Behind The Scenes Of A Business: 3 Important Things To Know About

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As a new entrepreneur, you’re eager to proceed with your first ever business idea. You’ve seen many people follow the path to success and want to replicate them. Before you get started, you must know about some crucial things that happen behind the scenes. These are things that the public doesn’t really see but are crucial to the running of a business. You can find out what these things are by reading the points below:

Procurement

Procurement is a fancy term for when you need to get your hands on something. In a business sense, it refers to purchasing your supplies and getting them delivered to you. Every business needs to stock up on certain supplies at times during the year. The items you procure depend on your company. For retailers, you need actual products and items that you’ll them sell. Other companies buy resources that they use to create products. Even things like office supplies need to be procured by your business. As the owner, it’s your job to find various vendors who can supply you with what you need. It’s essential that your company has all the supplies it needs to work and get the job done.

Payment Processing

Whenever you buy something from someone, you have to exchange money. You give them cash, and they give you change. Alternatively, you pay by card, and they end up with the money. If you’ve never been involved in business, then you probably have no idea how those card payments get processed. Well, for a business to get paid it has to set up a merchant account that accepts card payments.  There are loads of companies like HBMS that supply these accounts to businesses. This all goes on behind the scenes and the money ends up in your merchant account where it can be withdrawn and used however you like. As a business owner, you need to gain knowledge on payment processing and how to implement it in your company.

Paying Tax

Business tax is something hardly anyone sees from the public perspective. Unless you’re running a business, you won’t know what goes on with regards to tax. Companies have to pay income tax each year on their profits. Business owners need to spend ages managing their books and ensuring they pay the right tax at the right time. Failure to do so can lead to financial penalties and a black mark against your business. There are loads of accountants or financial advisors that can help a business pay its tax if you happen to be struggling. The main thing to remember is that it needs to be done. There’s no way around it, and if you forget, then you’ll damage your business.

The purpose of this article was to bring you some advice surrounding the ‘boring’ side of running a business. By taking a look at important things that happen behind the scenes, you can ensure your company is run correctly. You’ll have everything in place behind the scenes, which makes other parts of your business run more efficiently too.

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You’ve Won The Lottery! Lump Sum or Annual Payments?

Recently, a record Powerball jackpot of 1.6 billion dollars was won by 3 winners. That’s about $530 million dollars apiece. Wow! Unfortunately, I only won a measly $7, but at least that’s $7 to the good and more than probably most people won.

From what I’ve read, most people who win big jackpot opt to take the lump sum. Some do it because they want it all right now. Others because they want control over all the money and fear that if they pass on, nothing goes to their heirs. I don’t know if it’s true for all lottery type games and gambling overall, but I do know that in many cases, the rule is that annual payments stop upon the death of the winner, even if all the winnings haven’t been paid out.

And, if the winner is already quite elderly, this fear is even more legitimate.

However, unless I was very old and the annual payments wouldn’t be very much, I would

opt for taking annual payments! And, if you were one of the three winners, having won $530 million dollars from that huge jackpot, you should opt for the annual payments, too, and here’s why.

  1. You don’t get all of the money when you take a lump sum! Each winner of the Powerball jackpot will get their 530 million only if they take annual payments. If you take a lump sum, it will get it cut to around 300 million, and that’s before taxes are taken out. After taxes, you may be left with $150 to $200 million by some estimates.

  2. If you blow it all right away as many big winners have done, that’s it! No more money coming! Sure, the $180 million you’d be left with in the previous example is still a huge amount of money and you’d have it now. And, if you kept your head, you can certainly have the fact of never having to work again and yet having a very good lifestyle that you are in nearly complete control of, be your life. But there are lots of pitfalls, like friends and relatives and others coming out of the woodwork, many who may try to sue you for the money and really tangle up things for a long time, and making you hire attorneys and financial experts, all of which will cost you money, and, if you haven’t managed the money well, you could still wind up even more broke than you were before you won. With annual payments, you’ll have more money coming in the next year for 30 years. And you’ll likely get a much bigger percentage of your 530 million.

  3. You may not be able to have future payments go to your heirs, but those payments you do receive will still let you leave a great deal of money to them!

    Thirty years of annual payments from that 530 million that you won would come to $17.6 million per year. But of course there’s taxes. Let’s say, worse case scenario, you have 60 percent taken out for taxes. That would take it down to approximately $7 million yearly that you would receive every year for 30 years! Worried you may pass on after the first year’s payment? You’d still get to leave $7 million to your heirs. How many people do you know that can even leave that much or are in line to inherit that much money? I don’t know any.

