Employment Agreements – It is in the company’s best interest to set up an employment agreement between the employer and the prospective employee, if not immediately upon employment, then as early in the term of employment as possible. This agreement should explicitly spell out the terms and conditions of employment. The establishment of this agreement by the employer and subsequent acceptance of this agreement by the new employee protects many of the company’s key assets and properties, including the customer base and the staff.

Two major clauses of many employment agreements are non-compete clauses and non-solicitation agreements. Inclusion of these clauses further protects the company in the event that the employee leaves the company (and maybe under not-so-positive terms). By stating that an employee is not contractually permitted to work for a competitor immediately after termination of employment (non-compete) or not allowed to take his or her clients with him or her after termination of employment (non-solicitation), the employer is effectively protecting the system that is in place in the company. The employee can take the knowledge and experience gained during that term of employment, but can’t effectively do anything with that knowledge that would hurt the company.

Payroll Processing – When adding a new full-time employee, the onus also falls on the company to effectively add that employee onto the payroll. This is a task that is far more complex then adding a line item onto a spreadsheet, and given the barrage of recent legislation on a state and federal level, this task is more complex than ever.

While there was a time that a company could regularly consult with a CPA to get a hire added to the payroll, that process has become far less frequent in recent years. Dave recommends that a small business that is hiring new employees instead consult a reputable, nationally-regarded payroll service, such as ADP or Paychex.

The third alternative to using a CPA or payroll service would be to administer payroll in house. On the surface, this would appear to be the most cost-effective method for a small business to handle this task. But thanks to the recent legislative developments that affect payroll administration (including, but not limited to, the Pennsylvania New Hire Reporting Act, the further development of I-9’s, overtime and minimum wage laws, the Family Medical Leave Act, COBRA issues), doing this task yourself becomes more trouble than the money you save is worth. As a result, you may be putting less emphasis on your core competencies.

Sales employees – Sales employees are generally a different animal than other types of employees. Instead of working on a straight salary basis, most sales employees instead work on a combination of salary and commission. As with other terms of employment, business owners are encouraged to explicitly lay out the percentage-based breakdown of how these two categories will work in the employment agreement.

For one thing, business owners are advised to be mindful when setting up a “draw”, or a current payment in advance of future anticipated commission, for their sales employees. While it may be beneficial to the sales representative in the short term, there’s the odd chance that the performance may not live up to the expectation that the draw assumes.

Watch the Law - Business owners, whether dealing with sales or other employees should also be mindful of overtime and minimum wage laws. For instance, if you have a full-time employee who is making less than $24,000, but is spending more than 40 hours a week in the workplace, that is a red flag to the employer that “time and a half” compensation is due for any time worked over the 40 allotted hours. It is for this reason that employers should be mindful when dealing with new hires, both young and old, that work for less than this amount.

Business owners should also be mindful when it comes to expenses to salaried employees and how these expenses relate to payroll. For example, if an employee, for whatever reason, requests an advance in compensation (akin to a draw for a sales rep), that money should run through payroll, so that the proper taxes can be taken out of it.

In addition, as discussed on prior editions of “Ask the Accountant”, employers should be mindful of non-salaried forms of compensation for employees as they relate to payroll tax. If an employee wants to run a cell phone bill through the company or lease a car through the company, there are two ways to go about doing this. The first way is for the employee to be directly reimbursed for expenses such as these, where the employee submits a bill, the bill is paid through the company, and, if the employment agreement calls for it, the expense will be taken out of the employee’s paycheck.

The other way is for the employer to allot an “allowance” to the employee, so that the employee can process these expenses outside of the company. While this way may lead to less internal hassle, it is imperative that this allowance is to be run through payroll, much like standard salary, as this allowance is subject to the same payroll taxes as other monetary forms of compensation.

As always, Dave recommends that you consult with your CPA or financial planner should you be confused on any of the aforementioned issues. And as always, Dave and his staff at Wilke and Associates invite you to contact them as well, either by calling them at (412) 278-2200, or on the web at www.wilkecpa.com.

