Business Credit – What it means? and its importance!

Introduction:

 

Business Credit is the ability to obtain finance under the business name. The goal of Business Credit program is to develop a credit profile using EIN number rather than an individual’s social security number. This separates owner’s personal credit from the business credit. Developing a credit image for the business conserves cash and building a corporate credit profile can keep the company out of “no credit / high risk” and “high interest” categories, thereby saving money.

 

Our program will establish your credit identity with various reporting agencies. This allows for more credit to be achieved as the enterprise grows. This reduces the business owner to use his personal credit to run his business.

 

Advantages of Business Credit:

 

·         Helps protect the personal Credit Score.

·         If personal credit is used for business purposes and the business fails, the risk of losing everything is more.

·         When personal money and assets are used for financing in the business, the personal credit is damaged as getting finance requires personal credit check and every time a credit check is made, the credit score takes a hit.

·         It saves time and money of the entity

·         Meeting the current lending needs

·         It allows the company to be prepared for any future lending needs

·         Have cash in the business when it’s needed

·         The business will be able to extend the cash flow

·         It helps in lowering the interest rates for the company

·         Helps building credibility for your business

·         Use the ultimate leverage i.e.; Other People’s Money

·         Business credit is tax deductible for the entity

·         Borrowed money is not taxable for the company

 

 

Types of Business Credit:

 

There are two different types of “Business Credit”

 

1. Lines of credit with individual vendors i.e., vendor credit or trade credit– This is the most common, easiest to get & therefore the most talked about such as the credit associated with a particular store like an office supply store.

 

1. Cash credit – But for investments that really matter for your company’s growth you need access to cold, hard cash – that you can spend when, where and how you want.

 

 

Steps involved in Business Credit Program:

 

1. First step is to check business compliance with the credit markets and build a business credit profile.
2. Registering with the Credit Bureaus and other relevant databases
3. Once business credit is established, the business or Corporation is given a grade or rate by the various rating agencies
4. The business starts receiving lines of credit from credit grantors
5. Access the list of banks, companies, private lenders that provide credit lines
6. Work for various ways to grow the business long term.

 

 

ICS, Inc. – the makers of www.mybizfiler.com does provide Business Credit Program Services. Kindly visit our website or write to sales@mybizfiler.com for more details.

ICS, Inc (www.mybizfiler.com) offers a wide range of services typically offered by a Big 5 Accounting firm and a CPA firm in the U.S. ICS offers Incorporation, Book Keeping, Payroll Services, HR & Business Consulting etc.  Contact ICS today at    203 437 4083   , e-mail – sales@mybizfiler.com, or by accessing 24/7 chat page on www.mybizfiler.com.

The contents of this post are personal statements or opinions expressed by Madhavi Chalasani, Asst Manager of ICS, Inc. who has written the article. They must not be construed as financial, investment or taxation advice.

All you need to know about Payroll Taxes

To be very precise, Payroll taxes are the state and federal taxes that you, as an employer, are required to withhold and/or to pay on behalf of your employees. You are required to withhold state and federal income taxes as well as social security and Medicare taxes from your employees’ wages. You are also required to pay a matching amount of social security and Medicare taxes for your employees and to pay State and Federal unemployment tax.

To know how much federal income tax to withhold from employee’s wages, you should have a form W-4 (Employee’s withholding Allowance certificate), on file for each employee. All taxable states also require state withholding forms; you may need to know more about it. Encourage your employee’s to file an updated form w-4 for 2008, especially if they owed taxes or received a large refund when filing their 2007 tax return.

                                            

Generally speaking, employers report payroll by calculating gross pay and various payroll deductions to arrive at net pay. While this seems simple enough to understand, calculating various payroll deductions requires that the payroll accountant be detail-oriented and work with extreme accuracy. Before calculating payroll, as an employer you need to understand statutory payroll tax deductions and voluntary payroll deductions.

Statutory Payroll Tax Deduction’s

Payroll taxes must be withheld from an employee’s paycheck. This is required by law. Employers must hand these withholdings over to various tax agencies. Payroll tax deductions include the following:

• Federal income tax withholding (based on withholding tables in Publication 15)
• Social Security tax withholding (6.2% up to the annual maximum)
• Medicare tax withholding (1.45%)
• State income tax withholding
• Various local tax withholdings (such as city, county, or school district taxes, state disability or unemployment insurance).

Voluntary Payroll Deduction’s

Voluntary payroll deductions are withheld from an employee’s paycheck only if the employee has agreed to the deduction. Voluntary deductions pay for various benefits which the employee has chosen to participate in. Voluntary payroll deductions include the following:

 

• Health insurance premiums (medical, dental, and eye care)
• Life insurance premiums
• Retirement plan contributions (such as a 401k plan)
• Employee stock purchase plans (ESPP and ESOP plans)
• Meals, uniforms, union dues and other job-related expenses

Voluntary deductions can be paid with pre-tax dollars or after-tax dollars, depending on the type of benefit being paid for. Professional grade payroll software will help you keep track of all the tax-related payroll calculations.

