#016: Estate Planning for Business Owners with Rebecca Hobbs

When owning a small business, you need a bank but…are all banks the same? Dr. Joe Bergquist of Harleysville Bank says no. Dr. Berqguist joins us today to share some experience and advice when it comes to small business banking.

Choosing your bank
When choosing your bank, understand what your needs are as a business and what a bank can provide you. Not all banks offer the same options. Big Bank Corporations can oftentimes offer cheaper rates but lack when it comes to customer service or relationships. Small banks can be great for seeing the big picture and being available for you, but you might be worried you’ll outgrow them. When you’re shopping for a bank for your small business, ask around in the community or your chamber of commerce, good banks will have good reputations and no shortage of recommendations.

Building a relationship
Do not think lightly about a relationship with your banker. Dr. Bergquit shares a story about PPP loans that will make you think twice about your bank and your relationship. Building a quality relationship in which your banker knows and understands your business and you as a business owner can be the difference between securing a loan or not!

Dr. Joe Bergquist has some great advice in today’s episode and I am sure we will be hearing from him again. Don’t forget to check out our online quiz at Modern CPA Online, to find out if YOU are ready for tax time!

What’s Inside: 

• Why is choosing the right bank so important?
• Are all banks the same?
• The difference a relationship can make in banking.

Mentioned In This Episode:
Free Online Masterclass 3 Big Financial Mistakes New Business Owners Make
Take This FREE 60 Second Quiz To Find Out “If Your Business Is Ready For Tax Time?”
Modern CPA Online
ModernCPA - YouTube

Tax time does not have to be fear and panic-inducing, but as a new business owner, the upcoming tax season can be scary! Today Modern CPA and Kara Renninger discuss some common tax concerns and tips to help you get prepared.

1. Be Proactive! Take the time to organize your expenses whether you've started a separate business account or not. Document and keep track of all of your business expenses and income so you have what you need for your tax professional or DIY software.
2. Understand Deductions! Do you know what deductions you qualify for? Educate and be aware of the deductions you can use so you have appropriate information when filing. 
3. How will you file? Does your business need to file its own taxes or are you a single entity or independent contractor whose taxes will pass through personal taxes?
4. Understanding Taxes. In many businesses, especially independent contractors or side hustles you will pay self-employment tax on your business which is about 15.2% because you are paying both sides of what an employer would normally be responsible for half of.

So are you ready for tax time? These were just a few big tax-time tips. Check out our free online quiz, at ModernCPAOnline.com/Quiz, to find out if YOU are ready!

What’s Inside: 

• How to get ready for tax time.
• Tax tips for small businesses and independent contractors.
• Are you ready for tax time? Take the Modern CPA quiz.
• What you need to know when filing your new business taxes.
• Are you aware of the deductions your business qualifies for?
• What is self-employment tax and why do you have to pay it?

Mentioned In This Episode:
Free Online Masterclass 3 Big Financial Mistakes New Business Owners Make
Take This FREE 60 Second Quiz To Find Out “If Your Business Is Ready For Tax Time?”
Modern CPA Online
ModernCPA - YouTube

Are you considering purchasing commercial real estate to create a brick-and-mortar space for your business? Today we go over how you should purchase property and other key concepts to consider.

When purchasing commercial real estate, it is important that the property is purchased with an entity all its own. We recommend an LLC that is taxed as a partnership versus an S-Corp, Corporation, or even an LLC taxed as a corporation.

There are a lot of benefits to purchasing commercial real estate with a separate entity. You can structure ownership of the property differently than the structure of ownership of the operating entity. You also have the possibility to keep and rent the space if you happen to sell or close your business, creating passive income. Additionally, as the owning entity, you can rent the space to your own operating entity with a rental agreement and fair market rent for tax benefits.

In this episode, we cover all the basics when it comes to purchasing commercial real estate. Tune in and check out our online Master Class for more important information on owning your own business. And if you're unsure if your business is ready for tax time, check out ModernCPA.com/Quiz to take a 60-second quiz to find out!

