Certified Entrepreneurial Advisor

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10

Mar'17

How do I fund my startup idea?

Assuming that you don’t know anything about funding, or how deals work, you should consider yourself a lamb wandering in the forest full of wolves. Really. First thing you need to do is get an advisor, either an CPA or an attorney who understands how start-ups work. This is the tricky part. There are a lot of people who think they know how this stuff works, but have never actually done a deal. You know what I’m talking about, right? So, find some attorney and accountant who has actually been through the process, multiple times. You will have to ask around, and interview people. (That’s a post in and of itself: see https://CEAnow.org where we actually have a course on finding the right advisors) Next, you have to work up a very preliminary business plan. Ok, so you have the hottest thing since the hula hoop. So show me the numbers. Show me the research. Prove to me that you have a USP. ( oh, don’t know what that is? Yikes!) The business plan is the center to your funding request. You can’t do anything without it. Get it done right. ( Not to sound like a broken record, but …

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09

Mar'17

What is a Financial Advisor?

Financial Advisor = one who advises on finances. In the real world, we’re talking about someone who is either: A financial products sales person, eg a stock broker, insurance salesman, annuity salesperson, or A fee-only financial advisor who provides advice for a fee eg an accountant who provides personal financial advice and planning, an attorney who prepares estate plans. The vast majority of “financial advisors” fall into category # 1. There is no requirement to qualify as a financial advisor, one need not even have a high school diploma to call themselves a financial advisor. In order to sell securities, insurance or annuities, one must possess a license. These licenses (insurance license, Series 63, Series 7) are of varying difficulty. For example, I took the insurance license test with no preparation and passed. The Series 63 and Series 7 tests, administered by FINRA, take a little preparation, but are only mildly difficult compared to the CPA exam. They focus primarily on the legal implications of selling investments. The licenses do not prepare a candidate to adequately advise anyone on investments. Other credentials do that. A CFP ( certified financial planner) is one of these additional credentials that at least indicates …

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08

Mar'17

How Much Can I Deduct for Auto Expenses in My Business?

How many cars can you deduct: as many as you use in the business. How much? You deduct the “business use portion” only, computed by taking the business miles driven in a year divided by the total miles driven in that year. You can’t guess or take a wild average you pull out of your hat, either. The law requires contemporaneous records. That means you keep an auto log for each vehicle. What do you deduct? The costs of owning and operating the vehicle, including things like gasoline, oil, repairs, tires, car washes, registration, taxes, lease expense, interest paid, licenses and depreciation. But here’s the hard part: you have to know what those expenses are by vehicle! You can’t just take a wild guess, you have to have records (and receipts, proof), by vehicle! That’s what gets most people in trouble. Does the car have to be used over 50% for business?  If you use the car over 50%, you can take special, accelerated depreciation deductions. Under 50% you are limited to the old fashion straight-line depreciation. Again, only for the business use portion. Drive 10,000 miles and only have 1000 provable business miles, you get 10% of all costs, …

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06

Mar'17

Should I get a Business Partner?

Perhaps, but be very careful. Most business partnerships do not survive, and the breakups can be painful and extremely expensive. Things usually look rosy when you begin, but can degenerate into some pretty ugly stuff. My suggestion is that you not form a partnership. I would suggest a LLC or a corporation. You should talk to a business attorney about this. Secondly, you need to be very careful in the selection of any co-owner. What are they bringing to the table? What will they contribute? Are you really willing to give up ownership and some control to somebody else? You better have a really good reason to want a co-owner. You better research the candidates extensively and exhaustively. Thirdly, you need to think about everything that can go wrong. How will you deal with major disagreements? How will you deal with getting out of the arrangement? What happens if your co-owner doesn’t do their part, or worse yet, takes from the business? Think about every possible bad thing, and address it in writing. Finally, think about how this is going to work on an on-going basis. Right now you are the man in charge. What happens when you have to …

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06

Mar'17

Why is it that people who are immoral are so often more successful?

Question:  If a business owner works hard and lives a moral life, are they usually not as successful as an immoral business man?  Answer:  Where did you get that crazy idea? I am sure you can point to some examples where it appears to be true, but the premise of your question is contrary to the fundamental laws of the universe. Evil does not succeed. Not all moral people will succeed. But to be truly successful, you must be moral. Immoral people may appear to succeed. They may have a lot of money, they may appear from the outside to have all the evidences of success. But inside, in their hearts, there is a rot that destroys their soul. For what have you gained if you have material success but have lost your soul? Answer: not much. The outward appearances of success are deceiving. What truly matters is what is not shown: what is inside you, in your heart. For you can have all the money in the world, but if you have no joy, where are you? You cannot have joy if you have no moral compass. If you follow your moral compass, you will be successful. Maybe not in …

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04

Mar'17

What are the implications of an office in a state?

