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Why and How to Build Cybersecurity into Your Company Culture

Posted: 03 Mar 2020 03:00 PM PST

At least 61% of retailers were the victim of some type of cyberattack between late 2018 and late 2019, according to data from the Ponemon Institute. However, only half of retailers said they had a plan in place to respond to data breaches. In 2018, IT governance group ISACA reported that 42% of organizations lacked a cybersecurity culture plan.

These figures are discouraging for several reasons.

First, companies without a response plan or a strong cybersecurity culture are more likely to face costly GDPR penalties if a breach exposes the data of their EU-based customers. Second, a company without a plan is a vulnerable company. Fraudsters and cybercriminals trade tips on easy targets, so any retailer with known vulnerabilities may be hit with more than one attack. And third, data breaches – along with ransomware attacks and wire fraud committed through email attacks – can quickly destroy a small business by blocking access to data, breaking customer trust or causing the business to run out of funds.

To reduce these risks, retailers must build cybersecurity into their company culture. 

Cybersecure culture comes from the top

Just like any other culture initiative, the drive for a more cybersecure organization must come from the C suite. It's up to the company's leadership to make cybersecurity a priority and a daily practice. Leaders are responsible for developing a plan that sets expectations for employee training, behaviors and best practices related to security. 

Then, it's up to leaders to implement that plan and model the behavior they expect from the rest of the organization. 

Start with the basics

Because there are so many ways that hackers and fraudsters can go after companies, deciding where to start implementing a more secure culture can be a challenge. Remember that cybercriminals like easy wins, so closing basic security gaps first will go a long way.

Passwords

Weak passwords are easy for criminals to figure out or guess. Lists of the most popular bad passwords make the news every year, and it's disappointing how little they change from one year to the next. Even complex passwords can become a liability if they're used by an employee for more than one account. For example, if an employee uses the same password for their business email account and their Facebook account, their business email becomes vulnerable if their Facebook credentials are stolen. 

With access to an employee's business email, thieves can lurk in an inbox, impersonate the employee and intercept sensitive data. If the employee is in payroll, accounting or the CFO's office, a compromised email account can lead to unauthorized funds transfers or rerouted direct deposits. 

Better password policies can reduce these risks. A strong cybersecurity culture will include guidelines for creating strong passwords that are hard to crack. It will also include requirements that each employee's work-related passwords must be unique – not used for any other business or personal account.

Training and awareness

Phishing is still a problem for retailers and other organizations. In January, the UPS Store chain notified customers that some of its stores' email accounts had been compromised by a phishing scheme. Customers frequently email documents to the UPS Store for printing, and the chain said the personal and financial data in some of those documents was exposed. 

Beyond data theft, phishing attacks can also lead to carefully targeted business email compromise scams, which have cost companies $26 billion over the past three years. For example, a fraud ring might impersonate the email address of a company's financial head to send a spear-phishing email to his or her assistant, asking for a wire transfer to a "vendor" to resolve a last-minute crisis of some sort. 

And phishing can also lead to ransomware attacks that lock companies out of their own databases, cause business interruptions and cost a small fortune in ransoms and remediation. Ransomware attacks rose by 41% from 2018 to 2019. 

Regular education and training sessions can encourage employees to be cautious about clicking links in emails that can kick-start a phishing attack. Training can also set the expectation that employees will verify urgent requests from higher-ups by voice call or in-person before sharing personal data via email or initiating a funds transfer. 

Patches and updates

Keeping software up to date and patched is one of the most basic cybersecurity best practices, but many organizations fall short. For example, software that went unpatched for months led to the huge Equifax breach of US consumers' personal and financial data in 2017. Making time for updates and patches should be part of every organization's cybersecurity culture plan. If that maintenance is routinely postponed to avoid interrupting work, it's time to reframe it as something that can prevent longer, costlier business interruptions. 

Response plan

Every organization needs a plan for what to do after a data breach or other cybersecurity incident. This should outline immediate steps to be taken, such as who to alert in-house, which outside agencies and parties to notify, what to do with affected equipment and systems, and any other reporting and legal requirements. 

Planning ahead can make breach response less chaotic and more efficient. It can also help your organization avoid penalties for delayed reporting. For example, while the new CCPA law doesn't impose reporting requirements for data breaches, GDPR sets a time limit of 72 hours to report personal data loss after a breach is discovered. Without a plan in place, it's unlikely that most businesses could make that deadline.

With the cybersecurity basics baked into your company culture, you can move on to the bigger picture: an organization where everyone has a part to play and your IT and security people work with other teams to foster better security habits. 

Show employees the big picture

It's one thing to tell customer sales representatives not to click on links in emails from strangers. It's another to explain that they're on the front lines of keeping phishing attacks out of your company's email system. That understanding can motivate employees to be more aware of security issues, but only 34% of the employees in ISACA's 2018 survey said they understood their role in their organization's cybersecurity culture. 

Emphasize the role of IT

A company with a strong cybersecurity culture won't let its IT team stay in a silo. Security considerations should be a part of all decisions, and IT subject matter experts should be available to lead trainings and answer questions from employees. 

