Partnership Or Sole Proprietor - Which Is A Better Model For Daycare Centres?

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Are you fretting over whether you should start the daycare centre on your own or with a partner? To make an informed decision, you first need to understand how both business ownerships differ. Whilst both are fairly simple forms of ownership and ideal for small businesses, it has its advantages and disadvantages.

Let’s start with sole proprietorship. It is a very simple model. You just walk into the company registration authority to register your daycare business. The owner and the company are not separate legal entities, which means that you and the daycare centre are considered as one entity for tax and liability purposes. The daycare centre and you are jointly responsible for all debts related to the business.

As for partnerships, there are 2 different types. One is general partnership whilst the other is private limited. Like sole proprietorship, a general partnership is also very easy to set up, simply walk into the company registration authority to register your daycare business. And like in a sole proprietorship, the daycare centre and partners are not separate legal entities. Which means all the partners are responsible for any debts incurred by the daycare centre. For example, if the daycare business incurred a debt of $30,000 and the partners decided to wind up it up due to lack of capital, all the partners are liable to pay off the debt with their own personal assets, unless they choose to declare bankrupt. Unlike in a private limited partnership, the partners and daycare business are considered separate legal entities and are therefore not liable to pay off any debts with their own personal assets. However, unlike a general partnership, it is a little more complicated to set up and will entail depositing and maintaining a certain amount of money in the bank which acts as a guarantee. The plus side is suppliers, because of the forced deposit in the bank, tend to be more inclined to offer private limited companies better credit terms than a general partnership.

There are however a few differences. As a sole proprietor, you are the boss and therefore have the absolute say in the daycare business. It also means that you will need to undertake all the risks, costs and responsibilities by yourself. In a partnership, however, all the risk, cost and responsibilities are shared as all the partners are bosses. Which also means that the running of the daycare business will need to be by general consensus to ensure that all the partners are kept happy.

There is no one best business ownership model as both of them carries with them its own form of risk and returns. Some prefer the freedom of a sole proprietorship whilst others feel more secure in numbers. Even in partnerships, some prefer the simplicity of a general partnership whilst others prefer the security of a private limited partnership. Which form of business ownership you ultimately enter into is highly dependent on your personal risk appetite and resource.

For more information or resources on starting a successful daycare, please visit http://www.setupadaycare.com

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The Tax Advantages of Starting Up a Daycare in Your Home

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You are in the childcare business. Now what? You must decide a number of pressing questions. How to organize my business? What forms do I need to keep track of? What logs of information do I need to keep? Why does this all seem so confusing? What planet do accountants and IRS agents come from anyways?

Take a deep breath and we will try to create some simple rules to add some sanity to the confusion. I’m going to start with a couple of advantages to running a child care center from your personal home and will address some of the tricks to record keeping in its own special chapter.

Why is child care a business like no other? You are allowed to follow your own special rules not allowed by any other business run out of your home.

See the IRS is not all bad. Oh my, I did just say that?

You are allowed to count all the areas in your home used regularly for your business – not just those used exclusively for childcare when determining the space in the home that you can deduct. You are the only business that is allowed this treatment.

Here comes the real meat and potatoes, the forms and code sections. (Ugh.)

The most important calculation that you need to understand is a formula called the “Time-Space Calculation.” This is the calculation that allows you to make your personal expenses that no one else can deduct, as business expenses. In order to do this the IRS demands that you report these expenses separately on form 8829.

First we need to determine the space component of the calculation. Step one is to draw a floor plan of your home. Notice I said floor plan not blueprint. We are trying to determine the square-footage of your rooms a percentage of your home – we’re not trying to rebuild the home! Each room is labeled one of three titles: 100% Personal, 100% business, shared. The IRS has ruled that for a room to be counted as shared it must only be used regularly for business, not exclusively. Each year you will need to verify the space component with a new floor plan of the home.

