Administrator

About Administrator

This author has not yet filled in any details.
So far Administrator has created 175 blog entries.

Retirement Options For The Self Employed

One of the biggest mistakes entrepreneurs make is not planning adequately for their retirement. This isn’t all that surprising. If you’re self-employed, it’s a squeeze to set the money aside, even if it is tax-deferred. There’s a fear that you may need those funds to keep things rolling if the business doesn’t grow the way you expect, or clients are lax on paying your invoices.

The good news is that Uncle Sam does offer help in a variety of relatively painless plans to help self-employed small-business owners save for retirement in tax-favorable accounts. Here’s a round-up of the three main options:

SEP-IRA If you’re a one-man/woman band, this account is a good bet. A simplified employee pension, or SEP IRA, is a basic way to set aside pretax savings. You can contribute as much as 25 percent of your net self-employment income, up to a maximum of $50,000.

Best features: Flexibility. There’s no need to fund the account until you file your tax return (i.e. there is no requirement that you fund it each year). So if your net income turns out to be higher than expected, you can make a larger contribution and trim your tax bill. If you have a bad year, you can reduce your contribution. Furthermore, if you’re building your new business on the side while still working for an employer who’s sponsored 401(k) plan you contribute to; your contributions to a SEP don’t interfere with your current workplace plan.

Considerations: This plan may be costly eventually if you have employees, as opposed to contract workers. The plan requires that you must make the same percentage contributions for all “covered,” workers, or those who are 21 and older who have been employed by you for at least three of the last five years and are expected to earn $550 in the current year. Generally, you can deduct the contributions you make each year to each employee’s SEP-IRA. If you are self-employed, you can deduct the contributions you make each year to your own SEP-IRA.

Tax Filer Tip: You have until the due date for your tax returns, including any extensions (meaning as late at October 15th), to both set up and fund the plan. You can open SEP-IRA at practically any financial service company including banks, mutual fund companies or brokerage firms. Firms such a Fidelity, Schwab, T. Rowe Price or Vanguard will set up an account gratis and account fees are low or nil.

Solo 401(k) This is a good choice for business owners and their spouses who are able to set aside a significant portion of their earnings. With a solo 401(k), as an employee, you can stash away as much as $17,000. As the employer, you can contribute another 25% of compensation, up to a ceiling of $50,000 including your employee contribution. If you’re 50 or older, you can toss in another $5,500 extra. Total savings: a whopping $55,500.

Best features: Generous contribution limits. If there’s a set-up or annual fee, it will be low. You might pay a small set-up fee, $100 or less, plus an annual fee of $10 to $250. There are no set-up fees, for example, at Fidelity or Vanguard.

And these contribution amounts are optional, so you can save the top figure in flush years and zilch in leaner times. If you already have an individual retirement account funded by money rolled from a previous employer’s 401(k), you can roll those retirement savings into your new solo 401(k).

It’s also possible to take out a loan against a solo 401(k). That can be useful if you need funds in a pinch. You can borrow half the account’s balance, up to $50,000, and normally can take up to five years to pay it back (provider rules differ). We don’t recommend borrowing from your plan unless it’s a serious situation. But having the option can make it easier to get over the psychological hurdle of opening a retirement account.

Considerations: No extra employees can participate – only self-employed business owners and a spouse. This is not the best option if you’re still working a day job. If you contribute to an employee 401(k) at your day job, you might already be saving the max. You get only one combined $17,000 employee contribution limit to a 401 (k) plan, no matter how many jobs you’re working.

Tax Filer Tip: The deadline to open a new plan is typically December 31^st (or fiscal year end) and must be funded by your tax return due date, plus extension. This is a traditional “qualified” pension. That means you must file an annual Form 5500 report once you have $250,000 of assets in it. So you may have some paperwork here. Fidelity and Vanguard, for example, provide the information you need for the form, but do not complete or file it for you.

SIMPLE IRA. A SIMPLE IRA is designed specifically for small businesses and self-employed individuals. If you have a few employees, say, less than 10, who make more than $5,000, but far from six figures, and want to offer a plan for them as a perk, this is probably the one for you. It was designed for firms with no more than 100 employees.

For 2012, you can make an employee contribution of up to $11,500 pretax, or $14,000 if you’re 50 or older. There isn’t any percentage of income restrictions. Your contributions are tax deductible, and your investments grow tax deferred until you are ready to make withdrawals in retirement.

A SIMPLE IRA is a little burdensome if you’re a fledgling firm. You’re generally required to make a contribution to match each employee’s salary reduction contributions on a dollar-for-dollar basis up to 3% of the employee’s salary or a flat 2% of pay – no matter what the employee contributes to the account.

Best features: Easy paper work. It should take about 15 minutes or less to fill out the forms.

Considerations: This one isn’t for moonlighters – you can’t contribute if you’ve already maxed out employee contributions to a 401(k) at your day job. Also, if you need to make a withdrawal from a SIMPLE IRA plan within two years of its inception, the 25% penalty is significantly higher than the 10% fee you’d be charged for early withdrawal from a SEP IRA.

