04October
2018
A Legally Binding Contract

The success of your business depends to a great extent on the quality of the contracts you sign. A good contract protects everyone, while a bad contract could ruin you. Every time you promise to exchange services or property, you create a contract — either written or unwritten. Oral contracts present several problems. They can be ambiguous, difficult to enforce and hard to prove in court. “Contracts of choice” are always written to help eliminate potential disputes. They contain precise terms about the people or companies involved, the property or services offered, and of course, the agreed-upon price. Contracts may also include…

04October
2018
Make Your Workplace Drug Free

Employee drug and alcohol abuse can cost your company in many ways, including increased absences, workplace accidents and high health costs. In addition, studies show that drug users are five times more likely than other employees to file a worker’s compensation claim. To protect themselves, many companies now routinely administer drug and alcohol tests to job applicants and employees. If your firm isn’t among them, the Department of Labor (DOL) warns that you may become an “employer of choice” for drug abusers who are unable to get — or keep — a job with employers that do drug testing. In…

04October
2018
‘Partnership’ Culture is Best for Success

Certain workplace culture characteristics consistently bring about higher financial performance, according to a study done by one researcher. Organizational psychologist Dr. Richard Petronio surveyed 200,000 employees at 50 companies in a cross-section of industries — high-tech, health care, insurance, transportation, manufacturing, finance, services and retail. The study identified the workplace culture characteristics that correlate with financial success. It categorized five major types of employer-employee culture styles: Entrepreneurial (“leader-follower”), Paternal (“parent-child”), Mechanical (“machine-part”), Exploitive (“master-slave”) and Partnership (“partner-partner”). Although many companies aspire to an entrepreneurial style, the study found the partnership style is the one where employers outperform. Certain employers consistently…

20September
2018
The Concept of Asset Allocation

If you live in or have visited a big city, you’ve probably run into street vendors — people who sell everything from hot dogs to umbrellas in carts on the streets and sidewalks. Many of these entrepreneurs sell completely unrelated products, such as coffee and ice cream. At first glance, this approach seems a bit odd, but it turns out to be quite clever. When the weather is cold, it’s easier to sell hot cups of coffee. When the weather is hot, it’s easier to sell ice cream. By selling both, vendors reduce the risk of losing money on any…

20September
2018
Business Sale: Who Owns Professional Goodwill?

When a professional corporation sells its assets or liquidates, one important tax issue is whether the corporation or the shareholder-employees own any appreciated professional goodwill (with a fair market value in excess of tax basis). For tax purposes, goodwill is an intangible asset. It represents the value of a trade or business based on expected continued customer patronage due to its name, reputation and similar factors. Such goodwill often does not appear on the corporate balance sheet, because it was developed by the corporation or by its shareholder-employees without any historical cost assigned to it for either financial accounting or…

20September
2018
Revising Estate Strategy Assumptions

When the rules of the game change, tactics should follow in response to the new landscape. While estate tax exemptions have ridden an uncertain roller coaster in recent years, the rules appear to be stabilizing, prompting many to reconsider conventional estate strategies.¹ A few years ago, Congress raised the estate and gift tax exemption to $10 million per person, and has adjusted for the rate of inflation since then. By 2017 it had risen to $5.49 million. Then the Tax Cuts and Jobs Act raised it much higher, to $11.18 million through 2018 and the top rate is 40%.² This…

11September
2018
The Fine Points of a Buy-Sell Agreement

A buy-sell agreement provides family business co-owners with protection so they don’t lose control of their ventures. It restricts each shareholder, partner or member of a business from unilaterally transferring an ownership interest to anyone outside the group. It also ensures there will be a willing buyer for each co-owner’s interest when he or she retires, dies, becomes disabled or another “triggering event” occurs. Obviously, business owners need sources of money to finance the buyouts of withdrawing co-owners when triggering events occur under a buy-sell agreement. The death of a co-owner is the most common, and most catastrophic, event. For…

06September
2018
How the Risk of Detection Reduces Fraud

Do your employees feel like they’re being watched? If they don’t, they may be emboldened to steal. In the same way that putting more police officers on streets tends to reduce crime, making your company’s anti-fraud activities more visible can discourage fraud perpetrators. Good internal controls are critical to preventing fraud. But many companies have learned the hard way that employees bent on fraud can find their way around internal controls if the incentive outweighs the risk. You must, therefore, make sure that your employees — including senior managers — understand that the risks of committing fraud are greater than…

