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- How Do Owners of an LLC or S Corporation Get Paid?
- Best Retirement Investments That Produce Income
- How to Assess a Job Candidate: Look for These 23 Things in Their Resume
| How Do Owners of an LLC or S Corporation Get Paid? Posted: 08 Dec 2019 11:31 AM PST While the excitement and professional fulfillment of starting a business offer much gratification, most entrepreneurs also strive for the financial fruits (i.e., money) of their labors, too. The way that small business owners get paid depends on the business entity type they've set up for their company. A business's legal structure also affects how business owners' income is taxed. Generally, people who operate their small businesses as sole proprietorships or partnerships, which aren't formally registered business entities, can take money out of the business bank account to pay themselves. But what about owners of limited liability companies (LLCs) and S Corporations? Let's take a moment to discuss how LLC owners ("members") and S Corporation owners ("shareholders") get compensated. Getting paid as an owner of an LLCGenerally, an LLC's owners cannot be considered employees of their company nor can they receive compensation in the form of wages and salaries.* Instead, a single-member LLC’s owner is treated as a sole proprietor for tax purposes, and owners of a multi-member LLC are treated as partners in a general partnership. To get paid by the business, LLC members take money out of their share of the company’s profits. Here's an overview of how that usually works: Single-member LLCThe owner of a single-member LLC withdraws money by taking an "owner's draw"—writing themselves a business check or (if their bank allows it) transferring money from the LLC bank account to the owner's personal bank account. Multi-member LLCEach LLC member has a capital account (a log of that member's membership share of the LLC and their financial activities). When members need money, they take a draw from the LLC, which is accounted for in the capital account. Draws are usually made via a business check written out to the member. There may be other ways for LLC members to get paid for certain services that they provide to their company and it's critical to talk with a tax and accounting expert to understand your options. Income taxes and the LLCAn attractive feature of the LLC business entity is the company does not pay taxes. Instead, the profits and losses of the LLC flow through to its members, who must report them on their personal income tax returns. When setting up an LLC, members decide if all owners will divide the company's profits evenly, or based on their ownership percentage, or according to some other formula that all agree on. Then, each member gets taxed on their distribution of profits. For example, let’s say an LLC has two members, with one owning 60% of the company while the other owns 40%. The members have agreed that the distribution of profits should be equal to the members’ ownership percentages. In this scenario, the first member must report 60% of the LLC’s profits and losses on their personal tax return, and the other member must report 40% of the LLC’s profits or losses on their personal tax return. AN IMPORTANT REMINDER: Owner's draws from an LLC are NOT paychecks. No federal or state income taxes nor Social Security and Medicare taxes are withheld from those payments. Under most circumstances, LLC members must make estimated tax payments every quarter to cover taxes due on their share of the LLC’s profits. The profits are taxed the same (whether they are taken as personal draws or remain in the business’s bank account). *Note: If an LLC elects to be taxed as a corporation, the rule about members’ eligibility to be employees of the company is null. In that case, the company pays taxes directly to the IRS. Members can be employees and therefore report their wages, salaries, and dividends on their personal tax returns. Getting paid as the owner of an S CorporationAn S Corporation is either an LLC or C Corporation that has elected for special tax treatment with the IRS. An S Corporation's income, losses, deductions, and credits pass through to its shareholders' personal federal income tax returns. Shareholders then report the business's income and losses on their personal tax returns and are taxed at their individual income tax rates. Although LLCs and S Corps have pass-through tax treatment in common, there's a critical difference: An S Corporation's shareholders who do substantial work for the S Corp are considered employees. Therefore, the business must put them on its payroll and compensate them through wages or salaries—from which income taxes, Social Security and Medicare taxes (FICA), unemployment taxes (FUTA), and possibly other taxes are withheld. An S Corp's remaining profits are paid out in distributions to the company's shareholders, who then report those distributions on their personal income tax returns. Unlike wages and salaries, distributions are not subject to FICA and FUTA taxes. Note that if distributions to any shareholder exceed that shareholder's stake in the business, that excess amount will be taxed as a long-term capital gain. Other Articles From AllBusiness.com:
It’s not uncommon for S Corporation owners to run into trouble because they’ve paid themselves a suspiciously small salary and then take most of their compensation in the form of distributions to minimize the amount of FUTA and FICA payroll taxes they have to pay. Both the IRS and Social Security Administration are vigilant in tracking down people who try to game the system this way. The government expects that S Corp owners will pay themselves a “reasonable salary,” which depends on the industry and the scope of the shareholders’ duties. If you’re considering operating as an S Corp, I suggest you do some research to determine what reasonable compensation will be for the work you’ll perform for your company. If the IRS believes you are substantially underpaid for the services you provide, it may require that you make adjustments to your tax returns, or it might even revoke your S Corporation status. You can still take advantage of the self-employment tax-free distributions of an S Corp, as long as you pay yourself a reasonable salary. Seek expertiseWhile the information I've shared in this article will help you understand the basics of how you can get paid as an LLC member or S Corporation shareholder, it is not a substitute for professional financial, tax, or legal advice. Ask a licensed accountant (and/or tax advisor) and attorney for guidance as you establish how your LLC or S Corp will compensate you for your investments of time, money, blood, sweat, and tears. RELATED: Solopreneurs and LLCs: Why They Make a Great Match The post How Do Owners of an LLC or S Corporation Get Paid? appeared first on AllBusiness.com The post How Do Owners of an LLC or S Corporation Get Paid? appeared first on AllBusiness.com. Click for more information about Nellie Akalp.  |
| Best Retirement Investments That Produce Income Posted: 08 Dec 2019 11:07 AM PST By Paul Partridge One of the most common questions we hear is "What is the best retirement investment?" Spoiler alert: there is no one, single best investment for retirement accounts. That's because economic conditions change. Interest rates change. We have to monitor and adjust our portfolio to changing circumstances. So let's broaden the question from what is the best investment for retirement to what are the best retirement investments? A sensible investment strategy is to have several different assets in your portfolio so you're prepared to navigate all different types of market climates. But first, a question: Can you live solely on interest earned from your bank savings account? Most retirees can't. We need our investments to produce income to maintain our lifestyle–and pay the bills that continue after we stop working. That's why I'll focus here on the best investments for retirement that produce income. Because after our working paychecks stop, income is what sustains us during retirement. Here are the most common income producing options: 1. Social SecurityMost men and women don't think of Social Security as an asset. But it absolutely is. It's a guaranteed income stream that pays you for life. Many of our clients stand to collect over $1 million in Social Security benefits in retirement. It's in your best interest to understand and manage this asset. There are hundreds of ways to collect Social Security, so it pays to talk to an expert who can help you maximize your benefits. Most people just take it starting the day they retire. This can be a costly mistake. Also, how you take your benefit will impact your spouse if you die first, and vice versa. So it's worth understanding all your options. 2. Retirement income fundsRetirement income funds are low-maintenance mutual funds for retirees. Typically, they're diversified in conservative stocks and bonds. The goal of the fund is to produce monthly or quarterly income that can supplement other sources of retirement income. Most of the big mutual fund companies offer these actively managed funds. There's usually a required minimum investment, and fund holders pay fees similar to other mutual fund products. Pros: Men and women who don't like to spend much time on their investments find retirement income funds attractive. There's a certain set-it-and-forget-it appeal to them, similar to index funds. Cons: Retirement income funds are exposed to stock market risk just like mutual funds are. Because people don't pay regular attention to them, we've seen instances where retirees go several months before they realize they've had a significant loss. Also, the retirement income is not guaranteed.  Will your investments generate sufficient income to ensure a comfortable retirement? 