Learning Center for Tax and Financial Insights

We’ve all heard the term “the rich get richer.” According to a report released from ProPublica, it turns out that one of the ways that truism is perpetuated is through the strategic use of tax-sheltered Roth individual retirement accounts (IRAs). The good news is that the same approach is available to the man on the street. The only thing you need is the know-how. How the ultra-wealthy use Roth IRAs The story details how ultra-smart people have become ultra-wealthy, accumulating millions and billions of dollars through the Roth’s tax sheltering properties. Where these accounts don’t offer the upfront tax break that you get with traditional 401(k) plans and IRAs, they are tax-advantaged when it comes time to make withdrawals. And the same investors who are blocked from contributing directly to a Roth due to their higher income have the option of converting assets that are held in a traditional IRA or 401(k) into a Roth. Though they still need to pay taxes on the money that they roll into the new account, once it’s there it can be withdrawn with no tax impact after it’s been held a minimum of five years and the account holder reaches the age of 59 1/2, or it can be kept in the account where it grows tax free. The ProPublica report explains that this strategy grew an account valued at under $2,000 in 1999 to one worth $5 billion for Paypal founder Peter Thiel, who sheltered his investments in what is known as a self-directed Roth IRA, which offers identical tax advantages of untaxed distributions and growth as a standard Roth IRA, while at the same time providing more investment opportunities such as shares in private companies or in real estate. That’s how Thiel grew his account, holding shares of PayPal long before it became a publicly traded company. As attractive as self-directed IRAs sound, there are some caveats. You are not going to be able to invest in them through traditional firms like Vanguard or Fidelity Investments. Instead, you’ll need to contact a specialized custodian who can facilitate your purchase but will not provide you with any advice on your investments, including telling you if what you’re doing is legal or not. Choosing to get involved in a self-directed IRA is a decision to go it alone and accept the consequences. You need to do your homework, both on what is allowed and isn’t and on the value of the alternative assets you choose. It may seem like an insignificant detail, but not paying attention to it puts you at risk for breaking tax laws. All the cautionary notes aside, investing in assets within a self-directed IRA gives you the advantages of the tax-free Roth products and allows you to sell what you’re holding at a profit and then roll those gains into new asset purchases within the same account. Alternatively, you can go the more traditional route and select the standard Roth IRA and invest in high growth potential investment options. Doing so helps bypass worries about liquidating traditional IRA or 401(k) holdings after retirement and risking higher future tax rates, as well as having to meet the Required Minimum Distribution amounts that those accounts impose on you if you are the original account owner and you reach the age of 72. If you have questions about tax-advantaged retirement savings options, contact our office.

When you’re in the midst of building or growing a business, the last thing on your mind is what happens if the owner suddenly dies. If the business was established as a partnership and the surviving partner has equity in the business, then a buy-sell agreement can provide a quick solution, particularly if there is an insurance policy that’s been set up specifically to facilitate the buyout. Those who worked with an experienced attorney or accountant when setting the business up generally have the good fortune of having a plan in place whether there’s a partnership or not, but that is not always the case. The absence of the driving force behind a business affects employees, customers, and the family members who may have relied on the organization for income. If you find yourself in this unfortunate situation, you need to know the steps available, and how best to approach the many issues that will arise. The First Decision: Whether to Save the Business or Not Though the knee-jerk reaction to the death of a business owner may be to try to keep the business going, that is not always the best or smartest answer. Every situation is different, and decisions need to be made from a practical standpoint rather than an emotional one. If the business owner was a professional and the entire entity was dependent upon them, their strengths, skills, and personality, then no amount of good intentions is likely to save the business. Imagine trying to continue to run a medical practice with a new physician. Though some patients may stay on, the majority are likely to move to another practice in order to ensure the continuity of their care. The exception to this would be where there was already a partnership, or an heir of the business owner is able to assume their responsibilities in a way that makes the clientele comfortable. But even that transition represents a risk, as the time between the death and resetting the business is likely to be filled with costs for which revenue is not being generated. Making a determination about whether to preserve and continue a business requires planning, realism, and perhaps most important of all, cash. Unless the estate has the funds available to keep things afloat while a new plan is agreed to, the challenges are likely to mount. In the absence of a contingency plan with funds set aside to support it, the business owner’s estate is free to decide to walk away from the business. In many cases the value of the operation may have rested almost exclusively on the deceased individual’s