Tag Archives: finance

S is for S-Corporation

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For this week’s post we will get to know one the incorporation options a bit better and learn what it has to offer a new entrepreneur: the S-Corporation!

First off, what is an S-Corporation?

Well, an S-Corporation (also known as the S-Corp) is a special type of corporation that draws its designation from subsection S of the tax code. To start an S-Corp, a small business owner starts a C-Corporation in the state where it is headquartered, then files for S-corporation status with the IRS. While an-S Corporation is similar to a C-Corporation, it has different income and self-employment tax regulations. 

One of the biggest and best differences between an S-Corporation and a C-Corporation is the pass through taxation. Like an LLC, an S-Corporation does not pay taxes at the corporate level. Any income or losses are reported only on the personal income taxes of the business owner’s. As a result, this avoids the issue of double taxation that affects C-Corporations. Since net losses are also passed through, the individual shareholder may be able to reduce his or her tax liability by offsetting other income with any S-Corporation losses.

Though, there is an important caveat to keep in mind: 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.”

If pass through taxation sounds good to you, consider the S-Corporation for your new business. And no pressure, if you end up deciding you’d like to stick with a regular C-Corporation after declaring your business as an S-Corporation, you can easily drop the S-Corporation status with the IRS.

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How to Find Investors for Your Business Idea

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Having a great business idea is just the first step. Getting funding for your new company is the more challenging task that follows up. Often, individuals are discouraged from making their dream a reality because of the limited funding opportunities that are available.

It is possible to find investment for a business idea, even if the economy is slow. Presentation of your idea and having a highly professional business plan will show potential investors that you are serious and that you have what it takes to succeed. The following tips will help you present yourself well and capture the interest of potential investors.

A Great Business Plan is Prerequisite Number One:
Investors are busy people. They have many years of experience in corporate management and they can immediately recognize people who are serious about starting a business and the ones that are making amateur attempts.

To impress a potential investor, you need a solid business plan. Good business plans require a lot of research and hours of preparation. You have to be familiar with the market, with your financial needs and with the specifics of the product that will turn it into a success.

A poorly written business plan will be discarded immediately, which means that your business attempts end before you will have even gotten the chance to prove yourself.

Offer Something Unique and Market-Worthy:
Even if you have the greatest product idea, you may still find it difficult to get funding. The investors will analyze the idea’s revenue-generation potential.

Choose the right market niche. It has to be relatively empty. Trying to compete against major, well-established players will make it difficult for you to get a market share and to begin making money.

Great product ideas are the ones that can be sold easily. Think about practicality and about finding the right target audience. This is the product development you will need to follow, in order to attract investment.

Have Realistic Expectations:
Having realistic expectations and understanding that failure is a possibility will help you negotiate and present your business plan in a solid, professional manner. Investors avoid working with dreamers. Although having a grand vision is great for a start, you will have to learn how to keep it real.

Just think about it! Investors meet dreamers and new entrepreneurs on a regular basis. Realistic expectations and understanding of business processes will help you set yourself apart and achieve the main goal – finding funding for your business idea.

Learn How to Negotiate:
Finding investment for your project will often mean that you will have to negotiate. Learn how to do it in a way that does not alienate people and that helps you achieve your investment goals at the same time.

Very often, interested investors will be willing to offer something but their conditions may be tough. You will have to talk it over, reaching an agreement that benefits both of the parties involved.

Good communication and negotiation skills will help you create a great first impression but they will also keep the integrity of your business idea. The experience that investors have could work against you and this is why you need to have an idea about the compromises you are willing to make and the parts of the process you will remain inflexible about.

Maintain a Healthy Amount of Skepticism:
Understand one very important part of the investment seeking process – if something appears too good to be true, than it probably is a trap.

Investment scams target young, inexperienced entrepreneurs. You could fall for such an offer, finding it impossible to recover and regain your financial integrity.

Refuse investment offers that have very unusual demands, that will bind you for many years to come and that will take away your financial freedom. If you have some concerns, talk to a forensic accountant about the investment option. The forensic accountant will do research instead of you, figuring out whether the funding is legitimate or a fraud scheme.

Author Bio: This is a guest post written by Nick Anderson. He is an experience finance writer and works for Forths Forensic Accountants.

