Financers offer two types of leases: open-end and closed-end. An open-end lease requires you to pay any difference between the projected residual, or remaining, value of the vehicle and its actual market value at the end of the lease term. In other words, if the leased vehicle depreciates faster than anticipated, you’ll have to pay the difference between the expected value and the true market value at the end of the lease. The projected value of the vehicle is included in the lease agreement at inception. Open-end leases are still offered, but they have largely been replaced by closed-end leases.
Also known as a walkaway lease, the closed-end lease specifies the price at which you may, but are not compelled to, purchase the vehicle at the end of the lease. Since you don’t have to buy it, you can walk away from that vehicle and enter into another lease agreement for a new vehicle. A closed-end lease shifts the risk of overestimating the residual value of the vehicle onto the lessor, who agrees to absorb any losses that stem from rapid depreciation. You are, however, responsible for any above-normal mileage or wear. Some other facts that you should be aware of concerning leases are below.
You must normally have very good credit to qualify for a lease. A lease with a low down payment exposes the lessor to greater risk of substantial loss in the event of a default on the obligation.
Lease payments are established to provide a return on the lessor’s capital that’s invested in the leased vehicle. The lower the return that a lessor will accept, the more you’ll benefit from the lower lease payments.
Lessors normally charge a substantial penalty in the event that you decide to terminate the lease early. Therefore, only enter into a lease if you’re prepared to fulfill the terms completely.
Leases typically specify a maximum number of miles that the vehicle can be driven before excess-mileage charges begin to accrue. Generally, 15,000 annual miles are allowed. You can attempt to negotiate a higher limit if you expect to exceed the mileage allowance.
Although manufacturer defects and routine scheduled maintenance are normally covered, other costs of operating the vehicle (such as registration, insurance coverage and non-routine repairs) are yours to pay.
Most leases require a nonrefundable down payment, usually from $1,000 to $2,000, depending on the value of the vehicle. A security deposit, which is generally refundable, may also be required. Sales taxes, if applicable, are usually added to each lease payment.
]]>1. SBA Loans
One of the most popular ways to secure financing is to get an SBA loan. The Small Business Administration is a government agency that guarantees small business loans. These loans are designed to help entrepreneurs get started with minimal out-of-pocket investments. They also have relaxed credit standards and competitive interest rates.
2. Venture Capital
If you have a good idea for business, you may be able to get private investors to provide you with venture capital. They will give you the money that you need, in return for a percentage of ownership in your company. While you may not like the idea of giving a part of your profits, it might be the best route for you to take because the influx of cash is usually good.
3. Peer-to-Peer Lending
There are also several peer-to-peer lending sites that you might want to investigate. These sites allow you to connect with individuals that have excess money to lend. These lenders will bid on your business and provide you with a competitive interest rate.
The term probate refers to the method of distribution of an individual's assets after they die. The estate will be taken before the local probate court and a judge will preside over the distribution of the assets.
Testate vs. Intestate
When the individual that passed away has a will, this is known as testate. The judge is going to then review the will and make sure that it is legitimate. As long as they do not see any problems with the well, they will usually uphold it and distribute the assets according to what the deceased had placed on the will.
If the individual did not have a will when they died, this is known as intestate. In this case, the court is going to appoint someone to handle the estate of the individual. They will collect all of the claims against the estate and use any assets to pay creditors. At that point, the judge is going to refer to personal experience as well as state law and order to determine the best way to distribute the assets of the deceased.
Not all property has to be probated when an individual dies. There are many different types of assets that can be considered non-probate assets. For example, if you set up a trust, the assets you put into it will avoid the probate process. If you own property jointly with another individual through joint tenancy, the property can pass to the survivor without having to go through probate. You can also set up payable-on-death accounts, which will allow the money in the accounts to pass to the beneficiaries immediately when you die without going through probate.
]]>Many well-known and popular establishments, including but not limited to fast food restaurants, frozen yogurt shops and hardware stores, are part of franchises. Entrepreneurs who would like to own a business but would prefer not to start one from scratch can purchase a franchise directly from the corporate headquarters. They will receive the backing of a large corporate presence, but they will still own their own businesses.