Tax Filer Tip: SIMPLE IRAS must be set up by October 1^st to make contributions for that year, and all employee contributions must be made by December 31^st.

For additional guidance on retirement plans for the self-employed, see IRS Publication 560.

By Administrator|2012-10-22T14:57:42-06:00October 22, 2012|Categories: Business Talk|Tags: Retirment, Self Employed, SEP IRA, SIMPLE IRA, Solo 401(k), Wilson Rogers|Comments Off

Trials of Finding Good Employees

Q: I’m a one man band and have recently decided to hire someone to lend me a hand. What do I need to keep in mind as I take my first steps towards being an employer?

A: At some point, many small business owners consider bringing in some outside help in order to ease their workload. However, hiring your first employee is not a process that should be done hastily. If done incorrectly, firing your first employee can be even more problematic then bringing them on board. Thus, below we’ll examine some of the challenges you’ll run into as well as other important items you’ll want to keep in mind so that employee No. 1 is a good fit.

Do Your Math. Many owners are sometimes taken aback at how much it actually costs to have an employee. The actual cost of the employee will be more than you think because of payroll tax obligations, benefits, etc. It’s not uncommon for a $10 per hour employee to cost the employer $12.50 – $14 per hour “fully burdened.” In a post later this month we’ll talk about the payroll tax obligations and how to make sure you cover yourself.

The Job Post. Whether you are hanging a help wanted sign in your shop window or posting to a job board, this is the first step in attracting applicants. Make sure the post is clear, concise, specific and informative. You don’t want to waste your time dealing with candidates that aren’t what you’re looking for. So be upfront about who you want to join your team and what you consider a good candidate (i.e. skill set).

Location, Location, Location. Where you post your job impacts the quality of candidates you get. The job pool who browses Craigslist (e.g. independent freelancers) vs. that of Indeed can vary significantly. Likewise, using an employment agency or staffing firm will land another caliber of employee. Thus keep in mind that if you want to find a highly skilled worker, you will typically need to pay more to post your role.

It Takes Time. Be prepared for a lengthy process. Many first time employers think that they’ll slap together a job post, tons of candidates will come flocking and they’ll simply pick the best one. Right? Unfortunately, most employers have to be patient as it often takes some time to find interested, qualified AND responsive candidates. It’s not uncommon for you to encounter candidates who initially appear interested but then disappear into the wild-blue-yonder without so much as an email. Likewise, commission only roles often take longer to fill. And when you do find that perfect match, you’ll still need time to do reference, background and criminal checks. Thus, make sure you allow enough lead time in your process, especially if you need someone to start by a certain time.

Don’t Settle. No matter how frustrating the process gets, don’t settle on a candidate just to fill the role. If they aren’t what you are looking for keep plugging on until you find your match. If this means rewriting your job post, paying more to have it posted in a different media or partnering with an outside firm, do it. Nothing beats hiring a person who at best isn’t a fit and worst is either detrimental to your company or causes financial issues (e.g. fraud or embezzlement).

By Administrator|2012-10-16T12:28:13-06:00October 16, 2012|Categories: Business Talk|Tags: hiring, new employee, Wilson Rogers|Comments Off

IRS Notices & How To Handle Them

So, you go to the mailbox and one of the letters has a return address that sends chills down your spine: IRS. While your first instinct is to drop the letter on the ground and hightail it back into the house and hide under the bed, that’s probably not the best choice. While most people don’t like being contacted by the IRS, many of their letters are no cause for panic because they are not audit related. This post will help you determine what type of notice you received and the steps you should take to begin clearing matters up.

The first step in the process is to determine what type of notice you have received. This IRS has over 76 different form letters that you can receive for various reasons. Listed below are the four main categories that they fall into.

Automated Adjustment Notice. These notices tend to start with a CP### and tend to contain the language “Summary of Proposed Changes.” The good news is that this is a computer generated notice and its far more straightforward and easier to deal with than an audit. About 3% of tax returns filed will produce an automated adjustment notice. The notice you receive will be due to one of the following four reasons:

Error correction – the IRS believes it has found a math error or similar problem in the return
Penalty assessment – the IRS believes you did not meet a filing or tax payment deadline
Interest assessment – the IRS believes you did not pay a tax bill on time
Under reporting – your tax return doesn’t list all the income others have reported to the IRS via 1099 or W-2 forms.

Next Steps

Read the notice and determine what the IRS is asking you about
Call the IRS (800-829-1040 if the numbers isn’t on the notice) and ask the representative for an explanation of the automated adjustment
If you are prepared, state why you believe the notice is wrong or correct
If you don’t clear up the matter on the phone, ask the person to note on its record that you disagree with the notice (take down the date and time you called)
Draft and send in your response. If you agree with the IRS/amount then sign the form and return it to the IRS along with payment. If you disagree, draft a brief letter stating why and send it (along with a copy of the notice) back to the IRS

Correspondence Audit. These notices tend to contain a check list of items, some of which may or may not be checked. While the bad news is that this is in fact an audit, the good news is that of the three audit types, this one is typically the easiest to deal with. Correspondence audits make up 75% of all IRS audits and do not require you to meet face-to-face with an IRS auditor.

