Business Entertainment Expenses Tax Inform

Topic 512

Entertainment expenses that are both ordinary and necessary in carrying on a trade or business may be deductible if they meet one of the two tests discussed in Publication 463.

You must have records to prove the business purpose (under the applicable test) and the amount of each expense, the date and place of the entertainment, and the business relationship of the persons entertained. For further information on record keeping, refer to Topic 305.

Generally, only 50% of food and beverage ("meal") and entertainment expenses are allowed as a deduction. For exceptions to the 50% limitation, refer to Publication 463, Travel, Entertainment, Gift and Car Expenses.

If you are an employee whose deductible business entertainment expenses are fully reimbursed under an accountable plan, the reimbursement should not be included in your wages on Form W-2 (PDF) and you should not deduct the expenses. If you are not reimbursed under an accountable plan, your expenses exceed the reimbursement you received under an accountable plan, or you are not reimbursed, use Form 2106 (PDF), or if you meet the conditions, Form 2106-EZ (PDF) to report business entertainment expenses. These expenses, including expenses that exceed the reimbursement under an accountable plan, are carried over to Form 1040, Schedule A (PDF), and are generally subject to the 2% of adjusted gross income limit. Refer to Topic 508 for more information on the 2% limit, Topic 305 for more information on record keeping requirements, and Publication 463 for a definition of accountable and nonaccountable plans.

If you are self–employed, use Form 1040, Schedule C (PDF), or Form 1040, Schedule C-EZ (PDF), or if you are a farmer, use Form 1040, Schedule F (PDF) to deduct these expenses.

For more information on meal or entertainment expenses, refer to Publication 463

 

www.gobrainstormconsulting.com
www.brainstormconsulting.blogspot.com

---

More new features than ever. Check out the new AOL Mail!

How to Create an Entertainment Business Plan

Step One

Establish the basic outline of your business. For an entertainment company, for example, you would want to include the initial services you'd offer as part of your business model, such as party music, DJs and costumed characters.

2

Step Two

Create milestones within your business plan. These milestones should indicate when you would hire new employees, when you would add new services or choose to upgrade to new and better equipment. When you write these milestones out you are making it easier to track progress and focus your business's energy in a specific direction.

3

Step Three

Write your budget into your business plan. This is especially important for when you are looking for investors for your business. With a clear budget it's possible to see how ambitious your business model is, and makes it easy for potential investors to see both how organized you are and how effectively their money would be spent.

4

Step Four

Put your business plan in writing and make it as presentable as possible. If this means spending a few dollars to build a customized portfolio with graphics and card stock paper, do it. The more professional it looks, the more people will take your entertainment business seriously.

5

Step Five

Update your business plan whenever the scope of your business changes. If your business is thriving and new technologies become available or new service options become predominant in the marketplace, feel free to make changes to the plan and incorporate new and fresh ideas.

 

 

www.gobrainstormconsulting.com
www.brainstormconsulting.blogspot.com

---

More new features than ever. Check out the new AOL Mail!

John kellogg

John Kellogg is an entertainment attorney, performer, and Assistant Chair of the Music Business/Management Department at Berklee College of Music. He is also a practicing lawyer, who for many years represented the R&B group The O'Jays, and who currently represents singer Gerald Levert as well as emerging artists. Kellogg also performed and recorded with the R&B/funk group Cameo before attending law school.

John Kellogg, Professor of Music Business/Management at Berklee College of Music, discusses matters of strategic interest to anyone starting out in the music industry, whether on the music or the business side. He addresses what the industry is likely to look like tomorrow and how that will change who gets paid and for what, how to use new media methods to get your music to your fans, how to network in the industry effectively, when you need a lawyer, and how to protect and monetize the songs you worked so hard on writing.

http://entertainmentebusiness.blogspot.com/

www.gobrainstormconsulting.com
www.brainstormconsulting.blogspot.com

---

More new features than ever. Check out the new AOL Mail!

Problem Solving

STEP 1: Describe the Situation

Before identifying the issues and opportunities in the scenario, read the text materials carefully and spend some time reflecting on the Mind Map. Write several introductory paragraphs identifying the key business concepts and theories that are illustrated in the scenario and note why they are important (do remember to cite your references to the text and/or selected readings). Then describe how the situation at the subject organization reflects these concepts and theories. Taking time to understand these key business concepts and theories will also help you to then detail the issues and opportunities the organization in the scenario is facing.

When identifying ethical dilemmas, start by comparing and contrasting the rights and interests of the different key stakeholders. A good way to do this is to think about how the values of the different stakeholders compete with each other. Some values to consider might be trust, caring, accountability, fairness, respect, citizenship, and honest, among others.