3. BondsWhen you buy a bond you're loaning money to a company, government, or municipality. In return, the entity pays you interest on the loan (usually semi-annually) until the maturity date, when you receive a lump sum payment equal to the bond's face value. Bonds can be purchased individually or bundled together in mutual funds or ETFs. The interest rate set at issuance remains fixed throughout the life of the bond. The price of a bond varies according to the bond's interest and how that rate compares to prevailing interest rates. Generally, when interest rates go down, the price of bonds rises; when interest rates rise, the price of bonds goes down. In this way, bond buyers are subject to interest rate risk—the risk that your bond can lose value when interest rates fluctuate. One way to hedge interest rate risk is to purchase bonds in a "bond ladder," a collection of bonds with different maturity dates. Each rung of the ladder represents a different interest rate. U.S. Treasury notes and bonds are considered among the safest investment options available, with very low credit risk. Treasury notes have maturities between two and 10 years; Treasury bonds have 30-year terms. Municipal bonds are issued by state, county, and municipal governments and their agencies. The interest you earn is free from federal income tax. You may also avoid state and local taxes if you live in the state where the municipal bonds are purchased, or if you live in a state without state income tax. Investors concerned about inflation purchase Treasury Inflation-Protected Securities (TIPS). TIPS pay interest plus additional principal tied to increases in the Consumer Price Index. Corporate bonds usually pay higher interest rates than government bonds because they have greater credit risk. "Junk bonds" are bonds rated below investment grade. 4. Dividend-paying stocks and mutual fundsDividend-paying stocks are the “Doublemint Gum” of investments—a way to "double your pleasure." You get the benefits of owning stocks plus the benefits of owning bonds. In other words, you have the potential for both growth and income. Many large corporations pay dividends on their stocks. A dividend is simply a portion of a company's net profit that is paid to its stockholders. Dividends are paid on common stock, preferred stock, mutual fund shares, and American depository receipts (ADRs). Companies usually pay dividends quarterly in cash or in shares of stock. Cash dividends are taxed at the federal, state, and local level—ordinarily at 15%. Stock dividends are not taxed until the shares are sold. Pros: The potential for income and capital appreciation. Dividend-paying stocks often outperform growth stocks in bear markets, since investors start to favor income over growth. Cons: Stocks are subject to market risk. Also, corporations are not required to pay dividends to stockholders; they're paid at the discretion of the company's board of directors depending on the profitability of the company. So, unlike interest on a bond, a dividend is not automatic. Other Articles From AllBusiness.com:
5. Rental real estateResearching, finding, buying, fixing up, renting out, and managing property for income is not for everyone—especially for retirees looking for a relaxed lifestyle. But for those with real estate experience who understand the potential pitfalls, home or apartment rentals can be among the best investments for retirement income. Pros: Property rentals can produce steady income, tax breaks, and equity growth. Cons: Being a landlord requires hands-on involvement. Housing prices are cyclical and can drop significantly, as we saw in 2007 to 2010. Expenses include renovation, maintenance, property damage, taxes, advertising, and vacancy rates, to name a few. 6. Real estate investment trusts (REITs)Real estate investment trusts (REITs) are a type of mutual fund that manages a portfolio of real estate or mortgages to earn profits for shareholders. Equity REITs own real estate directly. Shareholders receive income from rents received, and capital gains when property is sold at a profit. Mortgage REITs lend money to building developers and share interest income with shareholders. REIT investors typically are seeking income and capital appreciation (as opposed to write-offs). Because REITs are not correlated with the stock market, some believe that REITs are good investments to hold when stock markets are underperforming. Pros: REITs can provide income, diversification, appreciation, and professional management. In general, real estate is not considered liquid but REITs are, because REITs can be traded daily. Cons: Commercial real estate prices experience booms and busts. REITs do not provide depreciation write-offs and losses are not passed through to shareholders. 7. Equity index annuity (with a lifetime income rider)In recent years, an increasing number of retirees are using equity index annuities in place of bonds for the "safe" portion of their portfolio. The main reasons are principal protection and higher potential returns without market risk or interest rate risk. An equity index annuity (also known as fixed index annuity) is a contract between you and an insurance company. You pay a premium to the insurance company and the issuer promises to make future, recurring payments to you similar to a pension plan. For a fee, you can add an optional benefit called a rider. The rider provides the certainty of a stable income stream that pays you as long as you live–and as long as your spouse lives if the contract is set up that way. If you die early, the remainder goes to your beneficiaries. It's important not to confuse equity index annuities with variable annuities, which are subject to market loss and often have high fees. Pros: A personal pension plan that protects your money and provides guaranteed income for life—even if you live to 120*. Some annuity companies offer an upfront bonus as well. Cons: Like a CD, you can't access all your money during the contract term without a surrender charge (many companies allow for 10% withdrawal per year penalty-free). In exchange for a lifetime income, you give up the opportunity for large upside market gains. * Guarantees are based on the claims-paying ability of the insurance company. 