Purchasing a Franchise
To purchase a franchise, the applicant must have sufficient financial resources and business experience. The franchise as a whole will suffer if one location is not up to par or goes out of business. In order to maintain consistency across multiple locations and continue to develop a strong brand, franchise owners are very strict about the regulations and rules for owning and operating one of their franchises.
Whether you can own more than one franchise will depend on the rules of that particular franchise. Typically, most franchises both allow and encourage this type of behavior. It is not uncommon to meet a business owner whose goal is to continually open new locations of a single franchise in districts where he or she determines that there can be a large profit. However, some franchises restrict activity due to their own standards and distinct goals. Read the franchisee materials for a particular corporation to discover if owning multiple franchises will be restricted.
A franchise chain typically starts with a single business owner at a single location. Often, the owner has the goal of franchising the business in the future. However, it is also common for the owner to simply desire a profitable business. Once that owner determines that the business model is sound and a second location can be added, the owner will have to determine whether he or she would like to also own that second location or sell the rights to open the location to another person. If he or she decides to franchise, the business model will be solidified so a franchise can be built.
The franchise cost of any chain will depend on the predicted profits, the location and the support of the corporation at large. A very profitable franchise, such as a large, well-known hardware store, may cost upwards of several hundreds of thousands of dollars. On the contrary, purchasing a franchise of a small tutoring company with moderate profits may cost only $20,000 to $30,000. The level of support offered at the corporate level will also affect price. For example, an independent insurance office is notoriously very entrepreneurial, meaning that the individual franchise owner has a lot of control. This may be less costly than a chain whose corporation provides more support.
In a franchise registration state, the state must register and approve all franchise documents prior to sale of any franchise. These states include:
If you are selling a franchise anywhere in the state, these documents must be registered prior to sale. Previously, the FCC set a national requirement that you disclose your franchise documents to potential franchisees at your initial meeting. This is no longer a requirement. If you are selling a franchise across state boundaries, unique regulations may apply based on the laws of each state. Ensure you have fully researched and complied with these regulations prior to finalizing a sale.
Nearly any type of business can be franchised, but most franchises are retail establishments. For example, coffee shops, yogurt shops, clothing stores, restaurants and hardware stores are commonly franchised. Beyond retail franchises, the International Franchise Association has a list of categories of potential franchise industries such as senior care, energy, truck and ATM businesses. Retail businesses tend to be the easiest business models to copy, which makes them good options for franchising. However, even complicated business models can be replicated effectively. Varying levels of control can be afforded to business owners looking for entrepreneurial opportunities.
]]>Years of Service
You must serve at least 20 years prior to becoming eligible for military reserve retirement pay. A qualified year is one in which a service member earned at least 60 active points or 75 inactive points. You are eligible to earn one point for each day of service in the Reserves or National Guard, up to 365. In leap years, you will need to have 366 days per year. At least eight years must be served as a member of the Active Reserve. This was changed in 2002 when the active requirement reduced to only six years. You will additionally only be required to serve six active years if the years of service were between October 5, 1994, and September 30, 2001.
Early Retirement Options
As of 2009, there is a new early retirement option in place. In this system, you may be able to retire as early as age 50. You can reduce your minimum retirement age. The new provision only applies to new active duty service after the provision was passed; this starts on January 28, 2008. The maximum reduction is 10 years, so you will not be able to retire before the age of 50, regardless of your total number of years of active duty service. Further, just because you receive retirement benefits does not mean you will qualify for health benefits. You must still wait until the age 60 to meet that qualification.
Calculating Retirement Benefits
The military uses a formula to calculate how much you will receive in benefits. The formula can become quite complicated with several provisions now in place, but the basis is still simple. Calculate the total number of years of service you gain credit for by dividing your total retirement credits by 360. There are two basic formulas to calculate your benefits from here. One is called the "Final Basic Pay" formula, and the other is the "High 3 Formula."
If you entered the service prior to September 8, 1980, use the final basic pay formula to calculate benefits. Multiple your years of service, found in step one, by 2.5 percent. Do this up to a maximum of 75 percent, then multiply the result by the basic pay you were receiving at the end of your career.