There are many ways an entrepreneur can go about funding a business for both the startup and growth phases. On December 17, Dave detailed these methods, and categorized them four ways.

1. Operations – There are five major ways a business can get funding via the day-to-day operations of the business.
   • Customer payment: One way is to encourage customers to prepay for the good or service, thus ensuring a healthy amount of capital up front. One way to do this is to establish some sort of discount for payment in advance, be it 10% or even 50%, depending on the industry. While this is common practice for industries that produce goods, it’s a growing practice for industries that produce services, such as accounting or plumbing. Be careful not to encourage too great a discount, however, for fear of ultimately losing money when all is said and done. Pay attention to your margins.
   • Factoring accounts receivable: Another way to secure some capital for your business is to leverage the money that you bill your clients for your good or service. One thing you can do is process your accounts receivable through a factoring company. You can take an outstanding invoice to a customer, then sell it to a factoring company for a percentage of the amount of the invoice (generally 75-80% of the invoice is a good number to shoot for). The factoring company would then be responsible for collecting the entire invoice amount from the customer. You then have a substantial amount of your invoiced dollar amount in hand, without the hassle of spending valuable time and resources chasing down clients in order to collect the entire amount.
   • Accounts payable: - Upon purchasing a piece of equipment from a vendor, try to negotiate a payment plan such that you end up paying for the equipment over time, maybe via a monthly or bi-monthly plan, rather than paying the entire amount up front.
     Another tactic may even be more effective, but also more tricky, as it usually requires a healthier customer/vendor relationship. Don’t be afraid to offer a vendor the promise of multiple referrals in exchange for a discount to you for the good or service that vendor provides. If you can successfully promise a vendor that you can land them a number of potential customers in exchange for a discount on the things you purchase, a smart vendor would be more than willing to trade a short term percentage discount on one customer for multiple customers a month or two down the road.
   • Purchase commitments – Offer your vendor an exclusive purchase commitment over a period of time (maybe a year or so) in exchange for a discount on goods services, or even an up-front payment. A great example of this would be the “pouring rights” that major soft drink companies bid on for major events, such as the Three Rivers Regatta. If Coke, for example, pays $50,000 for the rights to exclusively be sold at the event, it’s a short term expense for what will ultimately be a major gain for Coke, and it gives you a nice amount of capital with which to operate.
   • Government grants – These are very complicated to procure, but they can be effective. Certain organizations offer a self-employment assistance program, where you can get working capital for the initial stages of your business, generally by leveraging such sources of income as unemployment payments.
     (and when you’re all tapped out of operational resources….)
2. Debt
   • Bank/SBA loan – rather than pay a ten or twenty percent fee for a factoring agency, take on a bank loan to pay only seven percent interest.
     And if you need to, contact the SBA in hopes of getting them to guarantee the loan, thus making the bank loan a little easier to procure.
   • Leasing equipment – You can purchase the equipment you need to start a company through a leasing company, thus putting you on the hook for monthly payments for that equipment. While you’ll have immediate access to everything you’ll need to get your business up and running, you’ll also carry the responsibility that goes with it.
   • Family and Friends – There’s always the option of hitting up those close to you for a loan to get you off the ground. Depending on who you ask, this could be a successful method, but in the long run, it really isn’t all that advisable an option, lest business issues and problems get in the way of personal interaction.
     (and when your debt options are tapped out….)
3. Equity
   • Angel Investors and Venture Capital – One of the most popular means of securing financing. There are plenty of individuals and companies out there looking for the right company in which to invest. If your business plan, and your ability to present it, is up to snuff, you’d be able to get as much money as you need, in exchange for giving up the corresponding stake in your company.
   • Giving your staff and employees “skin in the game” – Rather than paying a straight salary to your staff, give them some equity, provided they’ve worked hard enough to earn the right. Traditionally, employees who have equity in a company tend to work harder, so that they can share in the resulting profits.
   • Friends and family – Much like debt financing, you can offer your loved ones a stake in the company in exchange for the capital you need. Also not advised as a means of financing, as you’d be giving up control of your company in addition to the potential for personal relationships to suffer as a result of business problems.
   • Going public – The Initial Public Offering (IPO) is generally associated with the big “payday” for a company’s funding prospects, but it’s also subject to the most scrutiny, especially in recent years thanks to Sarbanes-Oxley and other similar restrictive legislation.
   • Private Placement – The other big payday comes without the government legislation of the IPO, so it’s generally recommended as a way of getting a healthy amount of working capital, but without all the rules and regulations of a public company.
     (And if you’re in desperate need of a last resort….)
4. Hard Money (ill-advised)