 

The responsibility for payroll taxes continues even after paychecks have been issued to employees. The company is responsible for paying the employer’s share of payroll taxes, for depositing tax dollars withheld from the employees’ paychecks, preparing various reconciliation reports, accounting for the payroll expense through their financial reporting, and filing payroll tax returns.

 

Employers are required to report their payroll tax obligations and to deposit payroll taxes in a timely manner. Reporting requirements include:

 

• Making federal tax deposits (Form 8109)
• Annual federal unemployment tax return (Form 940 or 940EZ)
• Employer’s quarterly payroll tax return (Form 941)
• Annual Return of Withheld Federal Income Tax (Form 945)
• Wage and Tax Statements (Form W-2)

 

Kindly approach mybizfiler for its high quality, competitive price and accurate payroll services & reports like:

 

·         Computerized checks

·         W2’s and 1099’s

·         Services like 401K etc.

·         Tax Payments and Filing

·         Guaranteed accurate

·         Direct Deposit

·         940/941 forms

·         Handwritten checks

·         Standard Payroll Report

·         Customized Payroll Report

·         Employee benefit plan Report

 

For information on Federal/State payroll tax requirements you can contact mybizfiler at 203-437-4083, visit www.mybizfiler.com for online chat assistance.

 

 

The contents of this post are personal statements or opinions expressed by Mohammed Ibrahim, Manager and Harish Kumar Reddy, Asst Manager of ICS, Inc who has written the article. They must not be construed as financial, investment or taxation advice.

 

What are Nominee Director Services? Who is a Nominee Director? Why do I need these services?…

Who is a Nominee Director?

A Nominee Director is an individual who acts as a company’s director for the purpose of fulfilling the legal requirement to have a director and perhaps to protect the identities of the persons actually controlling the company.  A Nominee Director is intended to facilitate the beneficial owner in matters of privacy. In certain jurisdictions there is a requirement to identify on the public record the details of the entity’s directors. In such cases the benefits of anonymity can only be achieved through the use of third party professional director.  By using a “Nominee” the names of the entity’s beneficial owners are neither on the record nor disclosed to any third party.

Who can appoint the Nominee Director?

New and existing entities can appoint a Nominee Director.

• For a new entity, there will be an agreement between the owner of the Company and the Nominee Director (or) the company which is rendering the Nominee service. The Agreement will also contain the responsibilities and the liabilities of the nominee director.
• For an existing entity, the nominee director will be appointed only after the approval by the Board of Directors. An agreement will then be signed by the entity and Nominee service provider, Nominee Director on its Board. The tenure of the nominee director will be fixed at the time of appointment.

The nominee director so appointed will not have any voting rights in the meetings held by the entity.

Why could someone need a Nominee service for the Business needs?

There are two reasons for going for this service, they are:

• An individual who does not want to disclose their identity as an owner of an organization.
• Individuals who does not have SSN (Social Security Number) and want an EIN, as it is mandatory to use SSN in the application.

Nominee Services For “Obtaining Ein” & “Nominee Director”

In today’s busy world, most of us would like to simplify our lives. One easy way to do this is by using the Nominee services for the new or existing business. The most popular nominee services in USA are “Nominee service only to obtain EIN” & “Nominee service only as nominee director with authority to write checks or sign documents.”

Nominee Service for obtaining EIN:

Nominee service EIN is designed only for the purpose obtaining the Federal Tax ID number with an agreement between the two parties. The Nominee’s SSN will be used on the application to obtain EIN and once EIN is received, the nominee will resign and the beneficiary/owner will take over the entity.

Nominee service EIN is provided to Corporation, LLC, Partnership and sole-proprietors who plan to have employees. This service is not available for LLC’s or S-Corporations which are taxed as partnerships or as an individual.

What is EIN?

EIN (Employer Identification Number) is also known as Tax ID (Tax Identification Number) which is issued by IRS. The EIN is a nine digit number (in xx-xxxxxxx format) which constitutes, to some extent, the social security number of the company.

EIN has to be applied usually after a new business is started. Any individual needs an EIN for starting a new business like Corporation, LLC, Partnership or plan to have employees. EIN is also required for opening a bank account for the company.

Nominee director with authority to write checks or sign documents:

Some corporations may need nominee directors for signing their checks or tax returns since they may be international owners / founders. This provides them the flexibility of operating their business irrespective of their geographical location in the globe. Nominee Directors with authority to write checks, etc do need to enter in a special agreement with the owners to waive the liability arising out of signing.

Responsibilities and Liabilities of a Nominee Director:

• Such directors are in name only and have no other responsibilities and powers.
• Nominee Director(s) are not responsible for and will not make any decisions whatsoever in connection with the management of the entity.
• Nominee Director(s) will neither be identified, nor can sign entity documents nor can sign returns on behalf of the entity.
• The beneficial owner is fully responsible for financial, legal and in all other aspects for the operation of the entity.
• The nominee will not have any liabilities as he will neither be signing any contract on behalf of the entity nor signing up for obtaining a Bank Account.
• The Nominee Director cannot and will not enter into any business contract or financial or moral commitment.

