business finance

Choosing a Legal Professional for Your Business: FAQs

Westchester NY accountant Paul Herman of Herman & Company CPA’s has all the answers to your personal finance questions! The following are frequently asked questions our Westchester accounting firm regularly receives regarding choosing a legal professional for your business.
▼ Should I hire an attorney?

It is necessary to hire an attorney for some disputes that require a lot of time. Having an attorney makes you more prepared, but you may also hire one for a significant business transaction. http://www.flickr.com/photos/safari_vacation/6260723020/If there is a problem where the court is concerned, it is advisable to hire an attorney.

 

 

The following should be considered when determining if an attorney is necessary:

  • Is this a difficult legal dispute or will I end up in court? What is involved in terms of money, property, or time? Positive answers demonstrate the need for an attorney.
  • Does a book exist that will be able to help me so I don’t have to hire an attorney? Some problems can be resolved with little help.
  • Have you looked for non-Lawyer legal resources to help?

Certain disputes can be solved without needing an attorney. For example, a living will can be prepared by a non-legal organization such as the American Association of Retired Persons. There are several organizations that can aid in the process of obtaining a living will form from the state along with information for filling it out.

▼ What process do I follow to handle the dispute by myself?

The use of letters and negotiation solves many disputes without the need of an attorney. Arbitration or mediation may also be used. There are legal self-help manuals and conferences that can aid in resolving disputes.

Idea: Instead of hiring an attorney to fully represent you, only use them for paper review or advice.

Negotiation without a lawyer: This can resolve many small disputes. Many books cover the process of negotiation.

Idea: Make sure to learn about the legal issues that could be brought up before the negotiation by speaking with a legal hot line or consulting resource.

Mediation or arbitration: You can find dispute resolution centers in almost every state. The areas that they commonly focus on are complaints from consumers, rental property disputes, and arguments between neighbors or members of a family.

Mediation consists of a third party who helps the two parties talk about the problems and hopefully reach an agreement. Arbitration is a more formal process where a third party reaches a conclusion after hearing both sides.

These are the low cost options in comparison to going to court or hiring a lawyer for representation.

Small claims court: Each state defines the limits for the amount of damages, which can be filed in small claims court. These are less formal and require less paperwork than normal courts. You must be prepared to function as your own lawyer in small claims court, which involves compiling evidence, investigating the law and making your story known in court.

 What method should I use to find a good attorney?

Speak with friends, relatives, clergymen, social workers or your doctor for their opinions. You can also use the referral lists that are compiled by the Bar Association.

Pay close attention to the specialty area in the Bar Association lists, as many attorneys work in different areas. A lawyer that is a part of one of the organizations may have just what you are looking for.

More sources are the Who’s Who in America Law and the Martindale Hubbell Law Directory. Make use of referral services for particular groups (for example, people with disabilities, elders or victims of domestic violence).

If using the referral service, ask for details on how the lawyers were selected. Many referral services use lawyers who are members of a certain organization.

The court and your bank can be great referral sources as well as the yellow pages. After the list is compiled, spend time with each of them and slowly eliminate attorneys.

▼ What should I ask my possible lawyers?

Before beginning a consultation, the following questions should be asked:

  • Is the first consultation free?
  • How long have you been an attorney?
  • Do you have a lot of cases that are like mine? (Try to find an attorney that has experience in your problem area.)
  • Are there references, such as trust officers in banks or other attorneys that I can contact?
  • Are there any clients or special-interest groups that you work for that may cause a conflict of interest?
  • Can we make a fee agreement? May we discuss the fees?
  • Is there anything in particular that I should bring to the first consultation?

Make sure to consult with at least two of the attorneys from your list. There is no need to be embarrassed about choosing the best attorney or changing appointments with an attorney after all investigation is complete.

It is now time to interview the possible attorneys. Make sure to have a brief summary of the case at hand as well as general questions to ask the attorney. There are two objectives for meeting with the attorney: 1) to see if the attorney has the talent needed to represent you, and 2) to see if you are comfortable with attorney and the fee agreement.

