July 2016

July 2016
THE VALLEY BUSINESS JOURNAL
www.TheValleyBusinessJournal.com
Funding For Your Business – A New Approach
MONEY
by
Ted Saul
Sr. Staff Writer
Raising money for a non-profit
organization used to require a variety
of activities that might include phone
soliciting, mailing letters or asking
for funds through the media. These
time-consuming tasks can end up being
a full time job. But with the introduction
of fund-raising websites such as FundRazr,
FirstGiving and DonorsChoose
the process has become much easier. At
these sites, a donor can easily invest in
the non-profit of their choice.
The passing of the JOBS Act of 2012
opened up the opportunity to finance
businesses in a similar manner through
investment crowdfunding. This means
that if you are looking to fund a startup or
raise capital to expand a business there is
now direct access to investors. Sites such
as AngelList, Early Shares and RockThe-
Post give you the opportunity to put your
business on display for those looking for
a good investment.
While the documentation requirements
may vary from site to site, a
fifty page business plan probably won’t
be required. However you will want
to take time to develop a proposal to
cover certain points. Start with an eye
catching summary of your plans. Keep
in mind that you are probably up against
many others so write in such a way to
capture the reader and make them want
to read further. Telling the story clearly
is important and having it proofed is a
good idea as well. Better yet, have the
project reviewed by a third party to see
if they can grasp your objectives.
Secondly, let the reader know
19
about you and other founders. Include
relevant background information that
builds creditability and demonstrate
that you will be able to lead the business
to success. Thirdly, give the reader
reasons why they should invest in your
company. Include marketing plans for
the products or services. Explain how
customers will be attracted and the
plans to build a customer base. Also,
identify your niche market and why you
will be different from competitors. Finally
share who is on your startup team
including key partners and consultants.
If traditional funding attempts haven’t
worked, try this new approach. As
usual use your favorite search engine to
find a complete list of sites available. Be
sure to do your homework and perform
complete background research.
Ted Saul is a business coach that assists
with Business Plans and Project Management.
He holds a master certificate
in project management and has earned
his MBA from Regis University. Ted
can be reached on LinkedIn, TedS787
on Twitter or emailing Ted@tsaul.com.
The Individual Need for Disability Insurance
MONEY
by by
Julie Steve Ngo Fillingim
Many people believe that their biggest
asset is their home. For most of us,
our biggest asset is the ability to work
and earn an income. Not being able to
work – due to a job loss or a disability
having taken away the ability to work
is often financially devastating.
Everyone who works for a living is
familiar with what can happen if they
lose their job. On the other hand, the
possibility of a serious disability is a
risk few seem to consider. How likely
is it that you will become seriously disabled?
According to one study, 30%
of all Americans between the ages of
35 and 65 suffered a disability lasting
at least 90 days.¹
Don’t Count on Social Security
– Individuals do manage to qualify for
disability benefits from Social security.
However, the Social Security definition
of “disability” is so strict that, in 2010,
only 36.3% of initial claims for Social
Security disability benefits were accepted.²
Obviously, something else beyond
Social Security is needed.
Group Disability Insurance –
Many employers will provide, or make
available, disability insurance on a
group basis. However, even those
who are covered by a group policy
can still be at a substantial risk. Employer-sponsored
disability policies
seldom replace more than 60% of your
monthly salary. Further, many policies
have a monthly maximum benefit that
may be far less than what some people
earn. Income taxes can also be an issue
of the employer is paying the full cost of
the coverage and not including it in the
employee’s income, disability benefits
are fully taxable. If an employee pays
for the disability insurance with after-tax
dollars, the benefits are received free of
income tax.³
Individual Disability Income Insurance
– If group coverage is not available,
the solution may be individual disability
income insurance. Although individual
policies can cost more, as long as you pay
the premiums with after-tax dollars, the
benefits are not taxable. Plus, an individual
policy allows you to tailor its terms to
fit your own needs. When shopping for
an individual disability policy, consider
the following:
• Company strength: You need to know
if the company is financially sound.
• Definition of disability: Look for a
policy that defines disability in the
broadest terms possible. Some policies
will not permit you to work in a
different occupation and still collect
disability benefits.
• Elimination period: How long must
you wait before disability payments
begin?
• Benefit period: How long will you need
coverage? Both short-term and longterm
disability benefits are available.
• Inflation protection: Try to find a policy
that adjusts benefits for inflation.
¹ Based upon the 1985 Commissioners’ Individual
Disability Table.
² Annual Statistical Report on the Social
Security Disability Insurance Program, 2011, July
2012. Table 60, Medical decisions at the initial
adjudicative level, by year of application and
program, all decisions.
³ The discussion here concerns federal income
tax law only. State or local law may vary.
Are You an Employee or an Independent Contractor?
If you are a business owner hiring
or contracting with other individuals
to provide services, it is important to
determine whether the individuals
providing services are employees or
independent contractors. In making the
determination, all information that provides
evidence of the degree of control
and independence must be considered.
Under common-law rules, anyone
who performs services for you is your
employee if you can control what will
be done and how it will be done. Therefore
an employer-employee relationship
exists when the person for whom
services are performed has the right to
control and direct the individual who
performs the services, not only as to
result, but also as to details and means.
The general rule is that an individual
is an independent contractor if the payer
has the right to control or direct only
the result of the work and not what will
be done and how it will be done. If you
are an independent contractor, you are
self-employed. Therefore your earnings
are subject to Self-Employment Tax.
Generally, you must withhold income
taxes, withhold and pay Social
Security and Medicare taxes, and pay
unemployment tax on wages paid to an
employee. You do not generally have to
withhold or pay any taxes on payments
to independent contractors.
Common law recognizes three
categories of evidence to consider when
determining the degree of control and
independence:
1. Behavioral: Does the company
control what the worker does and how
the worker does his or her job?
2. Financial: How the worker
is paid (W2 or Form 1099-MISC),
whether expenses are reimbursed, who
provides tools/supplies?
3. Type of Relationship: Are there
written contracts or employee benefits
(such as pension plan, insurance, vacation
pay)? Will the relationship continue
and is the work performed a key aspect
of the business?
Businesses must weigh all these
factors when determining whether a
worker is an employee or independent
contractor. If, after reviewing the three
categories of evidence, you are still
unclear whether a worker is an employee
or an independent contractor, you
can file Form SS-8, Determination of
Worker Status for Purposes of Federal
Employment Taxes and Income Tax
Withholding with the IRS. The form
may be filed by either the business or
the worker. The IRS will review the
facts and circumstances and officially
determine the worker’s status.
If you classify an employee as an
independent contractor and you have no
reasonable basis for doing so, you may
be held liable for employment taxes for
that worker.
Esther Phahla is a Certified Public
Accountant and Certified Tax Coach in
Temecula. She also holds a Master’s of
Science in Taxation. She is the Best Selling
Co-Author of a Tax Planning book
“Why Didn’t My CPA Tell Me That”.
She can be reached at (951) 514-2652
or visit www.estherphahlacpa.com.
MONEY
by
Esther Phahla,
CPA, CTC, MST