Never Forget Greenwood

In 1921 the Greenwood District in Oklahoma was one of the wealthiest black communities in all of America. It was described as the Black Wall Street. What an interesting name for the epicenter of black businesses, even though there were no brokerage houses. As history records, Greenwood was burned to ashes by a white mob. But I want to suggest to you today that it just wasn’t the businesses that were burned to the ground. I want to suggest that black America’s financial principles, financial literacy and management were burned to the ground and buried in mass economic graves for generations. Today, I’d like us to ask the question, what financial principles have we forgotten from Greenwood?

Support Black Businesses

The first and perhaps most critical factors which contributed to Greenwood’s success as black wall street, was that blacks supported black businesses. Close to 100 years later, black consumers celebrate Juneteenth oblivious to the economic reality that a dollar circulates 28 days in Asian communities, 19 days in Jewish communities but only six hours in African-American communities. Have you forgotten Greenwood?

Appreciable Assets

The second most powerful principle is that blacks owned assets which would appreciate in value. Yes, they owned businesses, hotels, hospitals, land, and other maturing assets. Today, most of the black consumer spending power of 1.3 trillion dollars are spent on assets having little or no appreciable value such as clothes and cars. It’s one thing if the money was spent on such depreciable assets, but black consumers also had stock in the company, like Nike. But the truth is, most of black America does not even own stocks in the brands they purchase the most!

Black Spending Power

Black America’s spending power is an estimated 1.3 trillion dollars, yet black businesses are not supported and blacks don’t own assets which appreciate. How is it with your consumption and spending? It was James W. Frick who said, “Don’t tell me what your priorities are. Show me where you spend your money, and I’ll tell you what your priorities are.” Where does your money go? Are you imitating the financial principles from Greenwood?




The Color of Money

The health pandemic has exposed economic racial disparities and systemic racism. While the government handed out an estimated three trillion dollars in relief to restore and support the economy, because of the structural barriers deeply rooted in our history of racial inequality, there is still a cost to being black. Pandemics, catastrophes and financial crisis only widens the wealth gap between black and white families in America. Here are some of the costs of being black.

FICO Score and Home Ownership

The African American unemployment rate has spiked as a result of the COVID lockdown. Mortgage lending standards usually tighten after a crisis which only widens the wealth gap making it increasingly more difficult for blacks to own homes. What’s the cost of being black? The average borrower FICO score at origination is 730. Due to high unemployment among blacks due to the virus, African Americans will have even lower FICO scores which will result in a severe decline in home ownership thereby expanding the wealth gap.

Assets and Income

During times of economic hardship or depression African Americans lose more wealth than their white counterparts. The median income gap between white and black families also widens during an economic downturn leading to blacks having less resources to draw on when things get really difficult. What’s the cost of being black? The cost is that when the economic downturn is over and the economy begins to grow, people of color are in a weakened economic condition and cannot benefit from the post recession economy and asset appreciation.

Tax and Savings

The U.S. tax code prioritizes savings in certain assets over other savings. Retirement savings accounts such as 401(k) plans and individual retirement accounts (IRAs), as well as mortgage borrowing to finance a primary residence, receive preferential treatment under the tax code. Yet blacks are less likely to work in jobs that carry benefits such as retirement savings due to historical occupational segregation. What’s the cost of being black? These obstacles translate into fewer tax advantages and fewer chances to benefit from recent stock and housing market gains, resulting in significantly less wealth for blacks when compared to white Americans.




How to Avoid a Bank Robbery

This is not a notice or warning coming from your local police department or neighborhood watch group. Some of you may surmise that since the community in which you live is gated or filled with educated professionals that this notice is simply not applicable to you. But this kind of bank robbery only requires you to posses a bank account or a credit union account. With 40 million and counting individuals unemployed, stimulus checks being handed out of $1,200.00 or more, and the United States Treasury pouring trillions of dollars into the economy, how do you know your money is safe? Here’s the skinny! Or as some would say, here are some facts!

Financial Institution Coverage

The Federal Deposit Insurance Corporation (FDIC) insures most consumer funds deposited into the bank, while the National Credit Union Share Insurance Fund (NCUSIF) insures most funds deposited into a credit union. In general your deposits are covered up to two hundred and fifty-thousand dollars ($250,000.00). What you should know is that not all banks are FDIC insured or covered dollar for dollar on your account.