 Is a certain fee agreement better for me?

The basic rate for legal services depends on location. Based on your knowledge of the fees, a “fair” fee should be selected. Here are a few factors that play a role in the decision:

  • What can you afford?
  • Is this a routine case or do I need someone with special experience?
  • What is the going rate for the attorneys in my area?
  • What can I take care of without the attorney?

The following are basic fee agreements in use by attorneys:

Flat fee: There is a specific total that will be charged for work on your case.

  • Idea: Make sure to ask if copies, transcribing and other expenses are included in this rate.
  • This is normally offered only if the case is simple or routine.
  • Note: Litigation is not usually a flat fee, but an attorney can give you a fair estimate beforehand.

Hourly rate: A rate will be charged for each hour or part of the hour that the attorney works on your case. For example, if the attorney’s fee is $50 per hour and puts in five hours of work, then the cost will be $250. Some rates may vary depending on whether they are hours spent in court or doing investigation and preparation.

  • Idea: If you decide on an hourly rate, find out how much expertise the attorney has in your particular problem area. Someone who is less experienced will need more hours to complete the work, even though the hourly rate is lower.
  • The size of the firm also affects the price. Smaller firms and urban lawyers usually charge a higher hourly rate than lawyers in rural areas and large law firms charge the most.
  • Idea: Find out what is included in the hourly rate. Will you be charged for other staff members time put into the case and if so, how? Are there any other expenses that I will be billed for besides the hourly rate?

Contingency fee: The final amount owed is based on the amount awarded in the case. In this scenery, if you lose the case, the lawyer does not receive anything besides expenses. This is normally one-third of the total.

  • Idea: Find out if the fee will be calculated before or after expenses are taken into account. This can make a significant difference in the amount of the fee.
▼ What can I do to save money on legal fees?

Bear in mind that attorney fees are usually negotiable even though you will not be asked to bargain over the fees. The following are a few tips to make sure you save the most money possible:

  • Shop around for flat fees on routine cases.
  • Discuss the method of billing for hourly rates. To avoid problems, have a written agreement stating the fee agreement as well as what is involved.
  • Find an attorney with the qualifications necessary for your case. The majority of legal work is fairly routine. Knowing what form needs to be completed and then who to file that with plays a large role.
  • Propose to help with the workload.
  • Use the lawyer as the middleman. If you only need a letter written to the opposing party, some attorneys will negotiate a lower fee.
  • Work the lawyer as your coach. Hire a lawyer to guide you and review documents and letters that you prepared and signed if you would like to represent yourself in court (pro se).
  • Select an attorney that specializes in your particular case.
  • Always arrive prepared to lawyer meetings. The more information you have at hand means that less time that the lawyer needs to spend looking for that information.
  • Be forthcoming with your attorney. To save time and money, make sure the attorney knows all the pertinent facts as soon as possible to reduce the need for more investigation.
  • If factors change, inform your lawyer immediately. This can possibly save the lawyer’s time or keep the lawyer from working on the case in the wrong direction.
  • Be prepared when having contact with your lawyer. Ask all questions in one call. When you receive a letter or information in writing, pass it on to other staff members instead of contacting the attorney, unless you have a specific need.
  • Pay close attention to invoices. Ask that you receive an invoice regularly. This applies to all types of fee agreements including a contingency fee. If you have a question regarding any of the items, you should immediately speak with your attorney.

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Armonk NY, Bedford NY, Harrison NY, Chappaqua NY, White Plains NY, Scarsdale NY, Purchase NY, Greenwich CT and beyond.

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How to Resolve a Consumer Complaint

 Scarsdale CPA Paul Herman has all the answers to your personal finance questions! In the business world, consumer complaints are inevitable. However, approaching the complaint using these steps is your guaranteed way to solve the issue at hand, leaving both you and your customer satisfied! 

