Posted on 1/10/2018 12:12 PM By First Bank
If you're a small business owner, you face many challenges in growing your company. One of them is recruiting and retaining the best talent for your needs. When your primary goals are managing costs and increasing revenue, how do you sufficiently entice new recruits and reward current staff members for continually putting their best efforts forward? One way is ensuring that you provide a competitive, cost-effective benefit package comprised of both traditional and not-so-traditional benefits.
In order to remain competitive, nearly all employers should offer some form of health insurance and retirement savings plan. Yet according to the U.S. Department of Labor, only 55% of small employers (private companies with fewer than 100 employees) offer health coverage and just 52% offer a retirement plan.1
Small businesses can typically choose among traditional plans or managed care/health maintenance organizations (HMOs). Traditional plans are typically more expen ...
Posted on 1/10/2018 11:55 AM By First Bank
Risk management is a key component in any successful business plan. In today's world — where data breaches are common occurrences — it's especially important for business owners to understand the digital risks they face. Are you doing all you can to mitigate the risk of a cyberattack?
The importance of cybersecurity
Many small-business owners may think their organizations hold little appeal to hackers due to their small size and limited scope. However, according to the Small Business Administration (SBA), this naiveté may actually make them ideal targets. Small businesses are keepers of employee and customer data, financial account information, and intellectual property. Their systems, if not adequately protected, may also inadvertently provide access to larger supplier networks. "Given their role in the nation's supply chain and economy, combined with fewer resources than their larger counterparts to secure their information, systems, and networks, small employers are an at ...
Posted on 1/10/2018 10:41 AM By First Bank
A charitable remainder trust (CRT) can be a great way for taxpayers to leverage their generosity, producing tax savings that can be used to provide greater benefits to themselves, their spouses, or others, and then to their favorite charities. Tax savings are generated because taxpayers receive income, gift, and estate tax deductions for the value of their donations, and can defer or avoid capital gains tax when appreciated assets are donated.
What is a charitable remainder trust?
A charitable remainder trust (CRT) is an irrevocable trust used to enable donors (called grantors) to give money or property to charities, while continuing to receive income (fixed or variable) from the property for life or for a period of time up to 20 years. The grantor, and/or other beneficiaries (the income beneficiaries) receive distributions from the trust annually, and the charities (the remainder beneficiaries) receive the assets remaining in the trust when the trust ends. The grantor gets an immediate in ...
Posted on 1/10/2018 10:02 AM By First Bank
A buy-sell agreement is a legally binding contract in which the owners of a business set forth the terms and conditions of a future sale or buy back of a departing owner's share of the business. Specifically, buy-sells control when owners can sell their interests, who can buy an owner's interest, and at what price.
Buy-sells can accomplish many objectives, but are primarily used to ensure the smooth continuation of a business after a potentially disruptive event, such as an owner's retirement, incapacity, or death.
Also valuable estate planning tools, buy-sells can provide for the orderly succession of a family business, and for the liquidity needed for payment of a deceased owner's estate settlement costs and taxes. Further, if structured properly, a buy-sell can establish the purchase price as the taxable value of an owner's business interest, avoiding unexpected estate tax consequences at the owner's death.
What is a buy-sell agreement?
Buy-sell agreements ...
Posted on 1/10/2018 9:42 AM By First Bank
What are business assets, and how do you decide whether to lease or buy them?
In the context of the lease versus buy decision, "business assets" refers to fixed assets (such as buildings, machinery, and office equipment) that can usually be depreciated over time. Because these fixed assets are necessary to the operation of most businesses, a question often arises as to whether the business owner should purchase the assets outright or lease them from another party. There are advantages and disadvantages to both leasing and buying. Therefore, your decision should be an informed one, based on the needs of your business and your own preferences.
What is depreciation, and how can it influence your decision to lease or buy business assets?
The IRS assumes that certain tangible business property will decline in value over time due to wear and tear, exhaustion, or obsolescence. Consequently, each year, a portion of the property's value is subtracted (i.e., taken as an expense), based on how l ...