 

ICS, Inc. – the makers of www.mybizfiler.com does provide Nominee Services and a representative as Nominee Director. Kindly visit our website or write to sales@mybizfiler.com for more details.

ICS, Inc (www.mybizfiler.com) offers a wide range of services typically offered by a Big 5 Accounting firm and a CPA firm in the U.S. ICS offers Incorporation, Book Keeping, Payroll Services, HR & Business Consulting etc.  Contact ICS today at    203 437 4083   , e-mail – sales@mybizfiler.com, or by accessing 24/7 chat page on www.mybizfiler.com.

The contents of this post are personal statements or opinions expressed by Priyanka Kosigi, Manager of ICS, Inc. who has written the article and by Padmaja Nallamotu, Manager of IBSN Global Inc. who has assisted and supported the article. They must not be construed as financial, investment or taxation advice.

Can a Resident Alien, Work Visa holder form a Business Entity in US?

Most of the resident or non-resident aliens who are aspiring to start a business in US have questions on their eligibility of doing so. The most common question comes to their mind is with their current visa status, can they incorporate a business entity like a Corporation or LLC? Here are the answers….

 

A resident or non resident alien can form a business entity in US however it depends on the entity types, and subject to fulfillment of immigration requirements.

 

For instance H1 and H-1B visa holders who work for a company can form a business entity in US however they cannot receive salary from the same entity. They cannot form an employee employer relationship with any other entity until they get a petition from the current employer to work with other companies and get their H1 or H-1B issued from the new entity. However, the new entity should be eligible to do so.

 

F1 Visa holders can also create a business entity, but need to form in the name of the person who has a valid visa. They can make investments in the business and can share profits.

 

An individual with a valid EAD can also start a business and work. EAD allows one to work as an employee and collect salary from the company.

 

The important point to note here is that a resident or non-resident alien can form LLC, C Corporation but not S Corporation. A shareholder of S Corporation must be either US citizen or a Green Card holder. The best way to determine the type of entity and the incorporation process is to consult www.mybizfiler.com or an attorney.

 

As a conclusion it can be said that best way one can benefit from a business with out having GC or EAD is to become an owner, employer, investor and derive profits even though by not having physical presence in US!.

.

 

• VISA- H1
  • Description – Non- Immigrant visa established by USCIS, to employ workers with specialized training
  • Entity LLC- Yes
  • Entity C CORP- Yes
  • Entity S CORP- No
  • Explanation – You can very well form a business but you cannot work for the company but can share profits

 

• VISA- H-1B
  • Description – Non- Immigrant visa established by USCIS, to employ workers with specialized training
  • Entity LLC- Yes
  • Entity C CORP- Yes
  • Entity S CORP- No
  • Explanation- You can very well form a business but you can also work for the different employers only when all employers must have filed an H-1B petition for you.

 

• VISA- H4
  • Description- The H-4 Dependent Visa allows the dependent spouse and children of any principal H-class visa holder’s entry to the United States and free travel in and out of the country.
  • Entity LLC- Yes
  • Entity C CORP- Yes
  • Entity S CORP- No

 

• VISA- F1
  • Description- The F-1 visa is a non-immigrant, full-time, student visa that allows foreigners to pursue education in the United States
  • Entity LLC- Yes
  • Entity C CORP- Yes
  • Entity S CORP- No
  • Explanation- You can start a business when you are on f1 visa. But, you have to start on other person’s name who is having a valid visa (who can work legally and earn income).You can put the investment (partnership) and you can take the partnership in the property. For example start a business with your current owner and put some investment in the business and take the percentage in the property.

 

• VISA- F1-OPT
  • Description- Persons seeking to pursue a full course of study at a school in the United States may be eligible for a visa for the course of their study plus, in some cases, a period for practical training in their field of study.
  • Entity LLC- Yes
  • Entity C CORP- Yes
  • Entity S CORP- No
  • Explanation- With OPT, you can work in your own company, provided that the company is active in your field of study. The OPT does NOT allow you to work in a company, even your own, if the work is not in your field of study. It is called Practical Training for a reason.

 

• VISA- B1
  • Description- Available to all visitors coming to U.S for business or pleasure. B-1 business visitor visas are for a short duration and must not involve local employment
  • Entity LLC- Yes
  • Entity C CORP- Yes
  • Entity S CORP- No
  • Explanation- If you are simply going to invest and start up a business in the US and hire people to run it and you will not be working it yourself (more of an investment rather than employment), you can do so at anytime and come as a visitor to check things out, meetings etc. If you are actually going to be involved in the business in the US you should be looking at the E-2 visa.

