New Business Direction LLC
As a business coach, I’ve often witnessed the power of familial bonds in the world of entrepreneurship. One strategy that has shown immense potential for both the business and the family is hiring children within the business. While some may raise eyebrows at the idea, there are numerous benefits to be reaped from such a decision, ranging from financial advantages to fostering a sense of responsibility and entrepreneurship in the younger generation.
Two Financial Benefits of Hiring Your Children in Your Business
Hiring your children and offering them a salary can be a mutually beneficial scenario, financially speaking:
- Salary Expenses: Instead of handing out allowances, you can pay them a reasonable wage for the work they do. The IRS allows business owners to deduct reasonable wages paid to their children as a business expense.
- Tax Advantages: Hiring your children can also offer tax advantages for both parties. Children can earn up to a certain amount (subject to change, so consulting a tax professional is advisable) without paying federal income tax. For the business, wages paid to children are deductible as a business expense, reducing the overall taxable income.
Tax Exemptions and Retirement Benefits Associated with Hiring Your Children
As a business owner, it’s also important to understand the potential tax benefits of providing certain benefits to your employees, including family members. In particular, offering retirement planning as a benefit to your children can both introduce them to the concept of saving early on and yield tax advantages for your family. Let’s get into the details:
Tax Exemptions for Certain Benefits: Depending on the structure of your business and the tax laws in your jurisdiction, certain benefits provided to employees, including your children, may be tax-exempt. This could include health insurance premiums or contributions to retirement plans.
Retirement Planning as a Benefit: By hiring your children, you can also introduce them to the concept of retirement savings early on. You may establish retirement accounts, such as a Roth IRA, and contribute a portion of their earnings. This not only helps them start saving for their future but also reduces the family’s overall tax liability.
Three Final Benefits of Hiring Your Children within Your Small Business
Hiring your children can reap benefits beyond providing you and them financial and tax-savings benefits. This decision can also offer them a meaningful learning opportunity and set the stage for their future success, both professionally and financially. Here are three final benefits of hiring your children within your small business:
- Hiring your children provides them with a learning opportunity: Working in the family business provides invaluable real-world experience for children. They learn important skills such as communication, teamwork, problem-solving, and financial literacy, all of which are crucial for their future endeavors.
- Hiring your children creates an opportunity for family bonding: Working together can strengthen family bonds and create shared experiences. It provides an opportunity for open communication and mutual understanding between generations, fostering a sense of unity and purpose within the family.
- Hiring your children allows for proactive succession planning: Hiring children can be a strategic move for succession planning. It allows them to gain firsthand experience and knowledge of the business, preparing them to take on leadership roles in the future.
Ultimately, hiring your children in your business can be a win-win situation for both the family and the business. This business strategy offers financial benefits, tax advantages, and valuable learning opportunities while fostering a strong sense of family unity and preparing the next generation for future success.
However, it’s essential to approach this decision thoughtfully and in compliance with all legal and tax regulations. Consulting with a qualified tax advisor or financial planner is a great way to navigate the complexities–and maximize the benefits–of this arrangement.
Implementing a new accounting system is no small feat. It requires careful planning, coordination, and commitment from every team member. We’re always excited to help a business with a new accounting infrastructure implementation because we know the positive impact it can have on a business.
We also understand that, as a business owner, transitioning to a new software solution can be both exciting and daunting. You’re taking a giant leap in a positive direction to increase your efficiency, enhance the functionality of your accounting system, and optimize your processes.
But great reward doesn’t come without some risk: you’ve likely already considered employee learning curves, potential technical challenges during the transition period, and how a new implementation could disrupt daily operations. These concerns are valid, and with the right expectations, the journey can be smoother and more rewarding for everyone involved.
Hard Work Ahead: Embracing the Challenge
Let’s be honest: implementing a new accounting system isn’t a walk in the park. It requires time, effort, and resources to ensure a successful transition. From data migration to process reengineering, numerous tasks need to be completed with precision and attention to detail. It’s a journey that will test the resilience and determination of the entire team.
Rowing in the Same Direction: Unity in Purpose
Implementing a new accounting system requires a collective effort from your entire team. Everyone on board must be rowing in the same direction; if you notice team members resisting the change, it’s best to address the issue head-on. Ultimately, the goal is not to make their jobs harder; it’s to improve their workflows and processes in the future by putting in the hard work now. And for your implementation to be as successful and pain-free as possible, every team member must be ready to embrace change, adapt to new processes, and support one another throughout the transition. With a company culture of collaboration and communication, we can overcome any challenges that come our way while implementing your new accounting infrastructure.
