Steps to protect your wealth from family

bookkeeping-1 Steps to protect your wealth from familyDo you consider yourself an expert on protecting your wealth from hackers or thieves? One thing you may not be considering is your own family members. Should you be concerned about protecting your wealth from family? Have you ever had one of your in-laws reach out to you about a great deal they are working on? A family member may also be in temporary financial difficulties. You may feel sorry for them and want to help.

Even loans to family members should have proper financial steps put in place. There should still be proper documentation of the loan. If you have plans to forgive the debt some day, documentation is still advisable for some of the following reasons.

You may want or need the money back someday
The individual may get divorced and you will want protection from having your money getting divided
between the parties.
The party may die and the loan is not included in their will.
There is no documentation completed on your estate and what you wish to happen to it.
The person you lent the money to may forget the amount and what the action plan was. If this
happens, you may be hesitant about approaching them about the debt. It could also create bad

For all of the above reasons, documentation and action plans should always be put in writing. If you plan to gift a portion each year, this can happen then happen the least amount of difficulty.

Proper financial steps still apply, even with loans to family members. For example, proper due diligence should still be completed. This financial deal should be treated as an arms length transaction. If it does not smell right, have the fortitude to walk away. Some due diligence steps are:

1. Obtain a copy of their business plan
2. Meet all the parties involved. Obtain a good feeling about them and what they are doing.
3. Obtain documentation on the forecasts and assess the forecast for reasonableness.
4. Find out how much control your party will have in the business. Are they a minority member with
no control?
5. Make sure they are going to stay aware of what is happening with the investment. You do not want
them forgetting about it. Obtain monthly or quarterly updates for your own peace of mind.
6. Document the understanding of the parties involved and what steps will happen if things go south.

Remember, money lent should always be documented. Proper research should also be completed. Later grief may be avoided. By this way you may be able to protect your wealth from all including family members. #taxsmartpros

Five methods to help your business be successful

Is your business on track to be successful? Is it going the direction you want it to go? At the end of the month when you review your financial statements, do you know if the results are good or bad? Are you only preparing financial statements for your tax accountant? You should be interested in creating financial statements for more than just to get your taxes done. Use your financial statements to help you can make proper decisions. Know if you are on track to keep your business successful. Here are five proven methods that accountants and small business owners use to analyze financial statements.


KPI’s are ratio’s that are used to determine various aspects of your business. They combine components of your financial statements to tell you if your business is successful. KPI’s are used by themselves or by comparing to prior years or to other businesses in your industry. The KPI categories are Liquidity, Solvency, Efficiency, Profitability, Financial Leverage and Coverage. Key Performance Indicators are very useful tools.


Prepare an annual budget to enable you to make financial decisions during the year. Budgets are a very useful tool in measuring the success of your business. They are not meant to be static or set in stone. Truly useful budgets are fluid. If your business model changes, update the budget. Monthly, compare your financial statement results against this budget to determine if your business is on track to be successful.


Month to month comparison of your income statement can be very useful. Report your income statement on a rolling twelve month basis. Compare how the various categories or business segments are performing. Categorization errors will be visible. Is there a month that is missing rent expense? Why? Perform further analysis and find out. There may also be a business segment is doing well for the year but had a down month. Is it cyclical or was there a problem that month. Drill down on the data and find out the answers.


Comparing your financial results on a year over year basis will help you keep your business successful. Is this year better than last year or worse? Has an expense category gone wild and needs to be corrected? You now have your financial results in a format to analyze and make course corrections.


Successful businesses make long term plans. Five year plans are very useful to help your business be successful. Your budgeting process, and the financial statement analysis should be measured against the five year plan to make sure you are on track. Do you need to make changes in your approach to get back on the expected path? A comparison of the financial data will help you in this decision process.

I would suggest you do further research on these five proven methods of financial analysis and use them. You may also ask your accountant to help you with this analysis.

Classify employees correctly using the exempt wages definition

One complicated issue that is often handled incorrectly is the classification of employees. Some companies are choosing to classify their employees as exempt. They may feel this practice will save them from the minimum wage laws. What is the Exempt Wages definition and how can you use it correctly?

payroll-300x200 Classify employees correctly using the exempt wages definition

The exempt wages definition can be found at Please review this fact sheet for additional information.

