When setting up a new business or considering how to make your current business the best it can be, you have multiple options. One of the most important decisions to make is which legal entity to choose. In the past, S corporations have been the small business’ preferred legal entity. However, the recent advent of the limited liability company (LLC) has generated a great deal of interest about this newer legal entity. Why? Many advantages exist to operating a business as an LLC.
- S corporations are limited to 100 shareholders; but there are no restrictions on how many members may be part of an LLC.
- S corporations are limited to a single class of stock; whereas an LLC may have an unlimited number of membership classes.
- S corporations cannot have a shareholder other that an individual, qualified estate or trust. LLCs can have members that are corporations, partnerships, LLCs or unincorporated entities
- S corporations cannot have shareholders who are nonresident alien individuals; whereas LLCs can have non US residents.
- LLC members are not susceptible to a “piercing the corporate veil” attack solely as a consequence of the members’ failure to satisfy certain administrative formalities such as annual meetings and election of Board of Directors.
Are you setting up a new business or want to evaluate the financial effectiveness of your current business model? Give us a call. We can help you determine the right business entity for your business.
We can’t avoid it. The discussion is everywhere. I’ve debated it. I’m sure you have, too. The hot topic of today is the current deficit situation. The Democrats’ solution to cut the deficit is to generate additional revenue by raising taxes. On the other hand, Republicans want to reduce spending.
However, with all of this rhetoric, people are forgetting something…taxes are going up in 2013 whether Congress acts or not.
Here are three examples of what is to come:
- Bush Tax Cuts – Currently these are set to expire at the end of 2012. Beginning in 2013, the highest tax bracket will increase to 38.9% from the current 35%.
- Medicare Payroll Taxes – Thanks to ObamaCare, a new tax was created for wage earning individuals making more than $200,000 (and couples making more than $250,000) to kick in an additional 0.9% on wages above that amount.
- Investment Income Medicare Tax – This new 3.8% tax will affect taxpayers whose “modified adjusted gross income” wages, plus investment income, top $200,000 for individuals or $250,000 for couples. The tax will apply to whichever is less: investment income or the amount by which modified adjusted gross income exceeds the income threshold. Investment income will include taxable capital gains, dividends, interest income, annuities, royalties and rental receipts.
Much like the current alternative minimum tax, both of the new Medicare taxes will not be indexed for inflation. So they’ll include an increasing number of taxpayers over time.
On a positive note, there are ways of avoiding some of these taxes through current planning and using different retirement vehicles. Contact us to discuss how we can help lower you taxes in the coming future.
In today’s business environment the saying “cash is king” is still very much true. This is because cash is needed to meet our financial obligations. As business owners and leaders, one of our major cash obligations is payroll. Payroll can include salaries, taxes, insurance and various other perks that you company may offer. With a watchful eye towards your cash flow, the question you are probably asking is, “Am I getting my money’s worth for my employees?” Below are a few key performance indicators of payroll:
- Sales – the most common performance indicator for employees is the amount of sales they generate. This number is easy obtain and compare among various employees; however, it can be very deceiving. For example, Employee A and Employee B may both have the same sales number, but Employee A may be selling items with lower margins. This may cause lower overall earnings even though the revenue is higher. Thus, a sales performance indicator needs to go beyond just revenues.
- Sales Volume – as with “sales”, the volume of sales is also very easy to track. Please note, you can have the same issues with this number management as you do with sales performance indicators. The number of products of all your employees may not necessarily indicate the current financial worth of each employee.
- Time – another performance indicator is the amount of time each employee spends on the work he or she performs. This indicator is most useful for service and project based industries. However, the assumption that the more hours spent on work equals more productive employee is not always true. If you pay an employee $25 an hour and they spend 10 hours on a project that you are billing for $100, the employee is actually losing money for your business.
- Space – another consideration is the amount of space the company needs for its employees. The more employees you have, the more square footage of lease spaces needed to house those employees in your office. With today’s technology, many employees have the capability of working outside of the office location (such as from home). Although not all employees are able to work independently, this is a great cost savings measure that can reduce your monthly fixed rent.
Each of these performance indicators needs to be tailored to your specific company. If not used properly, your company could be losing money on unproductive employees. If you have any questions concerning the productivity of your employees, please feel free to call us and we can tailor performance indicators specifically to the needs of your company.