Thursday, January 15, 2009

Got that Tax ID number yet?

In the past month or so there has been a rash of inquiries from would-be entrepreneurs about the requirements to open a wholesale account with Wool2Dye4. I thought I would list them, and then see if I can interest the right people into securing a Federal Tax ID number. First, to the requirements:
-Business Name
-Tax ID Number
-Committment to ten pound minimum weight on order

Now, this ten pounds may be spread out among several yarns, and the ten pounds does not have to be of each individual yarn or spinning fiber. That is, the entire order must weigh ten pounds.

That question, though, of the tax id number is the one which stumps folks. It is free and easy to get a tax id number for your home-based business (or any business, of course), and it can be done over the internet at Just fill out the application for the SS-4 form, Employer ID. Even though you may not intend to maintain a payroll, this is where you get a Federal Tax ID number.

Just having a Federal Tax ID number will not affect your income taxes. Most of my customers are part-time dyers, or work-at-home clients and operate as a sole proprietor. That is, they do not have a registered corporation or limited partnership, but are operating the most simple form of business, the sole proprietorship. There is only one owner in this form of business ... the sole proprietor. What it immediately lends to your business is the sense of permanence. You gain credibility when you are more organized and look more like a business, even though you may be working in space borrowed from the family living quarters. If you have a Federal Tax ID when you apply for discounts with your suppliers, you are more credible. Period.

Most people do not realize that simply having this Tax ID number (also called EIN, or Employer's Identification Number), will not affect the taxes you pay on your income tax. You probably will not make a profit for several years anyway, so keep track of your business expenses (cost of goods sold, shipping, materials, assistants, advertising, etc.) and of your income (sales) and you will get a quick picture of where you stand. Take a count of the value of the inventory expressed in your cost, and also any outstanding invoices at the end of the year to get a complete picture of profit/loss.

The value of having the number is the perceived credibility it lends to your business.

If in doubt, then go find a business advisor and ask them. There is a federal small business assistance program in every state, and it's called the Small Business Assistance Center. (I used to direct one here in Virginia!) Another place to go for advice is the local chapter of SCORE, the US Small Business Administration's office of retired executives. Both are free, and both are great places to go and talk about the structure, operation, forecasts, trends, future growth, profit, etc. of your business. Don't forget that many, many businesses began in someone's spare room and grew into viable and profitable enterprises. And, it could be yours, next!

Friday, January 02, 2009

That Progressive Ins. Grey Sweater!

If you've seen Progressive's '08 fall ad campaign, I am sure you will have noticed the chunky grey sweater that a customer is wearing. Every time I see that ad, I want that sweater!

Seems like other knitters share this interest also. A Google search yields quite a few mentions of this sweater, but no results. I decided to write to the Progressive folks and ask about it. Here is the reply I received, straight from the folks themselves...

Dear Sheila Mahone,
Thank you for contacting Progressive.
We’re thrilled that you’re enjoying our new commercials and are interested in the gray sweater. However, we’re unable to provide you with a pastern for that sweater. At this time, we're also unable to provide any information about the manufacturer of the specific sweater.
We apologize for any inconvenience this may have caused you.

Inconvenience? Hmmm. I have to think about that one. Maybe the inconvenience of disappointment? That could be what he refers to.

I wrote back and said that if he could contact the ad agency they used for that ad, then I would be happy to sell the pattern on my website! Think of it, I proposed ... all those knitters out there who are anxious to make that sweater!

So far, no response from the corporate guys.