  4. You have more money coming! The positive side as mentioned at the end of number 2 above, you have more money coming! You know all those problems that cropped up before when you first won? Like those friends and relatives you didn’t know you had suing you, and those nasty taxes? And your overindulgence, like that $350,000 Ferrari you bought? Well, next year, you’ll get more money, and the year after that, for 30 years! You’ll get smarter, learn how to pay your taxes and manage your money, you won’t be out buying a new Ferrari, and you’ll probably outdistance those nuisance lawsuits brought about by all those new-found friends and relatives from the woodwork.

So, if you do win big, think about taking annual payments instead. And first thing, see your tax people and get a trusted financial advisor first thing! You’ll be glad you did.

Happy playing and good luck!

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Stop Paying to Pay Your Taxes!

Last year (2014) was the last straw! I went to the same tax preparation company that I’d gone to for the last ten years and ended up paying $608 to have my return prepared and filed!

$608!                    

And this for a relatively simple return!

To start at the beginning, when I used this preparer, a very well-known chain, I paid maybe $250 and was also sent a coupon that took $20 off my bill. But each year, the price kept going up! Last year (2014) it was $608, a steep rise from the year before, when I paid roughly $450! And, to top this off, the preparer stopped sending their discount coupons.

Well, I asked why my return, (which was fairly simple with some self-employment income, but certainly nothing like what a decent sized business would generate),had cost so much to prepare.

I was told that it was due to my number of w2’s and the division of my self-employment income generating more forms, each of which added another $100 to the cost! And I think I only had 3 w2’s and one 1099!

So, did they protect me and go to bat for me with any problems with the IRS? Well, yes, on two occasions. But, it was for mistakes they made! Not for anything I forgot to include or miscalculations I made!

So, this year, (2015) I decided enough was enough! I found a service, partly supported and endorsed by the AARP, which does tax returns free of charge. They also provide resources that can help you if you are audited. And they do a good job!

Luckily, in most of my past years, I had gotten refunds that were enough to cover the cost of preparation. However, I guess that had I gone to a tax preparation business, I may have paid $700 or more this time! With the $200 refund I’m getting this year, I would have ended up $500 in the hole, if not more!

Is there a down side or catch to using this free service? Sure. There are requirements, such as income levels. If too high, then you’re not eligible, although, the threshold is fairly high. Also, there are some things that they cannot do regarding tax returns, mostly things that are in much more complex returns, unless you’re willing to forgo the deductions, but, in many cases, the taxpayer will still save more by not going to a standard preparer.

In my case, the actual organization doing the free tax returns is called “Cash Oregon”, and is endorsed by the AARP. Oh, and by the way, there are no age restrictions, even though the AARP is involved.

And, depending on your area and how the organization you find works in your area, you may have to make an appointment well in advance, or, if they only do walk-in service, you may have to get up very early in the morning, arrive very early, and wait half the day or more. But, it’s well worth it! And unless you have the kind of return that is very complex and has a possibly greater chance of being audited, you should be just fine using a free service.

Just be sure to make sure that it is supported or endorsed by a reputable organization such as the AARP.

Oh, and what about the possible suggestion that I simply find another provider, one of the other well-known tax preparation companies? Well, while I was waiting, another guy came in and told the clerk he was trying Cash Oregon’s service because he was tired of paying exorbitant costs to have his taxes prepared by one of those other well-known companies!

So, if you’re seeing your tax refunds getting chewed to pieces by your tax preparer’s high costs, or even worse, having to pay that high cost on top of any taxes you owe try looking for a free service!

And support the FAIR TAX! (See my post, FAIR TAX! IT’S WAY PAST TIME!)

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Don’t Drive? Need a License? No! Need an Updated ID? Yes!

So, you no longer drive or have stopped driving. And that means you have no need of a license, or a need to update it. But, do you still need an up to date ID? The answer is, yes!

Now, we’re not like an iron curtain country where we need “papers”, but there are cases where an up to date ID can really help. And no, not just to enter bars or other adults only places.

I went to do my taxes last week, and, while waiting, a customer appeared who had not updated his ID, so, the expired ID he had was considered invalid. This meant that he had to go and update his ID before he could do his taxes.

There can be other cases where an updated ID is essential. Among these are getting all kinds of services and discounts for senior citizens. Also, one is often needed for banking and other financial transactions. Then of course, you need one if you’re going to fly anywhere.

And lastly, if you lose your wallet and it ends up with the police or other law enforcement authority, you may have more trouble getting it back.

