You Need a Team to Grow Your Business

You can’t do it all alone. When you look at the success of any individual or business, you quickly realize that they didn’t get there alone. They had help.

That help came in the form of accounting, sales, IT or any other areas that are important in running a business.

Many times, solo entrepreneurs start off on their own and keep it that way. And that strategy can work well for awhile. However, eventually they’ll hit a ceiling.

How does this occur? There are but so many hours in the day and but so many things they can be doing at one time. That’s where the team comes in. And with that team, comes a much better chance at success.

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Tax Preparation Firm TaxAssurances Celebrates Our 5 Year Anniversary!

I never just dreamed about success. I’m working for it. This is my start up story.

I remember when TaxAssurances was just a thought. I was supposed to start a franchise with H&R Block but it didn’t work out. Later that day I talked to a friend who told me that I could do it myself, and that’s where my dream began. December 1, 2011 TaxAssurances opened, and by January 2012 my dream was alive.

-Kolonji Murray

IRS Tax Filing Help & Advice On How to Pay Yourself When You Have a Business

People go into business to make money. Figuring out how to account for the money they make can be a challenge. Thankfully, the IRS has provided guidance on how to handle accounting for the money business owners make.

Here is the guidance:

The procedures for compensating yourself for your efforts in carrying on a trade or business will depend on the type of business structure you elect. Below are topics that frequently arise when new business owners ask the Internal Revenue Service questions about paying themselves.

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Corporate officers

An officer of a corporation is generally an employee, but an officer who performs no services or only minor services, and who neither receives nor is entitled to receive any pay, is not considered an employee. Refer to “Who Are Employees?” in Publication 15-A, Employer’s Supplemental Tax Guide (PDF).

Partners

Partners are not employees and should not be issued a Form W-2 in lieu of Form 1065, Schedule K-1, for distributions or guaranteed payments from the partnership. Refer to partnerships for more information.

Dividend distributions

Any distribution to shareholders from earnings and profits is generally a dividend. However, a distribution is not a taxable dividend if it is a return of capital to the shareholder. Most distributions are in money, but they may also be in stock or other property. For information on shareholder reporting of dividends and other distributions, refer to Publication 550, Investment Income and Expenses.

Form 1099-MISC or Form W-2

You cannot designate a worker, including yourself, as an employee or independent contractor solely by the issuance of Form W-2 or Form 1099-MISC. It does not matter whether the person works full time or part time. You use Form 1099-MISC, Miscellaneous Income (PDF) to report payments to others who are not your employees. You use Form W-2 to report wages, car allowance, and other compensation for employees.

Treating employees as nonemployees

You will be liable for social security and Medicare taxes and withheld income tax if you do not deduct and withhold them because you treat an employee as a nonemployee, including yourself if you are a corporate officer, and you may be liable for a  trust fund recovery penalty. Refer toPublication 15, Circular E, Employer’s Tax Guide for details about the trust fund recovery penalty orIndependent Contractor for more information on employee classification.

Shareholder loan or officer’s compensation?

A loan by a corporation to a corporate officer should include the characteristics of a loan made at arm’s length. That is, there should be a contract with a stated interest rate, a specified length of time for repayment, and a consequence for failure to repay the loan. Collateral would also be an indication of a loan. A below-market loan is a loan which provides for no interest or interest at a rate below the federal rate that applies. If a corporation issues you, as a shareholder or an employee, a below-market loan, the lender’s payment to the borrower is treated as a gift, dividend, contribution to capital, payment of wages, or other payment, depending on the substance of the transaction.

See “Below-market interest rate loans” under Employees’ Pay / Kinds of Pay / Loans or Advances in Publication 535, Business Expenses for more information.

Reasonable compensation

Because an officer of a corporation is generally an employee with wages subject to withholding, corporate officers may question what is considered reasonable compensation for the efforts they contribute to conducting their trade or business. Wages paid to you as an officer of a corporation should generally be commensurate with your duties. Refer to “Employee’s Pay, Tests for Deducting Pay” in Publication 535, Business Expenses for more information. Public libraries may have reference sources that provide averages of compensation paid for various types of services. The Internal Revenue Service may determine that adjustments must be made to the income and expenses of tax returns for both the corporation and an individual shareholder if the officer is substantially underpaid for services provided.