The second component of the calculation is the time component. This seems pretty straight forward. At first you may just count the hours when children are present but you would be missing out on all the other time spent in you home working on your business. These hours include time spent preparing for the day, record keeping, and appointments with parents, and cleaning up from the day. Once you have determined the space percentage and the time spent percentage you simply multiply the two percentages together and you are set to go.

Okay. Now what?

Direct vs. Indirect Expenses

The easiest way to define direct business expenses is to call them expenses that you simply wouldn’t have if you hadn’t decided to start a daycare. Advertising, Liability Insurance, Toys, Art Supplies, etc. all fall into this category.

Indirect expenses are defined as those shared by you as an individual and your business. Rent, Mortgage Interest, Real Estate Taxes, Utilities, Household supplies, Home Owners Insurance, Repairs and Maintenance, etc. fall into this category. The indirect expenses are put through the “time-space calculation” and the direct expenses are put directly to the business tax return.

The last wrinkle that you need to deal with is to determine what a capital asset is verses an expense. Assets are things that you own that will last longer than one year. For example, your house, car, furniture, stove, refrigerator, microwave, are all assets. These items must be depreciated, expensed over a period of time, not expensed in the current year.

You then need to determine if the item is shared or directly used by the business. Your house is used jointly. A daycare van used specifically for child transportation is a day care specific capital expense. The jointly used assets must be depreciated and applied to the time space calculation. This manual does not allow enough time for an in-depth discussion of depreciation rules. Hopefully, however, you have a general idea that there are different expenses and assets for your business which need to be accounted for.

Startup Costs

Startup costs are the expenses associated with starting a business, both direct and capital, made prior to the actual start of operations. These costs are treated differently than normal expenses. The IRS does not want to see two years of startup expenses and no income on your income tax return. Therefore you are allowed to expense the first $5,000 of expenses in your first year of operation and any expenses over that amount are capitalized and amortized (divided equally) over sixty months. Examples of startup costs are Legal and professional fees, supplies, toys, day care furniture, license fees, education classes, etc. Capital costs might be room additions to bring the house in compliance, fence in the back play area and the like.

Choice of Business Entity

The type of entity that you choose to operate your business can have significant ramifications in the future. Record keeping stays an important component regardless of which entity you choose. We will address that in its own special chapter. A word about insurance would be appropriate at this time. You should always maintain insurance on your business no matter which entity you choose. I will make the assumption that you are starting your business for the long term. With that assumption your business will need to be protected and as such will need liability insurance, just like your home needs home owners insurance. You are attempting to protect the source of your future income from loss.

Now back to the subject at hand.

The moment you as an individual start to engage in providing a service or providing a product to others you are engaging in a business. This business can be regulated or unregulated; the IRS does not care for tax purposes. Your state licensing board obviously does care and you should follow all appropriate rules in your state.

Sole Proprietor

The default type of organization is the sole proprietor. This is the easiest to form, (no cost) but could be the costliest in the long run. The sole proprietor is fully liable for the debts and obligations of the business. The argument that I hear from clients is “I truly don’t have own anything right now, why should I be concerned?” If you are taken to court and a judgment is rendered against your business, it will be applied against all your current personal and business assets now and in the future.

Secondly, the net income of your business is treated as a wage. You are both the employee and the employer. Most employees are unaware that the employer matches an equal amount of their social security tax. This amounts to 7.65% from the employee and 7.65% from the employer totaling 15.3% on the first $90,000 of wage (adjusted annually upwards). This tax is assessed over and above any federal and state taxes.

Single Member Limited Liability Company.

As the name suggests, this is a form of an entity that will limit you from the full liability of the sole proprietorship. The costs are nominal $130.00 in the state of Wisconsin plus the attorney fees if you require assistance. The taxes are exactly the same as the sole proprietor, so the only difference is the peace of mind of the limited liability.