   Generally, there are sources of funding that you should not touch under any circumstances with the goal of financing your company. One such source is your 401K savings. If you touch the savings before the traditional maturation period expires (when you turn 59 ½), you’ll pay a severe penalty for the right to do so. You could also use your credit cards to finance your businss, but the interest is potentially back-breaking in the long run, should you not be able to pay your bill on time and in full. Borrowing against your home equity or your life insurance are also not advice, in addition to (once again) relying on friends and family members.

As you can see, there are a lot of options out there to get the money you need. Some of these are more beneficial than others. As always, Dave advises that whatever you do, be sure to consult with a financial planner before you do anything towards securing financing.

For more information, contact Dave at Wilke and Associates at (412) 278-2200 or online at www.wilkecpa.com.

1. Determine your method of accounting (cash vs. accrual) – For any new business, it’s recommended that, upon initial creation of the business, the owner determines whether or not it will employ a cash-based or accrual-based accounting method. (Cash-based accounting means that you credit the income as being in place at the time of the transaction, whereas accrual-based accounting means that the income is credited a short time after the product is distributed or the service is executed.)

   Generally, accrual-based accounting is better for retail businesses, whereas cash-based accounting is better for service businesses.

2. Delay production and sales in December - By doing this, you can push a lot of the resulting income into 2006. In addition, you are also deferring a good portion of the tax liability as well.

3. Accelerate expenses/deductions. – If you have a lot of office equipment to purchase or other materials or services, do it during December of the current year (a “holiday shopping spree” of sorts). This is another way to decrease a company’s tax liability in 2005. A similar method is to make sure all bills are paid off before the end of 2005, even if you find yourself paying a bill a month or two earlier than you’re generally used to.

4. Income shifting – If you have a spouse or any children, they provide great opportunities for shifting some company income around, thus decreasing your tax liability for 2005. Basically, at any opportunity that arises where a spouse or child does work that applies to the betterment of the company (answering phones, making a delivery, “consulting” by way of talking about company issues), you can pay them for what they’re doing. A good way to take advantage of this scenario is to involve a 401K or other retirement plan. If you pay your spouse for work that is done, then the spouse contributes the bulk of that payment to a 401K plan, you actually get two tax advantages for the price of one, as the initial payment defers your company’s income, and your spouse’s deposit into a tax-deferred retirement account will defer the income tax as well.

   (NOTE: The key with this strategy is documentation. For every instance for which you defer income by way of payment to a spouse or child, you must have proper documentation of hours worked, duties performed, etc. Failure to do so will put you at serious risk when it comes time for an audit.)

5. Reinvest your profits - Just like in Tip #3, you can reinvest your company’s profits for 2005 into more office equipment, or another company car, or software that improves productivity. All these purchases, so long as they’re business-related, defer tax liability for 2005.

   For federal tax purposes, a business is allowed to expense $105,000 worth of assets in this manner for 2005. This number is targeted for “small-businesses”, which are categorized as companies that spend under a $400,000 for assets. “Large businesses”, those that spend OVER $400,000, don’t qualify for that expense.

6. Reinvest in Research and Development – If you don’t want to reinvest in hard assets, you can always reinvest in a new concept or strategy. If you spend money on a new design or a new form of software in 2005, that can also reduce your tax liability for this year.

