If you have a corporation (or an LLC), you can elect S Corporation status by filing a form with the IRS. You have to obtain approval form the IRS before you can file taxes as an S Corporation. Fill out and file IRS Form 2553, Election by a Small Business Corporation or use a service to file the form for you.
Not all corporations can obtain S Corporation status, so check the regulations.
It stands for Federal Employer Identification Number and it is issued by the IRS. Most business entities, including, Limited Liability Companies, Sole Proprietorships, Corporations or Partnerships are required to have a FEIN. There is an exception if you are sole proprietor without any employees, in which case you can use your social security number.
You can get a FEIN on the web immediately by filling out & filing Form SS-4, the Application for Employer Identification Number. You can also apply over the phone and receive it the same day, but you should review the application and gather all the information required before calling so that you have all the answers you need. If you file the form by mail or fax, it will take longer.
If your suppliers have your D & B number & report to D & B, you’ll begin to build a credit history and eventually establish a Paydex score. As with a personal credit score, you build a solid Paydex score by staying current on your payment terms with your creditors.
Having a good business credit score does not mean you can let your personal credit score slide. Small businesses are judged on both the owner’s credit and the business’ credit when being evaluated by banks and financial institutions. The best credit management practice is to keep your balances low on both business and personal credit lines.
The way to get into the D & B system is to apply for a D & B number. If you don’t already have one, you can get one for free. It takes about 30 days and arrives snail mail. If you are applying for a government contract, you can get an expedited one online for free.
This is a third party (not the Realtor© or Real Estate Broker) who oversees processing the final paperwork related to the sale, such as, the deed transfer, mortgage payoff, etc.
Sometimes this person or company is referred to as the Settlement Agent. Buyers and Sellers can also be represented by their own attorneys in the closing process.
Your income will be subject to the self-employment tax of 15.3% on net earnings.
Replacement Cost coverage pays your property damage or loss claim based on the cost of replacing the item. This is much better coverage than Actual Cash Value (ACV) coverage.
Replacement Cost coverage does not mean that you & the claims adjuster will not disagree over what it will cost to replace the item, but it does mean that you will almost always receive more money than with an ACV claim payment.
For tax deduction purposes you still need to document the contribution to deduct it, so check your phone bill to see if the text message indicates the date, the charity’s name and the amount.
If it does, that should suffice to meet the written documentation standard. If it doesn’t show all three items, you’ll need to contact the charity to get the needed paperwork.
The US Patent and Trademark Office (USPTO) allows you to file a trademark application online. Most states also have a trademark filing process, so check with the business office for your state to see which office handles the process if you want to start there.
Make sure to search existing trademarks thoroughly before filing, so you don’t waste the filing fee if someone already registered the mark in the product or service category you want. The USPTO has a search function on it’s website for all US registered trademarks.
Consulting a trademark attorney is often the best way to go simply because trademark law can be confusing and they have the resources to do a global search for you and advise you about which product classifications are correct for your use or intended use.
If the appraisal comes in for less than the agreed sale price, the parties to the sale or purchase might have to take further action depending on the specific terms of the real estate contract.
There are many possibilities depending on the terms of the sale contract: the sale could be cancelled; the parties could renegotiate the price; the lender could require a higher down payment; or the lender could refuse to lend at all. It all depends on how the deal is structured.
Sometimes appraisals can be successfully challenged, but it is difficult to do.
You can either go to the IRS website and file the form or hire an outside service to do it for you. The EIN (also referred to as an FEIN) is used to identify your company for all tax purposes, including income tax and payroll tax.
You may also need state identifying numbers, but the EIN is the place to start.
When calculating the inventory costs for an item sold, LIFO uses the values of the latest inventory acquired to calculate the profit on the sale.
The alternative to using LIFO is to use FIFO (First in First Out).
Flood insurance covers damage to your home, commercial real estate and personal or business property caused by natural flooding.
Flood insurance premium rates are subsidized by the federal government.
Most mortgage companies require flood insurance if you are in an area likely to flood.
But floods can happen anywhere, so think carefully when deciding whether or not you are at risk.
Most homeowners and business PC & L policies do not cover flood damage. Check with your insurance agent or broker to fully understand your flood insurance coverage.
Thanks to the FACT Act (Fair and Accurate Credit Transactions Act), you are entitled to one free credit report every year from each of the three major national credit reporting agencies (Equifax, Trans Union, and Experian). (If you also want your credit score, you’ll have to pay a fee.)
Checking your credit report at least annually is very important to your financial well-being – and often overlooked in our busy lives. To obtain your free report, go to www.annualcreditreport.com and follow the instructions.
Erroneous or outdated information in your credit file can cost you money because it lowers your credit scores, so it’s worth the trouble to check your credit. If you find incorrect information, you can contest it and have it corrected. Instructions for doing so can be found on each of the credit reporting agency websites & may be submitted online in most cases.
Be wary of “credit repair” scams. There are reputable firms in the credit repair business, but also many rogue companies that will charge fees and not do anything.
If you’re considering hiring a company to help improve your credit scores, be sure to check them out with the Better Business Bureau and your state’s Attorney General or Consumer Protection office before hiring them.
Most, but not all, mortgage loans are “amortizing” and consist of payments that include both principal & interest.
When people refer to “mortgage payments”, they generally mean the total P & I amount.
Sometimes the “mortgage payment” also includes an escrow item (e.g., real estate taxes), as well.
You can request a free transcript of your return by snail mail using Form 4506T or 4506T-EZ. A transcript lists all transactions related to your return for that year, including payments and any adjustments.
The request can also be made by phone or on the IRS website. Transcripts are usually available for up to 10 years of returns.
If you want an actual copy of your tax return, use Form 4506. There is a fee for each year requested.
Copies are usually available for the current year and the previous six filing years. But this is not guaranteed, so keeping a copy of all your own returns is the safest way to insure you have them if needed.
There are a lot of regulations around commercial uses of email, so the best thing to do is use an outside vendor who specializes in this. This way, you’ll stay in compliance with the email regulations. Also, when sending mass emails, your regular email service may think you are engaging in SPAM and bounce the emails or shut down your service.
Services like Aweber or Constant Contact have well priced introductory programs to keep your costs down. The cost rises as your list expands.