Charting the Course: Milestones and Deadlines
Like any major project, implementing a new accounting system involves setting milestones and deadlines to keep the team on track. These milestones serve as checkpoints to assess progress and make necessary adjustments along the way. Whether we’re completing data migration or conducting one-on-one training with your team, each milestone brings us one step closer to our ultimate goal: to give you a beautiful accounting infrastructure that meets your current business needs and still leaves room for growth.
Bringing It All Together: The “Go Live” Date
The “go live” date is the culmination of your months of hard work and preparation. It’s the moment when the new accounting system officially replaces the old one, and all systems are a go! Reaching this milestone involves coordinating a multitude of moving parts, from finalizing configurations to conducting system testing. Everyone needs to be aligned and working together towards this common goal.
Embracing Differences
Transitioning to a new accounting system inevitably brings about comparisons between the old and the new. From software functionalities to workflow processes, there will be changes that require adjustment and adaptation. It’s important to acknowledge these differences and approach them with an open mind and a willingness to learn. We wouldn’t be guiding you through an implementation if we didn’t already understand your business’s unique needs and believe we were charting the best path forward for you. With the right mindset, we can turn the differences between your former and future accounting systems into opportunities for growth and improvement.
Implementing a new accounting system is a significant undertaking that requires dedication, perseverance, and teamwork. By setting clear expectations and rallying the team around a common goal, we can confidently navigate this journey and achieve success. You can learn more about our implementation services here.
When building a team, classifying your workforce correctly is vital to your business’s success and legal compliance. Employees and independent contractors are not interchangeable terms, and it’s important that you can distinguish between the two in your organization.
While it may seem like a simple solution to classify members of your workforce as independent contractors, there are actually very specific criteria that determine whether a worker can be classified as an independent contractor. Workforce classification is not a grey area – the IRS has an independent contractor test, as do many states, and they do not always follow the same criteria. In this article, we’ll discuss the differences between an employee and an independent contractor so you can ensure you’re operating your business correctly.
When is a worker considered an Employee?
Employees work under your direct control – they follow your schedule, use your company tools, and often receive benefits such as training, healthcare and/or retirement. You withhold taxes from their paychecks and contribute your share of payroll and unemployment taxes, you pay workers’ compensation insurance on the wages, and you file quarterly and annual returns with the IRS, Social Security Administration, and state agencies.
When is a worker considered an Independent Contractor?
Independent contractors maintain autonomy – they work for themselves and have their own company, they set their own schedule, they provide their own tools, they have their own general and/or professional liability insurance, and they handle their own income and/or self-employment taxes and pay their own expenses. They are typically hired for a specific project and under contract and take the risk of whether or not they make a profit.
What can happen if a worker is misclassified as an Independent Contractor?
If the IRS determines that you have been misclassifying an employee as an independent contractor, the penalty can equal 20% of the wages paid; 100% of the employee FICA taxes that should have been withheld; 100% of the employer FICA taxes that should have been paid; 20-75% of the underpayment of taxes; 25% of the late payment of taxes; and a per-worker fine.
In addition, there are Department of Labor and state penalties for misclassifying employees as contractors, which can equal any overtime that should have been paid. Plus, courts can award an additional 100% of unpaid overtime payments.
Penalties can also include severe criminal sanctions, including felony charges.
There’s a lot at stake when it comes to classifying your workforce correctly, and cutting corners here can be a costly decision for your business. Proper classification safeguards your company from legal issues and ensures compliance with labor laws, workers’ compensation laws, and Federal and state laws. If you have questions about the classification of your workforce or need support with payroll in your business, reach out to our team at newbusinessdirections.com/contact.
Running a business can feel like a whirlwind of responsibilities! Time is a precious resource for entrepreneurs, and taking shortcuts can be tempting. However, there’s one shortcut we really recommend against: sharing sensitive documents like bank statements, financial reports, tax forms, and more over email.
When safeguarding your valuable information (and that of your customers!), prioritizing security is essential. With cyber threats constantly evolving, email is an increasingly vulnerable method for transmitting confidential data. How should you be sharing your sensitive documents instead? By embracing secure document-sharing portals.
Document-sharing portals like SmartVault employ state-of-the-art encryption techniques to prevent bad actors from accessing your information. They can streamline your workflows, save time, and reduce errors. Most have user-friendly, intuitive interfaces, too, making it easy for you and your team to implement the new tech successfully.