7. Take advantage of year-end tax credits – There are a number of tax credits that are available at years-end, ones which come “right off the bottom line”, in that they are credited to the amount you owe, as opposed to your income.

   A major source of tax credits come from your kids. Whether it comes from tax credits earned by putting a child through college, or simply by having a child who may not be college age, there are credits to be had within your own household. There are also child care credits as well, should you choose to go that route.

   In addition, there are also earned income tax credits and real-estate improvement taxes that can be used to reduce 2005 tax liability as well. For the latter, there are tax credits available should you make your facility more accessible to the handicapped. You can earn up to 50% of your costs of making adjustments to that end in the form of tax credits. There are also tax credits available for real-estate rehabilitation.

   Also, down the road, there will be energy tax credits available. These are the ones that Dave spoke of about a month ago on the program. Unfortunately, they won’t kick in until 2006, but it IS something to look ahead to when you sit down for some long-range planning.

As always, if you’re confused as to where your company stands with regard to any of these strategies, Dave suggests that you consult your tax advisor for more information. For more information on the tips that Dave provided, contact Wilke and Associates at (412) 278-2200 or on the web at www.wilkecpa.com.

With the Major League Baseball post-season in full swing, Dave decided to break the implications down into “singles” for individuals, and “home runs” for businesses.

1. SINGLES
   • Personal residence – People who purchase energy-efficient windows, appliances, and HVAC equipment for their primary home (as opposed to a secondary home, like a summer home) anytime after January 1, 2006 will be eligible for up to $500 in tax credits. (These credits are subject to the alternative minimum tax.). This also applies to those who employ solar heating and cooling as well as other forms of solar energy to their homes.
   • Automobile – One of the growing trends in our more energy-conscious society is the emergence of hybrid automobiles on our roads. Tax credits of up to $3,500 will be offered to those who purchase these hybrids (specifically those that weigh under 8,300 pounds) for personal use. Plus, as the technology develops for fuel cell vehicles, look for credits of up to $12,000 for these vehicles as they become more prominent.
2. HOME RUNS
   • Commercial buildings – Starting January 1, 2006, businesses that build buildings using energy-efficient means of heating, roofing, lighting, and other features will be eligible for a full 100% tax credit for these installations. Same goes for existing buildings that make the upgrade to these energy-efficient features. In a sense, this would be the equivalent of being able to expense these installations.
     As a result, look for more and more energy-efficient commercial buildings along our landscape over the next few years. The numbers speak for themselves.

As always, Dave suggests that you consult with your accountant to clear up any confusion that may result from this policy. If you have any more questions about the tax fallout from the 2005 Energy Policy Act, give Wilke and Associates a call at (412) 278-2200, or check them out online at www.wilkecpa.com.

1. Deadlines - Before you do anything, be aware that many corporations miss the March 15 deadline for filing their taxes. Those corporations are advised to consult their accountant to file an extension (Form 7004).

2. Submitting an incorrect Tax I.D. Number – Much like individuals do with their Social Security numbers, sometimes, corporations accidentally transpose two digits in the tax I.D. number, creating a mess for the I.R.S., who use those numbers as the primary reference point for an corporation's tax history. If you’re using an accountant to prepare these taxes, be sure to double and triple check the work involved.

3. Submitting a name that doesn't match the tax I.D. number – This can happen on two fronts: if there is an incorrect name submitted on the return itself, or if there is an error in the listing of the company’s officers on the tax return.

4. Misrepresentation of the business activity code – The business activity code is an essential piece of information, as the I.R.S. uses that code to build an expectation of the company’s tax return. Any discrepancy in this code, when compared to the actual activity of the business in question, could lead to an audit of the entire return.

5. Initial Year Tax Return – If 2004 is the first year for which your company is filing taxes, be sure to check the box on the form that says “Initial Tax Return.”
   (On a related note, be sure to look for any “Short year” tax issues that come up as well.)