Reward people for cybersecurity wins

When everyone understands they're part of a companywide effort to beat back fraudsters and hackers, positive reinforcement can help the new mindset stick. Think of the signs in manufacturing plants that emphasize physical safety by showing the number of days without an accident. You can take the same approach, let your people know how long you've gone without a cyber incident and see how long you can keep the streak going. 

Consider rewards and recognition for employees who spot phishing scams, patch software quickly and change their passwords to be unique and more secure. Once best practices are in place, you may also want to implement retraining or privilege changes for employees who repeatedly make cybersecurity mistakes. 

Keep learning about cyber risks

Like any other type of criminal, cybercriminals are always looking for new weaknesses to exploit. That means the details of your company's best practices, training and planning will always be evolving to protect against new threats. 

When your company's leadership commits to cybersecurity best practices, shows everyone they have a part to play and celebrates security wins, you're on your way to a stronger company that's a less appealing target for cybercriminals.

Why Millennials Get Collaborative Leadership (and You Should, Too)

Posted: 03 Mar 2020 02:41 PM PST

As millennials eclipse older generations in the workforce, some company leaders are trying to force the generation to fit into traditional hierarchical management systems. That won't cut it, especially as more millennials enter leadership roles.

Consider a millennial friend of mine, an engineer we'll call Mary. Mary holds an undergraduate degree from the Massachusetts Institute of Technology and a graduate degree from Cambridge. She's smart, hardworking and great with people. Anyone would agree she's the ideal young professional.

After graduate school, Mary landed a job with a big oil company. Although the work was challenging and the money was plentiful, she hated the organization – mentorship opportunities were sparse, the bureaucracy was stifling, and Mary had little say over her own work. So she left, taking a 30% pay cut for a position at a large company that promised everything she was missing.

There, Mary found the same hierarchy and the same problems.

She now works at a smaller company that matches her values more closely. And her story is not an uncommon one: According to a recent Deloitte survey, 49% of millennials would quit their current jobs within two years if they had the choice.

Instead of trying to force millennials to conform, business leaders must evolve, or risk alienating this vital part of the workforce. To start, revamping leadership and fostering effective collaboration will go a long way toward appealing to millennial workers. WeSpire outlined 10 things millennials look for in an employer. Check out the top five:

  1. Corporate learning
  2. Purpose
  3. Culture
  4. Flexibility
  5. Real responsibilities

You'll notice money and power didn't even make the list. Millennials want to engage and contribute in meaningful ways to both business and society. It's time for organizations to let them.

The trouble with outdated systems

For 25 years, I've helped organizations upgrade their operating systems. Admittedly, it's difficult for large or legacy companies to change their ways.

But the workforce has changed thanks to emerging technologies, different consumer interests and shifting market forces. Now, millennials want new dynamics in the workplace – an environment where workers share power and responsibility.

This new value system can't exist in the old operating system. New power is not hierarchical; it's egalitarian, networked (or matrixed), collaborative and transparent. Everyone plays multiple roles. The hierarchy, or vertical dimension, acts as a support system for interconnected teams. Stakeholder teams make decisions using collaborative tools. The focus is horizontal – it's on customers and suppliers, products and services, and business processes and projects.

According to a report by American Express, nearly 40% of millennials already assume the current hierarchical format will no longer be relevant in 10 years.

Viewing millennials in a new light

Millennials are looking for organizations where they can engage in meaningful work. Taking cues from this generation's values can mean the difference between evolution and obsolescence.

Today's world is changing at breakneck speed: An organization's survival requires harnessing the collective talent of its people. Likewise, creating a culture that embraces employee contributions isn't a corporate strategy for recruiting millennials talent; it's a critical shift for increasing the engagement and productivity of employees from every generation.

Unless you want to get left behind, your seasoned team members must be willing to learn an entirely different leadership approach. Ideally, each individual leader can adopt his or her own collaborative style and receive training on helpful methods and tools. For organizationwide transformation, leaders must get behind the change and model desired behavior.

Implementing leadership and effective collaboration

To tap into millennials' talent (and support transformational leadership), tackle these three areas to build a more welcoming and productive workplace. You'll take your leadership and effective collaboration to new heights:

  1. Meetings.The first step toward collaborative (and millennial-friendly) decision-making is to change how you run meetings. Many leaders don't know how to run a collaborative meeting, so most meetings are directive: Someone sits at the head of the table and shares news. If that person is a bit more enlightened, he or she might collect input and then impart his or her decision to the gathered throngs.

    A collaborative meeting operates differently: The assembled team works together to make a decision or create a plan. This shift is easier if the team has been trained in collaborative decision-making or planning. Instead of issuing updates and edicts, meeting leaders provide process and facilitation. Ultimately, these meetings should produce solutions or results, even if the outcome is simply greater understanding or communication of project updates.
  1. Projects.Most leaders try to steer initiatives with a command-and-control approach, which doesn't work for millennials. And frankly, it doesn't work for anyone. Projects tend to run outside the hierarchy, meaning they bring together people from different departments and at different authority levels. This makes projects a wonderful opportunity for employees to practice collaboration.