If you are thinking of doing work for the federal government or applying for a federal grant, you’ll need to have a D-U-N-S number issued by Dun & Bradstreet. This number is the reference number that Dun & Bradstreet assigns to your credit and business file. It’s commonly known as a D & B number.
Most banks and many of your suppliers or vendors will also use your D & B number to pull credit references for your business. If you don’t have a number, you can get one online for free.
It is used in the calculation of the cost of inventory items when a product sale is made.
When calculating the inventory costs for an item sold, FIFO uses the costs of the oldest available inventory to calculate the gross profit or loss on a sale.
It’s a very complicated subject, but in a nutshell it’s effectively a minimum tax that hits certain higher and middle income tax payers.
Basically these taxpayers (and you may be one of them) have to calculate their income tax two ways to satisfy the IRS. If the alternative (AMT) calculation is lower than the regular calculation, you’re in the clear. If it’s more, you’re stuck with the higher tax.
Originally, the idea was to make certain that high income tax payers paid their fair share of taxes. Unfortunately, over time it’s begun to hit a much larger group of people than was originally intended.
Definitely consult your tax professional about this if you think it might affect you as you may need to increase your tax withholding to accommodate it.
If you do your own taxes, the IRS has an AMT calculator on its website to help you figure out your tax liability yourself. If you are using tax preparation software, it should be able to handle the calculation for you.
Many businesses operate using a fictitious business name as their public face. Both sole proprietors and business entities (e.g., LLCs or corporations) can use fictitious names. Sometimes this is done to clearly differentiate the business from the business owner’s name, sometimes it is done for branding purposes and sometimes it is done for marketing purposes.
Whatever the reason, most states and/or localities require you to register a fictitious name before using it to protect consumers against fraud.
This process is usually pretty simple. It usually involves filing an application with either a state or municipal agency and paying a fee. It may also require advertising the name to give public notice that you intend to use it.
To find out the requirements in your location, check with your state’s business office or your county clerk’s office. Either should be able to point you to the right office for filing. You can also use an outside service company to handle the filings for you.
To figure it out, you add up all your assets such as savings, investments, real estate holdings, retirement accounts, etc.
Then deduct from that number all your personal liabilities (credit card balances, mortgages, student loans, etc.) and the difference is your Net Worth, assuming your Assets exceed your Liabilities.
This is known as a loss carryforward. In some instances, losses can also be carried “back” but the rules are complex so consult a tax advisor as to how to make use of this tax benefit.
A quick price drop in the major indexes is not a bear market, but a continuing drop of 20% or more over a few months would be considered a bear market.
Investors who are pessimistic & believe the markets are going to trend down are known as being “bearish”.
Net Asset Value or NAV, is a mutual fund term. The NAV is the price per share at which the mutual fund is valued. It is based on the value of all its holdings divided by the number of mutual fund shares outstanding.
The Net Asset Value of a mutual fund is not fixed; it is calculated based on the net value of the securities or other investments it holds and also for any liabilities the mutual fund owes.
Most mutual funds NAV is set once per day at the close of the trading day. The NAV is the price per share you will pay when buying shares in the mutual fund or the price you will realize when you are selling shares in the mutual fund.
Money market accounts sold by brokerage firms are a type of mutual fund and their share value can fluctuate based on the value of the underlying assets.
FDIC insurance is not unlimited. It is subject to certain dollar limits per depositor and total coverage in any one bank can be affected by type of account (e.g. single, joint ownership, trust) as account balances for insurance purposes are tallied per depositor in each bank.
It is rare, but there have been historical instances when mutual fund money market accounts have “broken the dollar.” Brokerage based MMAs are insured by the Securities Investment Corporation (SIPC) , not the federal government.
Financial firms offering MMAs make every effort they can to maintain the dollar per share valuation.
Loans are available for large capital purchases, such as equipment or real estate. The loans are made by participating lenders (e.g., banks) but are guaranteed by the SBA.
There are several different Section 504 programs, depending on the asset purchase being funded.
Leverage involves using primarily borrowed funds to purchase an investment, thus requiring less money from the asset purchaser.
Most real estate projects use leverage in the form of mortgages or other debt instruments.
There are many “benchmark indexes” that are used as indicators of performance. They represent a select group of stocks, bonds or other assets that are identified and used as a “benchmark” against which to track your investment portfolio’s performance.
Once the group of assets is identified, they are not actively managed, simply tracked and reported by the Index management firm. Investors use the index results to measure the relative performance of similar assets in their own portfolios.
There are many different indexes. Benchmark Index examples include: Russell 2000, S & P 500, MSCI EAFE index, NASDAQ Composite and Barclays Capital Aggregate Bond Index.
The Financial Industry Regulatory Authority (FINRA) provides a Broker Check service to look up the work and complaint history of regulated firms and brokers.
You’ll be able to check licensing status and other information on the FINRA site.
Doing an online search for pertinent professional information and checking with relevant state licensing boards is also an avenue to pursue.
Additional due diligence such as checking referrals and past performance should be performed before handing over your money to an Investment Advisor.
The term is used in different ways in various areas of business. At its essence it is an analysis that is performed to show the “gap” or difference between actual performance and optimum or potential performance.
This type of analysis allows management to assess how well a business is performing versus the optimal performance expected. It is a metric tool used for business strategic & financial planning.
Credit Unions offer savings & checking accounts, auto loans, mortgages, personal loans and credit cards to their members
Angel investors typically provide the “seed funding” capital that allows an entrepreneur to take his/her business to the next level. The business being funded may or may not yet have revenue of its own.
A 200 day Moving Average is shown on a chart & tracks the average price of a stock during a particular 200 day long period. Moving averages can also be charted for other date ranges.
It’s a type of Technical Indicator & technical traders use it (among other indicators) to assess when to buy or sell a stock position.
There can be exceptions to this depending on the type of business you are running, so check with your accountant or on the IRS website before filing your taxes.
The 12b-1 fee covers distribution & marketing costs incurred by the fund, including commissions paid to brokers.
12b-1 fees are included in the calculation of the Expense Ratio for the mutual fund and are required to be disclosed in the Prospectus for the fund. These fees are charged as a percentage of the assets in the fund.
All fees reduce your overall annual returns and can vary widely from one fund to another, so prudent investors research fees before investing in a fund.
Some funds temporarily reduce or eliminate 12b-1 fees as a way to lower fees & show improved returns, but be careful because these fee reductions will expire at some point & reduce your returns accordingly.