 

• VISA- L1
  • Description- Temporary visa that allows companies in USA & other countries to transfer certain classes of employees from its foreign operations for up to seven years. The employee must have worked for a parent, affiliate, subsidiary, or branch office of the U.S. Company outside of the USA for at least one year out of the last three years.
  • Entity LLC- Yes
  • Entity C CORP- Yes
  • Entity S CORP- No
  • Explanation- L1 Visa holder can incorporate business. This type of visa allows an executive or manager to come to the U.S. to establish a new business

 

• VISA- Employment Authorization Document (EAD)
  • Description- an Employment Authorization Document (EAD), EAD card, known popularly as Work Permit, is a document issued by United States Citizenship and Immigration Services (USCIS) that provides its holder a legal right to work in the United States of America. It should not be confused with the green card. EAD has fewer employment and immigration-related privileges than the green card.
  • Entity LLC- Yes
  • Entity C CORP- Yes
  • Entity S CORP- No                
  • Explanation- You can start and work for your business with a valid EAD. The only difference is that you can work for the company and collect salary. What EAD does allow you is to work as an employee of the company. So, technically, you can start a business even on H1 or B1/B2. The only way one can benefit from a business one owns without a GC or EAD is by becoming an investor. Investment income from a business you own is legal all the time, even if you live outside the US.

 

• Green Card Holder
  • Description- A Green Card is a Permanent Visa to USA. Green Card gives you the status of permanent resident and legal rights to work in United States
  • Entity LLC- Yes
  • Entity C CORP- Yes
  • Entity S CORP- Yes
  • Explanation- You can very well form a business

 

• US Citizen
  • Description- US citizenship can be acquired by birth or by the process of naturalization. The process of an immigrant becoming a US citizen is termed as ‘naturalization’. If you are not born in the US, you have to naturalize to become a US citizen.
  • Entity LLC- Yes
  • Entity C CORP- Yes
  • Entity S CORP- Yes
  • Explanation- You can very well form a business

 ICS, Inc (www.mybizfiler.com) offers a wide range of services typically offered by a Big 5 Accounting firm and a CPA firm in the U.S. ICS offers Incorporation, Book Keeping, Payroll Services, HR & Business Consulting etc.  Contact ICS today at    203 437 4083   , e-mail – sales@mybizfiler.com, or by accessing 24/7 chat page onwww.mybizfiler.com.

The contents of this post are personal statements or opinions expressed by Nirmal Jain Senior Manager , ICS Inc. They must not be construed as financial, investment or taxation advice.

 

 

 

What is IFRS and why are global economies looking at one accounting standard?

What is IFRS?

International Financial Reporting Standards (IFRS) is a set of accounting standards, developed by the International Accounting Standards Board (IASB) that is becoming the global standard for the preparation of public company financial statements.

 

Worldwide Adoption of IFRS  

From the past few years many changes have been seen by many in finance and accounting sectors. Today it is observed that many major economies in the world are under way to adopt IFRS. Nearly 100 countries have adapted their local accounting standards to conform to IFRS.

 It is under practice that many nations developed their own local Generally Accepted Accounting Principles (GAAP). The advent of IFRS has brought with it the choice of adopting a globally accepted set of standards instead of using local GAAP.

 

 But why is IFRS so important and why is convergence of accounting standards so advantageous or even necessary?

 International Financial Reporting Standards remove some of the subjectivity from financial reporting and provide a consistent basis for recognition, measurement, presentation and disclosure of transactions and events in financial statements. In recent Past, there have been cases where companies reporting under IFRS in Europe record a loss but when these same companies re-state their accounts according to US GAAP they record a profit!

 Financial statements are prepared based on a number of accounting principles and assumptions. Accountants use their judgment to apply these principles and produce financial statements for use by management, shareholders, analysts, finance providers, governmental agencies, the general public and other stakeholders.

 

Why is the World looking at IFRS?

 Convergence of accounting standards will have the effect of attracting investment through greater transparency and a lower cost of capital for potential investors. In recent times Companies are finding it increasingly difficult to raise money and get them listed on stock exchanges as they were not following the standard in accordance with IFRS. Differences in accounting practice make it difficult for investors, whether individual or institutional, to compare the financial results of different companies and make investment decisions.

 

 To Whom It Benefits

 Multinational companies will find it easier to comply with reporting requirements of overseas stock exchanges since they would no longer have to re-state their accounts.

Governments will be in a better position to assess the tax liabilities of multinational companies receiving income from overseas as well as for foreign multinationals setting up shop in their own country.

 In 2005 the European Union formally adopted IFRS as the single accounting standard throughout their member countries. Australia, Russia, China, South Africa and the GCC nations have already converged or are in the process of converging with IFRS. Canada has committed to adopting IFRS by 2011. Japan, India, Brazil and Mexico are also pursuing convergence or adoption of IFRS.

 In 2007 the US Securities & Exchange Commission made the landmark decision to allow non-US companies to file their financial statements based on IFRS without reconciling back to US GAAP. This is widely regarded as the most significant step by the SEC towards full adoption of IFRS in the not too distant future. This change by the SEC is an effort to reduce the barriers to capital flows between countries using IFRS and US GAAP.

 The IASC expects that by 2011 more than 150 countries will have adopted IFRS including the US which is expected to at least have converged with IFRS to a great extent either by changing US GAAP or adopting IFRS outright.

 

 Who gets affected by the change?