Correspondence audits are used to verify straightforward matters. For example, the IRS may request that you send in purchase and sale documentation to verify gains or losses on stock sales, or closing statements for real estate sales. Typically resolution can be had by simply sending in the requested documents, but sometimes the IRS is proposing changes that you may disagree with.

Next Steps

Read the notice and determine what the IRS is asking you to do/provide
Make photocopies of the documents you gather and neatly organize them so they can easily be examined by the IRS (don’t send your originals)
Write a clear and concise cover letter to send with your items (send it to the IRS agent that send you the letter) that list all the documents you are providing
Send your items certified mail, return receipt requested, so you have a record of actually responding

Office Audit. This letter will typically have the numbers 2202 located on it somewhere and may reference an appointment date/time. Just as it sounds, an Office Audit takes place at an IRS office where you will meet face to face with an auditor. According to IRS statistics, the average additional tax and penalties owed resulting from an office audit is about $6,000. The notice you receive should list the specific issues on your tax return that the IRS wants to examine.

Next Steps

Call the IRS to schedule the audit or confirm the day and time that the IRS has proposed
Highlight or circle all the listed issues on the notice as you find them so you can ensure you gather all of the needed information
Review your records and find the documentation needed to justify each issue
Organize all relevant documentation into neat categories based on the items in question (only include documentation directly related to the item in question)
Make necessary copies to provide to the auditor during your meeting
Remain credible during your meeting. If you lie to the auditor once, they may not believe anything else that you say
If further documentation is needed to prove your case and you have it, schedule a date/time to send it to the auditor

Field Audit. This letter will typically have the numbers 3253 located on it somewhere and may reference an appointment date/time. Field audits are the most serious of the three and the amount owed often runs into several thousands of dollars. The subjects of these audits tend to be small business owners, self-employed taxpayers, owners of multiple rental real estate properties, earners of more than $100,000 and individuals with complex tax returns.

The steps to resolve a field audit are essentially the same as an Office Audit. However, due to their nature and the rigor involved, it’s probably advisable that you secure someone to represent you. This can be an Enrolled Agent (EA), Attorney or Certified Public Accountant (CPA). Your agent will then help you gather the necessary information and can even speak to the IRS on your behalf if you prefer not to. However, the real benefit of representation is that the person can address complex tax matters that you may not know the specifics of (especially if someone else prepared your return).

By Administrator|2012-10-10T12:59:26-06:00October 10, 2012|Categories: Tax Talk|Tags: irs aduit, irs notice, Wilson Rogers|Comments Off

S-Corps and Taxation Considerations

An S corporation (sometimes referred to as an S Corp) is a special type of corporation created through an IRS tax election (you must first incorporate the business and then make the IRS election via Form 2553). Many new business owners often contact us asking if this is a good form to conduct business under. While there are advantages to operating as an S Corp, there are some things that one should consider prior to making the election. Depending on your goals, one may find that it’s better to operate under another organizational structure.

Ownership Restrictions

Per IRS guidelines, S Corp owners (shareholders) must first meet the following criteria:

Limited to 100 or fewer persons/entities
Must be US citizens/residents (cannot be non-resident aliens)
Cannot be C Corporations (C Corp), other S Corps, limited liability companies (LLCs), partnerships or certain trusts
Any shareholder who works for the company must pay him or herself “reasonable compensation.” Basically, the shareholder must be paid fair market value, or the IRS might reclassify any additional corporate earnings as “wages”

Benefits

Many small business owners elect S Corp status for two main reasons:

Avoid double taxation on distributions
Allow corporate losses to flow through to its owners (however there are 3 loss limitations discussed later)

Other typical advantages include:

Limited liability protection. Owners are not typically responsible for business debts and liabilities.
Easy transfer of ownership. Ownership is easily transferable through the sale of stock.
Unlimited life. When a corporation’s owner incurs a disabling illness or dies, the corporation does not cease to exist.
Potential use of personal assets for business use. Check out this post about S-Corp vehicle usage and this one for S-Corp home office usage.

Pass Through Taxation

What makes the S Corp different from C Corp is that profits and losses pass through to your personal tax return. Consequently, the business is not taxed itself, only the shareholders are taxed. The amount which is taxed is determined by the shareholders basis (i.e. their interest in the business). What is unique about S Corp basis is that it fluctuates depending on several things including the company’s operational performance.

Additionally, since the tax liability lies with the shareholder and not the corporation, individuals have to make sure that they receive enough money from the corporation in the form of distributions in order to satisfy their tax obligation. Non dividend distributions aren’t taxable to the extent the shareholder has adequate basis.

Importance of Basis

It is important that a shareholder know their stock AND debt basis at all times. As such, it is imperative that it be calculated every year. If the corporation allocates a loss or deduction to the shareholder, in order to claim it the shareholder needs to demonstrate that they have enough stock or debt basis. For example, if a person invests $10,000 in a company (i.e. stock basis) and the company then passes through a $18,000 loss to them in a single year, only $10,000 will be deductible in that year. The remaining $8,000 becomes “suspended” until the shareholder has adequate basis in the future.

