Employers Must To Be Privy To Affordable Care Act Risks From Noncompliant Employee Health Payments or Reimbursements.  Donald Sauder, CPA We would like to take a moment this month to remind you of the important tax ramifications of employer compliance with the Affordable Care Act. With the previous enactment of the Affordable Care Act, and the gradual implications to your business with tax laws regarding health payments or health reimbursements for employees, effective compliance has proven challenging. Understanding and being reminded of the possible relevance to your business, is our goal. Large employers, those with 50 or more full-time employees, or full-time equivalents are required to provide a compliant health plan option for all employees. However, each employee has the option to waive health insurance coverage. For small employers (those with fewer than 50 full-time equivalent employees), a qualified group health plan is not required. More obscure, this is not to say that small employer are exempt from the Affordable Care Act laws. Small employers must still follow stringent new guidelines to comply with the Affordable Care Act tax laws regarding health payments for employees. Affordable Care Act guidelines for small employers: First, payments and reimbursements that are compliant for small employers under the Affordable Care Act laws are: Payments for compliant qualifying group health insurance plans. A compliant group health plan must meet the Affordable Care Act requirements, and all employees must have the option to participate. Not every health plan is a qualifying group plan. If your business has a health plan, talk with your insurance agency to inquire on your plans features for Affordable Care Act compliance. Increasing employee compensation, or paying bonuses to assist employees with the cost of purchasing a personal or family health plan is permissible. This can be for health insurance, health care sharing ministries,…

Preface: Special asset departments handle distressed loan situations. The uniqueness of bank workouts is something few entrepreneurs should sit alone at the conference table with when involved in special assets department situations. The low cost of trusted advisors is the best investment you can make when you have a special asset department loan.   The Special Assets Department   Before you sign on a loan, you should know about the special assets department. The special assets department is the banking arm that handles distressed loans. When a loan is assigned to the special assets department the bank has decided the risk associated with the loan(s) is at the top of the risk ladder and requires special attention. Special asset departments are also know as workout departments. Breech loan covenants, missed payments or certain business activities indicate that repayment to the bank is an uncertain risk, and your loan may be placed in the special assets department.   If you receive word from your friendly banker that your loan is being placed in special assets, the first step should be to obtain a knowledgeable and trusted advisor to speak into the situation. Special asset’s is a high stakes “chess game” with the bank. Coordinating loan repayment with adeptly experienced bank workout specialists and understanding all options in accordance with original loan documents to rights and remedies of loan repayment, including bankruptcy, is challenging. If you didn’t have attorney’s read and edit your loan agreement before loan signing, with the special assets department, your chattel, even the dishes in the cupboard and art on the walls, may be at risk.   Meet with the bank. Discuss how aggressive the bank will be reducing loan risks. What are the options to resolve the banks concerns? Have your trusted advisor sit in on the meetings…

Preface: Decisively develop your marketing plan to better satisfy the needs and wants of your specific customer and client market segments. Marketing is about adding [strategic] value gains that better satisfy marketplace wants and need that segue developing enduring market yardage for you’re in business.   Marketing 101   Successful marketing is the science and art of understanding, developing, and adding value to better satisfy the needs and wants of your customers and clients. With careful research of how your business can profitably satisfy needs and wants, you can position and further your business as a leader in its respective marketplace. Marketing 101 – can you enunciate the unique strategic value(s)  your business provides [or will/can] to the marketplace?   Marketing is expensive and time-consuming; and most often only performed by those businesses with a projected budget for such supplementary expenses. To quote Philip Kotler, an expert on marketing, “Companies worry too much about the cost of doing something. They should worry about the cost of not doing it.”   Yet, every business should be concerned about properly satisfying the needs and wants of your customers and clients. Selling your product or service is only the curl on top of the soft ice-cream cone of marketing. It might be the first thing you think about; but there is a lot more to it. Marketing is about adding more value to the customers and clients who transact business with you. While creativity is important to the art of marketing, the science of market research, market modeling, and predictive analytics provide valuable elements to the marketing equation.   Developing Marketing Policies   Why should anyone buy from your business? Your answer should be more than you are the lowest cost supplier or provider. Your answer should include how you best satisfy the needs and wants of your customers…

