Email Marketing: All Aboard
Filed Under: Articles of Interest
Tags: Articles of Interest, Marketing
Whether it’s promoting a new product or reminding customers of a deadline, email marketing is a quick, easy and affordable way for you to get your message out to your customers. There are a number of companies out there that provide tools for launching and tracking your own email marketing campaigns. But before you sign-up for a service and start aimlessly blasting away at your customer base, perhaps you should consider the “marketing train program” and the three “cars” of the train that Chia-Li Chien of WomenEntrepreneur.com explains in her recent article How to Create Effective E-mail Marketing:
Active marketing. Active marketing involves programs that allow you to be in front of your target clients and customers. For example, my business markets to women business owners. Therefore, my active marketing programs consist of speaking engagements, quarterly business retreats, teaching classes, strategic relationship building and networking with women business owner associations. This allows me to stay in front of my target clients in the most effective way.
Passive Marketing. Passive marketing involves little interaction but is a great resource for someone who is searching for information. In my business, examples include books, websites, brochures, manuals, this column for Womenentreprenur.com, articles, blogs, etc. These are reference materials that stay passive. The important part of passive marketing is becoming an expert in your industry so you stand out and take the leadership position.
Follow-up. This is where your newsletter comes in. It allows you to follow up consistently and stay in front of your target clients. We use ConstantContact to e-mail our Journal of Value Growth on a Monthly Basis.
To read the full article click here.
Cash Balance Pension Plans Offer Viable Alternative to Traditional 401K
Filed Under: Articles of Interest
Tags: Articles of Interest, Taxes
If you’re a small business owner closing in on retirement, these last 18 months may have you reconsidering the transition, especially if your 401(k) took the plunge with the nation’s economy. Now your five year plan is a 10 year plan, so in an effort to catch up you begin tossing excess profits into a contribution plan whose growth is based on the performance of a struggling economy. Seems kind of risky, huh? What if the market falls again? How far away from retirement will you be then?
Cash Balance Plans offer small business owners a low risk alternative to a traditional defined contribution plan. As with any financial vehicle, lower risk usually translates into a smaller return, but when the market bottoms out the Cash Balance Plan stays intact because the benefits are guaranteed. To read more about Cash Balance Plans and their real-world applications, check out the article, “The Best-Kept Tax Secret for Small Business” by Nancy Mann Jackson that was recently featured on CNNMoney.com. Below is an excerpt:
For two years, Dr. James Smouse of Atlanta Oral and Facial Surgery tried to convince his younger partners to participate in a cash balance pension plan, a unique defined-benefit plan that offers business owners the opportunity to make hefty, tax-deferred contributions toward their retirement savings. But until the recession hit, they weren’t interested.
“They thought they’d be better off investing their money in stocks and other vehicles,” Smouse says. “But what happened over the past 18 months showed there’s a risk, and after working a few years, they’ve seen how much money they have to pay in taxes.”
With their cash balance plan — which guarantees an annual return of 4%, compounded over 30 years for the youngest participants — Smouse’s partners realized they could enjoy significant retirement benefits with tax savings now and little risk later. So in 2009, the group worked with actuaries at Jacksonville, Fla.-based Dorsa Consulting to establish their plan.
The cash balance pension plan — little-known and even less understood — is growing in popularity. “It’s the best-kept secret in retirement planning. Even CPAs don’t know about it,” says Stephen Dobrow, president of Burlingame, Calif.-based Primark Benefits.
The plans, which involve mandatory annual contributions, work best for small business owners with fewer than 20 employees and excess profits of more than $50,000 per year that they can afford to sink into funding a pension , says Richard Jensen, president of BRS Consulting in Little Rock, Ark. If your company fits the bill, you can enjoy these benefits:
Accelerated Retirement Savings. Most business owners don’t begin saving aggressively for retirement until they’re five or 10 years away from it, Dobrow says. They tend to plow any extra profits back into the business.
For those owners, a cash balance plan offers an opportunity to catch up quickly. At Smouse’s office, owners who are less than five years from retirement can sock away an extra $60,000 each year pre-tax, beyond their investments in the firm’s profit-sharing plan. Younger owners only have to put in $10,000 per year.
Security. A cash balance plan is a defined-benefit plan, as opposed to a defined contribution plan like a 401(k). That means that it guarantees a targeted annual benefit beginning when the owner reaches a certain age. Working with an actuary, participants set annual contributions that will yield the set benefit.
And upon retirement, those benefits are guaranteed: “When the market fell, people’s cash balance plans didn’t drop; their 401(k)s did,” says John McCrary of Dorsa Consulting. “People with a cash balance plan didn’t lose anything.”
Those benefits are guaranteed by the business. As the plan’s sponsor, it’s responsible for the funding. But most companies shift the responsibility to a financial services firm.
For example, say a plan wants to guarantee a post-retirement benefit of $1,000 per month for life. The plan sponsor can then go buy an annuity from a company like ING.
