January is typically the time when people resolve to get in shape or quit bad habits. But business owners can also make New Year’s resolutions to get their finances and other business affairs in order as a fresh start to the New Year. Here are five New Year’s resolutions to consider adopting in 2015…
Business Succession Planning. The issue of business succession is one that confronts almost all privately held businesses. Unfortunately, the failure to consider succession planning at an appropriate time can adversely affect a retired founder who is relying on continued income from the business, and may impact the continued viability of the business itself. Start to think about business succession early on and continue to think about it on a regular basis; this will enhance the prospects for a successful transition. While planning for business succession is not a guarantee that the plan will succeed, failure to plan will generally guarantee a lack of success.
Board of Directors. Most small businesses can benefit from having an advisory board. Call it a brain trust or something else, it is basically a group of professional and business people who meet periodically, but regularly, to review all aspects of your business and give independent critical advice. In forming the board consider geographic diversity, size of members’ companies and industry sectors. You want the board members to speak freely, so relationships among the board members are important. Once you know who you want, you should personally call each prospective member to speak with him about it.
Worker Misclassification. Despite the widespread use of independent contractors and written agreements making clear that those providing the service are independent contractors, not employees, an increasing number of companies face liability for claims that they have misclassified those workers in violation of state and federal laws. While the financial incentives for companies to classify them as independent contractors remain strong, challenges to the classification of workers are on the rise and the liability for misclassification can be substantial. From the government’s point of view, employers that misclassify employees as contractors fail to withhold taxes and other deductions and also fail to pay the employer’s share of the Social Security contribution. If they are employees and not contractors, they are entitled to be paid overtime for work in excess of 40 hours per week and may also be entitled to participate in certain of the employer’s employee benefit programs.
Residential Mortgages. Residential mortgage rates have remained low. In fact, in the last few weeks they have even dropped a bit. If a purchase is on your radar, this may be the time. If you haven’t refinanced in a while, you may want to consider it. Remember, however, that there are costs associated with a refinance. Here are some examples: If you live in a home in Bergen County worth $600,000 and want to refinance for $400,000 good deals abound. If you have excellent credit you can get a 30 year fixed rate mortgage for about 3.75 percent with no points and about $1,000 in closing costs. If you would consider an ARM, you can get a 10/1 ARM (interest rate guaranteed for 10 years) for 3.375 percent with no points and about $1,200 in closing costs.
Estate and Gift Tax Planning. Review your estate plan and documents to reflect changes in your financial or family situations. The increased federal estate tax exemption ($5,430,000 per individual in 2015) allows a husband and wife who have used their lifetime exemptions to gift $180,000 in addition to annual exclusion gifts ($14,000 each, per donee). The continuing low interest environment makes intra-family loans and certain strategies, such as a grantor retained annuity trust and a charitable lead annuity trust attractive, while others such as a charitable remainder trust and a qualified personal residence trust, remain less attractive.
By Louis Pashman, co-founder and member, and Joseph Goldman, head of the Trusts & Estates practice, of Pashman Stein, a commercial law firm based in Hackensack. Contact them at email@example.com or firstname.lastname@example.org.
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