Incorporate Your Independence from Lawsuits, Taxes and Death

Jul 12, 2014 by

July is a special time of the year. It is a time for family trips, vacation time, seeing relatives and friends, barbecues, swimming, summer concerts and fun at the cabin!

It’s also the month we celebrate our independence and freedom as a country. So this month of July my goal is to help you maximize your independence in your business from:

  • Lawsuits (Separate your personal and business assets and form an LLC or corporation to protect you and your family from devastating unpredictable lawsuits). Avoid the $99 corporations -which is like buying a car without brakes!
  • Taxes (Operate your business as a business, not a hobby, maximize your meals, travel and entertainment expenses and bullet proof your records from an IRS audit).
  • Death (Will you’re loved ones be protected when you pass on? Will all your assets and all you worked for be tied up in the probate courts? Proper estate planning is a must to protect your family’s future).

I’m going to be sharing with you high level strategies, ideas, tools and concepts that will allow your business to achieve its independence and freedom that you deserve.

Also, if you need support during the month of July with forming a complete foundation for your current business or a new business, you will be able to take advance of our July Independence Special Incorporating Offer that will help you and your business celebrate it’s true independence in the month of July and on.

Remember, to put you and your family in the best position to be independent. Even if you are already financially independent, are all your assets protected from attack? If you are building your financial independence every dollar counts in taxes saved, which may be reinvested to help you grow and expand.

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Is Your Foundation Complete?

Jun 24, 2014 by

Even if you have been in a business for years with a separate legal entity and your business, it makes sense to check in and determine if your foundation is complete. Perhaps you establish only a couple parts of a complete foundation and moving forward this is a great time to make sure it is complete.

Let’s address the 5 areas of a complete foundation for your business and the main areas to address in each category. Some of these main seem simple, but sometimes the simple ones that you don’t do are the ones that come back to haunt your business down the road.

Formation

  • The formation of the LLC or Corporation.
  • A separate EIN number for the entity. Sometimes people make the mistake of using an EIN number for a past entity or a sole proprietorship. Remember, each entity is a separate legal entity and requires its own identifying EIN.
  • A record book that has been completed. This means have you taken the time to complete all the initial minutes and meetings and appointment of managers or directors and officers. Also, have you update the annual minutes and minutes for the entity? You may have completed the initial record book and even issues membership interest or stock but never added any other formalities over the years. If that is the case I would recommend you listen to my interview with attorney Sherwood Cook on corporate responsibilities and implement what he recommends to get back on track. If you don’t want to do the work you are able to pay him and his firm to do this for you: http://budurl.com/CorpCompliance
  • Was the entity properly capitalized? If you are the member or shareholder did you personal put any money into the entity bank account in exchange of ownership? Perhaps you contributed assets as part of your capitalization. If you contributed services that will be a taxable event. If you have a partner this is especially important to make you properly capitalize the company. How much should that be? That is a question that varies. Does the capitalization need to be $20K? Not necessarily. In most cases, at least in Nevada, capitalization as low as $200 was determined ok, in other states that may not be the case. If you have partner and you both own the company 50/50, you might want to at least put in $1K each.
  • Did you make a complete transition from a sole proprietorship to a separate entity? You may think this sounds silly especially if you have been operating through an LLC for three years or long but you would be surprised at the mistakes that are made. For example, if you had a DBA name before the entity did you keep the same DBA name when you operated with the LLC and forget to reconnect the DBA to the new entity not to you personally? This happens and this basically means you are still operating a sole proprietorship for everything you title to that DBA name. Did you ever establish a separate bank account for the new entity? Most of you probably have but again you would be surprised how many are using the same bank account tied to the DBA name (which was never attached to the new LLC).
  • Did you apply for a separate business credit card under the EIN number linked to the separate legal entity? If you are still using your personal credit card that is not helping your business. There are some steps from a business credit point of view to make sure you company is in compliance, like a real email address, web site, 411 listing for your business, but then the next step is to ask the bank about the application process for a business credit card. Some banks will not grant a business credit card until the entity has been around for one year. Some banks will tell you to apply but don’t know the rules on the bank end and criteria. You also want to find out what your personal credit score has to be and what personal credit bureau they pull that score from before you apply. The benefit of having a separate business credit card is that the debt does not appear in your personal credit bureaus when it is under the EIN of the entity. That helps protect your personal credit score.