popularity and relationships with clientele, and when that is the case the decision is clear, though often painful. Walking away from a business can feel like a second death, and it is easy to feel compelled to try to save the owner’s creation – but doing so can lead to financial losses that make the death feel even more painful. Step One to Preserve a Business After the Owner’s Death If, after reviewing the advantages and disadvantages of trying to preserve the business, you make the decision to either sell it or find a way to continue operations, the estate will need to switch legal control of the business over to a dedicated personal representative of the estate. If the selection represents a challenge due to differing opinions, the court can appoint a curator to step in temporarily. Most states allow this person to assume all of the business and estate responsibilities that a permanent representative would have, while others assign an administrator ad litem who has powers limited to making business decisions. In the latter scenario, a separate individual would be assigned to overseeing matters surrounding the estate. When time is of the essence in preserving a business, the court can appoint a curator extremely expeditiously: In some cases, a death certificate will not have been issued and a curator will already have been appointed. Though this may seem overly hasty, and maybe even disrespectful, there are legal issues, customers, employees, and other administrative tasks involving bank accounts and financial institutions that require continuity. Control of the Business’ Bank Accounts One of the most important things that a newly assigned curator will take charge of is the business’ bank accounts, especially if the deceased owner is the only signatory. Banks will not allow checks to be written or withdrawals to be made without an authorized person’s signature, and they will freeze all accounts once they learn of a business owner’s death. This means that bills will not be paid, employees will not receive paychecks, and those limitations will lead to services or goods not being provided. Once legal control of the business has been established, whether permanently or temporarily, the bank needs to be made aware of the new person’s identity and must be provided with legal documents that prove their authority. This may involve having the curator or estate representative name themselves the new president so that they can inform the bank and provide a new signature card. Control of the Business’ Digital Assets Today’s business environment is heavily reliant upon a digital, online presence, and that means that the curator, executor, administrator, or other decision maker will need to gain access to passwords so that they can control those assets. Laws are beginning to be passed to facilitate the transfer of this information, including in California where a Uniform Fiduciary Access to Digital Assets Act has been passed. This new legislation provides authority over digital assets to those who are fiduciaries of a business. Fiduciaries are those that the court has recognized as having authority in the absence of explicit instructions from the deceased business owner. This is another example of how having guidance from an attorney or accountant early in the establishment of a business can pre-address issues and head off potential problems. Selling the Business If the decision is made that the business is to be sold, it is essential that an outside entity such as a business broker is brought in to provide reliable, data-driven information on the business’ value. Business brokers do receive a commission on completed sales, and many people are concerned that they might boost the value in order to increase their commission. But commissions are only provided once a sale has been complete, and an unrealistic number is unlikely to attract a serious buyer. When working with a broker, ask them how they arrive at the value that they assign. Their research should be based on industry information. If a broker expresses disinterest in handling the sale, it’s a good idea to quiz them as to why — in some cases the issue may be a lack of familiarity or available information to fulfill the assignment, but in other instances they may not see the sale as a legitimate possibility, and therefore not worth their time. Their explanations can provide you with valuable insight. There are some scenarios where there is an obvious prospective buyer. This may be a competitor or an individual who has long worked alongside the deceased owner. This is often the easiest and most sensible option, as well as the one that is most likely to deliver favorable, uncomplicated terms. Working with a friendly buyer can expedite the process and alleviate stress. Be Aware of Personal Guarantee Issues After the death of a long-time owner, many vendors and creditors become gun-shy about doing business with a new individual, and this is particularly true for items or services that represent significant expenses. The problem is often addressed by asking for a personal guarantee from the new owner – but offering one may not be a good idea. Making long-term decisions and commitments is generally not advised until the disposition of the business has been resolved, so issues such as whether to sign a new lease or to purchase a new piece of equipment is better left until after that larger decision has been made. If you are the heir to a business owner who did not leave explicit instructions about what to do with their business and the topic has never come up, there’s a good chance that they assumed or intended that their business would die with them. Even if that is the case, it is helpful to spell those intentions out, and especially to take out an insurance policy that will help carry survivors through the time it takes to shut the business down or close it.

