IRS Bias?...George, Jeeves, And Simon...Race Matters... Patents...Corporate Refugee
(FORTUNE Small Business) – Not everyone is buying the IRS' less oppressive image. Dozens of Asian-American entrepreneurs in Los Angeles say the IRS has unfairly targeted them for audits and has selectively charged an "ozone tax." The obscure excise duty applies to imported products made with ozone-depleting chemicals, such as refrigerators and computers. But the IRS seems to be ignoring big firms such as Sharp Electronics. "I've never even heard of the ozone tax," says Sharp spokesman Don Meyer. "Sounds like they're going after the middlemen, who are easier to get cash from." The IRS did not return our calls for comment. But it has denied any bias. "We try to treat all taxpayers fairly," it told the Los Angeles Times, which first reported the issue.
Tell that to "middleman" Daniel Hou and 40 other members of the Southern California Chinese Computer Association, who have been audited. Hou got his $3 million ozone tax bill reduced to $50,000. But the IRS "selectively attacked us," he says. "They shouldn't be able to do that."
Times Square might have been just another intersection if not for Douglas Leigh. A signmaker and adman, his bright ideas began lighting up Broadway in the 1930s. His best-known product: the Camel cigarette man who blew five-foot-wide "smoke" rings into the streets for 26 years. Leigh stayed in the business until his death in December at age 92, just missing the eve of one of the century's biggest nights in Times Square.
Another entrepreneur, from the opposite coast, also died in December: Bill Bowerman, 88, the former track coach who teamed up with Phil Knight to create Nike. In the early 1970s, Bowerman poured a rubber compound into his wife's waffle iron, creating the modern running shoe.
Five-year-olds usually fill their days with finger paints and animal crackers, not business plans--unless they attend one of the 250 K-8 charter schools participating in MicroSociety, a national program that believes entrepreneurship is elementary. Along with the ABCs, students get primers on taxes, public relations ("Sorry, Mom, I have no comment"), and the value of the mogen, MicroSociety's currency. By first grade, kids in math classes are solving inventory problems.
Alyson Hall, a second grader who plays for a school in Lowell, Mass., says she likes being the boss. She and her classmates formed Woodworking, which sells toy butterflies and trucks for as much as 60 mogen apiece. Is this what they mean by teaching kids values?
If Lee's, A Baltimore ice cream maker, gets its McCormick's cinnamon blend into a store near you, it might have the U.S. Senate to thank. For years, Lee's has been frustrated by big retailers' hefty slotting fees and has practically given up. Manufacturers often must pay $1,000 to $20,000 per product to get shelf space.
For big manufacturers, the fees are a just another cost of doing business. But for smaller companies, the price is punishing. Amid growing complaints, the Senate Committee on Small Business interviewed 79 small and fed-up firms, and it held hearings in October. Now the FTC is investigating the anticompetitive nature of slotting, and the General Accounting Office is calculating its impact. Results are expected later this year.
When Mitchell Duneier reminisces about his days on "the street," he's not talking about IPOs. A University of Wisconsin sociologist, Duneier spent months working alongside more pedestrian entrepreneurs: New York City's sidewalk vendors--homeless or housed--who hawk books and magazines they scavenge from the trash. His intriguing new book, Sidewalk (Farrar, Straus & Giroux, $27), suggests that running a microbusiness, even at curbside, can yield both self- esteem and cash.
Too bushed to bargain? Too rushed to wrangle? The Women's Consumer Network (www.womensconsumer network.com) will do the wheedling for you. Online subscribers pay $21 a year and benefit from their collective buying power on everything from health insurance to PCs. Melissa Moss founded WCN knowing women make 89% of all household buying decisions. She's also appealing to women business owners. Backers include Allen & Co. and CBS Corp.
Energizer bunny, Move over. Taking a cue from corporate mascots past, dot-com companies are creating characters designed to help their brands rise above the crowd. There's Furniture .com's cat, George, the site's putative arbiter of interior design. Roxy.com has Niedermeyer, a glassy-eyed nerd-in-waiting who helps users make its high-tech purchases. Pets.com employs the puppylike persona Sock Puppet to promote the site's pet supplies. The uptown mascot is Jeeves, the servile butler of search engine AskJeeves.com, who is the first dot-com character balloon in the Macy's Thanksgiving Day Parade. And the vote for most annoying (our call) goes to Simon, the cartoon hunk of MySimon.com, a comparison-shopping site.
Legal Minds are still debating the impact of a sweeping package of patent laws passed by Congress late last year. The legislation was pushed by fortune 500 giants such as AT&T and GE, who wanted to synchronize the U.S. patent system with those of other countries and beef up protection from infringement suits brought by independent inventors. But many inventors and small companies argued that the law would emasculate a system that has kept the playing field level for innovators big and small for decades.
The independent inventor community seems to have succeeded in knocking out some of the most harmful measures. But there's one big, worrying change: In the past, all the vital info in a patent application stayed under wraps until a patent was issued, often years later. Now, if you apply for U.S. and foreign patent protection, the material will be made public worldwide in 18 months. Watch out: Those big-company R&D departments will be ready to jump on your bandwagon.
Some lawyers become basket cases, others become basket makers. Cynthia McKay quit her law career ("No fun," she says) to pack potpourri and banana bread into baskets. McKay says her franchise company, Le Gourmet Gift Baskets, has 320 licensees. She charges a one-time fee of $3,500 and (unlike other franchises) no royalty fees. That small investment can earn licensees between $10,000 and $200,000 a year, says McKay. To become a "basketeer," you need a love of shopping, baking, and selling. A law degree is optional.
More than two hundred years before the Clintons' Whitewater, there was George Washington's Dismal Swamp Company. The first president's venture was supposed to transform 900 acres of swampy Southern frontier into fertile farmland. Instead, the financial fiasco involved 11 business partners and a band of bureaucrats and farmers. The Fabulous History of the Dismal Swamp Company: A Story of George Washington's Times (Knopf, $35), by Charles Royster, eloquently portrays the colonial corporate order built on cronyism, executive excess, and debt. The more things change....
Diversity in the workplace isn't a black-and-white issue for On-Target Supplies & Logistics, an African-American-owned and-operated subcontractor to high-tech heavies such as EDS and Texas Instruments. Nearly 70% of the Dallas-based company's employees are black. That was a strength in the past, says On-Target VP Lorene Smith, but it became a big disadvantage in a multicultural society. So On-Target is working to hire more white, Asian, and Hispanic workers. Why? "A diverse staff can deliver our message to a diverse clientele," reasons Smith. She credits the staffing strategy with most of the company's recent gains: Sales topped $22 million last year, up from $15 million in 1998.
For some businesses, 51 has been a magic number. That's the minimum percentage of equity in a company that ethnic minorities must hold for it to qualify as a minority business enterprise, or MBE. Those are the suppliers often used by government or corporate diversity programs.
Now the group that helps MBEs connect with big firms wants to change the math. The National Minority Supplier Development Council argues that a 30% rule would allow more investment by white-owned venture funds. Folks like Jesse Jackson, who has pushed Wall Street to invest more in minorities, are applauding. But opponents like the NAACP and Black Enterprise publisher Earl Graves call the plan a disaster that would let unscrupulous investors transform legitimate MBEs into nonminority-controlled "fronts."
by Arlyn Tobias Gajilan with Carlye Adler, Anne Ashby Gilbert, Beth Kwon, Maggie Overfelt, Edward Robinson, Tara Weingarten, and Rachel Weissman