Tuesday, June 30, 2009

Uncle Sam -- our silent partner

By Kevin Reardon

Recently one of my kids asked one of the all-time great questions: "Dad, how much money do we have?" Reflecting back to a similar conversation I had with my father, I recall clearly his response. He said, "I would have lots more if Uncle Sam didn't keep taking what we earn".

My dad's take on the question was clear and very thought-provoking. During my career as a financial advisor, the concept of keeping what you earn has always been one of our primary objectives when counseling clients, and it comes in several forms.

With every dollar earned in the form of wages, we owe Uncle Sam, i.e. the Federal Government, a piece of our earnings. In addition, many of us pay state income taxes, unless you live in a state that doesn't impose such tax. Our tax code is considered 'Progressive,' which doesn't mean it has anything to do with progress or advancement. Rather, a progressive tax code means higher income earners pay a higher tax rate. In addition to these income taxes, don't forget that every employee pays a 6.2 percent tax for Social Security (up to $106,800 in 2009) and 1.45 percent tax to Medicare (unlimited). In the event you are a business owner or are self-employed, you also pay the matching employer contribution, which brings your total tax to 15.3 percent. Taxes are considered 'Silent' because most taxes come out automatically and without (real) discussion. I mention that government is our 'Partner' out of pure sarcasm.

Of course, there are a few ways to lower your income taxes. First, contributing to an employer sponsored retirement plan, such as a 401k or 403b, will lower your taxable income. This money comes out before taxes, allowing 100 percent of your contribution to flow into retirement accounts. In addition, the government doesn't tax the growth on your investments while it is in a 401k or IRA. Keep in mind that the government will be back to tax you when withdrawals occur, and if you tap into these funds before a designed retirement date, they will tack a penalty on top of the income tax.

Another common way to reduce your taxes is through various deductions allowed on your tax return, including charitable contributions, mortgage interest deductions, business expenses, etc. Remember that none of these deductions are free. You still need to give money to charity to receive the charitable deduction, carry a mortgage in order to deduct the interest, and be incurring and paying for business expenses in order to deduct them.

Once you have paid your income taxes, the money left over is yours to keep, right? With some of your hard-earned 'fortune,' you might consider buying things, like groceries, clothing, personal sundry items, or even shoes. Don't forget that you will pay sales tax every time you make a purchase. Again, the 'Silent' tax returns. This tax is collected automatically every time you make a purchase without negotiation or discussion. Not surprisingly, the onerous task of collecting this tax is placed on businesses ... further 'taxing' their operation.

Now that you have paid your income taxes and purchased essential items for survival, the remaining fortune is yours to keep, right? If you purchase a home, don't forget to budget for property taxes. Few first home buyers look at the total cost of maintaining a property before purchasing it and property taxes are usually a leading expense. Property taxes vary from state to state and from one municipality to another. All things being equal, smaller homes will be assessed less property tax than large ones. In addition, it is usually less expensive to maintain a smaller home than a larger home, leaving more money in your pocket.

Now that you have purchased essential items for survival and own a home, many people invest those proceeds hoping to grow their fortune. This is a wise move, but not without risk and cost. If you invest wisely and grow your assets, your 'Silent Partner' returns to claim a percentage of your growth in the form of a capital gains tax, without having taken risk or exerting effort.

In addition, countless taxes and user fees are assessed on us each and every day. Some of my favorites include: hotel taxes (also known as a pillow tax), rental car taxes, tax on your phone lines and utility bills, drivers license and fishing license fees, personal property taxes for business, stadium taxes, etc. (See the list below for additional items on which you're taxed.)

For the family who worked hard, saved money, invested wisely and accumulated wealth, the government created the ultimate tax - the inheritance tax, better named the Death Tax. For people who have accumulated a certain threshold of assets, this is a tax on the assets of those who have died. It is the ultimate tax because it is difficult for those paying the tax to object to the collection of the tax.

As you consider all of this, let me ask two rhetorical questions: First, how much money does government need to operate? Of course, we could be talking about the Federal Government, State Government, County Government, City Government, etc... The answer for all types of government is ironically, and unfortunately, the same: they need More, More, More!

Our second question is to ask, What is it that government does incredibly well, better than any individual or private enterprise could do? Please ponder this question and provide us with the long laundry list of items you come up with - our list is rather short.

Now that you're smiling, here's a little poem for your further amusement:

The Tax Poem

Tax his land, tax his wage,
Tax his bed in which he lays.

Tax his tractor, tax his mule,
Teach him taxes is the rule.

Tax his cow, tax his goat,
Tax his pants, tax his coat.

Tax his ties, tax his shirts,
Tax his work, tax his dirt.

Tax his tobacco, tax his drink,
Tax him if he tries to think.

Tax his booze, tax his beers,
If he cries, tax his tears.

Tax his bills, tax his gas,
Tax his notes, tax his cash

Tax him good and let him know
That after taxes, he has no dough

If he hollers, tax him more,
Tax him until he's good and sore.