Compliance

  • Does your business even have a business license? Even if you are a home based business you should find out if one is required in your city or county. You may live in an area that does not allow you to have a license from your home. You may have to go to a license handing service to pay a few for your license. You may be in a business that has an exception and a local business license is not required. Most business license agencies are looking for revenue and are getting smarter with creating new categories. Does your business require a sales tax number? Even if you sell online and ship a physical product you should have a sales tax number for products sold in your own state.
  • Corporate formalities are also a part of compliance on an ongoing basis. This was covered in the first area under foundation.
  • Payroll. If you have an LLC taxed as an S corporation, an S or C corporation you should have payroll at some point when the mangers, officers or employees are being paid. Keep in mind if you have an LLC taxed as a partnership with NO outside employees there is NO payroll for the partners, only guaranteed payments. Guaranteed payments are taxed like earned income, but payroll is not required because partners are NOT employees. You may have independent contractors who are not employees but just make sure they meet the tests of an independent contractor and are NOT considered employees. We would recommend you use a payroll service like ADP who is the biggest in the business. They have turn key solutions that are inexpensive on a monthly basis to keep your business in compliance with all the employee rules and regulations. It is well worth the $50 or so per month investment to have them handle all of that for you plus the payroll taxes that are due and end of the year filings. In the NCP members areas at ncpmembers.com there is a payroll webinar with ADP and goes through all the requirements. After watching it, I bet there will be no way you want to handle all those requirements with local, state and the federal rules. It is much easier to pay ADP to help you keep in compliance.

Taxes

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Startups – How To Get Partners On The Same Page

Apr 22, 2014 by

History is filled with inspiring stories about many successful business partnerships including Apple, Google and Facebook. Having a business partner gives you a great sounding board to help you make the best decisions to grow your business. When partnerships work at their best, they can help you see through your own blind spots and capture ideas you may have missed on your own.

Ideally, if you and your partner are on the same page you can help each other stay on the path to growth and success. On the downside of that equation, my observation over the years is that the businesses with the most issues and lawsuits are the ones involving partners. There are endless stories about one partner blaming the other for a business failure, or taking off with the money from a successful business or charging huge personal bills on the company credit card.

Here are the top 6 areas of agreement to get partners on the same page:

  1. The vision. You must agree on the vision of the company and what your short and long terms goals will be. You may not agree on how you will get there, but a common understanding of the vision is essential. If both partners have a different vision from the start, that usually creates problems, unless one partner is the majority owner and has final say. This is especially important when the business partners are husband and wife. The short term vision may be “just to pay the bills” which should be replaced by something more compelling for the long term. If you’re not clear on your business vision, take 1-2 hours to brainstorm together about where you want to take the company. You may be surprised at the input from your partner and what they really have in mind.
  2. Capitalization. When partners start up a company there’s often a lot of confusion over the money used to capitalized it. Many times when I’ve met with partners in my conference room and asked them how they were going to divide the responsibility for capital, they ended up abandoning their business plans. In the end it was for the best because the business was likely to go nowhere without clear agreement on how much money each partner expected to put in and take out over the life of the business. Here’s the common miscommunication: One partner may say, “I will put in $20K into the company and you do the work.” What does “I will put $20K” into the company really mean? Is that capitalization which means NONE of the $20K will be paid back? Or is it mostly a loan that has to be paid back when the company generates profits? What typically happens is a few months into the business, the partner who put in the $20K will expect part of that “loan” to be paid back, and there’s the beginning of the conflict. “What do you mean pay back the loan? That was your investment into the company!” In another scenario, let’s say the company is failing a year down the road. The partner who kicked in the $20K may say, “we need to pay back my $20K loan before we go under.” The other partner may have assumed that the $20K was capitalization. I’ve also seen it work the other way, where one partner puts in $20K and the company takes off and is bought out for millions. The second partner may say, “Here’s your $20K loan back plus interest.” The first partner might ask, “Are you crazy? That was my capitalization for 50% of this company – NOT a loan!”  Another frequent disconnect is between a financial partner and the one that provides “sweat equity” or services for their percentage ownership of the company. Usually at some point the “sweat equity” partner regrets the amount of work they’re doing compared to the effort put in by the financial partner unless they were extra clear about ownership value from the beginning.
  3. Roles, responsibilities and time commitment. Partners must also be on the same page about their roles in the company. It sounds easy to throw titles around like President and CEO, or Managers of the LLC, but have you really defined the responsibilities of those roles and have you taken the time to discuss them? Do you have an organization chart for your company? If it’s just your spouse and you do you have roles clearly defined and a way to measure them to determine each other’s effectiveness? What about the amount of time that each person is able to commit to the company? Does one partner have a family and the other partner is single? Are you both expected to work 70 hours per week? If you agree upon certain roles and one role takes a lot less time because your partner has a skill set in a certain area, you can’t get upset if you’re working more than that the other partner if those are the roles you agreed on. It’s important to have realistic metrics in place so that both partners can fairly measure progress and make proportional improvements.
  4. Compensation. A vital question is when and how much will each partner be paid from the business. This is a special concern if one partner has a tighter personal budget than the other. The partner that does not need the income is more likely to want to reinvest all the money into the business to grow it faster. The other partner that needs to make some money from the business is going to be more likely to want to take money out of the business for income purposes You need to be clear from the beginning how each partner will be compensation. This assumes that you’ve agreed on a budget with real numbers on it as part of your business plan. If one partner has loaned the company money, the repayment terms must also be spelled out. Is that money coming out of profits first before the partners are paid? This must be worked out in advance.
  5. Buy-sell agreement. This allows you or your partner to gracefully sell their ownership in the company and exit when desired on agreeable terms versus ending up in a legal battle. This agreement sets forth an agreed upon accounting formula to evaluate the value of the company before you sell and take your share. As you can imagine, the selling partner’s CPA will evaluate high, and the buying partner’s CPA will evaluate low. This also handles the process if one partner wants to sell their shares and the other partner does not want to buy them. Now the selling partner has the option to go out to the open market. The buy-sell agreement also outlines the payment arrangement for the partner that is selling their ownership stake back to the other partner or the company. Typically, the payment may be 20% paid out up front and the other 80% over a 4 year period of time. Not many companies have enough cash lying around to pay out 100% of your ownership stake when you leave the company. It is also important to have a term life insurance policy on each partner so if one passes away. The surviving partner will need the insurance proceeds to be able to pay off the deceased partner’s estate and move forward with the business. A buy-sell agreement through a law firm may cost about $2500. A standard buy-sell agreement legal form costs under $50 and you can save a lot of money by taking it to a law firm and having them customize it for you. Should you set up a buy-sell agreement from the start of your business? Yes, but in most cases it doesn’t happen this way because owners wait to see if the business is successful before spending money on additional legal services. Revisit the buy-sell agreement during the first year to make sure it’s in place and current for year two!
  6. Exit strategy. Do you have an end in mind? Do you know from the start whether you want your company to be acquired or do you plan stick with it and make it grow bigger and bigger? It’s important for you and your partners to talk about your goals in the beginning. If your goal is to sell the business, you’ll also want to talk with your CPA firm about the tax ramifications. The buy-sell agreement will be an invaluable tool if you can’t decide on an exit strategy right now but want a mechanism in place to facilitate things fairly should one partner decides to exit earlier than the other.