Some banks may have FDIC insurance coverage for only a percentage of your money deposited. For example, a bank may have FDIC insurance coverage of only fifty cents on each dollar. Which means that if you have $100,000.00 dollars in your account you will only be insured or covered for up to $50,000.00 dollars of your total balance. Can you afford to lose fifty percent or any amount of your hard earned funds during a pandemic? Or, can you afford to lose fifty percent of your earnings when most Americans have less than three months of emergency savings in their deposit accounts? Bank robbery! Check to see if your bank is FDIC insured dollar for dollar.

Which Accounts are Covered

FDIC insurance covers all types of deposits received at an insured bank, including checking accounts, negotiable order of withdrawal (NOW) accounts, savings accounts, money market deposit accounts (MMDAs), certificates of deposit (CD) and other time deposits, and official items issued by a bank (such as cashier’s checks or money orders). Keep your deposits within these type of accounts.

Which Accounts are Not Covered

FDIC does not insure non deposit investment products, even if they were purchased from an insured bank, including annuities, mutual funds, stocks, bonds, government securities, municipal securities and US Treasury securities. Here is an interesting point: the contents of a safety deposit box are not insured by the FDIC. (Make sure you read the contract you signed with the bank when you rented the safety deposit box in the event that some other type of insurance is provided. Some banks may make a very limited payment if the box or contents are damaged or destroyed, depending on the circumstances.) Go in and speak with your banker immediately!

Check Your Coverage

FDIC and NCUSIF insure accounts under different categories at each financial institution. For example, one category is single ownership of deposit accounts while another is joint ownership deposit accounts. For accounts which are only in your name the sum of all your deposits at a single institution are insured up to $250,000.00. If you and your spouse have a joint checking and savings account at a bank your total coverage for the joint account is $500,000.00. This would also be in addition to the coverage you each have for any single owned accounts at the bank. Check on all your bank accounts to avoid being a victim of the next bank robbery.

Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC . Give2Get Rich, LLC 2020. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.




How Coronavirus is Impacting Your Retirement Plan

At the end of 2019 Congress passed into law the Setting Every Community Up for Retirement Enhancement Act, also known as the SECURE Act. With over 1.3 million COVID-19 cases in the United States and more than 79,000 deaths recorded, it might be time for you to rethink your Individual Retirement Account (IRA) or 401k distribution upon death.

SECURE Act

Under the SECURE Act starting in 2020, a non spouse heir who inherits retirement account distributions can no longer stretch out the receipt of those funds over his or her lifetime. A non spouse heir must now receive those distributions over ten years.

This means that your children can no longer spread the required minimum distributions from all the money you saved for years, over their lifetime. Therefore, they may be placed into a higher tax bracket having to withdraw this money over ten years and not a lifetime. This is also true if you have an estate plan and leave your retirement in a trust.

Here are some additional ways the SECURE Act may impact you:

  1. As an employee you can now contribute to a traditional IRA after age 70. That said, you may want to consider contributing to a Roth IRA instead of a traditional IRA.
  2. If you adopt or give birth to a child you can withdraw up to $5,000.00 from your IRA or 401K without tax penalty.
  3. Beginning in 2021 as a part-time employee you will be eligible to contribute to a 401K plan. Prior to the passage of this Act, people who worked less than 1,000 hours durning a year were not allowed to participate in such plans.
  4. Consider converting your traditional IRA in stages to a Roth IRA. While your heirs will still have to withdraw the money in ten years, they would not be taxed on the money and they could allow it to grow with nine years of tax free growth.

Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC

Give2Get Rich, LLC 2020. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.




How COVID-19 is Impacting Your Credit Report

In the midst of a crisis, where unemployment exceeds 30 million individuals, oftentimes the last thing on your mind is your credit report. Why should you care about your credit report when your household income has decreased from two persons to one or zero. You should care because your credit report is tied to your next job, apartment rental or house purchase. This is why it is critical that preserving and protecting your credit be part of your pandemic survival strategy. Consider the following credit information.

1. Modifications under the CARES Act to the Fair Credit Reporting Act:

Under Section 4021 of the CARES Act, the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et. seq., is amended to impose new reporting requirements on institutions that furnish credit information to credit reporting agencies. Section 4021 provides that an institution that makes an “accommodation” with respect to one or more payments on a credit obligation or account that is subject to deferrals or forbearance agreements because of the COVID-19 pandemic—and the consumer makes the payments or is not required to make one or more payments pursuant to the accommodation—must report such obligation or account as “current” or as the status reported prior to the accommodation.

Are all your credit accounts current?