8. Other optionsThere are other effective ways to generate income in retirement, including closed-end funds, limited partnerships, covered calls, peer-to-peer lending, and defined outcome ETFs. There's even a way to use life insurance to produce tax-free retirement income. But these options are a bit more complicated and require longer explanations than we have room for here. SummaryGenerating sufficient income to assure a comfortable, stress-free retirement is a challenge that's become even more difficult in recent years. Each of these strategies can be helpful depending upon your risk profile, interest/ability to monitor and manage investments, and your income needs. RELATED: One-Third of Small Business Owners Have No Retirement Plan—Do You? The post Best Retirement Investments That Produce Income appeared first on AllBusiness.com The post Best Retirement Investments That Produce Income appeared first on AllBusiness.com. Click for more information about Guest Post.  |
| How to Assess a Job Candidate: Look for These 23 Things in Their Resume Posted: 08 Dec 2019 09:10 AM PST Revised and updated Dec. 8, 2019 Companies receive a lot of resume, and deciding which candidates to bring in for an in-person interview can be a hard decision. For many hiring managers, it all starts with what’s on the applicant’s resume. What element makes a resume stand out, allowing that person to move on to the next round of the hiring process? To find out more, we asked Young Entrepreneur Council (YEC) members the following question: Q. What’s one thing a resume must have in order for you to invite the candidate in for an in-person interview?1. Proof I always look for proof. If a resume tells me that someone is an expert in AI, I ask myself: “Where’s the evidence?” In order to take a resume seriously, I need concrete evidence for every skill listed, whether it’s a project they built, code they wrote, or even strong references. —Frederik Bussler, AngelStarter 2. Effort You can tell the difference between a candidate who typed up their resume in five minutes, versus one who spent hours crafting an informative and impressive resume prior to applying. People who put effort into writing their resume instantly win favor in my book. —Blair Williams, MemberPress 3. Accomplishments Instead of just listing their skills, I look for candidates who list their accomplishments on their resume. For instance, instead of only listing “social media marketing” as a skill, I like to see an accomplishment related to it, such as “I grew the company’s Facebook group by attracting 2,000 new members in three months.” Anyone can list a skill on their resume, but the results are even better. —Stephanie Wells, Formidable Forms 4. Soft Skills If a candidate doesn’t take the time to tell me how they work well with others, communicate, listen, etc., then it’s not someone I’m keen on interviewing. Businesses require soft skills just as much as technical skills, if not more. You can always build onto your technical expertise, but behavioral habits are much more difficult to make and break. —Jared Atchison, WPForms 5. Track record of success A resume must show qualitative or quantitative results you have accomplished for other employers. This shows a track record of meeting goals and achieving objectives for companies or organizations you’ve worked for. —Serenity Gibbons, NAACP
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6. Character Our business is the sum of everyone who works for us. We are all humans with interests, personalities, and families. When I am looking through resumes, I try to pick people who demonstrate that they are charismatic and have character through their writing. These people are usually creative and talented, making them assets for my company. —Syed Balkhi, WPBeginner 7. Good writing I look for proper grammar, active voice, and strong writing when reviewing and sorting through resumes. If I notice typos, grammatical errors, or other syntax issues, then I will put the resume into the “trash pile.” If a candidate can’t take a minute to proofread their resume, then there’s no reason why I should move them onto the next round. —Kristin Kimberly Marquet, Marquet Media, LLC 8. Applicable talent stack The resumes that I find the most appealing are the ones that demonstrate a combination of relevant skills and experiences. Instead of just focusing on one or two skills, a candidate with a “talent stack” of five or so key strengths is an extremely valuable asset to any company. These individuals are extremely versatile workers and have a clear desire to grow with their companies. —Bryce Welker, The Big 4 Accounting Firms 9. Loyalty I want to see a few work experiences that last more than a year from good companies that we also resonate with or respect. I also want to see character references from these companies. If you have character references, then you won my heart! —Daisy