What’s Inside: 

• What kind of entity can and should purchase commercial real estate?
• Creating passive income with commercial real estate. 
• How to structure ownership of property versus ownership of business.
• Renting your commercial property to your own operating entity.
• Tax benefits and concerns with owning commercial real estate.
• What do you need to purchase commercial real estate?

Mentioned In This Episode:

Free Online Masterclass 3 Big Financial Mistakes New Business Owners Make
Take This FREE 60 Second Quiz To Find Out “If Your Business Is Ready For Tax Time?”
Modern CPA Online
ModernCPA - YouTube

It is harder than ever to attract and retain employees. Employee Benefits can make your business seem more appealing than the competition when it comes to new applicants. Employee benefits can span an array of offerings like health and dental insurance, retirement plans, paid time off, work hour flexibility, remote work, company vehicles or phones, and so much more. When it comes to each of these, certain provisions, rules, and tax implications apply.

Generally, companies smaller than 50 employees are not required to offer or pay for health insurance or other benefits. However, if you decide to offer benefits to one employee, all other employees who match the qualifications and are eligible must also be offered equal benefits. You must not discriminate against offering benefits if all rules pertaining to the benefit are met by the employee.

Offerings such as insurance, retirement, and PTO should be offered under a written plan known as a Cafeteria Plan. These outline the types of benefits, how much (if any) the business will pay for or match, and how much will be allocated as taxable income. Other benefits like company vehicles, phones, computers, business meals, etc should be outlined as a Non-Cafeteria Plan in the employee manual. This explains how the company will reimburse employees for incurred expenses and how this will be reflected as taxable income or deductions for both the employee and employer.

While Employee Benefits are a major way to attract new employees there is a fair amount of planning and documenting that must occur. We dive into all the details in our course, Up Level Your Small Business IQ which you can check out on our website!

If you found this episode helpful then please like, subscribe, and share on social media!

What’s Inside: 

• How to better attract and retain employees.
• What are Employee Benefits?
• What size business requires benefit offerings?
• What are Employee Benefit Provisions?
• What are the tax implications of Employee Benefits?

Mentioned In This Episode:

Modern CPA Online
ModernCPA - YouTube

What is an LLC?
A limited liability company (LLC) is a business structure in the U.S. that protects its owners from personal responsibility for their debts or liabilities. Limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship.

Should I choose an LLC?
When it comes to deciding if an LLC is right for you there are a lot of options and things to consider. An LLC lends itself to a lot of flexibility and can in the same way as a variety of business entities. Without knowing specifically your business it’s hard to make a claim to what will work best for you, but Michelle and Shawn discuss generalities that can apply when you consider your industry.

LLC and Taxes
A common misconception is that an LLC is the “cheaper” or cost-effective option when it comes to taxes and tax deductions. In reality, they are going to be pretty much the same whether you're an S Corp or an LLC filing as an S Corp, and so on for all of the business entities.

Modern CPA advises appropriate legal consultation when it comes to choosing how to structure your business. Determine your needs both long-term and short-term, and take business decisions seriously.

What’s Inside: 

• What is an LLC?
• Do you need an LLC?
• Common Tax misconceptions for LLCs.

Mentioned In This Episode:
Modern CPA Online
ModernCPA - YouTube

We often get asked, “Who should I hire?”. If you’re a small business that is experiencing growth and it's time to add to your team, what’s the right decision: Employee or Independent Contractor? There are many different laws, rules, stipulations, and tax requirements that can help you make decisions.

What does the law say?
If you’re considering hiring an employee or an independent contractor, be sure to check Common Law and Safe Harbor rules to see how they apply to your situation.

Common Law:
Behavioral - What control does the employer have over how, when, where, and even who does the work?

Financial - What financial responsibilities fall on the employer vs the worker? Who pays for tools and other materials?

Relationship - How do the employer and the worker view the business relationship? Is there a written contract describing roles and responsibilities

Safe Harbor:
Reasonable Basis - Are you following industry standards?
Reporting Consistency - Are you filing the same for the worker year after year?
Substantive Consistency - Are you treating all workers of the same situation the same?

