3 Things to Know: Tax Season

Tax time can be overwhelming no matter how large or small your business. Here are some articles from Mind Your Business on three tax-related topics we think you should know more about.

Tax season making your head spin? Luckily for you, our resident experts are here to explain three things they want you to know about taxes when it comes to your small business.

The first thing you should know: An understanding of the audit rules and correct classification are crucial.

It’s important that you understand the rules governing the auditing of partnerships and LLCs that are taxed as partnerships. Here's what you need to know so you don’t get penalized.

Also, if a worker is misclassified, your company could be liable for an enormous bill for back employment taxes plus penalties, interest and legal costs. Follow these tips to help your business avoid all of the extra taxes and penalties that go with misclassifying employees. And, here’s another explanation from a human resources perspective on the differences between 1099 contractors and W-2 employees.

The second thing you need to know: It’s important to consider taxes when planning for the future.

There’s so much to know as you start coming up with an exit plan for your business. When it comes to the taxes associated with business succession, things can get costly quickly. Perhaps a Partnership Administration Success Strategy (PASS) is right for you. Learn more about this buy-out approach that’s generally income tax free.

The third thing you should know: GCP/COSE can help you save money at tax time.

You already know that working with the GCP Energy Team to complete an assessment of your facility can help you uncover savings of up to 20%. But, did you know of the tax savings (Code Section 179) for building owners under the federal Tax Cuts and Jobs Act of 2017? Learn more about this act, which allows for immediate expensing of certain building components and systems involved in an energy project.

We can also save you at tax time thanks to the COSE MEWA. To provide members with a more competitive set of healthcare coverage solutions for your company and your employees, COSE has partnered with Medical Mutual to offer the COSE Health and Wellness Trust, also known as the COSE MEWA. Because MEWAs are not subject to some of the Affordable Care Act’s mandated benefits and taxes, it helps to keep costs lower. You can thank us later.

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  • Next up: Accessing Capital: ECDI
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  • Accessing Capital: ECDI

    Access to capital can be problematic not only for aspiring start-ups but also for established businesses looking to upgrade or expand. Ohio small business owners are fortunate to have access to an incredible resource in the Economic and Community Development Institute (ECDI), a small business educator and statewide SBA lender that expanded its services to Cleveland in 2012.

    Access to capital can be problematic not only for aspiring start-ups but also for established businesses looking to upgrade or expand. Ohio small business owners are fortunate to have access to an incredible resource in the Economic and Community Development Institute (ECDI), a small business educator and statewide SBA lender that expanded its services to Cleveland in 2012.

    With loans ranging from $500 up to $350,000, ECDI is a top-ranked micro-lender whose mission is to invest in people and businesses. Whether you are in need of new or upgraded equipment, operating costs or some backing to get your entrepreneurial dream off the ground, ECDI may be the answer.

    For more information about ECDI, their educational classes or a loan application, go to www.ecdi.org.


    TIP: 

    ECDI is holding a Business Information Session in Cleveland at noon on Monday, July 20, to inform prospective ECDI clients about programs to develop, fund, and launch a business. Loan program requirements and procedures will also be discussed. Register at www.ecdi.org/events.


    This article originally appeared in the July 13, 2015, edition of Small Business Matters.


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  • Next up: Accounting for the Launch of Your Business
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  • Accounting for the Launch of Your Business

    A lot of work goes into getting a small business off the ground. While finding your niche, developing and executing a business plan, and hitting the sales path hard are all extremely important, entrepreneurs shouldn’t forget about the accounting side of the business. Jim Bonvissuto, president of BIG Financial & Advisory Services, took time recently to answer a few questions related to the initial accounting steps all business owners should keep in mind during the launch of their business.

    A lot of work goes into getting a small business off the ground. While finding your niche, developing and executing a business plan, and hitting the sales path hard are all extremely important, entrepreneurs shouldn’t forget about the accounting side of the business.

    Jim Bonvissuto, president of BIG Financial & Advisory Services, took time recently to answer a few questions related to the initial accounting steps all business owners should keep in mind during the launch of their business.

