One small town in Washington has flipped an old adage on its head: Here, money does grow on trees.
This twist was spurred on by the recession generated by COVID-19. With little economic movement happening in its town of 2,000, Tenino, Wash. began printing wooden dollars.
These dollars aren’t legal US tender, but they are backed by the town’s general fund. These wooden bucks have become so successful that roughly 200 businesses in and around Tenino accept the new form of currency.
While other communities may not be circulating wooden money, Tenino’s local currency isn’t alone in the wake of the pandemic.
In southern Italy, the small town of Castellino del Biferno began printing “Ducati” banknotes to help the community’s businesses after COVID-19 hit. According to euronews, the town’s 550 residents have spent thousands of the currency at local shops.
“We decided to mint money to make sure the local economy could withstand the impact of the situation,” Castellino del Biferno mayor Enrico Fratangelo said in April. “However small this economy may be, there are three or four businesses still open, without considering bars or pubs.”
And at least one other community has started its own currency due to COVID-19: Shiawassee County in Michigan has been using its ShiaCash program to help businesses stay afloat during these uncertain times.
“Weâve got a lot of people that work in the county that donât live in the county,” Theresa Trecha, an owner of a local bowling alley in Shiawassee County, told MLive. “A lot of those folks, they work and then they go, and so in order to maybe get those people to take advantage a little bit of what the town has to offer — thatâs a great way to do it.”
Local Currencies Can Stabilize Local Economies
For many years, the US dollar has enjoyed success as the world’s currency.
In recent times, however, it has seen challenges from the Euro — the primary currency throughout most of Europe — and the Japanese yen. While local currencies won’t ever rival these global titans of monetary units (in fact, the US is pretty stringent on new currencies; for instance, you can’t use a private currency in an attempt to replace US dollars), they have seen some success at becoming more valuable than the US’ primary form of legal tender.
“We now have people from outside of our borders, so outside of the city, who are willing to pay more than the face value,” Tenino mayor Wayne Fournier told Radio New Zealand. “There are some people who are willing to offer seven times the face value of the currency that we’re printing, so our Tenino dollars are worth more than the US dollar right now in an exchange rate sense.”
Fournier further added in an interview with Fox Business that some businesses in the town are accepting 25 Tenino dollars for as much as $50 worth of goods.
According to the Schumacher Center for New Economics, an organization that has helped grow local currencies in the past, the main advantage of these alternative currencies is that they keep the money local. This in turn helps stabilize small businesses that may otherwise struggle to compete against larger chains. National currencies like the US dollar, meanwhile, can be spent within a community and then be moved outside of the local area. Additionally, these currencies can foster “stronger relationships” between local businesses and their neighboring citizens.
Community Currencies Are Nothing New
The concept of local currencies often gains steam during times of economic downturns. This is actually the second time Tenino has “printed” wooden money — the first was during the Great Depression in the early 1930s.
Tenino’s first go at a community currency was quite popular and it became something of a viral sensation. In fact, hoteliers as far away as Chicago and Eugene, Oregon even accepted the money in lieu of American dollars. The first iteration of the Tenino wooden was such a success that people continued making commemorative versions for tourists up until at least 2018.
Other communities in the past have also seen economical gains by implementing a local currency.
For instance, Berkshares have only risen in popularity since their introduction in 2006 in the Berkshire region of New England. Since inception, the currency has seen over 10 million of its own dollars go out into circulation — for a region of fewer than 25,000 people. Berkshares also net consumers a tidy savings — for every $100 in Berkshares someone spends, it only costs 95 US dollars.
Community currencies have also enjoyed success the world over. Just two years ago, the VaramedÃ launched in Spain. In England, the Brixton Pound has popularly aimed to keep money local in a South London district. There are also active community currencies in places like Japan, New Zealand, and Kenya.
Starting A Local Currency In Your Community
Starting a community currency is no easy task.
You’ll need to first get other organizations and businesses within your community on board. This means reaching out to your local government, chamber of congress, and other business owners. Once you have enough backing to get the ball rolling,
There are tools and organizations able to help, however. Complimentary Currency offers a platform (and an app) that communities can take advantage of to boost their economies. The Schumacher Center also runs its Local Currency Program, which could help get your ideas up and running.
If you find starting a community currency too daunting, there are other ways to help kick start your local economy. For instance, consider a gift card program like the Pay Forward Project in Seattle. Other communities have also found success with passport programs, such as the initiative ran in Gray, Maine.
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One of the hottest business buzzwords during the coronavirus pandemic has been “pivot” — the concept of businesses reinventing and shifting strategies. Turning this term into action has become a necessity for many as the sociological and financial fallout from COVID-19 has hit the entire world economy hard.
By the numbers, small businesses across the US have indeed embraced the pivot: 92% reported changing at least one aspect of their business since the onset of COVID-19, according to data from a recent survey that was released online last week.
The survey, conducted by software recommendation platform GetApp, also found that many businesses pivoted in “multiple ways.” Only 8% of the 577 small business leaders surveyed didn’t report altering their business model at all.
For 58% of businesses, pivoting has included incorporating “a new online delivery channel.” Other common tweaks mentioned in the survey include adding a new virtual service (40%), offline delivery channel (36%), or product (31%).
COVID-19 Necessitated Quick Pivots
GetApp specifically highlighted Asahi Imports, a small Japanese grocery store and delicatessen in Austin, Texas that quickly incorporated online shopping and curbside pickup to meet customer needs.
“With the pandemic, we had to act fast,” Asahi Imports owner Sally Matsumae said. “We had to scramble to get some sort of system that shoppers could use to tell us what items they wanted without having to step into the store.”
The survey also found that companies that have pivoted were three times more likely to report increased revenue. However, there are still challenges facing pivoting businesses. For instance, 22% reported that their staff lack the necessary skills for new approaches while 16% noted a scarcity of cash.
Despite any challenges, a whopping 96% of businesses plan to keep at least some of their changes, a finding that Matsumae agrees with.
“I think curbside shopping and home delivery are here to stay,” she said. “Weâve always wanted to do it and COVID just sped the process along.”
According to the survey, 43% plan to keep all changes, potentially indicating that pivots have proved successful for many small businesses. 81% of respondents were also bullish that Q3 revenue will beat Q2.
“Ultimately, what matters most is getting your business online — how you do it is less important,” Zach Capers, a senior content analyst at GetApp, wrote in the survey’s report. He later added: “Small businesses will need to continue innovating until customer behaviors stabilize.”
GetApp’s findings parallel other reports, such as those in The New York Times — in May, the Gray Lady covered several companies that utilized pivots in an effort to survive COVID-19. Elsewhere, The Washington Post reported over the weekend how small wineries are turning to virtual tools to thrive amidst the pandemic.
The ubiquity of the pivot has also seen the rise of tools aiming to guide businesses making much-needed shifts. In this vein, Merchant Maverick recently covered a new webseries dedicated to helping businesses find new ways of building revenue.
How Your Business Can Pivot
In its report of the survey, GetApp highlighted five areas where businesses can pivot:
Online delivery channels. Turning to online marketplaces or taking orders via the web can provide brick-and-mortar businesses with a boost.
Virtual services. Crafting a virtual version of a business’ existing services may potentially reach a wider audience, such as those who live further away.
Offline delivery channels. Adding curbside pickup or home delivery provides customers with more convenience (and more safety during COVID-19).
Designing new products. A new product can make up for lost revenue from existing streams.
Targeting new customers. If a business loses revenue from one subset of customers, refocusing on a different group could make up some lost ground — such as commercial suppliers selling directly to consumers.
For more tips on how your business can handle COVID-19, check out Merchant Maverick’s guide to outbreaks and pandemics.
H/T Small Business Trends
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Intuit is a well-known name in the world of business finance. Now the financial titan is getting in on the small business banking game with QuickBooks Cash.
The Mountain View, Calif.-headquartered company announced the new product — which acts as a checking account for businesses — in a press release on Wednesday.
To snag the focus of financial decision-makers, Intuit has bundled QuickBooks Cash with a high-yield interest rate: Customers will receive a 1.00% annual percentage yield (APY) on all balances — a competitive rate compared to most accounts on the market today.
Intuit is touting QuickBooks Cash for its lack of common banking fees such as account opening, maintenance, and overdraft fees. Account holders will also be free of the need to maintain a minimum balance. Note that QuickBooks Cash does require a QuickBooks Online account, which costs money (the minimum tier is $25 per month).
This new offering is meant to work in sync with Intuit’s existing QuickBooks products, such as payroll, payments, and accounting services.