    Just like leading meetings, collaborative project leadership shifts the onus of planning tasks and decisions from the leader to the team. When the team learns how to plan a project and monitor its progress, it owns the project and develops a deeper commitment. This sense of ownership provides the engagement millennials crave; it also improves productivity and efficiency. Essentially, people work better and faster on projects they're excited about and engaged in.

    Projects are a team sport, and the team wants to participate. In this capacity, the leader must become a facilitator and coach; he or she can't control everything. In this new era, leaders must learn to empower the team; it energizes teams and produces better results.
  1. Goal setting.In the old operating system, leaders set unrealistic goals – often known as "stretch" goals – for their teams. This approach sets everyone up to fail, which creates a culture of (you guessed it) failure. To attain a culture of success, then, set people up to succeed. Do this by letting them set their own goals, ones that are realistic and achievable. Teams can create baseline and upside goals as well: The baseline goals are achievable, and the upsides are a stretch. This approach provides a challenge and a sense of accomplishment.

    In the new operating system, the team sets the goal instead of the leader. When a leader sets goals, people tend to resist, especially if that goal is unrealistic. Nothing kills motivation more than having your boss give you a goal that you can't achieve because it's just not doable.

    Let teams determine what they can and can't achieve. Let them define their own deadlines and budget. Let them have contingency so that when things do go wrong – as they inevitably do – they can recover and still succeed.

A more collaborative future

The old management systems have been broken for decades, long before millennials entered the workforce. Unlike their predecessors, however, this generation has refused to accept the status quo.

Now, more millennials are in leadership roles, and they're increasing workplace collaboration, engagement and effectiveness. This is true both in startups and in enlightened organizations that recognize the need for new systems based on new power.

4 Ways AI-Powered Speech Recognition Impacts Small Businesses

Posted: 03 Mar 2020 12:55 PM PST

Today, 40% of adults in the U.S. use voice search daily and this usage rate is expected to grow. Products like Amazon Echo and Google Home are also being adopted at a faster rate than any other technology in history. 

These statistics indicate that more and more interactions are taking place through voice commands. For businesses, this means that the marketing landscape is shifting. You need to recognize and understand the impact of speech recognition technology, especially its application in voice search.

Voice search has developed from advances in AI, specifically natural language processing and speech recognition. As speech recognition becomes more accurate and widespread, your business will have to grow with the changes it brings.

Voice search is the future.

Speech recognition and its application in voice search will play a large role in how people interact with businesses. Voice-based technology offers several benefits that showcase why its use is only going to grow. 

  • Voice commands are more convenient as there's no need to type and enter a query
  • Advanced integrations allow people to carry out activities ranging from ordering groceries to managing one's home environment
  • Voice-enabled devices enable multitasking
  • Home assistants boost productivity as they require less effort and save time

The future of marketing will be shaped by data science and big data. A report on the future of marketing shows that 26% of marketers believe that AI will drive marketing trends. Another 21.23% recognize that voice search will specifically feature as an important trend. 

You need to ensure that your content creation strategies and SEO planning cover voice search and voice-enabled tasks. Let's look at key changes that businesses need to consider as a response to AI-driven advances in online business.  

Businesses need to optimize content for voice search.

As more searches take place through voice commands, businesses will need to create content to rank for such searches. Here are ways you can optimize content for voice search.

Add clear business information.

One of the main ways people use voice search is by asking questions to which there are specific answers. For your business, you need to create content on your site that directly answers users' questions.

When people ask questions like "What time does the electronics store open?" the search engine should be able to find that information. It's important to update your business listings on social media and other platforms to reflect this data correctly. Also, update your content for days when your business is closed or if timings have changed. It's helpful to create site information reflecting seasonal changes that affect your customer.

Other information that you need to add is customer care and contact information. In general, think about specific questions users are likely to ask about a business and ensure that content is available for it. 

Answer domain and industry-related questions.

Another key way you can build content is to answer questions related to your domain or industry. Many potential customers are looking for specific products and tech information. These people are looking for solutions and your business can help them.

Create content that answers technology and domain-related questions on your site. Structure your content into clear paragraphs and lists to answer a specific problem. Search engines will crawl your content and provide text-to-speech responses to queries.

Create a FAQs page.

A FAQs page with commonly asked questions and concise answers is a strong content candidate for voice search results. Do research using social listening tools and analytics software to understand what people are looking for. 

When creating answers, make them short and direct. Keep your answers to 30 words or fewer to make it more likely that they are pulled up for search results. 

The ultimate goal is to create content from the perspective of a user searching for information. When you do that you'll be able to create relevant content that's picked up for voice search results.

Add the speakable tag.

Schema.org is a useful site that catalogs and explains how to use markups to describe your website content. By adding specific markups you make it clear to search engines what a piece of content is all about. 

For voice search, you can now use the markup 'Speakable' to indicate that a piece of text is useful as a text-to-speech result. It's important to know, however, that there are limitations to whether you can apply it to your content.

At present, this kind of markup is only applicable to eligible news sites. If you have a news publication website or write for one through guest posts, then it's helpful to be aware of the new speakable tag. 

