Organization Can Help New Companies Break the Snack Food Code

Question: Two friends of mine started a small business producing snack items. They need to know how one acquires the necessary five-digit vendor identification numbers and how one determines the five-digit product I.D.’s for each type of snack. Can you help?

--S.J. Baer, Woodland Hills

Answer: The organization that administers the Universal Product Code (UPC) is called the Uniform Code Council Inc.

The Lawrenceville, N.J.-based group, a not-for-profit organization founded in 1972 as the Uniform Grocery Product Code Council, can be reached at its customer service office in Dayton, Ohio, at (937) 435-3870, or through their Web site: https://www.uc-council.org.

Companies that need a UPC for their products apply for membership in the UCC and get a company identification code as well as numbers for their products and more industry information.

--Chris Urban, director of

information services, Technomic

Inc., restaurant and food service

consulting, Chicago

Toy Pricing Breakdown

Q: Our company has developed a toy that is ready to be marketed wholesale, but I need some information about the industry. How much markup is typically added to the cost of a toy? Is the markup supposed to include delivery charges, or is trucking added to the total purchase order, to be paid by the retailer?

--Tori Duncan, Hidden Hills

A: The retail toy industry in the U.S. is pretty much dominated by large chains rather than independent stores, so you will be able to dictate your price only if you truly have a “top of the chart” or “must-have” item. Otherwise, the wholesale price is pretty much determined by retail pricing and the markup structure of retail chains.

Toy stores, gift and specialty stores, mass merchandise and discount stores all have different pricing and markup structures. For example, if you believe your product should sell very well at a toy store for $9.99 and that the retailer normally sells its products at 100% markup, you should try to sell them at about $5, trying to build in a decent profit margin for yourself. If you wholesale the same item at, say, $6.35, the retail price might have to go up to $12.99, sales won’t be as promising, and the buyer might pass up your item.

You can quote your price either with the buyer responsible for everything once you ship the product from your warehouse, or freight prepaid, which means that you, as the seller, are responsible for delivery.

Usually this detail becomes part of your sales negotiations. If you agree to include the shipping cost in your selling price, you must be very careful and do detailed research before you begin negotiating with buyers. The shipping costs vary greatly from company to company and they also depend on the size of your shipments. It is very easy to incorrectly estimate the shipping cost when you are quoting a price, because shipping is one of the greatest variables in the wholesale and distribution trade.

--Charlie Woo, Megatoys,

Los Angeles

Getting the Word Out

Q: I am a licensed therapist operating a Web site that specializes in self-help solutions for people suffering from panic disorders. My program is an alternative to drug therapy that has helped many people. The business grew rapidly last year but has slowed this year, and I feel I need media exposure. I don’t have the capital to invest in television advertising or large-circulation print media. Do you have any suggestions?

--Bert Anderson, Redlands

A: My first suggestion is to make certain that you have taken advantage of all the search engines available for links to your Web site. Have you developed different Web addresses (such as Dontpanic.com) to attract additional visitors? You might want to approach sites that place special emphasis on holistic or alternative health care and see whether you can get linked to their sites or be listed in any specialized search engines they sponsor.

It might also be worthwhile to place relatively inexpensive classified ads in the “personal” columns of such publications as Los Angeles magazine and L.A. Weekly, directing readers to your Web site.

If your program is self-help, you need to find a hook for attracting media interest. Can you pitch stories about your site based on the increased evidence of panic-attack disabilities? Is there something else that would be newsworthy related to this health problem?

Your fundamental focus should be to differentiate your services from those of your competitors. If you can afford professional help, I’d advise you to hire a public relations firm with experience in health care and alternative medicine before you consider doing any advertising on your own. You should be prepared to pay at least $2,500 per month for the services of a good PR firm.

--Gay Silberg, partner,

Graham, Silberg, Sugarman,

Los Angeles

A Tax-Free Spinoff

Q: I am the sole stockholder of a small company with a good credit history and reputation. The company also dabbles in stocks and bond investments. I am planning to take in a partner and expand into a side business. Is there a tax-free way to split the company into two entities, with the new company taking on the current name and the original firm getting a new name and assuming the investment portfolio? For tax reasons, I prefer not to have the portfolio transferred to me until I retire.

--Tran Nguyen,

Los Angeles

A: I would strongly encourage you to engage a competent tax advisor before embarking on this endeavor. However, there are some guidelines that should help you get started: Section 355 of the Internal Revenue Code provides for several different corporate divisions that are tax-free to the recipient of the shares. This area of the code allows for a new corporation to “spin off” the shares of a subsidiary corporation (the existing corporation) to the shareholders of the parent company.

In this fashion, a new corporation would be created and the shares of the existing corporation would be contributed to it by the shareholders, in exchange for shares of the new corporation. Then, at least 80% of the stock of this controlled corporation must be distributed to the shareholders.

There are several important caveats: One is that the trade or business of the controlled (and “spun-off”) corporation must have been engaged in for at least five years before this transaction.

Further, the trade or business of the corporation must continue to be engaged in after the transaction. These kinds of transactions can be quite complicated, and if you do not structure the relationship between the two companies correctly, you may face unanticipated tax consequences. Get a professional to help you in your specific situation.

--David R. Flamer, CPA,

Lasher, Flamer & Associates,

Woodland Hills

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If you have a question about how to start or operate a small business, mail it to Karen E. Klein, Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia, CA 91016, or e-mail it to kklein6349@aol.com. Include your name, address and telephone number. This column is designed to answer questions of general interest. It should not be construed as legal advice.