Establishing Business Credit – Secured Business Credit Cards
Many businesses now use corporate credit cards to pay their bills, particularly those between their suppliers or vendors and themselves. There are a number of products on the market that can meet these needs. They include the traditional credit card that accumulates a balance monthly and requires only a minimum monthly payment to keep the account up to date as well as procurement cards that are used by many companies to purchase small items or supplies. An example of a procurement card might be a gas card that allows employees to fill up the company vehicles.
But another form of credit card used by businesses is called a secured business credit card. The difference between a traditional credit card and a secured business credit card is that the latter requires a business to open and maintain a savings account that provides a backup to the creditor in the case of any defaults or missed payments by the borrower.
A secured business credit card can be used to pay for all the same services as a regular business card and in order to open one a bank or credit card company will require a savings deposit that can range from a few hundred to several thousand dollars. The business is then allowed to use the secured business credit card up to the level of this deposit, although some lenders put additional restrictions on the borrowing amounts depending on the credit rating of the business.
In addition there are normally application and processing fees for a secured business credit card that will cover the administrative costs of the application including any credit or reference checks that the lending institution may wish to carry out. These fees vary from lender to lender. A secured business credit card is also usually more expensive to use than a conventional credit card and often has an annual fee and carries a higher rate of interest than a traditional credit card.
The advantages of a secured business credit card are that it allows the business to continue to access the convenience of using a credit card, even if their overall credit rating or credit score is not that great. Even companies and individuals that have faced serious financial problems like loan defaults and bankruptcies are eligible to apply for a secured business credit card. Sometimes a secured business credit card can make the difference between business survival and their downfall because it lets the business pay vendors who are reluctant to advance any more supplies unless they have a guarantee of cash or a secured business credit card in their hands.
The other major advantage of a secured business credit card is that it allows a business to build or restore their business credit rating. Many financial reporting agencies look at the successful use of a secured business credit card as a step on the road to rehabilitating poor credit scores and in the long term can assist a business to recover its credit rating and its reputation.
Business Insurance – When Do I Need It?
“Is it worth insuring my business?” This is the usual question that business owners have in mind when asked if they do have business insurance. The answer is simple. It is a big YES. All types of business must have a certain form of insurance for its business and for its employees. Non-profit and profit organizations are never excused for this. Even small and large scale business ventures should avail of the benefits of business insurance. The type of insurance you need depends on the type of business you have.
If you own a business with huge assets, will you not apply for theft insurance? If you own a security agency, will you not insure your employees with a life insurance? Business insurance is a need. The rule of thumb is that the Worker’s Compensation Insurance is a requirement if you have employees. Making a decision as to what type of insurance you need is easy. Here are the five (5) basic but valuable questions that will guide you in finding the right business insurance for you.
1. What are my choices for business insurance?
Business organizations must insure the business in four different categories: asset, capital, health, and life.
2. Is homeowners insurance fit for my assets?
Often, our first investment is our house. It is recommended not to withhold when acquiring homeowner insurance. It will be much better if you could pay for a guaranteed-replacement premium. It is a great relief when calamities happen. You may, of course, indicate a specific amount that can be covered on your insurance. But it may give you inconvenience if you will have to shell out for the difference if calamities happened. That is how business insurance goes.
3. Do I need to obtain office insurance as well?
Yes, you will have to. The computers, phones, fax machines and the usual office equipments need to be insured and that is all for your benefit. Special business insurance may also apply especially if you meet your clients in your office whether on an occasional or regular basis.
4. I am driving when going to work or any places. Do I need car insurance?
You are open and vulnerable to damages when you drive without any form of protection in your body. The same principle goes for driving a car without any car insurance. If, by accident, you hit another car, and you are not enrolled to any form of business insurance, will it not create a huge and undesirable damage not just to you and to the other person’s properties but most specially to your financials as well? That could have been prevented had you enrolled yourself to a car insurance.
5. Do I need to insure myself with a life insurance?
Yes, you need it especially if someone is finally-dependent to you. The idea of having a life insurance is basic. It takes care of your income when untoward incidents happen. If you are not a married person and nobody depends on you in terms of financials, it can be considered optional. But if a family, a parent, a sibling, or anyone depends on your assistance, securing a life insurance must never be neglected. Life insurance is also your business insurance.
There is a lot more things to consider with regard to business insurance. The five basic questions above will lead you to one common principle: if you have a family, if you care about your health, and if you are earning for a living, then you need to insure your family, your health, and your business.
Small Business Tax Deductions – How to Deduct Meal Expenses Without Keeping Receipts
The mantra of tax record-keeping has remained relentlessly burdensome for decades: no receipt, no deduction. But fear not, you who loathe the never-ending climb up the mountain of paperwork required by the U.S. tax code.
Many of our most beloved tax rules have exceptions, and such is the case with this one. Believe it or not, there are actually expenses you can legally deduct without a receipt. Here’s one for self-employed folks who travel out-of-town on business.
When it comes to deducting your meals while on an overnight business trip, you have two options with regard to record-keeping.
OPTION #1:
You keep your receipt from each meal and simply deduct the cost of the meal times 50%, a la the “No Receipt, No Deduction” rule.
OPTION #2:
You use The Per Diem Method to determine your meal deduction. For each day of the trip, you are allowed a daily meal allowance, depending on what part of the country you were visiting.
For example, the per diem meal rate for Birmingham, AL is $44. For San Francisco, it’s $64 (as of 9/30/08). Like Option #1, your actual deduction is 50% of the per diem amount — $22 in Birmingham and $32 in San Francisco.
To find the per diem allowances as of 9/30/08 for all parts of the country, get a copy of IRS Publication 1542, available at the IRS website. If a particular area is not listed, then the allowance is $39 per day.
Take note: There are two very nice advantages to The Per Diem Method.
Benefit #1: You don’t have to keep receipts for your meals. Yep, you can pitch ‘em. Scouts honor.
Benefit #2: It doesn’t matter how much you actually spend on meals, you still get to deduct 50% of the per diem amount. This can result in hundreds of dollars in tax savings for you.
Example: You regularly go to several major cities for overnight business trips, traveling about five days each month. These cities all have a per diem rate of $64.
You are frugal. To save both time and money, you prefer to eat at fast food restaurants three times a day. On average, you spend only $20/day on meals.
But the per diem rate is $64/day. If you used Option #1, your actual deduction would be $20 x 50%, or $10/day. With Option #2, you get to deduct $64 x 50%, or $32/day.
The difference between Option #1 and #2 is $22/day. Over the course of the year, this adds up to an extra $1,320 in deductible meal expenses ($22/day x 60 days) — even though you didn’t actually spend the extra $1,320!
End result: you save $396 in taxes (assuming your combined federal and state income tax rate is 30%). And you can throw away 60 days worth of meal receipts.
Whoa . . . $396 in tax savings without spending a dime.
One final note: The per diem method is available to Sole Proprietors, Partners and LLC Members. If your business is a Corporation and you own more then 10% of the company stock, you can’t use the per diem method for yourself. Sorry! That’s taxes for ya.