“ING promises to pay that participant the $1,000 per month as long as they live,” McCrary says “The only investment risk that the participant now has is that ING stays in business during his lifetime. No matter what the market does, the risk now has shifted from the plan to ING. But they have a pool of money to pay from, so they really have maybe 15 to 20 years for the market to rebound and start growing again.”
McCrary compares a defined benefit plan to a loan. “We know how much we want at retirement, we know how many years we have until we reach age 65, and we can estimate a rate of return,” he says. “It’s not really quite that easy, but that is the big picture.”
However, if the investment returns are poor, the plans can be underfunded. Because most cash balance plans for small employers will terminate when the owner retires, the final contribution due is the amount needed to cover any underfunding. In that case, the owner can either contribute the full amount or waive any shortfall, which means they will take a smaller benefit, McCrary says.
But cash balance plans are conservative, aiming for slow, steady growth with a return of 5% to 6% percent, which helps limit losses in a bad market.
To read the full article click HERE.
The LLC is Just One Form Away From S-Corp Status
Filed Under: Limited Liability Company, S-Corporation
Tags: Limited Liability Company, S-Corporation
If you were to walk into an accountant’s office, and explain to them that you are a small business owner running a sole proprietorship looking to form a company, what type of corporate entity do you think they would tell you to form? There’s a real good chance the first words out of the tax professional’s mouth would be, “Form an S-Corp”.
In my six years of helping business owners incorporate, I can’t tell you how many conversations I have had with clients that say they need to form S-Corps because their accountants’ told them to. That’s fine from a small business stand-point, avoiding entity level taxation so that profits and losses flow through to the owners is how you’d want to be taxed anyway. But that’s just it. IT’S A TAX STATUS! Many accountants are familiar only with the taxation of a corporate entity, and that’s the way it should be……..that’s what you pay them for. But when it comes to choosing the type of company that suits your organization’s structure (one person), a corporation is not always the best fit. You do have options.
After leaving the accountant’s office now you think you need to incorporate, so you start doing some research on the internet for “S-Corp”. What you’ll find is lots of sites that explain what the S-Corp is but none offer to really set one up for you. Why is that? BECAUSE IT’S A TAX STATUS!
Now what? Maybe you try searching “corporation” or “incorporate”. Well, look out because now you’ve opened the flood gates; oodles of companies willing to help you incorporate overflow into the computer’s tropical fish background. You start checking out a couple of websites, and gather information about packages and pricing, but still no S-Corp. Don’t make me say it again…….
Eventually you make a phone call to one of the online incorporators. The service representative asks how they may help you, and you say, “I need to form an S-Corp”. At this point you’re already well on your way to forming a corporation. Next thing you know you’re talking shares of stock, board of directors, officers, meetings, minutes, blah, blah, blah. Sounds like a lot of work just to become an S-Corp so that your accountant’s job is easier, especially if you were a sole proprietor to begin with. Rather than forming a corporation, consider forming an LLC instead. That’s right I said LLC.
With the LLC, you all but eliminate the formalities of the corporation while limiting your liability for the debts and obligations of your business. And best of all, the IRS treats the LLC as a flow through entity by default. What does that mean? It means that if things don’t work out with the accountant and you don’t end up electing S-Corp status, you can still file your taxes like when you were a sole proprietor. This will work for partnerships too. Regardless of whether you choose a corporation or an LLC, once the entity is formed you’ll still need to file with the IRS to obtain that S-Corp status. If you go LLC you will only need to file one additional form (IRS Form 8832: Entity Classification Election) to be considered for S-Corp treatment. So what’s one more form?
Clear Definition: Just One More Reason to Form an LLC in Delaware
Filed Under: Delaware, Limited Liability Company
Tags: Delaware, Limited Liability Company
I recently stumbled upon an article that I found absolutely fascinating considering my line of work. In the July 7, 2010 edition of Masuda Funai’s Business Update, Stephen Proctor asks,” Is a limited liability company bound by its own operating agreement?”
Now let’s think about this. How could the LLC not be bound by its own agreement? I mean it is the operating agreement, after all, that set the guidelines for management and ownership of the LLC. However, after reading further I found the real issue at hand is whether or not the LLC itself be required to sign the agreement, and if not, is the LLC really bound to it. There are state statutes that unsuccessfully define “parties” to the agreement, or even bind the LLC as an entity separate from its members. So what does that really mean and does it even matter? Well, as you’re about to read, failure to clearly define such terms allowed the managing member of a Wisconsin LLC misappropriate funds and there was nothing the LLC could do about. What you’ll also find in the article is how once again Delaware sets the bar for all things corporate. See the excerpt of Proctor’s article below:
One of the early cases dealing with this issue held that a Wisconsin limited liability company that did not sign the operating agreement was not bound by it. (Bubbles & Bleach, LLC v. Becker No. 97 C 1320, 1997 WL 285938 (N.D. IL May 23, 1997) In Bubbles & Bleach, the limited liability company brought suit in Illinois federal court against the managing member for misappropriation of funds. The managing member moved to dismiss the Illinois federal case. The operating agreement included an arbitration clause that required arbitration in Wisconsin under Wisconsin law. The operating agreement was binding on the “parties” to the agreement, but the term “parties” was not defined. Further, Wisconsin defined an operating agreement as an agreement among the members. The court found that there was no indication that Wisconsin intended to bind the limited liability company as an entity distinct from its members. So the limited liability company was not bound by the arbitration provision in the operating agreement.
