy. 

7) Health - less physical contact with an office staff means a lower chance of catching the office flu.  No drive to work, stress from a crazed boss or impossible deadline improves general health.

8) Taxes - a home business can mean savings on taxes by taking advantage of allowed IRS deductions. 

One important thing to remember: keep home time/space and work time/space separate and distinct.  Set up a space that is comfortable and everything is located in easy to reach locations.

- AJ