6. Accounting Method – This is often a troublesome spot for companies to get caught in, as sometimes, accountants will note that the company’s accounting method is a cash method when it is actually an accrual-based method, or vice versa. Getting this straight is especially critical during the company’s first year, when this method of accounting is generally selected.
   More often than not, businesses that are just starting out use a cash-based method, where income is determined by what a company takes in when a company takes it in, with expenses determined by what a company spends when it spends it. This is due to the fact that, in the early stages of a business, that business needs as much money as possible up front, to cover startup expenses. As the business grows and expands, it may be more advantageous to go with an accrual-based method, when accounts receivable and accounts payable are factored in to the income statement.

7. Failure to properly note the owner’s salary – This comes up quite often in S-corps, where the owner will not denote the salary he or she takes home as “officer’s compensation”, as listed on page 1 of the return. Failure to properly note this salary will likely increase that company’s chance of an audit.

8. Misclassifications – Often, there are misclassifications within the details in the category of Cost of Goods Sold (COGS). Primarily, this is a result of classifying many of the costs that should be considered COGS (basically, any cost that goes into the production of the final product or service) under the vast category of “other” or “general” deductions, leaving the COGS amount at a very low level, sometimes zero. The implied indication that a company has no Cost of Goods Sold could very well lead to an audit.

9. Tax Credits – Often, corporations, especially S-corporations may unknowingly become eligible for a variety of credits that aren’t factored in come tax time. One such credit applies to companies that incur any fees in the process of setting up a company retirement plan. Credits such as these should be noted on forms that are filed as attachments to the overall return.

10. Depreciation – In general, accountants maintain depreciation schedules for all of the depreciable assets a company possesses. It is a good idea to make sure that your company is on the same page with your accountant in terms of all the different methods and areas for which depreciation can be calculated.

Dave suggests that you go over these areas with your accountant so that your accountant is on the same page when it comes to properly handling these critical areas.

For more information on these issues, contact Wilke and Associates at (412) 278-2200 or on the web at www.wilkecpa.com.

1. Submitting an incorrect Social Security Number - Sometimes, filers accidentally transpose two digits, creating a mess for the I.R.S., who use those numbers as the primary reference point for an individual's tax history.

2. Submitting a name that doesn't match the social security number - Often, the cause of this error involves changes to a married name, without prior notification of the Social Security Department. Failure to notify the department leads to needless hassle as they try to form a connection of name and number that may not be there in the first place.

3. Miscalculation of Child Credits - Recently, the income limit for those who qualify for a child credit has increased to over $100,000. This increase is better for a middle-aged worker, but may also create more of a problem if this credit is not calculated correctly.

4. Math errors - Often, filers simply miscalculate a percentage here or accidentally subtract one credit twice. Easy to overlook, but troublesome to overcome.

5. Alternative Minimum Tax - Yet another calculation to consider for those whose income is in excess of $80,000. More calculations to consider mean more chances to make an error or two that could cost you in the long run.

6. Failure to consider all 1099's and W 2's - If you overlook one of these reports in your filing, your numbers will certainly differ from those of the I.R.S., who have all of these reports in full. Be extra careful here.

7. Misrepresentation of filing status - More often than not, this one pops up when couples that are separated are involved. The two most common errors in this case occur when (1) both members of the separated couple file as "single" when technically, they are still married and (2) each member of the separated couple files as "head of household", when again, they are still married.

8. Use of attachments - It is critical to attach any requested forms to reflect income. One such form that is sometimes overlooked is the 1099-R, reflecting the distribution of retirement accounts. This is a critical one that is required for submission with tax reports, but only if there is withholding on it.

9. Misrepresentation of childcare credit - Tax filers can receive credit for using "day care" services to watch their children. When taking this into consideration, it is essential to have the tax ID number for that day care service.

10. Misrepresentation of estimated payments - When determining the amount of the estimated payment, filers often enter the wrong amount, or enter the correct amount, but in the wrong location on the tax file.
    In addition to watching for these errors when filing your own taxes, Dave suggests that you go over these errors with any preparer you may use so that that preparer is on the same page when it comes to avoiding these mistakes.

