Tag Archives: small business

Dec 16 2013
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Healthcare Reform

Small Business Health Care Tax Credit Applications Due by 12/23/13

On Nov. 27, 2013, HHS delayed online enrollment for FF-SHOPs until November 2014.  This means that small employers can enroll directly in SHOP coverage through agents, brokers or insurers. If you plan to claim the Small Business Health Care Tax Credit, you’ll need to get an official eligibility determination from the SHOP Marketplace, which means submitting a SHOP application.  If you’re eligible, you’ll claim the tax credit when you submit your federal income tax returns for 2014. For SHOP coverage to begin on Jan. 1, 2014, HHS intends to extend the enrollment deadline to Dec. 23, 2013.

Here’s how to figure out if the company will qualify for a small business health care tax credit:

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To get started, you’ll need to complete a small business SHOP application and read the Frequently Asked Questions about SHOP.

To be eligible, you must:

•  Cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees.

•  You must also have fewer than 25 full-time equivalent employees (FTEs). You are probably wondering: what IS an FTE. Basically, two half-time workers (less than 30 hr/ wk) count as one FTE. That means 20 half-time employees are equivalent to 10 FTEs, which makes the number of FTEs 10, not 20.

•  Those employees must have average wages of less than $50,000 (as adjusted for inflation beginning in 2014) per year.

**Remember, you will have to purchase insurance through the SHOP Marketplace to be eligible for the credit for tax years 2014 and beyond.

How do you claim the credit?

You must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit. For detailed information on filling out this form, see the Instructions for Form 8941.

Your tax adviser / Certified Public Accountant (CPA) should be able to assist you with the preparation when the company is submitting the federal tax returns.

If you are a small business, include the amount as part of the general business credit on your income tax return.

 Also, the amount of the credit you receive works on a sliding scale. The smaller the business or charity, the bigger the credit. So if you have more than 10 FTEs or if the average wage is more than $25,000 (as adjusted for inflation beginning in 2014), the amount of the credit you receive will be less.

You will need an agent or broker to help you with your application to the SHOP. Please let us know how we can assist you.

Dana Rostro is the Director of Employee Benefits Sales and Operations at Texas Associates Insurors. Dana is ACA certified and has helped clients develop the best strategies for their operations within the new healthcare legislation.

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Dec 12 2013
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Business Insurance

What Types of Insurance Do Small Businesses NEED?

????????????????????????????????????????Every year in the United States, 600,000 new businesses are started. There are many reasons people start their own small business, from a desire to be in control of their own destiny, to the passion to pursue a lifelong dream. Regardless of your reasons for starting a small business, protecting that business investment with insurance is an important part of business ownership. The right insurance will minimize the risks you face due to unexpected events, liabilities, and losses.

Types of Small Business Insurance

Liability Insurance 

The most basic type of insurance that any small business requires is liability insurance. The basic idea behind liability insurance is to protect the policy holder against lawsuits or other legal exigencies. Small-business liability insurance covers things like bodily damage or third-party property damage vis-a-vis your staff, products and services. Liability insurance is the bedrock of small business insurance because it protects your most valued assets.

Workers’ Compensation

Workers’ compensation is perhaps the second most important form of insurance to protect you and your small business. This type of insurance focuses on wage replacement and employee medical benefits in the unfortunate circumstance that a small-business employee is injured while on the job.

The important thing to bear in mind is that small-business employees, by signing up for workers’ compensation, waive the right to sue the employer for negligence vis-a-vis an injury sustained on the job. Workers’ compensation effectively indemnifies small business owners against huge payouts and/or protracted court appearances. Most states require workers’ compensation for small businesses hiring W2 workers.

Professional Liability Insurance 

Professional liability insurance, also known as errors and omissions coverage, protects small business owners against charges relating to advice given or services rendered by employees. Professional liability insurance can help lower the cost of defending the business against negligence claims in court and/or reduce the monetary damages granted in a civil lawsuit.