How to Handle Complaints from Scarsdale Accountant

Nobody likes to deal with a complaint. Luckily, these steps will help your business handle them with ease!

You should first approach the seller of the item. Then, get in touch with the relevant consumer agency. If neither of the previous provides adequate results, a lawsuit can be filed or you may use arbitration.

 

Approach the Seller

  1. Compile all necessary evidence such as canceled checks, receipt, photographs showing the issue, a warranty, bill of sale or contract.
  2. Determine your goal. Would you like the product replaced? Would you like a refund? Are you just looking for an apology?
  3. Schedule a meeting with the manager, customer service representative or other appropriate person by calling the store or service provider. In this meeting with the individual, describe as clearly as possible the nature of the issue and what your goal is. If you can only speak by phone, write a letter as follow-up and keep detailed notes of the dates and with whom you spoke with. It is important to note that if there is a valid warranty for the product, it is best to follow-up with the manufacturer and not the merchant.
  4. Take the issue to a higher level, if this doesn’t find a solution. This could be the corporate president or supervisor. At this point, you should put your complaint in writing if you have yet to do so. This letter should detail your name, phone numbers, address, and account number (if applicable). Include the date and place of purchase as well as the model and serial number if a product is involved. Concisely describe the issue at hand and the process you have gone through so far to reach a solution. Lastly, you should include what outcome you want and state a deadline for this outcome. Keep a copy of the letter for yourself and include relevant copies of documents. Make sure you keep the originals and retain copies of any correspondence you receive from the company.

Get in touch with an agency

If your desired goal has yet to be reached, you will want to look in the phone for a consumer complaint agency, such as the county, city or state consumer protection office or the Better Business Bureau.

Another option is to go with the trade association method. There are industry trade associations that will offer to aid in mediating issues with regards to their members.

You may want to get in touch with the appropriate state-banking regulator if your issue deals with a bank. If an insurer is involved, you will want to get in touch the state insurance regulator, for a securities problem contact the securities regular or for utilities problems contact the public utilities commission.

Call the state-licensing department if you the issue deals with a state-licensed trade, such as a plumber.

Research the lemon laws of your state, unless you reside in Arkansas or South Dakota, by getting in touch with your state consumer protections agency in the event that you purchased a bad used car.

Get in contact with your area postal inspector, whose information can be located in the U.S. government section of the telephone book, for issues that pertain to mail order or mail fraud.

Look into finding a local television news program hotline for resolving consumer complaints.

Filing a lawsuit

When there are no more options, you will want to file a court case in either small claims court, if the amount is small (usually less than $5000) or if not, a regular lawsuit.

More than likely speaking with an attorney and having them draft a letter to the merchant or service provider giving the details about the lawsuit will resolve the issue.

You probably won’t need to hire a lawyer if a small claims case is involved. If the case is bigger than small claims, you will want to hire a lawyer.

Scarsdale  accountant Paul Herman is here to help you with all your personal finance needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Larchmont NY, Scarsdale NY, Rye NY, Purchase NY, Bedford NY, Katonah NY, White Plains NY and beyond.

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Business Tax Breaks

Scarsdale CPA Paul Herman has all the answers to your personal finance questions! Tax tips for businesses from scarsdale cpaSeveral favorable business tax provisions have a limited term life that may dictate taking action between now and year-end. They include the following two provisions.

Section 179 Deduction. Your business may be able to take advantage of the temporarily increased Section 179 deduction. Under the Section 179 deduction privilege, an eligible business can often claim first-year depreciation write-offs for the entire cost of new and used equipment, software, and eligible real property costs. For tax years beginning in 2013, the maximum Section 179 deduction is $500,000, including up to $250,000 for qualifying real property costs. However, you cannot claim a Section 179 write-off that would create or increase an overall business tax loss. For tax years beginning in 2014, the maximum deduction is scheduled to drop back to only $25,000, and most real property costs will be ineligible.