If you are a corporation (or an LLC), you can elect S Corporation status by filing a form with the IRS.
You have to obtain approval from the IRS before filing taxes as a Sub S.
Use IRS Form 2553, Election by a Small Business Corporation.
Not all corporations can obtain S Corporation status, so check the regulations.
Flood insurance policies are issued through private insurance companies in partnership with the National Flood Insurance Program.
Broker’s can own and operate a real estate brokerage office; agents cannot. An agent works under the supervision of a Broker and the Broker is generally responsible for the Agent’s work and for compliance.
Agents are Independent Contractors, not employees of the Broker.
Obtaining a Brokers’ license requires additional experience and education beyond that needed to obtain an Agent’s license.
These loans can be used for starting or growing a business, making equipment purchases or other specified expenditures.
The loans are made by third party lenders (e.g., banks) not the SBA. The SBA establishes the lending guidelines & then guarantees repayment. This is one of several small business lending programs backed by the SBA.
A tax deduction lowers your net taxable income, so it can shrink the total amount of taxes you owe. But deductions can be subject to various limitations which can impact how much value they have in overall tax reduction.
Examples of KPIs are customer retention statistics, net revenue, revenue growth, profit margins, etc.
KPIs differ from business to business, but they are a proven way to evaluate & track performance & productivity.
The difference between your basis in the asset & your net sales revenue typically equals your capital gain, although “basis” calculations can be quite complex.
Capital Gains are taxed at different tax rates than regular income such as wages.
For tax purposes, long term capital gains & short term capital gains are also subject to different tax rates.
Assets that are convertible into cash within 12 months are generally considered the Current Assets of a business.
Examples of typical Current Assets are:
• Cash on Hand
• Accounts Receivable
Current Assets are enumerated on the Balance Sheet.
Franchises can have exclusive or non-exclusive areas. The franchisor grants certain rights (e.g., an exclusive geographic area to do business in, recipes or use of a business name) & sometimes provides specific operational services to the franchisee for a fee.
ETFs can be traded like stocks or bonds and their value fluctuates based on the values of the underlying assets.
Some ETFs use leverage or other strategies to increase their yield, so it is important to thoroughly understand ETFs & their risks before investing in them.
Once all the real estate and financing transaction conditions of the contract have been met, the final paperwork can be executed and the ownership transferred. This is the last step in the “closing” process.
It includes the delivery of the deed to the Buyer, signing of loan notes and mortgage (if financed), disbursement of required funds to various parties and any other actions required to conclude the real estate purchase and sale.
Trademarks show the ownership of a name, such as a brand or a product name. Registering a trademark shows ownership of the mark and any design made part of the trademark.
Registering either a patent or a trademark makes public the ownership of the invention or name and gives the owner legal rights to prevent other people from using the patented invention or trademarked name.
In the United States, patents and trademarks are usually registered through the US Patent & Trademark Office.
To protect trademarks internationally, you can register the trademark in other countries as well.
Trademark and patent attorneys specialize in this area and can advise you about the process and costs involved.
It is also possible to handle the registration yourself, but the process is complicated. More information is available on the USPTO site.
A title company researches the property’s title, which is about the ownership rights in the property. It is critical to know who owns the property and if there are any restrictions on transferring that ownership.
A title company looks into the history of the property and confirms the current ownership, the type of ownership (individual, trust, corporate, etc.) of the property, identifies any liens or encumbrances or other “defects” or problems with the title.
Title companies also arrange for Title Insurance for the lender and the buyer. Title companies often handle all the legal filings and paperwork for closing on the property.
When prices drop by 20% from the previous high point in the market, investors identify it as a Bear market.
Investors who have a gloomy outlook about investing trends, are considered to be “Bearish.”
Used predominantly in Europe, it is considered a “consumption” tax. At each stage of manufacture, a tax is levied (“added”) to the cost of the item based on the materials or value added in the manufacturing step.
VAT taxes may also be collected at the point of final sale.
SWOT stand for Strengths, Weaknesses, Opportunities & Threats.
Businesses use SWOT analysis as a technique to plan for a variety of scenarios, including new product assessments, business startups, strategic plans and marketing plans.
This strategy uses a stock’s Dividend Ratio as the basis for decisions to buy or sell.
Investors purchase the 10 stocks in the Dow Jones Industrial Average (DJIA) that have the highest dividend payout ratio. Each year investors buy, hold or sell their stocks according to the stocks’ latest divided ratios.
Investors who use dividend payout strategies are looking at the total annual yield on the stock, including both dividends & capital appreciation.
However your ability to deduct the loss against current income is restricted by your “basis” and your “risk of loss” in the business.
It’s a complicated set of rules, so consult a tax advisor to be sure you are eligible to take the deduction or review the regulations on the IRS site.
Rating agencies evaluate the financial strength of bond issuers (governments and corporations) and issue an alpha numeric rating that indicates the level of risk associated with the bond.
The three rating agencies that are often referenced are:
Each rating agency has a slightly different rating scale (e.g., AAA, BBB, aa1) that quickly illustrates their opinion of the relative financial risk associated with the bond.
Bond ratings affect the interest rate paid and also indicate whether the bond is considered investment grade or non-investment grade (higher risk to the bond investor).
It is known as a “resale number” because businesses use it to prove they are not subject to sales tax on their raw materials or goods purchased for resale.
However, businesses are subject to paying sales tax on goods or services they use & which are not part of an item that will be resold. It is important to understand the distinction in order to use a resale certificate correctly.
Usually, sales tax is collected only on finished goods or on professional or other services provided. But sales tax laws are administered on the state and local level, so they vary widely among states, cities, counties or towns.
Regulations, tax rates, services & products subject to sales tax differ from location to location. It is important to understand when & how you are required to collect sales tax, especially if you are an online retailer.
Getting appropriate tax and legal advice on this issue is very important as business owners can, in some circumstances, be held personally liable for unpaid sales taxes.
It is a federal government agency that has lending programs and grants tailored for small businesses.
It also provides education and local assistance from retired business executives through the SCORE program and its Small Business Development Center.
There are local SBA chapters across the country.
Dividends are usually considered taxable income to the shareholder when they are paid out.
Dividends are calculated based on the number of shares outstanding of each class of stock. A pro-rata share of the company’s earnings are paid out to shareholders as dividends.