Loss Limitations

As mentioned above, losses are limited to the extent that an owner has basis. However, there are in fact three limitations which could cause a loss to be nondeductible at any given time. Each limitation must be met in the following order before a shareholder is allowed to claim a flow through loss:

Stock and Debt Basis Limitations
At Risk Limitations
Passive Activity Limitations

Calculating Stock Basis

A good way to think of stock basis is in terms of a checking account. Basis essentially equals deposits and earnings less any withdrawals made. Furthermore, similar to a bank account (with no overdraft protection) basis cannot go negative – that is more cannot come out than goes in.

Initial basis typically starts with the money a shareholder paid for the S Corp shares, property contributed to the corporation, carryover basis if gifted stock, stepped-up basis if inherited stock or basis of C Corp stock at the time the C Corp converts to an S Corp.
Subsequent basis is made via adjustments which are typically recorded at the end of the corporations tax year. First they are increased by income items, then decreased by distributions and lastly decreased by deduction and loss items. The order is important because if basis is positive before distributions but would be negative if all deduction items were subtracted (however, again, basis cannot be negative) then the excess loss would be suspended rather than the excess distribution being taxable.

Other Important Considerations

S Corps must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation before non-wage distributions may be made to the shareholder-employee.
The instructions to the Form 1120S, U.S. Income Tax Return for an S Corporation, state “Distributions and other payments by an S corporation to a corporate officer must be treated as wages to the extent the amounts are reasonable compensation for services rendered to the corporation.”
Under section 7436 of the Internal Revenue Code, the IRS has the authority to reclassify payments made to shareholders from non-wage distributions to wages (which are subject to employment taxes).
Suspended losses and deductions due to basis limitations retain their character in subsequent years. Any suspended loss or deduction items in excess of stock and/or debt basis are carried forward indefinitely until basis is increased in subsequent years or the shareholder disposes of their stock.
In determining current year allowable losses, current year loss and deduction items are combined with the suspended loss and deduction items carried over from the prior year, though the current year and suspended items should be separately stated on the Form 1040 Schedule E or other appropriate schedule on the return.
If the current year has different types of loss and deduction items, which exceed stock and/or debt basis, the allowable loss and deduction items must be allocated pro rata based on the size of the particular loss and deduction items.
If a shareholder sells their stock, suspended losses due to basis limitations are lost. Any gain on the sale of the stock does not increase the shareholder’s stock basis. A stock basis computation should be reviewed in the year stock is sold or disposed of.
A non-dividend distribution in excess of stock basis is taxed as a capital gain on the shareholder’s personal return. Stock held for longer than one year is a long-term capital gain (LTCG).

By Administrator|2019-08-28T07:38:59-06:00September 30, 2012|Categories: Tax Talk|Tags: accountable plan agreement, basis, Business Owned Automobile, Can an S Corp write off a car?, Can I claim car expenses on my business?, Can I depreciate a personal vehicle used for business?, Can my corporation pay my rent?, Form 8829, home office deduction, home office expense worksheet, how to deduct home office expense for partnership, how to deduct home office expenses on income taxes, irs standard mileage rate, s corp, s corp automobile expenses, s corp car allowance, s corp car expenses, s corp vehicle depreciation, S-Corp Automobile Deduction, S-Corp home office deduction, s-corp vehicle ownership, S-Corps and Taxation Considerations, sample accountable plan agreement, Section 280A, Tax Deductions for Personal Car Used for S Corporation Business, taxes, the auto expenses of an s corporation shareholder, unreimbursed partnership expenses, where to deduct home office expense, where to deduct home office expense for s corp, Wilson Rogers|Comments Off

5 Ways To Grow Your Business

Market Share, or how much of the pie is coming through your door, is one thing that all businesses try to track. If you listen to the big guys, they’re always tracking if share is up, if it’s down and just how they can go and get more of it. Yet when the economy is down, many business folks and entrepreneurs alike will throw their hands up and say that “oh well, there’s nothing we can do to grow right now.”

Down markets present a host of opportunities for the savvy and innovative business person to grow their business. Listed below are five ways that you can increase your share of the pie when times are tough.

Examine/Exploit Your Competitors Weaknesses. When times are hard, companies will look to ease the bleeding so to speak. This might mean reduced advertising, hiring and marketing. If you look at where your competitors are failing and step in with better services or products, you might just see an increase in customers. For example, when Restaurant A had to stop offering free fries with their meals, Restaurant B took it as an opportunity to market that their combos “still” had free fries. The result? A few new customers during the lunch hour that use to frequent their competitor.

Get The Word Out. While marketing/sales professionals tend to live the good life when the economy is up, their budgets are often the first to be slashed when times head south. However, nothing happens in an organization until a sale is made and sales don’t happen without marketing. Thus when times are down, if you still have adequate cash flow, don’t cut your marketing but instead continue spending on “smart” marketing. What this means is that if you can highlight something you do that your competitors don’t – go for it! What you don’t want to do is spend money where it won’t make a difference. So, if for example you’re a landscaping company in Chicago, it probably doesn’t make sense to do a major ad campaign in December when it won’t lift your sales all that much (unless you offer snow removal of course).

