Monthly Archives: November 2014

What is a Self-Directed IRA?

Individual retirement arrangement or IRA’s are very common and well-known. Normally when someone owns an IRA they invest in stocks, bonds, and mutual funds, but did you know that there is alternative arrangement, called a self-directed IRA?

A self-directed IRA allows an individual to invest in a wide array of assets, including real estate, private equity, and to make private loans. There are prohibited transactions though, such as living in a property owned by the self-directed IRA, so you must be careful to comply with the rules.

Why Use a Self-Directed IRA? Because of the ability to invest in non-traditional assets, you have the ability to earn a higher rate of return and to diversify your investments from traditional stock and bond portfolios.

Traps to Be Aware of: The easiest mistake to make is to not be aware of the tax traps of investing in private equity or real estate. For example, if you invest in a restaurant that is formed as an LLC, then the income from the LLC will be “passed-through” to the IRA. Although this is allowed, the income is considered “unrelated business taxable income” and would trigger tax on the income. A way of getting around this is to invest in a company organized as a c-corporation and receive dividend income.

Other Traps: These traps are called prohibited transactions and if you engage in them then the IRS will tax all of your IRA assets as a distribution as ordinary income plus penalties, when applicable. A sample of prohibited transactions includes borrowing money from your IRA, selling property to it, using it as security for a loan, and many other self-dealing transactions.

Despite the traps that need to be avoided, a self-directed IRA may be appropriate for your portfolio. As with any investments you need to perform your due diligence to choose the right investments, IRA custodian, and advisors.

Affordable Care Act Provisions You Should Know

There are many provisions and rules to know about Obamacare so let’s start with some basics that you should know.

Individual Shared Responsibility: This provision requires you and your family to have qualifying health insurance, otherwise you will need to make a responsibility payment (really a tax) on your 2014 tax return. The payment is the greater of 1 percent of your household income that is above your tax return filing threshold or a flat dollar amount of $95 per adult and $47.50 per child, limited to a family maximum of $285.

Small Business Health Care Tax Credit: A small business, defined as having fewer than 25 employees who work full-time, may be eligible for a tax credit to reduce the health insurance premium cost. The maximum credit is 35% of premiums paid for health insurance as long as the employer pays at least 50% of the premiums. Also, the average annual wages of employees must be less than $50,000.

Premium Tax Credit for Individuals: If you qualify, you may be able to receive a credit for your health insurance. To be eligible, you must satisfy the following requirements: You need to purchase your health insurance through the Health Insurance Marketplace, you need to have household income between one and four times the federal poverty line (for a family of four the range is $23,550 to $94,200), and you can’t be eligible for other coverage, such as Medicare.

Effectively Marketing Your Business

Technology is constantly changing and so has the way a business can market. Even with these changes there are two basic ways a business should focus their marketing.

Marketing to Existing Customers: This is when you focus your efforts on people who currently make purchases from you. LL Bean does an excellent job at this. Once you order from them, they will include you on their email distribution list to alert you of sales or new items. They even send out a small seasonal catalog for clothing, home goods, and outdoor supplies.

The key is to create loyalty and to help your customers think of your business for a variety of their needs, unlike the old expression, “Out of sight, out of mind,” which is what you do not want to happen. Retaining existing customers should be a priority for all businesses, as it is much costlier to acquire a new customer.

Marketing to New Customers: There are numerous methods to bring in new customers, including referrals and word of mouth from existing customers, Internet marketing, direct marketing, and networking/rainmaking. No matter which method you choose you need to know and do the following:

–           Target Market: You need to spend your efforts on potential customers who are ready, willing, and able to make purchases from you, otherwise nothing else matters. Determine who these customers are and spend your time and money there.

–          Communicate Your Offer: What are you offering that will entice potential customers? Is it a solution to a problem? Free shipping and returns? Top-notch service?

–          Follow-Up & Serve: This may sound like a given, but if you are offering 24 hour emergency plumbing services, and do not answer the phone, then you are probably losing potential customers.

Marketing also does not have to be expensive or complex. It just has to be well-thought out to make it as effective as possible.