Leadership Honored at 9th Annual 20 Under 40 Awards

The 2019 20 Under 40 Award Recipients pose for a portrait at the luncheon on Friday in Watertown. Julia Hopkins/NNYBusiness

[Read more…]

Which Business Form Is Right For Your Business?

Jennifer McCluskey

People looking to start a business ask me all the time what form of business is right for them, but it can also be useful for owners of an existing business to re-evaluate their business structure and talk to their professional support team of accountants, attorneys and others. It may be advantageous to switch business forms, especially considering new tax laws that have been put in place over the last couple of years. In the next couple of paragraphs, I’m going to go over a quick review of the different business structures; sole proprietorship, partnership, LLC, S-Corporation, and C-Corporation so that you will know what questions to ask your team. 

    The simplest and easiest business set-up is a sole proprietorship (single person or married couple) or general partnership (more than one person). A business becomes a sole proprietorship or partnership by filing a DBA (Doing Business As) form at the county clerk’s office. This registers the business’s name at the county level, but does not provide any protections beyond that. Specifically, it does not provide any legal protections. If a business is a sole proprietor and gets sued, the business is fully connected to the owner so all of the owner’s assets are at risk. A time to consider switching would be if a business grows and creates jobs, or opens a storefront, both of which may make it more likely for a lawsuit to happen. Business liability insurance can protect businesses as well, but it may be important to have an additional layer of protection that a different legal structure can provide. 

    The next step up beyond a sole proprietorship is an LLC, S-Corporation, or C-Corporation. These business structures help protect a business should a lawsuit happen by creating a separate legal entity for the business. They’re not foolproof; someone can still sue the business owner personally, but they often can help. Creating one of these business entities will register a business’s name at the state level. Most of the businesses that I work with are set up as sole proprietorships or LLC’s. 

    Filing a business as an LLC or Corporation at the state level gives the business owner some more choices in how he or she pays taxes as well. All sole proprietorships and general partnerships fill out their business taxes as part of the personal tax return of their owner or owners. If a business owner sets up an LLC, she can choose to continue filing taxes as a “disregarded entity,” meaning she would continue filing taxes on her personal return. However, LLC’s do have the option to file taxes as a corporation, which may allow the owner to take advantage of better tax rates if the business has a high profit. Owners of high profit businesses also may want to consider setting up as an S-Corp. To do this the business owner would file as a Corporation at the state level and then fill out paperwork for the IRS to get the S-Corp designation. This will let the business owner do their taxes a little more simply than a C-Corp, but will let the owner take corporate tax rates for any business income beyond the owner’s salary. An owner of an S-Corp has to be able to pay themselves a “market rate” salary, so this setup would not be as useful for businesses that are lower profit. Finally, a business owner could choose to set her business up as a full C-Corp. This will allow her to distribute dividends to investors and owners and will require tax filing as a corporation. 

    At the SBDC we can only give overviews; we are not accountants or attorneys to offer tax or legal advice. We recommend speaking to your accountant and attorney before making any business structure decisions. We can help connect you with a local support network if you do need one of these professionals to help advise you along your business journey. You can contact the SUNY Canton SBDC at (315) 386-7312, SUNY Canton SBDC at Clinton Community College at (518) 324-7232, or the Watertown SBDC at JCC (315) 782-9262 for free and confidential business counseling. 

Keep your Business Healthy With The Right Funding

Jennifer McCluskey

Having access to the correct type of funding stream at the right time can be very important for keeping your business healthy. Even if you don’t need funding right now, a great regular health habit for your business is developing and maintaining a solid relationship with your bank. When you find that your business is ready for additional capital to be able to grow, you have several options: 

Loans vs. Lines of Credit 

    There are several differences between loans and lines of credit. A loan is usually a large chunk of money that is given to you by the bank to buy something specific, for which you repay principal and interest for a set time period. Loans are usually best for larger purchases like land, buildings, larger equipment, etc. When starting a business, working capital (A.K.A money to start and keep your business going for the first few months) can be built into a business loan, too. 