06September
2018
Let Logic, Not Emotion, Prevail Over Your Portfolio

Imagine this scene: You’re at your favorite clothing store when you see a shirt. You pick it up, consider it, then put it back. It’s not your color. As you move away, you notice another customer picking up that same shirt. Suddenly, you think that maybe it would look good on you. But it’s the last one. You can’t wait for the other customer to set it down so you can snatch it up. It’s a fact of human nature that emotions can wreak havoc on our decision-making abilities. A growing field of study called behavioral finance seeks to identify the…

23August
2018
Pair a Trust and an Installment Sale to Pass on Your Business

For many people, a family business is a significant source of wealth, so passing it on to the next generation in a tax-efficient manner is an important estate planning goal. One of the simplest and most effective strategies available is an installment sale to an intentionally defective grantor trust (IDGT). So long as the business generates sufficient cash flow to make the installment payments, a sale to an IDGT The Pros and Cons Of Selling to an IDGT An installment sale of a business to an intentionally defective grantor trust (IDGT) offers many benefits, including the following: Selling to a trust…

23August
2018
Squeeze More Out of a Company SEP

If you want a retirement plan for your small company or self-employed business — but you don’t want to be buried in paperwork — consider a simplified employee pension plan or SEP. Among the appealing advantages: SEPs are set up by simply filling out a brief form. Annual reports aren’t required to be filed with the IRS, although you must provide a copy of the SEP form to each covered employee. (Most retirement plans require detailed reports to be filed with the IRS and the Department of Labor.) Contributions can go from zero to the maximum each year, so if…

23August
2018
When a Spouse Inherits an IRA

Spouses have the most flexibility when inheriting individual retirement accounts (IRAs). The basic rules are: The spouse may treat the inherited IRA as his/her own (or roll it over into his or her own IRA) or remain the beneficiary on the account. The spouse may only treat the IRA as his or her own if he or she is the sole beneficiary. If there are multiple beneficiaries, the account can be separated so the spouse’s share is in its own account. When the spouse elects to treat the IRA as his or her own, the IRA is simply retitled as…

15August
2018
Pull the Plug on Employee Theft

Not all crooks roam the streets at night. Some might be roaming your company hallways, stealing cash, forging or altering checks, and pilfering your inventory and property.                   Even worse, they may be stealing intellectual property such as confidential documents or trade secrets. What can you do to pull the plug on employee theft? Here are 18 crime busters: 1. Talk openly with your employees about theft and dishonesty. Set an example for ethical behavior. 2. Be suspicious of any employee with a sudden financial change. (Has someone started buying expensive clothes,…

15August
2018
Limit the Impact of E-Mail in Court

You just finished typing a draft of an aggressive e-mail message explaining why you think your company’s strategic plan can — and will — destroy the competition. Later, you think the memo was too bold, particularly the attachment that showed how much market share you could steal from the competitors in your hometown. You decide to delete the e-mail. It’s gone, right? History will never see it. Wrong. Plaintiffs and prosecutors alike are finding that e-mail can provide fertile ground for discovery in litigation. It is playing a greatly increased role in court for several reasons: E-mail is almost impossible…

15August
2018
Make a Tax-Smart Redemption of C Corp Stock

Do you have too much of your net worth tied up in your family C corporation? Consider bailing out some or all of that hard-earned wealth with a stock redemption. Here’s an explanation of why the federal income tax results for stock redemptions are far better today than in the past when much higher tax rates applied to dividend income. A redemption occurs when you sell back some or all of your shares to the corporation. In other words, you get cash from the family corporation in exchange for turning in some or all of your stock. The general rule…

26July
2018
Synchronize Your Student With College Savings

Here are two lessons for parents of future college students about saving enough money in time: 1. No one has figured out how to save and invest enough overnight to pay for a college education. 2. Timing is critical so that the college savings and investing package you put together is available exactly when the tuition, room and board, and book bills come due. Most parents don’t have a family income that is sufficiently substantial and a budget under strict enough control that, when their children are born, they can simply start saving with monthly contributions to a guaranteed fixed-income…

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