What can I do to prepare my small business for the generation to come?
The process of passing a family business onto the second generation is so difficult that not even a third of them survive. Beyond that, roughly half make it to a third generation. Read More »
How do I create a successful strategy for passing on my family business?
There are four key points to a successful business transfer, and they basically guarantee a transition for years to come within your family when implemented correctly. Here’s what your family must do: Read More »
Do I have what it takes to own and manage my own business?
First, think about why you want to start your own business and make a list. The thrill of being self-employed, the need for independence both financially and professionally, and the desire to use the most of your intelligence and talents are a few of the most frequent motivations. Read More »
What should the business strategy contain?
A business strategy, when applied to your company, should include an introduction, details about marketing, financial management, operations of the company, and a closing statement. Read More »
How do I know if a business based at home is good for me?
You have to base your decision to start your own business on something other than the desire to be your own boss, such as: knowing beforehand what it is going to take, a thorough evaluation of your personality, and willingness to go the extra mile. Read More »
Are there certain legal standards that will affect my home based business?
A home based business is affected by many of the same laws that apply to normal companies. Read More »
How can I prevent cash flow problems from hindering my small business?
One of the main reasons small businesses collapse is they have a poor cash flow strategy. The most common reason for this is that many small business owners do not have a grasp on basic accounting principles. You should learn the basics to maximize your cash flow. Read More »
What can I do to develop a better business cash flow?
There are several options for increasing cash reserves: Read More »
Is a cash reserve necessary in my small business?
It is important to have sufficient cash on hand to pay for expenses and emergencies. Cash beyond this should be put in a manageable, low-risk, interest bearing account, like a savings account, Treasury bill or short-term certificate of deposit.
Choosing a Professional
Should I hire an attorney?
It is necessary to hire an attorney for some disputes that require a lot of time. Having an attorney makes you more prepared, but you may also hire one for a significant business transaction. If there is a problem where the court is concerned, it is advisable to hire an attorney. Read More »
What process do I follow to handle the dispute by myself?
The use of letters and negotiation solves many disputes without the need of an attorney. Arbitration or mediation may also be used. There are legal self-help manuals and conferences that can aid in resolving disputes. Read More »
What method should I use to find a good attorney?
Speak with friends, relatives, clergymen, social workers or your doctor for their opinions. You can also use the referral lists that are compiled by the Bar Association. Read More »
What should I ask my possible lawyers?
Before beginning a consultation, the following questions should be asked: Read More »
Is a certain fee agreement better for me?
The basic rate for legal services depends on location. Based on your knowledge of the fees, a “fair” fee should be selected. Here are a few factors that play a role in the decision: Read More »
What can I do to save money on legal fees?
Bear in mind that attorney fees are usually negotiable even though you will not be asked to bargain over the fees. The following are a few tips to make sure you save the most money possible: Read More »
Do I need to know anything specific about employee benefits as a small employer?
The employer must pay for certain legal benefits and insurance coverage such as Social Security, unemployment insurance and worker’s compensation. Read More »
Are there different types of medical plans for employees?
There are two options: a fee-for-service plan, or a pre-paid plan (commonly referred to as a Health Maintenance Organization, or HMO). Read More »
What is a preferred provider organization (PPO)?
A network of doctors and/or hospitals that has contracts with a particular health insurer or employer that will give health care to employees at lower than the market rate. This offers a broad range of health care providers. Read More »
What is a health maintenance organization (HMO)?
Health care that is provided through a network of hospitals and doctors is a health maintenance organization (HMO). The benefits usually include preventative care, such as physical examinations, weight control and stop-smoking programs, baby care and immunizations. Read More »
What are the typical disability benefits provided to employees?
If an employee cannot work due to illness or accident, the disability plan gives him/her income replacement. These defer from worker’s compensation as they pay benefits for non-work related illness and injury, and can be either short-term or long-term. Read More »
Employees have what kinds of life insurance plans available to them?
The beneficiaries of an employee may collect death benefits from life insurance if the employee dies during their working years. The two main kinds of life insurance are: Read More »
What do I need to know about self-insurance?
Self-insurance means the business will pre-determine and pay a portion or all of the expenses of employees in ways similar to traditional health care providers. The funding comes from a trust or reserve account. Read More »
Do I need a “cafeteria plan”?
With a “cafeteria plan”, money which would normally be used as taxable salary is used, normally tax-free, for services that are necessary like health or child care. This saves the employee income and Social Security taxes. Read More »
For my business, what types of records are important to keep?