Draw account

If you are a sole proprietor  or partner in a partnership, the money or other forms of payment you take from your business should be accounted for in a draw account. This helps you know what amount of benefits you have taken from the business during the year. You cannot deduct the sole proprietor s own salary or any personal withdrawals made from the business.

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You Cannot Deduct Your Commuting Expenses on a Tax Return

Every so often during tax season I get a client that wants to deduct the expense of going back and forth to work on their taxes. They cannot do it. Here is what the IRS says about it:

“You cannot deduct the costs of taking a bus, trolley, subway, or taxi, or of driving a car between your home and your main or regular place of work. These costs are personal commuting expenses. You cannot deduct commuting expenses no matter how far your home is from your regular place of work. You cannot deduct commuting expenses even if you work during the commuting trip.

Example. You sometimes use your cell phone to make business calls while commuting to and from work. Sometimes business associates ride with you to and from work, and you have a business discussion in the car. These activities do not change the trip from personal to business. You cannot deduct your commuting expenses.”

For more on TaxAssurances, check out our reviews, photos and links on Yelp. New Rochelle taxes and tax help done professionally. Visit https://taxassurances.com/

Tax Planning Profile: The Partner That Ruined the Business

If you have a business with a partner or partners you need a fully funded buy sell agreement. It should be set up before any partners pass away, become disabled or find out they have cancer, diabetes, or other ailments that can limit workable solutions. Doing so is not only cost effective but it provides peace of mind.

Why? Do you want your current partner’s spouse and children as your new business partners? Nice enough people, but are they qualified and willing at the drop of a hat to run the business?

Moreover, what will happen to the value of the business if something happens to a partner? A business valued at $5 million can quickly drop to $2 million without proper planning.

Then what happens when a partner passes away, the estate is valued incorrectly and the IRS comes looking for more then what was paid in estate taxes by the heirs? I’ll tell you. Litigation with the heirs.

And of course, divorce never happens to business owners. In all of these scenarios, doing nothing ahead of time is a bad business decision. I can’t tell you how many calls I’ve made to owners who don’t have fully funded agreements. They’ll say, “I’m all taken care of.” But when you look at what happens to many businesses after a life event, you realize they were just blowing me off.

The real blow off was on them. They blew off serious business planning they never even thought about because they were busy running the business. Fair enough. But they can’t do that or bury their heads in the sand because they still need to address the complex issues that arise when life events happen. Otherwise, like it or not, a business may be forced to close.
The main reason owners want to have the agreement fully funded is because for most businesses, using cash on hand, a sinking fund or financing through a bank loan may be undesirable or unavailable as a solution. Therefore work with the right team to provide the best funding solution.

Now after you set this up, get back to marketing and selling!

For more on TaxAssurances, check out our reviews, photos and links on Yelp. New Rochelle taxes and tax help done professionally. Visit https://taxassurances.com/

The Power of Distribution

One of the overlooked and sometimes challenging parts of a business is its distribution. But it is vast and efficient distribution that can propel a business and its owners to phenomenal success. Whether the product or service is computer software, oil, institutional money management or popular entertainment, distribution is what allows the owner and manager to achieve great financial success.

With each of these businesses they are able to take a product or products and put them into a network that can have millions of individuals support the products or services at approximately the same time.

Software firms distribute through online and offline retailers. Money managers use money from large retirement plans for civilian employees and entertainment providers use online and offline distribution networks as well.

So as business owners look to grow their business, a focus on distribution of that product or service may be challenging but a search that none the less can bear profitable fruit.

For more on TaxAssurances, check out our reviews, photos and links on Yelp. New Rochelle taxes and tax help done professionally. Visit https://taxassurances.com/

Business Coaching Profile: Keeping The Dream Alive

Jerry runs Regal Printing, a successful print shop (C-corporation), he started 25 years ago. He has two employees, but he and his wife are sole owners with all management and decision making responsibility.

Jerry and his wife, Elizabeth, pooled their savings to get the business off the ground and have spent their lives nurturing it. It is by far their largest asset. Their oldest daughter is very active in the business, but their other two children are too young. Will any of their three children run Regal Printing some day? Or perhaps one of their key people? That depends.