“Small businesses face unique challenges in the management of their finances — too often, they have to track and manage their money inflows and outflows through multiple solutions, which can lead to increased fees and wasted time,” QuickBooks Capital and Payments senior vice president Rania Succar said in a statement. “Combining QuickBooks Cash with the powerful insights and financial management platform powered by QuickBooks, we are building a tool that accelerates the growth of small businesses.”
QuickBooks Cash accounts are FDIC-insured via GreenDot Bank for up to the standard $250,000.
Business banking seems to be the soup du jour of financial firms as of late. Just last week, online lender Kabbage announced its own checking account for businesses, Kabbage Checking. And like QuickBooks Cash, Kabbage Checking features a high APY meant to entice business owners (it’s also insured through GreenDot Bank).
QuickBooks Cash Leans Heavily On Integrations
Outside of the above-mentioned benefits, QuickBooks Cash features these additional perks:
Ability to see funds within 30 minutes when they’re processed via QuickBooks Payments.
A machine learning-powered tool that aims to predict a business’ cash flow needs 30 and 90 days into the future.
Ability to schedule vendor payments and automatically reconcile made payments within QuickBooks.
A QuickBooks Visa Business Debit Card that can be used with no fee at over 19,000 Allpoint ATM locations.
Access to QuickBooks Envelopes, a tool that allows businesses to create “savings buckets” for goal and expense management.
With these perks in mind, QuickBooks Cash seems to be aimed primarily at businesses already within the QuickBooks fold, with the hope of luring new companies into the QuickBooks ecosystem. The practicality of having all financial needs serviced by a single company remains to be seen, but Intuit is certainly attempting to strengthen its position in the financial sector of small businesses.
Interested businesses are able to apply for a QuickBooks Cash account today, but they first must sign up for QuickBooks Online before moving forward with the Cash application process.
Other High APY Bank Accounts For Businesses
Intuit claims that QuickBooks Cash’s APY beats the national average banking account by 25 times. Based on the latest FDIC national average of 0.04% for interest checking accounts, this claim is indeed true. However, there are still a few formidable foes that stack up pound for pound against Intuit’s freshly minted offering.
The most notable challenger is the newly announced Kabbage Checking, which just nudges out QuickBooks Cash with its 1.10% APY. Kabbage Checking also lacks any sort of fees, while QuickBooks Cash does require a paid QuickBooks Online account.
There’s also Axos Bank, which has a 0.50% APY business account, and Internet First Bank, which offers a 0.65% APY one. Local credit unions may also deal out high APYs, such as the 1.00% APY business account on offer through the Lafayette Federal Credit Union.
All told, QuickBooks Cash looks to be a solid option for businesses wanting a high-yield bank account. However, it will take time to see if this new product lives up to its lofty potential.
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There’s a new kid on the block in the world of small business checking accounts: Kabbage Checking.
As any new product should, this checking service — announced last week by online lender Kabbage — has a few tricks up its sleeve to entice business owners.
To start, Kabbage Checking boasts a 1.10% annual percentage yield (APY) that will be paid out monthly to each customer account. While APYs do fluctuate based on the market, Kabbage’s offering is among the highest available to small businesses at the time of writing.
Kabbage Checking also features no opening, maintenance, or monthly fees. On top of this, account holders won’t have to worry about minimum or daily balance requirements.
“We believe in the businesses too often left out, overlooked and underestimated,” Kabbage president Kathryn Petralia said in a statement. “Kabbage Checking is a new banking service built to give those small businesses an upper hand to earn more, save more and grow their business faster without sacrificing anything they expect from a bank.”
Atlanta-based Kabbage will jointly run the service alongside its partner Green Dot Bank, which will provide account holders with FDIC insurance for up to $250,000.
Kabbage Checking Requires Waitlist Sign-Up
Those interested in moving their small business’ funds over to Kabbage Checking will first need to sign up to join the waitlist. Do note there is an application process once off the waitlist, although Kabbage hasn’t made any approval requirements known.
Beyond the core perks mentioned above, other benefits bundled within Kabbage Checking include:
Depositing cash across a network of 90,000 retailers and service centers throughout the US.
Withdrawing cash from ATMs at 19,000 locations nationwide for free.
Creating up to five “Wallets” for savings track or cash flow management.
Paying vendors and bills electronically.
Being issued a Kabbage Debit Mastercard to use at any merchants who accept Mastercard.
Kabbage further promises that its checking account will integrate with its other products in a “seamless” fashion. For example, Kabbage Funding customers will be protected from overdrafts. It also hinted that wire transfers and mobile remote deposits will “launch later this year.”
The fintech is a fairly well-regarded loan provider for small businesses. Merchant Maverick gave Kabbage four stars in our review of its loan service, noting that the company requires no minimum credit score, lacks extra fees, and provides a fast-and-easy application process.
Kabbage has also been fairly active processing Paycheck Protection Program (PPP) applications. By the end of June, Kabbage had processed over 200,000 approved PPP loans with a focus on smaller businesses — its approved loans averaged $28,100, less than a third the size of the PPP’s national average.
Related: How Fintechs Fared: Many Small Businesses Got Much-Needed PPP Funding Via Online Lenders
Other Checking Account Options For Small Business
Kabbage Checking may be the newest player on the scene, but it’s far from the only checking account available to small businesses.
For instance, many traditional banks, such as Chase or Bank of America, offer business-focused solutions for customers. However, these checking accounts often don’t feature high APYs — meaning business owners won’t be able to fully make their money to work for them.
High APY accounts for small businesses also do exist. Examples here include Axos Bank, which has a 0.50% APY business account, and Internet First Bank, which offers a 0.65% APY one. Local credit unions can also dish out high APYs, such as with the 1.00% APY business account by Lafayette Federal Credit Union.
It’s also worth noting that accounting giant Intuit QuickBooks just announced its own business bank account with 1.00% APY. But among all the options Merchant Maverick surveyed, Kabbage’s 1.10% APY still came out on top at the time of writing.
Of course, because Kabbage Checking is an untested option, it’s possible that issues not usually seen at more well-established institutions may arise at some point down the line.
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Doing your own payroll is like skinning a cat â it may seem daunting, but there are many ways to do it. You just have to choose the one that works best for you. Read on to explore the pros and cons of doing your own payroll.
The Pros & Cons Of Manual Payroll
Some small business owners choose to do their own payroll manually. It saves money but it is not necessarily the best option for everyone.
Pros Of DIY Payroll
It’s Cheaper: When you outsource payroll, you incur an extra cost. That cost will depend on the kind of business you are running and the number of people on your payroll, but when you are running a small business, every penny counts. If you just canât justify the expense of outsourcing Payroll, you can do it yourself using free resources available.
You Stay In Control: Small business owners often fear losing control of their business. A third-party payroll provider may not do things the way you want them done. Doing it yourself allows you to maintain total control of your business operations.
You Know What’s Going On: Doing it yourself provides a good opportunity to understand everything about your payroll process and payroll taxes.
Cons Of DIY Payroll
It Takes Dedication: Successful DIY payroll depends directly on the effort of an individual. If you canât take care of it for some reason that month, it wonât be taken care of.
There’s A Significant Time Commitment: Doing your own payroll means sacrificing your own time. Time is the only resource that is even scarcer than money in the small business landscape, and there is an automatic cost to doing payroll yourself.
Lots Of Room For Error: You might get it wrong or incur too much stress. If you are not a naturally detail-oriented person, doing your own payroll might cause more stress than its worth — and put you in a position of liability when you get things wrong.
At the end of the day, it is a question of whether you have more money than time or more time than money. What is the opportunity cost? Is there another option that can ultimately give you better results?
How to Do Your Own Payroll Manually
There are several things you must keep in mind if you’re going to take the manual payroll route. Nothing about payroll is simple or low-stakes, so it’s crucial to have your ducks in a row.
1) Prepare The Proper Tax Documents
The 1-9 form is a requisite for verifying the identity of your employees as well as their employment availability. Every new hire must fill out this form during the onboarding process.
Your employee fills in the first part and you fill in the second part. New employees must furnish you with a document of identity, which could be their Passport, Green Card, Birth Certificate, Social Security Card, or Alien Registration Card.
Employees should fill out their own W-4s to document withholding tax (tax that the employer withholds from their salaries and pays to the government directly).
2) Have Your EIN Number Handy
An EIN is your Federal Employer Identification Number. This number is provided to you by the IRS. If you are a new business or company, you’ll need to request one from the IRS.
3) Gather Employee Earnings Information
Depending on your type of business and how it is run, you will need lots of information about your employees and their earnings. All of the following contribute to the overall labor burden of each employee:
Gross Pay: First, you must calculate their Gross Pay, which is what they earn before any money is deducted. For salaried employees, Gross Pay is the yearly salary. For employees who earn an hourly wage, gross pay can be found by multiplying their hourly wage by the number of hours worked. Generally, contractors and freelancers tend to be on an hourly wage.