Tax his coffin, tax his grave,
Tax the sod in which he lays.

Put these words upon his tomb,
"Taxes drove me to my doom!"

And when he's gone, we won't relax,
We'll still be after the inheritance TAX

- Author Unknown

-- Reardon is owner & president of Brookfield-based Shakespeare Wealth Management Inc.

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Monday, June 22, 2009

What do we have to lose? Let's lift Wisconsin's nuclear moratorium

By Tom Still

The opponents of nuclear energy in the United States were almost giddy earlier this year when President Obama slashed the budget for a proposed waste storage site in Nevada. Surely, they thought, the inevitable demise of the Yucca Mountain project would end silly talk of splitting more atoms to produce power.

They were wrong. While Obama is no fan of the Nevada waste site, and he's certainly not foolish enough to battle Senate Majority Leader Harry Reid in his home state, he understands the need to maintain – and even expand – America's fleet of commercial nuclear reactors.

"Nuclear power represents more than 70 percent of our non-carbon generated electricity," Obama said during his 2008 campaign. "It is unlikely that we can meet our aggressive climate goals if we eliminate nuclear power as an option…"

Some of the money shifted from Yucca Mountain has gone toward "next generation" nuclear energy research through the U.S. Department of Energy, which last month awarded 71 grants to U.S. universities – including 10 to the UW-Madison. The goal is to design a better nuclear plant, solve waste storage problems (perhaps through reactors that burn their own waste) and to keep dangerous materials out of the hands of terrorists and rogue nations.

"As a zero-carbon energy source, nuclear power must be part of our energy mix as we work towards energy independence and meeting the challenge of global warming," said Energy Secretary Steven Chu in announcing $44 million in grants. A day later, Chu unveiled a $2.9 million program to fund scholarships and fellowships for nuclear science and engineering students at U.S. universities and colleges. Chu said a new generation of nuclear scientists and engineers are needed for a growing industry.

This doesn't sound like an anti-nuke administration. In fact, it is cautiously bullish on expanding the use of nuclear energy and has singled out leading research programs such as UW-Madison to help meet that goal.

So, why does the state of Wisconsin cling to its outdated moratorium on building new generation plants?

Increasingly, the reasons for maintaining Wisconsin's Three Mile Island-era moratorium don't make sense. If you believe global climate change is the single largest environmental threat to the planet, you should embrace energy sources that don't emit greenhouse gases. If you believe there will be millions of new plug-in hybrid vehicles, all getting recharged while idle, you should want power sources that can reliably handle the load without generating more carbon.

Of course, solar and wind power will be a part of the answer, but those alternatives can't measure up to nuclear energy when it comes to steady and massive production of electricity. Today, those alternatives account for about 2 percent of electricity generation.

"Nuclear is the only large baseload source of energy that is not a fossil fuel, and the Obama administration has wisely decided to invest in nuclear along with other non-carbon sources," said Michael Corradini, who chairs the UW-Madison Department of Engineering Physics. Baseload sources such as nuclear run around the clock, while solar and wind operate intermittently.

Supporters of Wisconsin's nuclear moratorium have moved from arguing that nuclear power isn't safe (coal kills thousands of people each year around the world, while the U.S. nuclear industry has yet to kill anyone) to insisting it's too costly. Since 2005, according to the Wisconsin Public Research Group, the projected cost of building a reactor has tripled. But other sources say the cost per kilowatt for nuclear energy is falling, which may explain why 17 applications are pending at the Nuclear Regulatory Commission to build 26 more reactors.

There are 104 commercial reactors in the United States today, producing about 20 percent of the nation's power. There are two reactors in Wisconsin, where the percentage of electricity coming from nukes is also about 20 percent.

There's nothing to lose by ending Wisconsin's 25-year-old moratorium. Federal investment is spurring work aimed at building safe, reliable nuclear power plants. Nuclear energy can be a major contributor to reducing greenhouse gases and curbing reliance on carbon-based fuels. And some of the leading researchers in the United States, if not the world, are right here in Wisconsin.

Lifting the moratorium doesn't mean Wisconsin will be build a new plant tomorrow. But it does mean the state can be ready for the inevitable day that science produces a cleaner, safer and more efficient reactor.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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Benefits of a new mortgage in today's economy

By Kevin McKinley

Contrary to the belief of some sensible savers and investors, now could be a good time to take out a new, 30-year fixed-rate mortgage on your current home, and then pay the loan off as slowly as possible.

The macroeconomic motivation for this maneuver is that today's unprecedented low interest rates may lead to higher inflation tomorrow, which would bring higher interest rates the day after that (figuratively speaking).

The microeconomic reason for doing this is that the new mortgage could not only help you benefit from higher inflation and interest rates, but free up money that serve you better over both the short- and long-terms.

Conventional uses

Regular readers of this column will recall that last month's version detailed some sensible answer to the question, "What would I do with the money from my mortgage?"

Whether it's a lump sum or a lower monthly payment, any extra money could be used to pay down higher-interest debt, sock it away in savings to wait for higher interest rates, or ramp up contributions to at-work retirement plans.

