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Catch up on some of the latest posts with this week's roundup:
The W-2 income trap: what freelancers lose by becoming employees
Back when I started singing professionally, I used to get a stack of mail early in the year consisting of 1099 tax reporting forms from all of my previous year’s gigs. Within a few years, however, I began to find that more and more of those 1099s were being replaced with a different type of mail: W-2s, the forms I had associated with the various day jobs and temporary work that helped me make ends meet in those days. Even organizations who had sent me a 1099 in earlier years were now sending W-2s.
It turns out there was a reason for the shift. During the Obama administration, the IRS started to crack down on employers who were classifying workers as “contractors” (the 1099 types) when they should have been treated as “employees” (the W-2s). Their argument: If you go to wherever that employer is located and do a job for them on the regular, you’re an employee and should be taxed as such.
4 tips for starting a Business
by Levi Sanches, Millennial Wealth
If you’ve ever had aspirations of starting a business, the process can seem overwhelming. There are many questions and hurdles to address even before setting up shop. From complying with local, state, and federal regulations, to developing a marketing strategy or distribution network. The list goes on and on and the actual technical aspects of starting a business can vary greatly depending on the industry. While this article won’t address those specific factors, what we will cover are the basic building blocks we believe all entrepreneurs should engage in. These are 4 tips for starting a business we learned through the process of launching Millennial Wealth.
Our Story: Chad and I initially met as competitors while working at different wirehouse broker/dealer firms here in Seattle. We were both young and driven with the same desire to change the perception and accessibility of the industry we had devoted the beginning of our careers to. While that may sound naive, it did ultimately become the biggest driving force in choosing to launch our own firm.
Selling your Startup? What the Best Investors Do that You Should Too
Did you know part of your startup sale can be excluded from federal taxes? A provision in the tax code helps minimizes taxes for the wealthy investor and startup employee upon a stock sale. It’s called the Qualified Small Business Stock (“QSBS”) exemption. Most startup employees have no idea they can use this! This allows a C Corp shareholder to exclude up to 100% of their gain from taxes, if they meet certain parameters.
To qualify for the QSBS exclusion, five criteria must be met (legal jargon to follow): 1. The stock must have been directly acquired via an original issuance from a U.S. C corporation (Sec. 1202(c)(1)); 2. Both before and immediately after stock issuance, the C corporation’s tax basis in gross assets did not exceed $50 million (Sec. 1202(d)(1)); 3. The C corporation and shareholders must consent to supply documentation regarding QSBS (Sec. 1202(d)(1)(C)); 4. The C corporation conducts certain qualified active trades or businesses (Sec. 1202(e)); and 5. The stock must have been held for more than five years (Sec. 1202(b)(2)).
Forms of Business Ownership
As a business grows from a hobby or planned venture, it’s important to put thought into structuring it correctly to avoid costly issues down the road. Since establishing or changing the structure of your business will have long-term implications, consult with an accountant and attorney to help you select the form of ownership that is right for your company’s evolving needs.
The purpose of this post is to help you reflect on the vision for your business to help cut down on time spent during a consultation, which ultimately means savings in your pocket. Some of this can also help develop and formalize your business plan. In making a choice, you will want to consider the following:
The Benefits of Owning Your Own Business
I am most definitely biased when it comes to this topic. Ok, pretty much every topic I have written on. However, in the current economic landscape that we live in, the benefits of owning your own business are vast. We live in an exciting time in which technology continues to lower the barrier to entry for creating and operating a profitable business. I will simply cover what I believe to be the top three reasons here.
- Financial benefits.