Mobile-friendly formats are essential.

Voice search often takes place on mobile phones. Users looking for information are likely to click on the web link that comes with a voice search result. You can drive traffic to your blog and boost site conversions by making your site mobile-friendly.

Google has also implemented a mobile-first policy. This means that a company's mobile site will be indexed first and then the desktop version. Mobile-responsive sites will be prioritized by search engines. 

Along with creating content for voice search, it's important to ensure that your website platforms are optimized for mobile screens. When users click on the link that accompanies a voice search result, the linked website should continue to deliver positive experiences. 

Speech recognition will be used for work tasks

The impact of speech recognition technology can also be seen more directly in your business processes. Through the use of voice assistants and devices, speech recognition technology is transforming how people work. Here are a few ways that AI technology is being used to manage work tasks:

  • Documentation: Speech recognition makes it possible to dictate content for documentation purposes. This is currently in use in the medical field

  • Managing emails: Workers can open, write, and send emails through voice commands

  • Arranging meetings: Voice-enabled devices and software can be used to set up a meeting, book a room, and notify participants

  • Joining online conferences: People can issue a voice command to join a webinar or online conference

Such tasks are possible through products and tools that are specially developed for businesses. Amazon's Alexa for Business is geared towards managing office tasks. It cleans up time-consuming activities and streamlines work processes.

Cortana by Microsoft and other companies also make it possible to connect with work tools using speech recognition. These services make it possible to link voice assistants to Microsoft 365 and Google G Suite. 

Businesses can give their employees digital assistants to use at home to allow them to attend meetings. In this way, you can speech recognition technology helps with work and carries out important tasks with less effort.

Better accessibility

One of the most important ways that speech recognition will impact businesses and society is that it will create greater accessibility. Today, there are over 1 billion people who live with some type of disability, which can make using a website challenging. 

Speech recognition helps businesses accommodate people who have disabilities. It makes it possible for people to interact with a computer, an app or software without needing to use a keyboard. This makes your business more accessible and increases your reach to a larger audience. 

When creating content for voice search, you can boost readability and assist the differently-abled in a few simple ways. 

  • Structure your content with headings, subheadings and bullet points to make it easy for screen-reading software to read content

  • Use descriptive words for your anchor links instead of "Click here: or "Read more here." Such phrases don't give information about what the link will lead to

Incorporating accessibility will improve the usability of the website overall. You will also get a broader market penetration that benefits your business. Another key benefit is that you will positively build your brand image. 

Speech recognition technology can grow your business

The advances in AI and big data have transformed speech recognition technology. Deep learning and natural language processing have made it possible to increase the accuracy of speech recognition to a high degree.

The future is geared towards the greater use of voice search for online searches. More and more people will interact with businesses using voice assistant devices. 

Your business needs to meet these rising trends. With the information provided here, you'll be on your way to managing the changes AI brings.

The Top 5 Reasons Why Leading Specialists Don't Go to Your Company

Posted: 03 Mar 2020 12:20 PM PST

Have you ever searched for an employee? Do you remember the process? You posted a job opening on a popular job board, received applications, selected the relevant candidates, conducted an interview and, finally, hired the best one. This is the standard scheme for most ordinary jobs. But what do you do if you need to find the head of an entire department or a top manager?

You begin to do everything so that the exclusive specialist chooses you: highlight the company's advantages, offer a competitive salary, actively send emails in an attempt to recruit an employee. But all for nothing: Several months of active headhunting haven't led to a result.

Let's face the truth: The work in your company should be seriously attractive. A benefits package, flextime, an office in the center of the city – all these conditions have long since ceased to be unique, especially for C-level specialists. Consequently, before you start the troublesome search for C-level pros, think: What you can offer the candidate.

Five reasons why C-level pros aren't joining your team

Unattractive company presentation

Your business line may seem unpromising or uninteresting if you draft a tedious and dull job description.

Think about how your business can make professionals get interested in your offer. Does your business have a social dimension? Opportunities for experiments? High technologies? Perhaps you are launching an ambitious startup that is about to be on a par with the Forbes leaders and involves extraordinary tasks? Every sphere can become attractive, the main thing here is how you present it. 

Uninteresting tasks

High-level specialists are interested in the tasks. Monotonous job requirements may frighten the candidates.  Routine is certainly an inherent part of every work. This is normal, but any task becomes more interesting when there is freedom of decision-making.  

Top-level tech talents, for example, vest interest in job openings when they are offered a high area of responsibility, have the opportunity to implement their own solutions, use new technologies and carry out experiments. 

Specialists like when they have the opportunity not only to run the department but can influence the company's future. Each of us wants to feel valuable and irreplaceable. 

Noncompetitive working conditions

If your competitors offer specialists a salary higher than the market, options (an excellent motivation format that works well in the world of top management) and other bonuses, your task is to offer more.

Study the competitors' offers, identify priorities, offer more favorable conditions, and you'll have a good deal of luck.