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6 Things Small Businesses Almost Always Forget To Insure

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Given the stress of starting and running a business, it’s not surprising that small business owners often forget about some lesser-known types of insurance, or try to cut corners by foregoing the basics. Without the right insurance coverage, your business could lose a ton of money in an instant with nothing to back it up financially. Here are some areas small businesses almost always forget to insure.

1. Business Interruption Insurance: Because Disasters Wreck Your Bottom Line

Could your business survive a week or even a month of inactivity? Most can’t take that much lost revenue. Business interruption insurance protects you from losing money when your business cannot operate for a certain period of time.

If, for instance, your building was damaged, business interruption insurance would pay for areas including:

  • Lost profits
  • Expenses that you have to pay even though you’re not operating
  • The cost of relocating temporarily
  • Any extra expenses

2. Commercial Property Insurance: Because Quality Real Estate Is Hard To Find

Appearance is everything when it comes to business and advertising. For any business, it takes time to find the perfect office space. The commercial property is also probably the biggest expense for a small business. You should do everything you possibly can to protect your investment.

Commercial Property Insurance similar to home insurance will cover any unforeseen damage done to your space. Whether Mother Nature caused the damage through a disastrous flood or if an enraged employee takes it upon him or herself to remodel your lobby area. Your property insurance will cover all the sustaining damages. There’s a couple of different types of commercial property insurance so be sure to talk things over with your insurance broker.

3. Fraud Insurance: Employer Should Exercise Caution In Hiring

What would you do if an employee defrauded your company for thousands or even millions of dollars? You could press charges and sue the employee to get the money back, of course, but lawsuits can take years of litigation.

Fraud insurance protects your business when a trusted employee uses his or her position to steal money by being misleading about a work-related injury. Or if an employee continues to work after receiving benefits from a claim. This type of insurance is generally referred to as, claimant fraud. Improper claimant fraud can easily cost a small company millions, which in return can force trustworthy employee’s to pay higher insurance premiums. Since there’s not a sure way to know if an employee could potentially commit fraud. Employers should take precaution and look out for certain behaviors when a claim is filed like, combativeness, if they are hard to get in touch with, two versions of the same accident and no actual witnesses at the scene of the injury. In an office space filled with around thirty people, it’s a slim chance anything happens with zero witnesses.

4. Startup Insurance: Because Starting a New Business Can Be Scary

It takes a lot of courage to start a new business. According to some researchers, 90 percent of businesses fail within five years. If you’ve put your life savings into a failed business, you could emerge without anything to show for it.

Startup insurance protects you from this loss. You still face plenty of perils when you start a small business, but startup insurance lessens these risks. Entrepreneurs who have no knowledge of the insurance industry should take the extra time to find a seasoned insurance broker in your business industry to assist with purchasing the right coverage package. A great insurance package should include a few benefits that will not only benefit their employee’s, but the employer as well. Such as a health reimbursement arrangement that potentially covers all of your employees medical bills and rolls over any unused funds at the end of the year.

As a business owner you should view your company as your child. If you choose to make your company available to the public without any insurance, it’s similar to driving around town with your kid in a car without seatbelts. Without insurance you make your company more vulnerable to failure.

5. Health Insurance: Because You Can’t Run A Company With The Flu

New business owners need to save money wherever they can. But that doesn’t mean you should gamble with your health. It’s important for small business owners to purchase health insurance for themselves (assuming they don’t get it through their spouses’ employers).

Since health insurance is 100 percent tax-deductible, it doesn’t cost as much as you think. And it’s a smart move that could save your business and your life.

6. Special Event Liability Insurance: Because Company Picnics Can Be A Liability

Every business should have general liability insurance. That’s a given. If you plan to hold special events, though, you might need additional insurance to protect you.

The specifics vary according to the kind of event you host. Will you hold the event on company property? Do you plan to serve alcohol? What kind of activities will you have at the event?

These and other factors will play a role in the kind of special event liability insurance that you need. It isn’t as simple as, say, filling out a homeowners insurance quotes page, so you may want to talk to your insurance agent personally.

Small businesses need to protect themselves from the unexpected, and the world is full of unexpected events. What other types of insurance policies should small businesses purchase? Does your industry require you to carry specific types of insurance not mentioned here?

