How to choose the right bank for a business

When a business finally gets off the ground, the time will come when a separate account should be opened for it, creating an essential division between personal and corporate income.

What different banks offer businesses can vary greatly from institution to institution. Doing homework beforehand can save a great deal of money, time, and countless headaches.

Below, we will cover several areas that the entrepreneur needs to think about when the time comes to open a business bank account.

Determine business banking needs

Don’t go with the first financial institution that comes to mind. Every bank has its advantages and disadvantages given the structure of a business, its cash flow, and the needs of a given business and its employees.

Some banks charge more than others for the privilege of having a checking account, while others don’t charge anything for a given balance.

Some offer in-house financial investment services, while others specialize in helping small businesses grow from the ground up. Take time to examine all options on the table so that the best possible decision can be made.

What features make the most sense

While some businesses go with community based banks due to lower setup costs, these institutions often lack essential offerings such as online banking.

This feature is essential to companies looking to bootstrap, as being able to access services without setting foot in a physical bank branch saves valuable time, allowing the entrepreneur to spend more of it on higher value tasks.

Additionally, be sure to negotiate additional features that the bank offers, but may not be necessarily offered up front. There are many competitors in this space; given the choice between turning away a potential client and extending extras to a persistent entrepreneur, bankers will often opt for the latter.

Ensure a prospective bank’s size is sufficient

Sometimes, going with a bigger bank is the best move for a business. Larger financial institutions have enhanced abilities to extend loans of a size that a growing company might need, and they also are part of ATM networks that will prevent traveling executives from running into problems overseas.

On the latter count though, there are smaller banks that are part of international ATM networks, so be sure to do research before signing on the dotted line.

Periodically reevaluate the company’s banking requirements

While a certain bank might fit a business at this present moment, as the years go by, growth and changing needs might change that equation.

When doing an annual review for the business, evaluate whether your current financial institution is supplying satisfactory services, and whether other banks might be able to accommodate it better.

LLC or S-Corp: which is the best structure for a business?

While many business owners get started without paying heed to corporate structuring, they will eventually get to a point where protecting their assets from tax authorities and litigators will become important.
Of all the ways to structure a company, the LLC and S-Corp are two methods that entrepreneurs have been using to organize their business assets.

Which of these corporate structures are right for owners? It depends on their priorities; below, we will break down scenarios in which either an LLC or an S-Corp makes sense.

An LLC is the best structure for a business if…

1) Simplicity is a priority

Successful business owners are busy: they don’t have a lot of time to burn, so minimizing its usage on administrative tasks is a top priority.

The process by which an LLC is organized is simplistic, as its application form takes up a single page, guidelines are straightforward, and the owner doesn’t need to file a separate return for it, as they only need to report income on their personal income tax return.

2) Cash reserves are limited

Another distinct advantage of an LLC is that the application fee for setting one up is very inexpensive.  In most jurisdictions, you will only need to part with a couple hundred dollars for the privilege of applying for this business structure.

In the early stages of a start up, every dollar counts, so minimizing the amount of capital allocated to unproductive but necessary expenses is vital.

3) Some shareholders are not American citizens

An inescapable fact of business in the 21st century is that more companies have not just employees, but stakeholders that reside outside of the United States of America.

While other corporate structures place restrictions on ownership on non-American citizens, an LLC allows those without US citizenship to own a stake in a company which it is organized around.

An S-Corp is the best structure for a business if…

1) Shareholders wish to receive dividends from excess profits

A key benefit of an S-Corp is that it allows the business owner to pay out dividends from profits after necessary expenses have been addressed.

By paying stakeholders a “reasonable” salary (as defined by the regulation of an S-Corp), any profits that are left over can be distributed in the form of dividends, which offer a lower overall tax burden than what is assessed on straight salary.

If there is a reasonable expectation of a consistent annual profit, this can be a great way to minimize the tax bill of an owner and their partners.

2) Cultivating an image of integrity is paramount

As advantageous as organizing a company under an LLC can be,  its reputation often suffers due to bad actors in the business community.

If a business owner operates in an industry where reputation is a very important quality to maintain, an S-Corp can be a better organizing structure, as it has many rules and regulations to follow, and requires its owners to adopt official titles and responsibilities.

Directors need to be appointed to attach accountability for major decisions that are made with regards to company business, while officers are similarly appointed to handle day-to-day business operations.