So, what to do if you don’t drive and don’t need a license? Well, you can get just an ID card, usually from the DMV. They are usually good for 10 years, to my knowledge, and are accepted as valid forms of identification. And remember to keep it updated!

You never know when a valid ID can help you.

Be up to date!

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FAIR TAX! IT’S WAY PAST TIME!

What is the Fair Tax and Why We Should Support It.

You work and work to make a living, support your family, etc. Either as an employee, independent contractor, or business owner. You work quite hard, 100% for what you earn. You do 100% of the work, right?

But, you have a portion of your pay withheld, or you make quarterly tax payments, or both, and you have to file every year, and probably have to pay to have it done as well! You have to pay to pay your taxes!

On top of this, when a person dies, their heirs are responsible for death, inheritance, and estate taxes, despite the fact that the money in the bank and the money used to buy the estate and it’s effects has already been taxed!

This is wrong, especially in a country where the virtue of hard work is supposedly celebrated. There is a way to correct this. It’s called the Fair Tax.

The Fair Tax was originally proposed by former Congressman John Linder of Georgia, and has been publicized greatly by Atlanta radio commentator Neal Boortz.

They’ve also co-authored two books about the Fair Tax, “The Fair Tax Book”, and “Fair Tax: The Truth”. These two books are ones that every American should read.

First, here’s what the Fair Tax would do and how it would work:

  • It repeals the 16th amendment and eliminates the current income tax and death taxes.
  • it replaces the embedded taxes in everything we buy. Currently these make up 22% of the total price that we pay for all goods we buy. The Fair Tax would make up roughly this same percentage. NOTE!: Contrary to what critics say, the Fair Tax is NOT a tax on top of the price of the item as a sales tax would be! This means that the prices we pay would not change much if at all with the implementation of the Fair Tax!
  • You would not need to file taxes anymore and April 15th would be just another spring day! This includes those who are self-employed. And those who use paid help such as a CPA or Attorney to file taxes, would save at least $100-$500 a year, and for many people, more than that! Currently the cost of compliance alone is staggering, approximately $400 billion yearly! And remember, for businesses, this cost is huge, and is passed on to you, the consumer.
  • No More Audits! Yea!
  • Everyone who works, regardless of income, will get a ‘prebate’,   This will protect the poor as they can use this for necessities. To those of you who believe this to be another handout, this can actually replace, yes, replace, the current welfare state. And it will actually cost less, as there is less room for fraud and the poverty line is the limit as to how much a person would get! Also, since everyone is getting a prebate check, they’ll be no need to determine what it can be spent on and no one can get upset if someone uses it to buy some toy. No one will even know that the money is coming out of a person’s prebate check.
  • Businesses will flock to the USA to do business and even to relocate their headquarters here since there would no longer be an income tax or the massive cost of compliance that goes with it! And domestic businesses will want to stay here instead of relocating overseas! And, outsourcing jobs overseas will be reduced, perhaps greatly, and with foreign companies wanting to relocate here, jobs may be coming, too!
  • Related to above, our economy may boom like it never has before! With the money saved from not having to pay income tax or compliance costs, businesses will have more money to spend on hiring, expansion, and development of new products. This means cheaper goods, more jobs, more goods being available, and people with more money to spend and feeling economically secure enough to spend it and boost the economy further!
  • Bigger savings than from deductions and credits under the current system! No one would need deductions and credits under the Fair Tax, and they will save more money! Everyone will save by not having to pay their CPA or attorney at tax time, everyone will get an automatic raise since nothing would have to be withheld from their paychecks, at the same time their employers, for the same reason, would be making more money, too! The self-employed and independent contractors would not have to file quarterly taxes, everyone would get the prebate check up to the poverty level to cover basic necessities! And no one would be hit with audits, which almost always results in more taxes, fees, and penalties on top of penalties, and the joy of dealing with the IRS, whose employees and agents often can’t even give you a correct answer to your tax questions! This would all end under the Fair Tax!

I have known people who have worked two jobs to supplement their income and one person I know for sure wouldn’t need to do that if the Fair Tax were implemented!

One last thing. While more republicans than Democrats support the Fair Tax currently, this is neither a Democratic nor a Republican cause, it is an American cause for freedom! And it is a plan that will help Americans at all economic levels!

Now, what I’ve written is just a very concise description. There is more information out there and the best place to look on the internet is http://www.fairtax.org. There is much better information here that is better explained than what I’ve written here. It is very informative and I urge everyone to visit this site.

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Thank you for reading! 🙂