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Q: Can I withdraw money from my retirement plan without penalty if I use the money to buy my first home?
A: Generally, any withdrawals that you make from a qualified retirement plan before you reach age 59 ½ are subject to a 10-percent penalty.
There are exceptions to the rule, but not for buying a first-time home.
However, depending on the type of retirement plan you have, you may be able to borrow money from your plan to purchase your first home. Your plan administrator should have written information that explains when you can borrow funds.
If your retirement ...
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Q: I want to purchase a small business. How do I know how much it’s worth?
A: Valuing a small business can be quite a challenge. Having an appraisal done will give you the most accurate estimate of the value. But, most small-business buyers find this process far too expensive.
Without an impartial appraisal, you’ll need to investigate and evaluate the business.
Obtain tax returns, balance sheets and other financial documents. Also get copies of any ongoing loans, contracts or leases. Ask your tax or financial advisor to review these documents with you.
If the business owns significant assets such ...
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Q: I’m self-employed and have a corporation. I work out of my home. If I pay someone to come to the house to watch my son during workdays, can I deduct the cost as a business expense? A: Unfortunately, this is one area where being self-employed is less advantageous than being a corporate employee.
Employers generally pay for employee child care through a cafeteria benefit plan. The cafeteria plan must file an annual report with the IRS and can’t provide more than 25 percent of the benefits to highly compensated or key employees.
Based on the information you provided, the ...
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Q: How can I select investments that are best for me and my micro-business?
A: Before you select investments, you must identify your short-term and long-term needs, your appetite for financial risk, and your personal circumstances (age, children, financial state of your business, etc.). These factors are crucial to making smart investment decisions.
For instance, if you are risk averse, you might choose to invest in certificates of deposit that guarantee a return and are insured by the Federal Deposit Insurance Corporation (FDIC). If you want a long-term investment and are willing to take moderate financial risk, you could invest ...
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Q: Are there loans available specifically for woman- or minority-owned businesses or for low-income entrepreneurs?
A: Yes, there are numerous organizations that serve those types of micro-business owners. Here are two worth checking out.
Count Me In offers micro-loans to women business owners nationwide. The organization takes into consideration your type of business, prior experience, credit history and how you intend to use the money. The loans range from $500 up to $10,000 and are available for startups or existing businesses. You can learn more at the Web site, www.countmein.org.
The Association for Enterprise Opportunity (AEO) is a funding ...
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Q: Can you recommend an accounting software package for my micro-business?
Do these packages contain spreadsheets that I might need to calculate
some of my information?
A: You can choose from a number of accounting software packages that are useful for micro-businesses.
QuickBooks from Intuit is used by many small-business owners. It provides all of the financial and tax essentials, but doesn't offer much flexibility.
For more flexibility, Peachtree from Sage Software might be a better choice. It's also simple to learn.
A-Systems Accounting Software from A-Systems Corporation is work a look, too. It includes free multi-media training.
All of these products ...
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Financial ratios are used to evaluate the financial fitness of your business. If you familiarize yourself with these ratios and monitor them regularly, you can better determine if your financial condition is improving or deteriorating.
Here are some of the more commonly used ratios and an explanation of the information they provide. Profitability measures the returns on assets and equity. It tells you how efficiently your investment is earning income. Gross profit margin = gross profit ÷ sales Net profit margin = net income ÷ sales Return on Equity (ROE) = net income ÷ equity
Liquidity measures your ability to ...
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DBA stands for “doing business as.” It’s known in some states as an “assumed name certificate.” Your DBA is an assumed or fictitious name under which you conduct business.
In many instances, a DBA is required before you can obtain a state or local business license. With a DBA, you can use your assumed business name when opening a business bank account, making payments to suppliers, receiving payments from customers, and entering legal contracts.
In some states, DBA registration is conducted with a state agency, such as the secretary of state. In other states, you register your assumed name at ...
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Preparing a budget, particularly when starting a new business, isn't just a good idea; it is vital to your success.
Start by purchasing a small-business accounting software package. Use the chart of accounts provided by the software to see the types of expenses you can expect your business to incur. You'll see expenses such as rent, utilities, insurance, taxes, and dozens of other items. Based on your anticipated expenses, plug in dollar amounts for the fixed costs you expect during the next 12 months.
Next, identify customers and related sales volumes. Try to project your revenues for the next 12 ...
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The accounts in a chart of accounts are organized
in a particular way so that financial statements can be prepared efficiently.
The five major types of accounts are as follows:
Assets Liabilities Equity and Retained Earnings Income Expense The assets, liabilities and equity accounts are
included in the balance sheet of the financial statements. The income and
expense are included on the income statement. At the end of the reporting
period, the net income or loss at the bottom of the income statement is added to
(net income) or subtracted from (net loss) the retained earnings on the balance
sheet. After this amount is added to the ...