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January 17, 2002

Table of Contents


Quote of the Week

Special Notice

Staff Article - Selected Tax Considerations for Small Business

Technology Tip of the Week

Guest Article - Four Dynamite Marketing Tactics in Action

Parting Comments

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Quote of the Week

In youth we learn; in age we understand.

- Maria Ebner-Eschenbach

Special Notice!!!!!

We have added seven terrific new ebooks to our site that are free for you to download. These are outstanding books that you can also freely distribute to whoever you like. Download yours today at:

We have also added a new page dedicated to marketing tools. You'll find only best-of-breed resources listed there. Please visit it and see what you think.

Staff Article

Selected Tax Considerations for Small Businesses

by SBC Staff

Given the inevitability of certain approaching tax deadlines, we have seen an increase in questions from visitors to our website about several tax issues that we feel are worthy of discussion here. We'll review each of them briefly now. If you have any questions or want to explore a particular issue in more detail, please contact us with your specifics and we'll be happy to help.


If you transact business through a corporation you can choose to make an election to be taxed as an S Corporation. If you are not familiar with this election, this may sound like we're getting into complicated territory here, but relax. It's not that bad.

An S Corporation doesn't pay tax. Its earnings are passed through to the shareholders who pay tax as if they had earned the income directly. The earnings of a corporation that has made this election prepares a separate form for each shareholder of the company that lists the items of income or deduction that the shareholder must report on his or her individual income tax return. The corporation's S Corporation income tax return, Form 1120S, is filed with the IRS along with the Schedules K-1 that list the income to be reported by the shareholders.

The whole purpose of this scenario is to avoid double taxation of the earnings of your business; once at the corporate level and a second time when you withdraw the earnings. This election can save you quite a bit in taxes.

In order to be effective for a given tax year, the election must be made by the 15th day of the third month of the corporation's tax year. So if your corporation is a calendar year tax filer and you want the election to be effective for 2002, you need to file the election by March 15, 2002. If you file later than that, the election will be effective for the following tax year (2003) and your corporation would still be a regular corporation for 2002.

If you create a new corporation during the year, you must file the election within two months and fifteen days of the first day of the corporation's taxable year. So if you created the corporation on June 1, 2001, you would have to make the election by August 15, 2001 for it to be effective for 2001.


If you have an existing corporation with an established tax yearend, you'll simply have to wait until the following year for your election to take effect. You can simulate the same tax results by making sure you pay out all the corporation's earnings to yourself and the other shareholders before yearend. This would leave you with zero taxable income in the corporation so it pays no tax and all of the earnings would be taxed to the individual owners. However, you might open yourself to an unreasonable compensation claim by the IRS if your corporation's earnings are very high. Also, you will have to be able to estimate your corporation's taxable income very accurately before yearend in order to do this.

If you have a new corporation, you do have another option. A new corporation can adopt any fiscal yearend it chooses with its first tax return. Continuing the example above, if you started your corporation on June 1, 2001 and realized on August 16 that you missed the deadline for filing your S Corporation election, make June 30 your corporate fiscal yearend. File a return for the short period June 1, 2001 to June 30, 2001 and work with your accountants to try to make your expenses and income equal for that one month. There are many accounting methods you can use to do this.

Next, make your election on August 16 for the tax year beginning July 1, 2001 and ending June 30, 2002. Assuming you and the other shareholders are all calendar year taxpayers, you'll have to agree to change the yearend of the corporation to December 31 in order to have your election approved. So you will have a short S Corporation yearend for the period July 1, 2001 to December 31, 2001. Starting in 2002, your corporation will be a full-fledged calendar year taxpayer again.

There is a complete article that deals with this issue in more detail on our website on the Business Articles page.


Many people believe that since they are taxed on the earnings of the S Corporation anyway, they don't need to pay themselves a salary. This is not true. You may get away with it but you are merely playing the audit lottery. What's the difference you may ask? Employment taxes.

The IRS wants you to pay yourself and the other shareholders regular salaries and withhold the required taxes just as though the corporation was a regular corporation. If you are audited, the IRS will assess the taxes you should have withheld based on what they believe reasonable salaries should have been. They will also impose severe penalties for failure to withhold and failure to pay along with hefty interest charges.

Bottom line? Pay yourself and other shareholders who work in the business a salary. You have a lot of leeway as to how much the salaries should be as long as you pay something that you can support as reasonable. The IRS isn't going to be unreasonable with you unless you fail to pay salaries at all.

We hope this information is helpful to you. If you have other questions or require more details, please do not hesitate to let us know.

Copyright 2001, all rights reserved

Technology Tip of the Week

You probably have plenty of protection from viruses and hackers at your office, but what about at home? Both can cause tremendous destruction to your data if you don't have adequate backups. Even with backups you can waste a lot of hours cleaning up the mess.

Well, you can bulletproof your home computers with two free downloads.

Get the AVG antivirus system at It works extremely well and will cost you nothing.

Next, get the Tiny Personal Firewall from
This will keep the hackers away. To outsiders who might have found their way into your system before, your computer will appear to be turned off. You can test how well it works by going to the Gibson Research Corporation website at Use their Shields Up!! test to check the security of your connection to the Internet.


Guest Article

Four Dynamite Marketing Tactics in Action

by Joe Gracia

One of our most favorite activities while on vacation is eating! Here are a few marketing observations related to that universal need, during a recent vacation.


After completing a morning tour, we were ready for a quick bite to eat before moving on to our next destination. We saw a row of street food vendors a short distance away.