If you entered the service after September 8, 1980, use the High 3 formula. Multiply your years of service, found in step one, by 2.5 percent. Do this up to a maximum of 75 percent, then multiply the result by the average of the highest three years of pay you received while serving.
In order to be eligible for military reserve pay, you must have at least 20 years of service to the National Guard or the Reserves. At least eight of these years must be active reserve years. A year of service is any year when you earned at least 60 active duty retirement credits, or 75 inactive duty credits. You earn one credit for each day of service. Once you have accumulated 20 years of credit and are at least 60 years old, you can begin to collect pay. You may be eligible for early retirement based on the year you entered service and how many active duty years you served.
Military reserve pay is based on a calculation of the retirement point system. You earn one point per day of service in the military, up to 365 points per year. Your total points earned is divided by 360 at the end of your career to determine how many qualified years you served. Once you know your qualified years, you will use either the final basic pay or high-three system to calculate your pay. Final basic pay is used if you entered the service prior to September 8, 1980. The high three is used afterward. In both scenarios, you multiply your qualified years by 2.5 percent, with a 75 percent max. Then, use this percentage times your end pay. Or, average the highest 36 months pay in order to determine your benefit.
Reserve retired pay is calculated based on one of two formulas depending on the year you entered service. If you entered prior to September 8, 1980, you will use the final pay formula. If you entered after this day, you will use the High-3 formula. In both options, you first determine your qualified years of service by dividing your total number of retirement credits by 360.Then, multiply this formula by 2.5 percent per year up to 75 percent.
If you are on the final pay formula, multiply the total by either. Or, if you are on the High-3 formula, average of the highest 36 months of your pay.
]]>For example, John wants to pass his home onto John, Jr. He wants to avoid probate and lawsuits in doing this after his death. As such, he passes the home onto John, Jr., today. However, John needs to live in the home for the time being. He establishes a life estate deed. This allows him to live in the home and gain all the benefits, and costs, of home ownership until the day of his death. At that point, John's life estate expires. John, Jr., does not have to inherit the house through an estate. Instead, he is already the named owner of the home, and he can begin receiving ownership benefits immediately.
Once a contract for a life estate deed has been signed, it is difficult to revoke it. The parties listed in the contract would have to initiate the revocation because they are the lawful owners of the property. Another withdrawal option is to determine the parties were not in a sound legal mind or committed fraud when the contract was signed. This is very difficult to prove. Most cases involve a lengthy lawsuit and very expensive legal costs because life estate deeds are carefully drawn and executed.
]]>Instant Account Access
One common feature that you will find with all online banks is that you can access your account instantly. You will be able to get online any computer and login to your bank account. This will allow you to see a much money you have, what payments you have received, and what checks have cleared. Many online banks also make it possible for you to access your account from any PDA or cell phone. This provides you with a level of convenience that can be very beneficial to you.
Safety
Another benefit that you can get by working with an online bank is safety. Many people believe that it is not safe to do all of your business online with this type of bank. However, many people would also argue that this is actually safer than the traditional alternative. With a regular bank, you are going to receive paper statements and copies of cancelled checks. This is one of the easiest ways for identity thieves to get your information. They can simply look in your trash and find a copy of your bank statement. However, with online banks, everything can be conducted online. You are not going to have to worry about shredding your documents or anyone finding your cancelled checks. Because of this, your bank account is going to be very safe.
No Fees
One of the best things about online banks is that many of them do not charge fees. You could potentially get a checking account that allows you to pay all your bills online and you will not have to pay any fees to the bank. Some of them do not even have fees for bounced checks.
Check Images
When you are working with an online bank, you should also be able to get access to images of the checks that you have written. This way, instead of seeing simply an amount and a check number, you will actually be able to see a picture of the check that you wrote. Many times, this can jog your memory if you forgot to write down the information off of the check that you wrote.
Transfers
Another benefit that you can get from online banks is that you can transfer money to other accounts. This allows you to link up to another bank account from a bank that is located in your local area. This way, if you need to deposit cash, you can take it to your local bank and then transfer the money to your online bank quickly. You will also be able to easily transfer money to an investment account or some other type of account that you have.
