Biz: A Medical Savings Account for the Self Employed?

by Benita Tyler, Business Accountant & Tax Planner www.tbsusa.com

Q. I run my own company and plan to hire two employees this year. I'm researching medical savings account and wondered if there is any tax advantages for me as a self-employed business owner?

A. From the standpoint of tax planning, two Medical Savings Account (MSA) that you should consider are the Archer MSA and the Medicare Advantage MSA. Both plans operate like an IRA to lower your taxable income and income tax with tax free savings contributions. However, unlike IRA's where there may be a penalty for early withdrawal, an MSA provides you with access to tax-free withdrawals without penalty as long as they are used to pay for health care costs. 

Some points to note for each account are: 

• The Archer MSA is restricted to self-employed and/or the employees of small businesses 
• The Medicare Advantage requires you to be enrolled in Medicare in order to qualify. 

In addition to the tax advantages there is also the benefit of paying lower health care premiums. The offset to lower premiums, however, is higher deductibles which is something to factor in as you decide which health coverage is right for you. 

Note: Ms. Tyler is not compensated for suggesting these plans and is not responsible whether or not it works for you. She's simply giving alternatives for you to research and make a decision that suits your needs... Okay? Good! Thanks for reading!

Benita Tyler, the Financial Messenger and President of TBS USA,  started as a business support company in 1999.  In 2000, Benita began advising business owners on income taxes and helping them customize financial systems to increase profits and savings.  In 2003, Benita pioneered the “Wealthy Place Appraisal” a proprietary 7-step process that she uses to help business owners determine which decisions are moving them closer to wealth goals and which are causing them to lose ground. 

Get your appraisal and more at tbsusa.com! 

We're Getting Out of Debt! Week 2 - Business Debt!

Every Monday as @DorethiaConner & with my co-host, @BenitaTyler, we interview experts during our weekly Twitter Online convo #MoneyChat held from 8pm-9pm est.  This post pulls the highlights from our #MoneyChat topic 'Get Out of Debt in 2011'    Last week we discussed getting out of personal debt, this week our very own resident expert, @BenitaTyler, of TBSUSA Tax, Accounting and Small Business Consulting, gave us advice on how to trim business debt.  

What are some common sources of business financing?

Common forms of debt that in a small business include loans, lines of credit, venture capital and accounts receivable factoring

Is it possible to run a debt-free business?

Absolutely! It really just takes good financial management. Plan finances in advance and use tools like accounting software and spreadsheets to help you make good decisions with cash flow.

What are some of the cons to business debt?

Using borrowed money takes away some control in your company. Profits belong to lenders and  investors.  You may also have a significant amount of interest that drains your cash flows. Without financing you may not be able to reach as large a market as quickly as you’d like. The upside is you’re avoiding high cost of interest and the risk of non-payment. You are able to keep more of your profits. 

What steps can we take to create a debt-free business?

Strategically increase sales so that your business can cover operating expenses and generate surplus. Watch your spending –keep overhead as low as possible and always invest back into the business. Aim to create a cushion of 12 months’ worth of operating capital . 

Any final resources to help us manage business debt?

My last bit of advice would be to trim costs but not quality. If you are currently renting office space, but find yourself not utilizing it – virtual offices are good alternative to expensive leases. Try a Google search to locate one near you. Here are a few other resources for saving money in your business:

• Google Voice - free phone service 
• Rapid Fax Service  or Efax Service - affordable fax services
• Square Up  - credit card processing for your iPhone or iPad - a low cost alternative for merchant equipment with low transaction fees     
• Quickbooks and Freshbooks both offer online solutions that run about $19 a month. Evaluate the features to see if these work for your accounting/bookkeeping needs.

Oh and yes, there was homework! I didn't forget ... List all your debts smallest to largest. Develop a plan to pay them off in that order. So if you've been avoiding the letters, shoving them in a drawer or on top of a shelf - dig them out. It's time to take control of your finances, whether personal or business, instead of the other way around!

Just WHAT is #MoneyChat? Click here and here to find out!

-Dorethia

www.connercoaching.com

Should You Be Out of Debt Before Starting a Business?

I am asked this question a lot when I'm speaking or coaching clients. Many people have entrepreneurial dreams, but aren't sure how this fits in with getting their personal finances in order.

The answer is NO, you do not have to be out of debt to start your business. (As a side, no you do not have to be out of debt before you get married either. I get this one a lot too!)  Anyway, moving right along,  here are a few financial things to consider before you jump into the world of being your own boss....

Have You Mastered Your Money? 
If you think handling the family money is a pain, wait until you start a business! You must have a process in place and some discipline in handling your personal finances in order to be able to successfully manage your business income and expenses as well.

Can You Answer YES to These Questions?

• You complete a budget each pay period and you know where your money goes
• You write transactions in your checkbook when they occur or at least by the end of the day
• You balance your checkbook to your bank statement when it arrives (or online)
• You've reigned in unnecessary spending
• You do have a plan for paying off your personal debts 

Personal Emergency Fund

I do suggest having at least your partial emergency fund of $1,000 saved.

Saving For Your Business

First, complete a 'Startup Expenses' form. You can  find one here: http://www.score.org/ .
List everything you will need to start up and the cost associated. Then, look at your personal budget and calculate how much can be allocated toward saving for your business each pay.
Essentially, you will add a line in your budget for let's say  'Dave's Detailing'  and assign it a dollar amount. Be disciplined about setting that money aside.

Stay away from debt... I'm the poster girl for the bootstrapper. Bootstrapping allows you complete freedom, no one gets a piece of the pie but you because you didn't borrow money!

So off you go... get busy ... live your dream, start your business, just plan it out!!

Need some motivation? Check Out These Tunes!

McFadden & Whitehead - Ain't No Stoppin' Us Now
Survivor - Eye of The Tiger
Ben Harper - My Own Two Hands


Your Financial Coach,
~Dorethia
http://www.connercoaching.com/

Finish Your Business Plan in 3 Months!!!

Ahh, a business plan!!! Is the idea of tackling this task overwhelming in the midst of everything else on your 'To Do' list? Many entrepreneurs put it off, but the business plan is the foundation for your company. It is not just a document you need if you are approaching investors or banks for loans. Even if you are funding your business yourself you need a business plan!

You discover things about your methods, ideas, and industry when you have to put all your research and hard work down on paper. You can save yourself a lot of time and money when you have a written plan!!!

A Few Quick Tips!

1. Spend two weeks on each section: there are 10 - 12 sections in a business plan - two weeks on each section = 3 months.

2. Finish the sections that are the easiest for you first. If you already have an idea of your operations or company description -complete those and then tackle the areas you have to research.

3. Write the Executive Summary last as it 'summarizes' the detail of your plan.

The portions that may need a little more time is the research you will need to do for your Market Research, Industry and Competitive Analysis. But don't drag it out - set specific days and times to work on it and stick to your deadline!


Check It Out -

www.Score.org: Business planning and financial templates for startups and existing businesses

Score offers some one of the best templates I've found complete with explanations of each section - and they're free! No two-ton book to buy or carry around!!