Death,Taxes, and Royalties Part 2 Taxes

Hola from New Mexico,


Franchisees have inevitable events to face. Among them are Death, Taxes, and Royalties. In part 1 we decided that Royalties are like taxes, the money isn't yours.

Taxes, it is that time again. It amazes me how the same business tax code can be interrupted so many different ways. I can visit the same same operation, with the same amount of employees, and in the same ballpark income wise, and the variation of expenses is amazing. I won't go into what I think you can and can't write off your taxes for a tax break, because I am not an accountant, but I do have some tax advise.

First of all pay what you owe. That shouldn't have to be said.

Second, send in your franchise income tax reports by April 15th. Unless it can't be avoided, do not get an extension until Oct. 15th. How can we figure out how you did last year if we wait until you get everything put together by April 15th. Let alone October 15th. I have people wanting me to help them plan a fall budget in September who haven't even put everything together from the year before. They won't have it together until October 15th!

Third, get a good tax accountant. Not just your brother-in-law that is a CPA. Get someone that knows all the ins and outs of the law. I have seen I and E statements for years and I can easily tell if they are using a good accountant. You may be leaving money on the table or your may be on the IRS hit list depending on your accountant.

Fourth, Use the information you generated for the IRS to make the next year business year better for your franchise. Take a hard look at expenses. Could some of those be cut back. Was it lack of business, or were you over spending?

Taxes and Royalties, it could be worse.....

Fran

Death, Taxes, and Royalties Part 1 Royalties

Franchisees,

Please pay your royalties to your franchisor. I don't know how strict other companies are about collecting their royalties and at what point they send your delinquent butt to collections, but the fact is that they shouldn't have to.

I shouldn't have to call you and talk you in to, or threaten you to pay your royalty fees. The fact is, it's not your money. You have just started thinking it is your money, and that you can use the money for other things. Once again, ITS NOT YOUR MONEY.

When you bought the franchise, actually you didn't buy anything. You were licensed to do business as....... Anyway, you signed a contract agreeing to pass along the % of sales royalty fees for the right to use the name, brand, operating procedures, etc.

Think of royalties as taxes. You never say, wow I took in $2,000 last month in taxes that I can spend on a new car, boat, marketing, or anything else. You don't get excited about tax money that was collected because you know you have to just pass it along to the state, county, and city.
You know it isn't yours to spend, and you know if you don't pass it on, a day of reckoning will come. You can't tell the IRS that you haven't sent your quarterly money in because your car broke down and you need to hire another employee. You can tell them, but it won't matter.

Start looking at whatever % you pay in royalty fees as taxes. This will help you when you are tempted to spend it instead of passing it on.

Fran