The decision to pay dividends and the amount of earnings to pay as dividends is determined by the Board of Directors.
A DBA or tradename can be different than your legal business name. As an example, your legal business name might be Sally Smith LLC, but your tradename is “Sally’s Interior Design.”
Tradenames are legal to use when doing business and usually must be registered through your local or state government. One business might have multiple tradenames or DBAs.
Corporations, LLCs, Partnerships and sole proprietors are all eligible to register a tradename.
By doing this, you can lower your total interest paid and shorten the time it takes to pay off your mortgage.
However, not all companies offer this option and be very cautious about any extra fees that may be tacked on for this type of payment plan. Fees could eliminate any benefits you gain.
A Seller hires a Listing Agent and pays her a commission to sell the property.
Generally, that commission paid to the Listing Agent is then split between the Buyer’s Agent & the Listing Agent at the point of sale.
Circumstances vary however, so ask your Realtor® to be certain you know the facts before making an offer.
The FHA insures mortgages on single family and multi-family homes.
The FHA is a government agency that is part of the U.S. Department of Housing and Development (HUD).
So it your property is assessed at $100,000 and you qualify for a $25,000 tax exemption, you will be taxed on $75,000 of value instead of $100,000.
Exemptions are not automatic, you usually need to apply for them.
States and localities have many different type of exemption categories, depending on your location.
Some of the typical exemptions are based on homestead, age, veteran status or disability reasons.
Check with your tax assessor’s office to see what exemptions are available and how to apply for them.
It usually refers to the profit made on the capital invested in some type of business venture or the financial gain earned from investing in a stock or other asset.
In business or investment circles it is used to forecast which investment or expenditure of capital will have the highest reward in a specified period of time.
HOAs have legal rights and in some states liens for overdue HOA fees can even lead to foreclosure.
Always get legal advice before taking any kind of action about HOA fee payments.
Mortgage lenders generally require borrowers to pay PMI if they put less than 20% down on their home purchase.
The premium is paid monthly & protects the lender, not the Borrower.
The monthly premium is taken into consideration when lenders qualify you for your mortgage on your home.
In some circumstances, once your home equity builds to more than 20% of market value, you may be able to have the lender lift this monthly payment requirement.
This allows time for the agent to market, show and negotiate a deal for the Seller.
As with all contract terms, the length of contract time is negotiable between the Seller and the Listing Broker.
If you have a 30 year fixed rate mortgage, your monthly payment of Principal and Interest (P & I) will remain the same over the 30 years.
This is the most common type of home mortgage loan.
With real estate contracts, contingency clauses typically relate to things like inspection results, the ability to obtain financing, sale of another property or availability of insurance.
Contingencies are agreed upon among the parties to the contract and control what happens under specified circumstances.
As an example, a financing contingency typically lets the buyers out of the purchase contract if they are unable to get a mortgage.
Unlike fixed rate mortgages, Adjustable Rate Mortgages (ARMs) have an initial interest rate that lasts only for a specific period of time. After that, the rate adjusts on a predetermined schedule usually every 1, 3 or 5 years.
So, for example, a 5/1 ARM, has an initial interest rate that is set for 5 years and then the rate adjusts annually each year after that. Similarly, a 5/3 ARM has an initial rate term of 5 years and then the rate adjusts every 3 years after that.
It’s important to note that this does not tell you anything about how much the rate can change or how high it can go. That’s a very important question to ask if you are considering an ARM, as there is great variety among ARMs.
There are a lot of regulations around commercial uses of email, so the best thing to do is use an outside vendor who specializes in this.
This way, you’ll stay in compliance with the various email regulations. Also, when sending mass emails, your regular email service may think you are engaging in SPAM and bounce the emails or shut down your service.
Services like Aweber or Constant Contact have well priced introductory programs to keep your costs down. The cost rises as your list expands.
A lien is an encumbrance on a particular piece of property or properties.
A lien gives the lien-holder a security interest in a property, such as a car or real estate.
The most common types of liens are Tax Liens and Mechanics Liens.
This annual limit is raised to $6,500 if you are 50 or older. This is commonly known as the “catch up” contribution.
Your entire contribution amount may or may not be tax deductible.
For example, being covered by a retirement plan at work or having an Adjusted Gross Income (AGI) that exceeds certain limits can both affect the tax deductibility of your contribution.
Check with your tax advisor or on the IRS site to find out these circumstances can impact your taxes.
It is the difference between what you owe on your mortgage loan(s) and what your house’s market value is. (Other owed amounts, such as debts secured by property liens, can also reduce equity.)
For example, if your house is worth $200,000 & you owe $125,000, your “equity” is $75,000.
This is a different amount than what you would realize at closing if you sold your home because the costs related to the sale of your home (e.g., real estate commissions, real estate transfer taxes, etc.) will be deducted from your net proceeds at closing.
In these specific lending programs, the SBA guarantees the repayment of your loan, thus reducing the risk of nonpayment for the lender. As a result you may receive a lower interest rate or perhaps be approved for a loan you might not ordinarily receive without the SBA guarantee.
These SBA loans must meet certain established guidelines and not all bank or other lenders participate.
Credit Unions are nonprofits formed by members who have something in common. Unions, religious organizations and local government employee groups are all common examples of groups who form credit unions.
Credit unions are membership organizations whose purpose is to provide financial services, such as loans, checking or savings accounts to its members.
Interest rates can be more advantageous at credit unions, so they are worth taking a comparative look at if you qualify for membership.
The term Bull Market can be applied to different types of asset classes (e.g., stocks, commodities, bonds) that are publicly traded.
It was first created in 1896 by Dow Jones & Company, the publisher of the Wall Street Journal.
The individual stocks that make up the index rarely change, but they can and do change based on the parameters of the Index and changes in the companies represented.
To be included, a company must be a leader in its industry, publically traded and held by both individual and institutional investors.
It is a way to look at Earnings that are the result of Business Operations only.
EBITDA separates non-cash items (depreciation and amortization) and non-operating items (taxes and Interest) from the bottom line earnings that result from operating the business.
In our ever more connected world, data is constantly being generated by everything we do.
As more and more of it is collected, analyzing it and drawing useful conclusions from it poses ever increasing processing challenges and opportunities.