50% First-year Bonus Depreciation. Above and beyond the Section 179 deduction, your business can also claim first-year bonus depreciation equal to 50% of the cost of most new (not used) equipment and software placed in service by December 31 of this year. For a new passenger auto or light truck that’s used for business and is subject to the luxury auto depreciation limitations, the 50% bonus depreciation break increases the maximum first-year depreciation deduction by $8,000. The 50% bonus depreciation break will expire at year-end unless Congress extends it.

Scarsdale accountant Paul Herman is here to help you with all your personal finance needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Scarsdale NY, Larchmont NY, Greenwich CT, Purchase NY, Dobbs Ferry NY, Tarrytown NY and beyond.

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Health and Medical Insurance FAQ’s for Employers

Scarsdale accountant Paul Herman has all the answers to your personal finance questions! Health Insurance tips for employers from Scarsdale tax preparersAs advisors to many businesses, we are frequently addressed with the following common questions regarding health and medical insurance for employees.
▼ Are there different types of medical plans for employees?

There are two options: a fee-for-service plan, or a pre-paid plan (commonly referred to as a Health Maintenance Organization, or HMO).

An indemnity plan or insurance permits each employee to decide their own doctor. The employee will pay for the medical care and then file a claim with the insurance company for reimbursement. There are deductibles and coinsurance as well. Deductibles vary from $100 to $1000 a year.

With coinsurance, a percentage of the medical expenses are paid by the employee and the remaining are covered by the plan. 20 percent is the normal coinsurance amount to be paid by the employee – the remaining 80 percent is paid by the plan.

There are three common indemnity plans that give health care to groups of employees: 1) a basic health insurance plan that will cover hospitalization and surgery as well as physician’s care in the hospital; 2) an insurance plan that will supplement the basic plan by reimbursing the charges not paid by that plan; and 3) a comprehensive plan that (with one common deductible and coinsurance features) will cover both hospital and medical care.

▼ What is a preferred provider organization (PPO)?

A network of doctors and/or hospitals that has contracts with a particular health insurer or employer that will give health care to employees at lower than the market rate. This offers a broad range of health care providers.

PPOs can be more expensive than HMOs due to the broader range of providers. There are no obligations to use the PPO providers, but there are strong financial incentives. PPOs often have less comprehensive benefits when compared to HMOs. The PPO providers normally receive payment from the insurers directly.

▼ What is a health maintenance organization (HMO)?

Health care that is provided through a network of hospitals and doctors is a health maintenance organization (HMO). The benefits usually include preventative care, such as physical examinations, weight control and stop-smoking programs, baby care and immunizations. The most common characteristic of HMOs is that the primary care provider is limited to only one doctor within a network, although there is usually a variety to choose from.

Outside of the network of hospitals and doctors of the HMO, there is no coverage. Due to the limited choices, the costs are lower. The payment for the HMO premiums are fixed and per employee. A small co-pay is due for the medical services, and no reimbursement is necessary.

▼ What are the typical disability benefits provided to employees?

If an employee cannot work due to illness or accident, the disability plan gives him/her income replacement. These defer from worker’s compensation as they pay benefits for non-work related illness and injury, and can be either short-term or long-term.

Short-term disability (STD) is used if the employee is unable to perform the normal duties of his/her occupation. The benefits are typically paid for a maximum of 26 weeks and begin on either the first or the eighth day of disability. The benefit level is dependent upon the employee’s salary and will range from 60 to 80 percent.

Long-term disability (LTD) commences after the conclusion of the short-term benefits. LTD benefits then continue for the entire length of the disability or until the date of normal retirement. This is also a percentage of the employee’s salary, typically between 60 and 80 percent. Social Security disability normally offsets these benefits – if an employee qualifies for the Social Security disability benefits, they will be subtracted from what the employer has paid.

Our Scarsdale tax preparers are here to help you with all your personal finance needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves White Plains NY, Mamaroneck NY, Larchmont NY, Purchase NY, Rye NY, Scarsdale NY and beyond.