Expand Product Offerings. Expanding by leaps and bounds is never advisable when the market is tough. However, businesses should be encouraged to look for add on, tuck in and complimentary products to help them grow. We’re not talking about adding on a major product line, but something that enhances what you already do. For example, a hot dog stand already attracts people who are looking for an inexpensive yet fast meal. Why not keep a case or two of “veggie” or vegan brats in stock? Many vegetarians don’t frequent this type of establishment alone but may wind up there when a friend or coworker does. If they can make a purchase from you, why not make the sale? It doesn’t cost you a ton to add the product, and you don’t even have to keep loads of inventory as the demand is probably pretty low.

Purchase A Failing Business. If you have deep pockets, a down economy is a good time to look for struggling competitors and help put them out of their misery. The only word of caution is make sure you do a thorough analysis of their business (i.e. due diligence) before you do the deal. Remember, there is a reason the business is struggling – just make sure that it’s something that you can fix or you will simply purchase a headache instead of increased profits.

Increase Volume. Playing the price card (i.e. reducing prices) is one of the last things recommend when times get tough. Not only do you lose money on the top end (e.g. sales) but you tend to lose it on the bottom line as well because of the inflexibility of certain fixed cost. However, if you have a streamlined operation that has solid margins (think > 50%) then you could go for a volume play. For example, if you can slightly reduce prices and keep yourself profitable, you may see an uptick in customers (volume). If the profit generated by the volume increase outweighs the money you lost when you reduced prices, then it’s a smart move. The goal would be to do this long enough where you increase your customer base and then gradually increase prices once the economy improves. The end result would then be a bigger market share and increased revenue/profits when compared to your competitors.

By Administrator|2012-09-25T12:30:19-06:00September 25, 2012|Categories: Business Talk|Tags: how to grow your business, increase sales, Wilson Rogers|Comments Off

The Power of Thought

Well, today there is a lot of controversy swirling in the media over some comments that presidential candidate and former Massachusetts Governor Mitt Romney made at a fundraising event. In short, Mr. Romney said the following about those voters whom polls indicate will instead vote for President Barack Obama:

“There are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe that government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you name it.”

He then goes on to state that his role “is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives.”

Now, we will not get into the details of politics in this post as that is personal opinion and everyone is entitled to their own viewpoint. However, there is one thing that is clear in the last statement, the belief that you can influence change in your life.

At some time or another, each of us fall susceptible to the thinking that there is nothing we can do regarding a particular situation. “I’ll never be smarter. I’ll never be a climber. I’ll never lose weight. I’ll never finish college. I’ll never be any good.” Statements like the foregoing are views that we have of ourselves, however, they are not fact until we make them so. Thus, here is the question at hand; how powerful is thought and can you think yourself into another situation?

Outlined below are six steps that we believe allow one to go from thought to change over the course of time.

Changed Thinking Transforms Your Beliefs. Beliefs are nothing more than the perception one has of something based on past or historical experiences/information. For most Americans, we believed that a fellow named Santa Claus brought us presents and cookies on Christmas for some time of our lives. Then one day that changed. Why? Did the facts of receiving presents and cookies change? Nope, your thinking surrounding how they got there did. This changed thinking then caused you to alter your beliefs and you no longer believed in Santa Claus. With that said, thinking can yield changes in all your beliefs. Being creative is when you think about your thinking, being innovative is when you begin to act on your ideas.

Altered Beliefs Modify Your Expectations. What you believe in guides what you expect in life. For the most part, all of us can take a look at a task or challenge and know whether or not we can succeed at it. Thus, in belief lies power; the power to give us clear vision, outline our opportunities and make our visions reality. In essence, our beliefs control just about everything we do in life. If we believe we will fail, we often don’t begin the journey of attempting a feat and thus the result of failing materializes. However, if we believe we can, while it is true that we may ultimately fail, we also move that much closer to ultimately succeeding.

Modified Expectations Give Way to A New Attitude. “Blessed is the one who expects nothing, for he shall receive it” – Benjamin Franklin. We’ll finish our analysis by looking at the story of a minister named Frank W. Gunsaulus who lived in the late 1800’s. While going through college he observed many defects in the educational system, defects which he believed could be corrected if he were the head of a college. He didn’t have the large sum of money necessary to start a school and could not make any real progress in attaining it for almost two years. However, he set his mind on attempting to make a difference which impacted his belief and attitude that he would eventually find a way to open a college.

A New Attitude Transforms Your Behavior. One day while in his room thinking of ways to raise the money to carry out his plans, it dawned on Mr. Gunsaulus that he had done nothing but think. He finally resolved that the time had come to take action. He still didn’t have a clear plan on just how he would raise the money, but he did do one thing, he called a newspaper and announced he would preach a sermon the following morning, entitled “What I would do if I had a million dollars.” Had it not been for his “new” attitude, Mr. Gunsaulus probably would have forever been locked in thought. William James was right when he said, “That which holds our attention determines our action.”