Entrepreneurs and technology companies are chasing new solutions to make use of this ever increasing data set and analyze it effectively.
Copyright protection for creative work (intellectual property) is important.
While copyright law is complex, copyright protection applies to “original works of authorship” that are both published and unpublished.
While copyright protection begins once the work is completed, making a formal record of it is prudent and will help you to prove your ownership in the event of a dispute.
You can register your work with the US Copyright Office for a fee. This can be done in hard copy or via the internet.
CUSIP® numbers identify individual financial instruments and each number is unique to a particular security, bond or derivative.
The number identifies the country of issue, the issuer of the security and helps to insure that securities and bonds are transferred correctly between owners.
CUSIP® numbers are overseen by the Committee on Uniform Security Identification Procedures.
Bonds are securities issued by corporations or government entities that pay an interest rate for a specified period of time.
At the end of the time period (known as the term), the principal is paid back in full (assuming the funds are available.)
Most publicly traded bonds are assigned credit quality ratings by one of the private rating agencies.
Each agency has its own system, but there are two basic categories: Investment Grade and Non-Investment grade.
Investment grade bonds have higher agency ratings. Non-investment grade bonds are commonly known as “junk” or “high-yield” bonds.
These agency ratings show the relative strength of the bond issuer, which is helpful in determining if you are likely to get your money back at the end of the term and the interest paid on time.
Bond interest is usually paid semi-annually, although each bond issue’s terms are specific. Generally, the higher the risk of default or the longer the term of the bond, the higher the interest rate paid.
Depending on the issuer, bond interest may be taxable or tax-exempt (certain types of government bonds.)
There are different kinds of bonds, including:
GAAP standards cover all areas of financial statement preparation, including when and how to recognize revenue, inventory valuation methods, disclosures, capitalization of expenditures, etc.
This wide ranging set of standards insures that financial statements are easily compared and give investors and business owners a relative sense of security that the statements accurately reflect the business’ true financial results.
Financial Statements for publically held companies are always prepared according to GAAP standards.
Two words: Tax Planning.
Now is the time to take a hard look at your business and personal financial results for the year so far. Profits, losses, contributions to tax advantaged accounts, salary and bonus decisions all need to be made before December 31st.
And that planning shouldn’t be done in a rush as you approach New Year’s Eve. This is particularly important this year since Congress is not at all clear about the changes that will be in effect January 1st.
So review your tax information and see if there are moves you should be making now because those same moves may cost you more if you wait until next year.
The idea is that money available to use today is worth more than the same amount of money available to use at a future date.
The Time Value of Money (TVM) financial calculation is rooted in the idea that money has earning power. So if you have $10 today & invest it to receive interest, that $10 will earn additional money.
If you don’t have the $10 until next year, you will have lost that interest earnings so that future $10 is effectively worth less even though the nominal value is the same.
TVM is important and at the heart of many investment and financial planning calculations, but is often misunderstood or underestimated outside of financial circles.
Some possible items include:
Read the association documents to be clear about what is covered. It is also important to review a copy of the HOA budget so you can see how your HOA fee money is being spent.
When you apply for a mortgage, the HOA fee is included in the calculation of your monthly housing costs, along with your mortgage payment and real estate taxes. This affects your qualification for your mortgage.
Points are sometimes paid up front as a way to reduce your mortgage interest rate. They are also known as Discount Points, because they “discount” your mortgage rate.
A Point is 1% of the mortgage loan amount.
So on a $100,000 mortgage loan, one Point would be $1,000. By paying points to the Lender at closing, the Lender will reduce your interest rate on your loan.
Reducing the interest rate saves money over the term of the loan and also may help you to qualify for your loan because the monthly payment is lowered due to the lower interest rate.
In order to know whether or not it is financially advantageous to pay points, you would need to analyze the total savings you realize due to the rate decrease and also estimate how long you expect to live in the property to determine if it is a smart move.
Paying Points increases your cash out of pocket at closing when buying a home, so that is also a consideration.
It is a mortgage related ratio that shows the relationship between a borrower’s monthly housing debt payments and monthly income.
As an example, if your gross monthly income is $3,000 and your monthly debt payments total $1,000 you have a 33% DTI (debt to income ratio):
$1,000 / $3,000 = 33%
Debt payments include mortgage principal and interest, student loans, credit cards, etc. The income used is before tax income or gross income.
Mortgage lenders usually prefer a DTI of 36% or less.
These are usually researched & issued by attorneys and they certify the accuracy of the Title held by the property owner. They also indicate if there are any problems with the title.
Title insurance companies rely on these opinions when issuing a Title insurance policy. Buyers rely on them to make certain that they are getting clear title to the property being purchased.
Yes. Generally, for federal income tax purposes, taxpayers can deduct the interest paid on primary & secondary residence mortgage loans, but only on loan amounts up to $1 million ($500,000 if married, filing separately).
It’s important to note that the deduction is for the interest on a mortgage loan of up to $1 million, not $1 million in actual loan interest.
Interest on loan amounts in excess of $1 million is usually not deductible & the rules vary depending on when you took out your mortgage, the type of loan (primary or home equity) & use of the loan proceeds.
So check with your tax adviser or get IRS Publication 936 to better navigate these regulations.
Most real estate parcels have a designated lot and block number that is shown on a Plat Map.
This lot and block number often shows in the deed description and is referenced in any contracts related to the sale or purchase of real estate.
Commercial leases almost always have an escalator clause.
The clause builds in an agreed upon future increase in the lease payment amount.
It’s usually tied to a time period (e.g., an annual increase or an increase after 5 years.)
But it can also be tied to other triggering events, so read your lease carefully & make sure you understand when & under what circumstances your lease payment can increase.
However a PUD is actually a zoning designation that governs the density & other zoning requirements for an area.
A subdivision can be in a PUD, but it isn’t required.
PUD requirements can include limitations (or exceptions) on density, community open areas, lot sizes, etc.
Many housing developments created by private developers are in PUDs.
The Borrower pays the interest amount only each month (or payment period) and the entire principal amount is due at the end of the term.
A more typical type of mortgage is an amortizing one, often referred to as a Fixed Rate or Variable Rate mortgage.
In an amortizing mortgage, your payment includes both Principal and Interest (P & I), so that your loan amount decreases with each payment.
These escrow accounts are analyzed annually to see if the monthly payment amount is too high or too low to cover these expenses for the next 12 months.