For more information on these errors, contact Wilke and Associates at (412) 278-2200 or on the web at www.wilkecpa.com

The Jobs Creation Act is being hailed as one of the largest tax revisions in years, yet few seem to be aware of it. The move was designed to curtail the increasing practice of corporations which took advantage of significant tax breaks by dealing overseas.

As a result of this act, there are four major aspects that a small business owner would be wise to consider:

1. The Domestic Producer Credit:The Jobs Creation Act allows for a three percent (3%) tax rate credit for Corporations, S-corporations, Limited Liability Corporations, Limited and General Partnerships. Generally, the credit will cover “production activities”, which will cover such areas as construction, manufacturing, architecture. For the pass-through corporations, this credit essentially goes directly to that owner him- or herself.

2. Increase in the Allotted Expense Amount: With the Jobs Creation Act, up to $102,000 of purchases can be written off as corporate expenses, an increase of $2,000. (For perspective, as recently as 1993, this cap was only $25,000.) This can cover anything from office equipment, computer software or hardware, so long as said expenses are for business purposes only.
   (One sidebar adjustment is the establishment of a $25,000 cap for S.U.V’s, to be used for business purposes. Previously, there had been no such cap…closing of the noted “S.U.V. loophole”, perhaps?)

3. Adjustment of Depreciation for Commercial Lease-Hold/ Building/Restaurant Improvements: The amount of years for depreciation for these improvements has been drastically reduced from 39 years to 15 years. This will reduce the delay in the deduction of the investments in “bricks and mortar”.

4. Writeoff of Start-up Costs: The process of starting up a business incurs a number of costs on its own, from incorporation costs to acquistion of a bank loan, and related fees along the way. With the Jobs Creation Act, the initial $5,000 of these costs can be written off, much like a standard business expense, and unlike a depreciable item.

As always, for any questions you may have, you are encouraged to consult your accountant for further discussion of these and any issues related to your business. For more information on Wilke and Associates, call them at (412) 278-2200, or check them out online at www.wilkecpa.com.

]]>http://www.taeradio.com/wilke/rss-comments-entry-891993.xmlRon MorrisSat, 31 Jul 2004 17:20:58 +0000http://www.taeradio.com/wilke/2007/1/31/tips-for-choosing-a-business-entity.html101703:1081443:891941(as presented by Dave Wilke on 7/31 edition of The American Entrepreneur)

In general, there are seven entities from which your business can choose to operate, either from inception or acquisition:

• Sole Proprietorship
• General Partnership
• Limited Liability Company
• S-Corporation
• C-Corporation
• Limited Partnership
• Not-for-Profit (not considered here, as there are no profits to tax)

Most people start out as a sole proprietorship; It’s free and it’s simple in that, people don’t have to deal with complexities of taking on other partners. (If you feel your business can handle a second partner, then a general partnership may work best for you).

Beyond the concept of a sole proprietorship, there are a series of questions that should be considered in order to properly determine what entity your business should assume:

• Do you have any personal assets?/Do you have good credit? If the answer to either of these questions is yes, then your business should not exist as a sole proprietorship or general partnership, as those two entities don’t provide any personal asset protection. (i.e. any liability will fall directly upon the owner(s)).
• How many owners in the company (now and 5-10 years in the future)?
• What is the exit strategy of the business (retirement)?
• Any involvement in multi-state activities?
• Are fringe benefits important?
• How will financing be handled (bank/investors)?
• What is the projected income of the company?