Delaware takes a completely opposite approach. In 2002, Delaware amended its limited liability company law to provide explicitly:
“A limited liability company is not required to execute its limited liability company agreement. A limited liability company is bound by its limited liability company agreement whether or not the limited liability company executes the limited liability company agreement.” (Delaware Limited Liability Company Act Section 18-101, as amended by 73 Delaware Laws, c. 295, Sections 1 and 2)
(As an aside, Delaware’s defined term is “limited liability company agreement,” but it can be referred to as an operating agreement, so the references are to the same agreement.)
It might have seemed that Delaware, considered a bellwether in these matters, would have settled this issue. But, as a recent Illinois case illustrates, the issue is far from settled. (Trover v. 419 OCR, Inc. 921 N.E. 2d 1249, Illinois Appellate Court, Fifth District, January 12, 2010).
Trover was a member of Far Oaks Development Group, LLC (FODG). Trover and the other members of FODG authorized the managing member, Halloran, to transfer land held by FODG to 419 OCR, Inc. (419 OCR, Inc. was owned by Halloran and Macaluso who were also members of FODG.) But Trover alleged that the agreement transferring the land included an oral promise by Halloran and Mancuso, representing 419 OCR, Inc., to pay FODG, in addition to the estimated price of the land to be sold, an additional sum of money to be determined as the land was developed and sold. Although the land was developed and sold at a profit, no additional funds were paid to FODG. The litigation by Trover was based on a derivative action on behalf of FODG alleging breach of contract and fraud.
Halloran and Macaluso sought to compel arbitration under the operating agreement of FODG. The trial court denied the motion to compel arbitration and the defendants appealed.
The court acknowledged that the arbitration provision in the operating agreement was broadly worded. In this case, some of the claims involved defendants (such as 419 OCR, Inc.) who were not members of FODG and were not parties to the operating agreement. Clearly, with respect to these defendants, arbitration could not be compelled. But the more interesting question was whether the limited liability company itself was considered a party to and bound by the terms of the operating agreement that created the limited liability company.
To read the full article click HERE. (requires free account to log on)
Delaware Superior Court Establishes the CCLD
Filed Under: Delaware
Tags: Court of Chancery, Delaware
In my last article, we took a look at Delaware’s Court of Chancery and how its rich history is a part of the Delaware advantage. From that post we learned that the Court of Chancery hears matters of equity where no legal precedent is established, but what happens to business litigation that is purely legal in nature? Commercial cases at law are heard by the Delaware Superior Court, which recently created a new division to identify and streamline resolution for complex commercial matters. In the June 2010 edition of The Metropolitan Corporate Counsel, Thomas E. Hanson, Jr. introduces the new Complex Commercial Litigation Division (CCLD) of the Delaware Superior Court. Below is an excerpt of the article that explains with further detail:
Introduction
Due primarily to the high cost of electronic discovery, delay in reaching a final resolution and uncertainty as to the outcome, there is a consensus that civil litigation must be reformed. To address the concerns of business litigants, and to provide yet another option for the resolution of complex business disputes within Delaware’s highly regarded court system, the Delaware Superior Court has established a Complex Commercial Litigation Division (CCLD) effective May 1, 2010. To promote prompt and efficient disposition of complex matters, the CCLD will include a special assignment of experienced judges, tight case management orders to move cases to conclusion, special e-discovery orders to limit expense and avoid disputes and protocols to control expert witness and fact discovery.
Not every business dispute is eligible for the CCLD. To qualify, a case must: (1) include a claim with an amount in controversy of at least one million dollars, (2) involve an exclusive choice of court agreement or a judgment resulting from an exclusive choice of court agreement or (3) be so designated by the president judge. Cases that meet one of these criteria can be brought in the CCLD – a forum that is focused on addressing what matters to parties who file and litigate complex commercial disputes.
The CCLD was designed to address two principal concerns of business litigants: (1) the need for predictable procedures to control the course of the proceedings and to bring such proceedings to a prompt conclusion and (2) the need for reasonable control over the cost of discovery, including e-discovery. The CCLD addresses these concerns by following three primary case administration principles.
First, each CCLD case will remain with the same judge from start to finish. Second, each CCLD case will be administered pursuant to uniform procedures, including the requirement of an early Rule 16 scheduling conference for counsel to meet and confer with the judge. At the Rule 16 conference, a case management order will be entered that covers all phases of the case, including the handling of discovery disputes and dispositive motions, early mandatory disclosures and the exchange of electronic discovery. Third, each CCLD case will be assigned firm pretrial and prompt trial dates that will be given priority as among the panel judges’ other trial assignments.
To read the full article click HERE.