Portals don’t just benefit you and your business, however! They can benefit your customer relationships, too. Adopting a portal can demonstrate a commitment to protecting your customers’ data, safeguard your reputation, and help you comply with data protection regulations.
While attaching a file to an email may feel more convenient in the moment, the tradeoff could be catastrophic. Instead, by taking an extra step to secure your documents, you’re investing in the long-term success of your business. We, as accountants, cannot overstate the importance of robust data security, and we encourage you to embrace the convenience and peace of mind that secure document-sharing portals provide!
Why Rhonda Rosand, CPA of New Business Directions LLC started to vlog and why she thinks it’s important to strive for excellence…not perfection!
Money and Marriage
One of the biggest things that can cause fights in a marriage is money. No matter where you are in a relationship, it’s a good idea to discuss these major money topics so you’ll know where you stand.
Show me the money: Combine or keep separate or both
One of the best ways to avoid conflict is to put your money into three separate piles: yours, your spouse’s, and a joint set of accounts. In this arrangement, each of you has control over some money that is all your own. The household spending will then come out of the joint account, and you both will make contributions to it on a regular basis.
As a couple, you’ll need to discuss who will pay for what as well as what your regular contribution will be to the joint account. This is no small discussion. The more thorough you are, the less conflict you’ll have over money.
One spouse or partner will normally handle the joint finances, and it’s typically the person with the most accounting knowledge. However, you both should have access to this account in case of emergency.
Savings and future purchase goals
Do you have goals about upcoming large purchases? These might include:
- A home purchase or improvement
- Children’s education
- Health care needs
- Saving for retirement
- A car purchase
- A second home purchase
- A vacation
- Another item such as a boat, furniture, technology gadgets, a plane, or something else
- A nest egg or cushion
If so, calculate how much you need and make a plan to set aside the money you need in the time frame you agree on.
Spending
Do you like to spend more than your spouse? Or is it the other way around? When money is flowing, there is usually no problem. When money is tight, that’s when the problems come in.
When there are conflicts in the area of spending, the best course is to focus on priorities. If you can agree on your priorities and goals, it can often shift spending habits.
Budget
You may want to set a budget to stick as close as possible to expected spending limits. Start by recording current spending in these areas, and then agree on the amounts you want to spend in the future.
- Rent or mortgage payment
- Utilities, including electric, gas, water, garbage, phone, internet, cable
- Food and supplies, including grocery, kitchen items, liquor, and eating out
- Entertainment, including travel, vacations, local events, holiday decorations, Netflix subscriptions, tech gadgets, books, etc.
- House maintenance including repairs, cleaning, lawn care, appliances, and decorating
- Automobile, including gas, insurance, licenses, and maintenance
- Clothing and accessories, including dry cleaning
- Health care, including pharmacy, doctor’s visit, and HSA contributions
- Personal care, such as haircuts, nail care, etc.
- Tuition and/or education expenses
- Contribution to retirement and savings accounts
- Charitable contributions
- Taxes, including federal, state, local, school, and property
- Paying down credit card or student loan debt
Retirement
What does retirement look like to both of you? Having this conversation will be enlightening. Know that dreams and goals can change over time as retirement approaches.
You’ll want to have an idea about what you’d like to spend during your final years so that you can make plans to start accumulating that wealth now. The sooner you start, the more years you have to build up your retirement assets.
Monitoring your progress
Keep an eye on your account balances to make sure everything is as it should be. Review bank and brokerage account statements and/or your budget once a month or at least once a quarter so there are no surprises or trends that sneak up on you.
When you reach your goals, reward yourself. Managing money is hard work, and you deserve to pat yourself on the back when a goal is achieved. If there is anything we can do to help you make your financial dreams come true, please reach out any time.
Today is the perfect time to think about your business goals and where you want to be one year from now. As year-end wraps up, you’ll soon know your financial numbers for 2018. You’ll then be able to evaluate how you did and map out a new plan for 2019. 
If you’re like many small business owners, you may have started your business without a business plan. Most businesses don’t need a long 20-page document that will just gather dust on a shelf. But you might want to consider putting together a short, 1- to 2-page concise document that includes the basic components of a typical business plan: mission, vision, strategies, and objectives.
A mission statement describes what the company is in business to do. And while you could simply state a mission similar to “Our mission is to sell our products and services,” you may want to think bigger than that in terms of how you want to be known or to impact more than your customers.
A vision statement describes your company’s future position. It’s what you aspire to be. It could again be, “Our vision is to sell more products and services than any other business.” Or it could be more inspiring and uplifting. 