Net Pay: Net Pay is what your employees earn after all deductions, including taxes and copays.
Overtime: This is money that employees earn for going beyond regular working hours. For example, a typical full-time employee gets overtime when they work more than 40 hours.
Bonuses: Employees get bonuses based on certain performance goals. A bonus has nothing to do with working hours or salary. It is a one-time reward for good performance. Bonus money is taxable.
Tips: Some employees, typically in the service industry, earn money from tips. Tips are rewards for good service and they typically come from customers or clients. You need a Payroll system to track tips because they too are taxed.
Commissions: Some employees earn on commission: a percentage of money from each sale they make. The IRS taxes the income of commission-only employees like any other supplemental income.
Paid Time-Off: Paid time-off is not necessarily synonymous with vacation days; it is used any time an employee is still earning although they have taken time off for medical leave, family leave, personal days, or paid vacation time. Your payroll system should reflect any adjustments to a paycheck depending on the time-off policies. You should also consider offering other leave options besides sick leave and vacation leave. Have a plan for maternity leave, paternity leave, and family leave, for example. Your employees should know as much as possible about your time-off policies, including whether they will be earning a regular rate for their paid time-off or not. They should also know what happens to unutilized time-off when the year ends. Note that the laws on paid leave are not the same in every state. You have to look up what the rules say in your own state.
Benefits: Benefits are extra incentives above and beyond salaries and wages. These benefits may include workersâ compensation, life insurance, dental, medical insurance, Family Medical Leave Act laws, unemployment taxes, and time off to exercise civic responsibilities such as voting, serving in the military, or jury duty.
Retirement: Retirement plans are some of the incentives that promote employee retention, like a 401K.
4) Choose Your Payroll Schedule
Businesses pay their employees weekly, bi-weekly, semi-monthly, or monthly. Each payroll schedule has its own benefits and drawbacks and you have to choose the right one for you.
Your choice of payroll schedule might be influenced by the industry you are in or the state in which you are operating.
5) Track Time
For employees who earn an hourly age or a salary, you need to track the hours they have worked. A payroll system should have the capacity to track employee working time.
6) Calculate Gross Pay
Gross Pay is the total amount of money that each employee earns before deductions. This means before things like taxes are deducted from the Pay. A simple tool like Excel can be used to calculate gross pay by multiplying the hours worked, including overtime, by the pay rate/hour.
Once you have the employee’s gross pay, you can calculate the deductions on each employee’s pay as well as their allowances.
8) Calculate Net Pay
To calculate net pay, subtract all the deductions from the employee’s gross pay.
9) Pay Your Employees
Pay your employees via direct deposits, checks, or any other method that works for both you and your employees.
10) Keep Strong Payroll Records
Putting together your payroll records at the end of the year can be a nightmare if you have not been documenting them faithfully. Update records throughout the year on a regular basis to avoid this nightmare.
Learn more about end of year payroll.
11) Don’t Forget To File & Pay Payroll Taxes
Creating a payroll system requires the right tax documents from employees. Thankfully, todayâs digital way of doing business reduces the amount of paperwork required.
Here are some of the tax forms you’ll need:
W-2: The W-2 form details information about all wages for the year and the taxes withheld.
W-4: Your employees will fill a W-4 form detailing the amount of tax that they expect will be withheld from their salaries. These withholding allowances will help you run the Payroll correctly.
1099: The 1099 is for freelancers and contractors to track their income. No taxes are withheld.
Schedule C: This is a profit/loss report for Sole Proprietors and Independent Contractors to file with the IRS. It is a profit-loss or income statement for calculating self-employment tax.
I-9: The 1-9 form verifies the identity of your employees as well as their employment availability. Employees should fill it as soon as they start working for you. The 1-9 form is filled by both the employee and the employer. You need the employeesâ formal identification papers.
940: Declare your payroll annually in a 940. This form details how much all your employees have earned and how much went into unemployment taxes.
941: File a 941 form annually. It has information about what you have paid your employees during the year and how much you withheld for social security taxes, income taxes, and Medicare. File the form and remit the money you withheld to the IRS.
944: Small businesses that withhold less than $1,000 in payroll taxes in a year will need to file a 944 form with the IRS.
Learn more about payroll taxes.
The Pros & Cons Of Using Payroll Software
There is a middle ground between outsourcing payroll entirely and doing it yourself manually. This option entails using payroll software. Once you feed a payroll software app with all the relevant information, all you have to do is to hit the âpayâ button and the whole process is taken care of for you.
There are some obvious advantages and disadvantages to using payroll software.
Maintain Control: Since you are not hiring a consultant, you are still retaining control over the details of your payroll. You or your in-house employee will be creating and viewing the reports as well as paying the employees and taking care of taxes.
Cheaper: Paying for payroll software is much cheaper than hiring a consultant or a company to do your payroll.
Quicker: Payroll software will do the job faster than you or anyone else would have done it.
Increased Security: Your financial information is much more secure because you have control over it. You can access your information anytime you want it. The payroll software safely stores the information.
It Takes Longer: On the other hand, using a payroll solution will take longer â at least initially â when you are still learning how to use the software properly. A mistake on your part could cost you hours to fix. Of course, once you have mastered it, the process gets infinitely faster.
Potential For Error: When you are doing your taxes yourself, mistakes might cost you hefty penalties with the IRS. Outsourcing payroll means someone else takes that risk.
Monthly Costs: Although payroll software is cheaper in the long run, there are some upfront costs that can be relatively high depending on the range of services. You also have to budget for annual fees.
Time Investment: When you first begin with a payroll software program, you have to invest plenty of man-hours in learning how the software works.
How to Do Your Own Payroll Using Payroll Software
If you’re looking for a fairly seamless and automated payroll process, you should probably invest in a payroll app. Payroll software not only handles the administration of pay, but also the processes of onboarding employees, as well as filing payroll taxes both quarterly and annually.
When you use payroll software, you get a payroll guarantee, which means that any penalties caused by tax mistakes will be on the software provider, and not on you.
1) Choose the Right Payroll Software
Analyze the unique needs of your business before settling on a payroll software app. Each payroll program has its own range of features. A full-service payroll app takes care of payroll, filing taxes, or even HR functions like keeping track of employee benefits and tracking time.
Consider the size of your company when choosing the right payroll software for you. Some products are tailor-made for microenterprises while others are more suited to mid-sized companies.
Look into payroll software designed for your specific industry. A payroll app made for your industry will serve you better than one that isnât. Hospitality companies, for example, have their own unique needs that may be different from those of companies in a different niche, like education, or manufacturing.
Some payroll software products are designed to be customizable to your business requirements. Consider one of these as long as you have the ability to use them with relative ease.
Choose software that is compatible with your level of accounting knowledge. Some are specifically designed for non-accountants and they are therefore easier to learn. Others are more complex and present a steeper learning curve.
Purchase software that is compatible with the tools you already have. For example, you might want to use one that is compatible with QuickBooks or Square, if that is what you are already using.
Find something that fits within your budget. If the whole point of working with a payroll program is to save money, then you definitely want something that is priced reasonably for you.
2) Add Company & Employee Information
As an employer, you require accurate and current information on each employee to process payroll accurately. For each employee, you’ll need the name in full, spelled correctly, as well as their Social Security Number, their jurisdictions (both lived-in and worked-in), and their correct address.
For your company, you’ll need information about tax IDs, and any additional tax information required.
You’ll also need to enter any employment forms, like the EIN, W-4, and the 1-9, into the software.
3) Track Time
A full-service payroll system takes on payroll calculations, deductions, check printing, tax support and tax filing, time tracking, and paid time off.
If you are not dealing with full-service payroll software, you may have to do without time tracking, among other features. Simplified payroll services are cheaper and have fewer features.
Decent payroll software should take care of regular time tracking, as well as PTO tracking, together with other features like paying contractors and employees, paying vendors, garnishing wages, online processing, filing taxes, paying vendors, and W-2 preparation and distribution.
4) Process Payroll
Processing your payroll involves a series of actions. You must determine your employeesâ wages and salaries, choose a pay schedule, calculate their taxes, withhold payroll taxes from their paychecks, deliver paychecks to the employees with the correct net pay after withholding the right amounts of money, remit taxes to the government, and provide employees with their W-2 or 1099 paperwork.
You may have a combination of employees and contractors on your payroll:
Employees are individuals over whose workload, paycheck, and working relationship you have control.
Contractors are individuals who are working with you for a specific period of time, according to a contract you have agreed upon. Contract employees are supposed to withhold their own tax. It is not your responsibility to withhold it. Your work is done as soon as you have paid them.