But there are other less-conventional but still potentially beneficial ways to put your extra savings to work.

Buying off Uncle Sam

If you're eligible, a relatively reliable "investment" idea for your mortgage proceeds would be to use some or all of the money to pay the taxes on converting some or all of your IRA to a Roth IRA.

To do so, your adjusted gross income for 2009 has to be less than $100,000 (but that amount doesn't include what you convert). Next year the income limitation is scheduled to disappear completely.

There is a definite advantage paying taxes on your IRA withdrawal while the balance is low, and the likelihood of higher tax rates in the future is high.

But even if you convert your IRA to a Roth IRA now and it turns out to be too soon, you have at least until April 15th of the next year to undo the conversion, and perhaps October 15th of 2010 if you choose to file an extension.

Investing in long-term care

If you like the idea of getting taxes on your retirement plan out of the way while asset values and tax rates are relatively low, you'll love the idea of paying a little right now for a potentially-devastating expense down the road.

By definition, heading off to a nursing home or assisted living facility isn't "fun." It's even less so if you or a loved one don't have the money to pay for the quality of care you or a loved one want and need.

So using your mortgage proceeds or savings from a new, lower payment to purchase a long-term care insurance policy could protect you and your family from losing your home, not to mention the rest of your hard-earned assets.

However, whether your mortgage savings come via a big lump sum or a little more money each month, due to the ever-changing nature of both long-term care and long-term care insurance, it's probably best to purchase the insurance by paying monthly premiums, rather than forking over a lump sum up front.

Higher education costs

Even if you're comfortable that your savings, retirement, and long-term care needs are covered, if you have a child or grandchild you're well aware that the cost of sending that kid to college is going in one direction (up), while the amount of money available to pay for it is going in another direction (not up).

So it may behoove your family to consider putting your extra cash in a college savings plan, also known as a 529 account. You won't get much of a tax deduction on the deposit, but the earnings left in the plan are sheltered from taxation.

Withdrawals that are used for qualified higher education expenses are tax-free, and the parent or grandparent can maintain control over the account and the withdrawals.

And if the child in question doesn't need the money, it can still be transferred to use for another family member.

The only downside of the 529 account is that you will owe taxes and a small penalty on the earnings portion of the account if you choose to use the proceeds for non-qualified purposes.

For example, cashing it out to pay off your mortgage.

-- McKinley bought his first share of stock at the age of 14, and began working for an investment firm at 17. After graduating from the University of Wisconsin with a degree in economics and history in 1988, he became one of the youngest licensed financial advisors in the country. He is now a Certified Financial Planner practitioner, and owner of McKinley Money LLC, a registered investment advisor in Eau Claire, Wisconsin that provides fee-based financial planning and investment management to individuals and families. Read McKinley's complete bio

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Friday, June 12, 2009

Book review: "Your Call Is (Not That) Important To Us"

By Terri Schlichenmeyer

by Emily Yellin c.2009, Free Press $26.00 / $34.00 Canada 292 pages, includes index

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You had a pressing little problem.

It started when you called a customer service hotline. The call connected, you pressed "1" for English, "2" for tech support, "4" for the specific product, then "9" to get a live operator.

But pressing "9" connected you somewhere else so you pressed "0" and heard "Thank you, goodbye." You had to start all over with your pressing little problem, pressing this number and that until you hung up in frustration.

What happened to customer service?

Author Emily Yellin wondered that same thing, and in her new book, "Your Call Is (not that) Important to Us", she takes a look at the evolution of customer relations and what is done when you press "1".

Ever since commerce was created, customers have complained about their ability to complain. Studies have shown that consumers overall are dissatisfied with one out of every five purchases but only a small percentage of those unhappy customers contact the corporation about it.

They figure nothing would be done anyhow, so why bother?

To battle what some believe are uncaring companies, websites have offered tips on getting around automated systems. Call center employees have gone on strike on behalf of their customers. Consumers are angry and disgusted by what they perceive is corporate apathy.

To their credit, Yellin points out, many businesses have been feverishly trying to solve the problem as best they can. Outsourcers (the second-least expensive method of customer service) are ever-vigilant for cultural differences and lingual accent elimination. Customer assistance via websites seems to be catching on. Businesses are beginning to understand that stellar customer service is not a necessary evil, but that it keeps customers coming back.

Still, when you're frustrated, you don't care about that. You want answers now. When you finally get through to that live person on the phone, it helps to remember that he or she is human, too. She might be a grandmother working from home in South Dakota. You might speak to a college student in Argentina or a mother in Nicaragua. The man with the Indian accent may be more educated than you are.

With a consumer's need for understanding and a journalist's curiosity, author Emily Yellin traveled the world in search of stories of customer service successes and failures.

What she discovered will amaze you and shock you. Or maybe not.

Yellin found people who are ferocious about customer service, including reports of CEOs taking their turn at call center phones. She spoke with people who make the study of customer relations their life's work. Conversely, she reports how blogs and websites have forced businesses to take action on poor customer relations, and how some companies still don't get it.

