Insight - Taking chances can pay off - By Michelle Libby

Everyone has to start somewhere. That’s what people say to get you to take the job with less pay, or to do something that you feel might be beneath you. However, sometimes starting somewhere below the top can be the right spot.

Today’s insight comes from my author persona. As the president of Maine Romance Writers, I talk to a lot of writers who want to be published and they want to make it big time with a six figure advance with a major publisher. 

Who doesn’t want that? If you’re going to dream, dream big. Reality: Very few people make it to the top without starting at the bottom of the mountain.

Sure Stephanie Meyers, who wrote the Twilight books, hit it big her first time, but that is rare. Keep the dream, but aim for attainable. 

For a new author there is much to learn. About writing, about editing, about submitting. Expect to hear “no” a lot. 

Stephen King heard “no” enough times to wallpaper his bathroom with the rejection letters. Most likely you will hear it too. It is discouraging, but there are alternatives. There are many medium sized publishers and small e-publishers (who only sell online). These types of companies are great training grounds for new authors. Learning to work with an editor is an invaluable experience. Feeling like you’re “in” is a great sense of accomplishment. Hearing “yes” we want you can take a dictionary-sized rejection pile and make you feel like Stephen King. 

Published is published. A year ago my book was released by a smallish press in New Jersey. The publisher is a tough business woman who was constantly tweaking her business model and because I was “in” I saw some of what was happening. I took a chance selling my book to Lyrical Press. I could have waited for Harlequin to come calling, but I could and probably would be still waiting. On January 1, the publisher of Lyrical made an announcement that Lyrical Press had been acquired by Kensington, which is one of the big six publishers of romance. Suddenly my little press was playing with the big boys. I took a chance and now the opportunities are endless. 

Don’t be afraid to take a chance on a lesser dream. You don’t know where it will lead you. 

-         Michelle Libby

Tax Tips: Setting up tax entity for small businesses - By Kevin Brunelle

I am often asked by entrepreneurs if they should set up a separate entity for their small business. For many people, operating as a sole proprietor is sufficient. If you are doing a little work on the side and you are not in a risky industry, there is often no reason to set up a separate entity. However, if you feel that you need to protect your personal assets, you are making enough money to make self-employment taxes a burden, or you are looking to bring in partners or investors, you need to consider setting up a separate entity. This brief article will discuss the many advantages of my favorite entity, the limited liability company (LLC) taxed as an S corporation (S corp). 

An LLC has many advantages over other business entities. An LLC, unlike a sole proprietorship, is designed to protect your personal assets from creditors. This “limited liability” means that if you put $5,000 into the entity and the entity owes a creditor $6,000, you are only liable for what you put into the entity, or $5,000. The earnings from an LLC are only taxed at the individual level instead of at the corporate and individual levels like in a C corporation. LLCs generally are much cheaper and easier to set up and administer than corporations. In fact, a single member LLC does not require the filing of a separate tax return as the earnings are reported directly on the owner’s individual tax return. LLCs can be flexible in the way that earnings are taxed and distributions are paid.

The major downside to an LLC when compared to an S corporation is the tax treatment of the earnings. LLC earnings are considered self-employed earnings which translate into an additional 15.3 percent in the form of Social Security and Medicare taxes for the owner. With an S corporation, the owner can pay himself a salary which will be subject to self-employment taxes, but any excess earnings are taxed as ordinary income. As long as the salary is “reasonable” in the eyes of the IRS, an owner can save substantial taxes with an S corp. 

Luckily, this is one instance in which owners can have their cake and eat it too. LLCs can be taxed as sole proprietorships, partnerships, S corporations or C corporations. I suggest setting up an LLC taxed as an S corporation which will give you the ease and protection of the LLC and the tax savings of the S corporation.

The above is a summation of complex tax law. Please check with your tax professional before making a decision. Our CPAs at Milliken, Perkins and Brunelle are available to assist you any time of year.

Are you prepared for the unexpected? Edward Jones

When you’re working to achieve your financial objectives, you will encounter obstacles. Some of these can be anticipated — for example, you won’t be able to invest as much as you want for retirement because you have to pay for your mortgage. Other challenges can’t be easily anticipated, but you can still plan for them — and you should. 
 

Obviously, the word “unexpected,” by definition, implies an unlimited number of possibilities. However, at different stages of your life, you may want to watch for some “expected” unexpected developments.

For example, during your working years, be prepared for the following:

• Emergency expenses — If you needed a major car or home repair, could you handle it? What about a temporary job loss? These events are costly — especially if you are forced to dip into your long-term investments to pay for them. To help guard against these threats, try to build an emergency fund containing six to 12 months’ worth of living expenses, held in a liquid, low-risk account.

• Investment risk and market volatility — Extreme price swings are unpredictable, and they can affect your investment success. To defend yourself against wild gyrations in the market, build a diversified portfolio containing quality investments. While diversification, by itself, can’t protect against loss or guarantee profits, it can help reduce the effect of volatility on your portfolio. And here’s one more thing you can do to cope with the ups and downs of investing: Maintain a long-term perspective. By doing so, you won’t be tempted to overreact to short-term downturns.