Transformed Behavior Revises Your Performance. By spurring himself to action, Mr. Gunsaulus preached a sermon to a well attended church with all the heart and soul that he could muster. He shared what he would do with a million dollars. He described his plans for organizing a great educational institution where young people would learn to do practical things, and at the same time develop their minds. Mr. Gunsaulus could have never gotten on that pulpit; many of us would rather stay in a routine than make changes. Even when we know that the changes are going to be better for us, we often don’t make them because we feel uncomfortable or awkward about making that kind of a change. However, Mr. Gunsaulus did give that sermon and the results were quite astounding.

Revised Performance Changes Your Life. When Gunsaulus finished and sat down, a man arose from his seat and made his way toward the pulpit. He approached Mr. Gunsaulus with an extended hand and said, “Reverend, I liked your sermon. I believe you can do everything you said you would, if you had a million dollars. My name is Phillip D. Armour.” Gunsaulus would eventually get the money he sought and became the first president of the Armour Institute of Technology (now IIT). The performance that Gunsaulus exhibited in the end changed his reality, yet it all began with his thinking and beliefs.

While thinking yourself to a different place in life is not easy, instantaneous or at times even pleasurable, it is something that can be done. The reality is that change makes a person feel alone, even if others are going through it. Yet it is easier to turn a failure into success than an excuse into a possibility. A person can fail and turn around and understand their failure and then make it a success. However, a person who makes excuses for everything may never truly succeed. With that said, if you are thinking of doing something different in life, take the first step and think your way to a new place. We’re confident you’ll be happy with the results!

By Administrator|2012-09-18T09:10:02-06:00September 18, 2012|Categories: General Ramblings|Tags: Armour Institute of Technology, belief leads to action, believing in yourself, Frank W. Gunsaulus, Frank W. Gunsaulus sermon, IIT, Illinois Institute of Technology, Phillip D. Armour, positive thinking, the power of thought, transforming your behavior|Comments Off

The Benefits Of Mutual Funds

Mutual fund ownership by U.S. households has grown appreciably over the past three decades. Forty-four percent of all U.S. households owned mutual funds in 2011. In 1980, this same figure was less than 6 percent. Furthermore, approximately 89 percent of total mutual fund assets were owned by these same estimated 90 million individual investors. So just what is it about mutual funds that make them such an attractive investment option?

Diversification. Mutual funds invest in a broad spectrum of securities and debt instruments. Thus, an investor can potentially limit their investment risk by reducing the effect of a decline in any single security. For example, if you own 100 shares of XYZ stock and it all tanks, you lose your shirt. However, if you own 100 shares of ABC mutual fund which is comprised of 5% XYZ stock, when the stock declines, your portfolio won’t feel the full brunt of it. Another benefit of diversification is that one can gain ownership to more companies and industries with a lower overall purchase price when compared to purchasing outright individual shares.

Professional Management. Most investors don’t have the time or wherewithal to perform the necessary research and continual analysis required to protect their investment. By pooling the money of many investors, mutual funds are a way to receive full-time professional management that few investors would be able to otherwise afford. These “fund managers” have teams of analyst and researchers who routinely update them and provide recommendations as to how the fund can achieve its goals. Thus, by investing in mutual funds you can rest assured that someone is continually monitoring you investments performance and making the necessary adjustments when warranted.

Liquidity. Buying and selling shares in a mutual fund is just as easy as it is to purchase shares of an individual stock. Most people can either invest or divest of their holdings within the same business day. This makes this vehicle extremely attractive for those who may need “relatively” quick access to their funds.

Convenience and Simplicity. Instead of having to track down and purchase each individual share, you only have to keep track of one; that of the mutual fund itself. Additionally, you will still receive the benefits of owning a diversified portfolio and a wide range of services including:

The ability to purchase or sale your shares via mail, telephone or internet
Minimal investment floors; allowing you to invest with as little as $50-$100 per month
The ability to schedule automatic investments/transfers into or out of the fund via your bank account

By Administrator|2012-09-04T16:12:30-06:00September 4, 2012|Categories: Accounting Talk|Tags: benefits of mutual funds|Comments Off

Top 5 Reasons Businesses Fail

When an entrepreneur embarks on their journey to build the next big thing, they will undoubtedly come across the “statistics” that we’ve heard a thousand times. You know the ones where 50% of businesses fail within a year and 95% are gone within five years. But just what is it that causes these new establishments to go belly up? Here is a list of the top five drivers based on our experience helping new companies navigate those early startup waters:

5. You start your business for the wrong reasons. The thought of being your own boss is cool until the first major issue comes up. Is the sole reason you’re starting your business because you want to make a lot of money? Do you think if you had your own business that you’d have more time with your family? If so, you’d better think again. Running a business is hard work – often much harder than what you have previously been doing to earn a living (especially if you’re coming from an office job). With that said, when times get tough (mentally, financially, spiritually, etc.) you need to have a firm resolve as to why you’re in this game. If your reason is planted on a weak foundation, don’t be surprised if you find yourself quitting before success has had a chance to begin.