5) Don’t Forget To File & Pay Payroll Taxes
All the money that you withhold from the earnings of your employees for the purpose of remitting tax to the government falls under the umbrella of payroll taxes.
You pay taxes to federal governments and the states. The money you withhold as payroll tax is a percentage of your employeeâs gross earnings. You have the responsibility to manage these taxes from employee salaries and wages. If you have contractors on 1099, they will manage their own payroll taxes.
Other Options for Processing Payroll
You may also consider outsourcing your payroll to an accountant or an accountancy firm to run it for you. Accountants have extensive experience and training and they will do a much better job in less time.
Accountants can help you to drastically reduce the amount of time you spend on the payroll, but you still have to provide the accountant with the right documentation â like your tracked time â so that they have what they need to do their job.
An accountant may be the best option for that entrepreneur who has no time at all to run their own payroll. All you have to do is give them your time cards and employee information. They handle the rest.
The problem with hiring an accountant is that it is the most expensive option. If you decide to go that route, try to find an accountant who has experience working with similar businesses to yours.
Choosing The Right Payroll Processing Option For Your Business
There are three ways to go when it comes to payroll. The first is to do it yourself manually. The second is to do it yourself but use a payroll software solution. The third way is to hire an accountant or an accountancy firm to do it for you.
Doing payroll manually demands the greatest time investment. It also exposes the entrepreneur to the risk of making costly errors. Go with manual payroll if you donât want to spend any money on payroll, you have some understanding of taxation and accounting (or you are naturally meticulous and good with numbers), and you have the time to spare. Manual DIY payroll works best when you have a smaller number of employees. The larger your team and the more complex your payroll needs, the harder it is to do.
Using payroll software still require some time investment from you, but it most likely wonât take as much time as the first method. If you donât have any accounting or taxation skills, you need to choose a simple app — one that is designed for amateurs. If you are not familiar with taxation and payroll in general, the learning curve will not be as steep since many of the processes are automated.
When you are dealing with a more complicated business payroll, you might want to consider option three: hiring an accountant. An accounting consultant will handle everything, including running payroll, monthly remittances, and paystub requests.
One of the best things about outsourcing is that the other party assumes responsibility for any errors. This means that you donât have to be afraid of making a mistake.
Whichever option you go with, make sure you feel comfortable. Payroll is an enormous responsibility. Choose wisely!
The post How To Do Your Own Payroll In 11 Easy Steps appeared first on Merchant Maverick.
For Ashley Miller, owner of Portland-based Ruby’s Cleaning Company, business is in her blood.
A product of small business owners who built up a successful franchise operation, Miller always understood that opening a business was part of her future; she knew the hours and hard work involved, she knew the mental acuity and life-balance requirements, and she knew she had the drive and connections to make it happen.
“I watched my parents manage their small business for over 25 years, and that totally gave me the confidence to take this step. When I imagined it, however, I always thought we would open our own bar,” Miller said.
The pandemic had other plans.
A Clean Slate
Back in March 2020, both a few short months and a lifetime ago, Miller was juggling two jobs just to hold the fort with her partner Henry and their son. A Portland State University graduate with degrees in Applied Linguistics and Cross-Cultural Communications, Miller was a substitute elementary teacher by day and the head bartender at The Ram — a popular local restaurant and brewery chain — by night. She’d go from juggling second-graders to slinging drinks, and while she loved both jobs and their energies, Miller was already dreaming about a change when change was thrust upon her.
“The pandemic took everything. Restaurants, closed. Schools, closed. I was definitely scared. And so for me, it was a real catalyst for forced change,” Miller said. Not only were both her jobs on hold, Miller’s 8-year-old was now home distance learning.
“I realized that COVID was going to impact my employment indefinitely, and I needed a long-term plan. That plan had to include how I’m going to work and still care for my own child.”
Then the news hit that schools might not resume in the fall — and the Ram closed its Clackamas location amid the economic fallout of the pandemic. With her two employment options no longer viable, Miller got to work.
The idea to start a cleaning company happened over socially-distanced beers with a friend. “She said we should clean houses, and I ran with it,” Miller laughed.
From there, Ruby’s Cleaning Service was quickly born.
“I decided I would take this on; take on the risk and the responsibility of starting a business. It’s already stressful to build something new, and without knowing what the future looks like, I couldn’t risk making mistakes and having that impact someone else’s life right now. Right now the business is just me, and if I need extra bodies I will hire independent contractors. Having employees is a goal for the future.”
Moving-In To The Right Niche
Miller has many goals for the future but in the meantime, she is figuring out her business and throwing herself fully into its long-term success.
“I have watched my parents and friends in their small businesses, and I come into this with an understanding that being a small business owner is about having the control to do what you love and to walk away from it, too. Maybe you end up not liking the day-to-day, but I get to work that all out myself. I get to call it — how I spend my day, who I work with,” she said.
She also loves how starting the business has provided much-needed mental exercise. Her brain is working overtime as it balances the nuts of bolts of owning a business with the reality of being that business’s lone employee.
What Miller loved about the service industry was both its brisk pace and its potential for connection to others: tending bar at a popular brewery and teaching little kids required all her mental dexterity and physical stamina. Owning Ruby’s Cleaning Service is the same. “It’s totally fulfilling to put my mind and body to work,” Miller said.
Ruby’s specializes in deep cleaning for real-estate move-ins/outs (offering everything from a full deep clean of an entire property to a pre-photography “spiff clean” needed before a listing goes live. While she is working with a client, Miller has a million other business-related items on her plate, and she still has to remember to check her phone to capitalize on potential opportunities for new clients. Until she has a consistent schedule with regulars, every phone call is a potential lead.
“Already a few real estate agents have called me in a blind panic because they need to get a place sparkling clean before pictures. When you’re building your client list, you don’t say no. I am the ‘yes’ woman right now. Can you do that? Yes. Can you be here? Yes. Right now? Yes!” Miller said. “When I first started, my prices were in the gutter. Then I got in there and it was such physically demanding work that I realized, no, there’s a reason to charge my worth.”
She admits that starting a cleaning service in a pandemic might raise eyebrows as fewer people are inviting strangers into their homes. She thought about that, too.
Miller will offer residential cleaning services if someone is in a great need, but wants to focus her energy and attention on her own branding — she knows she wants to become a favorite and go-to for real estate agencies and property management teams. Getting on vendor lists is key, and after she has built a reputation, she wants her company’s name to be synonymous with big jobs: luxury homes with expanded square-footage, commercial buildings, and specialized move-in/move-outs.
Ashley Miller’s best piece of advice for people thinking about jumping into the small business world is to find their niche.
“Carve out your niche. This is the key,” she said. “If you’re opening a restaurant, what makes you different? What type of atmosphere is special to your business, your place? It’s key for marketing to know how to market yourself directly to people looking for your services, and having a specific understanding of what makes your business unique.” For Miller, that niche involves skipping over residential cleaning services. She charges $200 per 1000 square feet and brings her own cleaning supplies. (But she’s happy to upgrade to other cleaning brands for a price, and has learned to ask if clients have their own preferred supplies, which are two industry tips for small ways to affect the bottom line).
Learning The Ropes
Miller has also been speaking with industry veterans.
“I reached out to a woman who owns a successful commercial cleaning business. She was unbelievably helpful in mentioning ideas or issues that hadn’t even crossed my mind,” Miller said. Many established small business owners love to take newbies under their wings to share years of learning and hard work.
One thing Miller learned is to always solicit feedback from clients.Â “I don’t take it personally or take it to heart. It’s better to ask and know you are meeting client expectations than to guess or assume,” she said. Her ultimate goal is to do great work and get asked to come back, and people like to come back to businesses where they feel valued and heard.
Right now, in these early stages, Miller says it feels like she has all the gears turning and working, but they don’t know how to work together yet. “I’m waiting for when all the gears run seamlessly, together.” She’s spending ample time on the nuts and bolts — things that she hopes will become easier as time passes.
“My time is going to the specific aspects of my business that need the most attention right now. I’m researching about accountants and taxes; do I have enough insurance? What is being bonded and do I need that, too?” Miller said.
Miller was even encouraged to ditch an accountant who was charging above the industry standard to run QuickBooks; she resolved to simply learn QuickBooks herself. “I know I need help, but I’m learning. I’ll run into a lot of verbiage, and I’m juggling what I can do myself and what I need someone else to help with. But at the moment, every penny in my company is valuable.”
Always Check The Oven First
As a DIY-er, Miller is ready. If she can learn to manage it herself, she wants to. She knows that at the heart of small business owners is a sense of adventure and a strong motivation to succeed. With her client list growing, Miller is ready to do what it takes to build this business during a time when starting a business might seem risky. Two months in, however, Miller has reasons to be optimistic: She’s not a small business newbie and she already has repeat clients.
