Tag Archives: savings

401ks for Entrepreneurs: What You Need to Know

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Starting your own business as an entrepreneur puts you at significant financial and personal risks. However, there is one risk – not saving for retirement – that you don’t have to subject yourself to. Whether you run your business alone or have a few employees at your back, there is a 401k plan available that can help you ensure that your golden years are stress-free.

Sole Proprietors

Just because your business is a one-person operation doesn’t mean you (and your spouse) have to miss out on the benefits of saving for retirement with a 401k account. You can set up an individual 401k (also known as a one-participant or solo- 401k) plan through your bank or another financial institution in order to contribute pre-tax funds into a savings, mutual fund, or money market account of your choosing.

As both employer and employee, you can make two kinds of contributions to your 401k account.

  • As employee, you can defer up to 100% of your earned income into your account, up to $17,500 per year (or $23,000 if you are over age 50).
  • As employer, you can contribute a further 25% of your earned income into the account. The total contributed amount cannot exceed $51,000 per year.
  • These contribution limits are current as of the 2013 tax year. The limits are now indexed to inflation and will increase in $500 over time.

As with most other retirement plans, there are withdrawal limits. You may be subject to taxes up to or exceeding 10% of the withdrawal amount for withdrawals made before age 59 ½. However, when setting up your individual plan, you can tailor these limits to allow you early access to your funds through loans or hardship distributions.

Business Owners with Employees

Offering a retirement plan as part of your employee compensation plan can help you attract talented and qualified employees to work for you. In many cases, you can offset offering a lower salary by including good benefits, including a 401k plan. You can deduct the cost of the plan from your business’s taxes each year, and your employees can put aside tax-free money in preparation for retirement.

  • A traditional 401k plan enable employers to make contributions on behalf of employees, match employee contributions or both. Employees can make their own contributions through pre-tax payroll deductions.  Employers are subject to annual nondiscrimination testing that ensures benefits are proportional among all employees. Employer contributions are subject to a vesting schedule (the length of time that must pass before employees attain full ownership of employer contributions).
  • A safe harbor 401k plan is similar to a traditional 401k. The differences include: employer contributions are fully vested when made; it is subject to far fewer complex tax rules, making it less of a burden on employers; and it is exempt from nondiscrimination testing.
  • An automatic enrollment 401k plan allows employers to deduct a certain amount from employee wages and contribute it to a retirement plan on the employee’s behalf. The employee must choose to opt out or contribute a different amount than that chosen by the employer.
  • The SIMPLE 401k plan was created specifically to make setting up employee retirement accounts easier for small businesses (those with fewer than 100 employees who receive at least $5,000 in compensation each year). It is not subject to nondiscrimination testing, and is a more cost-efficient way to offer retirement benefits to your employees.

While you can certainly set up your 401k accounts on your own, it’s best to ask the advice of your lawyer or business banker before making a final decision. An expert can help you make sure that the 401k you choose is right for your business’s financial plan, right for you and your employees, and easy to administer.

Author’s Bio: Megan Webb-Morgan writes for B2B lead gen resource, ResourceNation.com. Follow them on Facebook and Twitter.

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Guest Post: Should Your Small Business Buy or Lease Commercial Real Estate?

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For most businesses, having a physical location to meet, work and operate in is essential to the success of the business. One of the first steps in acquiring property for a small business is the decision to buy or lease office space. There is no right or wrong answer here as every business faces their own set of unique factors and budgets to make this decision with.

Whether your business is stable and established or still quite green, leasing or buying an office space will require that you consult an advisor who specializes in bookkeeping services because they can help you determine how much you can afford to spend on property as well as the cash available you have to use for scouting locations with. Below are a few more matters to consider when making your decision to buy or lease real estate for your business:

New Businesses:

If you are a small business who is new to the game and still expanding in terms of location and staff, then it is in your best interest to lease commercial real estate. Your goal should be to find a place that is in a good location, functional for the business, and, most importantly, available at a reasonable rate. As a new company, your budget will be smaller to work with, and you do not want to sink all of your available cash into high payments on a lease.

When you have found a great place to lease, make sure that the terms of your lease are flexible. Month to month payments are the easiest terms to work with offered, but annual renewal is another great option. Whatever you may decide, make sure that your terms do not exceed more than 5 years. This allows you freedom to look into larger properties as you continue to grow and establish your business.

If your small business is just taking off and you have the luxury of working with a larger budget, then you may consider buying instead of leasing. You should only do this if you have accumulated the amount of quality staff that can effectively deliver results based on the business coming in. If this is not the case, then leasing is still your best option.