Please listen carefully, as your options have changed: for businesses that want to spend their customer-relations money wisely, "Your Call Is (not that) Important to Us" gives plenty of positive ideas. For frustrated customers, it's a reminder that the voice on the other end of the phone belongs to somebody just trying to make a living.

-- Schlichenmeyer has been reading since she was three years old and she never goes anywhere without a book. She lives on a hill in Wisconsin with two dogs and 11,000 books.

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Thursday, June 11, 2009

Why financial planning matters in the toughest of times

By Kevin Reardon

With all of the harsh economic news that's come our way, you might ask yourself: Why enlist the services of a financial planner when your holdings are down and you're facing a host of financial problems? The answer might surprise you: Because, as dark as times may seem, you're actually giving yourself a fresh start in building a stronger financial future.

Indeed, many people don't make that choice. A recent Financial Planning Association / Ameriprise Financial survey showed that many people try to go it alone when it comes to a financial plan -- and they suffer considerably worse performance in their investment and savings goals over time than those who seek financial guidance from a professional. The cost of a financial planner may not be prohibitive due to factors we'll mention below and young people have a particular advantage on their side when using one -- time.

Here are some things everyone should know about the financial planning process.

It's a collaboration and a learning experience.

A financial planner is not a substitute for your own final decision-making. Planners serve as guides, editors and strategists. They should begin by asking questions of you -- and plenty of them. Their purpose is to understand all of your goals and maybe determine a few you haven't thought of. Some of these dreams might include buying a home or business for yourself, saving for a college education for your children, taking a dream vacation, reducing taxes and retiring comfortably. Financial planning is the process of wisely managing your finances so that you can achieve your dreams and goals while, at the same time, helping you negotiate the financial barriers that inevitably arise in every stage of life.

Planners often specialize.

Planners, like all professionals, tend to specialize in certain areas of interest, and they may receive continuing education in more than a dozen areas of expertise. However, Certified Financial Planners (CFP®) alone can earn continuing education credits in asset management, employee benefits, commercial real estate, insurance, investment management, estate management, retirement planning, 401(k) administration and health topics, among others.

Ask about tackling specific problems.

If your problem is credit card debt or difficulty refinancing, a planner may have specific contacts or the ability to make certain recommendations on how to get yourself in a better position to plan for the future.

They charge based on specific services.

Planners charge for their services in a variety of ways -- always ask up front what they charge and how they expect to be paid. Some "fee only" planners charge for a consultation, plan development or investment management, and they may charge on an hourly or project basis depending on the client's needs or as a percentage of assets under management. Some charge commissions for the sale of financial products they are licensed to sell, and others have hybrid structures mixing fees and commissions. Discuss advisory services first before committing to buying any particular product.

They can talk about your personal investments as well as the ones at work.

One of the best advantages to working with a financial planner is the chance to have a second set of eyes look at your wages, investments and benefits at work vs. what you'll be investing on your own outside work-based retirement and other savings plans. Be prepared to bring all of your finances into the discussion.

-- Reardon is owner & president of Brookfield-based Shakespeare Wealth Management Inc.

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Wednesday, June 10, 2009

The law of torts

By Gary Sherman

This piece will serve as a review of the general concepts of tort law to place the issue of joint and several liability in context.

Tort law is the body of law that deals with harm done by one person to another as a result of breach of a duty (other than a contractual duty). There are several elements:

* There must be a duty. In the most common case, we all have the duty to go about our lives taking due care not to harm others.

* There must be a breach of the duty. The breach could be intentional, but the usual form of breach is negligence, which means not exercising the due care that an ordinary person would take in the circumstances.

* The breach of duty must lead to harm to another.

* The harm must be closely related to the breach (proximate cause).

* The harm must be of the kind that can be resolved with money damages.

When issues of tort law are discussed in public today, the focus is usually on the defendant. That is because the insurance industry has framed the issues. However, the law of torts is really about the plaintiff, and for good reasons.

First of all, the object of all civil law is to resolve disputes. Before people developed law to resolve disputes, they were mostly resolved by violence. Today, we take for granted that peaceful resolution of disputes is the norm. We need to remember that an effective civil law system is our best guarantee that general civil peace will continue.

Secondly, the plaintiff has been harmed through the inappropriate actions of others. The plaintiff is analogous to a victim of crime, and may also be a victim of crime. We have developed sensitivity to crime victims in recent years, but somehow have been convinced not to see civil plaintiffs in the same way. That is wrong.

Think in terms of your own family. If you have a child or a sibling who is seriously injured by the inappropriate actions of another, you want them to be made whole. They may have expenses related to the injury, but they may have also suffered in other ways. They may be unable to walk, or in great pain, or unable to ever have children. They may need lifelong care. The person who is responsible for that harm, whether by a deliberate act or through negligence, should be held accountable and made to compensate the victim, just as we expect the criminal law to hold people accountable for their criminal acts.

