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Q: What tax laws apply if I hire a Canadian consulting firm? --L.R., Detroit

A: Foreign companies are not subject to U.S. taxes--unless, as with many offshore outfits that do business here, they are registered as a "U.S.-based foreign corporation." In that case, they are subject to a "branch profit tax," and you must withhold about 30% of your payment for the Internal Revenue Service. The Canadian company is then liable for regular corporate income tax on its U.S. income.

Q: I am developing a dress code. Does it matter what people wear? --M.H., Dallas

A: Psychologists say there is a link between dress, grooming, and work habits. A 1997 survey on casual dress codes found that relaxed standards did nothing to boost productivity or morale. On the contrary, the study concluded that relaxed dress leads to relaxed manners, relaxed morals, and relaxed productivity.

Have a question about running your small company? Send an e-mail message to smallbiz@businessweek.com By Karen E. Klein


Steve Ballmer, Power Forward
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