Established Businesses:

Once you have an established and successful business, purchasing real estate becomes a more practical option. Pending that you are not searching to expand your staff, this is a great choice to minimize the hassle in finding a new place in the future. By purchasing property, the payments will eventually cease which is much unlike a lease where payments are continuous and property ownership is never granted to the lessee.

The purchase of property is an investment; so you must take into account your risk tolerance and financial commitments. Consult a financial advisor to be able to come to a decision on whether to purchase or lease and the price range that you can afford.

Remember, property whether purchased or leased is an investment. Take some time to look at various locations and then make a list of pros and cons for each area. After you have done this, pick the place that you feel fits your company best as well as your customers and employees.

And start saving early! This gives you plenty of time to accrue the down payment necessary to purchase the building and helps build a good relationship with your banker, so they are more likely to be supportive when it comes time to ask for financing. If you decide not to purchase, then you’ll have a strong savings established to help start making payments on a lease.

Bert Doerhoff is owner and founder of Accubiz, a firm providing accounting services out of Jefferson City, Missouri. Accubiz specializes in small business accounting, bookkeeping service, and wealth management. Prior to opening his own firm, Doerhoff worked for Peat, Marwich, Mitchell & Co, which is currently known as KPMG. Frequently, he speaks at state level and national conferences on various business management topics.

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Taking Your Business to the Top!

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What inspires big business leaders and entrepreneurs? How do the best leaders at the top, the Donald Trumps of the business world get their drive and motivation? The beginning of a new year is a great time to get your inspiration on and grow your business. How do you do it and not lose sight of what you started along the way? These 4 tried and true tips are the ultimate to keep in mind that successful entrepreneurs everywhere use to get to the top!

1. Set Football Field Goals

Picture a football field. The goal is to run the ball to into the end zone and score, right? Along the way you hit different field markers, 5 yards, 10 yards, 15 yards and so on. You can’t get to the end without passing these markers. The same rings true with goals. What about a Hail Mary you ask? The receiver must run past and the ball must fly over each yard before they reach their destination.

There really are no short cuts when creating goals. Consider making smaller goals, or check points, you can reach on the way to your bigger goal. Many successful entrepreneurs do the same. Take sales, for example. If Apple hopes to do 2 billion more dollars in sales in 2012 than in 2011, you can be sure sales numbers will be monitored by quarter. Create a sub plan for your large business plan so that you can monitor your success. This way, if things aren’t working, you can fix it quickly and stay on track to achieving your bigger goals.

2. Think Outside the Box

Sometimes doing what you love isn’t enough to be successful. Consider taking your business to the next level. Think about ice cream makers, Ben and Jerry. According to businesspundit.com, the now-legendary duo decided to open a business after taking a correspondence course on the art of ice cream making. They discovered that just about the only college town without an ice cream shop was Burlington, Vermont. With $8,000 in savings and a $4,000 loan, they leased an old gas station in Burlington, purchased equipment, and began coming up with ideas for “unique” flavors. Twenty years later, the company was taking in $237 million in annual revenue.

What is unique about your business? What information, software, or recipes do you have that could make your business even better? Take a step back and try to look at your business from a different angle. Consider asking friends or customers for ideas or feedback. Business introspection combined with thinking outside the box will help you join the ranks of successful entrepreneurs.

3. Become an Athlete-Visionary

It might sound corny, but we believe that actually picturing success can work. Sometimes we have to step away from business in order to help our business. Many successful business owners attribute mind and body focus to their success. Our own CEO, Deborah Sweeney, is a spinning queen. She believes in a healthy lifestyle which therefore transfers over into a healthy business attitude. A healthy body leads to a healthy mind, therefore giving you a clear and focused head with which to make good business decisions. Focus on your goals, visualize success and make sure your body is in line with these thoughts and goals so that you can truly achieve success!

4. Listen, Don’t Hear

We are sure you know the difference between listening and hearing. Regardless of how long your business has been around or what type of business you have, there are businesses that have been around longer and that are far more established. When you turn on the morning news and hear information about Microsoft, Kraft, or even a successful mom and pop deli in New York, listen! You never know what tips you may pick up. Keeping your ear to the ground is crucial in terms of both staying current and continuing to be successful. Remember when your parents used to tell you to listen to your elders? The same lesson applies in business!

Creating a healthy and profitable business is no easy task. Take these tips to heart when it comes to taking your business to the top!

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