FBN’s Charles Payne, Penn Financial President Matt McCall, Plimsoll Mark Managing Director Jim Awad, Small Biz Expert Susan Solovic, TPNN News director Scottie Nell Hughes and Heritage Capital President & CIO Paul Schatz on SPXU, mutual funds vs. ETFs and stocks to gain passive income tax free.
Amazon.com founder, Jeff Bezos, isn’t very enthusiastic about posting profits. After all, when there’s a profit at the bottom of your balance sheet, the taxman comes knocking – no, pounding – at your door. Bezos would rather create cash flow and plow it all back into the growth of Amazon.com.
While none of us have a hefty Amazonian-sized cash flow to play around with, many small businesses are enjoying improved cash flow right now because of lower energy prices. To put this quite frankly, if you let all that money flow down to your bottom line or personal income, you’re going to lose a big chunk of it to the IRS.
The net result will essentially erase the benefits you seem to be enjoying today due to lower energy prices. Instead of giving it to multinational oil companies or OPEC nations, you’ll be giving it to Uncle Sam. Here are some approaches to dealing with the extra cash you may have on hand because of lower energy costs.
Improve and grow
Invest in your business. This is the Bezos strategy. Depending on how much you are saving due to $50-barrel oil you can do things such as:
- Increase your marketing budget,
- Hire temporary employees to handle special projects,
- Research/develop new markets and new products,
- Catch up on deferred maintenance,
- Improve/expand your facilities,
- Redesign your website,
- Buy new equipment,
- Boost inventory by negotiating lower pay-on-delivery prices.
Resuscitate your retirement
Another tax-free way to deal with the extra cash is to invest in yourself. Plow it into your retirement accounts. Talk this over with your accountant or financial advisor. There are a variety of retirement accounts available to small business owners and if you’re at least 50ish, you can often make larger contributions, and now is the ideal time to do that.
And since I’ve mentioned professional financial advice, there are some strategies that require more scrutiny that I can offer here, including:
- Boosting cash reserves in a contingency fund,
- Depositing with a bank in order to help qualify for a loan or line of credit,
- Setting up a holding company where you can park the cash, and others.
Look to the future
Having a windfall of cash due to lower energy prices is a good thing, even if some of it flows to the net income line of your tax form. But remember, energy prices will go up again. Be careful about investing this increased cash in ways that will cause you problems when your fuel bills return to higher levels.
In fact, that suggests another way to spend the money: Launch an energy efficiency project, upgrading equipment and facilities, then when prices go up again, they won’t take such a big bite out of your bottom line.
FBN’s Charles Payne, NewOak Capital President James Frischling, Tea Party News Network News Director Scottie Nell Hughes, small business expert Susan Solovic, retail analyst Hitha Prabhakar and Penn Financial Group founder Matt McCall debate what is consider fair wages.
FBN’s Charles Payne, NewOak Capital President James Frischling, small business expert Susan Solovic and Penn Financial Group founder Matt McCall on the psychology behind amateur investors and hedge funds.
FBN’s Charles Payne, NewOak Capital President James Frischling, small business expert Susan Solovic, retail analyst Hitha Prabhakar and Penn Financial Group founder Matt McCall on the outlook for Cubist Pharmaceuticals.
FBN’s Charles Payne, NewOak Capital President James Frischling, small business expert Susan Solovic, Tea Party News Network News Director Scottie Nell Hughes, retail analyst Hitha Prabhakar and Penn Financial Group founder Matt McCall on the economic impact of divorce.
FBN’s Charles Payne, NewOak Capital President James Frischling, small business expert Susan Solovic, Tea Party News Network News Director Scottie Nell Hughes, retail analyst Hitha Prabhakar and Penn Financial Group founder Matt McCall argue the government should get the taxpayer money back that was given to Jonathan Gruber.
That’s the kind of confidence you always want to hear from someone who’s heading a startup and in this case the guy making the statement is Vincent Bradley, one of the co-founders of Flashfunders. The story of his company is especially interesting because Flashfunders is a startup for startups.
There’s a lot to learn from the way Bradley and the team he works with have conceived and launched Flashfunders. But that’s not all: if you have a new business idea you’ve been longing to get started, their story might also open up an avenue for you to make it happen.
First things first: Flashfunders is a crowdfunding site where accredited (high wealth) investors ante up seed money and get some ownership in return. It’s not another Kickstarter where you get a t-shirt or the promise of a product to be delivered at some later date.
I started this with a rather bold statement from Bradley so let me tell you what Flashfunders is doing that gives him the confidence to make that claim. We’ll look at this from the side of the startups as well as the side of the investors.
First, for startups to access real seed money, generally up to about $2.5 million, there’s a long list of regulatory and legal requirements they must meet. Bradley estimates that if a startup had everything else in order, it would probably cost about $10,000 to jump through all the hoops.
The paperwork is done
Flashfunders has essentially put together a “turnkey” system that startups can plug into (maybe instead of “turnkey” I should have said “plug-n-play” to avoid mixing metaphors, but I digress). It is also the only FINRA registered broker-dealer licensed to transact equity securities on the web. All the hard stuff that is really outside of most entrepreneur’s wheelhouse is already in place.
Flashfunders has been able to pull this off because they are backed by Europlay Capital Advisors, who were the initial investors in Skype; and Stubbs Alderton & Markiles, the legal team for Beats, LinkedIn Series A & Skype. In other words, they are working with folks who have been through this a number of times.
In the same way that Flashfunders hopes to provide a critical service to startups, it plans on meeting the demands of investors.
“There are 8.5 million accredited investors in this country and right now less than 3 percent invest in startups and we think that’s a problem. It’s a problem for the companies (startups) and it’s a problem for the investors,” Bradley explains.
Allows for diversification
“Investors should be diversified and that includes having a piece of their net worth, a piece of their assets, in the venture class, so we want to open up access,” he continues. Flashfunders makes it easy for this group to invest directly in startups, unlike the model used by others. Investors can also pool their money and invest via funds.
Do you see an opportunity for yourself here, either to get a new business going or invest some funds? Bradley has more to say, including what he and the team at Flashfunders look for to determine if a startup has a chance at successfully raising money.
I’ll cover these points – and tell you why Flashfunders’ service is free to both startups and investors (yes, free) – in part two.
Oct. 29, 2014 – 2:35 – FBN’s Charles Payne, Tea Party News Network News Director Scottie Nell Hughes, A&G Capital CIO Hilary Kramer, small business expert Susan Solovic, retail analyst Hitha Prabhakar and Penn Financial Group founder Matt McCall debate the outlook for Rite Aid.
Oct. 29, 2014 – 3:11 – FBN’s Charles Payne, Tea Party News Network News Director Scottie Nell Hughes, A&G Capital CIO Hilary Kramer, small business expert Susan Solovic, retail analyst Hitha Prabhakar and Penn Financial Group founder Matt McCall on Whirlpool’s ‘smart’ washing machine.