This week we are looking at reasonable compensation, a legal necessity for anyone running a Corporation. Reasonable compensation is connected to one of the most fundamental parts of working for a company – getting paid – and yet it’s so widely misunderstood. When you form an Corporation, you create a separate, legal entity that ‘earns’ money. You then pull your wage from those earnings and pay whatever payroll taxes you owe.
In order to close a loophole wherein those running the corporation could ask for an extremely low salary, pay next to no payroll taxes, and then close the wage gap with distributions, the IRS requires that all corporate officers and executive be paid ‘reasonable compensation.’ But what constitutes reasonable compensation is a little more murky.
Who needs to be concerned with reasonable compensation?
Anyone that is runs, or helps run, a C-Corporation or S-Corporation must be reasonably compensated for their work. Continue reading
We cover a lot about how to start the business of your dreams, but what happens after you’ve been in business for a while? It’s typical for small businesses to go through a slump, or even, in some cases, to close. Here are three easy ways to avoid that, and start maintaining your business at the best of your ability! Continue reading
Estimated tax payments are one of the biggest shocks for new business owners. They know that they have to pay taxes, they just don’t realize they have to send in a check four times a year! Most businesses that expect to more than $1,000 – or $500 if the company is incorporated – in taxes have to make estimated payments to the IRS. And, since the next quarterly payment is due on September 15th, we thought it’d be a good idea to do a quick rundown of what estimated tax payments are.
What are estimated tax payments?
Exactly what they sound like. These payments are simply what you’d normally owe on your income. However, since you don’t have an employer to withhold and send in what you owe, you have to do it instead.
This post is brought to you by GoDaddy Online Bookkeeping the simplest way to manage your small business finances online. Sign up today for a less taxing tax time!
Remember your New Year’s resolutions? One of them was to get your life and business in order. Maybe you had a tough time with your taxes or you’re tired of always playing catch up with your books. Whatever the case, we’re now getting well into spring and it’s time to take those resolutions seriously.
But where to start? You could reorganize your office space, redo your business goals, or even finally spruce up your social media like you’ve wanted. However, in business, the success of your company comes down to the bottom line. That’s why we recommend paying close attention to your finances first.
Whether you’re a new entrepreneur or an old hand, money occupies a prominent role in your business. Failing to get – and keep – your finances in order can doom your company or consulting practice in the long run. While each entrepreneur has their own set of unique financial challenges, there are several areas where nearly all entrepreneurs can draw from a general well of wisdom.
1. Pay yourself first, Uncle Sam second.
No doubt, you’ve heard the expression “pay yourself first.” That’s good advice for everyone. However, entrepreneurs must remember that with no employer-initiated tax deductions to count on, they must also make provisions to cover self-employment taxes.
2. Hire pros, but know what they’re doing.
You didn’t go into business to spend hours working on spreadsheets. That’s why you hired a Certified Public Accountant. However, you should still understand the basics of keeping the books, if for no other reason than to be able to answer your accountant’s questions at tax time.
The New Year is the time when would-be entrepreneurs spring into action to get their companies started. One important piece of the entrepreneurial puzzle is getting funding for your business. As an entrepreneur, you face a challenging road, and one of the biggest challenges is finding a way to fund your company.
In the current economic environment, getting financing for a startup is very difficult. Many entrepreneurs go about this process the wrong way. They often have unrealistic expectations and think that getting funding will be quick and easy. Because of this, they go unprepared. Furthermore, they often pursue the wrong sources . For example, pursuing an angel investment won’t help you unless you are in a high growth industry. And, without collateral, most banks won’t give you a business loan regardless of how good your business plan is.
Because of this, more often than not they don’t get funded and their business fails. I know because I see this every day, but it doesn’t have to be this way. It’s a matter of reviewing your options and pursuing those with the greatest chance of success.
Before we review the list of financing options, I’d like to take a minute to dispel a common myth. Many entrepreneurs believe that only good ideas get funding. This is not true. Results get funding. And by “results,” I mean that the entrepreneur has already built a proof-of-concept business that is running at a small scale and producing results. Those businesses have a much greater chance of getting funded. Keep this point in mind as you seek financing.
By Mike Bertrand, Founder/CEO of MoneyStream - and as a special offer to MyCorporation customers, try it free for 90 days.
It’s a common joke among small business owners: I’m the CEO and the sales guy and the billing department and I make the coffee. As the founder of multiple successful software companies, including personal finance management service MoneyStream, I’ve certainly used that line more than a few times.
Of course, we don’t complain about making the coffee. Hey, someone’s got to do it. But there has to be a limit.
I’ve been fortunate to work with numerous entrepreneurs over the years. One of the pitfalls they fall into is the wasted timed on low-payoff work like running to get office supplies. Meanwhile, they short the activities that drive growth, such as negotiating a lucrative contract or persuading an existing client to grow their business.
Managing your personal and business finances is not low-payoff work. But it’s not your core competency either. Fortunately, you don’t have to be a CPA to properly manage your finances. Here are a few tips for saving time on financial management.