Got A Great New Business Idea?
There's Good News And Bad News

Do you have a great idea for a new business that you're sure will make a fortune? Have you invented an innovative product or thought up a cool new service? Well, I've got some good news and some bad news.

The good news is that it's great to be able to come up with new ideas. Having a solid business concept that fills a hole in the market by providing a needed product or service is a good beginning for a business.

Now for the bad news: No matter how good your business idea, how innovative your concept, your ultimate success depends on how well you take care of all the mundane, day-to-day stuff - the "business" side of business. Remember, one of The Basic Rules is that 80 percent of success comes from executing the fundamentals well.

What do I mean by fundamentals? It's all that stuff in your business life that you'd rather not have to deal with: the administrative details, the order processing, the bookkeeping, the sales calls.

As a business owner, I know this stuff isn't fun. I hate having to make decisions about insurance, figuring out how much inventory to re-order or negotiating with the landlord about our lease.

It's a lot more interesting to be thinking up new products or launching a new marketing idea.

Novice entrepreneurs imagine there's some magic formula to make the nitty-gritty details go away. What they'd like - what we'd all like - is someone who'd run our business, take care of all the day-to-day tasks so we could just do the creative, exciting things.

Unfortunately, there's no such magic formula. If you own a business, you can't lose sight of the fundamentals. Even if you have a partner or great employees, you have to take care of some of these basic business components yourself or at least make sure they're being taken care of and taken care of right. There's just no getting around it: Some stuff in business isn't fun. But it's necessary all the same. Here's your "business fundamentals" checklist:

• Go out there and make sales. I'm always surprised by the number of businesspeople who will do just about everything except make a sales call. Without sales, you don't have a business. Whatever reason you have for not making sales is just an excuse. Pick up that phone.
• Do the job and do it well. At the end of the day, you have to deliver what your customer bought. Whether you're a lawyer or a landscaper, you have to be proficient at what you do and actually get it done.
• Process the paperwork. Do you send out your invoices promptly? You can't get paid if you don't send the client a bill. Did you send the insurance form back? What's lurking under that pile of paper on your desk?
• Pay your bills on time. Whether applying for loans or establishing credit with vendors, you need a good credit rating. You'll have a better credit rating if you pay on time even if you maintain fairly high balances.
• Communicate. Staying in touch with your customers and your employees is a key part of your job as the company's leader. You may be working hard on a client's project, but if they don't hear from you, they'll think you're at the beach.
• Deal with the red tape. We all hate having to make sure our contracts are in order, applying for business licenses, or, even worse, paying taxes. But you jeopardize your business by neglecting to deal with aggravating, but necessary, red tape.
• Hire well. The success of your business depends on the quality of your employees. Don't rush when filling openings. Take your time to ensure whether an applicant is the right fit for you, not just their skills but their attitude and personality. Check references thoroughly.
• Go to work, day in and day out. There's no getting around it: The work won't get done unless someone does it. You've got to show up to succeed. That's the most basic fundamental of all.

Tax-Deferred Capital Gains

Capital gains are still more attractive than dividends to long-term investors, even though they are taxed at the same rate.

Why? Capital gains are tax deferred until a sale. Dividends are reduced by tax of up to 15% (or more including state taxes) before they can be reinvested. But a stock that provides the same rate of return through appreciation will do so on a pretax basis-and compound in value at a faster rate to a higher total.

If you buy stocks or funds for the long term through a taxable account, remember that a tax advantage is still enjoyed by appreciating stocks and funds that have a bias toward generating capital gains rather than dividend.

Consider This!

"It seems that every time Congress sets out to trim the budget, the knife slips and trims the taxpayer instead."
- Anonymous

When Barbary pirates demand a fee for allowing you to do business, it's called "tribute money." When the Mafia demands a fee for allowing you to do business, it's called "the protection racket." When the state demands a fee for allowing you to do business, it's called "income tax."

Is It A Valid Tax Shelter
Or Is It Completely Bogus?

During the early 1980's, the popular shelter was an investment in a movie, gold mine, painting, or building where promoter's immediate deductions far exceeding the money invested. Shelters typically involved assets with inflated values paid with phantom debt. (Due only if the investment succeeded, an unlikelihood.)

