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Finance

What Is The Best Legal Structure For My Business?

New entrepreneurs are often unaware of the many legalities surrounding a new business. Most specifically, the legal structure of your business.

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New entrepreneurs are often unaware of the many legalities surrounding a new business. Most specifically, the legal structure of your business. This refers to the type of entity your business is and can play a huge role in deciding what taxes you pay as well as all the legal paperwork you need to fill in.

Each legal structure has its pros and cons, but which one is best for your business? Take a look at each structure below, read all the information, and decide which one is best suited for your business model:

Sole Proprietorship

A sole proprietorship is the most common and simple legal structure for your business. This is where you are the sole owner of your business and are responsible for everything – including your assets and liabilities. This means it is your personal responsibility for all of your business finances, you are in charge of the money you make and must also be in charge of any money you owe. Recent research suggests that over half of businesses follow this legal structure.

The main pro of this structure is that you are in charge of the business, so all the money you make goes to you and you alone. However, the downside is that you’re liable for everything too. So, if someone has an issue with your business, they can sue you personally for it. Also, you get taxed as if your profits are personal income. What does this mean? It means you only pay individual tax and not company tax as well.

Partnership

The second legal structure is a partnership, where your business is owned by more than one person. Within this structure, there are two different types of a partnership; general and limited. With a general partnership, this is where everything is divided equally between the parties involved. You each take on the same responsibilities and liabilities. A limited one is where one person is in charge, and the others make a significant contribution but not as much as the main person.

If your business is structured as a general partnership, then it can fall under the sole proprietorship status too. This means all partners are in control of everything, which is a positive as it means you have more brains to bounce around ideas and more resources too. It also means you might have enough money to avoid applying for startup loans, which also means you avoid debt. If you’re a limited partnership, then you’ll fall under Limited Liability Partnership (LLP) status. This means that those with limited control aren’t as liable as the main controller. This can have its pros as it makes it harder to be personally liable during lawsuits if you have limited control. However, the downside is you don’t get an equal share of the profits.

In general, partnerships are good because of the collaboration involved, but bad because of the fact you have to share your profits between other people, meaning your personal take-home is less than if you owned it alone. Plus, another positive is that it follows the same tax structure as a sole proprietorship; you only pay personal income tax.

Limited Liability Company (LLC)

LLC’s are fast becoming a popular legal structure for businesses. Why? Because they allow you to enjoy the main benefits of a partnership (the collaboration, paying individual tax) without some of the negatives.

Mainly, an LLC consists of partners or shareholders – people that have a stake in your business. They’ve used their money to help fund things, and are partially in control of how things are run along with yourself. The key point is, with an LLC, all partners and shareholders aren’t personally liable for any legal issues your business gets into. This means if you fall into debt or get sued, you aren’t liable unless there’s concrete evidence that you’re responsible for the issue at hand.

An LLC is good as it offers you liability protection while also granting the tax benefits you get with partnerships and sole proprietorships. The only negatives are similar to partnerships, any profits you make need to be shared, and you don’t have full control of your business.

Corporation

Once your business establishes itself and starts to grow, you might want to consider switching its legal structure to that of a corporation. A corporation is a business that’s completely separate from you, the owner. While you have your legal rights, so does your business. You can own stock through your business, buy property through it, even sue people through it. It’s a legal entity created with the sole purpose of conducting business. As such, it also has to pay a separate tax. There are many types of corporations, with C corporations being the most common. These are businesses where the owners pay personal income tax, and the business itself pays a separate business tax.

The major benefit of a corporation is that you are completely protected from personal liability. If anything bad happens to the company, such as a lawsuit or heavy debt, you’re not liable, much like with an LLC. The major downside is that you pay two loads of tax; corporation tax and individual tax.

S Corporation

Finally, you have an S corporation which is similar in structure to a C corporation but with one clear difference. Your business is still a separate legal entity, but the tax situation is different. Instead of paying two types of tax, you only have to pay individual tax on any profits you make.

The catch is that you have to fulfill certain eligibility requirements to be classed as an S corporation. For example, you can’t have over a hundred shareholder, and you must be a domestic company. You also can’t have shareholders who are partners, it must only be individuals.