    A line of credit can be more useful when a shorter repayment term is anticipated. For instance, if a lawn care business needs equipment in the spring and knows they will make enough money in the summer to pay the equipment off, a line of credit might be a good idea. Or another example is if a business is doing a project for a government entity, often the business will not be paid for the project until 30 or 60 days after completion. In that case, the business could use a line of credit to cover materials, supplies, and salaries until the bill from the government entity is paid. Usually, a loan is for something specific, while a line of credit can be for pretty much anything the business owner needs, once it is set up. Another useful thing about a line of credit is that it is a revolving account that lets the borrowers draw, repay and redraw from available funds throughout the life of the line of credit. Payment and interest will only be due on the amount spent. Lines of credit will likely have a higher interest rate, however, and may be harder to get if the business owner does not have good credit or less solid performance. There often needs to be some collateral available to secure the line of credit. 

Other Types of Business Funding 

    You can seek a loan from your bank or from other banks in the area that do business lending, or there are alternative lending sources available. Sometimes your county or your town will have a loan or grant program, so it’s always worthwhile to stop by your local economic development office or SBDC to find out what funding options are available to you in your county. Contrary to popular belief there are not many grants available, and those that are often have stringent requirements like job creation. Most grants available for business owners in our area are obtained by municipalities from the state and are administered on the local level. There are a few others, such as ACCES-VR’s small grant program for people with disabilities to start a business, and larger government SBIR and STTR programs for tech companies. In St. Lawrence and Jefferson counties, there are also some small grants for artists through the SLC Arts Council. 

    Some kinds of businesses, specifically those that are scalable and may involve a patentable product or service, may be of interest to an investor. Local investment groups will usually need a business plan as well as a pitch presentation. Obtaining this kind of funding can be a challenge, but rewarding. Similar kinds of businesses, like those that have a fun product or are in the tech arena, may be able to get some funding through crowd funding, but that requires a very strong marketing strategy and the right kind of product. Loans and lines of credit have a broader application and are (relatively) easier to get. 

    If you are looking for funding for your business and would like to learn more, contact the SUNY Canton SBDC at (315) 386-7312, SUNY Canton SBDC at Clinton Community College at (518) 324-7232, or the Watertown SBDC at JCC (315) 782-9262 for free business counseling. 

FAQ In Marketing: A North Country Professional’s Cheat Sheet

Jessica Piatt

As the Director of Marketing at the Greater Watertown – North Country Chamber of Commerce, I often get asked questions about my responsibilities at the chamber. While there are many interesting aspects of my job, managing social media seems to pique the most interest. Without fail, I am asked to delineate. 

    This typically ignites a flurry of questions. With north country Businesses in mind, I have selected some of my favorite FAQs.  

I’m asked questions such as: 

  • I don’t have time; can’t I just link all our accounts? 
  • Is itreally necessary? 
  • What even is engagement?
  • How can my business benefit from it? 

    Let’s set the record straight. Yes, you can link your social media platforms to regurgitate the same content verbatim. But, just as we have all learned from the Jurassic Park franchise, just because you can, doesn’t mean that you should. When you post the same content on all your social media platforms, you might be getting the job done faster, but you’re lowering your performance in the process. Instead, consider posting similar content with copy that is unique to each individual platform. In this way you achieve the objective of getting the word out without coming across to your audience as repetitive or robotic.  

Is it really necessary? 

    You wouldn’t deny a free advertising opportunity or intentionally cut back on your customer service efforts, would you? Having a presence on social media is a place where you can increase brand awareness and engage people directly as an effective (and measurable) method to generate leads and sales. Need I say more? 

What even is engagement?  

    In essence, engagement is any time someone interacts with your social media. It comes in the form of metrics such as: likes, follows, comments, shares, re-tweets, and click-throughs. Any way people interact with you on platforms is social media engagement. Not only are these metrics essential for tracking the success of your campaigns on social media, they are an integral part of accomplishing goals in the digital age.  