A thrift bank is a type of banking institution that is generally smaller than a full-service bank. The thrift bank puts an emphasis on taking deposits from customers and using that money to issue mortgages. The money from the mortgage interest that is generated is used to provide interest to the depositors of the bank. Although this is the basic business model of the thrift bank, some thrift banks have expanded to offer additional features such as checking accounts. This is a type of banking that has been around for many years and is also known as a "savings and loan."
]]>Con: Difficulty Obtaining Insurance
Teen drivers are statistically the most dangerous on the road. There are a number of factors that lead to this statistic, including the fact that teen drivers are inexperienced and more likely to be distracted. Because of these problems, car insurance companies like to tie a teen driver into a plan with his or her parents. The philosophy behind this step is simple: insurance companies feel drivers are more likely to be cautious if they are responsible to their parents. Further, car insurance companies cannot exist by insuring only risky drivers. Instead, they must have a balance of good drivers and risky drivers. It is easier for an insurance company to supply coverage to a teen if there is another, less risky driver also on the plan.
Con: Expense
If you do succeed in finding a carrier to provide your car insurance, you should be aware of high costs. As a rule, car insurance companies raise costs and keep them high for any driver under the age of 25. Aside from this factor, you will be missing out on the advantages of grouping. Your parents are aware that paying for two cars to be insured on one plan is cheaper than paying for two plans. You will miss this benefit entirely, and you will end up paying substantially more to be on your own plan than you would simply reimbursing your parents.
Pro: Build Your Credit
One positive result of having your own car insurance at a young age is the ability to establish a payment history for yourself. Paying to insure your own car is a big financial step. It is something many individuals do not do until several years later in life. Starting early can help you build your credibility so you will be eligible for other opportunities at a young age. For example, you may find that you can obtain lower renter's insurance costs if you have been paying your own car insurance for years.
Pro: Reduce Future Costs
When you are on your parents' plan, your parents will benefit from your good driving record. The account as a whole will maintain a positive balance. After that, when you do eventually obtain your own insurance, you will still have no payment record and no history of credits versus debits to an insurance account. On the contrary, if you start young with your own insurance, you will establish a record early. You can then benefit from car insurance savings later in life that may at least partly offset the expense you took on as a teen.
If you wish to obtain your own auto insurance policy as a teenager, you will have to shop around for insurance companies willing to extend you a policy. Teen drivers are the costliest to insure, and many insurance companies would prefer to keep you on a plan with your parents. Research auto insurers that offer specific lines for new drivers. You can still expect to pay more than you would if you shared a plan with your parents. However, you can ask for discounts if you own your vehicle in your name, have a job or routinely get good grades in school.
Car insurance for teenagers is the most expensive type of auto insurance to secure. The expense comes from the fact that teen drivers make more claims than other groups of people. Insurance companies must charge more based on these statistics. The high charges are intended to make sure that the insurance company can afford anticipated claims from a teen driver. In order to reduce your insurance costs as a teen, stay on your parents' plans, look for good student discounts and take a safe driver class. Many insurance companies offer large discounts to teens who have gone to driving schools prior to getting their licenses.
There is no real option for cheap car insurance for teenagers. However, there are some discounts you may be able to take advantage of. First, it is best to group a teen driver's plan with his or her parents' plan. Then, ask about good student discounts. Most insurance companies will provide at least a small discount for students getting good grades in school since these individuals are likely to be safer drivers. Be sure to have a teenager take a safe or defensive driving class prior to getting a license. Turn in forms from these classes, such as those offered at the Department of Motor Vehicles, for a discount.
Good student car insurance offers a discount to teen drivers with good grades. Many insurance companies offer this discount. The driver simply submits copies of school records or report cards in order to receive the benefit. Insurance companies use demographic research to determine how much they should charge. They have discovered that students with good grades tend to have fewer claims than those not performing well in school. As a result, they reward those students with good grades with lower rates. The insurance system as a whole operates with this type of reward system. For example, individuals who are married or have children may also be eligible for discounts.
]]>If you decide to take an insolvent estate through probate, you will have the protection of the court each step of the way. This is the main reason beneficiaries decide to take the probate route to resolve an insolvent estate. However, the protection comes at a cost. You will likely find yourself deep in debt to attorneys and the court at the end of an insolvent estate probate process because the costs are only exacerbated by the insolvency.