In conclusion, having a business partner can take a lot of the burden of running a business off your shoulders and offer welcome inspiration and encouragement during tough times. Partnership also provides extra growth opportunities for a business, especially when the partners have complementary skill sets. Unfortunately, partnerships also happen to have the highest level of legal issues that I’ve seen over the years. This means it’s especially important to get on the same page at the start and during the first year to commit to long term success!

 

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Don’t Take My Word For It

Apr 16, 2014 by

Anytime you’re visiting unfamiliar territory, it always helps to get travel tips from someone who’s made the trip before you – someone who knows the wrong turns to avoid and how it feels to be a newcomer.

Meet Kevin and Melissa Knecht – a husband and wife entrepreneurial team wrapping up one of their most successful and abundant years ever!

Click here to watch their video: http://budurl.com/WhyLaunchWithNCP
 

How did they do it? Kevin and Melissa are happy to share their secrets with anyone who’s ready to take their business success to the next level. Certainly they already had the desire, determination and a clear vision of their destination.

What they were missing was a complete business foundation that could multiply and protect their profits. After some heavy comparison shopping for someone to walk them through the process of forming a corporation or LLC, they decided that NCP was the best value.

Sure, we could go on about the comprehensive process we took them through – but no one can explain what this experience did for their confidence and earning power better than Kevin and Melissa. They share the important highlights in this quick video.

If you’re ready to put your business on a powerful new success trajectory in 2014 like Kevin and Melissa did, NCP is ready to help! You’ll be amazed how fast, complete and affordable our system is. Take the next step and call us today at 1 (888) 627-7007 or (702) 367-7373.

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Watch this FIRST, Before Forming an LLC or Corporation

Apr 8, 2014 by

If you’re looking to form an LLC or corporation you must watch my BRAND NEW training to help you learn the 5 Essential Components of a Complete Business Foundation.

Why is this so important? Here’s what my friend, Attorney Lee Philips, said about businesses that rely on online articles of incorporation as their only form of legal protection:

“We slice through those in 15 minutes in court and go after the individual every time. That piece of paper provides NO protection!”

This is a direct quote from a legal expert, a counselor to the U.S. Supreme Court who has tried many cases representing plaintiffs. His courtroom experience has shown him that most business owners have no clue what complete formation entails.

Over the last 17 years my company, NCP, has helped thousands of entrepreneurs launch with confidence. Our COMPLETE FORMATION PROCESS ensured that they were starting out with more than just a flimsy piece of paper that provided no protection.

Lee’s comments inspired me to take our training to the next level – we want every NCP client to be CLEAR beyond all doubt what it takes to form a complete and secure business foundation. The result is my  BRAND NEW training called, the 5 Essential Components for a Complete Business Foundationand now you get access to it for FREE (for a limited time).

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Click here to register or get more information: http://budurl.com/LaunchWithConfidence

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How To Focus

Apr 7, 2014 by

Ah, the glamorous life of the entrepreneur. The entire business day is a constant battle for your attention, especially if you’re a “solo-preneur” or have a small staff. You likely have to wear a dizzying number of “hats” including sales, marketing, finance, customer service – maybe even counselor or referee when it comes to keeping your team on track.

Here’s a skill that the most successful entrepreneurs use to stay on top – they’ve trained themselves to focus on one task in one of those “hat” areas at a time. It’s something I struggle with myself, so I know it’s easier said than done. When it comes to productivity and focus, David Allen of gettingthingsdone.com is one of the best experts you’d ever want to meet.

One of David’s easiest and most powerful recommendations to sharpen your focus (you’re going to love this) involves just one blank sheet of paper. At the top, write “Mind Sweep – What’s Grabbing Your Attention?” and keep it next to you as you focus on ONE project for 25-45 minutes. When something pulls your attention away from what you’re doing, immediately capture it on your “Mind Sweep” sheet and get back to the task in front of you.

This fast and simple trick will raise your awareness of how often your mind wanders and help you to boost your productivity.

