Small Business Reading Room

Saturday, May 22, 2004

Blog for Business

Bill Gates has now weighed in on the value of blogs for businesses. I think I'll agree with him on this one.

As a tool for keeping customers apprised of current corporate happenings, a blog can be a useful way of creating conversations with customers.

Wednesday, May 19, 2004

Financial Crimes Information Network (FinCEN)

The FinCEN yesterday announced imposition of a Special Measure Against Commercial Bank of Syria, Including Its Subsidiary, Syrian Lebanese Commercial Bank, as a Financial Institution of Primary Money Laundering Concern, (Proposed Rule) (5/18/04).

Any business doing business with this bank, or doing business with anyone who DOES business with this bank would be well advised to steer clear and get more information.

More on what exactly is meant by a Special Measure is contained in the announcement that was published in the Federal Register.

This brings up one of the difficulties of doing business in an global economy. It is not easy to keep abreast of all the prohibited entities, organizations, countries and individuals. There are several government agencies that can issue these prohibitions and they are not all linked together, nor do they share a common format.

A good place to start researching partners for import and export business is the Bureau of Industry and Security within the Commerce Department. They publish a guide to avoiding dealing with prohibited persons that is very helpful. Within the guide they make reference to other lists maintained by the Commerce Department of countries, entities and individuals that Americans are prohibited from doing business with.



Tuesday, May 18, 2004

State Tax Games

What advice would you give to a guy who is financially over extended with debt, mortgage, car payments and does not make enough money to pay his minimum charges? Consider now that he already works a day job and a night job just to keep afloat.

We in Delaware call this a No Brainer. His best solution is to reduce his debt and cut back on spending.

But that is not the way it works in most state capitals.
Consider New York;
According to Cato Institute Policy Analysis Number 506 (Cleaning Up New York State's Budget Mess) New York spent $77 billion in FY00 and a whopping $91 billion in FY03. That is a 25% increase over three years!

The author, Raymond J. Keating, puts the problem in perspective: ..."if spending growth had simply been held to the inflation rate since FY95, total state spending would be $77 billion in FY04 rather than the $95 billion currently projected, and there would be room to balance the budget and cut taxes."

All this spending means the budget deficit will merely stay stable at around $9 billion meaning more borrowing to finance todays spending.

The same dynamic is at work in almost all fifty states. The states, like Colorado, that have constitutional limits on spending growth avoid this problem by taking the gross spending decision out of the hands of politicians.

In Delaware, the Governor split the difference based on budget assumptions that were off by a country mile. She raised taxes and fees (those who own LLCs will know what I mean), cut spending and deferred some capital spending. Then, when the budget deficit miraculously reduced itself, she cancelled the spending cuts. Guess what happened to the taxes and fees. You are right, they are now in effect.

So when the government argues that they do not have enough money, don't believe it. What they mean is they do not have enough money to cover all of their profligate spending.


Monday, May 17, 2004

The Black Hole of State Taxes.

Since it is Delaware State Franchise Tax time for LLCs and alternate entities, I thought it might be interesting to look at the work of the Multistate Tax Commission (MTC) in recent months. According to our friends at the MTC warned last week that H.R. 3220 (Business Activity Tax Simplification Act of 2003) would legalize controversial tax shelter schemes.

While most of our readers would consider this a good thing, lets consider why the MTC does not.

What the MTC considers a controversial tax shelter scheme that needs legalizing is actually perfectly legal already. The good free people of the State of Delaware have decided not to tax income from intangible assets a corporation earns from outside our state. Now it is none of Maryland's business that the people of Delaware have chosen to tax its corporations in this way. But Maryland and others cry foul because this feature of Delaware's tax code diminishes the tax revenue available to Maryland. Too bad.

Some laws were broken by the likes of MCI Worldcom. The States should focus on punishing the guilty instead of making a money grab for profits earned outside their borders.

The purpose of H.R. 3220 is to make Internet transactions simpler across the fifty states. I think we can agree that this would be a good thing too.

We will have more on State taxes and State budget financing in a future blog.


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Delaware Intercorp, Inc.
113 Barksdale Professional center
Newark, DE 19711-3258

"For all the best reasons to incorporate,the best place
is Delaware and the best incorporator is
Delaware Intercorp!"

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