Human beings are visual learners – they always have been, and they always will be. A big part of this has to do with the way that the human brain works. According to one recent study, when people hear information, they generally only remember about 10% of what they're exposed to. If that information is paired with relevant visuals – be it in the form of a video or even static content like a photo or infographic – they remember 65% of it on average. All told, it's estimated that between 51% and 80% of all businesses in every industry will rely heavily on visual content in 2021 – a trend that shows absolutely no signs of slowing down anytime soon. That, in essence, is what Canva is all about. Canva is a graphic design platform that can be used to create visual content like social media graphics, presentations, posters and more – all via an app that includes templates that make it easy to create the stunning content you need. The platform itself is available for free, although it does offer paid subscriptions through its "Canva Pro" and "Canva for Enterprise" tiers that unlock additional features for power users. Not only can users create content that immediately exists online, but they can also pay for physical products to be printed and shipped to customers – allowing brands of all types to make meaningful connections with their target audiences. In April of 2021, Canva reached a $15 billion valuation - simultaneously making its co-founders Melanie Perkins and Cliff Obrecht billionaires. This came less than a year after securing a $6 billion valuation, even though the COVID-19 pandemic was still making its way around the world. But what may seem like an overnight success was, for those co-founders, anything but. The story of Canva wasn't always easy – but it is one that can inspire entrepreneurs and businesses professionals everywhere moving forward.Canva: The Story So Far The idea that would go on to become Canva began in January of 2012 in Perth, Australia. It was then that Perkins, Obrecht and a third co-founder – Cameron Adams – saw a market that was in desperate need of being filled. The company began simply enough: They wanted to "make design accessible to all." It didn't matter what you actually needed those design services for – logos, business cards, presentations, or something else entirely. When Perkins and Obrecht were studying in college in Perth, the duo would earn side income by teaching other students various design programs. After determining that some of the platforms offered by companies like Microsoft and Adobe had too much of a learning curve, they decided that there had to be a better way. But when they couldn't find it, they decided to create that "better way" themselves. The duo – now a couple – started an online school yearbook design business, that was then called Fusion Books. They immediately launched a website that let users collaborate and build their profile pages, articles and other content that would then exist in those online school yearbooks. Perkins and Obrecht would then print the yearbooks, after which they would deliver them to schools across the country. The business was a success, but the pair didn't want to stop there. They wanted to go bigger, and they had ideas on how to do it. In 2010, Perkins had an encounter with an investor from Silicon Valley who saw the potential in such an idea. That investor introduced her to a few contacts, at which point they began to develop their idea even further. With the help of a few technology advisors and after the close of their first funding round, Canva was born in earnest – and the rest, as they say, is history. In its first year after launching, Canva had more than 750,000 active users. Now focused on marketing materials, its revenue increased from an already impressive $6.8 million to an enormous $23.5 million during the 2016/2017 fiscal year alone. Just one year later, in 2018, the company had raised more than $40 million from various investment firms and was already valued at $1 billion. The point of all this is that there is truly no idea too small (or too niche) to make an impact. Melanie Perkins and Cliff Obrecht were tired of spending time teaching complicated graphics programs to fellow students, so they decided to create a platform of their own to eliminate as much of the "hard work" as possible. That simple idea turned into something much larger than either of them could have imagined. For an entrepreneur, something like this isn't just a success story - it's a critical moment of inspiration to guide all their efforts moving forward.