• Long-term disability — One-third of all people between the ages of 30 and 64 will become disabled at some point, according to the Health Insurance Association of America. Disabilities can be economically devastating. As part of your benefits package, your employer may offer some disability insurance, but you may need to supplement it with private coverage. 

• Premature death — None of us can really predict our longevity. If something happens to you, would your family be able to stay in your home? Could your children still attend college? To protect these goals, you need adequate life insurance. 

As you approach retirement, and during your retirement years, you may want to focus on these challenges:

• Living longer than expected — You probably don’t think that “living longer than expected” is necessarily a bad thing. However, a longer-than-anticipated life span also carries with it the risk of outliving your money. Consequently, you may want to consider investment solutions that can provide you with an income stream that you can’t outlive. Also, you’ll need to be careful about how much you withdraw each year from your various retirement and investment accounts. 

• Need for long-term care — If you had to stay a few years in a nursing home, the cost could mount to hundreds of thousands of dollars. These expenses could jeopardize your financial security, so you’ll need to protect yourself. You could “self-insure,” but as that would be extremely costly, you may want to “transfer the risk” to an insurance company. A financial professional can help explain your choices. 

None of us can foresee all the events in our lives. But in your role as an investor, you can at least take positive steps to prepare for the unexpected — and those steps should lead you in the right direction as you move toward your important goals.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Marketing can make or break a product - By Michelle Libby

When I was little, my mother used to cook with Velveeta, a fake looking cheese, orange in color, but easy to melt and so yummy on sandwiches and hamburgers. To this day my family still puts Velveeta on our burgers and certain sandwiches.
 

This week it has come to my attention that there is an impending Cheesepocalypse. Kraft Foods, the maker of said yumminess, said that it can’t keep up with the demand for the golden cheese. During the last decade or two, Velveeta fell out of favor. No one wanted to eat that processed “cheese” when they could have Swiss, cheddar or provolone. Then came the marketing with the salsa company. Cube the Velveeta melt it in the microwave, then add a jar of salsa and voila…a cheesy dip for football parties. It took a year or so for this to catch on, but now look…wowza! Cheesepocalypse. 

With a small change and a blending of marketing, Kraft learned that a product that was only stocked at one store in our area (Hannaford) and with only two or three blocks on the shelf can skyrocket to popularity. Now Velveeta in various sizes takes over three shelves in all three of our local box supermarkets. That’s success.

Now small businesses are thinking, how can I create blended marketing to benefit my products and my company? Think about combining a company that sells bags and wallets made from recycled sailboat sails. Mix that with a company that engineers luggage. 

What about a company that sells small Maine-made gifts, which markets itself with a company or product that creates gift baskets. 

These are just ideas off the top of my head. Usually the great ideas are four or five layers down after asking “what if?” many more times. 

I love the idea of people working together to benefit everyone. Companies benefit, product sales increase thus creating more money, more jobs, the need for more advertising, increased production. It’s a cycle.

It all begins with a meeting. Someone at Kraft Foods in charge of Velveeta had a meeting with someone at the salsa company and they said, hey, there’s a football game on Sunday…can we work together? 

So rush to the store to pick up your Velveeta before it’s too late and I’d recommend stocking up for Superbowl Sunday because that “cheese” can last a long, long time…unrefrigerated and unopened in your pantry. It’s better to be safe than sorry.

Insight - Dreaded New Year's resolutions - By Michelle Libby

Phew! It’s over. The dreaded making of the New Year’s resolutions. Did you make any? I never sit down and write what I want to do in the new year. I don’t make a to-do list like exercise, eat better, smile more, hug my children more…I try to do this every day, thus begins the argument of to resolve or not to resolve. 
 

Why create demands on ourselves if in two months we aren’t going to follow through? How many people join the gym January 1 and then stop going January 10? A lot, ask any fitness center owner. 

I’m going to eat better this year, I’ve told myself, but then my birthday rolls around in February and cake is a must on that day. Then I’ve blown the whole deal and I might as well order a pizza. 

One year I made a resolution to have one family over every month for the whole year. I made dinner, usually something easy and we spent time talking, playing games and enjoying time away from the rat race. This I kept up until June, when one of my friends said “no.” I couldn’t move past that and June slipped away, then July…

Maybe we should make resolutions. Resolve to be nicer to one another. Resolve to be nicer to ourselves and make sure that we are taken care of first and foremost. 

Another reason to make resolutions is that they are sort of like goals. Any good business man or woman will tell you that goals are essential to moving forward. How can you see where you are going if you don’t know the way and don’t have a map? A goal can be as simple as kissing your husband for 10 seconds every day or as complex as filling out a food log of everything you put in your mouth. 

Okay, so New Year’s Day has come and gone, but it’s never too late to make goals or make small changes. Why not start now? 

-          Michelle Libby