Partnership

Partnerships are two or more people organized to operate a business. There is no limited liability and all partners are held responsible for the action of each partner. If you do decide to organize a partnership you can also use the multi member limited liability company and your liability will limited to the extent of business assets and your investment in the company.

Corporation

A corporation is considered an individual entity, and as such, needs to file its own income tax returns. You, as the owner, will receive a wage for working in the corporation and rent for the use of your property. Additionally, you will need to follow the rules of your state and should consult an attorney. Make sure you are receiving the benefits of liability protection and numerous other tax strategies that are available. Consult your accountant or attorney to verify that you are following rules and guidelines in your specific state.

Subchapter S Corporation

The major difference between a regular corporation and an S-corporation is the way in which it is taxed.

The S-corporation’s profits are distributed to the owners, one or more, and are taxed to each shareholder as ordinary income.

As you can see, there are many choices when deciding to operate your business. Not every business is the same and therefore each business must be examined to see which form of business entity is right for you. If you are unsure, seek professional guidance and explore which option is right for you.

Start Up Your Own Daycare and Make $90,000 per year. Get My Free 6 Part Newsletter at http://www.instantdaycareprofits.com Christine Groth, mentor, author has published a 6-week home study course on how to start your own daycare and be profitable, fast.

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The 5 Easy Ways to Market Your Daycare Center

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You’ve taken the leap of faith and decided your going to open your own family daycare center. You start thinking about where you’re going to have your daycare, and how it’s going to be arranged and what toys you are going to have.

But one thing you may not have thought about is, “how am I going to get kids?” Well, I’m here to tell you don’t worry. I really believe that there are a lot of families out there looking for childcare. Especially good childcare.

Marketing your new daycare can be relatively easy and painless. You don’t need to spend a whole lot of money or time. Just use a little creativity and you are well on your way. So, let’s begin with the 5 easy ways to market your new daycare center.

1. Visit your neighbors announcing your new business: Print up some flyers or invitations inviting your neighbors to an open house. Be sure to make it fun, serve juice and cookies and have some children’s games planned. Nothing to complicated but just make sure it’s fun. Remember even if your neighbors have no children, they may know someone who does so be sure to tell them to invite friends from work.

2. Reward Parents for telling others about your daycare: This is a surefire way of spreading the word about your daycare. For every parent who refers a friend who enrolls reward them with a special thank you. Perhaps a gift card, discount on childcare, something they would really enjoy.

3. Visit Employers in your area: Introduce yourself to human resources and or management. in any business. Tell them about your daycare and be sure to leave some business cards behind. Ask if you can place some on a bulletin board in the lunch room.

4. Become Good Friends with the School Secretary: Visit your local elementary school with a plate full of cookies and some business cards. Announce your new daycare and ask if they have a list of daycares in the area that do after school care. Be sure to place yourself on that list.

5. Get really excited about Halloween! Really decorate your home for Halloween and be sure to give out candy with business cards. Wear a costume and scare children as they walk up the side walk to your home. If parents see you love the holidays and you’re having fun wouldn’t they be interested in coming to your daycare?

There’s just a handful of fun and easy idea’s I have about marketing your daycare. And as you can see most of them cost little or nothing. Having fun and making money is what it’s all about.

"Daycare author and mentor, Christine Groth, "The Daycare Queen", is creator of the Guide to Instant Daycare Profits. To learn more about this step-by-step program, and to sign up for her FREE how-to-marketing articles and tips visit http://www.startingadaycaretips.com

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Copywriting Tips for Daycare Business Owners

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Copywriting can seem overwhelming for some. Some do not even know how to begin. Here are a few tips to make it a little easier.

Before you begin your copywriting, here’s what you should do.

First, take a piece of paper and list down what you think are the needs and wants of the parents are. It’ll probably be somewhere along the lines of a trustworthy caregiver to care for their child or a daycare centre that is near their house, a clean and hygienic daycare centre or even a daycare centre that is affordable. We’ll call this List A

With that in mind, list down the things / services that you possess which you think will be able to meet those needs and wants. For example, a good track record or it is a new centre or you offer the lowest rates in the neighborhood. That will provide you with the foundation to start your draft. We’ll call this List B.

