Welcome to Curious Business

Every Friday, I post a small insight into running Curio City and/or Blue Hills Editorial Services. My most recent posts are directly below. You can also start with the first post, or use the subject labels to the right to home in on particular topics. Feel free to comment on anything that interests you.
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Friday, January 19, 2018

Timing Is Everything



Christmas was supposed to seal Curio City's fate. Unexpected strength might have convinced me to reinvest and revive, whereas unexpected weakness would point to the exit. Weakness won, so now it's a question of how long to draw this out.  

Reasons to stretch it out

I just bought 75 more 9x6x4" boxes at 63 cents apiece. I still have two mostly-full cartons of padded envelopes. I've stashed probably 100 large boxes from my wife's enthusiastic Amazon habit. I rarely need large boxes anymore, but they're an impressive pile, even broken down. Together with the free priority-mail boxes that USPS supplies, I've got many hundreds of empty cartons begging to be filled and shipped. I hate throwing useful things away and it would take months or years to purge them all through weekly curbside recycling.

My Excel accounting file is formatted all the way through 2018. That is not as trivial as it sounds -- I have elaborate spreadsheets to track everything, including a lot of data that I don't use anymore but compulsively keep updated anyway; setting up a new year took a couple of hours. Eleven and a half pristine pages are waiting to absorb daily sales data, and all of my other tabs -- payroll, graphs, planned sales, planned and actual costs, etc. -- are ready for another year. I hate throwing completed work away, even after it's become pointless. 

I still have $18,000 worth of inventory (down from $25,000 last January) that's still dribbling out. By itself, that dribble doesn't generate enough money to cover the cost of staying in business. But if kite sales loft as expected from March through October, the other stuff can tag along at no incremental cost. I'd love to convert a few thousand more dollars worth of old stuff back into dollars before writing it all off. I hate throwing "new" merchandise away. 

In the end, everything left will be given away or trashed. That will generate losses to offset my Blue Hills income, and it would be nice to stretch that process out for a couple more years, taking just enough write-offs to neutralize my income. Technically, I suppose I don't have to keep my store open to do that. The IRS doesn't distinguish between Kraken Enterprises' operating companies.

A lot of that inventory is seasonal Christmas stuff that sells reliably every November and December. Way too much of the rest is Metal Earth models. Ordinarily, those also sell only during the holiday season, but I've marked them down so far that they're now contributing a little to the daily dribble. If I'm going to keep the store going through kite season, I'm tempted to keep going through another Christmas and capture another thousand or so bucks. Finishing out the year would be tidy from an accounting standpoint, and what's another two or three months in the big scheme of things?  

With 13 years of inertia behind me, it's easier in some ways to keep the whole shebang rolling than to dismantle it. 

Closing Curio City won't free me from filing quarterly 941 and annual 940 returns, issuing W-2s, reporting wages to the state, or any of the other routine corporate red tape. Unless I fold Kraken Enterprises, too -- which I won't, since Blue Hills is under that aegis -- I'll still have to pay corporate registration and tax preparation fees. I guess I won't have to collect and remit sales tax anymore, so that's at least something. 

My laptop is dying. Curio City might be able to build up enough cash to buy me a new one..maybe even a nice one. I don't want another cheap Dell, and the company owes me.

Mostly, I still need Curio City income. Even when it's as little as $50 per week, it pays at least something every other Monday. If last year's Blue Hills clients come through again, I'll make two big writing/editing jackpots with smaller payoffs every six or eight weeks -- Blue Hills paid me $12,000 last year, versus just $4,000 from Curio City. But there's no guarantee that those jobs will actually materialize again this year, and even if they do, there's a whole lot of calendar between paydays. And let's not forget that Curio City chips in $100 a month toward our personal bills for cell phone and internet access -- that's another $1,200 a year it pays me indirectly. 

Reasons to get it over with

As I keep marking things down lower and lower, the stuff that's trickling out brings in less and less money. The first two weeks of January only brought in $900 for stuff that was nominally worth $1,100. As time goes on, I'm increasingly left with things that are unwanted at any price. (Actually, that's not quite accurate. Given enough time and a low enough price, anything will sell eventually...just this week I finally recouped $26 for two things that cost me $34 10 years ago. Ironically, some guy in Canada paid $25 to have them shipped to the Great White North!). 