    Question: When an entrepreneur starts a business, what should they do first?

    Bonvissuto: The first step is to consult with a CPA.   It is critical that a business has not only the appropriate accounting methodology in place day 1, but almost more importantly is the tax structure regarding entity selection, business registration, and all the federal, state and local payroll withholding tax registrations be set up properly.  The second step is planning the ongoing management of the accounting and tax reporting/remittance that is required.

    Q: Are there different types of entities and does it matter what type is selected?

    Bonvissuto: A key issue that a start-up business has to answer is what type of organization structure they want to form.  A business can form as an S-Corp., C-Corp., Partnership, Sole Proprietor, and LLC.    Each of these entities have different tax pros and cons.  The LLC structure is not recognized by the IRS and still requires you to file a form with the IRS to determine what type of entity you will be taxed as (S-Corp.,  C-Corp., Partnership, or Sole Proprietor).  The entity selected for tax purposes could impact you personally anywhere from 10% to 35%.

    Q: How does a business owner know when it’s right to outsource accounting, or take care of it in house?

    Bonvissuto: A business owner’s primary focus is the day to day operations and growing the business.  The accounting for the business also needs to be a priority.  If there are not enough hours in the day for the owner to also handle the accounting, or they do not have the expertise in house to do so daily, they should outsource. 

    Q: What common mistakes do new entrepreneurs typically make when it comes to accounting? How can those mistakes be avoided?

    Bonvissuto: New entrepreneurs mistake accounting as only a means to filing a tax return annually in April. Accurate and timely accounting is the key tool to a successful business.  It will provide the business owner the information to make informed strategic decisions in order to avoid issues and sustain profitable growth. A few examples are: avoiding cash timing issues of when to pay bills and collect from customers, determining the best timing of advertising/marketing for a cyclical business, determining ways to increase profitability, determining whether one can afford to expand or rather should be cutting back. If the business owner does not have the accounting expertise and/or the appropriate staff in place, a CPA has the expertise to guide you in the right direction.  

    Want more expert advice? Check out COSE Expert Network, an online forum connecting business owners with creative solutions to the tough questions they face every day.

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  • Next up: An Insider's Look at Business Insurance
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  • An Insider's Look at Business Insurance

    Participants were navigated through the state of the business insurance industry, baseline coverages and what companies can do to get the best pricing for their business insurance needs in this informative webinar tailored to small business owners. Scroll down to the bottom of this article to listen to the full presentation and view the slides.

    During a recent COSE’s WebEd Series webinar, presenters Rob Strachan of Strachan Novak Insurance and Tessa Forby of Grange Insurance took a deep dive into the business insurance industry to help small businesses like yours understand their needs and achieve desirable outcomes when it comes to protecting their business.

    State of the industry

    According to the presenters, Ohio is one of the cheapest states to buy insurance and is considered a buyer’s market, with agencies activing aggressively to acquire new businesses. As with any industry, the business insurance industry is constantly changing due to the release of new technology. In this case, things like Uber and driverless cars will have an impact on the future of business insurance. Amazon is starting to get into the business insurance market place. All of these things will drastically change the landscape of the market moving forward.

    What is the role of the buyer?

    There are two ways to purchase insurance. Buyers can go directly to an insurance company, or they can get an independent broker or agent who can shop the market. If choosing the latter, buyers should have a face-to-face with their broker to explain important information such as their niche and core capabilities.

    What is the agent’s role?

    An insurance agent is a bridge between the buyer and the insurance company. A good agent should listen carefully to the client’s needs and then proceed to shop out to each insurance company. Agents usually have somewhere between five to 15 different insurance companies that they have relationships with and frequently connect with on behalf of their clients.