Geographic limitations

High-level specialists rarely work remotely: They need to be with the team on a regular basis, actively participate in the company affairs. But this doesn't mean that you can find pros only in your city: consider relocation.

Limiting yourself, you run the risk of missing the C-level pros simply because they live in another city. By expanding the boundaries of your search, you increase your chances of success. Perhaps your ideal candidate exists, they just live in another city. 

Working with top IT specialists, I've noticed that many of them refuse to consider the offer when they don't see prospects for moving to another city or country.

Modern specialists are very mobile and are eager to consider options for moving. I understand that in most cases large companies have this opportunity. Still, if you can recruit a specialist to work in your city, why not give it a try?

Believe me, relocation is an unusual and attractive experience that can motivate a top-level specialist to accept your offer. 

Ineffective recruiting

Do you use all the channels for recruiting, or handle only well-known job boards? How do you communicate with candidates: Do you write boilerplate emails or approach each candidate individually? How many selection stages do you have? Do you ask to pass a test assignment? 

If you don't have serious experience in selecting high-level personnel, I still recommend contacting special agencies. Professionals working there can hire a relevant specialist, even if you don't have a set of attractive conditions. 

Tips

Nevertheless, if you decided to search for top-level specialists yourself, I'll give some simple but effective tips:

  1. Don't conduct longinterviews and don't give the test assignments in the first selection stage. There is no need for a candidate to spend hours completing a task when they have several job offers.
  2. Collect feedbackfrom each candidate refused to accept the offer. This seems pretty obvious, but according to my experience, few people use this advice in their work and don't consider it necessary to find out the reasons for the refusal.
  3. Understand the candidate's profile: These are hard skills, as well as those soft specialist skills, that will be needed specifically for working in your team. When you start the recruiting process, you need to understand exactly who you are searching for. The way you motivate a specialist depends on this aspect. 

Summary

To recruit a high-level specialist is not an easy task even for prestigious companies. Assess your real possibilities: don't try to "hunt" a Facebook CTO if you can't offer more favorable conditions. Be honest with yourself and candidates, evaluate your company adequately.

If you are firmly confident in your abilities and feel that you are capable of achieving a result, use every effort to

  • Explain the most attractiveaspects of your business
  • Set interestingtasks and give the workflow a personal touch
  • Offer a salary higherthan your competitors offer and think about additional motivation
  • Search for specialists in other cities and countries and help them with relocation
  • Set uprecruiting processes so that candidates are more likely to apply for your job

Sure you'll succeed! Good luck in finding your ideal!

How to Pay LLC Taxes

Posted: 03 Mar 2020 06:34 AM PST

  • A limited liability company is a type of business structure, not an IRS-recognized form of taxation.
  • An LLC can file taxes as a sole proprietorship (one member), partnership (more than one member), S corporation or C corporation.
  • An LLC must adhere to federal guidelines, as well as specific regulations set by the state they operate in. 

How is a limited liability company taxed?

A limited liability company (LLC) is a pass-through entity, meaning that all of the profits of the LLC "pass through" to the owner or owners of the LLC (owners are also referred to as members). An LLC itself does not pay federal income taxes, but the owners or members of an LLC must report profits and losses on their personal income tax return. 

The IRS treats your LLC either as a sole proprietorship or a partnership depending on how many members your LLC has and the tax advantages you qualify for. 

"A single-member LLC is taxed as a sole proprietorship and is a disregarded entity, meaning that the owner and LLC are separate entities," said Joshua Zimmelman, owner of Westwood Tax & Consulting. "A multi-member LLC typically pays income tax as a partnership, so the individual members pay tax based on their share of ownership. Some LLCs elect to be classified as a corporation for tax advantage purposes. They continue to operate as an LLC but are taxed as a corporation or S-corp." 

Filing as a sole proprietorship or partnership

If you are a single-member LLC, your business is treated by the IRS as a sole proprietorship, which means that you will not have to file separate entity taxes; instead, you will need to report the business's profits or losses on your individual income tax return. Only the profit (income minus expenses) is taxed, and the rate at which it is taxed will depend on your regular federal and state income tax brackets. 

"The profit that's generated by an LLC that is taxed as a sole proprietorship is subject to both income tax and self-employment taxes, which represent the employee and employer portions of Social Security and Medicare taxes (15.3% total)," said David Cawley, a partner at Fraim, Cawley & Company, CPAs. 

Multimember LLCs, or partnerships, are taxed similarly to sole proprietorships – the business does not have to pay taxes at an entity level, but the members must pay income taxes on their personal income tax returns. To calculate how much money each member of the LLC will be taxed on, divide the business's net income among the members according to their ownership percentage. [Read related article: Tax Filing Tips for Independent Contractors] 

Filing as an S corporation

Some LLC owners may opt to file as a corporation. If an LLC files as an S corporation, each member is treated as an employee and pays themselves a reasonable salary that they must pay income tax on. Cawley said this "reasonable compensation" is often based on the owner's training, experience, responsibilities and time devoted to the business. 

After salary distributions, any corporate earnings may be treated as unearned income and won't be subject to self-employment taxes. Some businesses with a high level of income may find it beneficial to file taxes as an S-corp, since members who file as a sole proprietorship or partnership are subject self-employment income tax on all profits. 

