To succeed in business, have a plan

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Taking a trip without a map may get you lost, and trying to run a business without a plan is likely to have the same result.

A business plan is a map, your company’s written guide into the future. Not only does a good plan let you know where you are and where you’re headed, it provides potential lenders and investors with a portrait of your company.

Each plan will differ, but certain items are essential.

* First, you must define your market niche and identify the competition. How does your product or service differ from theirs?

* Next, determine your product and delivery costs; then look at your product pricing.

* Do you need new equipment or skills to compete now and in the future?

* What is your marketing scheme?

* How will you get the capital you need for your plans?

* Examine your key operating ratios, and determine projected profits for years covered by the plan.

Most business plans fail because they lack detail. A well-developed plan gives a new company immediate respect in the eyes of lenders, not only because it shows you to be thorough and far-sighted, but because lenders rarely see good business plans.

Wayne Gretzky, when asked the reason for his success said, “Some people skate to where the puck is. I skate to where the puck is going to be.” A good plan should help you do the same for your business.

Five Year-End Tax Tips

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* Early this month check the amount of 2011 tax you have prepaid through withholding and quarterly estimates. If you’ve underpaid, consider increasing your withholding before year-end. Withholding is considered to have been paid evenly throughout the year. This could prevent your being charged underpayment penalties for 2011.

* Avoid the marriage penalty. If a wedding or divorce is in your plans, be aware that your marital status as of December 31 determines your tax status for the whole year. Changing the dates of a year-end event may save taxes. Even though recent tax laws provided some relief from the marriage penalty, they did not eliminate it.

* Plan for losses. Check your basis in any S corporation in which you are a shareholder and where you expect a loss this year. Be sure you have sufficient basis to enable you to take the loss on your tax return.

* Use this year’s annual gift tax exclusion. If you make annual gifts to family members or others, make sure you complete your gifts for 2011 by December 31.

* Squeeze in planned equipment purchases before December 31. Taxpayers must usually deduct the cost of business property over several years. A special election allows taxpayers to expense up to $500,000 of new and used property purchased and put into service in 2011. Also check into the 100% bonus depreciation allowance for new equipment purchases.

Property such as machinery, equipment, and furnishings qualify. Be careful with special rules that apply to automobiles and personal computers.

Put financial gifts on your holiday shopping list

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When planning gifts for children on your holiday list, you might want to think beyond the traditional retail offerings. Consider financial gifts that can bestow benefits for many years to come.

Some financial gift options you might consider:

* U.S. savings bonds. Savings bonds are used by many families to introduce children to the savings concept. I bonds are indexed for inflation and can provide relatively attractive rates of return.

* IRAs (regular or Roth). For 2011, you can contribute the lower of $5,000 or the earned income of the child. An early financial start can produce amazing benefits from compounded interest accumulated over several decades.

* Stocks or mutual funds. Equities are a good way to introduce a child to the investment world.

* Collectible stock certificates. Vibrant framed certificates are available for many companies. A Disney, Dream Works, or Coca-Cola stock certificate can provide a colorful reminder of the importance of investing for the future.

* Collectibles. Postage stamps or coin collection kits can provide years of enjoyment and form the basis for some life-long hobbies. An interesting gift idea is an official U.S. mint proof coin set for the year the child was born.

Please call us if you would like to review the tax issues related to any of these financial gift options, especially if you are considering a larger amount.

Residential energy credit expires soon

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Claim the last of the residential energy credit. Install certain energy efficient property in your home by year-end (such as insulation, doors, and windows) and get a federal tax credit of up to $500. That’s the aggregate total credit, including amounts you claimed in prior years. The credit is scheduled to expire after December 2011.

New law provides tax credits for hiring veterans

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On November 21, 2011, President Obama signed the “Three Percent Withholding Repeal and Job CreatOn November 21, 2011, President Obama signed the “Three Percent Withholding Repeal and Job Creation Act” into law. This new law repeals three percent withholding on certain payments to government contractors. The law, H.R. 674, was amended to include the “Vow to Hire Heroes Act” which provides tax credits to employers who hire unemployed veterans.

The law creates the “Returning Heroes Tax Credit” and the “Wounded Warriors Tax Credit.” Employers may qualify for a credit of up to $5,600 for hiring a veteran who has been looking for employment for more than six months. A credit of up to $2,400 applies for veterans who have been unemployed for more than four weeks but less than six months. Employers who hire an unemployed veteran with service-connected disabilities who has been looking for work for more than six months may be eligible for a tax credit of up to $9,600.

The credits apply to new hires after November 21, 2011, through December 31, 2012. For more information about the new law, contact our office.ion Act” into law. This new law repeals three percent withholding on certain payments to government contractors. The law, H.R. 674, was amended to include the “Vow to Hire Heroes Act” which provides tax credits to employers who hire unemployed veterans.

Three Percent Withholding Repeal

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On November 21, 2011, President Obama signed the “Three Percent Withholding Repeal and Job Creation Act” into law. This new law repeals three percent withholding on certain payments to government contractors.

Great News for all small government contractors.