In other words, accounts that were current before the accommodations would remain current during the relief period, irrespective of any accommodations. On the other hand, delinquent accounts before the accommodations would remain delinquent, unless brought current by the consumer.

It’s important to know that this new reporting requirement does not apply to consumer accounts that have been charged off. These responsibilities will apply to reporting on accommodations made to consumer accounts between January 31, 2020 until 120 days after the end of the COVID-19 national emergency.

2. Greater Credit Access:

Starting on April 20, 2020, the three credit reporting agencies: Equifax, Experian and TransUnion will allow you to check your credit report for free each week for the next twelve months. Given COVID-19 scams, it is critical that you check your credit report frequently. These frequent credit checks by you will not impact your credit score. You can access your free credit report each week through AnnualCreditReport.com

3. Current Account:

If your account is current and you make an agreement to make a partial payment, skip a payment, or other accommodation, then the creditor is to report to credit reporting companies that you are current on your loan or account. This applies only if you are meeting the terms of the agreement.

4. Delinquent Account:

If your account is already delinquent and you make an agreement, then your account will maintain that status during the agreement until you bring the account current. If your account is already delinquent and you make an agreement, and you bring your account current, the creditor must report that you are current on your loan or account.

Credit Protection

COVID-19 now provides a shield in protecting your credit status. Remember, the CARES Act requirement applies only to agreements made between January 31, 2020 and either 120 days after March 27, 2020 or 120 days after the national emergency concerning COVID–19 ends. Take advantage of these options. Who knows, it may even be an opportune time to start rebuilding your credit.

Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC




What You Need to Know About Filing Your Taxes This Year

Federal income tax was introduced with the passage of the Revenue Act in 1861. The year 1913 marked the first time federal income tax filings were required with the filing deadline of March 1st, 1913. In 1918, the filing deadline was changed to March 15, 1918 and in 1955 it was changed again to April 15, 1955. Since 1955, the individual tax filing deadline has not changed until the United States Treasury’s recent announcement to extend the April 15, 2020 filing deadline to July 15, 2020. So what does this announcement mean for you?

FEDERAL FILING DEADLINE

The announcement means that you have until July 15, 2020 to file your personal/individual tax return for tax period 2019. Here, we are generally referring to persons filing Internal Revenue Form (IRS) 1040 or some version of the 1040 Form. For example, this would include disregarded/single member LLC’s and sole properties or schedule C filers.

FEDERAL PAYMENT DEADLINE

The announcement also means that if on July 15, 2020 or before, you have prepared your personal/ individual tax return for tax period 2019 and you have determined you have a tax liability (you owe); you must submit your payment on July 15, 2020. The lesson here is to try and prepare your taxes early to determine your disposition. Don’t procrastinate!

FEDERAL FILING DEADLINE EXTENSION

If for some reason you cannot file your 2019 federal income tax return by July 15, 2020 file an extension using IRS Form 4868 by July 15, 2020. Your extension must be postmarked or filed electronically July 15, 2020. The extension will provide you with time to file your return by October 15, 2020.

FAILURE TO FILE and FAILURE TO PAY

I could spend the next few weeks explaining IRC (Internal Revenue Code) Section 6651, but that would be too exciting. Therefore I’m giving you “the skinny” on it. If you can’t file by July 15, 2020 file an extension for….sake! If you owe and don’t have the money to pay, file your tax return anyway for….sake! Why? There are two penalties the IRS will assess if you fail to act.

One penalty is for the failure to file and the other is for the failure to pay. If the deadline comes and you fail to file your return, or an extension (IRS Form 4868) and you owe you will be assessed a penalty of 5% up to 25% of the liability (the amount you owe). Yikes! Additionally, if you owe, don’t have the money and fail to file your prepared or completed return you will be assessed a fail to pay penalty of 5% up to 25% of your tax liability. Yes! That’s right! Between the failure to file your return or an extension AND the failure to pay you could wind up increasing your potential tax liability by an additional 10-45% due to interest and penalties.

STATE DEADLINE

Most states if not all, have adopted the federal deadline for filing your tax returns. For example, the state of Maryland has changed their filing and payment dates to those of the Internal Revenue Service. Check with your local jurisdictions for further details.

They say the only sure thing in life are death and taxes. But where there is income tax the just man will pay more than the unjust man, on the same amount.