Cawley provided a scenario that demonstrates the differences in taxation based on an LLC that has $100,000 in profit. 

"If the LLC is treated as a sole proprietorship, the owner will have to pay $15,300 in self-employment taxes before income taxes are even considered," said Cawley. "In the same example, if the LLC is taxed as an S-corp and the owner pays themselves a reasonable salary of $40,000, only the $40,000 is subject to self-employment tax and income taxes. The remaining $60,000 is still subject to income taxes but not self-employment taxes, saving the owner nearly $10,000 in taxes annually."    

If your LLC is currently operating as a sole proprietorship and your business profit is growing consistently, you may want to consult with a tax expert to see if electing S-corporation status makes sense for your LLC. However, Aaron Messing, Esq., founder of Messing, P.C., said that LLC business owners should be aware of the limitations on the availability of S-corporation election. 

He listed the following legal requirements for S-corp consideration: 

  • An S corporation cannot have more than one class of stock.
  • An S corporation cannot have more than 100 stockholders.
  • With certain limited exceptions, only U.S. citizens or residents can be stockholders. 
  • An eligible U.S. entity must make a S-corporation election on IRS Form 2553 no more than two months and 15 days after the beginning of the tax year the election is to take effect to be timely. 

Filing as a C corporation

It is technically possible for an LLC to file taxes as a C corporation, but it is generally the least favorable option. Although the rate at which C corporations are taxed was recently reduced due to the Tax Cuts and Jobs Act (TCJA), they are still subject to a 21% tax rate for federal income taxes. Additionally, each member will be taxed on any of the remaining funds they take out of the business, whether it be through salary or dividends. 

"If the owner pays themselves a salary, the salary is subject to income taxes, 7.65% for Social Security and Medicare, and the company has to pay another 7.65%," said Cawley. "The owner will also have to pay income taxes on any dividends they take from the business. This is commonly referred to as 'double taxation' and is a reason many business owners and CPAs are getting away from choosing this structure." 

What are the tax advantages of an LLC?

One of the primary tax advantages of an LLC is flexibility. LLC members have a few taxation options available to them, which can result in tax savings. 

Another tax advantage of a limited liability company is business expense tax deductions. Under the Tax Cuts and Jobs Act, qualifying pass-through taxation entities can deduct 20% of their business income.  

"The biggest tax advantage is that expenses related to the income from the LLC can be written off so long as they are regular and ordinary business expenses," said Cawley. "Regular W-2 employees, on the other hand, can no longer deduct expenses related to work such as mileage or equipment after changes made by the Tax Cuts and Jobs Act of 2017." 

Do you have to pay LLC taxes if you made no money?

As with most things in business, it depends. If your LLC did not make a profit, you will likely not have to pay income taxes, but you may still be required to file a tax return or pay local property taxes for equipment you own and payroll taxes for employees. 

Whether or not you have to file taxes for an LLC with no income largely depends on how the LLC is taxed and whether your LLC had no activity or it just didn't make a profit. 

Zimmelman listed the following guidelines for LLCs that did not make a profit: 

  • LLC filing as a sole proprietorship: You don't need to file if there are no business expenses or income. You still need to file your personal tax return, but you don't need to include the LLC's info on your Schedule C if there has been no activity.

  • LLC filing as a partnership: You don't need to submit a partnership return if there are no business expenses to deduct or income.

  • LLC filing as a corporation: File a federal return every year, even if there was no income and no business activity. 

"If your LLC had business activity for the year, you should still include the LLC information on your tax return, even if you didn't earn a net profit," said Zimmelman. "You can deduct business expenses, but the IRS only lets you claim losses on your business for three out of five years. After that, they may reclassify your business as a hobby, which means you can no longer claim business expenses."

The Roadmap to Peer-to-Peer Lending

Posted: 03 Mar 2020 05:00 AM PST

  • Peer-to-peer lending is a completely new type of investment compared to stocks and bonds, which allows investors to diversify their portfolios.
  • Online lending platforms are websites that facilitate peer-to-peer lending by safely connecting borrowers to investors directly. These lending platforms set all rates, ensure all terms and conditions, and allow transactions.
  • A small business owner, such as a real estate developer, who is looking for money to fund a project and has exhausted traditional bank options should consider peer-to-peer lending. 

For small business owners, borrowing money without the hassle of going through a bank is ideal. Banks have extensive eligibility requirements, and even if you're approved, it can take a long time to get the money. Business owners and entrepreneurs who don't have good credit may find it especially difficult to get approved for loans issued by credit unions and traditional banks, even if their businesses are healthy. 

If you need a loan and can't get one from a bank, it's worth considering an alternative lending approach like peer-to-peer lending. Even with less-than-perfect credit, it's possible to get approval for a loan through online lending platforms. 

Online lending platforms are websites that facilitate peer-to-peer lending by safely connecting borrowers to investors directly. These lending platforms set all rates, ensure all terms and conditions, and allow transactions. 

