Are you considering making the transition from the role of employee to small business owner in this evolving economy? Start by strategizing and prioritizing your financial planning responsibilities.
With the collective guidance of a qualified tax adviser and Certified Financial PlannerTM professional from the Financial Planning Association, you can assemble a well-organized system of tracking what you spend to produce income. In addition, you can sensibly save money by learning more about eligible tax deductions you should take for your self-employed business.
Apply the following pointers and perspectives to efficiently develop and manage your new business:
There is a right way and a wrong way to close, dissolve or wind down the business. Simply walking away will leave a lot of open doors that need to be closed permanently.
Although it is never pleasant to shut down, sometimes you close a door so that another may open. If the business is not working and it cannot be saved, dissolve it and regroup. Bob Johnson of BET started and closed several businesses before hitting it big and becoming a billionaire. Not bad for regrouping, huh?
The goal of closing a business systematically is to close it quickly in a cost effective manner. So, the big question is: How do we properly close a business?
In a survey of workers who participate in an employer-sponsored retirement plan, 71 percent said they wanted their employers to increase their savings rate automatically by 1 percent each year. Some plans have auto-escalation features that increase workers' contributions by a percentage point on an annual basis.
Regardless of whether you save by default or by choice, increasing your retirement contributions could make a big difference in the amount you accumulate during your working years.
Although there's nothing magical about a 1 percent annual increase, it may be a manageable way to get closer to an appropriate contribution level for your age and personal situation. Industry estimates suggest that workers need to save 13 percent to 15 percent of salary throughout their careers to fund a retirement lifestyle equivalent to their pre-retirement standards of living. People who don't start saving until later in life may have to save a higher percentage.
The fact that businesses come and go is no surprise to anyone. Taking the current economy into consideration, many businesses are suffering. As business owners, we are trained to hang in there and ride out the storm. We are taught to sacrifice and put everything into the business.
To an owner, the business is like a child that was birthed. A failing business is a painful thing to endure because it is no longer fun. Both the owner and employees dread coming to work.
Win by any means necessary is the motto for many owners. Unfortunately, the conversation involving when to shut the business down is all too rare. Few want to admit failure or defeat. They do not even want to think about closing down.
Too many times pride stands in the way of folks asking for help. But if you are a small business, asking for help is the only way to stay above the fray. One area that business owners tend to run from is tax preparation.
Whether the business is fledgling or experienced, tax preparation is always dreaded. It is a necessary evil that cannot be avoided under any circumstance.
Here's a snapshot of the tax issues that can arise and detrimentally affect a business:
This is a question you could soon begin asking as a recent rise in interest rates contributed to price declines in many bond funds. News the Federal Reserve feels comfortable enough with the strength and state of our economy to consider a change in current monetary policy is, without doubt, a positive development. Unfortunately, for some bond investors, good news may be bad news!
Bond prices and yields have an inverse relationship, meaning they move in opposite directions. This means as yields (interest rates) rise, bond prices (values) can fall. Many investors – driven by fear, the need for income, increasing underweight allocations, or other factors – have invested heavily in bonds. Over the past five years, this demand has helped drive bond prices higher, lowering yields and subjecting many investors to the often ignored or forgotten risks associated with these investments, one of which is "interest rate risk".
"Interest rate risk" is a term used to describe how an investment's value will change due to an increase or decrease in interest rates. As a simple example: a bond yielding 4 percent is more valuable to investors if interest rates fall to 2 percent and is less valuable to investors if interest rates rise to 6 percent. This is because their fixed interest income would either be greater than or less than what a new investor would receive purchasing a bond at current rates. Interest rate risk affects all bondholders, but typically bonds with longer maturities and/or lower yields are most impacted.
WASHINGTON – Cheryl Lofton had never intended to be a small business owner. Her grandfather, J.C. Lofton, was the first African American to own a tailoring school and related business in Washington, D.C. She spent her summers working with him, learning the craft. She was able to earn money while enrolled at Howard University by ironing, mending, and tailoring her classmates' clothes.
When her grandfather became ill, she found herself spending more time on the business – including purchasing a new building – and less time sewing and attending to financial matters.
"The day I opened the doors to the new building was the day he died," she recalls. "I was the first college-educated person in my family, and I went so I wouldn't have to join the family business. But my conscience wouldn't let me let the business go under. At the time, no one else in the family was interested or able."