3) The owner wants to pay less in self-employment tax

While LLC’s are simple and inexpensive to set up,  they are subject to the quarterly self-employment tax that the IRS charges them, which can equate to a heftier tax bill for some companies.

Because an S-Corp structure allows owners to treat themselves as employees, the overall tax burden at the end of the day can be less due to the ability of S-Corp stakeholders be privy to unearned income (dividends).

Disclaimer – This post was not prepared by a certified accountant and just serves to present basic, publicly available information. Consult your tax professional before making any decisions. 

How to choose the right health care plan for employees

Of all the benefits that businesses offer, none are as highly valued as a comprehensive health plan.  With health care costs in this country being burdensome to many, having a policy that fits the needs of its employees is an attractive recruiting tool for the best talent out there.

When choosing a health plan, take note of the following in order to choose the package that is right for the team, as well as the company’s financial health.

What are the business’ needs?

Before searching for a health insurance plan, executives should draw up a list of priorities that they are seeking from the best possible policy. Overall cost to the company and employees is an obvious consideration, as a top of the line health insurance plan will do a company and its people no good if it is out of range of the company’s budget, or if the burden that would have to be shouldered by the employee represents an unreasonable amount of their take-home pay.

Coverage is another aspect that should be paid attention to, as some policies mask their low overall cost with ridiculously inadequate coverage when it comes to things such as pre-existing conditions or catastrophic health events.

Once these issues have been addressed, evaluate the specific types of coverage that are desired by employees of the company. This can include things like dental, maternity leave, and mental health services, all of which are typically supplementary when it comes to most health plans.

Insurance brokers:  to use or not to use?

While securing health insurance for the company is an important task, the process of seeking out bids from providers can be a time-consuming process.

An insurance broker can help solve these problems, as these professionals take the legwork out of the equation by offering a suite of insurance plans, with prices and offerings laid out in an easy-to-understand manner.

However, businesses should take care to research their broker’s reputation, as some will charge significantly more for premiums than if the company were to seek out insurance providers on their own.

Properly vet a potential insurer before signing any deal

While there are many names in the insurance industry that are well known, some are more obscure, and hundreds of these companies have gone under in the past decade for their less than stellar business practices. As such, any insurance firm that the company is thinking of partnering with should be thoroughly investigated.

Start by looking up their evaluation in the top ratings books, which are maintained by agencies such as Standard & Poor’s;  if they check out, still pay rapt attention to every line of legalese that you find in an insurance agreement before signing on behalf of the business.

Read the fine print carefully, as provisions that restricts coverage for something as little as crossing state lines exist in many agreements. If you uncover inconsistencies, work with the insurer to have them struck down; if they resist, seek out a different provider for the company’s insurance needs.

How Successful People Manage Their Time

It’s easy to look at a successful person’s accomplishments, and attribute it to unchangeable factors such as luck. However, successful people have reached their station in life primarily through the proper use of the most important resource in their life: their time.

The tips below will help make better use of the hours that are available in a day.

They set goals and break them into manageable chunks

Most projects seem intimidating at the outset,  which results in procrastination and analysis paralysis by many employees. By setting simple, concrete goals that are well-defined, and then breaking them down into manageable chunks, real progress can be realized from day to day.

They delegate time-consuming tasks of low overall importance

Just because an employee can do a specific job doesn’t mean they should be doing it. If there is another employee in a department or an external contractor that can take on a task that is of low overall importance, it should be delegated to them. This frees up the higher-skilled employees to spend their time on executing tasks of greater value, increasing their effectiveness and moving the project along at a greater rate of speed.

They embrace the concept of minimum effective load

When it comes to any task, a small amount of overall effort is responsible for the lion share of the desired effect. This relationship is described perfectly in the Pareto principle,  which states that 80% or more of a wanted or unwanted effect stems from 20% or less of the causes.

A good example of this relates to the times of the day when an employee is most effective; whether it is in the morning, afternoon, or in the evening, they should conduct their highest value tasks during the time when they have the most energy, and not when habits developed in the past dictate it.

They focus 100% of their energies on the task in front of them

An unfortunate tendency that many workers have developed over the past generation is that they attempt to multi-task, as it creates the illusion that they are getting a lot of work done. Despite this perception, studies have shown that multitasking slows down the overall pace of work flow,  rather than quickening its pace.

When working on a project, focusing on a single task at a time with all of one’s attention will result in higher productivity per person, rather than splitting one’s attention over multiple files and folders.