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May 19, 2006
I am an entrepreneur
"Entrepreneurs are risk takers and dreamers and doers. Entrepreneurs and small businesses play a crucial role in the U.S. economy."
The Fed-Ex man just delivered my certificate from Trenton, and now I'm proud to announce that I have joined the ranks of risk-takers, dreamers and doers. I'm president of Stephen Baker Media Ltd, a New Jersey-based corporation. But here's the bad news: I'm not taking risks (at least as far as I know), I'm not hiring people. I set up this corporation on the advice of an accountant, mostly to lower my tax bill.
So here's the question: Governments often boast of the thousands of start-ups sprouting on their turf. But how many of these new companies are designed specifically to reduce government revenue? I don't have a clue.
Of course, there's always the possibility that this new company will grow into a behemoth, with thousands of employees and the omnipresent SBMedia brand stamped on everything from cookbooks to bicycle helmets. At that point, I can see a much older and richer me giving an interview to a cub reporter in my penthouse office high atop the SBMedia tower in (rivitalized) Newark.
reporter: Did you ever imagine this company would grow so... powerful?
SB: Believe it or not, I started it up as tax strategy. You could probably find a blog post about it if you looked.
reporter: But you must have meticulously plotted out the path to greatness...
SB: (blushing) No, it wasn't until long after founding the company that I looked in the mirror one morning and spotted, to my great surprise, a risktaker, a dreamer, and yes, a doer.
To me an 'entrepreneur' is someone who starts with an idea and decides to build a business on it.
There is little chance that it will be an overnight success so it takes determination.
It might take twists and turns before you succeed.
As far as the 'tax purpose' you still need to show profits (even small ones)in 3 out of 5 years otherwise it will be looked at with suspicion by the IRS.
Have a good day
Posted by: Serge Lescouarnec at May 19, 2006 11:20 AM
Gee, Stephen, I guess you could ask your colleagues over at Smallbiz this question, but since I hang out in the small business space (Smallbusiness.com, for example), I think I can answer this one. Your accountant may have said, "to lower your tax bill," but the nuances of why you did so is not merely as a tax shelter and wouldn't work if you didn't have actual "revenue" you were generating from something other than your daytime gig. I assume this development in Stephen Baker empire is related to your afore-blogged book deal. By treating this business venture (I'm sure you're writing the book for purposes other than mere business, but let's focus on that aspect for the sake of this tax-related issue) as a business (i.e., incorporating yourself), you can more easily track the expenses related to the project and accurately reflect them in your future tax filings. By tracking them separately from your personal finances, you can also have a great "management tool" to see just how profitable SBMedia is, also. What your accountant did not tell you is that you'll soon be getting all sorts of pitches from insurance agents and marketers and, oh by the way, you're increasing your odds at being audited. Bottomline: Unless you have a side venture that actually generates revenue within a certain time frame, the tax-sheltering aspects of incorporation is not that inticing; and can lead to more headaches than benefits. However, if you have a side gig (writing, speaking, catering, selling bicycle helmets) that is generating revenues at a level where you can afford an accountant, then you'd be unwise NOT to set up a business entity that separates that activity. (Besides, you don't want to assume the personal liability for someone who may have a bike accident while wearing that helmet.)
Posted by: Rex Hammock at May 19, 2006 12:08 PM
Is it really wise to talk so openly about this? The IRS in the US must be pretty lame, they could learn a thing or two from Skatteverket in my country.
But dream on, Stephen...
Posted by: Bengt O. at May 19, 2006 12:18 PM
Yes, Bengt, I wondered if I should write the post, but the entire accounting industry in the United States is based upon giving people sage advice in order, in large part, to lower their tax bills. The IRS knows this.
Posted by: steve baker at May 19, 2006 06:23 PM
In my opinion, the question is not, about how many people You will employ in your new business, it is about success, and in order to succeed, as an entrepreneur You need to have courage, because, by going down the road trying to achieve your objectives you also will experience fear. It is a natural feeling. Being courageous is not about lacking fear. It?? learning how to deal and to cope with it, but knowing that at the end you??e going to be okay.Te root word of courage comes from the Latin , and means "heart". It is not surprising then that we find courage to be at the heart of all other traits in effective entrepreneurs.
Posted by: Henrique Pl??ger Abreu at May 22, 2006 09:15 AM
It's the old Liberty idea. You can have freedom with danger or slavery with ease. It won't be easy getting dollars without a spark of divinity. In God We Trust, as it says on our currency. I hope it all works out for you Steve. You can incorporate off shore from what I understand and do your banking off shore too. Lots of big companies do this sort of stuff with success. You're in New York, you're bank is in the islands and you're business is portable.
Posted by: Jim Dermitt at May 22, 2006 10:08 AM