Factors that indicate a bogus shelter are as follows:

• Promotional material, contains little mention of any opportunity for gain, emphasizes tax benefits. * Inflated assets values even with 'appraisals' and no personal liability on notes taxpayer signed. The transactions had no consequence other than tax. The taxpayer had no business purpose, such as making a profit, for engaging in the transaction. The taxpayer had neither economic risk nor prospect of gain other than tax savings.
  Besides investment shelters, you see tax-avoidance schemes using bogus trusts and fake churches. These generally result in no meaningful change in a taxpayer's control over or benefit from his assets or income. Mail-order churches are a popular scam. Taxpayers from these churches by buying a "certification of ordination" and "church charter". Church membership is limited to family members. The taxpayer ostensibly contributes his assets and paychecks, but continues to use those assets and defrays living expenses out of paychecks donated.
  A common thread in bogus trusts is that the taxpayer transfers personal or business assets or income into the trust. The taxpayer, the promoter or someone the taxpayer can control is named trustee. The transfer disguises that, in reality, nothing of practical significance changed. The taxpayer continues to control the assets and to benefit from the trust's contents. While many trusts are legitimate ways to save taxes, sham trusts are not. How do you recognize bogus tax shelters? A shelter huckster might tell you: Never pay taxes again. Deduct personal expenses. The IRS doesn't want you to know about this. This is so new, your CPA doesn't know about it yet. If he tells you of these, hold on to your checkbook and run. These factors show a bona fide investment:
• The sponsor had expertise and a favorable track record in the shelter industry.
• The income and expense projections were reasonable and showed a profit potential. The sponsor operated the shelter like a business. The moral: If it's too good to be true, don't trust it.
  Fake shelter buyers will surely be audited. When the Internal Revenue Service catches one shelter customer, this leads it to the promoter. After it examines the customer list, the agency starts auditing everyone on the list.

Suggestion: If you have any doubt about the shelter, get advice from someone independent of the sponsor. Talk to a tax attorney or us.

Or check it out with the IRS: Call 1-866-775-7474 or e-mail: irs.tax.shelter.hotline@irs.gov. Or you can look at a list of tax frauds at www.treas. gov/irs/ci.

Tax-Evasion Schemes
Flourish On The Internet

As tax evasion scams proliferate on the Internet, scheme victims and self-appointed watchdogs told the Senate Finance Committee the IRS isn't doing enough to pursue promoters or warn gullible taxpayers.

Aaron Bazar of North Potomac, Md., said he lost $8,000 after responding to an unsolicited e-mail touting what appeared to be a way to legally eliminate federal income taxes but actually was an illegal pyramid scheme.

"If somebody wants to steal from people, the Internet is the place to do it," said Bazar who quit the scheme months later after making no money.

Official estimates are difficult to find, but IRS Commissioner Charles Rossotti said there could be as much as $3 trillion in assets hidden in offshore bank accounts, which is one popular way of avoiding taxes. Senators cited an independent estimate that $300 billion a year in taxes are avoided through phony trusts, fake charity or religious setups and offshore accounts.

"We've got a problem," said Sen. Max Baucus, D-Mont.

Although these tax scams have been around for years, they are being marketed globally via the Internet. The IRS points to its 117 criminal convictions and a Feb. 28 raid by agents on dozens of promoters, the largest in IRS history, as evidence that it is making inroads. There is also information-warning taxpayers about other scams on its own Internet site.

Tax-Evasion: What To Look For

How will you know if that tax plan is a tax scam? Sen. Charles Grassley, R-Iowa, offered these tips:

1. Watch out for the pitch lines such as: "If it were illegal, the government would have arrested me;" "Taxes are voluntary and you can volunteer not to pay"; or "The IRS is weak. Play the audit lottery."
2. Check with an accountant or attorney before signing over any money. Be particularly wary if the promoter says the scheme is one your accountant or attorney won't understand. Or you can check with the IRS and report suspected fraud at 1-800-829-0433.
3. Although trusts can be a valid form of estate planning, some are thinly veiled tax avoidance scams marketed under these names: pure trust common law trust, constitutional trust, complex trust, sovereign trust, unincorporated business organization and pure equity trust.
4. Watch for warning signs such as a promise to reduce income or self-employment tax, deductions for personal expenses paid by a trust, use of back-dated documents, high fees to be offset by tax benefits and use of post office boxes as trust addresses.