Here are five things that happened this past month that affect your small business. 1) The G20 backed historic corporate tax reform at the latest summit. Another step forward for proponents of a global corporate minimum tax: At the first face-to-face G20 meeting since the start of the pandemic, “a landmark proposal to stop multinational companies from shifting profits to low-tax havens was endorsed.” (Source: Yahoo! Finance) Why this is important for your business: Companies with international operations would see changes to their taxation under this proposal ¬– but it’s still a long way from being adopted. Stay tuned. 2) The US recession actually lasted only two months. While difficult times for many individuals and small businesses lasted much longer (and for some are still continuing), “the U.S. recession touched off by the coronavirus lasted only two months, ending with a low point reached in April 2020 after the start of a sharp drop in economic activity in March of that year.” (Source: Reuters) Why this is important for your business: While the country had “by no means gotten back to normal operating capacity at that point,” it is helpful to be aware that the recession was the shortest on record. This may feed arguments in favor of the “cash first” approach policymakers took, including the extensive financing for small businesses. 3) Restaurant workers are quitting at a record rate. There are a variety of reasons – including the high-stress culture – but pay is high on the list. “Low wages are the most common reason people cite for leaving food service work. But in one recent survey, more than half of hospitality workers who've quit said no amount of pay would get them to return.” (Source: NPR) Why this is important for your business: If you operate in any sectors related to the restaurant industry, you’ve no doubt encountered businesses who are having staffing difficulties. Some may choose to raise wages, while others might wait it out to see if things revert to “normal.” 4) The economy is expected to cool off going forward. “The U.S. economy’s 2021 growth surge likely peaked in the spring, but a strong expansion is expected to continue into next year,” said economists surveyed by The Wall Street Journal. The bounce back from the recession prompted “red-hot” growth, but that burst is expected to slow. (Source: The Wall Street Journal) Why this is important for your business: This isn’t a bad thing. We’re past the peak for economic growth and have moved “into the more moderate phase of expansion.” Job gains, personal savings, and fiscal support are expected to keep the economy growing solidly over the next year. 5) During the pandemic, 1 in 5 business owners were on the brink of closing forever. A new study by OnePoll found that “One in five small business owners came frighteningly close to shuttering their business for good during the COVID-19 pandemic.” Additionally, 3 in 4 respondents said the past year was the most difficult they’ve ever faced in the life of their business. (Source: Study Finds) Why this is important for your business: If you’re one of these business owners, it’s helpful to know you’re not alone.

Have you recently got married? Or plan to do so soon? Here is a short checklist for what you should do in terms of taxes after tying the knot. .embed-container { position: relative; padding-bottom: 56.25%; height: 0; overflow: hidden; max-width: 100%; } .embed-container iframe, .embed-container object, .embed-container embed { position: absolute; top: 0; left: 0; width: 100%; height: 100%; }

After the year-plus you’ve just experienced, the last thing your small business needs is customers who are behind on their payments to you. You may have been giving them a break because you know that they’re struggling, too, but things have been looking up for many companies in the past few months. It’s time for you to be more proactive about calling in your debts. There are numerous ways you can accomplish this. One of the best is to send statements in QuickBooks Online, which are detailed reminder forms that contain multiple transactions. These can be especially helpful if you’ve sent multiple invoices with no response. There are three different types you can send, depending on your needs. Here’s how you create them. Before You Start QuickBooks Online offers a couple of options for formatting your statements. To see these, click the gear icon in the upper right corner and select Your Company | Account and Settings. Click the Sales tab and scroll down to the Statements section. Click the pencil icon over to the far right to make any changes needed. You can: List each transaction as a single line or include all of the detail lines. Display an aging table at the bottom of each statement. Click the buttons to specify your preference and then click Save and Done. QuickBooks Online gives you control over some elements of your statements. Three Statement Types You can choose from among three different types of statements in QuickBooks Online: Balance Forward includes invoices with outstanding balances for a specified range of dates. Open Item statements contain information about all unpaid (open) invoices from the last 365 days. And Transaction Statements show every transaction in a date range that you specify. We’ll describe how to create them so you can decide which makes the most sense for a particular situation. One Way to Create Statements Like it does for many other actions, QuickBooks Online offers two ways to create statements. The first is easier. Click the New button in the upper left and select Statement (under Other). Click the down arrow in the field under Statement Type to see the three options there. If you select Balance Forward, you’ll need to define three criteria (there will be similar options for the other two types): Statement Date Customer Balance Status (Open, Overdue, or All) Start Date and End Date