Connect with us at: Ruthven@give2getrich.com




Virus Economics: How to Spend Your Stimulus Check

Pandemic viruses are the mother of invention. Think about it! Within two weeks of the United States Congress passing stimulus legislation, the Internal Revenue Service (IRS), who would take several weeks if not months to provide taxpayers their refund, began issuing checks or direct deposits to over seventy-five million qualified individuals. While this issue is not the subject of my blog, I cannot help but ask, why does it take them so long to send me my Benjamins? Anyway, with social distancing and lock downs in effect we now have to deal with stimulus viral economics. How do you plan to spend your stimulus? Do you have a plan? What should you spend it on? Let’s highlight some options and controversy.

1. TITHING

This is probably controversy #1. Should I really be giving the church 10% of my stimulus check? It’s a pandemic after all! Can I defer my contribution and catch up later?  I’m already behind on my other bills. Is tithe a necessary expense?  Send your thoughts and responses to: ruthven@give2getrich.com let’s talk!

2. CREDIT CARD

Some who provide financial information may have a different view, but stimulus checks should not be used to pay your credit card bills. They can wait! While it’s not my considered recommendation to suggest ignoring your debt, this is an exception. Credit card payments are important but not necessary.

3. MORTGAGE /RENT

Now here is an expense worthy of top priority. Stimulus checks should be used to keep a roof over your head. Remember the average American rent is estimated to be $1,400.00. If your stimulus check is $1,200.00 then you have the perfect opportunity to take care as much of this expense as possible. Although this might seem like a no brainer, it’s worth mentioning: using your stimulus check to pay your mortgage or rent is a great way to use your stimulus check.

4. FOOD

In the battle of critical choices between food or mortgage who wins? It is a difficult choice, but I would probably choose to spend the money on mortgage/rent. My thought is I can always visit a soup kitchen, church, food pantry, neighbor or some place for assistance. Although, one can argue that since under the law and national emergency your landlord or mortgage company will probably not be able to evict you, I would vote in favor of paying the mortgage/rent. This decision is influenced by several factors like your family size, how many kids are at home or elderly parents living with you. The point is, either expense would qualify for stimulus check spending.

5. UTILITIES

When I say utilities I am thinking about electric, gas and telephone for starters. But this budget item begs the question, should stimulus checks be used to pay for cable bills? The answer is, do you need cable and if so, can you not find it at a cheaper price? Is cable a necessity? When considering whether or not to use your stimulus check on utilities ask whether or not the utility is a necessity and if you can get it elsewhere at a cheaper cost first.

6. CHILD SUPPORT

A client of mine text me this week to clarify whether or not her former husband’s stimulus check would be garnished for child support payments. I had to inform her that unfortunately he would receive his stimulus check despite his outstanding child support obligation. Does child support qualify as a necessary stimulus check expense? I would argue yes. The decision as to whether or not child support is a budgetary item to spend ones stimulus check on seems to revolve around which parent has custody or who is the child living with. But should that really matter? For the non-custodial parent, is this your child? If the child were living with you would not food and shelter qualify as necessary stimulus check expenses? Then such suggests that individuals should consider using their stimulus check to pay their child support.

7. DONATE

There are at least 20 million plus individuals who have lost their employment. State systems and processes are not equipped to handle the deluge of people applying for unemployment. Additionally, it may take some time before the unemployed begin receiving payments. Due to such a crisis there are several non-profits and churches who are addressing the needs of those in underserved communities during this virus. If you are in the position to do so I believe donating to these organizations is definitely a worthwhile expense. Again, if you are in the financial position to do so.

8. EMERGENCY FUND

If you can afford it, put some into your emergency fund. While you may still be employed and able to work from home, nothing is guaranteed in this economy. It’s called a rainy day fund, because one day it’s going to rain!

In conclusion, spend your stimulus check on absolute necessities first. It’s government assistance tailor-made to helping you meet your most important needs. Needs you are potentially unable to meet due to the drastic shift in our economy due to the virus.

 




The CARES Act and Help for the Self-Employed

Recently, Congress passed the CARES Act which provides financial support for small businesses during this COVID-19 period. One of the programs available for small business owners is the Payroll Protection Program (PPP). The program provides business owners with loans to help with everything from rent to payroll. If at least seventy-five percent (75%) of the loan is expended on employee payroll expenses, the loan will be forgiven.

The initial program was launched on April 3, 2020 for businesses with employees. However, on April 10, 2020 a second tier of the program was launched for independent contractors and those who are self employed filing under IRS Form 1099. Here are some suggestions and information for those of you interested in applying for a PPP loan as an independent contractor or self-employed individual.

How do I apply?