Traditionally, advertisers use the AIDA (stands for Attention, Interest, Desire and Action) model as a guide to generate highly successful advertisement copy. It is fairly simple, once you get the hang of it.

“A” stand for Attention. There should be an element in the copy whose job is to capture the audience’s attention. It usually is the headline or a photo/graphic. It should be arresting and should entice the potential parent to want to read more. The headline can be anything which you think will capture the attention of the reader. It can be in the form of a statement or a question. For example, you can use “The cheapest daycare charges in Town A” as a headline or “Are you looking for a cheap and reliable daycare centre?

"On the average, five times as many people read the headlines as read the body copy. It follows that, unless your headline sells your product, you have wasted 90 percent of your money." David Oglivy

Therefore a headline is extremely important.

“I” stands for Interest. The copy of the advertisement should aim to generate the audience’s interest. It should address their concerns / needs or provide them with a solution to a problem, using the information gathered from List A as well as List B.

“D” is for Desire. The next step is to get them to “buy” into your idea / product and really want the product. There should be a hook / bait such as testimonials, free gift, or even a time based discount etc.

The final and most important step - Action. Many advertisements miss this out. After telling your audience how your company is going to solve their problems, you need to tell them what to do next. Do you want them to call a hotline to make an appointment or come down to see your open house or bring this advertisement for a free gift. Don’t leave them hanging. Close the copy by telling them what to do.

For more information or resources on starting a daycare, please visit http://www.setupadaycare.com

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Opening A DayCare Center - How To Use Birthdays And Holidays To Stengthen Your DayCare Business

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Starting a daycare is not an easy decision. But, for many women around the world, it has proved to be the right one. Women are turning their once small daycare centers into successful businesses which earn them a great income. Many women have quit their jobs and are now financially independent. These women have more time to spend with their family and to do the things they love.

Once you have an initial number of kids in your daycare, it is time to ensure that they and, more importantly, their parents, are happy that they've chosen your daycare center. Remember the following sentence, because following it basically ensures a successful and growing daycare center business: "Happy children make for happy parents who in turn bring you more customers and more money."

You need to woo the parents who entrusted you with their children. There's no other way to put it. You can do so by appealing to the children. You should of course keep the children happy and safe all year around. That's the basic rule of running a day care. But you can also put in a little more effort on special occasions and get a lot more in return.

Don't know when and how? Here are a few suggestions:

1. Birthdays - you should make each child's birthday a special occasion. Either buy a cake or bake one yourself. Make a day of it, or at least an hour or so at the end of the day. Make sure to invite the child's parents to attend the party about 2 weeks in advance. They will be pleasantly surprised. Make them a part of the celebration. It will connect them more firmly to you and to your daycare.

2. Holidays - each holiday should be preceded by a special day at your daycare. For halloween, you can throw a preliminary costume party for the kids. Again, invite the parents. Make sure they know what you're doing. They'll be impressed with your energy and creativity.

3. Arrange a daycare play in which the kids act. Make sure that each kid gets about the same number of lines so that no parent will feel as if his/her kid got the short end of the stick. The children's families will be the audience.

You can come up with more ideas, I'm sure. Any event that brings the parents to your daycare center in a positive atmosphere, makes them more loyal customers who will recommend your daycare to more people. You will get more customers and make more money. All these events shouldn't cost much and can be a lot of fun to produce.

To get more ideas and tips on how to start and run a successful day care center, visit this dedicated webpage: Opening a day care center

Lucy Doyle runs a home business and is an expert on starting and operating successful daycare centers.

To read how you can too become a successful businesswoman by starting your own profitable daycare visit Lucy Doyle's expert webpage on starting daycare centers at this dedicated webpage: http://www.squidoo.com/startingadaycare

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