Thursday, 18 April 2019

Aging Well: Starting a business after retirement? Here’s some advice – Reading Eagle

Starting a business is something you have been thinking about. There are lots of ways to leverage your life skills, post-retirement.

Written by By Sean D. Curran

You worked all of your life. Maybe you stayed in one job the entire time or maybe you completely changed careers several times.

Now you are retired or close to retirement, but you still have a desire to work. Maybe you have a great business idea that you want to take to market and be an entrepreneur?

Starting a business is something you have been thinking about. There are lots of ways to leverage your life skills, post-retirement. You probably already know what you want to do. If, however, you have been solicited to start a business, like a direct marketing or multilevel marketing business, things are very different.

In the conventional business environment, you are responsible for managing your product or service offering, revenue including marketing and billing, taxes such business privilege tax, employees including payroll and worker’s compensation insurance as well as conventional property and casualty insurance for real estate and vehicles. If you work out of your home, you may need to see if your neighborhood is zoned such that you can operate your business there. If you park multiple company vehicles or have clients coming and going or anything commercial, you may get a cease-and-desist letter from the local government. Additionally, be careful about employees paid as “independent contractors.”

According to the IRS, the general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed. The company is not responsible for payroll taxes of an independent contractor.

However, for employees, an employer is subject to the Federal Insurance Contribution Act, or FICA (which includes Social Security tax and Medicare) and the Federal Unemployment Tax Act, or FUTA, which funds unemployment compensation for workers who lose their jobs. These payroll taxes can add up and can motivate a business owner to deem workers as independent contractors when they really should be considered employees. The consequences could be significant, including penalties, fines and back payments for as long as the misclassification has been occurring.

In the direct marketing environment, your product or service is developed, packaged and shipped to the consumer by a company where you are an independent contractor, often referred to as a representative or agent. You sell the products directly to the consumer, and you build your business by recruiting others to be independent contractors to do the same, also called your “downline,” which you then receive commissions and bonuses from their sales. You have no employees and therefore, no payroll tax liability.

The business systems are typically fully automated, including your own website with e-commerce capacity and the ability to see your downline’s sales volume. Promotions are automatic based on sales volume. The cost to become a rep is typically very reasonable. This type of business is legitimate, and many of the companies are very well-managed and well-capitalized. Many “reps” have conventional jobs and do direct marketing as a side opportunity until they can build their business and do it full time. Many of these individuals depend on this extra income to support their families and are good, honest people.

That sounds pretty good. So what’s the catch?

It is a lifestyle. Successful reps are typically working the business longer hours than they thought, constantly on the phone with a prospect or a conference call listening to a high-level superstar or the founder of the product. Be prepared to be overtaken by a constant stream of positive messages and personal growth techniques, especially at promotion recognition events that your sponsor will encourage you to attend.

The rep community is typically very friendly and supportive, and many new friendships are formed. Social media is very important to understand and participate in. Do not let your positive hype negatively impact your existing friendships and family, because everyone is potentially a prospect. Some whom you know may not be interested, so respect their decision. Many new reps burn out and stop doing the business because they didn’t understand the significant demand on their time and attention.

So be honest with yourself. Do you have the desire and interest to be a persistent prospector of clients and reps?

If so, think through how you want sell the product. Are you going to be an “expert” in the product which may require you to understand complex subject matter or are you going to be relying on your sponsor to sell your prospect? Be aware that if you want your sponsor to sell for you, you will be coordinating conference calls with your prospect and sponsor until you have the confidence to sell on your own.

Whether you are pursuing a conventional or direct-marketing business model, you need to be aware of income limits if you are receiving Social Security. The 2019 annual income limit is $17,640. Your benefits may decrease for income over that limit, depending on whether you have reached full retirement age of 66.5 years old. You can delay benefits as long as you want, but it may make sense to delay until you reach 70 years old because your monthly payment increases 8 percent every year you delay past 66 and up to 70 years old.

Additionally, in either conventional or direct marketing, you would want to consider forming a corporation or more likely a limited liability company to protect yourself from liability. You might as well make sure that you have a strong power of attorney with business rights for the agent in the event of a disability as well as a last will and testament that clearly deals with the control of the business.

Sean D. Curran, Curran Estate Law, focuses his practice, 222 N. Kenhorst Blvd., exclusively on estate and elder law, at


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