A crucial aspect of your business success depends on thorough and accurate financial record keeping. Accurate records help to provide information to operate efficiently as well as allow you to identify all your business assets, liabilities, income and expenses. This data will help you locate both strong and weak cycles of your business. Read More »
What should I know about automating a portion or all of my business?
First, you need to have a clear understanding of your company’s short and long-term goals. Consider the disadvantages and advantages to a computer, as well as what you want to achieve with a computer. Read More »
How can I guarantee that the computer system I’m using is right for me?
Selecting the right programs, choosing the right equipment and implementing the diverse applications are factors to consider when you computerize your business. There are three common types of software. Read More »
What can I do to successfully implement the new computer system?
You will come across problems when implementing computer applications, but correct planning can make the process smoother. Read More »
Travel and Entertainment
May I deduct meal expenses when visiting clients out of the office?
That is not common. Normally, you can only deduct the cost of a meal when away on a business-related trip or gone overnight.
Only 50% of the cost of the meal including the tip is allowed in the deduction.
Do I need to report employer reimbursements for travel, entertainment and meals?
If you give back any excess reimbursement, provide your employer with a detailed expense report and meet other requirements. There is no need to report the reimbursement or to deduct the expenses. Read More »
Are there limits on deductible entertainment, travel and meal costs?
Although there is no specific dollar limit, expenses should be ordinary and necessary and not over-generous.
The deduction cannot exceed 50% of the cost of business entertainment and meals.
For skyboxes and luxury water travel, there are other specific limitations.
May I deduct living expenses while away from home on temporary assignment?
Because temporary work site living expenses are separate from home travel expenses, they may be deducted. Read More »
Which expenses are deductible when I am traveling away from home?
There is a broad range of expenses that you can deduct while traveling. The most common are as follows: Read More »
Are there travel expenses that cannot be deducted?
The travel expenses below cannot be deducted:
- Travel as education
- Looking for a new job in a different field or for a new business site
- The cost of transportation between your home and the work site unless your home is your business headquarters.
Business entertainment — what can I deduct?
The conditions and limitations for business and entertainment deductions are the following: Read More »
How do I document my entertainment and travel expenses?
If your employer is reimbursing you for your expenses, you only need to prove them to him/her. To do this, submit a written accounting to the employer and return any excess amounts. Read More »
Marketing and Pricing
How can I be certain that my small business product or service will be marketable?
To determine where and how you can successfully sell your product or service (and at what price), you will need to use one of the most critical elements of business planning — market research. This includes interviewing potential suppliers and investigating your competition and consumer base. Read More »
What questions are appropriate to ask in market research?
You will want to learn about the consumers’ location, needs and resources, and what they can afford. Significant questions (can you compete effectively in price, delivery and quality? Where can the demand be created?) should be addressed. Read More »
When setting prices for my products or services, what should I consider?
There are different individual costs for each component of your service or product. Be sure to analyze every component of the product or service’s total cost. Upon completion of the analysis, prices can be established to maximize profits and eliminate deficit services. Material, labor and overhead costs are included in the cost components. Read More »
Business Forms of Organization
Will some types of business organization or entity limit my liability to business creditors?
Yes. Limited liability companies (LLCs), limited partnerships, limited liability partnerships (LLPs) and corporations are the most common forms. General partnerships and sole proprietorships don’t restrict owners’ liability, whereas limited partnerships limit liability of some partners (such as limited partners) and not others (like general partners).
How can I avoid the “corporate double tax” and what exactly is it?
A “corporate double tax” happens when a business corporation (or an entity that is treated as a business corporation for tax purposes) pays a federal tax on its income, and then its owners pay another tax as they collect corporate profits. Read More »
For tax purposes, what type of business entity is best?
Each business is different, although to save on overall taxes a “passthrough” entity is generally best, as it eliminates tax at the entity level. Owners of passthrough entities are taxed on the profits of the entity that they own. Owners are able to make tax deductions for startup and operating losses, against the income from other businesses or investments.
What entities are considered to be “passthrough”?
The leading “passthrough” forms are limited partnerships, LLCs, LLPs, S corps, sole proprietorships and general partnerships. You have a lot of power over whether or not your entity is treated as a passthrough for federal tax purposes. Read More »
To avoid double tax and limit my liability, which entity should I choose?
Assuming you don’t select to have them function as corporations, the following types will avoid double tax and limit liability: LLPs, LLCs, and limited partnerships (only for the limited partners). An S Corporation is usually another option. If you are a sole owner, the only option is an S Corp (or in certain states, LLCs).