As we walked past the first hot dog vendor, I noticed that he was absorbed in reading his newspaper. He didn't even notice us walking by. I knew that there were a few more hot dog vendors along the path so we continued walking.

As we approached a second hot dog vendor, he looked directly at Maria and I and asked with a big smile, 'How are you today?'

'Fine,' we said.

Then he said, 'Are you ready to try one of the best hot dogs you've ever eaten?'

I smiled and looked at Maria, she nodded her head enthusiastically, and a sale was made.

Why did we walk past the first hot dog vendor, and why didn't we walk past the second?

Because the second knows a lot about effective marketing, and the first knows very little -- or is independently wealthy and doesn't need the money.

The hot dog marketer knows something about Give to Get -- our marketing philosophy and strategy. He gave a little bit of attention to us and made us feel important. The first one made us feel -- invisible.

Were they the 'best' hot dogs we've ever eaten? Probably not. But when you're hungry, and they're served with a smile, they sure taste good.

People buy things they want from people they know, like and trust! If you want your customers to like you, and buy from you, then treat them as though they are the most important people in the world. You don't have to go an extra mile. Sometimes just an inch will do.


Now, this didn't happen, but I wish it would have. Our savvy hot dog marketer still has room for improvement.

Also available at his hot dog stand were delicious looking hot pretzels. But he never asked us if we would like one to go with our hot dogs.

Now, you may say, he probably assumed that if we wanted a pretzel, we would have asked for one. Or you may think he would have been pushy suggesting more products.

Folks, if you have such thoughts, please listen carefully, because those thoughts are costing you thousands of dollars in lost sales.

The only way you can know if a person wants something you have is by making an offer. Then they will have to make a decision -- yes, or no. You are not being pushy by offering your customers something else that you know they will enjoy or benefit by. Customers want you to suggest.

Your customers are not always thinking of your products. They have a million other things on their minds.

For instance, once I had ordered our hot dogs, I had to think about what we wanted on our hot dogs; what we wanted to drink and how I was going to hold everything and pay him at the same time. Plus, I had to think about a place for Maria and I to sit down to enjoy our meal. I wasn't thinking about his pretzels at that time.

But, I can guarantee you, that if he had said to me, 'I can give you a special price on pretzels today -- fifty cents off! How many would you like -- one or two?' I would have said, 'Sounds great! Give me two!'

Maria and I would have been happy, and he would have been happy.

But he didn't offer, so I didn't buy. Oh well, nobody's perfect. There's always room for improvement.

There is no better time to sell your customers something more, than when they are already in a buying mood. Give your customers a special offer on another related product or service that will benefit them, when they are already in the process of buying something from you.

You may wonder, 'Why should I give them a discount on this second product or service? Shouldn't I make them pay full price?'

You can test it and see. But, more often than not, by giving your customers a 'special' deal for the moment, you will get many more accepting your offer. Keep in mind, that the profit on this additional sale is profit that you wouldn't have had.


On another day, at the end of a tour of a colonial home, we asked our guide if she could recommend a local restaurant.

She did better than that. In addition to her hearty recommendation, she gave us two coupons for the local eatery.

Pretty impressive. This is called a Joint Venture.

The local restaurant owner obviously knows something about Give to Get and knew that tourists get hungry after a morning tour. So he approached the tour guides and asked if they would like a supply of discount coupons to pass on to their tour groups who might be looking for a casual, but comfortable dining experience.

And why wouldn't the guides want to provide their guests with recommendations and coupons to a restaurant that they enjoy themselves? Perhaps the guides get a free meal once a week for their recommendations.

Joint Ventures, where two or more companies help one another, are an excellent way to attract business that you would not have otherwise gotten.


I'm not making that line up. We must have heard the owner of a Cajun Chicken franchise repeat that line a hundred times as he handed out samples of his delicious Bourbon Chicken.

We've mentioned in past articles that a bourbon chicken vendor at one of our local malls attracts the lion's share of lunch customers by simply handing out free samples of his bourbon chicken. It is so delicious, that it is difficult to keep walking past his stand without buying.

Well, apparently, bourbon chicken vendors across the country are aware of the power of samples too. Because as we searched for a place for lunch in the huge mall food court, we could hear in the distance, 'Yummy! Yummy! Good for Your Tummy!'

We were so hungry by this time that we were drawn like a magnet to this unusual and hilarious chant.

It was difficult to see where this chant was coming from because there was such a large crowd surrounding the stand. You can imagine our surprise as we edged our way through the crowd to see a smiling, enthusiastic bourbon chicken vendor passing out sample after sample of bourbon chicken while repeating his slogan.

I feel sorry for the other vendors in his vicinity, because they hardly stand a chance. The only bigger crowd than the one around him and his samples, was the one at his cash register ordering the full meal.

Samples help you sell. Give people what they want. Think of how much easier it is for a person to decide if they want your product of not, when they can sample it.

We provide hundreds of marketing samples on our Web site and in our Newsletter so our potential customers can get to know, like, and trust us.

Ice cream stands provide free samples, America Online provides hundreds of hours of their service for free so you can sample it.

How are you using free samples to help sell your products and services? With a little creative thought, you can use this powerful technique to explode your sales.

Copyright (c) 2002, Joe Gracia
Give to Get Marketing

Get your Free Marketing Idea-Kit, plus hundreds of free marketing tips, articles and case studies to help you grow your business at the Give to Get Marketing Web site.

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