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Employee Benefits as a Small Employer

Scarsdale CPA Paul Herman of Herman & Company CPA’s has all the answers to your personal finance questions!

As an employer, it’s important to understand the ins and outs of benefits that you can offer to your employees. The employer must pay for certain legal benefits and insurance coverage such as Social Security, unemployment insurance and worker’s compensation. Tips for small businesses and employee benefits from scarsdale accountantThe money for the Social Security program comes from payments made by employers, employees and self-employed persons to an insurance fund that will provide income after retirement. At the age of 65, full retirement benefits usually become available. There are other aspects of Social Security that deal with survivor, dependent, and disability benefits, Medicaid, Supplemental Security Income and Medicare.

Benefits for unemployment insurance are to be paid under the laws of individual states from the Federal-State Unemployment Compensation Program. Contributions to the program include payments made by the employer, based on the total payroll. The purpose of worker’s compensation is to provide benefits to workers who are disabled due to an illness or injury while at work. The coverage and benefits vary by state. In the majority of states, private insurance or employer self-insurance will provide the coverage necessary. Short-term disability benefits are governed by the state also.

Health insurance, disability insurance, life insurance, a retirement plan, flexible compensation, and leave are often included in a comprehensive benefit plan. An employer may choose to offer such benefits as bonuses, reimbursement of employee educational expenses, service awards, and perquisites appropriate to employee responsibility.

You need to determine what you are willing to pay for this coverage before implementing a benefit plan. It might be a good idea to consult employees as to what benefits they are seeking. For example, is a retirement plan more important than a medical plan? Another decision is whether you will protect your employees from current economic hardships or in the future. The last step is deciding who will manage the plan, you or an insurance broker.

Our Westchester tax preparers are here to help you with all your personal finance needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Larchmont NY, Katonah NY, Briarcliff Manor NY, Mount Kisco NY, Scarsdale NY and beyond.

Travel and Entertainment FAQs

Scarsdale tax preparers at Herman & Company CPA’s have all the answers to your personal finance questions! business expenses with travel tips from scarsdale accountantThe following is a list of FAQs I receive in regards to business expenses, travel and entertainment:
May I deduct meal expenses when visiting clients out of the office?

That is not common. Normally, you can only deduct the cost of a meal when away on a business-related trip or gone overnight.

Only 50% of the cost of the meal including the tip is allowed in the deduction.

▼ Do I need to report employer reimbursements for travel, entertainment and meals?

If you give back any excess reimbursement, provide your employer with a detailed expense report and meet other requirements. There is no need to report the reimbursement or to deduct the expenses.

Deduction limits are obligatory for your boss, not you, and the limit of 2% on miscellaneous item deductions will not have an effect on your entertainment, travel and meal costs.

▼ Are there limits on deductible entertainment, travel and meal costs?

Although there is no specific dollar limit, expenses should be ordinary and necessary and not over-generous.

The deduction cannot exceed 50% of the cost of business entertainment and meals.

For skyboxes and luxury water travel, there are other specific limitations.

▼ May I deduct living expenses while away from home on temporary assignment?

Because temporary work site living expenses are separate from home travel expenses, they may be deducted.

An assignment that is not expected to last more than a year is considered temporary. If the assignment is for more than one year than the new area becomes your tax home and you can’t deduct expenses as away-from-home travel.

▼ Which expenses are deductible when I am traveling away from home?

There is a broad range of expenses that you can deduct while traveling. The most common are as follows:

  • Accommodation and meals (where there is a 50% limit on meals)
  • Transportation fees or actual costs at a per-mile rate for using your own vehicle. The transportation costs also include getting around in the work area, commuting to and from hotels, restaurants, offices, terminals, etc.
  • Phone, fax, laundry, baggage handling
  • Any tips related to the above
▼ Are there travel expenses that cannot be deducted?

