“There is a belief in this country that ‘I don’t need to deal with money management because I hardly have any money’. Many young people engage in “short-term thinking,” like expecting to save money only after they graduate from college or professional school.”

Unfortunately the topic of saving and investing money is not taught in our schools unless you specialize in the subject. It doesn’t matter how much money you make. Take the time to find a good financial planner Springfield Mo that will guide you in the right direction.

I recently took the step and I can personally tell you it was an extremely good feeling.

Source:
The New York Times

Earnout – An arrangement in which sellers of a business receive additional future payment, usually based on future earnings.

“As many as half of all small business acquisitions involve earnouts, which generally last from two to four years and range from 15% to 30% of the purchase price (though 50% is not unheard of). Earnouts are particularly common in acquisitions of high-growth companies and those with unproven products. Takeovers of service businesses, in which the entrepreneur’s relationships with clients are crucial, are also likely candidates for earnouts.”

Earnouts can be a very risky transaction. It takes all of the power (and accomplishments) you hold in your company and hands it over to the corporation who purchases the rights. Don’t get starry-eyed by the initial payoff. Negotiate for all you and your company are worth.

Here’s how to protect yourself:

1) Get a lawyer.
2) Get the largest up-front payment you can.
3) Negotiate the targets for the earnout.
4) Fight for sliding-scale rather than all-or-nothing payments.

Source:
BusinessWeek.com

In yesterday’s post, Avoid Legal Trouble I wrote about switching from sole-proprietor to LLC in order to protect personal assets. Taking things a step further, you can create a C or S corporation.

Both types of corporations have advantages and disadvantages. Have a knowledgeable tax professional at your side to ensure compliance.

The IRS plans to examine 5,000 randomly selected S corporation returns from the 2003 and 2004 tax years. The audits will start later this year, and should all be completed within two to three years

S corporations are attractive to shareholders because they offer the same liability as traditional C corporations without double taxation.

The IRS is looking to see whether employee shareholders are forgoing a salary or reporting artificially low pay in favor of a big dividend. Some shareholders have done so to reduce or even eliminate self-employment taxes; that’s against the law.

Why not just simplify the tax system and eliminate the IRS altogether?

Source:
Associated Press