Jing, Banish 10. Tailored content One thing that's important to get an interview here is a resume that has some tailored content. If you're not able to speak to how your experience makes you a fit for the company and position, then it's not likely going to work. A resume should be a story about the candidate, but that story should be tailored to the job and company. —Baruch Labunski, Rank Secure 11. Authenticity So many resumes are stuffed with boasting capabilities and unnecessary technical jargon. It makes a huge difference to receive a resume where the applicant clearly outlines their experience with authentic descriptions. This means they took the time to reflect, understand their input in the company, and stayed humble along the journey. Being genuine showcases their honesty. —Dalip Jaggi, Devise Interactive 12. The right keywords Employers want to know ahead of time that you are really qualified for the job. With so many tasks to complete in a day, hiring managers typically skim through resumes to ID certain keywords that match the job. The key to a strong resume is to make a list of skills required for the position that matches your experience. Choose keywords with the strongest match to be used throughout your resume. —Blair Thomas, eMerchantBroker 13. Emphasis on results over responsibilities All of our best hires have come from applicants who on their resume (and in-person) put an emphasis on the results they’ve gotten in their roles, not the responsibilities they had. If they don’t have this on their resume, we don’t disqualify them but ask about it in the interview. If they start going around it and saying “We achieved X,” we dig deeper into their role in achieving these results. —Karl Kangur, Above House 14. Transferable skills When candidates take the time to make their previous work experience applicable to the job, that shows that they understand the job they’re applying to and understand transferable skills. A list of unrelated skills on a resume makes it seem like the resume was not written for the specific job description and just printed off and handed out to many—which can be a red flag. —Diego Orjuela, Cables & Sensors 15. Positivity The second I look at an application and see a potential new hire trash-talking their boss, I instantly put down the resume. Negative emotions breed negativity in others, and that’s not something you want floating around your business. I look for people who are positive and passionate. —David Henzel, LTVPlus 16. Relevance
17. Length of employment
18. Alignment of core values
19. Quality references
20. Decent formatting
21. Ability to follow directions
22. Growth
23. Something memorable
RELATED: Top 9 Hiring Tips for Small Business Owners These answers are provided by Young Entrepreneur Council (YEC), an invite-only organization comprised of the world's most successful young entrepreneurs. YEC members represent nearly every industry, generate billions of dollars in revenue each year and have created tens of thousands of jobs. Learn more at yec.co. The post How to Assess a Job Candidate: Look for These 23 Things in Their Resume appeared first on AllBusiness.com The post How to Assess a Job Candidate: Look for These 23 Things in Their Resume appeared first on AllBusiness.com. Click for more information about YEC.  |
Hiring managers primarily 
Our businesses have been around for over a decade, and we plan to be around for many more decades to come. I need long-term team members who can learn about our company and help push growth forward while moving up in the company. I do not even read resume
A candidate with strong potential will study our website and incorporate our core values somewhere in their resume or cover letter. Even if a potential employee doesn’t directly address the values, we 
If a job candidate is willing to put high-level references down, that tells me they worked hard at their previous job and are proud to have others speak on their behalf. If what I see is a collection of references from 10 years ago, red flags go up. —
Even if a candidate has relevant experience, there are a blinding myriad of CVs to review. The keywords we look for are sometimes hidden in resume formats that do not help highlight experience. We’re looking for relevance or a quality in the candidate that convinces us they can complete the work. —
The only real information I get from a resume is an overview of how well an applicant reads a listing and follows the instructions therein. I’ll ask for something specific, just to gauge the applicant’s responsiveness, but then I immediately move on to their portfolio. I rarely feel like I get a real sense of a person from a one page list of skills. —
When evaluating resume
The resumes that stand out do something different. They don’t just focus on education and experience—they give an idea of who the person really is. Completed a marathon? It shows a level of commitment; you worked full-time while earning your degree? Powerful—it shows that you have a strong work ethic. Share what you normally wouldn’t put on a resume. That way you’ll be memorable. —| You are subscribed to email updates from AllBusiness.com. To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
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