4. Lack of Planning. Anyone who has ever been in charge of an event knows that that were it not for their careful, methodical, strategic planning (and hard work) success would not have followed. The same should be said of most business successes. Many small businesses fail because something which was very fundamental to their success (such as marketing or customer seasonality) was not thoroughly understood and addressed. If for no other reason than to flush out these potential sticking points, we always recommend that a new entrepreneur take the time to prepare a business plan. Besides, most lenders will request one if you’re seeking to secure capital for your company so you might as well go through the exercise.

3. Over-expansion. A leading cause of business failure, expanding too quickly, often happens when owners confuse success with how fast they can grow. Thus, a focus on slow and steadily planned growth is far more ideal. Many a bankruptcy has been caused by rapidly expanding companies.

At the same time, you do not want to repress growth. Once you have an established solid customer base and good cash flow, let your success help you set the right measured pace. Some indications that expansion may be warranted include the inability to fill customer orders/requests in a timely manner and employees having difficulty keeping up with production demands. If expansion is what you need to succeed, identify what and who you need to add in order for your business to grow.

2. Poor Management. Many a new business owner often find themselves admitting that they know how to make the product or deliver the service , but lack management expertise in areas such as finance, purchasing, selling, production and hiring/managing employees. Unless they recognize what they don’t do well and seek help quickly, many owners may soon face disaster.

Neglect of a business can also be its downfall. Care must be taken to regularly study, organize, plan and control all activities of its operations. This includes continually staying in touch with market research, customer data and of course the financials. The moment that that you take your eyes of the game so to speak is when your competitors will take the opportunity to make their move. Thus, new owners must always be aware of what’s going on or risk sinking their ship!

1. Insufficient Capital. The most common yet fatal mistake for many failed businesses is having insufficient operating funds. Many owners often underestimate how much money is needed to weather the start up phase and are forced to close before they even have had a fair chance to succeed. Some also may have an unrealistic expectation of incoming revenues from sales, which can exacerbate the situation.

Before you begin your venture it is imperative to ascertain how much money your business will require. We’re not talking about only the costs of starting your endeavor, but the cost of staying in business. It is not uncommon for a business to take a year or two to get going. This means you will need enough funds to cover all your expenses until sales can eventually pay for these costs. To start, we’d recommend using a business start up cost calculator such as this one or setting up a consultation with a local accounting firm or CPA. Many will be happy to talk with you as no one wants to see a business fail.

By Administrator|2012-08-28T20:11:01-06:00August 28, 2012|Categories: Business Talk|Tags: business over expansion, insufficient business capital, lack of business planning, poor business management, starting your business for the wrong reasons, Top 5 Reasons Businesses Fail, why businesses fail; poor company management|Comments Off

Upcoming Tax Changes in 2013

Q: I’ve heard that tax year 2013 could be much different than 2012 due to the expiration of the Bush tax cuts. Do you all have any perspective on this?

A: Back in 2001, then President Bush passed what was known as the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), more commonly known as the Bush Tax cuts. For the last few years ever since the cuts were extended through 2012, there has been much consternation as to what is going to happen to tax rates in 2013 when they expire. The question on everyone’s mind is if the expiration of the cuts in 2013 will really be all that painful? Some also wonder if Congress will extend the tax cuts as they did in 2010 when the expiration was originally scheduled to occur. Not knowing the final outcome, it’s important to have a plan in place to prepare for whatever Congress decides.

In addition to the above, the Patient Protection and Affordable Care Act (PPACA), also referred to as Obamacare, will also have provisions that begin in 2013.

If we take a look at the provisions that President Obama has included in his fiscal year 2013 budget, we can get an idea if we need to worry much about what may potentially happen.

EGTRRA

Increase in ordinary tax brackets. The most significant changes from the expiration of the 2001 tax cuts would be the increase of the Ordinary Income Tax Brackets. For most earners, the Income Tax would not increase, but individuals who are in the top two brackets would see changes. For example, if you earn over $390,050 a year, expect an increase of 4.6% in the top most bracket.

Increase in long-term capital gains rates. Ever since 2003 long term capital gains tax for assets held greater than 1 year has been 15% for those in the 15% bracket and higher and 10% for those in the 10% bracket. The change would affect single taxpayers with taxable income below $200,000, head of households below $225,000 and joint couples below $250,000. These individuals long term rate would remain at 15% while filers above these amounts would have a have a 20% rate.

Qualified dividend tax rate. Since 2003 the maximum qualified dividend tax rate has been 15%. President Obama’s budget proposal looks to keep the current dividend rate of 15% for everyone not considered an upper income taxpayer. For these individuals, dividends would be taxed at their ordinary income tax rate of either 36% or 39.6%.