No Nonintervention Powers
When you enter probate on a solvent estate, you have the power to ask for nonintervention of the court on certain issues. This allows you to resolve some debts on your own simply by repaying creditors out of the estate. You will save money by handling issues on your own. When an estate is insolvent, most jurisdictions will not permit nonintervention.
This means every single transaction must be run through the court. Similar to a bankruptcy proceeding, a probate on an insolvent estate freezes the assets and lets the court decide how to spend the money left behind. You will find yourself at the mercy of the court in even the smallest transaction, which can consume your time and money.
Insufficient Assets to Pay for Attorney
In probate, the attorney and court fees to resolve an insolvent estate are paid out of the estate. The attorney is paid first, and the remainder of the estate goes to pay off creditors. The creditors’ shares of the pot shrink as attorney fees go up. In some cases, the attorney fees may climb so high that nothing is left for the creditors.
Insufficient funds can be a problem in small estates where only a few thousand dollars are left to repay debts, even if the debts are small. Attorney fees will quickly eat up those few thousand dollars. You will be left with few options. One is to handle the probate and try to handle the debts on your own. The other is to enter probate and pay attorney fees out of pocket.
Time to Resolve Disputes
When you handle dispute resolution on an insolvent estate yourself, you can move at your own pace. You decide which creditors to engage first, and you decide which assets to liquidate immediately. You hand all of this over to the court when you enter probate. The court will then establish it’s timeline. This may, or may not, work with your goals to end the process quickly. Probate can take years to resolve an insolvent estate. While this time is daunting and the cost can be high, you should also keep in mind the alternative. If you decide to “go it alone” on resolving the issue, you lose the protection of the court. It can take just as long for you to personally verify and repay all debts as it would take the court. Do not let time be the reason to avoid probate, instead keep in mind it can be a serious disadvantage to go through the court system.
An insolvent estate does not have enough assets to cover liabilities at the time of the decedent’s death. As a result, the beneficiaries of the estate will inherent nothing. It is up to the beneficiaries to determine how the insolvency will be resolved. There is no correct way to handle the process, and each individual will have to choose based on the circumstances of the individual estate in question. The size of the estate, the types of debts remaining and the resources of the beneficiary will all come into play.
Choose Based on the Estate Size
For a relatively small estate, with only a few thousand dollars in assets at the time of death, the best method will be to either ignore the liabilities or to close them personally. As a beneficiary, you have no actual obligation to ensure debts are paid. You are not named on the debts, and the credit of the decedent will have no impact on you. This will not stop creditors from contacting you, however, so it may be best to resolve the estate personally.
You can liquidate the assets in the estate and repay the creditors a portion of the remaining cash equivalent to the portion of debt the decedent owed the creditor. If you were to move through probate, it is unlikely the estate would have enough cash to pay an attorney and still repay creditors, and you may be stuck with the bill. For a larger estate, probate may be a better option. By putting the estate in probate, you can remove yourself from personally making any decisions. The assets of the estate are liquidated, and attorney and court fees are paid out of this sum. Then, the remaining cash is used to repay creditors.
Choose Based on Types of Debts
If the debts in an insolvent estate are largely secured, it may be easy to resolve the debts by surrendering the collateral. You can carry out the process of voluntarily surrendering the assets, resolving the debts one by one. However, if the debts are largely unsecured, it will be harder to pay them off by surrendering collateral. Instead, you would have to liquidate each asset yourself, collecting the cash earned and repaying creditors personally. In this instance, entering probate may be a better option. The court can handle the liquidation process for you, and the court will determine how to negotiate repayment.
Choose Based on Personal Resources
If you have limited resources to handle the dissolution of an estate, it is best to avoid probate. Probate always runs the risk of resulting in legal fees. Without the cash to pay, probate is not a good option to you. However, if you have the cash on hand to cover this expense, probate can save you a lot of time and hassle. In the end, you may owe nothing at all.
Insolvent estates are those where the decedent’s assets are not sufficient to cover debts after death. As a result, there will be no inheritance left to the beneficiaries of the estate, and those beneficiaries may further have a legal obligation to help resolve the debts. Thankfully, less than 10 percent of all estates are insolvent, so it is not likely you will have to face the problem. If you do, however, there are three main ways to handle debts in an insolvent estate.