For now, Miller is here for the long-haul, learning what she needs to become the leader of her own business niche. The best things she’s learned so far about the cleaning business? You can know everything you need to know about a house by its oven.
“At first, I didn’t know how to budget my time. Now I’ve got it. I’ll go check out the oven first — you can tell a lot about a house by how gross their oven is,” Miller laughed. But no matter how gross it starts, Ashley Miller and Ruby’s Cleaning Service will leave it shiny and new.
Do you have a story idea, tip, or small business spotlight idea for the Merchant Maverick news team? Shoot us an email: [email protected].
The post Ruby’s Cleaning Service: A Pandemic Cinderella Story appeared first on Merchant Maverick.
If you had “Coin Shortage because of COVID” on your 2020 bingo sheet, you can check that box and keep on hunting for other unique or unexpected consequences of this year’s coronavirus pandemic. A perfect storm between closed coin production and a decrease in moving coins through the banking systems has resulted in a coin shortage, and some small businesses are already feeling the impact.
Last month, the Federal Reserve issued a statement on the coin shortage, with Jerome Powell telling Congress: “What’s happened is — with the partial closure of the economy — the flow of coins through the economy has … kind of stopped. The places where you’d go to your coins and get credit … those have not been working.”
Coins Are Stuck In A Stopped System
Treasury Secretary Steve Mnuchin said in a virtual investment summit, “As it relates to coins, so many businesses shut down, a lot of coins got stuck in the system, so we are a little bit far behind on coins.”
There are several reasons why the COVID-19 pandemic has resulted in coins becoming stuck in the system. One is that on advice from the Centers for Disease Control (CDC), many small businesses stopped accepting cash in an attempt to slow the spread of the virus. The shift to cashless transactions and contactless payment systems resulted in fewer coins moving through the system.
With fewer coins going to the bank, banks cannot move coins back out into circulation. The Federal Reserve Task Force, started June 30, is expected to report on their suggestions to mitigate the shortage in early August. According to the Task Force:
“The primary issue with coin is a dramatic deceleration of coin circulation through the supply chain … While there is adequate coin in the economy, the slowed pace of circulation has meant that sufficient quantities of coin are not readily available where needed.”
Decreased circulation has been accompanied by decreased coin output, as the U.S. Mint has dramatically slowed output in an attempt to protect its employees from contracting the virus.
Coin Shortage Impact On Small Business
Grocery stores, car washes, laundromats, convenience stores, dispensaries, vending machines, and gas stations are all businesses that depend on coins. Some of those businesses are still running as cash-only businesses in a credit world. Underbanked and smaller businesses are most at risk of being disproportionately affected by a cash shortage.
This also affects underbanked households who primarily pay with cash. According to an FDIC survey in 2017, 8.4 million households in the United States do not have a banking account of any type. If places are not accepting cash or offering change, or if businesses lose their ability to give change, the impact is greater among these households and cash-only businesses.
In non-COVID days, small businesses could easily receive change from their local banks. However, as some businesses stopped accepting cash and the U.S. Mint slowed production, fewer coins have found their way back to banks. (Third-party coin systems like Coinstar — which banks depend on for coin circulation — have also experienced fewer deposits since March.)
Many small businesses have resorted to rationing their coins. Jeff Lenard from the National Association of Convenience stores told CBS News that, “Right now cash is a problem. [Small businesses] are only being given a fraction of what they normally get in terms of coin.”
Part of the Federal Reserve’s coin task force mission is to safely increase production, but even that might not mean a quick-fix. According to an interview with the Las Vegas Review Journal, Ted Rossman, an industry analyst with CreditCards.com said, “The mint … is working overtime to try to pump more coins into the system … Iâve seen some projections as far out as November.â Rossman, however, thinks that things will look better sooner than that.
In the meantime, some small businesses are asking for coins from customers, and other places are buying coins. Whether those coins actually get into the hands of the small business owners that need them, however, is a different issue.
Yiming Ma, an assistant professor of finance at Columbia Business School, said in an interview with Forbes that the Federal Reserve can’t just flood the economy with coins and hope for the best.
“It’s not a one day and everything is solved type of problem. We should be thinking about how to allocate distribution so it’s taken back in a way to help communities and businesses that are in the most need of coins. It’s easier said than done.”
How Your Small Business Can Respond To The Coin Shortage
If your small business doesn’t need coins to survive, you should help distribute the coins you receive back to your local banks or into local cash-only businesses.
If you are a small business that relies on coins, however, don’t hesitate to put out a “Coin APB” into the world and on your social media feeds. Most of the coins that typically run through our economy are languishing in piggy banks and sofa cushions. Skip the bank and go straight to the community to see if you can nudge some of those coins back into circulation.
For other COVID-19 related coverage, check out Merchant Maverick’s Coronavirus Hub for more articles about how to navigate the pandemic.
Do you have a story idea, tip, or press release for the Merchant Maverick news team? Shoot us an email: [email protected].
The post The Great Coin Shortage Of 2020 Threatens Small Businesses Across America appeared first on Merchant Maverick.
In a recent installment of her Pivoteers & Pioneers series, Yulia Ovchinnikova invited the founder of Silicon Harlem, Clayton Banks, to speak to a business audience an hour and change north of Manhattan. Banks has been developing Harlem’s technology hub since 1994, a feat Ovchinnikova has been trying to replicate in her area through her business, the OpenHub Project.
Before Silicon Valley came to dominate the industry, another valley on the opposite coast was home to the nation’s burgeoning tech industry. At its peak, IBM employed over 7,000 workers at its plant in Kingston, a small city in New York’s Hudson Valley about halfway between New York City and Albany. Twenty miles down the Hudson River in the City of Poughkeepsie, IBM established laboratories for research and development. While not all of that infrastructure is gone — reports of IBM’s demise have been greatly exaggerated and, in fact, they’re doing some intriguing work on quantum computing in the region — the Hudson Valley’s reputation as a technology corridor has largely been consigned to the past. But it won’t remain there long. Not if Ovchinnikova, who operates out of Newburgh, has anything to say about it.
Ovchinnikova, who holds a Ph.D. in Economics from the Russian Academy of Science and an MA in Applied Mathematics and Computer Science from Moscow State Technical University of Electronics & Mathematics, has made a mission of revitalizing her adopted home’s tech industry. Since 2017, OpenHub, in collaboration with SUNY Ulster, has offered web development boot camps, an afterschool coding program for girls in the City of Newburgh, IT professional certifications, and frequent special events designed to bring existing tech workers together. The group’s mission? Building a strong, accessible technology hub for the region’s businesses, schools, and governments.
In October 2019, with the help of local sponsors, OpenHub held its inaugural HVTechFest, a two-day event that featured talks, panels, and a hackathon (an event where attendees are given a problem to solve, typically with hardware and/or software). The event turned out to be well-received, and spirits were running high.
Along Came COVID
Ovchinnikova and her team were well into the process of developing the second annual HVTechfest when New York became ground zero for the coronavirus outbreak in the US in March. While the Hudson Valley wasn’t hit quite as hard as New York City, it still had some of the highest infection rates in the state. The lockdown lasted longer here than in most of the country, putting significant strain on local businesses. Though the festival wasn’t to have been held until October 2020, the likelihood of being able to hold a successful mass gathering of that kind in 2020 appeared less and less likely. OpenHub needed to pivot.
But as it turned out, so did most other businesses.
OpenHub began to take notice of the other businesses in the area that were not only adapting to a new normal of restricted indoor occupancy but were actually thriving in it. The main difference between the restaurants and companies that were doing well and those that weren’t? How well they applied technology in their day-to-day processes.
Pivoteers & Pioneers
“Forcing people to go remote revealed differences in the availability of tech and readiness,” Ovchinnikova observes. “Addressing that digital divide is very important.”
With that in mind, the Pivoteers & Pioneers series was born. Conceived of as a free five-part webisode series for the age of social distancing, the program has focused on different aspects of the lockdown economy, ranging from restaurants, to banking, to telehealth, to tech groups like Digital Harlem. The fifth webisode, which debuted on July 10th, focused on education and how various school districts tackled the challenge of having to teach students remotely.
“During our 5 biweekly webisode series we reviewed important topics related to our current moment with COVID and closures,” explains Ovchinnikova, “These topics were actively engaging more than 500 Hudson Valley influencers, businesses, and educators.”
Watching these events, it becomes immediately clear that businesses and institutions have reluctantly entered a period of experimentation and rapid adaptation. The cost of failing to adapt to the “new normal” can mean a devastating loss of profits, but those who adapt successfully often uncover better ways of doing things. Many of these new methods and niches will persist long after the coronavirus crisis has ended.