    What you need to know before seeking coverage

    When evaluating a business for coverage, there are several things an insurance company wants to see, such as:

    • Pride of ownership, including housekeeping of the space and maintenance of the equipment;
    • protective devices such as sprinklers, central station burglar and/or fire alarm, cameras on property and other safeguards;
    • good record keeping of things like job files, vehicle maintenance, etc;
    • financial stability that proves the company is making money and has capital to put back into the business;
    • experience in the field so that the insurance provider is confident the business knows what they’re doing; and
    • appropriate hiring practices. Do they drug test employees or determine what kind of a driving record they have? How frequently is there turnover within the company?

    And on the other hand, there are of course things an insurance company does not want to see from a potential customer, such as:

    • Inaccurate marketing materials or information that exaggerates the company’s capabilities;
    • lack of prior insurance, which could be an indicator that the company doesn’t truly recognize the need for insurance;
    • late reporting of claims, which could be an indicator that the company was careless in preventing a claim from getting too large;
    • frequently changing carriers or agents, showing a lack of loyalty or that they are trying to avoid something;
    • poor payment history, which might show the company isn’t financially stable or that they don’t acknowledge insurance as being an important part of the business; and
    • Difficult clients who seem like they are not receptive to working with insurance carriers.

    When it comes to insurance, there is always “the fine print,” right? The webinar presenters encourage business owners to understand the small print when it comes to the different types of insurance. Here’s a list of important questions to make sure you’re asking:

    Important question No. 1: If someone else’s equipment is in your care inside your building, does your policy cover their stuff?

    Important question No. 2: Is flood included? What about things like pollution, product recall and professional liability?

    Important question No. 3: What happens if equipment breaks down?

    Important question No. 4: Does it exclude things like pollution, product recall and professional liability?

    Important question No. 5: What is the coverage territory?

    Important question No. 6: Does it include non-owned or hired automobiles? What about towing and rental expenses?

    Important question No. 7: What is the coverage timeframe? How far back will the insurance cover you and will it extend into the future?

    Important question No. 8: Are you covered from a cyber perspective: Viruses, phishing emails, privacy breaches?

    Important question No. 9: In the event that you have to cease business for a period, does it cover business income, extra expenses and the effort you need to get your business going again?

    And a few parting words: Do not look at your insurance as an expense. Instead, view it as an asset. You have someone to do your taxes, a financial advisor and a lawyer, among other professionals on your “team.” Do you have an insurance advisor? A hole is left in your business if you don’t have the proper planning needed when it comes to business insurance. Make sure you find someone who is involved and responsive, and who is not trying to sell you something.

    The full recap of this webinar can be viewed below. Also, be sure to head over to COSE’s Events Page to view other upcoming events that can help your business grow.


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  • Next up: Becoming Successful Takes Hard Work—Staying Successful Takes Planning
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  • Becoming Successful Takes Hard Work—Staying Successful Takes Planning

    It used to be if you had a good product and provided solid customer service, you could count on success. While product and service are still critical, other variables—such as increased competition for key employees—can make maintaining and building on that success difficult.

    Consider your own business. Your success didn’t happen overnight. It took careful planning, attention to detail and a lot of hard work. And if your business is like most, the contributions of a few key employees is responsible for your business’s success. That’s part of the reason why more business owners are looking for creative ways to reward and retain their key people. Unfortunately, government regulations can make it difficult for businesses to reward one select group of people without doing the same for everyone.

    So, how do you build on your success and reward the people who’ve worked hard, year after year, to make that success happen? One answer might be the use of a welfare benefit plan designed to help small business owners provide themselves and select key employees with substantial life insurance protection, medical benefits, or other optional benefits.

    Why life insurance? It’s one of the most remarkable financial tools ever developed. Life insurance proceeds can be used to:

    • Help families maintain their lifestyle and pursue their objectives following the loss of a major breadwinner.

    • Fund the purchase of a co-owner’s share of the business following her or his pre-mature death.

    • Pay estate taxes and other expenses, allowing personal and business assets to pass to an individual’s named beneficiary intact.

    How can a 419 plan help business owners?