Tort law is mostly judge made. It is the last great area of the law that is primarily common law, as judge-made law is called. Most areas of the law were common law until about 75 years ago, but activist legislatures have since taken over most lawmaking from courts.

If the plaintiff is partly responsible for his or her own harm, this is called contributory negligence and the damages of the defendants are reduced accordingly. In Wisconsin, if the contributory negligence of the plaintiff is found to be greater than that of the defendants, there is no recovery at all.

When there are more than just two people involved in an incident involving harm, the question naturally arises of how much each party is responsible for. Under some circumstances, defendants can be held "jointly and severally" liable for the damages. This means that each is responsible for all the damages, irrespective of how much each was at fault.

It is interesting to note that partners are always jointly and severally liable for all of the actions of a partnership. There is no apportioning of blame. If a partner becomes insolvent, the other partners are responsible. That is the nature of a partnership. Likewise, employers are responsible for the actions of their employees in the course of the employment. These concepts are ancient, like the concepts of tort law.

The rules of joint and several liability were judge-made common law from long before Wisconsin became a state -- until 1995. In 1995, the legislature tinkered with the joint and several liability rules so that no defendant was jointly and severally liable unless the jury found that they had more than 50 percent of the blame. Thus, if the person who was 51 percent negligent was insolvent, the plaintiff, even if blameless, was left without full compensation from the defendant who was 49 percent responsible.

This is putting a lot of faith in the fine judgment of the jury. After all, the percentage of negligence is an opinion, not a scientific fact, and an awful lot depends upon it.

So, this year, the governor's budget proposed to return to the traditional common law rules of joint and several liability. After seven public hearings and hundreds of emails, the Joint Committee on Finance modified the proposal to provide that a person had to be at least 20 percent responsible for the plaintiff's damages to be held jointly and severally liable. This compromise is intended to avoid disproportionate results, but is still in keeping with the time-honored public policy that innocent victims should be made whole by those who harmed them whenever possible.

Wisconsin citizens pay less for liability insurance than the citizens of any other state, or the District of Columbia. Wisconsin juries are famously parsimonious and fewer claims are filed in Wisconsin than in other states. In fact, the number of civil suits filed in Wisconsin has declined every year since 1985, ten years before the legislature tinkered with the common law in 1995. None of that is likely to change.

-- Sherman, a Democrat, represents Wisconsin's 74th Assembly District.

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Tuesday, June 9, 2009

Government contracting reforms continue federal push for increased regulation, penalties

Adam C. Briggs


Daniel J. Finerty


Margaret R. Kurlinski

President Barack Obama has promised sweeping reforms to the federal government's procurement process for later this year, but several recent reforms have already changed the regulatory landscape for businesses contracting with the federal government.

Through a combination of new legislation, administrative rulemakings related to the American Recovery and Reinvestment Act of 2009, and several new Executive Orders, the federal government continues to impose new compliance burdens onto contractors.

Furthermore, the Department of Labor's proposed budget for fiscal year 2010 calls for a significant increase in funding and staffing for the Office of Federal Contract Compliance Programs, the office charged with enforcing federal laws and executive orders requiring contractors to take affirmative action in employment.

Government contracting has always carried compliance costs, and these reforms will not be the last major changes in government contracting policy this year. Still, adherence to these new policies does not require existing government contractors to abandon the practices that have made them successful federal contractors in the past.

These changes, as well as those anticipated for the second half of the year, will require businesses to turn anew to their ongoing compliance efforts to ensure that all employees and agents are equal partners in continued contracting success. Businesses new to government contracting should devote special attention to internal training, particularly for those employees dealing directly with government officials or managing employee relations.

Click here to read details in the full "Economic Recovery Alert" from Godfrey & Kahn.

-- Briggs, Finerty and Kurlinski are attorneys at Godfrey & Kahn.

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Friday, June 5, 2009

Thinking about starting or buying a business? In this economy, don't quit your day job

By Kevin Reardon

If you've ever fantasized about quitting your job and starting or buying a business, you're certainly not alone. However, it's definitely not something to do on a whim -- you'll need time and plenty of good advice.

A business startup requires parallel planning in advance for your business and personal finances. That's because business owners -- even those who are acquiring ongoing businesses or starting their own companies on the cheap -- quickly find their business and personal finances are inextricably linked.

That means that before you plan the business, plan your finances first. Here are some basic steps to consider right now:

Get some advice first
You need not one, but two sets of financial advice when starting a business. The first involves the viability of your business concept. You should understand your business idea inside and out before you launch and what your new company's immediate and long-term cash needs will be. The second set of advice involves your own finances and how prepared you are for what will surely be a major lifestyle transition. Because new business owners frequently underestimate their new business's expenses starting out, they can find themselves funding those business needs out-of-pocket. That means less money for day-to-day living expenses as well as long-term planning for retirement. That's why it's critical to consult a tax and financial expert such as a Certified Financial Planner (CFP) professional at the outset.