The travel expenses below cannot be deducted:

  • Travel as education
  • Looking for a new job in a different field or for a new business site
  • The cost of transportation between your home and the work site unless your home is your business headquarters.
▼ Business entertainment – what can I deduct?

The conditions and limitations for business and entertainment deductions are the following:

  • A business discussion should be held before, during or after the entertainment.
  • Usually, the deduction is limited to 50% of the cost for entertainment and meals.
  • In settings where spousal attendance is customary, expenses of spouses of business associates (and your own spouse) can be included in the deduction.
  • There are more limitations for club dues, entertainment facilities and skyboxes.
▼ How do I document my entertainment and travel expenses?

If your employer is reimbursing you for your expenses, you only need to prove them to him/her. To do this, submit a written accounting to the employer and return any excess amounts.

“Accountable plans” or per diem arrangements and mileage allowances are used instead of detailed accounting for the employer, if place, time, and business purpose are verified.

Detailed documentation is required by the IRS when expenses aren’t fully reimbursed by the employer or you fail to return excess reimbursements. If you are the employee, a 2% floor on miscellaneous item deductions is applied to your deductions.

You should record the expenses as close to the time of expenditure as possible.

Our Westchester CPA firm is here to help you with all your personal finance needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Mamaroneck NY, Bedford NY, Purchase NY, Scarsdale NY, Mount Kisco NY and beyond.

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Cash Flow and Your Small Business

 Scarsdale tax preparers at Herman & Company CPA’s have all the answers to your personal finance questions! Cash Flow Small Business Tips from Scarsdale AccountantThe following are common FAQ’s we receive from small business owners and budding entrepreneurs regarding cash flow and small businesses.
How can I prevent cash flow problems from hindering my small business?

One of the main reasons small businesses collapse is they have a poor cash flow strategy. The most common reason for this is that many small business owners do not have a grasp on basic accounting principles. You should learn the basics to maximize your cash flow.

You can either keep cash on hand or in a business bank account in order to take care of the expenses. This will be enough to allow the company to pay bills, to supply investment capital and to have sufficient funds in case of emergencies.

An operating cycle begins with the buying of inventory, and ends with receiving the payment for the inventory. It keeps track of the transition of assets to cash. Normally, you purchase an excess of inventory so as not to exhaust your stock as soon as sales are made. Accounts receivable and cash sales will make up your sales. The normal payment date for accounts receivable is 30 days from the purchase date, which is applicable to both your inventory and products sold. Cash and accounts payable are lessened with an inventory payment is made. The collection of receivables will raise your cash. At this point, the operating cycle and the cash has made a full circle and will start again.

An analysis of the cash flow will demonstrate if the everyday operations produce sufficient cash to reach the obligation and the relation between large expenditures to pay for obligations and large inflows of cash from sales. With this information, it will be apparent if the inflows and outflows of your business have a positive cash flow or a net loss. Over time, important changes will be seen.

A projection of the monthly cash flow will uncover and eliminate any deficiencies or surpluses in the cash flow and show the relations between previous projections and actual figures. A business financial strategy should be changed to allow for more cash when cash deficiencies are discovered. If a surplus of cash is found, it may be due to excessive borrowing or money that should be invested. The purpose is to construct a strategy to allow a well-balanced cash flow.

▼ What can I do to develop a better business cash flow?

There are several options for increasing cash reserves:

