Vol. 12  No. 12  
December  2013
Big Ideas for Small Business Newsletter
"Behind every institutional failure, there's a name."
~ William D. Swenson (b. 1978 -  ),
U.S. Army Captain and 2013 Medal of Honor Winner

Prohibited Transactions and Your Retirement Plan



The tax law has strict rules about what you can and cannot do when it comes to your qualified retirement plans and IRAs. The funds are designed for retirement savings; the rules prevent you from self-dealing and certain other actions that are thought to run counter to the purpose of these plans.

What are prohibited transactions?
Paraphrasing the Senate Report from 1974, the purpose of prohibited transactions is to prevent taxpayers from using their qualified retirement plans to engage in transactions that could place plan assets and income at risk of loss before retirement. Prohibited transactions are listed in Section 4975 of the Internal Revenue Code. They include, whether done directly or indirectly:
  1. Sale, exchange, or leasing, of any property between a plan and a disqualified person.
  2. Lending of money or other extension of credit between a plan and a disqualified person.
  3. Furnishing of goods, services, or facilities between a plan and a disqualified person
  4. Transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a plan.
What to Do with Savings from Lower Gasoline Prices          
For the past several years, prices at the pump have remained high and, for many companies, gasoline has been a big expenditure. However, prices have been coming down and are expected to be lower in the coming year (some are even predicting an oil glut).

For businesses that entail a substantial amount of driving, the cost savings from lower gasoline prices can really mount up. What are you going to do with these cost savings?

Determine your cost savings
How much did your business spend on gasoline in 2012 and 2013? Let's take this case: a self-employed person drives 20,000 miles a year on business. The cost may have been $2,800 for gas (assuming the vehicle got 25 miles per gallon and the price was $3.50 per gallon). If the price drops to $3.00 per gallon, that's a $400 savings per year.

Read More...
Should Your Business Be Involved in Politics?
It's a fact of life that politicians either support a particular issue or oppose it. These issues may impact your business and your personal life. Is it wise for your business to become involved and visible in your political activities? Here are my thoughts; you may disagree.

When it's a good idea to be involved
Businesses are impacted by government rules and regulations, so it's vital for you to stay up on what's happening, particularly in your state and community. You may want to weigh in on a particular issue by supporting a candidate that favors your view; your support can be private and need not be linked to your business.

Our Readers Ask

Q:   I'm selling my business and part of the purchase price is for a covenant not to compete. How is this taxed?

A:  The payments you receive for agreeing not to compete with your former company for a set number of years are ordinary income to you. However, the payments are not subject to self-employment tax.

book_review

Book Review

 

 

Planet Entrepreneur: The World Entrepreneurship Forum's Guide to Business Success Around the World 
Steven D. Strauss ~ Wiley ~ Hardcover: $25.00

 

This book explores the fascinating and multi-faceted global entrepreneurial revolution. Using real-world examples, stories, and strategies, Planet Entrepreneur shows how important, vital, and vast this revolution is, what the emerging markets are, where today's opportunities today lie; and how to tap into the entrepreneurial mindset to achieve success. Written by members of the World Entrepreneurship Forum, the first think tank fully dedicated to entrepreneurship, and pulled together by Steve Strauss, each chapter focuses on different aspects of the challenges and opportunities currently being encountered (and solved) by entrepreneurs.

 

 

 
 

  


In This Issue
Prohibited Transactions and Your Retirement Plan
What to Do with Savings from Lower Gasoline Prices
Should Your Business Be Involved in Politics?
Our Readers Ask
Featured Book Review
It's a Fact!


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It's a Fact!
 
Partnership Returns on the Rise
The number of partnership returns for 2010 increased 2.5% to 3,248,481, from 3,168,728 for 2009. This increase is attributable to the growth in the number of limited liability companies. 
Source: IRS 




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