How can my business benefit from it? 

    Come on people! I mean it is 2019. Having a presence on social media platforms offers your business the opportunity to highlight the services you provide or products you offer. It can also be used to enhance your brand’s other marketing efforts. Your digital presence can engage your audience and grow your consumer or client base. Ultimately, your presence on social media platforms will further your goals as an organization. 

    As the director of marketing at the Greater Watertown – North Country Chamber of Commerce, I welcome curiosity. Talking to members and interested businesses about their concerns or questions  surrounding social media platforms is one of the highlights of my job. If you are curious, I challenge you to seek understanding. Use resources such as chambers, or other organizations dedicated to promoting and supporting businesses, to gain insight. Glean from the expertise of those in your professional network. Finally, employ your findings to benefit your business. 

Small Business Startup: The Mason Jar

SYDNEY SCHAEFER/NNY BUSINESS
Lynette Thayer, owner of The Mason Jar, poses for a portrait outside the store along Riverside Drive in Clayton.

  [Read more…]

Small Business Startup: The Rift Thrift

SYDNEY SCHAEFER/NNY BUSINESS
Brian James, owner of The Rift Thrift stands in front of his store located in downtown Cape Vincent.

[Read more…]

Small Business Startup: Island Bay Pier House

HOLLY BONAME/NNY BUSINESS
Island Bay Pier House co-owners Brandi Wanecski and Adam Beaman stand behind the restaurant’s illuminated bar.

[Read more…]

Small Business Startup: Seabound Yachts

Jeremy Cohen, owner of Seabound Yachts

    [Read more…]

Adjusting Business Plan for Seasonal Changes

Jennifer McCluskey

Many businesses, especially here in Canton and Potsdam which have large college student populations, struggle with slower summer months.  Others in more touristy areas, such as near Higley or out in Clayton or Alex Bay, have the opposite seasonal changes.  A survey from Wells Fargo reported that 45 percent of business owners say they reliably have several times of the year that are faster and slower than others.  But no matter when your business’s slow season is there are many strategies for dealing with slower seasonal sales. 

    One strategy is to close up shop during the slow months. You’ll keep having to pay rent, but utilities, employees, and other costs will be gone or minimal.  This is the strategy that is often employed in some predominantly tourist areas.  However, if your product can serve locals as well, possibly staying open when everyone else is closed might lead to some small profits, or possibly large ones if there is an ice fishing derby or some other event. The Wells Fargo survey mentioned previously also reported that 62 percent of small business owners said they reduce their capital expenditures during slow seasons, and 43 percent said they reduce hours for their employees.

    Another strategy is to set money aside during the high sales months.  This is hard for many business owners.  Forty-one percent of business owners surveyed said seasonal differences make it more difficult to manage cash flow.  Planning can be difficult when you don’t know what’s right around the bend, or if you’re just barely making it during the better parts of the year.  If this is the case for your business, you may want to use your slow season to take a hard look at your financials and see if there are ways you can trim costs during the rest of the year so that you can be better prepared for next year’s downturns, or create a financial budget if you’re just winging it.  Make sure you are realistic with your cash flow projections for the future by having a good idea of past trends and sales in both slow and peak times. Update your forecasts regularly to make sure you are on top of any changes in trends.  Your SBDC advisor can help create and analyze projected budgets. 

    You may be able to delay some expenses until different times of year.  Talk to some of your vendors, for example your insurance company, to see if you could pay at a different time of year.  Even if they say no, I’m sure they won’t mind if you pay your bill ahead of time in the spring so that you’re all set when it’s due in the summer.  Another idea to improve cash flow during slow months is to collect a deposit from customers, for example half down and half on delivery.  This works especially well when there is a substantial gap between booking your service and service delivery. 