STEP 2: Frame the “Right” Problem

The problem must be broadly stated so that it will lead to many possibilities, and must be one where there can be no single answer.

A litmus test for a problem statement:

It should be short and memorable—almost like a vision statement (25 words or less).
It should be about realizing opportunities.
It shouldn't have a solution or suggest a specific tactic—it should lend itself to many solutions.

One way to begin to think about how to craft a problem statement is to think about what the organization aspires to be and the major challenge it must overcome to achieve that vision. Ask:

What does the organization aspire to be?
What is the major challenge the organization must overcome to achieve its vision?

The organization will ___(a)___ by ___(b)___.


STEP 3: Describe the “End-State” Goals

The end-state goals are really how the organization will know it has become what it wants to become.

What does the ideal future end state look like? What are the goals that define it?
Things to consider when thinking about end-state goals:

Profitability Measures: revenues, expenses, margins, net income, and ROI
Innovation: Introduction of New Technologies
Social Responsibility
Employee Development
Organizational Development
Product and Market Development
Quality Control
Customer Acquisition and Retention


STEP 4: Identify the Alternatives

Do my possible solutions support my problem statement? Have I thought about how I might be able to combine several into a blended solution?

When creating alternatives:

Identify the alternative using generic benchmarking.
Make sure the findings are company specific.
Validate the alternative with the generic benchmarking findings you used to create the alternative.

Benchmarking Analysis: The A-B-C approach

Summarize/paraphrase the benchmarking findings. Include the relevant citations expected in all scholarly research.
Explain the relevance of this benchmarking to the company in the scenario.
Identify a specific solution that you can detail for the company in the scenario, based on this finding.


STEP 5: Evaluate the Alternatives:

Seldom is there a single "best solution." Second-tier alternatives integrate the best of various alternatives into a "second-order" or "second-tier" alternative.

When evaluating alternatives, ask:

How does each alternative meet the end-state goals?
What scoring system should I use? (See Table 4 in the Problem Solution Template)
Are there goals which, if not met, would eliminate the solution?
What are my assumptions and constraints?
What are some best-case solutions?

Eliminate all but the best three or four solutions.


STEP 6: Identify and Assess Risks

In this step, the two or three possible solutions are each evaluated to identify potential risks and negative consequences. If the risks or negative consequences are severe enough, a solution might be eliminated from consideration. For the solutions that remain, the following question is then asked: How do we address or mitigate these risks? Tactics are identified to address potential risks.

Moen, B., and Rundmo, T. (2004), offer a good explanation of risk mitigation. From their perspective, it includes any one or more of the following approaches, with an emphasis on attempting those measures in the sequence in which they are listed below:

· Avoiding the impact altogether by not implementing a solution or parts of a solution
· Minimizing impacts by limiting the degree or magnitude of the solution and its implementation
· Rectifying the impact by repairing, rehabilitating, or restoring the environment
· Reducing or eliminating the impact over time by preservation and maintenance operations during the life of the solution implementation
· Compensating for the impact of the solution implementation by replacing or providing substitute resources or environments


STEP 7: Make the Decision

What are the reasonable alternatives to consider?

What are pros and cons of each?

What is the best decision given the facts and considering your intuition?

For each alternative, consider the following, and label it in Table 6 in the Problem Solution Template as pro or con:
· How well does it fit with the end-state goals?
· How strong is the benchmarking validation for the alternative?
· How significant are the risks associated with the alternative?
· How well can you mitigate those risks?
· Are there any major constraints associated with the alternative?


STEP 8: Develop and Implement the Solution

When thinking about the implementation plan, consider the following:
What? Define the work to be completed.
Capability? Conduct a skills gap analysis to determine whether the organization has the capability to complete the work.
How long? Identify the time needed to complete the work.
What cost ($)? Identify the budget needed to get the work done.
How much (resources)? Identify the resources (people, supplies, etc.) needed to complete the work.
Who? Identify who is going to oversee the work.

The last step is to create a schedule and timeline. It may be best to put this in table format:
Work
Start and End Dates
Cost
Resources
Person in Charge












STEP 9: Evaluate the Results

Things that can’t be measured can’t be improved. When measuring the implementation of a solution to determine its success, ask the following questions:

· What is the expected outcome?
· Does the outcome align with the end-state goals?
· How will you measure the outcome?
· How will the measurement be tracked (especially through feedback loops)?