Ninety percent of the 21 million U.S. businesses are family owned. Yet only 30 percent of family run companies today succeed into the second generation, and only 15 percent survive into the third (Source: SBA.gov). Business continuation planning can be difficult for your clients, especially with all the day-to-day problems that need immediate attention. But, lack of planning can be devastating. Most likely the 30 percent of businesses that do make it, make it because their owner planned for the orderly transfer of the enterprise.

Jerry and Elizabeth’s situation is common. A family business is often the owner’s major asset. The death or disability of a business owner who is usually the key to the success of a business can seriously damage the business’ value. Good planning can substantially minimize these risks.

Let’s take a look at why some owners plan for business continuation while others do not, the methods and tools to transfer business interests, and how to begin developing a plan.

“Business continuation” planning simply means planning for the transfer of business ownership and management from the current owner to someone else. There are a number of good reasons why owners should plan for the transfer of their businesses, such as avoiding the business passing to under-qualified owners, protecting key employees or raising cash. However, most of the time the planning is done simply to “keep the dream alive” and ensure the business extends beyond the owner’s lifetime as in Jerry’s case. Few business owners work for a lifetime only to consciously decide to let their business dissolve when they’re no longer able to manage it.

Every business owner should consider having a buy-sell agreement to ensure the continuation of the business and to protect the owner and his or her family.However, owners frequently don’t know what they want to do, nor do they understand the various options open to them. Buy-sell agreements work no matter what form a business takes: sole proprietorship, partnership, limited liability corporation, C corporation, or S corporation.

Beyond taking that all-important first step and getting the agreement set up, having the dollars available to make the transfer happen is also key. Generally, the most convenient and thorough method of funding the buy-sell agreement is through life and disability income insurance. Buy-sell agreements funded with life insurance offer these benefits:

1. Creation of an exit timeline
2. Determination of a value for the business
3. Liquidity to support the family
4. Identification of a transferee

Clearly, a buy-sell agreement best protects owners and families if arrangements are made prior to death or disability. And, funding the buy-sell agreement so the dollars are there when needed is essential. There are a myriad of disability and life insurance solutions for this problem. It’s never too early to plan for the continuation of your business. To get started, ask yourself some general questions:

•  Why do you want to plan for business continuation, and what do you want to accomplish?
• When and how do you want to transfer your business?
• Who are possible candidates to own your business?
• What do you consider an acceptable value for your business?
• What problems could arise in the continuation process?
• Who is available to help you?

First and foremost, assess your business continuation situation carefully so your plan accomplishes your goals. A buy-sell agreement funded with life insurance or disability income insurance may offer some answers to keep the dream alive!

For more on TaxAssurances, check out our reviews, photos and links on Yelp. New Rochelle taxes and tax help done professionally. Visit https://taxassurances.com/

An Excerpt from Tax Preparation Firm TaxAssurances’ Book for Small Business

Whether they are starting a new business or expanding an existing business, entrepreneurs of all strips need to have passion and drive for what they are doing. They need passion and drive because the road for any entrepreneur is littered with challenges and hurdles that have to be overcome on a constant basis.

Passion and drive is reflected in the time and energy that is put in the little details in starting and running a business. It is reflected in the financial commitment that owners put into the business. It is reflected in the sometimes lonely journey and effort that a business owner endures to make their business a success.

Deliveries will be late or missed. Employees will be late or quit. Clients will find a million and one reasons not to pay you on time or if the entrepreneur is really luck, not at all. And none of this will be in the original or revised business plan the entrepreneur may or may not have done. Business owners need that passion and drive because that is what is going to move them forward during the tough times.

Owners will want to cry about any one of the challenges they face, but the problem will still be there when the crying is over and a solution still needs to be found. Passion and drive for what they do during those gut wrenching times will propel them forward and help them overcome those challenges.

Passion and drive will help them devise solutions and responses that keep the business going. The challenges may spark a creative bent that they otherwise might not have used. And in really breakthrough moments, it will put the business on a much better trajectory then before the challenge first appeared.

For more on TaxAssurances, check out our reviews, photos and links on Yelp. New Rochelle taxes and tax help done professionally. Visit https://taxassurances.com/

Tax Help: SECURE THE FUTURE OF YOUR BUSINESS

When it comes to your business, hoping for the best won’t ensure its future. Take Jack Stanton for example. Jack spent thirty years building a manufacturing giant, Stanton Solutions Corporation. However, due to the rigors of maintaining his company, he had little time for any personal financial and estate planning. Then, Jack died unexpectedly in a boating accident. All of a sudden, Stanton Solutions, a multi-million dollar manufacturing empire was facing an uncertain future caused by the loss of its owner and upper-most key executive.