Because the program is so new all the logistics have not been worked out and the process is ever evolving. That said, you will have to apply using the same application form used by small business employers. Use the following link to apply: PPP Application Form.

What type of information or documents will I need as a contractor or self-employed individual?

While all of the guidance and clarity is not available, you should start with assembling your most recent year(s) personal tax return, 1099’s, bank statements and other official documents which can help to establish your gross income. In particular, review your Schedule C on your IRS Form 1040 tax return.

How much should I ask for or what is my eligibility amount?

The PPP is based upon the amount spent on payroll. Contractors and self-employed individuals are eligible for a loan of up to one hundred thousand dollars ($100,000.00) in annual income, which then has to be prorated into a monthly amount. Because independent contractors or self employed individuals do not have payroll or use payroll services, calculating the eligibility amount is going to be different from that of an employer/employee based business. I would suggest using a very simple method to calculate your eligible loan amount. Begin by calculating your annual income. Then divide your annual amount by twelve (12) to determine your monthly income. Finally, multiply your monthly amount by two and one half (2 1/2) to determine your eligible amount. Until we have further guidance and clarity from treasury this is the current suggestion.

Where can I get help?

To apply for these loans, help is available from your local commercial and community banks. Beware of banks or lenders who are not willing to provide you with two and one half (2 1/2) months calculation of your full loan eligibility. You may also check with your local chamber of commerce for help in identifying approved lenders.

Finally, in this environment scammers are “ah plenty”! Therefore, if you are getting emails and calls from people reaching out to help you, that’s not quite how these programs work. This is true especially if it’s not someone you have done business with before. You may even want to seek referrals before you begin talking with them. If they are going to charge you a fee, walk away. If they are promising you that your loan application will be processed quickly, walk away.

I only started my business in January 2020 or this year, can I still apply ?

Yes. You are eligible to apply if your business started before February 15, 2020. You will have to engage your local lender, SBA, your accountant and or lawyer to assist you with providing the relevant information needed to support your application if your business is new.

Will my PPP loan be forgiven?

The short answer is maybe. In some instances the entire loan will be forgiven while in other cases only a percentage of the loan will be forgiven. Here is the big picture on forgiveness. The analysis has a two step process. The first step requires you to keep detailed records/tracking of your payroll, interest on debt, rent and utility expenses for eight (8) weeks after your loan origination date.

The second step will require you to maintain a head count of your employees since February 15, 2020. If your head count decreases, you may be eligible for a portion of the loan amount being forgiven. If on the other hand for example you had released your employees but re-hired them and retained them through June 30, 2020, in addition to at least using 75% of the entire loan amount on payroll, then the entire loan can be forgiven.

As for independent contractors or self-employed individuals, a good place to begin when determining your salary and qualifying amount for forgiveness is the amount reported on your IRS Form Schedule C as net earning from self employment.




The COVID-19 Big 3 Payments

The pandemic of coronavirus COVID-19 has caused many to fall on hard times. With people losing their jobs and struggling to generate income, families across the country are struggling to make ends meet. This has caused Governors like Andrew Cuomo of New York to suspend mortgage payments. Zack Friedman of Forbes Magazine quotes Governor Cuomo saying, “This is a real-life benefit. People are under tremendous economic pressure. Making a mortgage payment can be one of the number one stressors. Eliminating that stressor for 90 days, I think, will go a long way.”

The recent crisis has caused me to reflect on Psalm 50:15 where David writes, “Call upon Me in the day of trouble; I will deliver you, and you shall glorify Me.” What puzzles me is that bankers, credit card companies and lenders have already made provisions of assistance for customers experiencing hardship. But it seems like the customers are too afraid to ask. If provisions have already been made why not stand on your faith and ask for what you want? Today I’d like to give you guidance on who should you ask and for what so you can get the help you need.

Credit Card Payments

From American Express to Apple Card, most credit card companies are providing some kind of relief or forbearance when it comes to making your monthly payment. One suggestion would be to ask for the temporary lowering of your interest rate. You may also ask for a lower monthly payment during this period or removal of late fee charges. Some cards may even allow you to avoid past due payments and charges. If you’re really strapped for cash, ask for a waiver of the early withdrawal fee on your certificate of deposit.

Car Payments

So for some of you let’s just keep it 100. You probably need to turn in your car, get rid of the car note or get a cheaper car. All the car dealers now have programs for those going through this COVID-19 financial hardship. But, you won’t know what your options are until you call them and share with them your story. They are assessing each situation on a case-by-case basis. Options can range from deferment of payment to waiving of late fees or reduction of interest rates. Reach out now before they repossess your vehicle.