Ignore the Problem
While creditors may try to convince you otherwise, in most states you have no obligation to meet the debts incurred by a decedent’s estate. The creditors can try to recover by contacting you or the court, but you have inherited none of the estate if it is insolvent, so you are not legally obligated to any of the property or the debts. The effectiveness of this strategy may partly depend on your state of residence and whether you inherited any property while the decedent was living. You may want to consult an attorney to learn if the creditors could attempt to contact you in any way and what rights you have if they do.
Handle the Debts Personally
If you have received the entire estate and found it to be insolvent, you may personally attempt to resolve debts. You can contact each creditor to verify debts owed and offer to surrender assets, to resolve those debts. This strategy can be time consuming. Furthermore, many creditors will attempt to take advantage of you in this situation. They are aware you are not the original debtor, so they may attempt to assess fees and charges against the estate and claim these charges were part of the original contract.
If you are not careful to follow the contracts and verify all debts, then you can end up paying more than is legally necessary for each debt. Always start by verifying all debts, assuring none are past the statute of limitations and knowing the legal obligation the estate has to repay any of the debts prior to negotiating with creditors.
Use Probate for the Debts
You may want to enter probate in order to resolve the debts. The main advantage of this is you have a court system to assure all debts are lawful and you are not overpaying. The court will work to reduce the total debts owed so the estate can cover it’s liabilities. Unfortunately, however, the court does not recognize your legal rights. As the beneficiary, you will not have the ability to handle any debts personally. Every single debt must go through the court, which can drive up court costs and probate expenses. Probate can be a very expensive process and this can add to the overall expenses of the estate itself.
]]>Why Offer Warrants?
Companies offer warrants on their shares when they want to boost investor confidence. They are predicting the value of their stock will go up; if it does, then investors will have greater confidence in the stock in the future. For this reason, warrants are often issued at the same time a company issues a new stock.
Why Buy Warrants?
As an investor, you have the opportunity to earn a very high return on investment with warrants. Warrants are high risk, high reward certificates that are transferable and sellable. This makes them very flexible, and they can be attractive to investors. They are popular with hedge funds and strategists as well.
A stock warrant is always issued with an exercise date and price. American warrants can be exercised any time before the exercise date at the exercise price. With European warrants, you can only exercise the warrant on the exact exercise date. When you exercise a warrant, you can notify your broker or the issuing company with either your put or call order. Warrants are issued directly by companies. As a result, when you exercise the document, the company will be the one that issues you the shares directly.
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Bequests are a method for giving property to an individual or organization after your death. You can state your intention to bequeath property in your will, or you can bequeath the property while you are living. Most commonly, property is transferred in a will and is required to go through probate before it is distributed. The tax benefits are usually more favorable than other gifting options.
Charitable Bequests
Charitable bequests are popular because they offer flexibility and have few tax consequences. If you bequeath property to charity, you will receive a tax deduction. You can bequeath the property while you are alive, retain use of the property and hand it over upon your death.
Giver's Tax Liability
Anytime an individual gives a piece of property, there will be tax obligations applied to the transfer. There are two types of tax consequences. First, there is a possible estate tax on the property. The estate tax is constantly under reform. As of 2010, the estate tax remains at 35 percent, but it is only charged for very large estates. An individual leaving $5 million, or a couple leaving $10 million, will have an estate tax charged to their property. If the property is worth less than this amount, an estate tax will not be assessed.
However, there may be a capital gains tax on a property that is transferred, if the value has increased. For example, if you purchase a home for $200,000 and it is worth $300,000 when you transfer it, you are required to pay taxes on the $100,000 difference. Capital gains taxes are due and can be paid by the giver or the receiver. In either case, the cost basis is the original owner's cost basis.
Receiver's Tax Liability
A receiver does not pay income tax on any property received through bequest. Property acquired by inheritance does not count as income. Keep in mind, however, that you are required to pay estate or capital gains taxes as described above. There are a few steps you should take in order to determine your tax liability. First, determine if you owe an estate tax on the property based on its nominal value. Then, if you are receiving an asset that has changed in value, you may have to declare a capital gain or capital loss at the time of the asset's sale. You will not have to pay a capital gains tax until the gain is realized.