The Pros and Cons
Beyond the laws and rules, there may be options that seem attractive for both situations to hire an employee or an independent contractor. Employees can provide more stable, consistent, permanent work but also require more of an investment with quarterly tax deposits and insurance benefits. Independent Contractors require less investment upfront but need more flexibility and freedom from the employer which can be a concern for security or client lists.

Tax Documents
Once you’ve decided on what type of worker you will hire, you need to ensure you’re filing the proper tax documents. Both situations require specific documents needed, even at the time of hiring. Do you need a W9, W2, 1099 or something else entirely?

Be sure to listen to the full episode for all the details on these important points! If you find this episode helpful, find us on YouTube and like and subscribe.

What’s Inside: 

• What is the difference between an employee and an independent contractor?
• What are the Common Law rules?
• What are the Safe Harbor Rules?
• What are the pros and cons for employees and independent contractors?
• What are the tax documents and obligations for employees and independent contractors?

Mentioned In This Episode:
Modern CPA Online
ModernCPA - YouTube

It's time to invest in your business to help it grow and maximize productivity. But how can investing affect your taxes? That's what we're talking about in today's podcast.

What are the ways you can invest in your business?

Business Assets: Anything purchased for your business in order to operate or grow operations (technology, tools, real estate, vehicles, employees, etc.)

Stocks: Actually investing profits or business money into the market.

Employee benefits: Any type of monetary investment into benefits and programs that are a priority for you to your employees. (Retirement funds, health care, etc.)

How can investing affect your taxes?

Various investments will have different implications for your taxes year after year. You need to take into account the efficiency of certain investments, the useful life of assets, as well as gains and payouts from stocks, and what that looks like in a given year.

What’s Inside: 

• What is an investment for a small business?
• What types of investments can small businesses make?
• How can different investments affect taxes?
• How will tax implications change year to year with investments?

Mentioned In This Episode:
Modern CPA Online
ModernCPA - YouTube

While the world is growing used to virtual businesses popping up and thriving in many industries, there is a very different setup and management for running a remote business. Allison Sandberg is the founder of the virtual travel agency, Magical Memory Planners. Allison started out as a person who loved travel and travel advice, turning passion into profit her one-man show travel agency has grown to a team of over 30.

Allison shares how her business has had to change internal communication and information platforms over time from small Facebook groups to Workplace and a formal business website. In addition to creating these platforms, Allison shares how she keeps the family workplace feeling alive in a sea of screens through personal connections. She encourages downtime communication, birthday cards, and agent-only AND family travel trips for the business.

Allison’s remote team is all made up of mostly individual contractors which can make control a little tricky. She shares tips, and some mistakes made when it comes to contracts, structure, and procedures for onboarding and maintaining these team members.

This thriving virtual business owner also has one important piece of advice: Think Big. Allison encourages new and prospective business owners to think big from the beginning when it comes to setting up programs, policies, and procedures. Adapt software and systems that can grow with you, if you don't NEED them from the beginning, you will benefit from starting with something you won't have to totally redo as you grow.

For more on Allison and a little something fun, be sure to listen and subscribe to her podcast, Travel Talk! This episode is full of some incredible tips and advice for listeners. As always please, like, subscribe, and follow us on social media to stay connected.

What’s Inside: 

• How to set up a business for long-term growth.
• Making changes and adjustments as your business grows.
• Managing a remote team for employees and individual contractors.
• Virtual business mistakes and advice.
• Are virtual businesses better than brick and mortar in today’s economy?

Mentioned In This Episode:
Magical Memory Planners - Home | Facebook
Magical Memory Planners Travel (@magicalmemoryplanners) • Instagram photos and videos
Travel Talk Podcast - YouTube
Modern CPA Online
ModernCPA - YouTube

No business can operate if they aren't getting paid. Michelle and Shawn cover all the reasons you may not be getting payments and what to do next, with these 6 tips.

Tip #1
Take a look at your payment procedures: How are you accepting payments? Are you offering enough, accessible modes of payment? How are you sending invoices? Are you clients receiving and opening these invoices? Are you utilizing an accounting service that tracks paid invoices?