Each of these legal structures comes with positive and negative features. The main things to consider are how much control you have over your business, what tax laws you must abide by, and how liable you will be if things go wrong.

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Finance

Undeniable Proof That You Need Freight Factoring

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Sometimes business owners are too proud to admit that they need help with their finances. What they fail to realize is that it happens even to the very best of companies. Cash flow is a matter that can be fixed without you having to apply for a loan at a traditional bank. There are options available, and freight factoring is one of them.

If you’re still in denial about why you should consider freight factoring, here are things to think about.

You’re failing to take on more significant projects because of limited cash flow

Are you failing to take on more substantial contracts and projects because your clients are taking so long to pay you for work you’ve already completed? It’s not unusual in the world of business for clients to have a 90-day grace period in which to settle their accounts. However, this could very well mean going more than two months without receiving a dime. It can hamper efforts to grow your business.

You’re failing to retain top talent because you can’t pay on time

When clients take their time clearing their invoices, it can cause problems on your end in your business. If you’re struggling to get payment and paying your employees on time, this can become a problematic issue in your company, which could see you losing top talent. No one wants to work for a company that doesn’t pay on time and is continually coming up with excuses as to why it can’t pay them. Don’t be this type of company. Find a factoring company to help you out.

You are seen as a defaulter by business associates

You want people doing business with you to think well of you and your trucking business, isn’t that so? No one wants to be thought of as a defaulter or someone who doesn’t do what they said they would do. This is particularly true if you have people you need to pay that have rendered your business service. Once again, if there is no positive cash flow in your firm because clients are taking longer to process and pay you what they owe, it can have negative repercussions on other areas of your business.

You’re getting rejected because of bad credit

Perhaps you’ve had a rough patch in your business, and your credit score isn’t too good. Maybe you’ve even gone to banks to see if they could lend you a helping hand, but they turned you down because of this bad credit score. Is there no hope for you? Fortunately for you, there is. You see, freight factoring companies don’t consider your credit score when they choose to extend a line of credit to you. They look at your clients’ credit, and if your clients have good credit, then your application stands a higher chance of being accepted.

You’re considering filing for bankruptcy

When a business is struggling to keep up with its day-to-day operations, things can become so complicated that at times, one considers filing for bankruptcy. If a lack of liquidity is making you feel like retiring your business, then you need to think again. This is something a freight factoring firm can help you out with. Thanks to their quick application and approval processes, you can almost solve this dilemma overnight!

If your business is suffering from any one of these points, it might be time to consider partnering up with a freight factoring company.

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Finance

How a Fractional CFO Can Help Your Startup Grow

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A fractional CFO can help start-ups by providing services for organizations on a part-time or contractual basis. This means the company can gain the expertise of a CFO without the significant costs that an in-house, full-time CFO may bring.

Typically, a CFO is brought on for a specific project to meet the company’s financial goals, or to address financial challenges sustainably.

What Can a Fractional CFO Do for a Startup?

Fractional CFOs work on a number of projects that require expertise in financial modeling, accounting and business strategy. They usually work on a project or challenge that the company’s current in-house staff are not equipped to deliver on.

Future Forecasting

Many in-house accounting and back-office finance professionals spend their time working on past financial transactions and the present. A fractional CFO may be brought on to forecast the future of the business from a financial perspective, providing strategic recommendations for its growth.

A fractional CFO often contributes to a business by strategizing the best ways to achieve the growth required. This often requires thinking about financial goals over the next few years and making recommendations on financing the business, through external investment or loans.

Improving Cash Flow

Understanding how cash flows in and out of a startup will be a key consideration for the founders and investors of a company. A fractional CFO can assist by improving the analytical capabilities of the business’ data and will then create a plan of action based on the analysis.

They can get to the bottom of where revenue leakage exists, with the goal of minimizing leakages and creating innovative ways to improve cash flow depending on the business goal.

How to Make Cost Cuts

A job that many startup founders and management teams do not enjoy is looking for ways to cut costs. However, running a startup in a lean fashion is often a requirement due to limited funding of the business. A fractional CFO can make this a more bearable process by analyzing incomings and outgoings and figuring out what can be cut or reduced for a more profitable business. It can be easier for a fractional CFO to make the required recommendations, as they find it easier to act objectively compared with an in-house CFO.