Why are limited liability companies (LLCs) so great?
Limited liability and passthrough tax treatment are both combined in LLCs. This provides benefits that are unavailable from S Corps. The main benefits are: Read More »
If my business is a professional practice, what are the special conditions?
A major concern is the limitation of liability, especially malpractice liability. Against the liability of your own malpractice, there is no entity that will protect you. Read More »
If I change my form of business organization, what are the federal tax consequences?
A change of entity is an event that may need to be carefully planned and implemented to avoid a taxable event. It also may have significant future tax implications. You should consult with a professional before making any changes or decisions to your business organization.
Is it necessary for state business entity rules to follow federal tax rules?
Bear in mind the differences between state tax law and state business law. Whatever tax status you select for your entity beneath the federal check-the-box system, keep in mind that you may be considered a different type of entity for state business law purposes. Read More »
What is the definition of a corporation?
A legal entity that exists independently of its owners is a corporation. When correctly filled out articles of incorporation are filed with the proper state authority and all fees are paid, a corporation is created.
There is a difference between an “S” corporation and a “C” corporation, what is it?
Every corporation begins as a “C” corporation and must pay income tax on the taxable income made by the corporation. Read More »
Is an attorney necessary to incorporate?
Obtaining a lawyer is not a necessity to incorporate (except in South Carolina, where an attorney’s signature is required). You can fill out and file the articles of incorporation by yourself in every other state. However, you should be completely briefed on all aspects of the law beforehand. Read More »
Is there a process for naming my corporation?
Take time to think about a name for your corporation. The most common rule for naming your corporation is that it cannot be misleadingly similar to a company that is already formed, but each state has their own rules. A suffix must be included in the corporation name such as “Incorporated”, “Inc.”, “Company”, and “Corp.” Each state has suffix standards of their own.
Are there benefits to incorporating?
Limiting your liability to the assets of the corporation is the primary advantage of incorporating. It is common that shareholders are not responsible for the debts or obligations of the corporation. Read More »
What exactly is a Registered Agent?
In the majority of states, a corporation is required to name a “registered agent.” The agent must be located in the formation state. The registered agent must be accessible during regular business hours to receive official state documents or service of process.
Do I need a specific number of Directors or Shareholders?
Most states permit one person to function as director, shareholder, and all officer roles.
Are there a number of shares of stock I should choose and at what par value?
You may select any quantity that you wish. The par value is either “No Par Value” or any dollar amount per share as you choose. In some states you must issue the stock for no less than the par value. Some states establish their fees from the amount of shares approved, multiplied by the par value.
What does EIN stand for and what is a Federal Tax Identification Number?
A Federal Tax Identification Number, which is also known as a Employer Identification Number (EIN) is required for each corporation so the IRS may track payroll and income taxes paid by the corporation. Just as a Social Security number, an EIN is used for almost every function of the business.
After I incorporate, what do I do next?
If your director(s) have yet to be designated in the articles, you will need to hold your first shareholder meeting to select your director(s). After that, you will need to hold the first organizational meeting of directors. During this meeting, you will hold elections for officers, approve the company’s bylaws and issue your stock, as well as other actions.
Limited Liability Companies
Who should establish an LLC?
If you are worried about personal exposure to lawsuits that arise from your company, you should think about forming an LLC (Limited Liability Company). Read More »
Is an LLC or an S corporation better?
Even though the special tax status of the S corporation does away with double taxation, it doesn’t have the elasticity of an LLC in distributing income to the owners. Read More »
What does an LLC Operating Agreement signify?
It allows you to structure your financial and working relations with your co-owners in a way that best fits your company. Your co-owners and you determine each owner’s percentage of ownership in the LLC, his/her rights and responsibilities, his/her share of gains or losses, and what will become of the business in case one owner leaves.
Is it necessary to have an Operating Agreement?
It is possible to have a written operating agreement in most states, but you are not advised to begin a business without one. The following are a few reasons why an operating agreement is necessary: Read More »
Is it necessary to have LLC meetings?
Failure to have shareholder or director meetings can cause the corporation to be subject to alter ego liability, although this is not typical of LLCs in most states. For example, in California the failure of an LLC to have meetings with members or managers is normally not regarded as grounds for enforcing the alter ego doctrine if the LLCs Articles of Organization or Operating Agreement do not state the requirement of said meetings.
Are there exceptions to Limited Liability?
Even though LLC owners enjoy the benefits of limited personal liability for many transactions of their business, it is important to note that this protection is not absolute. The owner of the LLC may be held personally responsible if he/she: Read More »