Different school districts, for example, have wildly different ideas about how much remote school work to give children for optimal results. Similarly, viewpoints varied — sometimes strongly — on the potential of free municipal wireless internet to bridge the digital divide in those communities. Banks and credit unions discussed their strategies to make remote banking more effective by offering apps that eliminate the need to physically enter their brick-and-mortar branches to do things like deposit checks.
“These webinars were interactive and allowed people to share their experience and get actionable insights from participants working in the same area or industry,” explains Ovchinnikova. “We tried to define pioneers and pivoteers — those who were finding new approaches, or new ways of doing things in their business, serving their customers, finding new offerings, or discover a new niche.”
While the webinars are regionally focused, the topics they cover will likely be useful to businesses in any area that is struggling to maintain something close to normal operations during a full or partial lockdown. Interested business owners, or anyone else, can register for webinars on OpenHub’s site or view past ones on YouTube. Ovchinnikova encourages anyone interested in future content to subscribe to the YouTube channel.
Ovchinnikova says there’s been a lot of demand to bring the series back for another run, which she is considering, along with how to align OpenHub’s own COVID-related pivot with her longer-term goals of breathing new life into the Hudson Valley’s tech industry. At the moment, she still plans to hold HVTechFest 2020 in some capacity, even if the event ends up needing to be conducted remotely. In that sense, the web series has served as a test drive for how tech-related seminars and information could be presented to the community if an in-person event proves to be impossible by October.
“We saw a need, and we plan to continue with the webinar format,” says Ovchinnikova.
The post Pivoteers & Pioneers: How Technology Is Adapting To The Post-Covid World appeared first on Merchant Maverick.
The Pied Piper Play Cafe in Portland, Oregon’s Sellwood Neighborhood was a community favorite until it closed its doors for good.
The Pied Piper Play Cafe was the realization of a dream.
Located in Portland, Oregon’s Sellwood neighborhood, the cafe opened in 2015. It was whimsically decorated with a playful and detailed mural illustrating childhood storybook characters. The business also boasted a contained play area, served fresh food, and even had a patio and on-site parking. It was not just owner Melissa Swan’s dream; it was also the type of desired community gathering spot dreamed about by other frazzled parents juggling work and kids in the upscale district.
How It All Started
Prior to opening her doors, Swan did her homework.
She visited every other play place in the Portland area and set loose her own two little girls. “I’d sit there with my notebook and write down everything,” she said. Putting her “feet to the ground” enabled Swan to see what was working and not working. She tinkered with her business plan, adapted that plan, procured financing from investors (which included a successful Kickstarter campaign), stepped down from her teaching career, and started the Pied Piper Play Cafe.
Fast WiFi. Power outlets galore. Comfortable seating. A bathroom outfitted with parents of young children in mind. Bottomless drip coffee. Fresh food at cheap prices.
Swan’s homework paid off. Mostly.
“A complaint in many play places is that the food is expensive. Guests want to order something different than what they can whip up fast and cheap at their own place, so I had a great menu and my prices were affordable. Great idea, but I charged way too little. I should have charged more,” Swan said. “People always told me I needed to charge more.”
If she had to do it all over again, adjusting her food margins would be one piece of small advice. But often, the desire to please and serve the community outweighed her quest for profits; she knew she needed to revamp the menu and hire someone to run cost analysis; she knew there were ways to streamline and cut down on expenses in the kitchen. What time could she dedicate to those projects? As the single-owner of a business, Swan wore all the hats. Even deciding which hat to take off and delegate to another was an exhausting process.
“In the beginning, before I switched over to a food delivery service, I was shopping twice a day. Before opening and after closing, I’d hit the Cash ‘N Carry,” Swan said. “The morning rush was the most important time of day, so I’d be there to open and stay through the afternoon. During slower times, I’d manage guests and do my finances, work on the menu, clean, post on social media, work on my newsletter, respond to guest emails and inquiries.”
She admits that that time of her life is “a total blur.”
Deciding To Close For Good
It took a single moment for Swan to know she should walk away.
Swan was crunching the numbers to see if she could take any time away from the business. She was there seven days a week, working 8-10 hour days at the business site, and only getting small bursts of time away — and even that time away was still spent on the business, shopping, marketing, managing her books. The more enjoyable aspects of her business, like trivia nights and special events, meant she would put in even more time per week. It felt unsustainable.
“The numbers said it would take a number of unforeseen years before I was profitable enough to relinquish the day-to-day management. I was so focused one night after I closed, I was sitting there working on my newsletter, and as I was sending it out, I realized it was my youngest daughter’s birthday. I’d completely forgotten,” Swan said. “And that was it. Even though I opened the cafe to do something that would give me hours with my kids, I was going to miss their entire childhood if I stayed open.”
Swan estimated that on a good week she spent 60 hours working. She is not alone. According to a survey by the New York Enterprise Report, “The majority of small business owners say they work at least 50 hours a week.” The same report noted that 25% of business owners worked over 60 hours a week.
Initially, Swan hoped owning her own business would give her more hours at home and fewer outside work hours than teaching (another job not known to inspire work-life balance). At least with teaching, she could grade papers at home. Swan felt like her children spent most of their time with her at the cafe. “They were growing up there,” she said.
She spent the next day exploring her options. She had a lease; she still owed some money to angel investors; the business was still a place of great joy and connection; there was grief mixed with the relief. It was a process.
It wasn’t too long after that opportunity knocked. A local food cart was making a transition to a brick and mortar restaurant and was eyeing her space. The onsite parking and patio were big draws for their purposes as well, and the sushi-crafting partners mentioned to Swan that they were fans of her location.
“I mentioned I was thinking of closing and asked if they were interested in negotiating a bill of sale for the entire business,” Swan said. It didn’t take long for the two small businesses to make a deal. They took over her lease and she sold the business as-is including the sale of all her kitchen equipment: commercial fridges and freezers; oven; dishwasher; fryer; stovetop.
When Swan took over the business space herself, she converted the open space into a workable commercial kitchen — the sushi restaurant benefited greatly from her hard work getting the place up to code. She benefited from getting to name her number. “There’s part of me that feels like I left money on the table,” she laughed. “I had a number in my head that wasn’t too high, reasonable, and they accepted it far too quickly.”
Tying Up Loose Ends
The actual closing of the business was a headache. She ran her last payroll through Heartland Payroll services, paid all of her invoices, sold the remaining equipment (including her climbing structure to a play location opening nearby; that small business also closed its doors last month). She followed the IRS checklist for business closures and tried to work through her sadness and questions about what to do next. She hired a local accountant to work on her books and had kept careful records using QuickBooks accounting programs.
“There was a lot to do,” Swan said. “But I have no regrets. Not about opening or closing.”
Even though the cafe “consumed her life,” Swan is often grateful and nostalgic for running her own business.
“I would run into people in the community and people would say hello. Exhausted moms would confess the play cafe was their sanctuary. It felt like a service to provide this space, and I loved that aspect. There are people I met at the cafe who are still my friends,” Swan said. She still misses the people the most.
The mad rush of owning a business? She doesn’t miss that as much.
Tips For Other Small Business Owners
Melissa Swan’s best tips for small business owners just starting out is to evaluate their business model to determine chances for success. “Having a good idea is easy,” Swan said, “but how lucrative can that good idea be? Do you have the ability to make yourself different and stand out? You wind up working so much, so it’s important to understand what that investment of time will look like.”
She also wishes she had used Square’s software and hardware early on and for everything. “I was scammed by a local point of sale merchant who talked me into a four-year lease on equipment I couldn’t even use,” she recounted. “I wish I had started using Square from the start because I ended up switching over to it anyway. I had this giant piece of equipment just taking up space; I was paying monthly for nothing.”
Her other piece of advice is to embrace Kickstarter, even if it feels a little uncomfortable to ask for money in that manner. “I do recommend Kickstarter and it was 100% worth doing. My two complaints were that they do take a chunk out of your earnings, and I was just embarrassed asking for money. It felt like a show, a dance, but the Kickstarter did help,” Swan said.
She also understands the loss many small business owners are experiencing across the globe as the pandemic dictates small business success or failure. There is a sense of gratitude that closing the cafe was her choice and not a choice made for her through tragedy. Even so, there are still moments when Swan entertains the idea of going back into business. There’s something in her that loves the challenges of dreaming and creating a place that serves the community and can turn a profit.
“I don’t think I’d ever want to own a brick and mortar store again,” she mused. “But there are many options for a small business that I still think about. Maybe a food cart someday . . . I can see myself possibly owning a food cart.”