Author’s Bio: Kristina Jackson is a passionate freelance writer in technology, business and design. When she’s not busy writing, you can find her hanging out with her puppy Louie. Or watching online videos of Paula Deen. 

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P is for Protecting Your Personal Assets with a Professional Corporation

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The name of the game this week is “Professional Corporation,” which happens to help protect your personal assets. That’s right, we have a triple “P” ABCs of MyCorp post, so buckle up for some serious alliteration.

A Professional Corporation is one of the more common types of entities for business owners to choose. The paperwork is a bit on the extensive side (especially compared to an entity like a Sole Proprietorship) but all that paperwork is well worth it because, as our title suggests, a Professional Corporation protects your personal assets.

A Professional Corporation does this by separating you (and your personal assets) from your business. This means that if your business were ever in deep trouble and owed some big time money, you wouldn’t be obligated to hand over your house or other assets.

This can make accounting trickier than if you opted for a simpler entity but, like I said, the protection makes it well worth it. You’ll also be paying taxes based on what you choose to pay yourself from your business. This means more money towards growing your business, and what business owner doesn’t want that?

So if you’re doing some entity shopping, be sure to keep the Professional Corporation as an option, especially if you’re looking for something protective.

 

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Guest Post: How to Beat an Economic Downturn

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Although governments across the globe are beginning to appreciate the value the small businesses bring to an economy, this realization has come at a time when such ventures are experiencing immense financial difficulty. From 2008-2010 during the years of global recession between 2008 and 2010, a significant number of small businesses were lost to an unforgiving economic climate, which in turn led to a stagnated employment sector and diminished productivity.

This experience has taught invaluable lessons to firms that survived, however, with the result being that a number of small businesses are now far better equipped to consolidate their venture as the economy falters. The key to remaining solvent during a recession lies in implementing an integrated strategy for growth, and one that strives to cut costs while also laying foundations for the creation of new and independent revenue streams.

Cost Cutting: Where to Make Significant Financial Savings for Your Business

When addressing opportunities to make financial savings, the first thing to ensure is that your potential strategies do not compromise the quality of your product or service. It is important to focus on non-strategic or operational aspects of your business when looking to reduce costs, as this can be done without impacting upon your core business vision. Your energy usage and choice of supplier provide excellent examples of where money can be saved effectively, so long as you are patient and willing to compare a comprehensive range of business prices.

While you are implementing these money saving strategies, however the sharper business minds should also be working hard to diversify a venture and create sustainable revenue streams. This may present numerous options depending on the exact nature of your business, but a key example would be for a traditional retail outlet to develop a remote store front and sell their products online to a global consumer base. This may not seem like the most innovative business solution, but it is a simple method through which to add value to a commercial venture.

Some companies have tried to beat the economic downturn by consolidating with other companies. It may seem daunting joining your business in partnership with a competitor but if the both of you are struggling, why not combine the workforce and skill sets offered so the both of you come out on top? After finances have settled and the economy has become stable, each firm can go its separate way to carry on successfully as a solo enterprise.

The Bottom Line

While the current economic climate may be largely oppressive, there remains ample opportunity for businesses to consolidate and grow their operation with. By making a commitment to learn from your experiences when trading during a recession and striving to save money while developing additional revenue streams, it is possible to break free from the constraints of financial hardship and experience organic commercial growth.

Author Bio: This post was contributed by Tom Cafferkey of Business Electric. To discover how your business can access a more affordable energy supply, visit us today!

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Guest Post: How to Find Government Grants for Businesses

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With access to capital being so tight right now, grants are a hot topic among cash-strapped entrepreneurs looking to start or expand a business. Each year, the United States government supports businesses by providing billions of dollars in grants administered by 26 different federal agencies. More than 1,000 business grant opportunities are offered through the federal government each year and thousands more are offered through state and local agencies.

Out of the $600 billion in grants the federal government gives out every year about 5% ($30 billion) are awarded to businesses. The rest go to states, governments, governmental agencies, nonprofit organizations, universities, schools and school districts. When the federal government does provide grants directly to businesses, most are awarded to support research and development activities—primarily related to technology, energy, healthcare, public safety and criminal justice, among others.