 A country’s intention to adopt IFRS or converge with IFRS is highly admirable and to be applauded. However, the accounting profession, governments, regulators, national accounting standard setters, and other constituents must continue to work together to eliminate differences between national and international standards. The principal actions needed to support convergence are outlined below.

 v The Accounting Profession needs to assist governments and standard setters in formulating and  enacting convergence plans, provide IFRS training and education and support the preparation of national  language translations of IFRS.  

 v Governments must establish formal convergence plans that include target dates for implementation and address impediments to convergence, for example the link between financial accounting and lax legislation.

 v Regulators should set up efficient and effective enforcement mechanisms to increase the consistency and quality of application of IFRS as well as support the International Financial Reporting Interpretations Committee (IFRIC) and the IASB as the sole clearing house for interpretation of IFRS.

 v National Standard Setters must decide on a strategy and timetable for achieving convergence and develop an active standard setting agenda aimed at eliminating existing differences with IFRS.

 v The IASB is required to address concerns about the complexity and operational practicality of IFRS, prioritize the SME project as an agenda item and oversee and authorize translations of IFRS in various languages.

 v The Preparers of financial statements must actively participate in the standard setting process, in particular to identify practical application concerns, as well as providing IFRS training for staff and managers, including those in non-financial roles.

 v Universities need to include IFRS in the core accounting curriculum.

 v Analysts and Investors are required to promote convergence of national accounting standards with IFRS. They should also actively participate in the IASB’s standard setting process, in particular to identify users’ needs, and educate their staff regarding the IFRS reporting model.

 

SEC offers roadmap to global accounting standards

 The Securities and Exchange Commission has proposed roadmap that could lead to the use of international financial reporting standards (IFRS) by U.S. issuers beginning in 2014. Currently US Companies are using US Gaap. In 2011 SEC would make a final decision whether to adopt IFRS.

“An international language of disclosure and transparency is a goal worth pursuing on behalf of investors who seek comparable financial information to make well-informed investment decisions,” said SEC Chairman Christopher Cox. “The increasing worldwide acceptance of financial reporting using IFRS, and U.S. investors’ increasing ownership of securities issued by foreign companies that report financial information using IFRS, have led the SEC to propose this cautious and careful plan. Clearly setting out the SEC’s direction well in advance, as well as the conditions that must be met, will help fulfill our mission of protecting investors and facilitating capital formation.”

My Opinion

 The transition from GAAP to IFRS is not only inevitable, but a positive development that would help make capital markets more competitive. Transitioning to IFRS would allow companies to compete for capital in other countries, while reducing cost and complexity for companies operating internationally; we also think that embracing a single set of global accounting standards would contribute to a higher degree of investor understanding and confidence. Also IFRS is very important for US Investors as they own 2/3 rd of securities issued by foreign companies. Because of IFRS there will be greater comparability and greater confidence in the transparency of financial reporting for the US investors  

 

ICS can help you and your business. ICS, Inc (www.mybizfiler.com) offers a wide range of services typically offered by a Big 5 Accounting firm and a CPA firm in the U.S. ICS offers Incorporation, Book Keeping, Payroll Services, HR & Business Consulting etc.  Contact ICS today at 203 437 4083, e-mail – sales@mybizfiler.com, or by accessing 24/7 chat page on www.mybizfiler.com

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The contents of this post are personal statements or opinions expressed by Winni Sharma, Senior Manager, ICS Inc. They must not be construed as financial, investment or taxation advice.

 

Did you know? There are more than 5.5 million Small Businesses in the US!!

America is a country made of Entrepreneurs, a country that that believes in Free trade, and a country where talent meets success. If 5.5 million business owners have made a difference by setting up their own businesses in US, what are you waiting for, why not put your talent, and hard work to make money for yourself? 

Below is the Statistics on number of businesses (State-wise) in the US. 60% of these businesses have less than 5 employees –  

State	Number of Businesses	State	Number of Businesses
Alabama	83,319	Maryland	74,730
Alaska	23,796	Massachusetts	123,314
Arizona	85,384	Michigan	177,845
Arkansas	61,078	Minnesota	103,333
California	701,876	Mississippi	50,196
Colorado	110,844	Missouri	117,469
Connecticut	75,270	Montana	35,837
Delaware	15,183	Nebraska	42,204
District of Columbia	8,832	Nevada	42,634
Florida	375,543	New Hampshire	31,059
Georgia	165,810	NewJersey	149,214
Hawaii	29,452	NewMexico	43,986
Idaho	36,739	NewYork	293,878
Illinois	206,838	North Carolina	170,956
Indiana	104,176	North Dakota	18,334
Iowa	67,253	Ohio	192,243
Kansas	62,037	Oklahoma	79,088
Kentucky	68,812	Oregon	85,907
Louisiana	88,294	Pennsylvania	230,835
Maine	31,788	Rhode Island	20,654
South Carolina	85,821	Virginia	113,192
South Dakota	19,044	Washington	124,979
Tennessee	109,389	WestVirginia	27,427
Texas	396,060	Wisconsin	125,384
Utah	41,623	Wyoming	18,098
Vermont	17,181

 

ICS can incorporate your busines, and take on all the mundane work such as Book Keeping, payroll processing, financial analysis, so that you can focus on your business. All these services delivered at 1/4th the price that a typical CPA office charges. I heard you saying, WHAT, Is that possible? The answer is, Yes, our Delivery excellence is the one that enables us to offer quality service at lower than affordable price!

