Barbara’s Blog

On Monday, July 16, Dr. Stephen R. Covey, author of The 7 Habits of Highly Effective People and founder of FranklinCovey Co., died as the result of a bicycle accident at the age of 79.

His books, including The 7 Habits, First Things First, The 8th Habit: From Effectiveness to Greatness, and Principle-Centered Leadership, sold millions of copies (more than 25 million worldwide for The 7 Habits alone). He was named one of TIME Magazine’s 25 Most Influential Americans and received The National Entrepreneur of the Year Lifetime Achievement Award for Entrepreneurial Leadership.

He’s had a profound influence on business owners, like me, who’ve read his books. Through his books, as well as how he led his life, here is some of the legacy he leaves behind:

• Follow the 7 habits. These are: (1) be proactive, (2) begin with the end in mind, (3) put first things first, (4) think win-win, (5) seek first to understand, then to be understood, (6) synergize (use positive teamwork), and (7) sharpen the saw (balance and renew personal resources for work-life balance).
• Be organized. Long before smartphones and even PDAs, there was Franklin Covey’s Franklin Day Planner in which to keep notes on appointments, contacts, and other vital business information. For many years, it was my mainstay for organization.
• Align your values with principles. In Covey’s view, principles are external laws of nature, but values are internal and changeable. Essentially, he advised that you make sure that your head is on straight.
• Be a teacher. He was a professor at Utah State University’s School of Business. While I never took any of his courses, here or in his previous positions, I’m sure he had a lot of valuable information and advice to impart.
• Keep family first. Success in business is meaningless without family to share it with.  Covey was a husband who had nine children and 52 grandchildren.

He led an exemplary life. He’ll be missed.

If you pay at least half of the health care premiums for your staff and meet a slew of requirements, you can claim a federal tax credit based on your payments. The IRS recently released a draft of Form 8941, Credit for Small Employer Health Insurance Premiums; this form will accompany 2010 tax returns. The 25-line form walks an employer through the eligibility requirements. Instructions to the form have not been released.

In addition to the form, the IRS has a chart containing 3 “simple” steps for determining eligibility. The steps are helpful, but hardly simple.

The credit was enacted to encourage small businesses to pay for health coverage. To date, I have not heard from any business owner who has decided to offer coverage solely because of the credit opportunity.

Those who already pay for coverage may be glad to reap some tax savings, but the amount of the savings is not sufficient incentive to go out and incur the cost of coverage. Those whose businesses are strictly family owned and run do not qualify for the credit. Self-employed individuals with no employees do not qualify for the credit.

I would be interested to learn whether you have purchased coverage solely because of the credit or know of any other business owner who has done so. You can send me an email at info [at] barbaraweltman [dot] com or comment here.

A report by the SBA’s Office of Advocacy found that fewer than 2% of small business owners had a Keogh (self-employed) plan and only 18% participated in 401(k) plans.  Only about 36% had IRAs, and just one-third of them made an annual contribution for the 2005 tax year (the most recent year in the report).

What does this say about small business owners?  The report does not indicate the reasons for not contributing, but here are some that I can think of:

1. Owners are unaware of the tax advantages to saving for retirement through qualified plans and IRAs;
2. Owners are cash-short and unable to fund these plans;
3. Owners are too tightfisted to contribute on behalf of employees, something they would have to do in most cases if they wanted to personally benefit from retirement plans;
4. Owners don’t want to bother with the paperwork, investment responsibilities, and other details of having a plan;
5. Owners expect to sell their businesses as a way to create retirement funds.

The report did find that busness owners were more likely to have a retirement account if they were older, non-minority, better educated, and with an established business or more than one business.  The report also learned that being a male busines owner reduced the probability of IRA ownership from 35.6% to 31.2% but increased the probability of having a Keogh or participating in a 401(k) plan from 1.7% to 3.7% and from 17.4% to 20.3%, respectively.

Even though the deadline for setting up a 401(k), profit-sharing, or most other types of qualified retirement plans for 2009 ended on December 31, 2009, if you have not yet filed your income tax return for 2009 and determine that your business was profitable in 2009, you can still create and fund a Simplified Employee Pension (SEP) until the extended due date of your return.  For example, if you are a sole proprietor with a filing extension for your 2009 return, you have until October 15, 2010, to put tax-deductible funds into a SEP for 2009.  Your contribution limit for 2009 is up to $49,000, but your actual contribution depends on your earnings and funds on hand for making the contribution.  If you have employees, you’ll have to contribute to accounts for them.  For details about SEPs and other retirement plans, see IRS Publication 560, Retirement Plans for Small Business.