    Also, develop a positive relationship with your bank.  There are possibilities of obtaining a seasonal line of credit to get equipment and other items you need to get ready for your high season and then pay it off when the sales start coming in.  This could work well for something like a lawn care business which will need new equipment in the spring but won’t have money to pay for it until the summer. During slower times of the year, one in five business owners (21 percent) reported increasing their use of business lines of credit or business credit cards to bridge cash flow gaps. During busier times, two-thirds (64 percent) said they pay down debt or reduce their use of credit.   

    If you would like assistance planning for seasonal changes in your business cash flow, you can get in touch with your local Small Business Development Center office.  You can contact the SUNY Canton SBDC at (315) 386-7312, SUNY Canton SBDC at Clinton Community College at (518) 324-7232, or the Watertown SBDC at JCC (315) 782-9262 for free business counseling.  The Wells Fargo survey referenced can be viewed at https://wellsfargoworks.com/small-business-optimism-reaches-highest-point-in-a-decade.

               

Benefits of Owning Commercial Real Estate

Kiah Surgue

As a business owner, you should be aware of the many advantages to owning the commercial real estate where your business is located.  In order to pursue owning, you have to have a solid financial profile and a clear vision for growth.  Investors are more apt to lend to businesses with value and assets, combined with a low amount of debt compared to owner’s equity.  This is important to ownership and access to capital.  Ultimately this type of business investment can serve as a stable foundation for future commercial success. 

    The interest savings on purchasing versus leasing commercial real estate is huge.  When carrying a mortgage on the property, a portion of each monthly payment goes to principal and a portion goes to interest.  A business owner can use the interest portion as a tax deduction.  So, a property valued at $500,000 with 20 percent down, a 20-year term and an interest rate of 4.5 percent has total payments of $607,000 over the course of 20 years, of which $207,000 goes directly to interest.  Thus, a third of the total payments can be deducted over the term, a major tax bonus.

    Property tax write-offs are another advantage to owning commercial real estate.  When you own property, you are responsible for village, county and school taxes which are deductible expenses that can offset business income and business tax liability.  

    Additionally, depreciation on commercial real estate is a benefit come tax time.  All assets but the land will depreciate in value as soon as they are purchased, including the roof, siding, furnace, sinks, toilets, decking etc.  The IRS allows the depreciation of a residential rental unit over 27.5 years and a commercial building over 39 years.  For example, if you purchase a residential rental for $1 million, the annual depreciation that can be written off is about $36,000. 

    Many other tax deductions are available when owning a business.  Any maintenance or renovations done to the property are deductible, as well as purchases of equipment, furniture, fixtures, and inventory and working capital for common area maintenance charges, insurance, phone, electric, internet, office and supply expenses.

    Some investors purchase commercial real estate as a long term retirement investment to generate a valued asset, knowing that the capital gains tax rate on the sale of a building will generally be lower than the personal tax deduction associated with a traditional IRA.  This is another reason that owning commercial real estate can be favorable.

    Looking way ahead, if you plan to leave the property to a beneficiary such as a spouse, family member, partner etc. and they decide to sell the property, they will only pay taxes on the increased value from the time of the owner’s passing.  This is referred to as a post-sales tax savings and is another benefit to ownership. For example, a business owner purchases a commercial property for $1 million and it appreciates to $4 million over time.  Then the owner passes, the property goes to the beneficiary and the beneficiary sells the property for $5 million; the beneficiary only owes taxes on $1 million. What a tax savings!

    The benefits to owning your commercial property may outweigh leasing or renting a space.  If you have a business that is in a solid financial position, consult with your team of experts such as your business advisor, attorney, accountant and banker to see what your next move should be. 

                The New York State Small Business Development Center at JCC offers free, individual, confidential counseling to new or existing business owners in Jefferson and Lewis counties.  They also offer an entrepreneurial training course with presentations by area professionals in law, marketing, accounting, etc.  For more information, contact 315-782-9262, sbdc@sunyjefferson.edu. St. Lawrence County residents can contact their SBDC at SUNY Canton, 315-386-7312, sbdc@canton.edu.