Although 5% may not seem like a lot, it still amounts to $30 billion in grants that the federal government does award to businesses each year. Though you won’t find any federal grants specifically for starting a business or paying off debts, the range of business activities that federal grants support is broad enough on its own. As a grant writer myself, recent examples of funded business grants I have written included a $1 million grant to develop a renewable energy technology and a $9 million grant to commercialize a new concept in computing (U.S. Department of Energy). Other examples of awarded business grants include $91 million to develop solar PV cells (U.S. Department of Energy), $1.1 million to develop a communications infrastructure (U.S. Department of Agriculture) and $800,000 to support job skills training for rural populations (U.S. Department of Labor).

Before you begin looking for a grant for your business, keep the following facts in mind:

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Guest Post: How to Deal With an Angry Teenage Customer

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Summer is here, and with this wonderful, warm season teens descend upon all kinds of businesses, flush with extra cash and time to kill. Teenagers make great customers for businesses, but when they can’t always get what they want, trouble can easily start. So how do you deal with angry teenage customers without losing your cool? Our guest poster Andrew Schrage, co-owner of Money Crashers Personal Finance, stepped in today to give us tips on how to keep calm and carry on with your youthful summertime customer base.

When dealing with an irritated teen customer, you have to first remain calm. This can be difficult, but it’s important to keep your cool to prevent the situation from escalating.

Next, identify the problem. This can also be a challenge, especially if the teenager is more intent on causing a scene than actually having a problem resolved. However, you must do your best to calm the person down. Explain that you’re there to help, and that no one is trying to rip them off. Far too many consumers think the odds are stacked against them when registering a complaint with a business. Any savvy business owner knows that excellent customer service is a cornerstone to the success of their business, and dealing with unhappy consumers can definitely put your resolve to the test.

Once you understand the problem, work toward finding a quick and satisfactory solution that satisfies both sides. Teenagers just want to be heard, and aren’t necessarily looking for any monetary compensation. If they are, and their complaint is at least somewhat legitimate, consider offering them a refund or store credit. By taking an initial loss, you may earn yourself a repeat customer.

Follow Money Crashers on Twitter @MoneyCrashers and find out more at moneycrashers.com.

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Guest Post: What It Takes to Run a Business

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By David Nilssen, CEO & Co-founder, Guidant Financial

Before you make the leap into business ownership, it’s a good idea to ask yourself some tough questions to make sure you’re up to the job:

1) Are you self-motivated?

2) Are you organized?

3) Are you proficient in finance, accounting, sales, marketing and customer service?

4) Are you willing to put your business first?

If your answer to any of these questions is a firm “no” you may want to re-think your plans for entrepreneurship. If not; keep in mind there is more to starting a business than enjoying the excitement and joy of potential success.

As a leader, you must be willing to accept that there are a host of disadvantages that also come with the territory. These include, but are not limited to: risk; responsibility; pressure; fear of failure; frustration; long work hours; fewer job benefits; less time with family and friends; income fluctuation; possible loss of investment.

If you’re still enthusiastic about starting a business after reading that laundry list of negatives, you may just have what it takes to tackle the business world!

As a first step, take note of all of the business skills you’ll need to succeed:

Finance

Even if numbers aren’t your thing, you must have the intent to hire professionals to do a good job on your behalf, and the knowledge to interpret their progress. If you don’t understand how to read balance sheets and financial statements, now is the time to take a crash course.

Management

Good managers need the skills to create a plan of action and see it through to execution. Before the plan is created, they should schedule the tasks it will take to get there, such as deadlines for completion, cost estimates and assigning responsibilities among staff.

Leadership

Entrepreneurs need to be motivators, disciplinarians and role models. At the end of the day, leaders shouldn’t command respect; they should earn it by demonstrating the skills needed to excel in these ways.

Marketing

Getting the word out about your product or service is vital. You don’t necessarily need to be an expert in writing, design or social media to be able to market effectively, but you do need to have a basic understanding of what makes an effective marketing piece so you can delegate others to create materials on your behalf.

Human Resources

If you’re planning on managing a staff for your new business, you’ll need to become good at identifying the skills and personalities of those who will do the best work for your organization. Once they’re on board, you’ll need to become well-versed about employment regulations and best practices, and establish clear employee policies. Remember: employees can be your greatest asset or your most damaging liability.