Get rid of your debts
With the possible exception of mortgage debt, there's very little "good debt" in the life of a businessperson. So while you're researching your business concept and putting together your own financial plan, start cutting back and erasing as much credit card and adjustable-rate debt from your personal life as possible. The credit crisis is making it tough for any business owner -- even experienced ones -- to borrow money at attractive rates. You'll have the most flexibility when you owe as little as possible.

Work on your emergency fund
While it's wise for everyone to have 3-6 months of cash set aside for basic living expenses in case they lose their job or face a medical emergency, emergency funds are particularly necessary for new business owners. Startups can be particularly expensive and most businesses are not profitable from day one. Plan a more extensive emergency fund for yourself and for the business as well.

Start thinking about your legal business structure
Your personal financial situation and the kind of business you're starting should determine the legal designation of your company.

Before choosing a business structure, such as a sole proprietorship, S or C corporation, partnership, Limited Liability Partnership (LLP), or Limited Liability Company (LLC), owners should reflect on their business in the context of their overall financial life and ask themselves a series of questions:

* Is the business going to be your primary source of personal wealth and daily cash flow?
* Is it a side business?
* Do you expect the business to pay for your retirement?
* Do you want it to provide other financial benefits?
* Do you want to pass it on to family members or sell it to existing employees or outside buyers?

The answers to these questions figure importantly into the decision, along with other key factors such as what type of business you're starting, its risk factors, current tax laws, and regulations such as workman's compensation.

Plan your healthcare and other basic benefits
Automatic benefits are the plus side of working for someone else. When you're working for yourself, you become your own HR department and chances are you won't be able to match your old employer's buying power. If you support a family with these benefits or if you have particular health concerns, you need to price the out-of-pocket costs of such benefits before starting your own company -- depending on the business and the cost of those benefits, you might want to rethink your plans.

Price disability coverage now
You might have short-term disability coverage as part of your current employee benefits, but that will likely end once you quit your job. You should price long-term disability coverage based on your present working salary so you can qualify for the highest possible benefit. Disability coverage is critical for self-employed people since they're their own support system.

Starting or buying your own business can certainly be an attractive option, especially if you find yourself working in a low-paying or dead-end job. However, before you make the plunge, make sure you've done your homework.

-- Reardon is owner & president of Brookfield-based Shakespeare Wealth Management Inc.

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Thursday, June 4, 2009

Book review: "Twitter Power: How to Dominate Your Market One Tweet at a Time"

By Terri Schlichenmeyer

by Joel Comm c.2009, Wiley $24.95 / $29.95 Canada 245 pages, includes index

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Lately, you're feeling like a bit of a birdbrain.

Awhile back, somebody told you to get a MySpace page, so your business got one. Then, you were told you "needed" a Facebook page, and you got one of those. Now, everybody is all a-Twitter and you just don't get it.

You've got lots of room on those social sites, and you can add as much content as you want. So how can you possibly post anything of real importance on a website in 140 typed characters or less?

Furthermore, is anybody truly interested in the mundane details of your day?

Yes, says author Joel Comm, and in his new book "Twitter Power", he'll show you how you can advance your business and your career in a few tweet moves.

You already know about the power of the Web. If you've ever used one of those social sites, you know how fun (and addicting) they can be. Comm says that microblogging -- which is what Twitter is -- is fun, too, and can also prod your creativity by using content limits.

Becoming a Twitterer is simple, and begins with the sign-up page. Enter your name and your email address, but be careful choosing a username. Make it easy to remember (so people can find you), don't do anything too clever, and try to somehow tie it to your business or website.

So now that you're registered, you can start tweeting (posting info on Twitter) right away, but you probably shouldn't. First, finish your Twitter homepage with a photo, a brief bio, and links to your website. Once you're done with that, be sure you understand Twitter etiquette so you don't turn away potential followers, then give your followers something interesting to read.

Getting followers can be easy: just follow someone else, or join in a conversation. Comm believes that the beauty of Twitter is that it's a series of real-time conversations between millions of people, simultaneously. And, if used properly and creatively, some of them could become your new customers.

I've been on Twitter for nearly a year (@bookwormsez) but didn't use it much. It was just ... there. So, I thought I'd see what happened when I used some of author Joel Comm's advice.

Admittedly, I was skeptical. But I updated and upgraded my Twitter page just a little bit, and darned if my followings didn't go up 30 percent in less than five hours.

While this book is obviously useful and very easy to follow, the one thing I noticed (and that Comm fails to point out) is that all this takes time.

Lots of it. Even more, if you're not completely tech-savvy.

No doubt about it, tweeting is fun but, if done the way Comm suggests, the preliminaries may turn some time-starved businesspeople away.

Still, this book offers lots of ideas you may not have considered on your own as well as plenty of convincing success stories, so if you're tired of pecking around online with no results, read it. "Twitter Power" may give your business new wings.

-- Schlichenmeyer has been reading since she was three years old and she never goes anywhere without a book. She lives on a hill in Wisconsin with two dogs and 11,000 books.