Upon considering those questions, you can now focus on the various remaining types of business entities to choose from:

• -Limited Liability Companies (LLC’s): If you’re a single member, the State of Pennsylvania treats LLC’s like sole proprietorships. This is best suited for a company that may lose money over the first couple of years, as that loss is often passed through to a number of investors, as opposed to one owner (sole proprietorship) who stands to lose everything. One caution: the taxes on the LLC’s profits are often the highest of any business entity.
• -C-Corporation Unlike the other entities, a C-Corporation is taxed on its’ profits, not just the flow of income towards its owner(s). This is best suited for a company whose exit strategy is to go public. There is also the prevalence of fringe benefits, such as certain types of healthcare, in C-Corporations that aren’t there in other entities, as the business owner(s) is/are entitled to a pre-tax deduction.
• -S-Corporation – The profits on an S-Corporation generally not taxed, which is an advantage on one hand, but it can also be greater cause for an audit, especially if the chief officer’s salary does not show up on the tax return. That has led to the concept of “Reasonable Compensation”, the idea that an owner has to allow for an undefined salary based on how the business performs. Probably best suited for a company that intends to make $25K - $100K in profits.
• -Limited Partnership – Generally, the biggest decision to consider when taking on a limited partnership entity is figuring out who the general partner is. This entity is the only one that does not pay the Capital Stock Tax in the State of Pennsylvania. Best suited for a company whose profits exceed $100,000.

For more information on Business Entity Choice, contact Wilke and Associates at (412) 278-2200, or on the web at www.wilkecpa.com. Wilke and Associates’ “Ask the Accountant” segment can be heard Saturdays at 9:15 AM on The American Entrepreneur.

]]>http://www.taeradio.com/wilke/rss-comments-entry-891941.xmlRon MorrisSat, 24 Jul 2004 17:20:51 +0000http://www.taeradio.com/wilke/2004/7/24/dave-wilkes-new-hire-checklist.html101703:1081443:891962(As presented by Dave Wilke during his “Ask The Accountant” segment on the July 24, 2004 edition of The American Entrepreneur)

These are some things to consider so that an employer “covers all the bases” in terms of taking on a new hire, and that every step in the process is in full compliance with state and federal employment laws.

1. THE FAIR LABOR STANDARDS ACT – Applies to ANY employer. Some aspects:
   • Minimum Wage Law – Federal law states that the minimum wage is set at $5.15 per hour. However, this amount does vary from state to state, and in those cases, the individual state’s minimum wage trumps the federal minimum wage amount.
   • Overtime – (Recently revamped under the Fair Labor Standards Act) - If an employee works more than 40 hours in a seven-day period, that employee is entitled to a pay of time and a half, provided that employee is not exempt from this law (i.e. salespeople, management, other salaried professionals). One note of caution: If an employee works a 20-hour workweek, followed by a 60-hour workweek, that employee is STILL granted 20 overtime hours, because of that second week, although that employee worked a total of 80 hours over the course of those two weeks.
2. APPLICATIONS
   • Avoid Prohibitive Subjects – In the application and interview processes, employers are prohibited from asking a potential new hire about religion, sexual orientation, race, and other subjects that are irrelevant to the employee’s ability to perform the job for which they are applying.
   • “At Will” employment – Pennsylvania State Laws dictate that, unless indicated otherwise, employment is “at will”, meaning that either the employee can quit or the employer can fire the employee at any time without cause on either side, with no long-term contract in place.
3. COMPLIANCE WITH TAX ISSUES
   • W-4’s – This form is to be filled out by EVERY employee and held by the I.R.S. to indicate that taxes are to be taken out of the employee’s payment.
   • I-9’s – This form is to be filled out by EVERY employee and maintained on file at the employer’s place of business to indicate that the employee is not an immigrant or illegal alien working in the United States without proper documentation
4. SOME ISSUES FOR BIGGER COMPANIES
   (generally, the following apply to companies with more than 50 employees)
   • Family Medical Leave Act – Requires that employees who are off on a medical leave of absence will not lose their position upon their return.
   • Mental Health Parity Act – Requires that employers provide the same dollar caps for mental health benefits that they do for medical and surgical benefits.
5. PENNSYLVANIA STATE LAWS THAT TRUMP FEDERAL LAWS
   • New Hire Reporting – For every new hire, an employer is required to send the information of the hire to the State of Pennsylvania.
   • Child Labor Laws – Children must be 14 years old to begin work (i.e. for their parents), unless they are in an occupation where they are exempt (modeling, newspaper delivery…back when kids actually delivered newspapers…. etc.)
   • Workers Compensation – Every employer is required to carry workers compensation for his or her employees.
6. ONE MORE FEDERAL LAW
   • COBRA – For any company with an average 20 or more employees, an employer is required to provide continuing health coverage for a minimum of three months to any departed employee.