For more of Merchant Maverick’s tips on shutting your doors for good, read our article How To Close A Business.
The post Dissolution Of A Dream: One Small Business’s Journey To Closing Its Doors appeared first on Merchant Maverick.
When starting a small business, there is a litany of legal hoops to jump through and requirements you must follow to ensure your business is ready and compliant with state and federal guidelines. One of those requirements is to obtain a business license that allows you to operate legally in your city, state, and county. Yes, even home-based businesses need a license to operate within city limits! And you might even need more than one.
The guidelines for business licensure are designed to protect both businesses and consumers from unsafe practices, create a common language for small business owners within a geographic jurisdiction, and regulate businesses in a common location. The requirements and fees vary by state.
What A Business License Is & Why You Need One
A business license is a permit to operate your business, and it is non-negotiable. In fact, it is illegal to operate a business without a permit or license. The moment you conduct business within a certain city or county, you may be required to prove you’ve got all your legal ducks in a row. This keeps you accountable to the city in which you operate and helps local government agencies regulate the businesses in their jurisdiction.
Overall, the types and costs of licensure required will largely depend on the following factors:
Type of business you operate
Where your business operates
How many employees you have
The government uses business licenses to monitor taxes, including payroll taxes, and to hold businesses accountable for the health and safety of the public.
What could happen if you decide to take a chance and not get a license? Well, you could be liable for major damages (and if your business doesn’t have insurance, you could be held personally liable), you may have to pay a fine, or you could have to shutter your business.
Types Of Business Licenses
There are many different types of business licenses available. As always, you will want to do some additional research related to your own city/state/county or your specific business industry. This is by no means intended to be a comprehensive list of your personal legal requirements.
Federal VS State VS City & County Licenses
Most licenses, permits, and certifications are based on where your business is located. While you likely won’t stop with a local business license, starting in the area in which your business is located is the first step. Begin with your city and county. All businesses will need a business license for the city where they operate; these are located either online or at the city hall/with the city clerk.
Metropolitan areas might offer a single business license form for several counties to help businesses who may travel frequently between cities and counties to operate. While there are some state license requirements, some states don’t require state-specific licensure at all (states like California and Oregon have no state requirements; all licensing happens at the city level). For the rules in your state, check your state’s government website.
According to the Small Business Administration (SBA), you will need a federal business license if your business is managed by a federal agency. You can see the types of federal licenses listed below.
Common Types of Licenses
Requirements differ vastly from state to state and industry to industry. You may not need more than one type of license or you may need several. As you research which license options are required for your city and industry, you might see these types of licenses available for you:
Local Business License:Â All businesses will need a local business license from the city in which their business is located.
Seller’s Permit/Sales Tax License:Â This type of license/permit is what a business will need to collect sales tax from its customers.
Peddler’s License:Â If your business plans on selling door-to-door, your county might require a peddler’s license.
Cleaning/Janitorial License:Â A cleaning or janitorial business might require a cleaning/janitorial license depending on state requirements. However, cleaning companies need to be licensed and bonded as clients have come to expect that assurance.
Gardening & Landscaping License:Â Same as cleaning/janitorial, there are certain licenses in some states required for people working on gardening and landscaping. Many states require landscaping businesses to be bonded and insured.
Food Handling License:Â If your business serves food, there are state-specific food handler’s licenses that everyone working with food will need to obtain. A food handler’s license will show that you have the required information about food safety including proper cleaning, preparing, and storage.
Beauty Salon/Cosmetology License:Â All workers in a beauty salon must be licensed by the state. While these licenses are the responsibility of the individual cosmetologists, an owner of a salon should be acquainted with the rules and regulations regarding licensure and renewals.
Most small businesses do not need a federal license unless they fall into a specific industry that requires one. According to the SBA, the industries that require federal licenses for small businesses are in the following categories:
Agricultural:Â You will need this license from US Department of Agriculture if you transport animals or animal products, biologics and/or biotechnology, or plants across state lines.
Alcoholic Beverages:Â If you manufacture, wholesale, import, serve, or sell alcoholic beverages, your business will need licenses issued both by your state/local alcohol control board and the federal Alcohol and Tobacco Tax Trade Bureau.
Aviation:Â If your business involves aviation maintenance, operating aircraft, or transporting people/goods via air, you will need a license from the Federal Aviation Administration.
Commercial Fisheries:Â If you business involves commercial fishing, you will need a license from National Oceanic and Atmospheric Administration Fisheries Service.
Firearms, Ammunitions, & Explosives:Â If your business manufactures, deals, and imports firearms, ammunitions, and explosives, you will need a license from the Bureau of Alcohol, Tobacco, Firearms, and Explosives.
Fish & Wildlife:Â If your business involves the import/export of wildlife or derivative products, or actual wildlife, then you will need a license from the US Fish and Wildlife Service.Â
Maritime Transportation:Â If you provide transportation on the ocean or if you are a company that ships product by sea then you will need a license from The Federal Maritime Commission.
Mining & Drilling:Â Grab a license from Bureau of Safety and Environmental Enforcement if your business drills for natural gas, oil, or any other minerals on federal land.
Nuclear Energy:Â For all those small businesses out there who produce nuclear energy, or are in the business of nuclear distribution or disposal, please get a license from the US Nuclear Regulatory Commission.
Radio, Television, & Broadcasting:Â Businesses that broadcast via radio, television, wire, or cable will need a license from the Federal Communications Commission.
Transportation & Logistics:Â Transportation permits are handled by state offices, but the US Department of Transportation can direct small businesses to the right department.
How Much It Costs To Get A Business License
Initial license and renewal fees will vary depending on location, business size, and business activities. When you apply for a license, you will pay for the license itself and a fee. Some licenses have an expiration date: always check to see how long your license will last and when to renew. Factor renewal costs into your business expenses.
Business licenses will range anywhere from $50-$1500, and are largely determined by business industry, business size, and location. For example, Erie County, New York, permits for food establishments range from taverns with no food prep at $79, but an establishment that serves food and has over 50 seats has a $282 permit fee. However, if you are opening the same business in LA County, California, the fees are more expensive, the categories for businesses are more varied, prices are based on square-footage, and prices increase for restaurants deemed “high” vs. “low” risk. A restaurant between 501-1999 square feet will pay $1530 in permit fees.
How Long It Takes To Get A Business License
The amount of time it takes to get your license will largely depend on the city/county/state or federal office where you’ve applied — different jurisdictions and industries require more or less time. A smaller city might have quicker processing times than a larger metropolitan area; also, county offices will be generally faster than federal offices. (Online applications also have shorter waiting times than a traditional mail-in application.)
After filling out the applications and paying the fees, you will usually have to wait a few weeks before your license is official. Waiting times vary from industry to industry and the state where you apply. Account for this time when you apply for your license — don’t wait too long to get your business legal and compliant. If you are in a hurry, most places offer expedited permits for an additional fee.
How To Get A Business License Step-By-Step
For most small business owners, the nitty-gritty of licenses, permits, certifications, and paperwork is not nearly as fun as some of the other aspects of entrepreneurship. However, applying for a license is a monumental and important task when starting a business, and can be accomplished in three easy steps:
Research Your City/County & Industry’s Licensure Requirements: The bulk of your time in the licensing process will be researching which licenses and permits are needed. If the process seems overwhelming or you want to make sure you don’t miss any important components (for example, some licenses will require proof of insurance; this varies state by state and industry by industry), you may choose to hire a business law attorney or use SBA’s local assistance helper to find free help in your state. Merchant Maverick’s tip is to create a spreadsheet listing all the permits needed, the permit’s issuing authority, cost of the permit, application date, and renewal date. Most applications will need a business code and a business name, so research your industry’s business code.
Locate & Fill Our Application Forms: Use local websites and/or the SBA website to locate the necessary license application forms. Submit your application, pay the fees, and include any information the application may need, such as:
Name of business
Name of business owner
Number of employees
Federal ID number
Display The License When It Arrives: Some city locations might require the business owner to come and pick up the license at the office. However, other entities will mail the license. When the license arrives, check with the issuing body to see if there are requirements for posting the license in a clearly visible spot in your business location. Make a note of the renewal date and keep on top of making sure your licensure is current.
Get Started With These State & Federal Resources For Business Licenses
Each state, county, and city offers different license requirements and fees. State websites will often direct you to the local counties that operate as issuing boards for licensure.
Alabama: All businesses are required to register with the Alabama Department of Revenue for a Privilege License in order to conduct any business in the state. Small business owners in Alabama can head to the website AtlasAlabama, Alabama’s government website with information about licenses and collecting taxes, including links to the required government agencies, to research the state’s requirements.