Based on the balance in the account and the estimated cost of insurance and property taxes in the upcoming year, the lender will change the monthly payment as required.
Title can be acquired through sale, inheritance, gift, foreclosure or other legal transfer of rights in the real estate.
Title can be held in a variety of ways, including individually or in a legal entity such as a corporation, Trust, LLC, Partnership, etc.
Much of the paperwork related to final closing on a property is to insure that the Title is clear and can be legally transferred.
Title Insurance can be purchased to protect the property owner from any defects in the title that are discovered after purchase.
A Required Minimum Distribution (RMD) is the amount that the IRS requires you to take from your Traditional IRA, Simplified Employee Pension Plan (SEP) or Savings Incentive Match Plan for Employees (SIMPLE) once you reach age 70 ½.
The annual withdrawal amount required varies by your current age and the balance in your IRA account. Most financial firms and banks can help you to calculate and automate this deduction.
The IRS sets the schedule based on its life expectancy tables and usually this distribution must be taken by December 31st each year.
In the year you turn 70 ½ the rules are slightly different and the deadline can be extended into the early part of the following year. This extension of the deadline is only applicable for the year you turn 70 ½.
If you inherited money from any of these type accounts or a ROTH IRA and rolled the money into a Beneficiary IRA, there are minimum RMD amounts that must be distributed each year from that account regardless of your age.
These RMD rules can be complex so be sure to get the tax advice you need.
Not taking the correct RMD can result in a substantial tax penalty, so check the dates that affect you carefully.
FHA loans have low down payment options for borrowers.
Loans are available for single family homes & multi-family residential up to 4 units.
The National Flood Insurance Program (NFIP) is a government program established to help property owners, renters and businesses obtain flood insurance.
Flood insurance policies may appear to be written through a private insurance company, but the private insurance company is doing so in partnership with the NFIP.
The policy flood insurance rates are set at the national level and coverage amounts are capped.
Passive Income generally refers to revenue you receive that is not directly related to your effort. It also signifies that you are not “materially participating” in a business under IRS guidelines.
As an example, real estate investments can generate passive income for an owner who is not performing real estate services directly, but rather is just investing in the property & someone else is managing it.
Passive income from eCommerce generally refers to selling products or services 24/7 in an automated format so that you have repeated income from sales without repeated direct effort.
There are other types of passive income, but those are two of the most common.
• Large file sizes
• Bloated code
• Poor server response time
• Plug-in conflicts (WordPress based sites)
As a starting point for checking your website’s page speed, you can use the free Google PageSpeed Insights tool.
The results will include some suggested fixes and also give you your website’s current page load times for both mobile and desktop.
Slowly loading pages annoy prospective customers, so it’s important to test page speed regularly and have your web designer address any issues.
It is a type of liability that comes into effect only under certain specified circumstances. In a contract, a contingent liability is set up to cover a situation that might happen or become known in the future.
As an example, in a real estate sale contract, there may be contingent liability around environmental hazards that are unknown at the time of sale, but existed prior to the sale.
In this case, the prior owner may retain a contingent liability exposure even though the property ownership has changed hands. It depends on the terms of the contract of sale.
There are many options to choose from & they trade intraday like other ETFs.
To be useful, Goals and Objectives need to be actionable and specific.
The S.M.A.R.T. goals concept is a useful guideline for creating effective goals and objectives.
SMART Goals and Objectives satisfy each of the criteria below:
S – Specific
M – Measurable
A – Actionable
R – Relevant
T – Time Based
The SMART goal guidelines provide a road-map for successful goal creation and help drive your actions toward a desired outcome.
No. It depends on many factors, including the deceased’s state of primary residency, the amount of the total estate and whether there are any assets subject to probate.
The use of trusts, joint ownership of property and other estate planning techniques can minimize or eliminate the need for Probate, but each state varies so it is advisable to consult an estate attorney for specifics.
SCORE is a nonprofit organization that provides volunteer business counseling services at locations throughout the USA. When originally founded, most of the volunteer advisors were retired business executives.
You can make an appointment with a SCORE advisor and receive one on one free mentoring for your business.
Under the rules, up to $500,000 of the cost can be written off in the first year, rather than taking depreciation expense over 3, 5, 7 or more years. This accelerates the tax benefit of making the capital purchase.
Check with you accountant as this is effective for 2017, but the rules may be subject to change in the future.
Business Working Capital is calculated using Balance Sheet accounts. By subtracting Current Liabilities from Current Assets you can easily see the amount of cash or cash equivalents (assets that can quickly be converted to cash) you have available to run your business.
The formula is:
Current Liabilities – Current Assets = Working Capital
Working Capital is an indicator of your business’ liquidity and overall health. A situation where Current Liabilities exceed Current Assets is a red flag that your business is heading for a cash flow or liquidity problem.
This protects the lender because it insures that the real estate taxes and homeowners insurance are paid up to date. In effect, the lender forces the Borrower to save the money for these payments each month.
The lender creates an escrow account for the borrower & each month the borrower pays a portion of the escrow items along with their loan payment.
Typically, the monthly mortgage payment includes three items:
The bank or lender puts the escrow amount into the Borrower’s escrow account. When the insurance or real estate tax bills come due, the lender has the funds to pay bill.
Usually, the lender pays these bills directly from the escrow account on behalf of the Borrower.
Typically lenders require 3 months of escrow payments in advance at closing.
A Title that is marketable is free from any encumbrances or defects.
Some examples of defects or encumbrances are unpaid mechanics liens, judgments, unpaid taxes, or deed restrictions that impact the use or value of the property.
A Title search should be done before closing to insure that everything is in order.
Generally, interest paid on home equity loan amounts up to $100,000 is deductible for federal income tax purposes.
However, the tax deduction for HELOC loan interest is limited by the loan amount, the purpose of the loan & the date when the loan was taken out.
Also, state tax deductions for interest on HELOCs can vary so definitely check with your tax advisor or review IRS Publication 936 to understand all the rules.
The typical range of commission on the sale of residential properties is between 5 and 7 percent of the sale price, but that is not a given.
Real estate commissions on commercial and rental property transactions are also negotiable.
Real estate commissions are usually split between the Selling Broker and the Listing Broker, but this is not cast in stone either.
NAR membership requires adherence to a strict written Code of Ethics and Standards of Practice.