For investors, peer-to-peer lending is an attractive option because peer loans generally offer a higher return on investment than the lender would receive from traditional financial institutions. [Read related article: Small Business Financing Options Without a Traditional Bank.] 

What is peer-to-peer lending, and how does it work?

Peer-to-peer (or P2P) lending is a financial transaction in which an investor loans money directly to a borrower through an online platform. Instead of a financial institution lending money, it is individuals who lend to other individuals or businesses, according to Saurabh Jindal, CEO of Talk Travel. 

"Normally P2P lending works online, and the P2P lending platform vets the borrowers wishing to get loans and creates a profile for them on their platform," Jindal told business.com. "The lenders then evaluate the borrower and lend accordingly. Each lender is not supposed to provide 100% of financing for the borrower; rather, it is pooled by various lenders." 

Jindal says that a lender will provide loans to many borrowers, which diversifies their portfolio and reduces risks. The borrowers usually pay a lower interest fee than they would for a bank loan. 

 

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What is peer-to-peer lending for investors?

Individual investors open an online account on a lending platform and deposit money that can be used for peer loans. The applicants who want to borrow that money share their financial profiles and associated risk categories. The interest rate is predetermined, and the borrower then evaluates offers from investors and accepts one. 

Peer-to-peer lending offers investors a way to earn a higher return on their investments than they would receive from traditional investments. But the process can be riskier as well, due to the default rates of borrowers on peer lending sites. 

Peer-to-peer lending is a completely new type of investment compared to stocks and bonds, which allows investors to diversify their portfolios, according to Kyle Gomez, founder of The Potential Of Money. Gomez says that peer-to-peer lending also has these benefits: 

  • Control: P2P lending platforms let you choose the types of loans and how much to invest in each one. There are very few restrictions, allowing investors to be as creative as they want to be. 
  • Accessibility: Loans range from three months to five years and are usually from a global marketplace. This gives investors massive opportunities that other investment products simply do not provide. 
  • Speed: Lenders can invest in loans from halfway around the world in a matter of seconds. 
  • High interest rates: Personal loans tend to have a minimum of 10% interest, which is a very attractive return for an investor. 
  • No banks: Removing the middleman from loan transactions makes loans cheaper for borrowers and more profitable for investors. Also, though it may seem trivial, animosity for banks has been growing since the 2008 financial crisis. As a result, many investors prefer working on a P2P platform, removing banks from the picture. 

What is peer-to-peer lending for borrowers?

For borrowers, peer-to-peer lending involves pitching their loan request to marketplace lenders and then reviewing offers from investors, according to Shahid Hanif, founder of Shufti Pro. 

"The borrowers select one loan and P2P lending starts," Hanif said. "All the monthly payments and money transfers are handled through these platforms. The process is completely automatic, and borrowers can bargain with lenders as well." 

Peer-to-peer lending can be a great alternative for borrowers with bad credit history, because they may have trouble getting approved for traditional business or personal loan. Peer loans present an additional financing option for a wide range of purposes, including debt consolidation, student loans, real estate projects, working capital, and equipment or inventory purchases for your business. 

What are the types of peer-to-peer loans?

Many peer-to-peer loans though lending platforms are unsecured loans. Many business owners want an unsecured loan or line of credit because unsecured funding doesn't require you to pledge collateral. Contrarily, secured funding requires you to pledge assets that you or your business own, such as real estate, equipment and inventory. 

Business loans

A business loan can help you grow your company, especially if you're in the startup state and attempting to scale. But a business owner's ability to qualify usually depends on their credit profile or the business's revenue. Note that unsecured business loans are likely to carry a higher interest rate than secured loans. 

Typical interest rates for peer-to-peer loans are similar to those of traditional bank loans. Rates for peer-to-peer loans range from 7% to 39% APR, while traditional bank loans range from 6% to 36% APR. 

A real estate developer who is looking for money to fund a project and has exhausted traditional bank options should consider peer-to-peer lending. Real estate lending, or real estate crowdfunding, is a type of business loan that allows a company to fund property construction and development projects with investor money rather than going through a traditional lender. [For more information on small business loans, read our reviews of the best small business loans in 2020.] 

Personal loans

Borrowers can use personal loans to finance vehicle purchases, home improvements or medical bills. These loans can also cover debt consolidation, and they don't usually have the high credit requirements and other criteria of most financial institutions. 

There's a wide range of interest rates on unsecured personal loans. On average, these are short-term loans that consumers can receive from banks, credit unions or private lenders. Most personal loans range from two to five years, and they are usually repaid in monthly installments. Personal loans' interest rates generally range from 5% to 36%, depending on your credit score. For personal loan terms of two to five years, the average loan amounts range from $2,000 to $35,000. 

Student loans

Peer-to-peer student loans can be a great alternative to more traditional forms of educational funding. These loans are a good option for individuals who might not qualify for federal or private student loans. 

Student loans are generally allocated in lump sums, which can allow the borrower to distribute the money according to their school expenses. Most student loans are short-term loans, ranging from one to three years. Interest rates vary, but as a reference point, interest rates range from 6.95% to 35.89% for LendingClub and 5.99% to 36% for Prosper. 