This means, for example, you can hold a property without paying taxes. However, you must pay the taxes in the year you sell that property for a profit. There are relatively low tax rules applied to bequests. For this reason, many individuals find that a bequest is the best option for a property transfer. You can use an attorney to help you draw up the proper forms and explain the specific rules of your tax consequences. Always cross check the information that you are given with a tax authority because attorneys are not always well versed in tax laws unless they specialize in that area of law.
Charitable bequests are one way to donate property to charity. When you bequest property, you are giving it as a gift. Both you, and the recipient, receive favorable tax consequences as a result. You can donate property either while you are alive or through your will. If you decide to bequest while you are living, you can use the property for the remainder of your lifetime before turning it over to the charitable organization. This flexible structure makes bequests easy to manage. Many individuals prefer to use this method instead of allowing property to go into probate after death.
]]>You must keep written records of all donations to charity, including tax donations. If you are giving a sum larger than $250 on one donation, then you will need supporting documentation in order to receive the benefits. You should even keep records of any cash donations. To ensure your records qualify, keep the following:
If you are not donating money, you may be able to receive a charitable deduction for donation of property. You must be able to prove the market value of the property you donated if you intend on itemizing the deduction. You need the following in this case:
There is what is called a 50/30/20 deduction limit on all charitable donations. This means the following:
You cannot deduct the value of time spent on a project as a charitable donation tax deduction. For example, if you are a carpenter, you may devote a weekend to building for Habitat for Humanity. The time you spend on the project cannot be deducted at your normal hourly rate. However, any out-of-pocket expenses you incur during that period can be deducted. This includes wear and tear on your machinery, nails and supplies, and even lunches or the gas for driving time to and from the location. Any expense made during the time you are working can be deducted if it is directly related to the charity activity or event.
If you donate a vehicle, you are eligible for a charitable donation tax deduction. You cannot deduct more than 50 percent of your taxable income, regardless of the type of donation. There is a standard $500 deduction for the donation of a vehicle. You may be eligible to deduct more if
You can then deduct a value up to the amount the charity sold the vehicle for.
]]>Employee Eligibility
All eligible employees must be at least 21 years old, have three years of service in the past five years and have earned at least $450 in compensation from the employer. In general, these rules are in place to exclude one-time independent contractors or temporary employees from receiving benefits in the plan. However, part-time employees are eligible as long as they meet the $450 minimum and have worked at least 3 years in the past 5 years. To determine employee eligibility, an employer fills out an IRS Form 5305.
Spousal and Family Eligibility
The SEP IRA program can benefit companies employing family members. The employer must immediately vest the same percentage of income as he or she is receiving as the business owner into an IRA account for all participants, including family members. Since the rules are extremely equal, there is no favoritism for family members employed in the company. This can be expensive for an employer since the employer is the only contributor. When the recipient of the funds is a spouse or child, however, the tax deductible expense may be easier to stomach.
Benefits of SEP IRA Rules
The SEP IRA is most beneficial to an individual with a very small business since it is costly per employee. The business owner should have a desire to contribute to his or her own IRA as well as those of his or her partners and direct employees. Since the owner must contribute the same amount to his or her account as to the employees’ accounts, it is important the employer is prepared to take on this expense. For this reason, the SEP IRA is popular in partnerships, family-owned businesses and sole proprietorships. The low level of forms required makes the plan cheap to administer even if it requires high annual contributions from the employer.
Downsides of SEP IRA Rules
The main drawback of the SEP IRA is the fact that an employer must compensate all employees equally. If one employee is outperforming another or has been more loyal to the company, no additional IRA funds can be contributed on that employee’s behalf. This removes the ability for an employer to offer retirement funds as an incentive for employee performance or loyalty. Further, the SEP IRA is not a good option for a growing business. The unique circumstances provided by an SEP IRA are truly best for a very small operation, and the business will quickly incur too much expense if it continues to grow beyond a low number of current employees.