NAR offers members a wide range of professional development opportunities and specialty designations which allow members to stay on top of the latest real estate laws and effectively deal with special situations like short sales.
Members include many types of real estate professional, both residential and commercial, including real estate sales people, appraisers, property managers, and brokers.
For example, a financing or mortgage clause is a typical contingency clause in a real estate contract.
With a mortgage contingency, if the Buyer is approved for the mortgage, the contract remains in force and the Buyer must purchase the property (subject to other contract conditions).
If the Buyer does not qualify for a mortgage (after making a good faith effort), then the “contingency” isn’t met, so the Buyer is usually let out of the contract and the deal doesn’t go to conclusion.
Contingency clauses can be structured for the benefit of either party to the contract.
Contingency clauses vary widely from contract to contract and often have completion dates attached to them.
Be sure you understand the specifics of any contingency clauses clearly before signing any contract & get any needed legal advice.
It can be, and many home buyers have created wonderful homes or investment properties from less than perfect “fixer upper” starting points. If you like working on rehab projects and have the time and money needed, it is worth considering.
But it can also be a money pit, so it’s very important to fully understand what you are getting into & add some contingency funds to any estimates you put together for the costs of rehab. It’s almost guaranteed that there will be some surprises in any rehab project.
Many foreclosures or auction properties qualify as “fixer uppers” and it can be difficult or impossible to determine the home’s maintenance or repair history. Owners and Realtors© often do not have any available information, so do appropriate due diligence.
At a minimum, due diligence on a fixer upper should include doing thorough inspections, hiring an engineer or architect if needed, estimating your materials costs, getting estimates from contractors for repairs you will not do yourself, and reviewing available building department property history records. And don’t forget to look into the permits that will be required while you are there.
Professional appraisers use recent sales data, market trends, current property condition and other types of data to appraise a home or commercial property. Appraisers are licensed professionals.
Mortgage lenders require an appraisal by a professional appraiser of their choice prior to making a commitment to lend money on a property.
A deed is a legally binding written and signed document that conveys title to real property. There are different types of deeds, including Quitclaim Deed, General Warranty Deed and Special Warranty Deed.
The deed is delivered at closing to the Buyer by the Seller. Different types of deeds have different legal implications, so it is important to understand what type of deed is being conveyed.
There are two types of policies: Lender’s Title Insurance and Owner’s Title Insurance.
The Lender’s Title Insurance Policy does not protect the Owner.
Occasionally, some type of legal claim or issue comes to light after you have purchased your property. If that negatively impacts the clear Title to your property, Title Insurance is designed to protect your financial investment in your real estate purchase.
This tax is usually, but not always, paid by the Seller. Generally, the tax is calculated as a percentage of the gross sales price of the property.
The tax is usually collected and paid at Closing. It can apply to sales of both residential and commercial property and may be tax deductible.
Mortgage brokers often have more “alternative” mortgage options for borrowers with less than perfect credit or other mortgage qualifying challenges.
But both mortgage brokers and mortgage bankers have a variety of mortgage options, so shop around to find the best deal based on the terms, including interest rates, required documentation, down payment, fees, and credit scores.
The U.S. Congress established Freddie Mac in the 1970’s in order to help provide available funds for the residential mortgage market.
It is part of the “secondary” mortgage market, which is an investment market engaged in buying & selling mortgage loans & mortgage backed securities.
The Millage Rate is multiplied by the Assessed Property Value (which often differs from the market value) to calculate the annual real estate tax amount due.
Real Estate Taxes rates are generally referred to by the Millage Rate. So when you hear people talking about the Real Estate Tax Rate, they are referring to the Millage Rate.
The Millage Rate is the amount charged per $1,000 in property value.
The calculation is:
Assessed Property Value divided by 1,000 multiplied by the millage rate
Here’s a sample calculation for a home valued at $100,000 with a Millage Rate of $4.50:
$100,000 /1,000 = 100
100 x $4.50 = $450 in tax
Millage Rates are set for each new budget year & the current rate can be found on the tax assessor’s website or by calling the tax assessor’s office.
An offer to purchase property usually includes a good faith payment in the form of a deposit with the offer.
This payment is usually followed by a larger down payment amount once the contract is agreed upon.
In some areas, both the initial deposit and the down payment are referred to as earnest money. In some locations, only the initial deposit with the offer is referred to as earnest money.
Typically these amounts are fully credited to the Buyer at closing, unless there has been some kind of default in the contract terms by the Buyer.
Actual Cash Value (ACV) is an insurance term that will impact how much you are paid in the event of a loss due to stolen or damaged property.
When a policy’s coverage is based on ACV, the amount of money you will recover for a covered loss is the calculated on the replacement cost MINUS an amount for depreciation of the property.
The ACV amount is almost always less than the Replacement Value amount and the depreciation deduction can result in a significant reduction in the amount of money you are paid for your claim.
The Statement of Cash Flows shows where the funds you used to operate your business and pay your expenses came from.
It will show if the funds were generated by operations & sales, by borrowing, by sale of assets, or by capital investment.
Many neighborhoods & planned communities are part of a subdivision.
As an example, a developer may buy a large tract of land & then break it up into house sized lots.
These lots are usually detailed on a Plat Map.
To deduct your mortgage interest, you must itemize.
Be sure to do the calculation to make sure you are not paying more in taxes than you need to if you are eligible to deduct mortgage interest.
You might save on your taxes by itemizing or you might be better off taking the standard deduction. The only way to know which is more advantageous is to do the math.
But there are some restrictions that can limit the deduction (e.g., the length of time for construction can’t exceed 24 months).
Mortgage interest is deductible after the loan becomes permanent financing & the loan qualifies for the mortgage deduction. Again, there are limitations (e.g., the total loan amount can’t exceed $1 million).
Consult with a tax professional to determine the deductibility of the interest in your specific situation.
Potential buyers can search the HomeSteps site geographically and also by type of property.
Special financing for purchase and property rehab is available from Freddie Mac for some HomeSteps properties.
All purchase offers are made via the HomeSteps online submission process. Buyers can do this directly or if you are currently working with a Real Estate professional, your agent can handle the submission and purchase offer for you.
Most reputable insurance agents and brokers will quote the insurance policy including Replacement Cost coverage as it is much better protection for you, but the onus is on you to make sure you know what coverage level you are buying.
