What are the best ways to handle taxes?

The key with taxes is to stay on top of things and if the weekly routine referred to in the tips on managing money section is being followed, it will make a huge difference. Here are three more recommendations for handling taxes:

• Use a tax accountant for Federal and Franchise Tax filing preparation.  The costs for this service will be very reasonable if the books are in order.
• Payroll related and Sales & Use Tax is most effectively managed on a monthly routine where a day is set aside each month (e.g. the 5^th of the month) to comply with these various filings and payment obligations.  Almost all of these filings and payments are able to be taken care of online, which will reduce paperwork and your time involved.
• Financial Planning is very important as some of these tax related cash outlays can be a meaningful amount.  With some basic planning that incorporates these payments into the projections, the business would not be caught off guard having to make these payments on short notice.

How can I improve my chances of getting a loan?

Getting a loan these days seems to be more difficult than it’s been in the past. However, having at least two years of business history and having made timely payments to your vendors will greatly increase your chances. Being able to provide accurate historical financial statements with a financial forecast that portrays a reasonable projection in light of the history, along with a summary for the assumptions made will also increase the likelihood of getting a loan.

Be prepared to start with a small amount of credit to establish a track record.  This is the case even if you need to set up a small loan where it’s secured by a cash deposit of the same amount.  The key here is to demonstrate a track record of timely payments and financial responsibility and then seek to expand the amount extended on credit.

What are the best ways to protect personal finances?

Totally separating business and personal funds is an absolute must and is the minimum step in protecting personal finances by keeping track of how much personal funds are ‘invested’ into the business.

While being set up as a sole proprietorship is convenient and certainly has minimum set up and maintenance costs, it does nothing to protect personal finances since there is no legal distinction between the owner and the business.  As such, the owner has unlimited liability for all losses and debts.

Depending on your company’s level of sophistication, risk exposure, and maturity of the company, it would be worth exploring a Limited Liability Corporation or a Limited Liability Partnership legal entity structure.  Both of these structures do exactly what the name implies; limit the liability of the owners and their personal finances.

Great advice, isn’t it?

At this point in December, it can start to feel like the New Year – along with all our hopes, dreams, wishes and expectations for it – are barreling down on us. Personally, I’m a rabid Resolution-setter, and I have a pretty strong track record of making New Year’s changes actually happen – and stick.  But what I know after years of using the New Year as a great excuse to set and meet some goals is that it’s very, very helpful to get a head start, ramping-up to new habits, behaviors and target goals achievements starting in December.

If you’re one of the millions who has an eye on 2012 as the year in which you’ll buy a home (first or not), here are five things you can do now to put yourself on the right path:

1.    Check your credit. Take my word for it: there is no bad surprise worse than a bad credit surprise. Okay, maybe there is one thing worse – a credit surprise you receive while you’re in the midst of trying to buy a home!

Recent studies have revealed that a record high number of real estate transactions are falling out of escrow, and that credit “issues” are a leading cause of these dead deals. Your best chance at catching and correcting score-lowering errors and other derogatory items before they destroy your personal American Dream is to start checking and correcting while you still have time on your side.

2.    Do your research.  The more rapidly the real estate market changes, the more it behooves smart buyers to study up before they jump in.  And now’s the time – you can start doing online and in-person research into topics ranging from:

·    Target states, cities and neighborhoods. Whether you’re relocating or simply trying to narrow down the local districts to focus on during your 2012 house hunt, December is a great time to start your online research into decision-driving factors like tax rates, school districts, neighborhood character and even prices in various areas. Resident ratings and reviews sites like Trulia and NabeWise can help you make the neighborhood-lifestyle match.

Once you narrow things down and start speaking to local agents, ask them to brief you on the local market dynamics, including how long homes typically stay on the market and whether they generally go for more or less than the asking price, so you can be smart about how you search. (And yes, Virginia, there are areas where homes sell for more than asking, even as we speak!)

·    Real estate and mortgage pros. If you don’t already have your pros picked out, now is the time to get on the horn or drop an email or Facebook message to your circle of contacts, asking them for a referral to a broker or agent they love.  Follow up by: checking whether these pros are active in answering questions on Trulia Voices, searching for their name and seeing what sort of feedback on them you can cull from the web, then giving them a ring and launching a conversation about whether you and they might be a good partnership.

·    Short sales and REOs. Distressed property sales are not for the unwary. If you want to target upside down or foreclosed homes, or are planning to house hunt in an area where many of the listings are described as short sales or foreclosures, get educated about what you can expect from a distressed property purchase transaction before you get your heart set on a short sale.

·    What you get for the money. Online house hunting is a powerful tool – especially when it’s cold and wet! But there comes a point in your house hunt where you’ve got to just get out into the actual physical homes you’re seeing online in order to get a strong, accurate sense of what home features, aesthetics and location characteristics correlate with what price points.

·    Mortgage musts. You can read a bunch of articles about mortgages and get yourself pretty far down the path toward qualifying for a home loan, but you can only get a personalized action plan for a smooth road ‘home’ by talking with a local mortgage broker and having them assess your basic financials.  They might say you need to move funds around, pay a bill down or off or produce some sort of documentation from your employer.  And the time to start all that is now.