Alaska:Â Businesses in Alaska can register online through Alaska’s Department of Commerce, Community, and Economic Development. The website provides great information about licensing in the state and offers an immediately downloadable license if you qualify.
Arizona:Â Small business owners in Arizona can register through the Arizona Department of Revenue.
Arkansas:Â Business owners in Arkansas will need to check with the Government of Arkansas‘s website in their business section to see what rules/regulations apply. Businesses will need to register with the state in order to collect and pay taxes.
California:Â Small business owners in California should use the Governor’s Office of Business and Economic Development to ask questions about business and business licensure in the state. Businesses should also check with the Department of Consumer Affairs, where you can find a link to online business licensure forms and up-to-date information about California’s licensing boards.
Colorado: MyBizColorado is the state’s website for online forms and business licensure information. Coloradans can also check out business information, see what businesses need a license, and file with the state on the Secretary of State website.
Connecticut:Â Small business owners can use the Advanced Connecticut website for a step-by-step guide to registering and licensing a business in the state.
Delaware:Â Check out the Delaware Government’s Division of Revenue to use their small business license checklist.
Florida:Â My Florida’s government website has a checklist on starting a business that discusses licensure information. Small business owners can also check licensure requirements on the Department of Business and Professional Regulation website.
Georgia:Â Small business owners in Georgia can apply for a license online with the Georgia Secretary of State.
Hawaii:Â To register your business in the state of Hawaii, visit the Hawaii Business Express or check for licensure requirements with the Hawaii Department of Commerce.
Idaho:Â Small business owners in Idaho can use the state’s the Business Wizard to ask questions or fill out an online form for licensure.
Illinois:Â The Illinois government has access to license and permit information on its website.
Indiana:Â According to the Indiana Government’s website, “Indiana does not have any one single, comprehensive business license.” Instead, the government has provided a Business Owner’s Guide to walk small business owners through the process of becoming compliant in Indiana.
Iowa:Â Iowa’s licensing requirements are determined primarily by industry. Licensing information can be found on the Iowa Economic Development Authority’s Business Concierge page.
Kansas:Â Business owners in Kansas can find information on licenses located in the Kansas Government’s Department of Revenue website.
Kentucky:Â Kentucky’s One Stop Business Portal includes a search for whether or not licensure is needed for your particular industry.
Louisiana:Â In order to apply for licensure in the state of Louisiana, small business owners need to recreate an account at geauxBIZ — the government’s program for processing all business registration
Maine:Â All small business owners in Maine will need to apply for licenses at the city or county level. Maine’s Government website has a link to assist with searching which town or office business owners will need to visit to apply.
Maryland:Â Small business owners in Maryland can contact Maryland’s Department of Labor, Licensing, and Regulation for a list of agency contacts and general information about licenses based on industry.
Massachusetts:Â Information about licenses and permits for businesses in Massachusetts can be found on the Massachusetts Government website. From there, business owners can check to see if licenses are needed, check the status of a license, or apply online.
Michigan:Â Small business owners can find answers to their licensing questions at the Michigan Small Business Development Center. Not every business in Michigan needs a business license, so you can check to see if you need one at the Michigan State License Search site.
Minnesota:Â General information about Minnesota and small business license requirements can be found on the Licenses and Permits section on the Minnesota Government’s website. Businesses can also search for licensing agencies via the License Minnesota E-licensing portal.
Mississippi:Â Small business owners should use the guide on the Mississippi Small Business Development Center website to determine the state and local requirements for business licensure. The state of Mississippi also has a One Stop Shop Business website to help answer FAQs for small business owners.
Missouri:Â Small business owners can register their business with the Secretary of State and the Department of Revenue at once through the Missouri Business Portal.
Montana:Â The great state of Montana’s licensing mostly happens at the local level. To see if your small business needs a license in Montana, check out the Montana License Lookup to check both state and local licensure requirements. For other business questions regarding licensing, owners can check Montana’s Small Business Development Network.
Nebraska:Â Nebraska’s Secretary of State provides information on its website in the Licensing Division about requirements for small business licensure in the state.
Nevada:Â The SilverFlume Business Portal contains a step-by-step guide to small business licensure in the state of Nevada.
New Hampshire:Â New Hampshire has various licensure requirements for small business owners and the Department of Revenue website answers license FAQs. According to their site, “Regulated businesses may be subjected to certification, registration or accreditation and may experience routine inspections. Trades such as accounting, architecture, child-care, chiropractors, restaurants, and many more quire permits in order to being operation.”
New Jersey:Â Small business owners in New Jersey check the New Jersey Business Portal for an extensive list of license and permit news.
New Mexico:Â Licensing requirements in New Mexico vary between counties and municipalities. Small business owners can check the New Mexico Regulation and Licensing Department to check for online applications for common licenses.
New York:Â The New York State Business Express website contains a Business Wizard with business checklists to walk small business owners through the process of discovering what licensure requirements exist for their industry.
North Carolina:Â “The State of North Carolina does not issue a single business license. Your business may be subject to state, city, county and/or federal requirements,” according to the website for the Economic Development Partnership of North Carolina.
North Dakota:Â State of North Dakota provides licensing information on the North Dakota New Business Registration website.
Ohio:Â All businesses in Ohio need to register with the Secretary of State. On the Business in Ohio government website, small business owners can find a comprehensive list of licensing and license agencies.
Oklahoma:Â In Oklahoma, you don’t need to obtain general business licenses. However, certain industries will require special licensing. You’ll need to check out the Department of Commerce’s website to see if your industry applies as well as to see if you need any other requirements as an employer.
Oregon:Â In Oregon, you’ll want to visit the Oregon Secretary of State’s website to get started. There you’ll find a step by step plan for starting your business and you’ll be redirected to the Business Xpress website for specifics on licenses and other certifications you may need.
Pennsylvania:Â The Keystone State also has an online portal that lets you quickly handle all of your licensing needs. The Pennsylvania Licensing System (adorably acronymed PALS) is a one-stop-shop for all things licensing.
Rhode Island:Â Rhode Island provides forms on its business website. There is also a feature that allows you to search through the types of licenses your business might need by industry and there is a helpful guide of things you’ll need to get your business up and running.
South Carolina:Â There isn’t an overarching state business license in South Carolina, but individual cities will require their own licenses. To figure out what you’ll need, you’ll want to head to the state’s website where you can register your business, and apply for and renew licenses. There are also links and portals to other useful services for small businesses just starting out.
South Dakota:Â Check out South Dakota’s state website for a variety of links related to new business owners. You can download licensing forms there and register your business. You can also search to see if your particular business will need more than one type of license.
Tennessee:Â The Tennessee Department of Revenue says that “If you are subject to the business tax, you must register to pay the tax.” If your business generates more than $3,000 a year, but less than $10,000, you will need a minimal activity license.
Texas:Â Small business owners can check with the Texas Department of Licensing and Regulation for a list of industries where licenses are needed and a list of issuing agencies in the state.
Utah:Â The State of Utah’s Department of Commerce issued a Business Licensing and Registration Guide for small business owners. The guide lists all counties in Utah that require licenses for business to operate; it also includes information to connect owners to the state’s free services at the Small Business Development Centers.
Vermont:Â Vermont’s Department of Taxes small business guide recommends registering with the Secretary of State. and to use the resources at the Small Business Administration about license requirements.
Virginia:Â Virginia’s One-Stop Business Shop sends interested small business owners to the City Applications informational site about Virginia’s business licenses. The site says, “The common form of local business license in Virginia is the license tax. Typically, this is an annual application that all businesses must file where the fee is a calculation based off your gross receipts from the previous year.”
Washington:Â The Washington State Department of Revenue’s Business Licensing Wizard will walk small business owners through a business activity search to determine what type of license a small business might need.
Washington DC: All businesses in DC will need to register with a Basic Business License. Some categories are able to apply and print their license immediately.
West Virginia:Â According to the West Virginia State Tax Department, “Before engaging in business activity in West Virginia, every individual or business entity must obtain a West Virginia business registration certificate from the State Tax Department.” Small business owners can also check out the WV One Stop Business Portal.
Wisconsin:Â The State of Wisconsin’s Department of Agriculture, Trade, and Consumer Protection has an A-Z list of business licenses available in the state.
Wyoming:Â The Wyoming Business Council’s licensing and permitting FAQs have numerous resources for small business owners including a Guide to Licensing and Permitting.
As you can see, each state is different and varied in their license requirements, and it’s no small task to research your own state and industry requirements and to do your own due diligence. Use the Small Business Administration guidelines as a resource, and use their free access to SCORE for business counseling if you feel overwhelmed. Starting a business is an exciting time, and the paperwork might seem exhausting, but with this important step out of the way, you’ll be that much closer to your dream.
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