What would happen to your business and your family should you become disabled or die unexpectedly? Do you have key employees for family members who could step in and run the company in your absence?

Business Continuation Basics

It is essential to the future of your business and your family to have a succession strategy in place. In order for your business to maintain continuity, you need to implement a succession strategy that coincides with your goals and objectives. Your strategy should be flexible enough to handle changes within the company and its related industry(ies). However, one of the keys to a succession strategy is determining who or whom your successor(s) will be.

Deciding on, and preparing a successor may require years to familiarize him or her with the finer points of the business. Thus, it is important to select a replacement as soon as possible in order to maximize the possibility of a successful transition. In smaller businesses, it is not uncommon for one or more family members to be at the top of the list of potential successors.

If you wish to pass your business on to future generations, you will need to make an honest assessment of the respective needs of your family and business, the qualifications of any interested family members, and whether the family and business would be best served by a continued relationship. Communication with family members is extremely important in order to better ascertain overall interest or concern.

You can prepare yourself by honestly evaluating and reflecting on the necessary components of a well-thought-out succession strategy. Here are some points that may require further elaboration:

• a thorough job description of each position, including details regarding areas of responsibility and delegation of duties;
• a management/organizational plan;
• Assuring the availability of cash to meet the demands of federal and/or state estate taxes;
• a list of potential successors to your ownership, taking every candidate’s job experience and academic background into consideration; and
• a mechanism to ensure extensive on-the-job training for the successor(s).

Other Considerations

A succession strategy may also include a buy-sell agreement funded by life insurance. More than likely, your successor may not have the cash, or the ability, to borrow at the time of successorship. Under such an agreement, the death benefit proceeds of the life insurance can be used to provide the cash necessary for a successor to purchase an owner’s share of stock in the event of his or her untimely death.

In addition, it may be prudent to explore how your unexpected disability could affect not only your plans for successorship, but also your financial well-being. Under a disability buyout arrangement, a disability buyout policy provides a successor with cash to purchase shares in the event of the owner’s untimely disability.

For more on TaxAssurances, check out our reviews, photos and links on Yelp. New Rochelle taxes and tax help done professionally. Visit https://taxassurances.com/

An Excerpt from Tax Preparation Firm TaxAssurances’ Upcoming Book for Small Business

The accounting profession provides an excellent framework from which business owners can work from in tracking the financial progress of their business. This framework provides “slots” for where certain financial information and transactions should go. And once that information is put in those “slots” the natural flow of accounting reports allow valuable information about the financial condition of the business to come out, thus providing very valuable insight for business owners.

The basic Accounting reports that the profession provides and proves valuable to business owners are:

The Income Statement

The Balance Sheet and

The Statement of Cash Flow

Each one of these reports monitors a different financial aspect of the business but collectively they give valuable insight into how the business is moving forward. Business owners can use the reports to better determine how to use their financial resources. They can use it to see where there is leakage in the financial resources of the business.

For brand new business owners, while it may be difficult at first to put together on a consistent basis, these reports are tremendously helpful, because early on it may be tough for new owners to gauge how the business is doing without the reports. Owners may go on “gut” or simply monitor how much is in the bank account. While helpful to a certain degree, the monthly bank account statements do not necessarily provide in-depth insight into the business.

With real time accounting, owners can see how their business is progressing and gain confidence in knowing that over a particular quarter they have had a gradually increase in revenue. They can gauge when the sales for the business are strongest and weakest. They can see when expenses occur most frequently. And ultimately they can determine if the business is worth continuing or if it needs to be readjusted.

Financial reporting also helps business owners determine where to put necessary dollars toward marketing the business. By tracking what particular items or business lines sell more than others, owners can allocate appropriately. Ultimately, business owners will want to know how they are reaching their clients from a marketing perspective. Matching dollars spent, to dollars brought in through variously identified marketing efforts, will let the entrepreneur know how to proceed in the future.

For more on TaxAssurances, check out our reviews, photos and links on Yelp. New Rochelle taxes and tax help done professionally. Visit https://taxassurances.com/