Credit Cards

Credit card companies charge a fee. This fee is less than 3% in most cases. Sales prices need to reflect this. Speciality retailers who custom order for their customer a large ticket item with long lead times can save money by charging a 5% credit card processing or accepting a check for down payment.  Verify the check has cleared before placing the order with your vendor. Likewise, prior to the item shipping, require payment. This policy will vary depending on the customer, but saving 3% on a $10,000 order is still $300.00.

Using a rewards point credit card for purchases creates savings. When a large ticket item is sold on terms, commercial paper is generated and sold to a finance company at a discount of the face value. Equipment over $30,000 would fall in this category. Many finance companies accept payment by credit card when making the monthly payment. The processing center may accept reward point credit cards such as American Express and Discover Cards, Using these cards to make your monthly payments can create significant savings.. Converting your monthly AMEX bill from $20,000 to $150,000 can create an extra $1,500+ per month.

Using credit cards to start up a business is risky. One should have the cash flow to payoff the monthly credit card bills otherwise the interest rate may be greater than the rates offered by commercial lenders.

Credit and debit cards are used over 2/3 of the time for payments at retail stores. There are companies who offer unsecured loans to retailers who have sufficient revenue from credit and debit cards. At the time payment is received, they take an agreed upon percentage for each transaction (12% to 18%) until the loan, including interest, is paid off. Such arrangements affect cash flow. Terms and conditions vary, but usually requires the retailer to solely use their point of sale software at all cash registers.

 

Know Tax Law

Some tax laws are written to promote social needs, some are written to promote certain industries. Federal tax law was revised to promote manufacturing of durable goods several years ago by allowing rapid tax depreciation of new equipment, Sound boring? Under standard depreciation schedules a $100,000 piece of equipment acquired had to be written off via depreciation over several years. Incorporating the tax strategy that best fits your tax needs, this equipment could be written off for tax purposes the same year it was purchased or over several years. The actual payment schedule for the equipment does not affect tax ramifications, lease arrangements not withstanding.

Sales tax laws vary from state to state. In our client’s case, they published a quarterly sales brochure for their distributors at a cost of $100,000, sales tax was $7,000. Sales tax law for our client allows for sales material delivered by common carrier to be exempt from sales tax.  By pointing out this item of tax code, the client was able to earn a $56,000 sales tax credit. They were allowed to go back to just 2 years.

 

Incorporate

Always consult a legal expert if you are considering establishing a corporation. AMCR Financial Services are not legal experts, we cannot offer legal advice nor are we financial advisors. Single owners of small businesses face financial risk. What happens if a business fails? Most small businesses fail in the first 2 years, especially restaurants. If the business is a corporation, in most cases,  the personal assets of the shareholders such as homes and cash savings,  are protected from the creditors of the failed business. If the failed business entity is not a corporation, the personal assets of the owners may be seized to pay the debts owed to the creditors. Some states such as California charge a separate income tax for corporations, other states such as Nevada and Texas do not. The location or Nexus of where revenue is generated plays a key role as to where one should incorporate. If the main purpose to incorporate is to protect yourself from liability litigation, having adequate  liability insurance may be more cost effective than incorporating (contact your insurance agent).  Let the insurance companies fight your litigation for you.