Working in various retail situations for most of my life made Christmas the bane of my existence. I would love to put the world of buying and selling behind me and never dread another Christmas, never have to interact with self-righteous Christians or the orgy of materialism. Christmas 2017 never became all-consuming because I didn't support it, but I still had to block off a month of my life, just in case. I would love to end this before another Thanksgiving weekend. 

Ninety-seven out of every 100 customers are fine people. Two of the other three don't meet minimum competency through no fault of their own. The other one gives humanity a bad name. I relish the day when I never again have to be polite to somebody whom I wish would just die in a fire.   

I would finally be the master of my phone. Junk calls would drop to nothing and I would never have to listen to another voicemail as long as I live. Like the preceding observation, this isn't an argument for shutting down early, but it's an argument against dragging it out longer.

Technology standards are constantly evolving -- PayPal, especially, perpetually updates its security protocols. I lost interest in keeping up with ever-moving targets a few years ago, although I've grudgingly done so as needed. However, I will shut my site down before I will spend any money complying with some unexpected new requirement. 

My laptop is dying. If it finally goes tits-up before I can replace it, and if I can't easily recover my files and reinstall my programs and rebuild my accounts, that might be a good reason to kill Curio City...even though I need the same laptop and most of the same software to run Blue Hills.

Out in left field, the Supreme Court has agreed to revisit the question of taxing internet sales. A broad-based sales tax requirement would shut me down the minute it goes into effect, because who needs that grief? The wheels of government grind slowly, so it's almost surely a couple of years away, and tiny businesses like Curio City could be exempt. But the threat is out there. It could happen. 

Mainly, after 13 years I just plain don't want to do this anymore. Whatever enjoyment it used to deliver is long since gone. 

Conclusion: If kite sales pick up as expected I'll serve that market into the fall. If the Christmas season starts before that ends, I might drag it through December. OTOH, if I line up a reliable, regular Blue Hills gig, or if kites fail to take off this year, I might shutter Curio City as early as April or May. At this point it's only paying me $10 per day, on average, and while that's still more than $0, it's barely worth the aggravation. 

In other words, nothing has changed. Sorry for wasting your time.

Friday, December 29, 2017

Another Crappy Year Is Over

2017 was one of the worst years ever on so many levels. I've already said that Curio City had its worst December by a large margin: I only booked $1,690, compared to LY's previous record low of $4,637. For perspective, December 2008, when I was at the top of my game, brought in $16,163 -- 10 times what I made this year. 

Remember that the following numbers include Blue Hills, and the payroll line includes a couple of checks that went to my wife. I won't have "clean" Curio City numbers again until February.

December

Total income: -64.1%
Payroll: +37.6%
Marketing: -62.8%
Net Income (Profit) vs LY: -206.3% (-$1,585)
Actual Profit/Loss: -$816

2017 (Almost) Final

Total income: +41.9%
Total COGS: +2.3%
Payroll: +218.9%
Marketing: -44.2%
Net Income (Profit) vs LY: +258.4% (+$4,784)
Actual Profit/Loss: +$2,934

Annual sales were down by 5% from last year; that's my sixth consecutive decline. 

Profit is a bad thing at tax time, so I'm glad that fell from last month. Technically, Kraken owes me that bottom-line number, which is going to add roughly $735 in federal and state taxes to my personal 1040. In reality, Kraken can't really afford to pay even the anticipated taxes. I insist that it do so anyway...so I just transferred $800 from the company to myself a few moments ago in the guise of a "shareholder loan repayment", which is somehow preferable to a "shareholder distribution". I don't know why. Kraken still owes me $12,625 of the roughly $21,000 that I put into it in 2005.  

********************

Speaking of taxes (again)...I still don't know if Kraken Enterprises is, legally speaking, a pass-through entity in the eyes of the IRS. Logically, of course it is; each year's profit or loss goes onto my personal 1040. But tax policy is only ever accidentally logical. This story only sowed more doubt: 

The new pass-through provision is designed chiefly to aid capital-intensive companies, like a factory or a bakery, while excluding certain service industries such as accounting and medicine. But for some kinds of solo workers it could mean savings of hundreds or thousands of dollars, if they incorporate as a pass-through business. 

