It’s not impossible to get your business out of debt and heading towards profitability. Others have done it and you can too.

Facing bankruptcy can be a terrifying experience for a franchisee or small business owner. But it’s not uncommon - and it’s not hopeless either. Not everyone comes back from the brink, but Jeff McKeown is one entrepreneur who did. After four years in the staffing industry, he decided to open his own Express Personnel franchise in Racine, Wis. in 2000 at the age of 26.

In order to put the required $28,000 down, McKeown and his wife borrowed $15,000 and cashed out their 401(k)s and combined savings accounts to come up with the difference. Eager to get his business off the ground, McKeown said he accepted any and all clients, even those with bad credit and iffy documentation. He also felt that to compete, he needed to have the lowest price in town so he kept very small margins.

“Many clients did not pay their bills and several declared bankruptcy with huge payments to me outstanding,” McKeown explained.

By 2003 he owed the franchisor $120,000 and had maxed out all of his credit cards. Express Personnel’s corporate office even sent McKeown a 10-day letter that said the company planned take back the franchise.

That’s when he realized he was in trouble, McKeown said. So with the help of a consultant, he fired 30 percent of his customers, raised prices, and established minimum gross margins and strict credit terms. The business began to grow and by July 2006 he had paid off the majority of his debt. Last year, McKeown says he earned about $160,000 to $170,000 and is expecting to net $400,000 to $500,000 in 2007.

Climbing out of debt

If a franchisee or small business owner is nearing bankruptcy then “either their revenue is short or their expenses are too darn high, but usually it’s both,” according to Jeff Elgin, CEO of Minn.-based FranChoice, a franchise consulting firm.

Elgin suggests taking a good hard look at the expenses for starters, and making sure that all of them are absolutely necessary. “Take away the credit cards,” he said.

For franchisees, “usually, the fundamental issue is that they’re not executing the system,” Elgin said. And if it’s a good franchise company, then it has a proven and reliable system. “If you execute it, you will succeed,” he says. People just need to get “back to the basics of blocking and tackling.”

Indeed, many franchisors have consultants on staff tasked with helping franchisees grow their businesses.

“I thought I knew it all,” McKeown said. He now advises other young entrepreneurs to find a mentor or expert who can offer support and business advice.

By Jessica Dickler, CNNMoney.com staff writer

In case you didn’t know, the IRS added several new business tax types available for credit card payments in 2007. These tax types are payable electronically through Official Payments Corp. And the fee you pay is deductible too.

The IRS determined when it began accepting credit card payments for business taxes in 2006, that the convenience fee paid or incurred by a business making a tax payment with a credit card can be deducted as a business expense. This key feature continues in place in 2007, and represents an important benefit to business owners like you who take advantage of this convenient payment option.

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Life of an Internet Entrepreneur

Some Jackson Hewitt franchise owners may be feeling the heat after U.S. sues a franchisee for tax-fraud schemes.

On April 17 Jackson Hewitt franchise owners may be getting a little hot under the collar.

That’s not because of today’s tax deadline, but rather because earlier this month the Justice Department sued the operators of more than 125 Jackson Hewitt tax preparation offices, accusing them of cheating the U.S. Treasury out of more than $70 million through a “pervasive and massive series of tax-fraud schemes.”

Investigators accused 24 defendants in the Jackson Hewitt case of encouraging individuals to file bogus tax returns through such means as claiming fake deductions and fuel tax credits, seeking refunds based on phony earnings statements, and abusing the federal earned income tax credit.

“The news is going to negatively impact other stores,” according to Robert Purvin, chairman of the American Association of Franchisees and Dealers. “Hearing about a bad experience at one location may make you less likely to go into another location,” he said.

“That’s a fact of life of franchising.”

CNN Money

To raise revenue, the feds plan to stick their noses deeper into small-business financial records.

Carson Stanwood has no problem with the Internal Revenue Service going after tax cheats. The founder of Stanwood & Partners Public Relations, based in Jackson Hole, Wyo., understands that paying their taxes in full puts small-business owners like him at a competitive disadvantage against the corner cutters.

But when contemplating some of the Treasury Department’s recent enforcement proposals - such as vastly expanding the number of Form 1099s he would have to issue and requiring him to verify his independent contractors’ taxpayer IDs with the IRS - Stanwood, 47, changes his tune.

“I applaud them going after this until I hear that it’s going to vastly increase my paperwork. I believe it would add 20 to 25 percent to what I pay my bookkeeper - another $6,000 or $7,000 a year - which would suck,” says Stanwood, whose firm took in about $1.5 million last year. “That’s two or three laptops the employees won’t get, smaller Christmas bonuses, or an epic vacation my wife and I don’t take.”

More on this story

Smart ways to build your nest egg, whether you’re a business owner starting up, in your prime, or cashing out.

As surely as seasons change, entrepreneurs face a new personal finance challenge at every turn, whether it’s a sudden cash flow squeeze or a hike in taxes. And with stocks now wobbly, the path to wealth may seem less certain than ever. That’s why FSB recruited expert financial advisors to give custom-tailored advice to three busy entrepreneurs: one who owns a budding apparel company, another who runs a successful mortgage business, and a third who has just cashed out and is now considering his options. Here are some financial tips, including the latest on new tax laws and strategies, to help you make the most of life’s seasons.

Read more here

Keeping your tax files fit for the coming 12 months not only cuts frustration in another year, it likely will cut your taxes.

Here are some things to consider in the next few months:

1. Make a plan - At minimum your plan should summarize total revenue, collections by client and expenses from the past year to support projections for 2007. Update it quarterly.

   While you’re at it, consider major expenses you expect and time and budget those purchases to your advantage.

2. Keep better records - Probably the biggest single thing small-business people can do is keep good records. Poor record-keeping increases your taxes.

   It’s less likely that things get overlooked if they’re organized.

   Try this: Buy 12 envelopes and label them by the month. Put records of all deductible expenses each month inside the appropriate envelope; on the back, write a list of contents as you go and total each month’s expenses. (Or you can reach the same result with a paper accordion file.) At the end of the year, you’ll have a pretty good, organized set of records.



3. What’s your corporate structure? - Consider whether to change your business’s corporate structure. There may be tax benefits, for example, to switching from a C-Corporation to an S-Corporation. For most small businesses, the changes must be made by March 15 to affect this year’s taxes.
4. Set up retirement plans - If you don’t have a retirement plan in place, or want to make a change, do it now. Some plans take several months to establish, and an earlier start allows more savings - especially with automatic payroll deductions.

   A recent study reporting that just half of workers have socked away more than $42,000 for retirement by the time they reach age 40.

5. Do you work at home? - If you qualify - and there are plenty of restrictions - setting aside home office space may enable you to depreciate a portion of your home and also to deduct normal operational costs, such as mortgage or rent, property taxes, utilities and maintenance or repair costs. The sooner you set up your office, the longer you can claim those deductions.
6. Put your teens to work - Instead of paying them an allowance, pay older children to work for your business; their compensation will be a deduction for the business, and their tax rates likely are lower than yours.

   Sole proprietors don’t pay Social Security or Federal Unemployment Taxes on wages paid to their own children under age 18, but those wages must be reasonable for the child’s work.

7. Schedule a tax review - If you have a tax adviser, open your business calendar now and write yourself a reminder in about October to schedule a meeting next fall. A brief conference late in the year will result in a fee but may save taxes and time, accountants said.

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