With insurance, as most things, cheaper premiums may be the result of competitive quotes or indicate reduced coverage. Be sure you know which it is & the financial risk you are assuming when buying your policy.
To calculate your personal net worth, identify all your assets (e.g., cash, investments, personal property, real estate, retirement accounts) and all your liabilities (e.g., credit card debt, auto leases, mortgages, student loans).
Then subtract the total liabilities amount from the total asset amount. The difference is your Net Worth.
The idea is that if you make a large capital purchase, such as a building or equipment, the equipment or building isn’t “used up” in one year. You will use the asset to produce income for several or many years to come.
Depreciation matches up the future income produced by having the equipment with the cost of the current purchase. It also acknowledges that equipment wears out over time.
For example, if you buy a piece of manufacturing equipment for $50,000 you’ll presumably use that equipment for a number of years. So instead of taking the full $50,000 cost as an expense this year, you’ll spread it over several years.
Different types of assets have generally agreed upon “useful lives” and these schedules are used to calculate depreciation.
In a triple net lease the tenant pays for all the operating expenses. The majority of commercial leases are Triple Net.
There is a base lease payment for the space & the tenant also pays a proportionate share of the real estate taxes, insurance, maintenance, utilities, etc.
These costs are usually calculated annually & then billed monthly with the lease payment.
As examples, Amortization can be applied to intangible items, such as, “Goodwill” on the Balance Sheet or for spreading the costs of tangible expenses related to start-up costs over time.
Different write-off time periods are used for different types of assets.
Full payment is required to be made before the due date for the tax return. Failure to do so will result in interest and penalties.
One way to do this is to make estimated tax payments during the course of the year. For individuals, these payments are usually made on April 15th, June 15th, September 15th of the current tax year & January 15th of the following calendar year.
Dates sometimes vary if the day falls on a holiday or weekend, so check the IRS website to confirm the dates each year.
Goodwill is amortized over a set period of years, similarly to depreciation.
Goodwill from an accounting standpoint is the value placed on intangible company assets such as reputation or customer list value. Intangibles are non physical items (e.g., copyrights or patents) that are expected to support future business earnings.
Goodwill value, when added to the Book Value of a company’s assets, will usually increase the actual purchase price of the company.
When selling a company, the dollar amount assigned to Goodwill is usually subject to significant negotiation.
Different industries have different types of intangible assets that will affect the purchase price of a business.
The value of your Inventory will be found on your Balance Sheet in the Asset section.
Inventory can be finished goods ready for sale, e.g. a bottle of perfume, packaged & ready to ship.
It can also include the materials that will make up your finished goods, e.g., the bottle, the box, the labels, and the fragrance oils.
How you value your inventory will affect your profits and your taxes.
It does not reflect operating costs such as advertising or marketing.
It is strictly the cost of all items required to create your finished product, including the cost of “freight in” to get the raw materials or parts to your business.
It is also referred to as the Cost of Sales.
Your COG & how you value your inventory will affect your profits and taxes.
1. Deductions through payroll withholding.
2. Send a check the IRS with a paper form.
3. Use the EFTPS system to pay from a bank account.
4. Use the IRS Direct Pay system & pay directly from your bank account.
5. Use a credit card (there are fees charged for this option).
Additional options, include wire transfers & setting up a payment agreement if you can’t pay in full. More details about making tax payments are available on the IRS website.
Some adjustable rate loans are tied to the prime rate. This type of loan is usually referred to as Prime Plus and the rate moves up or down based on changes in the prime rate.
A very good customer may pay the prime rate, while a less creditworthy customer will pay a rate pegged to the prime rate with an additional percentage added on.
In the latter case, the loan rate is calculated by taking the Prime Rate and adding an agreed upon percentage. For example, if the Prime Rate is 3.5%, a rate of Prime + 2% would be a loan rate of 5.5%.
Ideas become creative “product” and copyright is a hot topic theses days with all the “shared” content on the internet. It’s important to protect your own copyrighted work and also to respect the work of others.
While copyright law is complex, copyright protection applies to “original works of authorship” that are both published and unpublished. Paintings, photographs, novels, screenplays — there are many forms of creative product which are protected by copyright laws. But it is important to know what your rights are & how to protect them.
While copyright protection technically begins once the work is completed, making a formal record of it is a good idea. You can register your work with the US Copyright Office for a fee. This can be done in hard copy or via the internet.
Intellectual Property attorneys specialize in copyright law, so if you have questions get the counsel you need from a specialist.
Both handle mortgage transactions. A mortgage broker generally works with a variety of different lenders and matches borrowers with lenders. Mortgage broker fees are usually paid by the lender and are disclosed on the closing statement.
A mortgage banker generally works for the lender directly and therefore places mortgage loans with only that lender.
In most states, Mortgage Brokers must be licensed and pass an exam. Mortgage Bankers are usually employees of a mortgage banking company.
“Grandfathering” often occurs when zoning laws are changed & existing properties or business uses do not meet the new codes but are allowed to continue doing business anyway.
Sometimes this is used to give an existing business a chance to phase in changes caused by a new law or regulation or to mitigate the cost of following the new regulations.
Not all new laws or regulations contain grandfather clauses and, even if they do, the impact can be limited in scope or in time.
So if you think the new law or regulation applies to your business be sure to get proper legal or financial advice.
For mortgage financing purposes, it depends on the number of units & the type of units on the property.
Multi-unit residential buildings will require commercial or a residential financing, depending on the number of units.
Properties with 4 or fewer residential units can usually be financed with residential mortgages. Building with more than 4 units (e.g., apartment buildings) will need commercial mortgage financing.
Typically for a single family home, apartment or condo rental, you’ll need enough money to cover the first month’s rent, the last month’s rent and a security deposit.
Security deposits usually equal one month’s rent, but if you have pets there may be an additional security deposit amount required.
Crowdfunding raises capital entirely online from many individual investors. It can be used to fund many things, including a business idea, a research & development project, new product development or for a community or nonprofit cause.
There are various sites which are used to handle the process, some for business related funding and others for social causes.
Some crowdfunding activities fall under the Securities & Exchange Commission’s rules, so it is important for the parties on both sides of the transaction to understand the legal implications, responsibilities, and risks.
The content on this site is provided for educational and informational purposes only. It is not intended nor provided as financial or legal advice.