A new employee will not immediately be eligible for an SEP IRA. SEP IRA requirements clearly state that an employee must have at least three years of service to the organization in the past five years. In addition, the employee must earn at least $450 from the employer in the given year to be eligible. These restrictions make it impossible to extend an SEP IRA immediately to a new hire. However, the individual may set up his or her own IRA account and roll the plan over into the company's IRA plan in the future.
If you run a sole proprietorship, you are eligible to open an SEP IRA. In fact, the SEP IRA plan is most beneficial for extremely small businesses. Under this plan, the owner of the business must contribute the same amount to an employee's IRA plan as he or she does to the owner's account. This means all employees, regardless of level of management or time with the company, will receive the same contribution amount annually. This makes the SEP IRA most feasible for a single-employee company or a partnership. Individuals who employ family members may also favor this plan.
]]>More Important than Making a Profit
It's possible for a business to demonstrate profitability on paper without having positive cash flow, as profitability is defined as the difference between the cost of producing something and the price for which it's sold. A company can be profitable and not generate enough cash to cover its operating expenses and debt. While any business can experience a restricted period of time with a negative cash flow, cash flow needs to be consistently positive over the long run for a business to be considered financially healthy. Investors, shareholders, lenders, and even potential employees all have a stake in a company's long term financial stability.
Carefully Monitored
Cash flow is generally analyzed over specific, limited time increments, such as monthly, quarterly (over the course of a year) or yearly. Some businesses manage negative cash flow by requesting a short-term line of credit from the bank to tide them over during cash shortfalls, but this can be difficult to obtain for smaller businesses, particularly during economic downturns.
The main advantage of borrowing from a 401k is you are essentially borrowing from yourself. This means you do not have to undergo the same screening process you receive when you are borrowing from another lender. Most people who consider borrowing from a 401k have bad credit, leading them to this option. You will be able to borrow up to 50% of the monies you have fully-vested. This can amount to a very large loan without any credit check, a down payment or collateral.
You can only borrow up to 50% of vested funds. This can be tricky for some people who do not understand the contribution process. When you contribute funds automatically in each paycheck, the funds hit the account very quickly. It is against the law for your employer to wait to deposit the contributions you have individually made. All contributions must be deposited within the 15th business day in the month following your contribution.
However, many people are confused by the fact the employer does not have to immediately match the contribution. Many employers have a quarterly deposit schedule for their matches. You may only borrow against the sum that is fully vested at the time your contract is complete.
First, it is necessary to understand most loans must be repaid within 5 years of the initial loan. If you fail to meet this requirement, you may be penalized for an unscheduled withdrawal from your 401k. This is a 10% penalty on the funds if they have been taken out prior to the time you are 59 1/2 years of age. These loans also cost more than just their interest rates. While the funds are on loan to you, they are not earning interest in the account. Further, you cannot make the withdraw for any type of purchase. The loans can only be taken to pay for a home purchase or student loans. You cannot simply pay off other debts with a 401k loan.
You will have to pay taxes on your loan amount when you receive it. Since your funds are not taxed when they are contributed, they have to be taxed on the back end. The tax rate is typically around 20% for most Americans. This means borrowing from your 401k can be exceedingly expensive in real dollars. It is a better option to consider a high risk personal loan rather than using this option. You may be tempted to use this option now, but you will pay for it in the future when you go to retire.
You can borrow fully vested funds only when you are borrowing against your 401k. If you have made deposits through your regularly occurring paycheck, the funds are immediately fully vested, and there is nothing to be concerned about. However, your employer's match may not be funded immediately. In this case, you can borrow those funds only once they do hit your account. At any given point, you may contact your 401k administrator to learn the amount you have fully vested in your account. You can then borrow up to 50 percent of this sum if your employer permits 401k loans.
If you are borrowing against your 401k, the loan is not reported to the credit bureaus. You are technically borrowing money from yourself, and no lending agency is extending the financing. On the one hand, this sounds like a great option, but on the other, there are many credit drawbacks to the loans as well. Since they are never reported, they do not help build your credit score. For example, you can borrow from your 401k to pay for college tuition for yourself and a dependent. However, if you qualify for a federal student loan, you will receive low interest rates, and you will build your credit in the process.
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