Question: The articles of incorporation say that the office of the corporation will be located in a certain state, and talk about “process of service.”  What does this have to do with taxes? Response:  All states require that if you incorporate in their state, you have an agent for receiving “process of service” in that state. It doesn’t mean that you actually have to have an office there. For example, most Delaware corporations don’t actually have offices in that state. They do have an agent which maintains an office that can receive legal documents ( like a court summons or pleading, lawsuit or the like) in the state. These  “corporate agents” operate a mail stop manned by one person who can receive “process of service” for hundreds, even thousands of corporations. The bottom line is that if you incorporate in a state, you have to hire someone to be in that state that can sign for legal documents “served” on them. This is an entirely different concept that having an office for tax purposes. That concept is known as nexus. It’s all about whether a state can tax the company’s income earned in that state. If a company has an …

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25

Feb'17

Will a LLC give me Liability Protection?

Response:  business advisors often suggest that a business form a LLC to protect the owner from liability… after all, it is called a “limited liability company.”  They may infer that the liability protection is absolute, and many a business owner with a LLC thinks this.   Nothing could be further from the truth.  What follows is business advice:  you should always consult with a qualified business attorney when dealing with legal issues. The title should give you a clue:  “Limited Liability.”  It didn’t say “absolute liability protection,” and for good reason.  There are many loopholes and “gotchas” in the law, and limiting liability for a business owner is fraught with problems. The first problem with liability protection is the most problematic:  separating the business from the individual owner.  Many LLC owners act as though the business and their personal affairs are one in the same.  They pay personal expenses from their LLC bank accounts, co-mingle assets, and operate the business in a manner that is indistinguishable from a sole proprietorship; in other words, the LLC is just an owner’s  “alter ego.” That leaves a wide open door to a lawsuit alleging that there is no difference between the company and …

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25

Feb'17

How Can you Benefit from a Bear Market or Recession

Question: what is it like to live through a Bear Market or Recession?  How can you benefit from it? Response:  For many people, a “bear market” will have little if any impact upon their daily lives. I’ve lived through many, and quite frankly, was oblivious to most of them. Yes, things may slow down if there is a recession mixed in, and you know the definition: it’s a recession if your neighbor loses his job, it’s a depression if you lose yours. A market crash is a rare event, and may not be associated with a recession. Clue: the 1987 market crash and recovery. (it was over and done with in less than a week) So, recession and bear market are not empirically linked. Your question is how to benefit from a bear market, and how to benefit from a recession. Two different things. In a bear market, stock prices are trending downward, but in spurts. Then there are a lot of up days. Volatility is up. You can make money by active, intelligent trading. This is not for amateurs, however. You have to be a good player of the technicals, and have a gut sense of what’s happening. Remember that …

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25

Feb'17

Is a S-Corp the Best Choice for a Real Estate Company?

Question:  I have a real estate development company.  I was told to form a S-Corp. Is this right? Response: Who told you a S-Corp was better for anything? I would suggest exactly the opposite. You NEVER want to have real estate in ANY corporation. EVER. NEVER. PERIOD. A LLC gives you the option to select the method of taxation that is best for your particular situation. OK, so let’s say you decide that for some quirk of fate that S Corp taxation is better than any other method. You can elect to be taxed under S-Corp rules. LLC’s are typically taxed as partnerships if there is more than one owner, and a disregarded entity if only one owner. Many tax preparers and attorneys love S-Corps. They think that they can pull a fast one on the IRS. Let’s say the company earns net income of $ 150,000. If you are a sole proprietor (not incorporated), the entire amount is subject to self employment tax, as well as income tax. But what if you were a S-Corp, and you took a salary of $ 50,000. How would that be taxed? Only the salary would be subject to self employment tax. (the entire …

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09

Feb'17

How can I Reduce the Costs of Production?

Question:  What are some suggestions to reduce the costs of production? Response: This is the question Operations Management people ask themselves all the time.  Here’s a list of things to do: Look at the product. How is it engineered? Can it be designed to use less parts? Can it be designed to be assembled faster? Can features be eliminated? Look at the systems by which the product is assembled. Can they be streamlined? Is there a natural flow, a logical set up and a more efficient process? Are you using a batch method when a process flow would be better? Look at tools. Do you have the best tools/ machines for the processes? Do you have enough of them? Are they positioned correctly? Are they maintained properly? Are their bottlenecks which cause wasted time and disrupt production? Look at labor. Can it be mechanized, automated or enhanced? Can the quality of the labor be improved, by additional training, better tools, better conditions? Look at materials. Can less expensive materials be used? Can better materials, with less defects be used? Can materials be purchased in different sizes to reduce waste? Look at the shop. Is the environment conductive to efficient production? …

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