3.    Fluff up your cash cushion. So, you’ve saved up your 3.5 percent down payment. Perhaps you saved a little extra for closing costs.  Or maybe you’re even one of those uber-aggressive 20-percent-down-ers.  No matter how much you’ve saved, you’ll find that you could use more once you activate your home buying action plan. Mark my words – after closing, you’ll crave extra cash to do some repairs, upgrade a couple of things, buy appliances or even just to hold onto in order to minimize your anxiety about depleting your savings!

So, if homebuying is on your personal 2012 action plan, don’t go hog wild on holiday gifts. Instead, wait until next year and give yourself the gift of a home.

4.    Shed some stuff.  Sell it. Donate it. Give it to relatives who’ve always coveted it.  Just get rid of it. If you do it before year’s end, you can kill three birds with one stone: (a) getting some cold hard cash to go toward your savings, (b) getting some tax receipts so you can deduct the value of your donations in January, (c) minimizing money spent on holiday gifts for loved ones and these two bonus birds – clearing the mental clutter that physical clutter creates and prepping for your move in advance.

5.    Sit very, very still.  Sometimes, the best way to further our goals is to stop tripping ourselves up.  In that vein, commit right now to refrain from making any major financial moves until you buy your home.  Don’t quit your job to start that personal chef business (yet), don’t pull a bunch of cash out of your savings account (without getting clearance form your mortgage pro first), and don’t start buying cars and boats on credit – even if you do love the idea of putting the red bow on the car you give your wife, like in the commercials.

I assure you, the bow you’ll be able to put on that house or condo will be much bigger, redder and more tax-advantaged!

Q: Buying a house worries me. I don’t know what I should be looking out for! I know that the older the house, the more likely it is that the wiring, plumbing and roof might be out of date, and the paint could even have lead in it if it’s old enough. I have been looking at houses and like a handful of them, but obviously don’t want to pay for an inspector for all of them. Help!

A: The fact is, you’re simply not going to be able to rule a home all the way in — or out — without paying for an inspection. Your best bet is to generally select the home on which you want to place an offer based on its location, basic specifications and how well they fit with your wants and needs, and the price you are able to negotiate for it.

You simply have to go into a home purchase with the understanding that it will not be a done deal until you do pay for a home inspection, and pest and roof inspections, too, in most cases.

Generally, homebuyers don’t have a laundry list of homes they feel are interchangeable with each other; they tend to have a strong preference for one over the others, or a ranked list of homes, based on things like location, aesthetics, price and the like.

And the fact is that the average plumbing, electrical or roof repair or upgrade might not even be a deal-breaker, depending on how strong your preference is for one home over the others.

If the home costs $250,000 and you love it, would the fact that it needs a $5,000 roof deter you from buying it? Most buyers would say no — and on today’s market, most buyers would simply try to negotiate with the seller to make the repair or get an upgrade credit, or chip in some or all of the needed repair.

With that said, there are some basic things you can and should watch out for with respect to the areas of concern you mentioned. First things first: disclosures.

Your agent can find out whether the seller’s disclosures are already available for the properties in which you’re interested.

Many times, smart, honest sellers will flat out disclose what plumbing, electrical and roofing kinks and quirks a home might have; if they mention lots of little repairs they’ve had to do over the time they’ve owned the place to a particular system (e.g., multiple times they’ve had to have the sewage line snaked, etc.) that may indicate that particular system (a) might need some work and (b) definitely needs a closer, professional inspection.

In terms of things you can see with your own two, untrained eyes, if you’re looking at an older home and have concerns about its electrical system, look to see:

• whether there are three-pronged or two-pronged plugs throughout (three-pronged plugs suggest, but do not guarantee, that the home might have modern grounding, which can reduce the risk of shock, and some of your appliances and electronics might need a three-pronged outlet to plug into);
• look for those little reset buttons on the electrical outlets in bathrooms, kitchens, laundry rooms and garages (they indicate modern safety upgrades known as ground-fault circuit interrupters (GFCI), which minimize shock hazards around water;
• watch for fuses vs. breakers (a fuse system is an older, almost obsolete method of electricity management and may indicate that an electrical upgrade will be needed in the home’s near-term future); and
• scorch marks on and near outlets (not good).

Water stains on walls and ceilings may indicate roof, plumbing or drainage issues; similarly, looking under sinks is a quick way to look for water damage and staining from plumbing leaks.

Actually, many roofs that require repair just look like it from the exterior, when viewed with the naked eye; if it seems rippled or raggedy or worn, it might require some repairs or upgrades in the near future.

But here’s the thing: Even if you do see any of these items, you should not necessarily construe them as a deal-breaker. Rather, you should take any or all of them as signs that you should ask your property inspector to pay special attention, or make sure you obtain a specialty inspection or repair bid from an expert like an electrician or roofer.

And by the same token, a home can have none of these visible signs of plumbing, electrical or roofing issues and still have major, deal-breaker-level condition problems.

I once represented a buyer who got into contract on a home that had been gutted and remodeled after a fire — new electrical, new plumbing, new roof — all on top of a completely rotten foundation that received six-figure repair estimates from multiple contractors.

When you find a property that works for you and get into contract on it, don’t cut corners or costs when it comes to having the home thoroughly and professionally inspected.