    Generally referred to as a “Section 419 Plan” after section 419 of the Internal Revenue Code, the plan is available to owners of C corporations, sub-chapter S corporations, and limited liability corporations, but not sole proprietors. It allows for the purchase of life insurance on owners and selected key employees using company dollars.

    The benefits to business owners include:

    • Plan contributions (policy premiums) for participants are considered a tax-deductible business expense.

    • Policy cash values grow free from current income taxes.

    • You can provide yourself and key employees with substantial life insurance benefits that, with proper planning, can pass to named beneficiaries income tax free and possibly estate tax free.

    • You can limit participation in the plan to just owners of the business and/or select employees.

    • You can accommodate your company’s cash flow needs by choosing from a variety of flexible funding alternatives. Typically, universal life policies are used because of their premium flexibility.

    • All plan assets are sheltered from the claims of creditors, whether business or personal.

    • Your plan can be integrated into any existing business continuation and estate plans, buy/sell agreements, and/or personal estate plans you or your employees may already have established. 

    • The only “cost” to plan participants is the income tax due on a small portion of plan contributions equal to the “economic benefit” of the life insurance protection. Some employers choose to provide employees with a “bonus” equal to this amount of the tax.

    The bottom line

    You and your key employees are likely the backbone of your past, and current, success. By protecting them, yourself and your business with life insurance, you can help ensure your company’s future success as well.

    This information is provided for educational purposes only and should not be construed as tax advice applicable to each individual. Please consult a qualified tax advisor regarding your individual circumstances. All guarantees are based on the claims paying ability of the issuer.

    Joseph Pilla is VP – Advanced Strategies at 21st Century Financial. Contact him via email at jpilla@xxiadvisors.com or via phone at 216-545-1781.


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  • Next up: Check Your Fiscal Fitness
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  • Check Your Fiscal Fitness

    How fiscally fit are you? You may vow to get into shape, lose weight, and eat healthier or take some other measure to improve your overall physical health. While these things will help you to feel better and hopefully live longer, they still require a strong will and self-discipline to meet the goal.

    Just as physical fitness can renew your vitality and increase your energy, fiscal fitness can help to invigorate your financial future. Don’t be fooled, because this too takes discipline.

    The following test will help you measure your fiscal fitness. If you are one of the fortunate people who have everything under control—carry on. If you don’t fall into this category—then it might be time for a check-up.

    Your fiscal fitness test

    Question No. 1: Do you find yourself financially short before each payday?

    Question No. 2: Do you have trouble knowing where your money went?

    Question No. 3: Has a recent change in your job or family status caused increased financial pressure?

    Question No. 4: Are you sure that the life, health and dental insurance that you receive from your employer will be sufficient for your family?

    Question No. 5: Are you saving for your children’s future education?

    Question No. 6: Will you run out of money during your retirement years?

    Question No. 7: Should your current savings be working harder for you?

    Question No. 8: Are your assets positioned properly to pass on to your beneficiary(s)?

    Question No. 9: Do you plan adequately for taxes, or is April 15 disaster time?

    Question No. 10: Lastly, have you established an emergency fund? If so, will it be sufficient for at least three months?

    How did you do? If you’re uncomfortable with your answers, then it might be time to revisit your plans. If you need assistance—don’t put it off—get it now.

    There are a number of planning tools available that can help you feel more in control of your financial well-being. It might also be beneficial for you to discuss your needs with financial professionals who can help by recommending an appropriate strategy designed specifically for you.

    It all boils down to this

    Regardless of your method, getting started is the key to helping you secure not only your fiscal fitness, but also your financial future.

    Joseph Pilla is V.P. Advanced Strategies & Business Advisory Services for XXI 21st Century Financial 216-545-1781. Custom designed strategies for both individual & businesses through uses of; Business Valuations, Premium Financing, Business Succession/ Asset Protection/ Insurance/ Wealth Transfer/ Investment/ & Retirement Planning.

    This content was prepared by Penn Mutual.

    ©2018 The Penn Mutual Life Insurance Company, Philadelphia, PA 19172

    2221552PH_Oct20

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