LMGW is proud to announce the hiring of Jeff Berman as IT Manager to provide outsourced IT services for our small and mid-sized business clients. Jeff has nearly 20 years of experience in Computers and Information Technology specializing in desktop support and network administration. He holds a Bachelor of Science degree in Network and Communications Management.
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California has a new Limited Liability Company (LLC) act which took effect January 1, 2014. The new law automatically applies to existing LLCs and the new law contains provisions that can result in forfeiture of LLC member rights, if action is not taken. If you are a member of a LLC, now would be a good time to have an attorney review the LLC operating agreement to ensure you are protected against possible forfeiture of your member rights. This is applicable to existing California LLCs and does not apply to foreign LLCs that have qualified to do business in California. Also, the new rules are not important for single-member LLCs or husband-and-wife LLCs. Please contact us if you need a referral to an attorney that can review your current operating agreement and make amendments to prevent forfeiture.
Saving for college is a daunting task. Over the past decade, tuition rates have been steadily rising and student financial aid is getting harder and harder to come by. The average college graduate had $26,500 of student loan debt in 2011, up almost 5% over the year before. To help ease the pain of rising tuition costs there are several college savings vehicles that help to save for college in tax-favorable ways. Let’s take a look at some of these plans.
A 529 plan is one of the most flexible ways to steadily save for college for your child, grandchild or other future student in your life. There are no income limitations on who can contribute to a 529 plan. Anyone can be an account owner and anyone can be a beneficiary. A contribution is considered a completed gift and is therefore excluded from a contributor’s estate. The contributions into the plan are not tax deductible but the earnings grow tax-free and there is no taxation on withdrawal as long as the withdrawal is used for qualified educational expenses.
529 plans fall under two categories – prepaid and savings. Prepaid plans lock in a tuition rate at an eligible public or private university. The contributions to the plan are only eligible to cover tuition and mandatory fees. Lump-sum installment plans are set up based on the beneficiary’s age and the number of years purchased; this is an advantage because it locks in lower tuition rate for the future. However, it impacts the student’s flexibility when choosing a university. Enrollment in these plans is also often limited to a certain time of year. Read more
Hiring an independent contractor is often the simplest way for a business to get help in the door. However, the IRS, state labor and employment boards, unemployment insurance and worker’s compensation authorities all investigate whether or not employers are properly classifying workers. If any of these authorities determine that a worker that is being treated as an independent contractor should actually be an employee the remedies to correct the misclassification can be costly.
There are many benefits of classifying a worker as an independent contractor such as not providing the contractor with employee benefits, avoiding employer payroll tax liability, the ability to budget a specific amount for a project without paying overtime or holiday pay, savings in clerical costs and recordkeeping, less liability, and savings on workers compensation and unemployment insurance. While a hired independent contractor and employer may be in agreement in regards to their status, the IRS or other authority could disagree if they deem the relationship falls under the definition of employer-employee.
If the IRS or other authority determines that a worker classified as an independent contractor is actually an employee it can prove costly—the employer will be liable for past employer payroll taxes as well as penalties and interest and the burden of filing or amending all necessary payroll tax returns. If the issue is serious enough court time and costs or even criminal sanctions could result. Also, any retirement plans or other benefit plans that require certain compliance could be invalidated. Read more
In 2009 a study was conducted to address how the accounting standards can meet the financial statement reporting needs of US private companies. The study found that accounting principles generally accepted in the United States of America (GAAP) often address issues that are not relevant to smaller, less complex companies, including those that are not public. Some of the most costly and complex standards to implement for a small business were the least relevant and least useful for the reader of the financial statements.
Many small private companies are normally only required to file income tax returns but lenders and bonding companies are requiring GAAP financials which the companies do not have the accounting resources to prepare. The cost of preparing the GAAP financials for these small private companies often exceeds the benefits.
The newly established Private Company Council will work directly with the Financial Accounting Standards Board (FASB) to give recommendations of various modifications to GAAP that would be considered beneficial for the small private company. During the first few years the council will meet several times during the year and will be open to the public. Stay tuned for updates on changes to the financial statement reporting standards for private companies as the Private Company Council implements its recommendations.