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Wednesday, June 3, 2009

How to avoid six common advertising offenses

By Randall Hoth

Small business owners often have to add the title of Advertising and Marketing Director to their long list of duties and may not be aware of the various laws regarding common advertising claims. Creating an effective advertising strategy isn't just about where and when ads are placed, but also what claims are being made and Better Business Bureau is providing guidance about some advertising phrases that can be misleading if not used properly.

According to Ad-ology research, 97 percent of small business owners in the U.S. are concerned about the economy but, regardless, 60 percent plan to spend the same amount on advertising in 2009 as in 2008 and 26 percent plan to increase advertising spending. Perhaps these businesses have been doing their research; a McGraw-Hill study found that during the economic downturn from 1980 to 1985, firms that advertised aggressively had sales that were 256 percent higher than companies that cut back.

Small business owners recognize that advertising and overall marketing are not the ideal categories for budget cuts in a rough economy. Advertising regulation issues though, are not necessarily something small business owners have time for, but ignorance of truth in advertising laws is not a defense and any business owner engaging in advertising should familiarize themselves with BBB's guidelines to help avoid inadvertent violations.

Following are six examples of commonly used phrases and tactics in advertising that are often misleading when not used properly:

"Free"

The word "free" may be used in advertising whenever the advertiser is offering an unconditional gift. If the shopper has to purchase an item in order to receive the free gift, the advertiser must clearly and conspicuously disclose the conditions. Also, an advertiser may not increase the price of the purchased item, nor decrease quantity or quality in conjunction with the free offer. Additionally, free offers should not be advertised when the item to be sold is customarily a negotiated-priced item such as an automobile or home.

"Save up to ..."

Price reduction claims that cover a range of products or services should state both the minimum and maximum savings without a misleading emphasis on the maximum savings. Also, the number of items available at the maximum savings should comprise typically 10 percent of the items being sold unless local or state law requires otherwise.

"Lowest price in town ...," "Our prices can't be beat ...," etc.

Prices for products and services fluctuate regularly and it can be extremely difficult for an advertiser to claim with certainty that their prices are lower than their competitors. Such claims should be avoided unless the advertiser can provide substantiation.

"Best," "Most," "Tops," and other superlative claims.

Superlative claims can be objective, based on fact, or subjective, based on opinion. Objective claims relate to tangible qualities and performance which can be measured against accepted standards. When making objective claims, an advertiser must be able to substantiate all claims.

Obvious use of puffery, such as an advertiser stating they think they offer the best customer service in town, may not be subject to truth-in-advertising standards. However, advertising is all about trust from the consumer's perspective and businesses should be vigilant against making subjective superlative claims that are misleading.

"Factory direct," "Wholesale prices," "Direct from the maker," etc.

Claims such as these imply significant savings from the actual price being offered by retailers. These claims should not be made unless the implied savings can be substantiated. Furthermore, claims such as "factory to you" or "factory direct" should not be used unless the advertiser actually manufactures the merchandise or owns the factory where the advertised products are made. Similarly, an advertiser cannot falsely claim to be a wholesaler, nor can an advertiser claim to offer "wholesale prices" or items "at cost" unless the items are being sold at the same price as would be purchased by a retailer for resale.

*Use of asterisks

Asterisks can be used in advertising if they offer additional information about a word or term that is not inherently deceptive. However, an asterisk or similar reference symbol cannot be used as a means to contradict or substantially change the meaning of the statement. The information referenced by the asterisk should also be clearly and prominently disclosed.

For more guidance on advertising, see BBB's Code of Advertising at: http://www.bbb.org/us/code-of-advertising/. Small business owners and consumers can file a complaint regarding questionable advertising claims with their BBB at www.bbb.org.

-- Hoth is president and CEO of the Wisconsin Better Business Bureau.

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Monday, June 1, 2009

GreenBiz: Buying local food helps farmers, schools and the environment

By Gregg Hoffmann

A vast majority of people in the world live within 10 miles of their food sources, but in the United States much of our food travels as far as 2,000 miles from the farm to the table.

While that system allows us to eat relatively fresh fruits and vegetables in winter in Wisconsin, it adds costs, has adverse environmental effects through transportation, raises questions about health and "food security" and takes money out of the local economy.

As transportation costs increase, and other factors change, such a system looks unsustainable over the long run. So, groups around the state are in various stages of organizing and running Community Food Systems.

From Vernon County in the southwest part of the state to Madison, Milwaukee and elsewhere, a variety of CFS projects can be found. A CFS is defined as: "a collaborative network that integrates sustainable food production, processing, distribution, consumption and waste management in order to enhance the environmental, economic and social health of a particular place."

Ken Meter, CEO of Crossroads Resource Center in Minneapolis, recently reported on an economic analysis for the food and farm system in southwest Wisconsin, including Monroe, Vernon, Richland and Crawford counties. The research has been backed, in part, by the Valley Stewardship Network, in cooperation with the Vernon County Economic Development Association and the Crawford County UW-Extension office.