The Emperors of Chocolate  Joel Glenn Brenner The book the Emperors of Chocolate: Inside the Secret World of Hershey and Mars provides a glimpse of two successful international businesses with a beginning like all the rest — with a vision of how they would serve (reward) customers in the marketplace. The Mars and Hershey companies where incorporated no different than every other great candy business – with a handful of ingredients, a copper kettle, a bag of sugar, and a dream. The book provides an interesting read on the development of early chocolate, with an inside look at the confection industry that is more revealing than expected for chocolate producing powerhouses.   For entrepreneurs, the book provides an entertaining glass on both Mars and Hershey. How Mars, the family-run business, was founded and developed by Forrest Sr., growing amongst intense competition and secrecy of upper management, with a management style of horizontal communication. Everyone on first name basis, no private offices, no personal secretaries, everyone fly’s coach, and paychecks reflect the business performance. Mars is 4 times the size or Hershey. The book reveals Forrest Mars attendance of Yale to learn about the money business, and mentoring under Pierre Holk. The creation of the Snicker bar, an idea that came from Frank, Forrest’s father, who told Forrest that a chocolate malt drink in caramel candy bar should be developed. Today the Snickers Bar is only one of the well know products of the Mars empire. Forrest learned that you can hire accountants, you can hire advertising men, and you can hire financial types, but if you want to rich you need a product and an idea – you can’t hire people to give you that.   Milton Hershey on the other hand, was not excited about business. He hated accounting and finance. Statistic…

Preface: Your smartphone sensors will work with this weather forecasting system. Are accurate 3 month or 6 month weather forecasts in our future, with precision on the (economic) weather impacts?    

Entrepreneurs and Paid Time Off – The 80/20 Rule   In 1897, Italian economist Vilfredo Pareto discovered the 80/20 rule while studying income and wealth patterns. It is so effective Richard Koch wrote a book on it – The 80/20 Principle: The Secret of Achieving More with Less. Well we can save you the time of reading book if you prefer. Here’s what you should know. The 80/20 principle is this –80% of business results flow from just 20% of your efforts. This is one of the secrets of highly effective people and organizations. Mr. Pareto’s study showed that 20% of the population enjoyed 80% of the resources. Pareto applied this to consumers to discover that 80% of what we achieve in our work is a result of 20% of the time spent; and that 20% of customers are usually 80% of a businesses profits. The statistics work like this. 20% of inputs = 80% of outputs; 20% of causes = 80% of consequences; 20% of our effort = 80% of results.   Koch’s book states that the top 20% professionals earn 80% of the income in any one business. The top 20% of businesses do 80% of the sales. The top 20% of friends are 80% of the important ones.   If you want to benefit, you’ve got to take action. The 80/20 wisdom says:   Celebrate exceptional productivity Look for shortcuts Be selective Strive for excellence in a few things, rather than many Delegate or outsource as much as possible Choose careers, employers, and employees with extraordinary care Only do what you do best and enjoy most Do the 20% that leads to 80% first Make the most of the 20% of our time that brings 80% of rewards   Making things simple, and not complex increased productivity….

Preface: Additional credit is not always optimal. If you plan to borrow, you should have a realistic plan for repayment beforehand. Work with your CPA to calculate debt to equity ratio’s (book and FMV) and assess risks before signing on a term loan. Counting the Cost – Business Loans So you want a business loan? Borrowing money is always easier than repayment; be certain before you sign on debt agreements that you absolutely must have a loan, and understand the risks. If you don’t borrow, you won’t be a financial indentured servant, but if you don’t borrow, you won’t achieve the profit of financial leverage. As with any business decision, the cost of financial leverage should be carefully counted before discussing any borrowing, small or large. Most banks will require personal guarantees on business borrowing, so if business income fades, your personal assets are at risk. What are the risks of borrowing money? First, you are taking risk with other money. Most banks and financial organizations that lend money are risk adverse. That is they want a consistent compound interest investment without financial volatility. You are guaranteeing their investment with your assets as collateral and guaranteed loan repayment efforts. Most bankers are quickly solicitous when your business financials lack positive cash flow should you be delinquent on payments may foreclose on your property. If you are cross-collateralized with multiple property or project loans, one loan in default leads to every loan in default. Financial conditions can deteriorate quickly with an over-leveraged business. Yet if you absolutely must borrow for business purposes you should prepare a loan package to demonstrate to a qualified lender your level of seriousness. A loan package is an organized group of documents that contain all of the information required to obtain an underlying decision from a lender on your…

