Soon after I tweeted out a link to our last blog post, I started getting text messages from good friend Michael Connelly, who knows a thing or two about running a small business. He started out by saying that we missed a few of the to-do items, and after reading all of his texts, I decided they were worth sharing with everyone. Here they are, counting down to #1...
5. Learn creative responses to the question "Are you crazy?"
4. Make note - when times are tough, you will quickly find out who of your family and friends are on your side.
3. Prepare yourself to say no to work if it doesn't fit your skills or personality, even if you desperately need the money.
2. Plan, but resolve to go on gut instinct.
1. Take a two week vacation now. In will be years before you get another one.
 The FDIC is an independent agency created by the Congress to maintain stability and public confidence in the nation's financial system by insuring deposits, overseeing financial institutions, and managing receipt of deposits from failed institutions. In response to the credit crisis in 2008, the FDIC's Transaction Account Guarantee (TAG) Program extended and enhanced a number of insuring programs for United States deposits with financial institutions, most notably increasing the insurance level to $250,000 for each financial institution and providing unlimited insurance in non-interest bearing depository accounts. So, in the event of bank failure, qualifying deposits within each financial institution would be protected up to $250,000, with separate unlimited protection on non-interest bearing depository accounts -- payable from deposits in receivership, or by funds of the FDIC in excess of those deposits received from the failed institution.
The TAG program carry a built-in expiration on December 31, 2012 (after a 2010 extension), but it was believed upon enactment there was a good chance that it's provisions may be further extended. However, a procedural motion fell short on Friday in the Senate that would have extended the TAG program two years, which effectively kills it.
What does that mean for businesses, non-profits, and governments? Well, for governments, not much should change -- State laws in both Pennsylvania and Maryland provide that public funds be either fully insured or be secured with collateral equal to uninsured amounts deposited with the bank. For non-profits and businesses, it means that every one dollar over $250,000 held in any financial institution in a depository account (demand [checking] and time [certificates of deposit]) would not be insured, and, in the event of a bank failure, there would be no guarantee that the amounts exceeding $250,000 would be returned to the business or non-profit.
With the end of 2012 in sight, take some time to review your depository situations to ensure that you will be properly protected moving into 2013, and contact our offices if you wish to discuss your depository situations and related planning in more detail.
The IRS announced several areas it is focusing on for audits of small businesses. The announcement comes as the IRS said it is increasing its oversight of small businesses and the reporting of taxes. The IRS believes that small businesses routinely under-report, and that this under-reporting is responsible for 84% of the $450 billion tax gap, reports the Examiner. Below are eight areas the IRS is targeting, as compiled by the Examiner: - Fringe benefits. The IRS believes that employers are not reporting employee fringe benefits like personal use of company vehicles.
- High income taxpayers. The IRS will focus on taxpayers with a total positive income of more than $1 million. Last year, the IRS audited 12.5% of all individuals with incomes of more than $1 million.
- Small business employee health insurance credit. This credit was first made available in 2010 and is now coming under IRS scrutiny. The IRS will look for compliance with eligibility requirements.
- International transactions. The IRS will focus on the international tax gap, individuals who hide assets overseas, and offshore transactions for large and small businesses.
- S corporations. The focus will be on deducting losses from S corporations and the use of S corporation distributions to avoid payment of Social Security taxes.
- Worker reclassification. Businesses may have an incentive to misclassify workers as independent contractors rather than employees, and the IRS believes that there is significant noncompliance in this area.
- Partnerships. This is a new area the IRS is targeting and the agency may take a look at large loss partnerships.
- Form 1099-K matching. The IRS announced that it will start Form 1099-K matching in late 2013. The IRS provided a reprieve from merchant card reporting on business returns for 2011 Schedule C and Forms 1065, 1120S and 1120; however, the IRS plans to change its approach after 2012 returns are filed. The IRS has indicated that it plans to pilot a business-matching program that can address a large amount of small business noncompliance.
 Starting and running a business is rarely a safe or simple process, and doing so with one’s spouse creates an additional layer of complexity. Whether that complexity will have a positive or negative effect depends on several factors. Here are some of the questions you need to discuss before going into business with your spouse.
How well do you work together at home? If you cooperate and collaborate for domestic chores, you’ll probably carry that pattern into your workplace. If you bicker constantly over how to do the laundry or maintain the yard, working together in business might be a risky option.
Even if you work well together, some disagreements are inevitable. How do you handle differences of opinion?
Will your business be adequately capitalized? You won’t have an outside salary to fall back on during hard times.
Will there be other partners or employees? Each spouse’s role and responsibilities with respect to coworkers and subordinates should be clearly defined. Spouses with drastically different management styles can make life miserable for employees and each other.
Will one of you be supervising the other and/or reviewing the other’s work? You’ll need to concentrate on treating one another with respect, especially when giving or taking constructive criticism. Conversely, continually overlooking your spouse’s mistakes or failings may drag down employee morale or otherwise harm your business.
Are your strengths complementary or redundant? For example, if you’re a pair of engineers starting an engineering firm, you might leave functions such as marketing and accounting to employees or outside services so you can work together within your area of expertise. If you find your professional decisions tend to clash, consider splitting up your clients or processes and working separately within two divisions.
We can help you address the relevant issues and devise a business plan based on your capabilities, personalities, and desires. Call us for an appointment to explore the possibilities.
 You’ve spent years developing your business, building its value, enhancing its reputation. Now you’re ready to move on. You place a “Business for Sale” advertisement in the Internet classifieds, and the next day an eager – overly eager – buyer approaches you with a deal that seems too good to be true. The buyer offers full price and wants to structure the deal as a stock sale. A stock sale means the buyer will get the entire business, including all its assets (cash, checking accounts, receivables, inventory and so on) at closing. The buyer doesn’t ask tough questions about the firm and seems in a hurry to close the sale. He or she offers a 10% down payment and says the full balance will be paid off within a year.
Seller beware! Business owners and regulators have found that scam artists use these types of transactions to strip value from companies, pulling out cash, and leaving the seller with a fistful of worthless stock. Within days of closing the sale, the buyer factors (sells) the receivables for cash, runs up company credit cards, sells off inventory, and empties cash accounts. The firm’s creditors don’t get paid. Your formerly prosperous business becomes an empty shell.
How can you avoid these types of scams when selling your business? Here are a few suggestions.
Perform an extensive background check on any potential buyer, including a review of the person’s credit reports, litigation history, tax liens, and so forth. A skilled attorney can often help with this research.
Beware of sales that go too smoothly. Legitimate buyers will perform due diligence, asking tough questions, inspecting financial records, and calling customers and vendors. If the buyer wants to close the sale in a hurry and doesn’t seem interested in the firm’s ongoing prospects, beware!
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