For more information on this New Hire Checklist, please call Dave Wilke at Wilke and Associates at (412) 278-2200, or visit the Wilke and Associates website at www.wilkecpa.com. “Ask the Accountant” can be heard Saturdays at 9:15 on The American Entrepreneur.

]]>http://www.taeradio.com/wilke/rss-comments-entry-891962.xmlRon MorrisSat, 13 Sep 2003 17:15:24 +0000http://www.taeradio.com/wilke/2003/9/13/8-critical-tips-for-real-estate-investing.html101703:1081443:891929From Dave Wilke (“Wilke and Associates”)

1. HAVE A BUSINESS PLAN – As is the case with any business, you need to plan your strategy for real estate investing. One of the big aspects you’ll need to look at is the reason that you’re making the investment in the first place. Do you want to buy a property and hold it for a few years? Do you intend to buy it to fix it up a bit? Do you want to “flip it” and sell it right away for a quick profit? Knowing what you want to do is key for “moving the ball forward” towards the goal of successful real estate investment.

2. CHOOSE AN ENTITY – Once you establish your business plan and your reason for investing, you’ll need to analyze that reason to determine at which entity your business will classify. If you want to buy and hold for awhile, you may be better off as an LLC, which is better suited to handling potential loss. If you want to “flip” the investments, an S-Corp may be better for you.

3. KNOW TAX IMPACTS – Knowing what tax implications could result from your investments just may save you large amounts of money in the long run. Do you get deductions for maintaining a rental property, such as a beach house? Should you buy a certain property right now, or should you wait a few months, and risk falling out of a time period where you could get some money back on next year’s return? Be sure to consult a CPA to discuss the possible tax impacts of real investment. You never know how much money you might be missing out on!

4. KNOW YOURSELF – Sound familiar? Ron Morris’s Number One “Immutable” holds true in real estate investment. Knowing your personal strengths and weaknesses are essential to being able to invest within your limits. Don’t invest in too many properties, if you’re not prepared to make the personal investment in each one.

5. MAINTAIN THREE CASH BACKUPS - Make sure that you have a solid financial foundation before you take this significant financial plunge. Anybody who even THINKS about real estate investment should have a solid reserve in personal savings, a healthy credit line, and a significant amount of hard money, be it either through 401K plans, or friends and family who may be able to help you out in a pinch.

6. ESTABLISH A PERSONAL FINANCIAL STATEMENT – When you take a “big picture” look at your financial portfolio, make sure you’re very well diversified. Real estate may be the heavy hitter for your portfolio, but make sure that portfolio is well rounded with stocks and bonds, in case the real estate falls through.

7. DEFINE AVAILABLE TIME – Perhaps more than any other form of investment, real estate investing takes up an enormous amount of time. If you’re into “hands-on” types of real-estate investments, you’ll be spending plenty of time fixing up a house or researching each property on your “shopping list”. Real estate properties are significant investments, and devoting an insufficient amount of time to them could prove to be quite costly in the long run! (Bottom line: If you don’t have the time, you better have the money!)

8. HAVE A MENTOR – This holds true, especially for the first real estate property in which you will invest. Have somebody close by who has been in the trenches and can give you advice as to what to look for when you make that initial leap into the world of real estate!

Wilke and Associates’ “Ask the Accountant” segment can be heard on The American Entrepreneur at 9:15 (right after Ron’s rant). Wilke and Associates can be reached at (412) 278-2200, or on the web at www.wilkecpa.com.

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