Customer Service

No business survives without customers, so it should be top priority to treat them well. Put simply, the old saying “under-promise and over-deliver” should become common practice.

David Nilssen is the CEO & Co-Founder of Guidant Financial. Read more tips about becoming a successful entrepreneur in his book, Making the Jump into Small Business Ownership.

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Free Tax Help from 1(800)Accountant!

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That April 17th tax deadline is just four weeks away! Most small business owners know how important it is to get their taxes finished early, but we want to make sure the small businesses we’ve helped create aren’t simply just sending in the necessary forms and hoping for the best.

We want you to know how to maximize every single deduction, decrease any chance of an IRS audit, and keep as much of your hard earned money as possible. With that in mind, we’ve teamed up with 1800Accountant.com to give everyone reading our blog and using our services a free business tax consultation. There are no obligations to stick with 1800Accountant if you do not want to, and you won’t regret setting up a consultation with their team of licensed CPA and accountants to help make sure you’ve followed a sound tax strategy.

If you’re interested, simply click here or on their logo above to access the webpage where you can sign up for your appointment with 1800Accountant.com. As we said before, it’s completely free, there are no obligations and it is a great way to get some professional advice regarding your small business’s tax obligations. If you’d like, you can also call them at 1-800-822-6868; just be sure to mention MyCorp!

Don’t miss this opportunity for free tax help, and remember to sign up as soon as possible to make sure you get an appointment slot that will fit your schedule.

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Making Sense of Retirement Plans

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As retirement plan sponsors, small businesses assume many responsibilities regarding their employees’ path to retirement, often acting as fiduciaries. Over the next year, any employer offering such plans faces new regulations from the Department of Labor. The rules, known as 408(b) (2), were originally scheduled to go into effect this past July, but have been postponed until April 1, 2012. The rules aim at providing greater transparency to the retirement industry as a whole, through documenting the fees participants pay brokers and retirement plan contractors for managing their accounts.

Retirement plans can be a burden to small business owners. This is due to the fact that upon becoming a plan sponsor, owners become a plan fiduciary and therefore must act in the sole interest of their participants. Owners cannot make a profit off of retirement plans. Any gains must be reimbursed to the plan.

These gains can be detected by the Department of Labor. Due to the April 1 start date of the rules these audits have been greatly increased. Although this might cause headaches for some small business owners, having a healthy retirement plan is still very important. Providing a retirement plan is a great way to ensure longevity among current employees. This is also a great way to attract bright new employees. There are two steps small business owners should take in order to safely navigate the retirement plan waters.

First, employers should understand what type of plan they provide, or want to provide, to their employees. There are two main types of plans, defined benefit and defined contribution plans. A defined benefit plan, funded by the employer, promises you a specific monthly benefit at retirement. The plan may state this promised benefit as an exact dollar amount, such as $100 per month at retirement. Or, more often, it may calculate your benefit through a formula that includes factors such as your salary, your age, and the number of years you worked at the company. For example, your pension benefit might be equal to 1 percent of your average salary for the last 5 years of employment times your total years of service.

A defined contribution plan, on the other hand, does not promise you a specific benefit amount at retirement. Instead, you and/or your employer contribute money to your individual account in the plan. In many cases, you are responsible for choosing how these contributions are invested, and deciding how much to contribute from your paycheck through pretax deductions. Your employer may add to your account, in some cases by matching a certain percentage of your contributions. The value of your account depends on how much is contributed and how well the investments perform. At retirement, you receive the balance in your account, reflecting the contributions, investment gains or losses, and any fees charged against your account. The 401(k) plan is a popular type of defined contribution plan.

Second, small business owners should become familiar with the new rules. Come April 2012, business owners, as plan sponsors, will be responsible for:

1. Identifying all service providers working for their employees’ retirement plans, including part-time workers, contractors and sub-contractors.
2. Have these workers put all of the duties they are performing for the plan in writing.
3. Have them put in writing whether or not they accept fiduciary responsibility.
4. Find out how much these workers make either from the retirement plan company or assets.
5. Make sure these fees are reasonable for the services being provided.

Providing a solid retirement plan will create stability and contentment both among small business owners and their employees.

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