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How to use your IRA to Fund Your Business Grow

Apr 2, 2014 by

If you believe in your business and think it has the potential to be a long-term success, why not make an investment in it using your retirement plan? Can it be done? You bet it can, using a so-called “self-directed Retirement Account.”

It can be one of the most powerful and easiest ways to fund the start up or expansion of your business.

By converting your previous retirement account into a self-directed account you can stop borrowing money from the bank. Here is the best part, instead of paying back interest to a bank to help fund your start up company or expand your business you can borrow from your own account without taxes and without penalty and then pay yourself back the principal and the interest.

Now, that’s powerful!

We have put together a free video that explains the benefits of converting your existing retirement account into a self-directed retirement account.

You can watch the BRAND NEW video right here.

Some additional benefits of a self-directed retirement account allows you to invest in what you want, by using your individual retirement account. The investment possibilities are endless, but here are some of the most popular picks from clients:

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A Free Tax Consultation for Your Business

Mar 27, 2014 by

Time is running out to schedule your appointment to review your business tax situation. 

Go to http://budurl.com/TaxConsultation to Schedule it now to get support first (appointment are first come first serve and will fill out fast).

This is an important message for your entity that has a return due on April 15th (any partnership including LLCs taxed as partnerships), plus of course a schedule C and your personal return.

Since the these tax returns are due in a only a few weeks away it’s very important that you touch base with your CPA/accountant to prepare and file your return. 

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Schedule Your FREE TAX CONSULTATION (A $199 Value)  with the Corporate Tax Network a company
NCP has partnered with to help make your life less taxing.

Go to http://budurl.com/TaxConsultation to Schedule it now to get support first (appointment are first come
first serve and will fill up fast).
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If you want the inside story on how to maximize your deductions for meals, travel, entertainment and other business expenses, please feel free to contact NCP directly at 1 (888) 627-7007. Tax-saving and record-keeping solutions is just one of the areas where NCP can support you with a complete foundation for business success. We’ll be happy to answer an additional questions you have.

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Is Your Business Screaming For An IRS Audit?

Mar 24, 2014 by

As tax time nears you should be aware of the trends that are clear – the IRS is targeting more small businesses for audits and they’re denying deductions left and right.  Sole proprietorships are especially at risk. I have confirmed with my CPA networks that there is a huge risk to continue to operate as a sole proprietorship. Our CPA contacts are also recommending that you should get off schedule C in 2014 ASAP.

Here are just a few of the audit trigger red flags that IRS agents are watching for:

  • claiming 100% business use for your vehicle (this will almost certainly invite an audit)
  • large deductions that seem out of proportion for the business (this is what their computer systems look for)
  • any schedule C deductions for business travel, meals or entertainment (you are able to take these deductions but if excessive and if audited not documented properly you are toast)
  • hobby losses claimed as business expenses (you best be able to prove you were a real business)
  • regular wage income combined with large schedule C losses (you must prove you had a real business, which we teach you those requirements on the training below)
  • any documentation that doesn’t meet their strict substantiation requirements (this is NOT your CPAs responsibility, it is yours)

 The vehicle deduction is a very common slipup. The IRS knows that 100% business use is extremely rare, especially when there’s no other vehicle for personal use. Activities like photography, dog breeding, car racing or other sports or outdoor activities are tough to substantiate as business expenses because they look like hobbies to the IRS.

Could your business be sending an “audit me!” message to the IRS? The surest way to protect yourself is to establish a complete foundation for your business, starting with a properly formed separate legal entity. Do you know the 5 essential elements of a complete business foundation? Take advantage of this brief, free training to find out where you may be vulnerable to the IRS!

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NEW TrainingThe 5 Essential Components for a Complete Business Foundation: 
http://budurl.com/LaunchWithConfidence

Pick your time and date to be part of this special training.

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Watch this FIRST, Before Forming an LLC or Corporation

Dec 21, 2013 by

If you’re looking to form an LLC or corporation you must watch my BRAND NEW training to help you learn the 5 Essential Components of a Complete Business Foundation.