Tip #2
Communicate with your clients: Before delivering products and services, it's okay to over communicate. Let your clients know what to expect including how they will be invoiced, when they will be invoiced, and what are the payment timeline terms.

Tip #3
Determine the problem: Give your clients the benefit of the doubt. Maybe the invoice went to junk mail or was accidentally thrown away. Maybe your client is struggling financially and could benefit from a mutual/unofficial payment plan. Maybe there was a problem with the product or service. Maybe there were unexpected fees and charges included on the invoice.

Tip #4
Have the hard conversations: When an invoice has gone unpaid, discuss with the customer solutions to their problem. Make right any wrongs on your behalf (poor services, information about charges, etc.) or include late fees if necessary.

Tip #5
Send an official letter: You’ve examined your processes, addressed problems, you’ve communicated with the customer, and you still haven't been paid. Send an official letter. This is a clear and adamant letter addressing the nonpayment with the customer and your terms to follow.

Tip #6
Debt Collections: Have your attorney draft a letter and determine whether this payment is worth following through to Debt Collections. Debt Collections will incur fees for you as a business that include court fees, attorney fees, etc.

We understand getting paid is important. If you are frequently experiencing nonpayment, pay close attention to these tips and make changes accordingly. In this episode, we also briefly address how nonpayments can affect your accounting financials and your taxes.

If you found this episode helpful, please like and subscribe to us on social media!

What’s Inside: 

• What do you do when a client refuses to pay for delivered products or services?
• Can you be the cause of unpaid invoices?
• How to create effective communication and ensure prompt payments.
• Why are customers not paying invoices?
• Are you seeing a frequent pattern in unpaid invoices?
• How do unpaid invoices affect your finances and taxes? 

Mentioned In This Episode:

Modern CPA Online
ModernCPA - YouTube

It may be scary to think about what will happen to your business and assets when you’re no longer around. Whether illness, sudden tragedy, or incapacitation causes you to be unable to make decisions and operate your business; you need to be prepared. Rebecca Hobbs is a Principal of law firm O’Donnell, Weiss & Mattei, P.C. here in Pennsylvania. As a Certified Elder Law Attorney, Rebecca shares her insights on the need for Estate planning and the building blocks of documents and decisions to get you started.

Important Documents:

• Last Will and Testament
• General Power of Attorney
• Advance Health Care Directive

These three documents are the building blocks of an estate plan, and begin with personal decisions that involve labeling family or important with necessary roles, determining your end of life preferences, and wishes involving personal assets. For business owners, there are nuances with business documents in the formation and operating of your business. It’s important to make sure these are included and communicate well with the other documents involved in your estate. Additionally, each situation, personal assets, trusts, and more will affect an estate plan and will differ individually, so it’s important to consult with a local attorney.

If you do not prepare these documents, consider estate planning, or various life insurances, things can get complicated for your loved ones at your end of life. Have these conversations about your wishes and expectations, as well as organize these documents and other important documents to make a difficult time easier for your close friends and family.

If you’re located in Pennsylvania and would like to reach out to Rebecca Hobbs, you can find her via the O’Donnell, Weiss & Mattei Law Firm as well as via email or LinkedIn.

What’s Inside: 

• How can you begin estate planning for your business?
• What happens when a business owner passes or is incapacitated?
• What are the building blocks for estate planning?
• Why should you consult an attorney for estate planning?
• Should you check and update your Last Will and Testament regularly?
• Why is estate planning important for business owners?

Mentioned In This Episode:

Rebecca A. Hobbs, Esquire, CELA
Certified as an Elder Law Attorney by the
National Elder Law Foundation as authorized
by the Pennsylvania Supreme Court
O’DONNELL, WEISS & MATTEI, P.C.
347 Bridge Street, Suite 200 Also with offices at:
Phoenixville, PA 19460
Phone: (610) 917-9347 41 East High Street
Fax: (610) 917-9348 Pottstown, PA 19464-5426
Email: rhobbs@owmlaw.com
Website: www.owmlaw.com
Rebecca Hobbs on LinkedIn
Phone: (610) 323-2800 Fax: (610) 323-2845

Modern CPA Online
ModernCPA - YouTube
ModernCPA Masterclass