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The contents of this post are personal statements or opinions expressed by Co-Founder, President & CEO, ICS Inc. They must not be construed as financial, investment or taxation advice. ICS, Inc (www.mybizfiler.com) offers a wide range of services typically offered by a Big 5 Accounting firm and a CPA firm in the U.S. ICS offers Incorporation, Book Keeping, Payroll Services, HR & Business Consulting etc.  Contact ICS today at      203 437 4083     , e-mail – sales@mybizfiler.com, or by accessing 24/7 chat page on www.mybizfiler.com.

Should You Elect S-Corporation Status? Any advantages?

Setting up a proper entity type is very important aspect of starting your business. As a business owner you should consider whether or not it makes sense to set up a LLC, S – Corporation, C Corporation or just run your business as a sole proprietor. As our effort to educate and train you from various aspects of setting up a correct entity type we would like to show you as to why an S Corporation may be right from you. Apart from liability protection perspective we would like to discuss the advantages an S – Corporation carries from tax prospective.

If your business currently operates as an LLC, a partnership or a sole proprietorship, then your profits are subject to self-employment taxes. As an S Corporation, only your salary is subject to self-employment taxes.

Here are the S – Corporation advantages:

Forming an S-Corporation generally allows you to pass business losses through to your personalincome tax return, where you can use it to offset any income that you (and your spouse, if you’re married) have from other sources.

 When you sell your S-Corporation, your taxable gain on the sale of the business can be less than it would have been had you operated the business as a regular C corporation.

The first $102,000 (for TY 2008) of salary that a person earns is subject to self-employment taxes of 15.3%. Half of this is paid by the employer and half by the employee. Of course, if you own your own business, then you are both employer and employee.

Salary in excess of $102,000 (for TY 2008) is subject to the Medicare tax rate of 2.9%. Again, half is paid by the employer and half by the employee.

If you operate as an LLC, a partnership or a sole proprietorship, then your profits are treated as salary, meaning you pay taxes per the above on all your profits.

If you operate as an S Corporation, then you only pay the above taxes on money you take as salary.

Let’s look at a simple illustration.

John is a sole proprietor bringing in sales of $100,000. After he pays his costs & expenses, his profit is $70,000. As a sole proprietor, he is required to pay self employment tax of 15.3% on this entire $70K of profit, which equates to $10,710.

Now, let’s assume John formed an S-Corporation for his business, and chooses to pay himself $40K for the year in salary, and take the remaining $30K of profit through a distribution. He still earns the same $70K in profit.

But, let’s look at the tax situation. Because corporations only pay Social Security & Medicare taxes on salaries, he’s only liable for $6,120, saving over $4,590 in taxes!

 

	Sole Proprietorship (Schedule C)	S-Corporation
Sales	$100,000	$100,000
Cost & Expense	$30,000	$30,000
Salary		$40,000*
Profit	$70,000	$30,000
Self Employment Tax	$10,710	N/A
Social Security & Medicare	N/A	$6,120**
Total Tax Savings		$4,590

* You pay yourself Salary for the efforts you put for the organization

** Pay Taxes only on your Salary not Profit

Many businesses are initially started as LLCs, partnerships or sole proprietorships because of the ease of setting them up. This completely makes sense but switching to an S Corporation is not that complex, so look at your business situation and make the change when the time is right. (Contact www.mybizfiler.com for additional details)

It is important to note that you are required to take “reasonable” compensation as salary when you operate as an S Corporation as per the IRS circular. This will be effective if you act in the capacity of officer / manager or employee for your business. (Contact www.mybizfiler.com for additional details)

Fortunately, a decision to elect to be an S-Corporation isn’t permanent. If your business later becomes more profitable and you find there are tax advantages to being a regular corporation, you can drop your S- Corporation status.

You may contact Incorporation & Accounting Professionals at ICS, Inc (www.mybizfiler.com) if you need help on Incorporating an S Corporation or changing the status of your C Corporation, LLC, LP, LLP, or Sole proprietorship.

ICS can help you and your business. ICS, Inc (www.mybizfiler.com) offers a wide range of services typically offered by a Big 5 Accounting firm and a CPA firm in the U.S. ICS offers Incorporation, Book Keeping, Payroll Services, HR & Business Consulting etc.  Contact ICS today at 203 437 4083, e-mail – sales@mybizfiler.com, or by accessing 24/7 chat page on www.mybizfiler.com

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The contents of this post are personal statements or opinions expressed by Umang Thakkar, Associate Vice President, ICS Inc. They must not be construed as financial, investment or taxation advice.

Looking for a Bookkeeping / Accounting / CPA firm – which works for your best interest?

Hiring the right Bookkeeping firm is an important aspect of your business. What do we look for in the firm we select to serve our business? Is it their business knowledge, skill sets, their approach & attitude, their passion towards work, customer service, price or a mixture of everything?  You ask me, I’d say everything!