Business Acquisition Analysis

Deciding to acquire a business can be a risky but rewarding decision. One important factor is valuing a business for sale correctly. Preparing well is the way to get it right and a fractional CFO can help with just that. An experienced, capable CFO will understand how to analyze detailed company financials and review the market for comparable businesses to arrive at a fair valuation. A CFO can then work on how to fund the acquisition through debt or equity.

Growth Strategy

Many people believe growth is the responsibility of the founder, salesperson or marketer of the company. However, fractional CFOs are likely able to provide important input for the growth strategy. A modern CFO will use customer acquisition cost analysis and customer lifetime value analysis to work out metrics. An example of this is identifying ROI on marketing expenses and then looking for ways to decrease the cost of acquiring customers. By using data analysis to inform them, CFOs are at the heart of a business’ strategy. A CFO will be able to predict near-term financial performance and engage with marketing teams to help improve practices.

A fractional CFO has many benefits to give to startups looking to grow their business, lower costs or simply get a hold of their accounting and future forecasts. A full-time CFO staff member may not be affordable for many small businesses who may still be building their product or getting traction in their market. However, a fractional CFO could give serious value to a growing company, if hired to help achieve specific, ambitious business objectives

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Finance

Making Money With Short Term Rentals

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Investors love investing in real estate as it usually outperforms other investment types like shares and managed funds. There are many ways to make a profit for your business with real estate too including ‘flipping’. This term refers to purchasing a revenue-generating asset and then shortly thereafter selling it again for a profit. In the US, the two asset classes mostly used for flipping are initial public offerings and real estate.

The longer-term real estate investing strategy that’s prevalent is buying homes to rent out on long term tenancies. It’s not just businesses that invest in rental properties, as a retirement strategy workers also look to have one or two investment properties in their portfolio for the weekly income and the long term capital gain on resale.

What’s also caught the attention of businesses and workers alike is the option to make money from short term rentals. Generating more income with short term rentals and by listing these properties on Airbnb is disrupting the accommodation sector and anyone with a home can do it. AirBnB is a disrupter and it has changed the way we travel. Staying in a spare room for a night or two, rather than a hotel is now accepted as the norm among all types of holidaymakers.

If you want to know how you can earn money with short term rentals, here is a quick guide.

What Is Airbnb?

Airbnb is an online marketplace for lodging around the world. It is popular among travelers who want to save money on accommodation. Because hotel rates are getting expensive, solo and group travelers are looking for more affordable options. Property rental listings on Airbnb can be a whole apartment, one room, or villas. Users can input the location and dates of arrival and departure to look for available properties.

The company started in 2008, and since then, it has reached worldwide popularity. Not only travelers are using this app, but also business-minded individuals take advantage of Airbnb’s technology to generate more money.

In the United States, there was a 45 percent increase in year-to-year bookings. Airbnb attracts millions of users worldwide, which comprises of frequent travelers and individuals who travel for work. About 700,000 companies are now using Airbnb for work-related purposes.

Earning Money with Short Term Rentals

You do not need to buy a property to list it on Airbnb. You can go for short term rentals to gain a more significant profit from daily or weekly rentals. Some people are already doing this strategy for years now, and you can also do the same if you find a property in a prime location.

Because this venture requires capital in the form of deposits, you need to be ready. Some property owners require bigger deposits, especially if the unit or apartment has appliances and furniture. Ensure that you have enough money to cover for deposits to get the business rolling. Once the apartment is ready for occupancy, you need to create an Airbnb account and list the property.

Other considerations you need to know:

  • Property Maintenance
  • Property Rating
  • Security
  • Facilities

Studying the market and how the business works can help you optimize the trade. Create a checklist to go through the essentials every time before a guest checks in. Besides, you can also connect with other people who do this business in different areas.

Technology opened up more profit opportunities for people. In hospitality, even you, who do not have much experience in property rentals, can earn money. Listing your extra room in the apartment can be a good start, but you can always experiment with making more profit. By short term rental, you can get access to excellent properties that can be listed on Airbnb.

Continue exploring the real estate market and make sure to learn new knowledge from experienced individuals. Who knows, you might gain financial freedom by being successful with this Airbnb venture. Check how other hosts present the properties, so you can have an idea of how to operate yours.

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