Keeping Track of Owner’s Draws
Question: I own a small lawn-care service and a small tutoring service, with a single business bank account for both. How do I pay myself out of this account? Right now, I’m writing checks to “cash” each time I want to withdraw money for personal use.
Answer: Accountants generally don’t recommend that you write checks to “cash,” unless you are making small reimbursements to yourself for petty-cash items. You need to be able to account more precisely for your expenditures, especially the funds you take out of the company for personal use.
Assuming you are operating both businesses as unincorporated entities, you should simply pay yourself with a check made out in your name, said Chris Kappos, a partner at accounting firm Williams & Ribb in Los Angeles.
“Each time you pay yourself, it’s considered an ‘owner’s draw’ for tax purposes. By writing the check to your name, you’ll be able to readily account for all owner’s draws at the end of your accounting period,” Kappos said.
You are not required to withhold taxes when you take your draws. You will probably be required to make quarterly tax payments, however, to cover self-employment and income taxes based on the profit of your two businesses.
“Be sure to budget for taxes, which are due quarterly, or with the filing of your regular income tax return in April,” Kappos said. Talk to a CPA for additional tax planning advice.
Marketing Plan Needs a
Defined Customer Base
Question: Three years ago I began an online business distributing educational CDs and DVDs to the Spanish-speaking population in the U.S. and abroad. This is an underserved niche market, but the marketing efforts I’ve made have drawn a total blank. Any suggestions?
Answer: Your fundamental problem may be that you haven’t defined your customer base carefully enough. A good marketing plan must begin with as detailed an identification of your ideal customer as possible.
Who will buy your products and why? Where do they live? How old are they? How much are they willing to spend? What are they listening to, reading and watching? The answers to all these questions will provide you with a marketing road map.
When it comes to the Spanish-speaking market, there are many things to consider. One of the most important is whether you want to sell primarily to customers who speak Spanish, or whether you also have products that appeal to the broader, bilingual market.
“Defining your primary and secondary target markets will be the key to determining the marketing plans that will successfully build traffic at your website,” said Ingrid Otero-Smart, president of Santa Monica-based Anita Santiago Advertising, which specializes in marketing to Latinos.
If you plan to go after a Spanish-dominant market segment, consider broadcast advertising, Otero-Smart advised.
“TV may be the most effective way to reach your audience, but budget constraints may eliminate that medium. In that case, consider partnering with a Spanish-language radio station to promote your site,” she said.
You may be able to negotiate a barter deal in which you get on-air mentions of your website in exchange for providing the station with free products that they can use for contest prizes.
You also should place regular ads in local Spanish-language newspapers, Otero-Smart said. “Since you are selling educational products, it’s likely that your target customer reads,” she said.
Consider attending Latino festivals and local street fairs in Spanish-speaking neighborhoods. Pass out fliers or set up a booth to build awareness of your products. If some of your products are designed for children, another possibility is to partner with schools and parent teacher associations in Latino neighborhoods.
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.