The goal of making measurements is to permit managers to see their company more clearly from many perspectives, and to make more effective long-term decisions. This is a very simple approach to thinking about measuring outcomes. As you make your way through the program, your approach to this step will become more sophisticated.

Working Capital

A little story---

I had a client who sold ornamental fish to pet stores. He had a good business going, and made strong profits, on the order of 30%. He had about $2.5MM in sales.

As it turns out, his reputation was so good, that Wal-Mart called and asked him to supply their Southeast stores with fish, to the tune of about $.5MM per quarter, or $2.0MM/year. My client was stunned with the possibilities. He immediately signed the contract and went about ordering more inventory and setting up the delivery runs.

Everything went fine for about 30 days. Then it dawned on my client that he was having some cash flow problems, and couldn't figure out why. He brought me in, and it took all of about 12 minutes to realize that Wal-Mart paid on 90 day terms. His profits were great, his balance sheet was terrific with great receivables, but he was going to go out of business because he had no cash. He had too much business!!

Asian American Buying Patterns

About 70 percent of Asian Americans are immigrants, and most are under the age of 30. Asian Americans are the fastestgrowing racial/ethnic subculture in the United States.
The Asian subculture is composed of Chinese, Japanese, Filipinos, Koreans, Asian
Indians, people from Southeast Asia, and Pacific Islanders. The diversity of the Asian
subculture is so great that generalizations about buying patterns of this group are
difficult to make.39 Consumer research on Asian Americans suggests that individuals
and families divide into two groups. Assimilated Asian Americans are conversant
in English, highly educated, hold professional and managerial positions, and exhibit
buying patterns very much like the typical American consumer. Nonassimilated
Asian Americans are recent immigrants who still cling to their native languages and
customs. The diversity of Asian Americans evident in language, customs, and tastes
requires marketers to be sensitive to different Asian nationalities. For example,
Anheuser-Busch’s agricultural products division sells eight different varieties of
California-grown rice, each with a different Asian label to cover a range of nationalities
and tastes. The company’s advertising also addresses the preferences of Chinese, Japanese, and Koreans for different kinds of rice bowls. Studies show that the Asian American subculture as a whole is characterized by hard work, strong family ties, appreciation for education, and median family incomes exceeding those of any other ethnic group. This subculture is also the most entrepreneurial in the United States, as evidenced by the number of Asian-owned businesses.
These qualities led Metropolitan Life Insurance to identify Asian Americans as a target for insurance following the company’s success in marketing to Hispanics. Target often uses Spanish
language advertising to communicate to the Hispanic community in the United States.

Hispanic Buying Patterns

Hispanics represent the largest racial/ethnic subculture in the United States in terms of population and spending power. About 50 percent of Hispanics in the United States are immigrants, and the majority are under the age of 25. Research on Hispanic buying practices has uncovered several consistent patterns:

1. Hispanics are quality and brand conscious. They are willing to pay a premium
price for premium quality and are often brand loyal.
2. Hispanics prefer buying American-made products, especially those offered by
firms that cater to Hispanic needs.
3. Hispanic buying preferences are strongly influenced by family and peers.
4. Hispanics consider advertising a credible product information source, and U.S.
firms spend more than $3 billion annually on advertising to Hispanics.
5. Convenience is not an important product attribute to Hispanic homemakers with
respect to food preparation or consumption, nor is low caffeine in coffee and
soft drinks, low fat in dairy products, and low cholesterol in packaged foods.

Despite some consistent buying patterns, marketing to Hispanics has proven to be
a challenge for two reasons. First, the Hispanic subculture is diverse and composed
of Mexicans, Puerto Ricans, Cubans, and others of Central and South American
ancestry. Cultural differences among these nationalities often affect product preferences.
For example, Campbell Soup Company sells its Casera line of soups, beans,
and sauces using different recipes to appeal to Puerto Ricans on the East Coast and
Mexicans in the Southwest. Second, a language barrier exists, and commercial messages
are frequently misinterpreted when translated into Spanish. Volkswagen
learned this lesson when the Spanish translation of its “Driver’s Wanted” slogan suggested
“chauffeurs wanted.” The Spanish slogan is now Agarra calle, a slang expression
that can be loosely translated as “let’s hit the road.”Sensitivity to the unique needs of Hispanics by firms has paid huge dividends.
For example, Metropolitan Life Insurance is the largest insurer of Hispanics. Goya
Foods dominates the market for ethnic food products sold to Hispanics. Best Foods’
Mazola Corn Oil captures two-thirds of the Hispanic market for this product category.
Time, Inc., has more than 400,000 subscribers to its People en Espanol.