A lot of things from these mentioned points can be found out only by talking with them or by passage of time. However you can make an initial decision to go with them based on some skills and knowledge related questions.

Why does it become so important to test a firm for their knowledge / skills before we outsource our accounting work to them – Well it’s because the costs you pay every time you move your accounting firm can be huge. Also untimely and inaccurate reports can put you under heavy penalties from taxing authorities.

We have used various questions below which will help you when interviewing your bookkeeping / accounting compliance firm in your initial conversation with them. With these questions you can test their knowledge in QuickBooks, Excel and General Accounting / Bookkeeping concepts.

QuickBooks: 

Are you Quick book certified?

Having a QuickBooks ProAdvisor License or a QuickBooks Certified User really differentiates a person / entity with other service providers. After achieving the ProAdvisor or Certified User status these QuickBooks professional gain required knowledge and skills needed to assist you with your Bookkeeping assignment.

Can you show us the process of invoicing and collecting from a customer in QuickBooks?

A QuickBooks Certified user or a QuickBooks ProAdvisor will mention creating an invoice, receiving payment and making a deposit, QuickBooks aging reports and QuickBooks pre-written collection letters.

Can you show us how to use QuickBooks to track or manage employee’s time?

QuickBooks has some neat time tracking features. An experienced QuickBooks have had the opportunity to use them, and if someone can explain you the details of the feature instantly then it is great sign of their knowledge.

We are maintaining our bookkeeping in Peachtree Accounting, can the data be transferred to QuickBooks?

An experience QuickBooks user will instantly say that it can be done. QuickBooks has a conversion feature wherein a data can be converted from Peachtree Accounting or many other similar accounting system in QuickBooks.

General accounting knowledge: 

What is the difference between capital expenditure and regular business expense?

An Accountant should be able to explain you a difference between an asset and an expense. Any expenditure that is associated with that asset usually qualifies as a Capital Expenditure.

Explain the differences between purchasing a computer and a travel expense, with respect to profitability, cash flow and general accounting?

An experienced bookkeeper will understand depreciation and easily talk about this.

Excel:

Scenario: you have a spreadsheet with information on 500 products.  You have a column which says the total available quantity. You want product line arranged in ascending order of quantity.

An experience Excel user will immediately tell you that this can be done by sorting.

General Business Knowledge:

You have a friend who is considering purchasing a company and she asks you to look at the numbers and let her know what you think.  What do you do?

There is no definite answer to this question. However an experience Accountant will talk to you about terms like due diligence, profitability of the firm compared to industry standards, cash flow analysis, balance sheet analysis, etc.

ICS Accounting Team is a group of professionals who are QuickBooks ProAdvisor and Certified Users. ICS, Inc (www.mybizfiler.com) offers a wide range of services typically offered by a Big 5 Accounting firm and a CPA firm in the U.S. ICS offers Incorporation, Book Keeping, Payroll Services, HR & Business Consulting etc.  Contact ICS today at 203 437 4083, e-mail – sales@mybizfiler.com, or by accessing 24/7 chat page on www.mybizfiler.com

 

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The contents of this post are personal statements or opinions expressed by Umang Thakkar, Associate Vice President, ICS Inc. They must not be construed as financial, investment or taxation advice.

Is America in recession? What strategies can we adopt in such times?

By the way, what is recession? Business guys, economists keep using it. Sales people use inflation and recession often; these 2 words are frequently used as an excuse to jack up prices, what does “Recession” mean after all??

The dictionary meaning of this term is – A recession is a contraction phase of the business cycle. A common rule of thumb is that a recession occurs when real gross domestic product (GDP) growth is negative for two or more consecutive quarters. In the USA, the National Bureau of Economic Research (NBER) defines it more broadly as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A sustained recession may become a depression.

On Apr 29^th 2008, a survey of 52 Economists by USA Today says that 2/3^rd of the Economists polled believe the country is in Recession. Martin Feldstein, President of the Cambridge group on March 18^th 2008, said that the US has slipped into deep recession, much more serious than the World War II times. According to majority of CFOs and CPAs surveyed by the American Institute of Certified Public Accountants and the University of North Carolina’s Kenan Flagler Business School on August 14, 2008, reveals that U.S. economy has already entered a recession and the outlook remains negative.

 (http://fmcenter.aicpa.org/Resources/Resources+and+Tools/3rd+Quarter++2008+Economic+Outlook+Survey.htm)

Other indicators of weakening American Economy –

1. GDP rate contracted in the 4^th quarter by 0.2%
2. GDS (Gross Domestic spending) shrunk by 0.5%
3. Domestic profits plunged by $ 125 billion
4. Sinking housing prices
5. Months of job losses, 51K was the latest number from the job loss reports
6. Turmoil in the financial markets.
7. Soaring Oil prices ($145 a barrel, record highs) and overall increase in commodity index
8. High Inflation – Currently stands at 5.6% v/s 2.74 as of Jan 2000

Now it’s clear that we are in recession, atleast the economists and statistics say that we are not in good times. WHAT DO WE DO NOW?