Preface: Entrepreneurial history is always interesting. Here is an abridgment of the history of UPS.   James E. Casey – Abridgment of the History of UPS 1907 in Seattle, Washington, an enterprising 19 year old James E. Casey borrowed $100 from a friend and started his own business, American Messenger Company. James had experience in the messenger business, having worked for some of his competitors before launching his own enterprise. Responding to telephone calls from a basement headquarters, Casey’s employees carried trays of food from restaurants, baggage, packages, and delivered messages. In 1907, the company’s largest assets were the bicycles. Casey had a strict business philosophy – be always courteous, be always reliable, with 24 hour service and low rates. Simply: the best service, and lowest rate.  In 1913 the company acquired its first delivery car, a Model T Ford. By 1916 the company was flourishing, and the color brown was brought to the business from Charlie Soderstom. Soon the three largest of Seattle’s department stores turned their deliver business over to Casey’s and his Merchants Parcel Delivery. In 1919 the company expanded beyond Seattle to Oakland, California and changed its name to United Parcel Service. In 1953 UPS resumed air operations, (first begun in 1929 and ended the same year by the Great Depression).   From the 1950’s to 1970’s UPS worked hard to ship freely in all 48 contiguous states with approval from the Interstate Commerce Commission. In 1975 the company obtained the “Golden Link” to serve every address in the 48 contiguous United Stated. In 1977 the Blue Label Air service reached Alaska. In 1999 UPS became a publicly traded company. In 2016 the company has a market cap of $82B.  Today, UPS delivers international packages to 185 countries and territories, reaching more than 4 billion people. Casey…

Preface: Every business should have a travel policy for expense reimbursements, if employees travel. This blog is written to bring to light the importance of a travel policy to manage travel reimbursement expectations.   Should Your Business Write an Accountable Travel Policy Businesses with employees who travel periodically should have an accountable travel plan policy for employee reimbursements for those travel expenses. A well-developed policy sets guidelines for qualified and nonqualified travel expense reimbursements. A well designed travel policy also develops expectations beforehand on qualifying travel costs. A travel policy can help reduce costs, and produce supporting receipts for tax deductions for employee expenses incurred during travel. For instance say an employee needs to fly to meet with a potential distributor or dealer. Planning your travel policy guidelines will limit certain employee expenses incurred during the travel. A travel policy doesn’t necessarily require restrictions on travel expenses; yet it should be designed to set expectations on what is and is not a qualifying travel expense. Qualifying travel expenses can include airfare, lodging, meals, vehicle rental, phone, taxi, tips, concierge, etc. If your employees understand before traveling, what will be a qualified travel expense, you can control costs, and keep expenses contained? A corporate credit card for traveling employees, will help accurately track costs, and provide cost saving travel discounts in some instances. A travel policy can set permitted airline carriers, or similar frequent travel reward programs for say meals, car rentals, lodging, etc. An accountable travel plan according to IRS code has three rules for compliance. i) your expenses must have a business connection, e.g. you cannot visit town and enjoy an afternoon at museums or historic venues and expense your entry passes, if it has no business connection, ii) You must adequately account to your employer the expenses within a reasonable period of time (within 30 days of receipt all…

Preface: Estate planning is complex. An awareness of options can sometime be helpful when making decisions on transfers of assets. One feature is the self-canceling installment note (SCIN). If you think a SCIN would be applicable to your asset transfer, talk with an estate/tax expert.  Self-Canceling Installment Notes – How They Work A self-canceling installment note (SCIN) is an estate planning and tax strategy involving installment notes applicable to the transfer of business assets with payment to the seller over time. Installment payments in a SCIN contain both interest and principal, governed by Internal Revenue Code provisions. A SCIN is applicable to say the sale of a business interest between family members. As long as the sales price and stated interest rate are reasonable, no taxable gift occurs on the planned sale. A SCIN’s self-canceling feature states that if the seller passes during the installment notes term, the buyer is relieved of any future payment requirements – the term cannot exceed actuarial life expectancy at the time of the transaction. So the SCIN offers a variety of valuable tax benefits: i) if the seller passes before the note matures, the outstanding principal is not added to the sellers estate, increasing the amount of tax-free transfers that can be achieved with an estate. ii) the seller can defer the capital gain on the sale with amortization of the gain over the timeframe of the SCIN. iii) the purchaser can deduct the interest paid on the installment note. Often when a SCIN is applied to estate planning, the selling price is higher than fair market value. So why would anyone choose a SCIN when selling assets in an estate planning? One reason is the option to freeze the value of assets for estate purposes. Say your business value is increasing at 7% per year, the SCIN…