Bookkeeping – Other Employer Provided Benefits (Lesson 93)
Other employer-provided benefits are composed of three groupings of benefits: welfare, other (Life Insurance, Auto & Education) and fringe.
Key Man
When a company relies on one or two individuals to provide the knowledge or source of information, these individuals ares known as the key man. It is not uncommon in many really small businesses for the owner to be the key man. As the company grows it is imperative to allow more individuals to have this knowledge. The fear for a small business owner is that by providing this knowledge to a non-owner is that this person will obtain the information and leave the company to create competition or worse publicize the information. To reduce or eliminate this issue, small businesses should use employee agreements, non-disclosure agreements, and binding contracts with employees that penalize the individual when personal gain is achieved from this knowledge.
Business Barriers
No business is instantaneously successful. There are multiple obstacles referred to as barriers all owners and managers have to overcome. There are three primary groups of barriers for every business out there.
Bookkeeping – Auto Costs Related to Owners and Family Members (Lesson 62)
The Internal Revenue Service scrutinizes expenses that can and often are benefits to owners. The most common benefit is the use of a company owned car for personal travel including using the car to get to and from work. Owners would love to have this cost of travel paid by the company and deductible for tax purposes.
Micro Businesses
Micro businesses are all around us. Often overlooked and rarely given a second thought they are the backbone of our economic system. From the local beauty salon to the Mom and Pop pizza shop; micro businesses are everywhere. Micro business is defined as the small closely held operation that provides a family a supplemental or primary source of income.
Shareholder Dynamics in Small Business
The majority of small businesses are owned by a single individual. An additional pool is family owned or controlled. The balance usually involves friends or relatives that are passive in ownership. These forms of ownership create some interesting shareholder dynamics and if not thought out, can create some legal and financial issues in small business when a life changing event occurs.
The Key Man
One of the most misunderstood principles of business deals with the one or few individuals in a small business operation who are critical to operations. This individual is referred to as the Key Man. The best example is that of the primary wage earner in the family unit.
How Much is a Fair Profit? Part III of V – Risk
A third factor in determining a fair profit percentage is risk. Risk is divided into two types. The first is insurable and the second is uninsurable risks. Insurable risks are mitigated and have very little to no effect on the profit formula due to transferring the risk to a third party known as the insurance underwriter. Uninsurable risks are non-transferable and therefore the profit must be adjusted to compensate for this type of risk.