Mortgage Payments

Can’t make your payment? Under Fannie Mae’s guidelines for single-family mortgages, foreclosure sales and evictions of borrowers are suspended for 60 days. Also, under this national emergency as a homeowner you are eligible for a forbearance plan to suspend, or reduce your mortgage payments for up to 12 months. Finally, if you are affected by COVID-19, you may request mortgage assistance by contacting your mortgage servicer.

If you are a tenant, ask your landlord for a partial deferment of your monthly rental amount due. You can always go bold and ask for a one month rent abatement! Point out you’ve been a model tenant, never paid late or complained etc. If applicable, offer services such as fixing the leak or painting the apartment to the landlord in exchange for a reduced rent. If allowable, you can rent out your designated parking spot for a month.

The choice is yours! You can remain trapped in your circumstances or you can ask for help in these COVID-19 times. If this pandemic has you in a time of financial trouble reach out to your lenders and call upon the Lord. “You have not because you ask not” (James 4:2-3).




Entrepreneurship: The Structure of Your Purpose

In our first article on entrepreneurship I listed some of the many decisions you must confront in starting your business in 2020. Now for some of you this is just a business. But today I’d like to suggest to you that it’s really your purpose. You’re not really an entrepreneur if you’re not making a difference in the community or being a blessing in the lives of others. But even purpose requires structure and order. So, what corporate structure should your purpose have? Should it be a non-profit, partnership, corporation, sole proprietorship or limited liability company? Let’s look at a few of these structures as you plan and help you fulfill your purpose.

NON-PROFIT

If you intend to start a non profit there are several steps and key factions to consider. The first consideration is whether your non profit will take the form of a corporation, non profit trust, unincorporated association or some other structure. If you choose to be a corporation, then you will need to incorporate or register with the state by filing some form of articles of incorporation.

Having decided to form a corporation, if you are seeking tax exempt status, where your donors’ contributions can be deductible under section 501(c)(3) of the internal revenue code, then the organization will need to be operated and organized exclusively for charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sport competition, or prevention of cruelty to children or animals. It simply means that your purpose must fall into one of those designated categories to qualify for special tax  exempt treatment.

What else would you have to consider? You will need to understand that simply because you have become incorporated in your state as a non profit does not mean that contributions received are tax deductible for your donors. In order to complete the non profit process you will be required to file Internal Revenue Service (IRS) Form 1023 with the Service in order to qualify for tax exempt status. There are two versions of the form. There is IRS Form 1023EZ for small non profits and the regular IRS Form 1023 for large or regular organizations.

Finally, you will have to decide whether your non profit is a public charity or a private foundation. One simple distinction between the two is, with a public charity donors can deduct up to 50% of their contributions not exceeding their adjusted gross income. However, with a private foundation donors can only deduct up to 30% of their adjusted gross income. Simply put, your donors can deduct a greater amount of their contributions, if the organization is a public charity as opposed to a private foundation.

SOLE PROPERTIERSHIP

This form of structure is the simplest to create. You do not need to register or file any documents with the state in which you live. To begin, all you have to do is create a name for your business, use your home address as your business address and use your social security number to open a bank account and start transactions with customers. While it is the easiest to create and to get started, simple does not always means the most prudent. Your social security number will be on all of your business papers and you will be more exposed to identity theft. Furthermore, you will be exposed to personal liability because your business is not registered or incorporated with the state. Think twice about this option.

CORPORATION

The corporate structure is a business model which has been in existence for a very long time. If you are thinking of operating as a corporation, you will first need to incorporate or register in your state or some other jurisdiction. Some organizations choose not to register in their state but in the state of Delaware. In Delaware, the court system, judges and other professionals are experts in corporate law as opposed to judges and lawyers in other jurisdictions.

In most states, a corporation will need at least two persons. Generally, one person may hold more than one position, but in all circumstances a corporation requires a board of directors and a variety of shareholders. The corporation is viewed as a separate person or entity and thus you will need to operate under some by-laws and other governance documents. The down side of this structure is that there is double taxation.

Finally, under the corporation designation, you can elect to become a sub-chapter S corporation. This may be one way to avoid double taxation. This corporate structure will allow profit or losses to pass directly to the owners.

Knowing what structure best fits your purpose or calling is important as an entrepreneur. If your structure is flawed,  it is just like trying to fit a square peg into a round hole. Choose wisely!