Pensions for sole proprietors
Dear Karen: I’m a sole proprietor with my only pension a Roth IRA. Is it possible that I can deduct my contributions?
Answer: Your Roth IRA is funded with after-tax dollars, so you can’t deduct your contributions. However, there are several good retirement plans that sole proprietors can set up quickly and easily. Joe Moklebust, advanced retirement specialist at Principal Financial Group, laid out some options:
Contributions to traditional IRAs are deductible, but you can contribute only $4,000 for 2007 and $5,000 for 2008 ($1,000 extra is permitted if you’re over 50). Simplified Employee Pension (SEP-IRA) plans and Savings Incentive Match Plan for Employees (SIMPLE) plans are relatively inexpensive and easy for small-business owners to establish.
Each plan has maximum contribution limits larger than IRAs, but it differs in specifics, particularly in regard to your employees. If all of your employees are immediate family members, you could establish an individual 401(k) plan, which costs a little more to establish and maintain but offers flexibility.
Ask your accountant to help you evaluate these plans, but don’t stop contributing to your Roth IRA. “Reducing taxes now is an admirable goal, but in terms of long-range planning it’s also good to have access to tax-free money in retirement,” Moklebust said.
Filling up extra warehouse space
Dear Karen: My 25-year-old import company has excess warehouse capacity because one of our biggest suppliers went out of business. We’d like to offer storage and order fulfillment to small Westside companies. Where do we find clients?
Answer: You could advertise in trade publications that serve the supply-chain management industry, but you’d have lots of competition, said Caroline Melberg, president of Melberg Marketing. She suggested that you advertise in industry publications of the small businesses that are your target customers.
“Make a list of the small businesses in your area that manufacture products, print a lot of materials or possibly offer rebates or prize fulfillment to their customers,” she said. “Then create a direct-mail letter, customized for those businesses, offering your new service.”
Recipe for a food enterprise
Dear Karen: How do I get started with a home-based salsa manufacturing business?
Answer: Because of health regulations, food products marketed commercially must be manufactured at facilities that are inspected and licensed, which rules out your home kitchen. You’ll need to contract with a manufacturer that works with entrepreneurial companies doing low-volume orders, said John Kidde, vice president of co-packing for Ventura Foods in Brea.
“There are small packers who do pickled beets one day, salsa the next and barbecue sauce the next. Their price will be higher [than those of larger manufacturers], but they’ll produce orders as small as 50 to 100 cases,” he said.
Before you sink money into manufacturing, you’ll want to get orders from specialty stores and small grocers. And you’ll need to think about labeling, distribution, marketing and writing a business plan. For more information, contact the California Restaurant Assn. ( www.calrest.org) and the culinary arts department at Los Angeles Trade Technical college (wellness.lattc.edu /culinary/culinary.html).
--
Got a question about running or starting a small enterprise? E-mail it to karen.e.klein@ latimes.com or mail it to In Box, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012.