Posted on 1/10/2018 9:29 AM By First Bank
What is a buy-sell agreement?
A buy-sell agreement is a legal contract common in closely held businesses. It is an agreement you can enter into now that provides for the future sale of your business interest. A buy-sell agreement is also referred to as a business continuation agreement, a stock purchase agreement, or a buyout agreement. When carefully drafted, your buy-sell agreement may be used to set the taxable value of your business interest.
Does it matter if your buy-sell agreement is with a family member?
The IRS tends to scrutinize transactions between related parties, so almost any business transaction between you and a family member could be subject to the attention of the IRS. The definition of family member includes your spouse; parents of you and your spouse plus their lineal descendants, including spouses; and any other "natural objects of the transferor's bounty." There are rules in effect that can make the sale of an interest in a family business seem more difficult. H ...
Posted on 1/10/2018 9:27 AM By First Bank
What are the tax consequences of business distributions?
A business can distribute cash or property to its owners. The tax consequences of the distribution to the owner will depend on the type of business entity that is involved. Distributions are sometimes included in the taxable income of the owner and sometimes not. Additionally, it is important to understand the impact of a distribution on an owner's tax basis. Although myriad business entities exist, the following types will be discussed here: C corporations, S corporations, partnerships, sole proprietorships, limited liability companies (LLCs), limited liability partnerships (LLPs), limited partnerships (LPs), and professional corporations (PCs).
Impact on specific business entities
Tax treatment will vary, depending on the type of business entity you select.
C corporations may distribute money or property to shareholders. The method used to make a corporate distribution will determine the tax consequences of the withd ...
Posted on 1/10/2018 9:23 AM By First Bank
Planning for your own business
Before you start your own business or buy an existing business, you should do some initial planning. You may have already decided what type of business you want--your own restaurant, retail outlet, service, or manufacturing plant. You need to choose a suitable location--can you work from home, or do you need a separate facility? You should assess your financial requirements, schedule daily activities, and plan for contingencies, which may be included in your business plan. Planning your business usually requires the help of any number of professionals--an attorney or accountant, for example. The success or failure of your business may depend on your initial planning, but how do you plan and what do you plan for?
Factors to consider when starting your own business
You will have to decide upon the legal structure of your business. For example, will you conduct business as a sole proprietor, or will you instead create an entity separate from yourself, ...
Posted on 1/9/2018 2:42 PM By First Bank
If you're self-employed or own a small business and you haven't established a retirement savings plan, what are you waiting for? A retirement plan can help you and your employees save for the future.
A retirement plan can have significant tax advantages:
Your contributions are deductible when made
Your contributions aren't taxed to an employee until distributed from the plan
Money in the retirement program grows tax deferred (or, in the case of Roth accounts, potentially tax free)
Types of plans
Retirement plans are usually either IRA-based (like SEPs and SIMPLE IRAs) or "qualified" (like 401(k)s, profit-sharing plans, and defined benefit plans). Qualified plans are generally more complicated and expensive to maintain than IRA-based plans because they have to comply with specific Internal Revenue Code and ERISA (the Employee Retirement Income Security Act of 1974) requirements in order to qualify for their tax benefits. Also, qualified plan assets ...
Posted on 1/9/2018 2:10 PM By First Bank
A private family foundation is a legal entity created, funded, and operated by a single family for the primary purpose of making grants to charities. Because of its charitable mission, a private family foundation is given tax-exempt status, like a public charity, and contributions to the foundation by family members are tax deductible, but to a lesser extent than contributions to a public charity.
Private family foundations are typically founded by high net worth individuals and families who want to maintain a high degree of control over their charitable legacies, and are willing to assume significant costs and responsibilities, and adhere to strict rules and requirements.
Typically, private family foundations are named to honor the founders (e.g., the Ford Foundation), and their charitable grant programs continue for many years after their founders' deaths.
What is a private family foundation?
Defined for tax purposes, a private family foundation is a charitable organization that ...
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