  • Accounts receivables: Properly control your accounts receivables and retrieve overdue accounts as quickly as possible. If you are not aggressive with collection, profits are lost.
  • Having stricter credit standards: With the tightening of credit and terms, more clients are paying for their purchases in cash, which leads to more cash on hand and lowering the bad-debt expense. Although this is beneficial in the short term, it may not be as appealing in the long term. Less strict credit policies permit more clients to purchase the products or services.
  • Take advantage of the market: A common problem is many small business price their products lower than the market and do not make a profit. You should research the product’s market, distribution costs and the competition before deciding on prices. Constantly keep an eye on the aspects that play a role on pricing and make adjustment when necessary.
  • Make use of short-term loans: Taking a loan from a financial institution can solve short-term cash flow problems. The common forms of credit used in these circumstances are revolving credit lines and equity loans.
  • Boost sales: One way to increase the cash flow is to boost sales. Take into account, when a large amount of your sales are credit sales, sales are boosted (as well as accounts receivable), but not cash on hand. This causes your inventory to diminish. Due to receivables not being collected until 30 days after the sale, a significant increase in credit sales will diminish the company’s cash reserves fast.
▼ Is a cash reserve necessary in my small business?

It is important to have sufficient cash on hand to pay for expenses and emergencies. Cash beyond this should be put in a manageable, low-risk, interest bearing account, like a savings account, Treasury bill or short-term certificate of deposit.

Our Scarsdale accountants are here for all your financial needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Scarsdale NY, Mount Kisco NY, Katonah NY, Bedford NY, Larchmont NY, Rye NY and beyond.

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Thinking About Becoming Your Own Boss?

 Scarsdale accountant Paul Herman of Herman & Company CPA’s has all the answers to your personal finance questions! medium_4124203689Being a business owner and working for yourself is a common dream shared by many. If you’re on the path to entrepreneurship, these tips may just come in handy:

 Do I have what it takes to own and manage my own business?

First, think about why you want to start your own business and make a list. The thrill of being self-employed, the need for independence both financially and professionally, and the desire to use the most of your intelligence and talents are a few of the most frequent motivations.

You also need to make sure you have the desire to put in the time to make a successful business. To decide what type of business fits you the best, you should think about what you find enjoyment in doing and what talents you have. Ask others for their thoughts, and see if any of your everyday activities can be made profitable.

At this point, you will need to investigate what will be the exact niche for your company. Determine what it is you want to put on the market, what the competition is like, and how to get ahead of the competition. The most important consideration is the demand for your product or service.

▼ What should the business strategy contain?

A business strategy, when applied to your company, should include an introduction, details about marketing, financial management, operations of the company, and a closing statement.

In the introduction of the business strategy, what should I incorporate?

This segment of the business strategy should contain information about the company and its objectives. Detail the experience within your company and the structure of management and legal status. State what your business has to get ahead of the competition.

In the marketing portion of the business strategy, what should I incorporate?

This is where you should state the products or services being offered and their demand in the market. It should also detail the market and its particular location and size.

In the financial management segment of the business strategy, what should I incorporate?

You should outline the source and amount of the initial equity capital. You also should create a monthly operating budget for the beginning years, as well as expected return on investment (or ROI) and monthly cash flow for these years. After that, present the balance sheets and income statements for the first 2 years and state the break-even point. Discuss your own balance sheet and ways of compensation. Explain who will be in charge of accounting affairs and how they will be maintained. Lastly, think through the possible problems that may arise and develop solutions.

In the operations segment of the business strategy, what should I incorporate?

This is where the explanation of the management of the daily activities will be. It should include insurance coverage, lease or rent agreements and the processes related to the staff and employment. It should also detail what is necessary to produce the products/services and the processes of production and delivery.

In the closing statement of the business strategy, what should I incorporate?

You should restate the company’s objectives and purposes and explain the dedication you have to make your company succeed. Be sure to include the methods you plan to use to reach your objectives.

Our Scarsdale tax preparers are here for all your financial needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Purchase NY, Larchmont NY, White Plains NY, Harrison NY, Pound Ridge NY, Scarsdale NY and beyond.

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Business Expenses

Westchester accountants at Herman & Company CPA’s have all the answers to your personal finance questions!

Business expenses are the cost of carrying on a trade or business. These expenses are usually deductible if the business is operated to make a profit.

What Can I Deduct?

To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. Business-Expense-Tips-from-Westchester-Accountant

 

 

 

 

 

 

 

 

An expense does not have to be indispensable to be considered necessary.