Details of exactly who might be able to claim these lower rates are still a bit unclear, even to specialists, and probably will be hashed out over the coming months as tax advisers and their clients test the limits of what qualifies as business income. 

Curio City could arguably be considered capital-intensive, since 80% of its revenue covers costs. Blue Hills, OTOH, is a service business with very little overhead. I might have to keep Curio City alive indefinitely just so that Blue Hills can qualify for the pass-through rules. But who knows? Not the experts, apparently. I'm sure I'll get a memo.

Massachusetts considers me a pass-through, but I'm exempt from withholding because all of my stockholders (me) are Massholes. I'm supposed to issue myself a form stating that that's true every January. Anarchist that I am, I don't.

I had wanted to file my tax returns early, but I spent most of this week fighting my dying laptop. Its performance started degrading a couple of weeks ago, and by yesterday it was all but unusable. All I'll say about that is that CHKDSK may be >30 years old, but it still saved my bacon. I had really feared that I would have to rebuild Kraken Enterprises from the ground up on a new machine, but now I'm tentatively confident that I can keep this three-year-old Dell going for another year.

(For some reason, I can't upload any images to Imgur via any method today and I've wasted way too much time trying. Today's hotlinked pic might not work.

Friday, December 22, 2017

Only the Little People Pay Taxes

The last time I looked into the tax bill that Republicans were still jury-rigging through Congress, I was among those whose taxes will probably go up because we are losing the home office deduction. For years, that has sheltered most of my wife's teaching income. I  learned a few days ago that we can't deduct the interest on the home equity line of credit that replaced our mortgage several years ago, either, so that's another big hit. Between those two things, we almost surely can't itemize anymore. (If that's true, I'll save a few hundred bucks by buying TurboTax instead of hiring a CPA, so...silver lining?)  

Now that the corporate bonanza is almost law, I'm sure you're wondering how it affects Kraken Enterprises, so I ran some numbers to see if being a corporation and a small business owner might offset those losses. As an S corporation, Kraken's profit or loss goes on our personal 1040 as non-wage income. For the past several years Kraken delivered a nice, fat loss that gave us a nice, fat deduction, but this year it's going to show a  profit. I think that passing its profit through to its only shareholder makes Kraken a pass-through entity, although I'm still a little hazy on that definition. Massachusetts has a special tax form for pass-throughs that I determined a few years ago doesn't apply to me, although I can't remember why. If Kraken is a pass-through, then 20% of the profit should be excluded from taxation. 

The first draft of this post was dense with numbers working through different scenarios. Mercifully for you, I just deleted two pages of that and skipped to the conclusion: Kraken doesn't make enough money for the new rates to have much effect. Kraken's profit this year (actually Blue Hills' profit tempered by Curio City's loss, but the IRS only sees Kraken, not its operating companies) is going to be around $5,000. That means $1,000 of that should be non-taxable. A $1,000 exclusion is nowhere near what the home office and HELOC deductions were worth.

If I reduce my Blue Hills paychecks from 90% of income to 75% next year, thereby exchanging some salary for profit, I will pay less payroll tax throughout the year and get a bigger K-1 payout at year's end (and hence a larger exclusion). But Kraken would need to make at least 10 times as much money as it does, or cut payroll to a tiny fraction of income, to come anywhere near offsetting the deductions that we're losing...and I can't realistically survive on smaller paychecks while I wait for that year-end payout.  


In other words, the new tax regime was written to benefit bigger businesses and richer people. Surprise! But accountants and lawyers are just beginning to find new loopholes, so it might ultimately be a matter of just learning some new gimmicks. For example, if we could somehow change my wife's W-2 teaching income into 1099 income, and funnel that through Blue Hills, we'd be golden. I can't imagine the universities who employ her going along with that, but over the next few years we'll surely learn all kinds of new legal fictions to game the system. Maybe the corporation can pay some of the expenses, such as a percentage of our utility bills, that used to go into the home office deduction. 

With a little political luck maybe this train wreck will be cleared before it forces us all to change tracks.   

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