Why is this so important? Here’s what my friend, Attorney Lee Philips, said about businesses that rely on online articles of incorporation as their only form of legal protection:

“We slice through those in 15 minutes in court and go after the individual every time. That piece of paper provides NO protection!”

This is a direct quote from a legal expert who has served as counselor before the Supreme Court and tried many cases representing plaintiffs. His courtroom experience has shown him that most business owners have no clue what complete formation entails.

Over the last 16 years my company, NCP, has helped thousands of entrepreneurs launch with confidence. Our COMPLETE FORMATION PROCESS ensured that they were starting out with more than just a flimsy piece of paper that provided no protection.

Lee’s comments inspired me to take our training to the next level – we want every NCP client to be CLEAR beyond all doubt what it takes to form a complete and secure business foundation. The result is my  BRAND NEW training called, the 5 Essential Components for a Complete Business Foundationand now you get access to it for FREE (for a limited time).

 

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Year End Tax Responsibilities for an Entity

Dec 5, 2013 by

This is an important message if you have an entity that has a December 31st year end which includes, LLC taxed as a partnership, S corporations, disregarded entities and S corporations.

Since the tax year end is only a few weeks away it’s very important that you touch base with your CPA/accountant to see if there are any last minute tax planning strategies you should implement in December – not in January when the year is over and your chance to reduce your tax bill is gone!

Perhaps you haven’t done December tax planning in the past. That’s common because most business owners don’t pay for any tax planning and just show up to the CPA’s office the following year when the taxes are due. This is the MOST expensive approach because you can’t make retroactive changes.

By the way, if you’re not already working with a CPA/accounting firm we do have a good recommendation for you – but more on that in a minute.

For now, here are a few key end-of-year tax planning strategies you want to have in place:

  1. If you have an S corporation (or LLC taxed as an S corporation) did you have any payroll in 2013? If you only had distributions with no payroll that would be an issue.
  2. Are your books current with year-to-date profit and loss? That’s important because if your business is profitable there may be some end-of-year expenses you can use to lower your net profit and taxes owed for 2013. You can only do that if your profit and loss records are up to date.
  3. Have you properly documented all your deductions throughout the year as required by law?
  4. Even if you had no profits in 2013, will your books and accounting practices for the year be viewed by the IRS as a business or a hobby? They aggressively search for people trying to disguise personal hobby expenses as business losses on a “guilty until proven innocent” basis.
  5. If you’re outside the U.S. are you and your family adequately prepared for U.S. tax rates and tax treaties that apply to your country?

These are all important factors that can be addressed before the end of the year – with a potential for substantial tax savings. Are you working with a tax firm that’s fully supporting you in these areas? NOW is the time for an expert review of your business – it’s important to get these protections in place BEFORE the tax year is over! Plus, you’ll be in a better position for IRS compliance and tax savings going into 2014.

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Operating as a Sole Proprietorship?

Oct 27, 2013 by

It’s a safe bet that you started your business to succeed and make money, not to add stress to your life and lose money.

To cut to the chase, operating as a sole proprietorship is NOT the fast track to success – in fact, it’s the shortest path to join the 95% of businesses that fail in the first 5 years.

To be fair, you probably made this choice for one of three logical reasons; (1) you were looking for the easiest and cheapest way to get started, (2) you wanted to test the waters to see if your idea would make money, or (3) your tax advisor told you to keep it simple and go the sole proprietorship route until you earn more than $40K to $50K in profits.

Risk taking

Unfortunately, that decision sends a different message to the rest of the business world:

“I don’t believe in myself, my product or my service or I don’t expect
to make $40K in profits.”

For going on two decades now, I’ve helped over 6,000 entrepreneurs reverse that message, escape the sole proprietorship trap and make a fast start to profits. Here are just a few of the strategic insights that woke my clients up to the money they were leaving on the table:

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