Change in benefit of itemized deductions. Itemized deductions allow one to reduce taxable income be deducting amounts greater than the standard deduction. This includes things such as charitable deductions, mortgage interest, state income taxes, medical expenses, etc. The value of itemized deductions for those upper income taxpayers would be capped at 28%, so someone in the 35% that currently receives $3,500 of benefit for $10,000 of itemized deductions, would only receive $2,800 of tax savings.

PPACA

Change in the health care deduction limit. Through December 31^st 2012 you can deduct health care expenses that exceed 7.5% of your adjusted gross income (AGI). However, beginning January 1^st 2013 that threshold will rise to 10%. For some, that essentially results in a tax increase, since you have to spend more on health care before seeing the deduction. A way to get around this is to use a FSA or HSA so that all of your expenses are basically tax deductible.

Medicare wage surtax. Starting in 2013, if you make more than $200,000 as a single person ($250,000 if married filing jointly) you will pay a 0.9% tax on the income above that level.

Medicare unearned income surtax. Another tax will be applied to Modified AGI (in this case AGI + tax-free income) for those with income levels that are the same as above. There is an additional 3.8% surtax applied to the lesser of your net investment income OR the excess Modified AGI beyond the limits.

Excise tax on medical devices. Medical devices such as prosthetics and wheelchairs will be assessed an excise tax of 2.3%, although items like hearing aids and eyewear that are sold in retail settings won’t be subject to the tax.

While the impact of most of these items won’t be felt until you file your 2013 return in 2014, it’s good to give some thought as to how you will plan out next year in light of what may be on the horizon. But then again, this is an election year so there is always the probability that no increases will happen. Who wants to increases taxes when you’re trying to get elected?

By Administrator|2012-08-21T10:56:50-06:00August 21, 2012|Categories: Tax Talk|Tags: tax changes in 2013, upcoming tax changes|Comments Off

The Advantage of Being A “Small” Business

This past weekend my family and friends celebrated our daughter Pilar’s 3^rd birthday. Her grand event was held at the Bronzeville Children’s Museum which meant that I would have the designated job of “goffer” until it was done. One of the things on my list was getting two Yo Gabba Gabba character balloons filled with helium so that I could bring them to the party.

Well, in case you didn’t know there is apparently a shortage of helium going on currently. Seems like it happens on an annual basis, but this year party store retailers appear to be limited in their ability to obtain it. Unless you are in the medical, brewing or welding industries, you are not considered top priority. Thus, many of the retailers who are selling it have their own restrictions on how they dole it out. Unfortunately, one of the restrictions that I came across from the “big boys” was that they weren’t filling outside balloons with helium, only ones that were purchased from them.

If you’ve ever hosted a kid’s party, you can relate to the stress of trying to make it all come together. Needless to say, after going to a couple of the big stores I was getting pretty fed up with the inability to get these balloons filled. So I decided that I would take a different approach, I’d find a “small business” that specialized in party decorations and the like.

This is where my friend Jo Jo The Balloon Lady enters. You see, this is a shop that I have seen on my way to our office quite a few times. I’ve never had a reason to frequent their establishment before this, but as I knew where it was I figured I would see if they would fill my balloons. I was greeted by a young woman who promptly took my order and told me that it wouldn’t be a problem to get them filled. It would cost me a little more than normal due to the helium shortage, but as a parent you know there is no price too great when it comes to your child’s happiness.

During this time I also got to speak with the proprietor and learn a little more about their business and just how long they had been there (15 years). I learned about the passion they had for the business, their commitment to it and just how much their customers meant to them. I vowed that they would have my business in the future and that I would spread the word about what a gem this little place was. Which brings me to the subject of this post.

When you’re small business, you have a set of competitive advantages that larger competitors may not. Thus, always make sure that you leverage the following as they are true tools that can bring you business:

Genuine Customer Service. The customer service experience is one that can make or break your opportunity to turn a first time customer into a repeat one. To this end, make sure that your staff is fully vested in just how important it is to make each customer happy. Whether it’s engaging in conversation, listing to their stories or just greeting them with a smile, make it a part of your operating procedures.

Opportunistic Thinking. Small businesses are started and run by entrepreneurs. These are the type of people that see a problem and try to build a better mouse trap to solve it. Likewise, they are also the ones most likely to “think outside the box” so to speak. So when the big boys set a certain status quo in the market, but you can figure out a way to capitalize on it, by all means go for it. “So you don’t want to fill outside balloons because you want the increased margin that comes with people buying balloons from you? That’s okay, we’ll fill all the balloons you won’t and make a nice little penny off it too!”

Build Relationships. I’ve said it before but I’ll mention it again; people do business with people they like. Better yet, people will go out of their way to rant, rave and refer business to people they like. So treat every customer as a friend and invite them to get to know you. Likewise, just like Sal the butcher learned that you would want your “special cut” of meat every Friday, make it a point to learn what makes your customers happy. You’ll soon find that by building these relationships you’ll have the opportunity to service a customer for a lifetime versus just a single transaction.

By Administrator|2012-08-19T21:16:35-06:00August 19, 2012|Categories: Who's The Boss?|Tags: small business advantages|Comments Off

Previous 131415 Next

About Administrator

ABOUT

RESOURCES