To qualify for exempt status the following must apply:

The exempt wages definition is found in Section 13(a)(1) of the FLSA. It provides an exemption from both minimum wage and overtime pay for employees. They must be employed as bona fide executive, administrative, professional and outside sales employees. Section 13(a)(1) and Section 13(a)(17) also exempt certain computer employees. To qualify for the exemption, employees must meet certain job duties tests. They also must be paid on a salary basis at not less than $455 per week. Job titles do not determine exempt status. To qualify for the exemption an employee’s specific job duties must meet all of the regulations.

In addition to the job duties requirement. there are also salary requirements.

Salary Basis Requirement

To qualify for exemption, according to the exempt wages definition, employees generally must be paid at not less than $455 per week on a salary basis. These salary requirements do not apply to outside sales employees, or teachers. Exempt computer employees may be paid at least $455 on a salary basis or on an hourly basis at a rate not less than $27.63 an hour.

Being paid as an exempt employee means the employee is regularly paid. This can be paid at determined frequencies but should be consistent. It should also be paid if the employee does any work for the company. Deductions may be made if the employee does not show up for work such as for vacation, sick or non-paid time off. If the employee is ready, willing and able to work, deductions may not be made for time when work is not available. This is an important consideration. If there is down time and the employee is able to work, they still must be paid.

The company may lose the exemption if there is an actual practice of making improper use of deductions from the employees pay. Documentation must be maintained by the company for all deductions from payroll for exempt employees.


When starting a new business or if your business is growing, small business owners may want to determine which type of business structure they should use. There are many different options and they can be confusing. When a person or persons choose to start a business they should consult an accountant or an attorney on what is the best option for them. Even if you choose to start your business as one structure, you can always change. It is a simple process.


An S-Corporation is one type of organization that is becoming popular. It offers many advantages but also contains some disadvantages. I will explain these in this blog.


An S-Corp is a corporation and has the advantages and also the requirements of a corporation. In order to maintain your status as a S-Corp you must meet all the rules of a corporation including the holding of a board meeting at least once per year and the issuance of stock. When completing the paperwork to elect S-corp status you state who the shareholders are and how much stock they each own.


An S-corp is a pass through entity. The earnings are passed through to the owners even if they are not distributed. This may cause a cash flow problem if not considered beforehand. However, an advantage of this is that the earnings may be passed through to the owners via wages or dividends and thus reduce the earnings of the corporation. Another advantage is the reduction or elimination of the self-employment tax. A sole proprietor, partnership or LLC suffer the cost of self-employment taxation. This can be a significant cost if the business earnings are large. A general rule of thumb is, if the net income is above $15,000 the owners should consider other options to reduce the self-employment tax. Incorporating as an S-Corp will solve this problem.


Those who are contemplating choosing to incorporate as a S-Corp should realize that all owners need to be U.S. Citizens and that there cannot be more than 100 of them. Also Corporations cannot be shareholders of the S-corp. There can only be one class of stock. This may be a disadvantage but may also be an advantage. It serves to keep the company simpler.


Another disadvantage is that capital gains on assets will incur higher taxation rates than with C-Corps or LLC’s. Also if the company is sold within 10 years of being incorporated the gain on the sale of the company is taxed at a higher rate. If you are contemplating S-Corp, then do it sooner to start the 10 year window.


Another disadvantage is that owners/shareholders with more than 2% stock cannot receive tax free benefits. This may be a problem with smaller companies such as a Mom-Pop business.


Generally though, S-Corporations may be a good fit if you are looking for a company structure that offers pass-through taxation and allows both salary and dividend payouts. These advantages must be balanced against the lack of flexibility and the extensive formalities that need to be followed.





Contract Employees

As a small business owner you are always looking for a way to save money and improve cash flow. One method you may use is to avoid payroll taxes by using contract employees instead of w-2 employees. However you have to be very careful if you choose this method. The IRS has very strict rules governing the use of contract laborers. You may find these detailed at (more…)