Answer is simple – Derisk!

• There are 100’s of business which are Recession free…. START YOUR OWN BUSINESS – Own Franchises, Start a Technology consulting business, Outsource Manpower, Start a Freelance Business, Open a School/Day care/Restaurant/Grocery store etc. 
• Deposit money in high interest earning CD’s – In an inflationary environment, bank Deposit rates are hiked. People with excess cash can deposit in high interest bearing accounts with FDIC insured banks.
• Invest in the Equity markets; you could easily find lot of Large Cap stocks for cheap valuations. Global and Emerging markets also has a lot to offer.

US recessions typically don’t pan out for long, thanks to the administration and the regulatory authorities behind this economy. Wishing you good days ahead….

ICS can help you and your business in these times. ICS, Inc (www.mybizfiler.com) offers a wide range of services typically offered by a Big 5 Accounting firm and a CPA firm in the U.S. ICS offers Incorporation, Book Keeping, Payroll Services, HR & Business Consulting etc.  Contact ICS today at    203 437 4083   , e-mail – sales@mybizfiler.com, or by accessing 24/7 chat page on www.mybizfiler.com.

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The contents of this post are personal statements or opinions expressed by Co-Founder, President & CEO, ICS Inc. They must not be construed as financial, investment or taxation advice.

Obama or McCain, Whose policies are good for Corporate America?

As the time to choose one of the U.S Presidential candidate comes close, I bet, it plays in every mind about that person, and the congressional party which will turn positive the ever growing US fiscal deficit, looming credit crisis, loss of jobs and the global inflation worries, is it Senator Barack Obama of the Democratic party, or Senator John MaCain of the Republican party.

Over the last 8 years, America has seen its budget turning negative to $350+ Billion from a surplus of $220 +Billion in year 2000. Owing to the President Bush’s $ 168 billion stimulus package, the federal deficit for next year is slated to be around $500 billion. Few economists feel that further tax cuts will bring this country out of recession, however, failing Social security and Medicare programs poses a big concern.

Here are some promises each of the presidential candidates make to the citizens of this nation – (hopefully atleast majority of these promises will be fulfilled, and not all remain as promises!. Our current President promised a big deal on trimming green house emissions…and it still remains a promise…)

Senator Obama –

ü Short term Tax Stimulus of $ 50 Billion

ü Providing health insurance coverage to 45 million uninsured Americans – $ 65 Billion

ü Develop green energy technologies, $ 150 billion

ü $ 60 billion (over the next 10 years) towards development of infrastructure

ü Early childhood education – $ 18 billion annually

ü College students to get $ 4000 in tuition tax credits

ü $ 1000 credit for families hit by high energy costs

ü Raise top two income tax brackets to 36% and 39.6%…… Ouch!

ü Raise taxes on Oil and gas companies

ü Tax Gains in the hands of Private equity partners as regular income (now as lower rate capital gain)

ü Bring Tax havens & income earned overseas under the tax net …… Ouch!

ü Offer AMT Indexation benefit & continue Bush’s reduced tax rates to families making income of less than $ 250K

Senator McCain –

ü Believes Tax cuts creates growth and bring back lost jobs – Overall estimate of $ 4.2 trillion in tax cuts over the next decade.

o Make President Bush’s Tax cuts (which is due to expire in 2011) permanent (Costs $170 billion over the next decade)

o Cut AMT rates and offer indexation ( Costs $ 120 Billion a year)

o To Increase Children and dependent deduction from $ 3500 to $ 7000

o Reduce Corporate Tax rate from 35% to 25% (Costs $ 73 billion annually)…Wow!

o Reduce Estate tax from planned 2009 rate of 45% to 15%

ü Promises to balance the budget by cost control, and closing tax loopholes (worth $ 100 Billion annually)

ü To Help lower energy costs

o Take away restrictions on offshore drilling

o Suspend federal gas tax

o Aggressive expansion of nuclear power,

o and measures to boost alternative energy.

Senator Obama’s plan means tax revenues at 18.3% of GDP v/s Senator McCain’s 17.6%, certainly looks like a better plan to bring the economy out of budget deficit. Also, Obama’s populist plan looks more clearer and realistic, a strategy to bring back this nation to its original strength by improving the fundamentals. However, it remains to be seen how some of the popular ideas such as taxing Private equity firms, placing a robust health care system, taxing gas producing companies and increasing the overall corporate tax rates, would play against heavy lobbying that takes place in Washington.

So, from a corporate taxation and law enforcement point of view, McCain’s agenda sounds better. As I said in the beginning, these are promises, no presidential candidate till date has kept up with them all….

I’m the believer of the saying, “Politics & Politicians never change, their agenda is always one and known”….anyways, Good luck Senator Obama and Senator McCain!……All I’d like to see is a good business environment that America has offered all these years to entrepreneurs like me and many others, and lower gasoline price to drive down to office everyday, and can afford to take a vacation from my busy and stressful routine!

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The contents of this post are personal statements or opinions expressed by the author. The above must not be construed as statements favoring or campaigning for any political party nor any financial, investment or taxation advice.