Q: Should I hire my child in the family business?
Ken Honick, a tax principal in the Sarasota CPA firm of Eaton Honick Pellegrino & McFarland, P.A, advises: First consider the impact hiring a family member may have on other employees. Will the other employees view the family member as receiving special treatment? Will this affect their morale and performance? Can you fire your child if he or she does not perform?
There may be tax savings from hiring a child in either a sole proprietorship or a partnership where the parents are the only partners. Payments for the services of a child under age 18 who works for his or her parents in a trade or business are not subject to social security, Medicare, federal unemployment compensation, or Florida unemployment compensation. In addition, the wages paid are deductible from the business income, reducing taxes at the parents' rate. The wages will be income to the child, who even if claimed as a dependent by his or her parents can still claim a standard deduction of $4,750 against earned income in 2003 ($4,850 in 2004). The child can also fund a traditional or Roth IRA to the extent of wages or $3,000, whichever is less.
Keep in mind that wages paid to a child must be actually earned! Ken Honick may be reached at (941) 365-1172 or e-mail [email protected]
Q: I'm shopping for a loan to expand my business. Should I get professional help in preparing my loan application?
Jerry Scott, executive vice-president, Bank of Commerce, says: Your assistance should come from your accountant and your banker. The key is to establish a relationship with your banker as you are developing your business. The banker can become a valuable member of the professional team to assist in the growth of your business and provide a financing plan to support its future success.
An accountant is another key member of the professional team. Good financial reporting should allow you to understand the success of your company and the need for future expansion. More importantly, the banker requires this information to review the financial status of your company and to establish plans for expansion.
Businesses also need the professional help of an attorney. It's important to establish these relationships early in your business life. They each provide valuable support to the future success of you business. Jerry Scott may be reached at (941) 373-0522.
Q. I'm about to invest in new computers for my growing company. How long should I plan on them lasting? Greg Pember of PCM Networking answers: Personal computers today usually have a life of three to four years, not because they break down but because of changes in software requirements, speed, etc. Buying a product such as Dell will give you a solid product as well as an on-site warranty for three years. Depending on how many users will be in this company and what their Internet needs are, you would also require a hub or switch, router, tape back-up and anti-virus software. Today there are many solutions available, so be sure to explore your company's requirements with respect to needs, dollars and future expansion. Greg Pember may be reached at (941) 351-8279 and [email protected].