One of the major findings of the analysis is that consumers in southwest Wisconsin spend $208 million buying food from outside the region. If consumers purchased 25 percent of their food directly from local farmers, it would produce $33 million of new farm income every year. That would offset current farm losses.

"Local food systems may be the best path toward economic recovery in this country," Meter told a recent gathering of about 100 people in Viroqua. "A farm and food economic system should build health, wealth, connections and capacity.

"Our current food system fails on those goals. It separates people from those who produce the food. It creates wealth for some and not for others."

The current system -- based on large farming domestically and imports from China, Mexico, Chile and other countries -- treats farm products and food as commodities and doesn't look at the impact on those who produce the food and eat it, Meter maintains.

Meter's statistics present a rather sobering picture of the food system in America overall and Wisconsin. State farmers as a whole make about $1.9 billion less than they did in 1969, when figures are adjusted for inflation, Meter claims. Wisconsin farmers have suffered the fourth worst loss of income of any state in America, he said.

In the country, farm income in 2008 was less than it was in 1929, when adjusted for inflation, Meter said. "And 2008 was considered one of the best for farm incomes in recent history," he said.

The current farm and food system encourages farmers to borrow beyond their means and become as big as possible. Arizona and New Mexico, where huge feed lots have been established, are two states that have shown increases in farm income.

But large operations raise concerns about environmental impact and health, Meter maintains. Plus, there's evidence the large operations aren't sustainable over the long run, he adds.

The Wall Street Journal reported recently that the United States could be close to becoming a net food importer. "This is in a country where we have prided ourselves in farm country for years on being able to feed the world," Meter said.

Because of these flaws in the system, Meter claims momentum is building for local farm and food systems. If you survey Wisconsin, there's evidence backing him up.

The Farm Fresh Atlas has become a go-to directory for those seeking to link farmers and consumers in direct buying arrangements. It is published by the REAP (Research, Education, Action and Policy on Food) Group, the Dane County Farmers' Market, the UW-Madison Center for Integrated Agricultural Systems and the Friends of the Dane County Farmers' Market.

You can find producers and markets for cheese and dairy, vegetables, fruit, eggs and many other goods. Farmers' markets around the state are listed. So are CSAs (Community Supported Agriculture) groups through which consumers can receive weekly fresh produce and other foods for a membership fee. See more: http://www.farmfreshatlas.org

Madison is a hotbed for CSAs and other innovative farmer-to-consumer programs. Of course, the market on the Capitol Square has become a tradition.

The Madison Area Community Supported Agriculture Coalition is active in maintaining a list of participating farmers, publishing guidelines on how to cook farm-fresh produce and with the Partners Share Program, a program that helps lower income people afford organic produce.

One of the concerns about organic farm produce is that people with more expendable income have been the traditional buyers, Meter admitted. However, programs like Partners Share are very helpful, he said.

By no means are CFS and CSA programs only found in small towns, rural areas and the state capital. Milwaukee has its share of programs, too. The Milwaukee CSA Initiative links urban dwellers with farmers around southeastern Wisconsin for transactions at share fees that range from $20 to $25 per week. The Initiative also maintains a directory of area farmers, drop off sites and markets.

Perhaps the best known program in Milwaukee is Will Allen's Growing Powers Inc. Allen was awarded a MacArthur Fellowship for his work in the urban center. Using low-cost farming technologies, such as raised beds, aquaculture, and heating greenhouses through composting, Growing Power grows a vast amount of food year-round at a two-acre farm site within the Milwaukee city limits.

The organization has grown to other farm sites in and around the Milwaukee and Chicago areas. "We started locally and now do work internationally," Allen said in MacArthur Foundation video when he received his fellowship in 2008. "More than a million people die annually because of poor food. It's happening here in the inner cities. I believe no matter what their income, people deserve access to safe, affordable food, grown naturally."

Growing Power provides training on how to grow food and puts on workshops all over the country for children and adults.

Of course, in rural areas, CSAs are looked at as potential boosts to the local economy as well as a way of feeding people. Meter said the loss of farms hurts merchants and service businesses in the small towns in rural areas.

"It can have devastating effects on many areas of the local economy," Meter said of farm failures.

Schools often also are hurt. In some rural areas of Wisconsin, almost 50 percent of the students qualify for federally subsidized meals programs. Farm-to-school programs around the state have helped local farmers and school meal budgets.

Americorps and other organizations provide grants for schools that participate in farm-to-school programs.

The Wisconsin Department of Agriculture, Trade and Consumer Protection also has become more active in recent years in maintaining a statewide local food guide and providing grants. This past year, 94 applicants sought more than $3 million in grant money, but DATCP had only $225,000 to distribute.

Meter believes the demand for grants and other funding will continue to grow because momentum is building rapidly for a better farm and food system.

"More and more people want very healthy food that we know the source of," Meter said. "It's especially important in low income areas, inner cities and in farm country. The momentum is amazing. People are saying we need to change the system.

-- Hoffmann has written many columns and features for WisPolitics.com and WisBusiness.com over the years. He will write the GreenBiz column monthly.

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