It is important to separate business expenses from the following expenses:

  • The expenses used to figure the cost of goods sold
  • Capital Expenses
  • Personal Expenses

Cost of Goods Sold
If your business manufactures products or purchases them for resale, you generally must value inventory at the beginning and end of each tax year to determine your cost of goods sold. Some of your expenses may be included in figuring the cost of goods sold. Cost of goods sold is deducted from your gross receipts to figure your gross profit for the year. If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense.

The following are types of expenses that go into figuring the cost of goods sold:

  • The cost of product or raw materials, including freight
  • Storage
  • Direct labor costs (including contributions to pensions or annuity plans) for workers who produce the products
  • Factory overhead

Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Indirect costs include rent, interest, taxes, storage, purchasing, processing, repackaging, handling, and administrative costs.

This rule does not apply to personal property you acquire for resale if your average annual gross receipts (or those of your predecessor) for the preceding 3 tax years are not more than $10 million.

Capital Expenses

You must capitalize, rather than deduct, some costs. These costs are a part of your investment in your business and are called capital expenses. Capital expenses are considered assets in your business.There are, in general, three types of costs you capitalize.

  • Business start-up cost (See the note below)
  • Business assets
  • Improvements

Note: You can elect to deduct or amortize certain business start-up costs.

Personal versus Business Expenses

Generally, you cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part.

For example, if you borrow money and use 70% of it for business and the other 30% for a family vacation, you can deduct 70% of the interest as a business expense. The remaining 30% is personal interest and is not deductible.

Business Use of Your Home

If you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation.

Business Use of Your Car

If you use your car in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage.
Other Types of Business Expenses

  • Employees’ Pay – You can generally deduct the pay you give your employees for the services they perform for your business.
  • Retirement Plans – Retirement plans are savings plans that offer you tax advantages to set aside money for your own, and your employees’, retirement.
  • Rent Expense – Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. If you have or will receive equity in or title to the property, the rent is not deductible.
  • Interest – Business interest expense is an amount charged for the use of money you borrowed for business activities.
  • Taxes – You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses.
  • Insurance – Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession.

Our Westchester accounting firm is here for all your personal finance needs. Please contact us for all inquiries and to receive your free personal finance consultation!

Herman and Company CPA’s proudly serves Scarsdale NY, Katonah NY, Mount Kisco NY, Rye NY, Bedford NY and beyond.

Business or Hobby?

White Plains financial planners here at Herman & Company CPA’s have all the answers to your personal finance questions!

It is generally accepted that people prefer to make a living doing something they like. A hobby is an activity for which you do not expect to make a profit. If you do not carry on your business or investment activity to make a profit, there is a limit on the deductions you can take.

Scarsdale CPA Tax Tips

Some lucky people can call golf both a business and a hobby!

You must include on your return income from an activity from which you do not expect to make a profit. An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. You cannot use a loss from the activity to offset other income. Activities you do as a hobby, or mainly for sport or recreation, come under this limit. So does an investment activity intended only to produce tax losses for the investors. The limit on not-for-profit losses applies to individuals, partnerships, estates trusts, and S corporations. For additional information on these entities, refer to business structures.

It does not apply to corporations other than S corporations. In determining whether you are carrying on an activity for profit, all the facts are taken into account. No one factor alone is decisive. Among the factors to consider are whether: You carry on the activity in a business-like manner, The time and effort you put into the activity indicate you intend to make it profitable, You depend on income from the activity for your livelihood, Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business), You change your methods of operation in an attempt to improve profitability, You, or your advisors, have the knowledge needed to carry on the activity as a successful business, You were successful in making a profit in similar activities in the past, The activity makes a profit in some years and the amount of profit it makes, and you can expect to make a future profit from the appreciation of the assets used in the activity.

For more tax tips and information, please contact Herman & Company CPA’s, accounting firm in White Plains, NY.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.