Is peer-to-peer lending safe?

Peer-to-peer lending is generally safe for both borrowers and lenders, since the lending platforms are registered with the Securities and Exchange Commission and work with FDIC-insured banks to issue loans and hold uninvested money. 

Peer-to-peer lending sites have various measures in place to make the process safe, which Jindal says may include these security measures: 

  1. They vet and conduct due diligence on the borrowers and give them ratings that are displayed to the investors (lenders). 
  1. The platforms provide buy-back guarantees (through insurance) to the lenders. In case of default by the borrower (inability to pay back the loan), the insurer compensates the lender. 
  1. The platforms make sure each loan request is met by multiple lenders. A lender who invests in multiple places diversifies their portfolio, thus reducing risk. 

Like any other investment, peer-to-peer lending involves some risks. There are two main risks, according to Gomez: 

  1. Defaults: When a borrower defaults on their loan, it could affect the investor. Ultimately, the money being borrowed is your money as an investor to the loan. 
  1. Lending site bankruptcy: It's also possible that the lending site will take on too many loans and won't be able to fund them all. 

Peer-to-peer lending has many benefits, such as better return on investment, cost advantages and investor relationships. However, there is one additional risk that individuals should understand – cybersecurity, according to Will Ellis, founder of Privacy Australia. 

"Due to the online nature of peer-to-peer lending, there are gateways for criminals to gain access to your private information, and the fact that this is financial information means that the risks are massive," Ellis said. "There are many forms of cybersecurity which individuals can implement in order to protect their information and create as many barriers between their information and cybercriminals as possible." 

What are some peer-to-peer lending sites?

Marketplace lending connects borrowers with willing online lenders. Many lending marketplaces offer new loan opportunities and loan refinancing. There are numerous platforms within the lending industry, but it's important to do your research and choose the lending company that best meets your business's needs. Here are a few popular online peer-to-peer lending platforms. 

LendingClub

LendingClub is one of the leading online lenders, offering business loans, personal loans, auto refinancing and patient solutions. Business owners interested in the lending site's small business loan can receive capital upfront with terms of one to five years, fixed monthly payments and no prepayment penalties. These are some eligibility requirements for this loan:

  • You've been in business for 12 months or more.
  • You make at least $50,000 in annual sales.
  • You have no recent bankruptcies or tax liens.
  • You own at least 20% of your business and have at least fair personal credit. 

Prosper

Prosper is a good lending network for when you need money fast. Prosper allows individuals to apply as borrowers and offers several loan types, including debt consolidation, home improvement, military and small business loans. 

This lending network offers fixed three- or five-year terms for its loans. Interest rates vary by loan type, terms and amounts, and your credit score and financial situation. It allows you to pay off your loan early with no penalties. 

Prosper borrowers must have a minimum credit score of 640, no bankruptcies within the past year and a debt-to-income ratio below 50%. 

Funding Circle

Funding Circle is an online peer lender that's all about small business loans. It was nominated for Best Small Business Loan for Low APR in 2019 by the U.S. News & World Report and won LendIt Fintech's 2019 award for Top Small Business Lending Platform. Funding Circle is an accredited business by the Better Business Bureau and currently has an A+ rating on the site. 

Funding Circle offers fixed-rate term loans, requiring a minimum of two years in business and a minimum FICO credit score of 620. Amounts for its small business loans range from $25,000 to $500,000. 

Can investors make money with peer-to-peer lending?

Peer-to-peer lending is a great way for accredited investors to make money. The investor looks at several loans with varying credit ratings – the higher the credit risk, the more the interest pays out for the investor. 

It's a smart investment option for online investors, who can earn up to 30% returns by lending money directly to verified borrowers, according to Julia Brookes, a consultant for Now Loans. 

"Investors can diversify their investment beyond traditional asset categories to earn returns higher than other sources of investments, such as saving accounts, fixed deposits, corporate bonds, mutual funds, etc.," Brookes said. "The cool thing about P2P lending is that it does empower investors to make micro-investments across various risk levels (high risk equals high expected return, low risk equals low expected return)." 

Hanif believes that investors feel comfortable on peer-to-peer lending platforms because of major benefits like these: 

  • Easier approvals
  • Lower fees
  • Saved time
  • Investing in the business of their choice
  • Potential profitable returns
  • Tax efficiency 

Can borrowers make money with peer-to-peer lending?

While investors can easily make money with peer-to-peer lending, so can many borrowers. For one, the borrower can make money by utilizing the peer-to-peer loan to pay off their high-interest loans, such as credit card debt, according to Marcus Anwar, co-founder of OhMy. 

"By doing so, they would be saving money by paying low interest on their debt," Anwar said. "For example, borrowers can be charged anywhere from 16% to 21% on their credit card debt. If the borrower gets a peer-to-peer loan with a lower interest rate of 5% to 9%, then they would be saving all that money by not paying a high interest rate." 

When done right, peer-to-peer lending can be very safe and lucrative for both borrowers and lenders. However, as with any other financial transaction, you must review each individual loan or investment opportunity on its own merits.
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