Your business strategies support how you’ll get from where you are to what is stated in your mission and vision statements. While there may be many ways to accomplish your mission and vision, strategies are the approaches you’ll take to get there.
Goals are measurable destinations with a timeline that are created from your strategies. Objectives finally get down to the nitty gritty and state the tactics and action plans you need to execute to put all of this work into play.
Each of these items can be written out on a few lines, taking up all together no more than a few pages. The benefits of having a concise business plan are many: if you think of an idea you want to do, you can check the plan to make sure your idea falls under your vision, mission, and strategies that you’ve laid out for the year. If it doesn’t, then you’ll know that your idea would take you off track from your plan, and you know how easy that can happen these days with all of the distractions and options available to us.
You may want to add additional sections to your plan depending on your strategies. If you plan to launch a new product or execute new marketing strategies, you might want to add a Market Summary section. If you seek new funding, you might want to have a section on funding options. With business planning, it makes sense to do what’s relevant, and nothing more or less.
We wish you the very best in 2019, and if we can help you with the financial portion of your business planning, please reach out.
Why Rhonda Rosand, CPA of New Business Directions LLC Vlogs Why Rhonda Rosand, CPA of New Business Directions LLC started to vlog and why she thinks it’s important to strive for excellence…not perfection!
I know that many of you are wondering if you should upgrade to the new Windows 10 operating system. It has been hard to ignore the constant reminders of this FREE upgrade. Every time we turn on our computers, there it is, asking us to Upgrade Now. Some of us have even had a surprise automatic installation of the newest operating system while we were sleeping!
Microsoft is offering this software for free until the end of July 2016, after which they are going to charge a fee – currently starting at $149 per system for the Home Edition – they have not yet released any pricing for the Professional versions of the software. If you are currently running Windows 8/8.1, then you may wish to consider the update to Windows 10, but please read further.
At New Business Directions, LLC, we have decided to stay with the Windows 7 platform and not to upgrade to Windows 10. Microsoft will still be issuing updates for Windows 7 until 2021 but will not offer any phone or online support for the product.
There have been many issues with the installation of Windows 10 especially in a networked environment and the software needs a lot of tweaking to network correctly and play with other devices – such as printers. We see no real advantage to updating to Windows 10 and we have found it to actually hinder some programs from running properly, specifically QuickBooks and Point of Sale.
Many businesses operate with seasonal peaks and valleys. Retail stores flourish in their busy holiday season. Construction contractors are busy when the weather is good. Accountants are very busy from January through April, but also experience a quarterly peak in July and October.
Your business many have its own calendar of busy and slow times. If your business goes through slow times, then your cash flow may suffer at certain times of the year. But having seasonal sales is only one of the reasons for a bumpy cash flow.
You might also have a business where annual payments are made for many items such as equipment purchases, software licenses, insurance renewals, and other large costs. On the revenue side, it could be that your clients pay you annually, which can be hard to predict.
There are many solutions that can help to smooth out the seasonal bumps, and here are a few ideas for your consideration.
Plan for Prosperity
When income and expenses go up and down and up and down, it’s really hard to know if you have enough money for obligations coming up. Creating a budget can help a great deal. Consider creating two budgets: one that shows the ups and downs and one that averages a year’s income and expenses into twelve equal parts.
With both budgets, you’ll be able to see which months will be deviating from average and by how much. From there, it’s easy to create some forecasts so you can stay on top of your cash requirements.
Cash vs. Accrual Basis
It might help your business decision-making to convert your books from cash basis to accrual basis. This is a huge decision that should be made with an accounting and tax expert, as there are plenty of ramifications to discuss. 
In some cases, the accrual basis of accounting will help keep those annual payments from sneaking up on you as 1/12 of the payment can be accrued on a monthly basis to a payables account. This also keeps your net income figure steadier from month to month.
If your clients prepay their accounts on a yearly basis, you can book the income monthly and keep the difference in a Prepaid account. This spreads your revenues out and recognizes them over time.
“Hiding” Money
If you feel accrual basis accounting is a little too much of a commitment, your accountant can still work with you to help you avoid the impulse of spending too much during the cash-rich busy season. Perhaps the excess cash can be put into a 
savings account until it’s needed. You can draw out 1/12 each month as you need it. A little planning such as the above suggested forecasts will help you determine how much you can take out each month. You can even name the Savings account “Do Not Spend!” or “Save for a Rainy Day.”
If it’s just too tempting to have all that excess cash building up in the good times of the year, try one of the ideas above to take back cash flow control and smooth out those bumps.