Small business owners in the fields of real estate, law, accounting, consulting or myriad other advice-giving professions that hire less than 500 employees should consider professional liability insurance to weather possible negligence claims. This type of insurance coverage goes beyond regular liability insurance.

Business Owner’s Policy 

This brand of small business insurance is a commercial insurance package specifically designed for small to medium-sized businesses. Business owner’s policies couple general liability insurance and property insurance into one bundled insurance coverage package. Small business owners can expect a reduced premium when purchasing business owner’s policy insurance coverage.

That said, although business owner’s policy coverage can be economical for your small business, business owner’s policies often have stringent eligibility conditions. The property insurance portion of a business owner’s policy covers things like fires, explosions and vandalism whereas the general liability side covers third-party injury or dismemberment.

Commercial Auto Insurance 

Commercial auto insurance helps protect all vehicles owned and/or used by a small business. This kind of insurance is especially handy for small businesses that use staff to transmit goods and services. Work cars, trucks and delivery vans are all indemnified against damage and collision under commercial auto insurance policies.

If your small business employees are driving their own vehicles for professional reasons, you may also want to consider non-owned auto liability to insure the company vis-a-vis an uninsured or underinsured employee.

In some instances, non-owned auto liability can be bundled with a business owner’s policy to reduce the overall cost of coverage for cash-strapped small business owners.

Beyond Basic Coverage

Some small business owners may want to consider disability, life and health insurance. While not directly related to small business operations, purchasing one or all three kinds of external coverage could prove prudent in the long run.

Randy Reynolds is the Managing Partner for Texas Associates Insurors. His knowledge and experience extends to the manufacturing and construction industries, as well as to financial services, hospitality and not-for-profit organizations.

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Dec 05 2013
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Business Insurance, Risk Management

Why Every Small Business Partnership Needs a Buy-Sell Agreement

When most small business owners think about risk, they tend to consider the things that impact the physical security of the business (fire, flooding, wind damage, etc.) and the financial buy sellsecurity of the business (receivables, demand, professional liability, etc.). Given the immediacy of these risks, it is easy to forget issues relating to business continuation. The reality is that if you buy a business or start one with a partner, you are both at risk for losing everything. Without a buy-sell agreement, Forbes warns you and your partner are facing a world of hurt from the financial and tax problems following “an owner’s death, incapacitation, divorce, bankruptcy, sale or retirement.”

What Is A Buy-Sell Agreement?

A typical buy-sell agreement will protect business owners in the event a co-owner wants out of the business voluntarily or otherwise. A partner may want to retire, to sell his/her shares, or to settle a divorce. On the other hand, the partner may die or become incapacitated and unable to participate. Once a buy-sell agreement sets up a price and terms for a buyout, you have assured the business’s continuation and seamless transition.

Benefits Of A Buy-Sell Agreement

There are several reasons to consider putting a buy-sell agreement in place:

  1. Protect the Business: You and your partner may agree on keeping an unwanted third party from acquiring the business. The contract facilitates a hassle-free shift in control or ownership, it can provide the protocol for fixing or calculating the buy-price to the selling partner or deceased owner’s interest, and it can assure the mandatory arbitration required to settle any arising disputes. Finally, it may define the rights of remaining owners to purchase the interest of the departing owner to resolve or avoid the disputes that often arise among family members.
  2. Structure Tax Treatment: A buy-sell agreement may be used to protect a company’s status as an S-corporation, professional LLC, or professional corporation identity. And, it may want to avoid the termination of its status as a partnership for tax purposes. In addition, under the Internal Revenue Code, there are prohibited shareholders. The IRS will tax the business as a C-corporation if and when a share of the business is transferred to a prohibited shareholder and its status S election will be terminated.
  3. Protect the Remaining Interests: Great peace of mind comes with certainty of the terms enabling you to purchase the departing partner’s interest through a predetermined long-term financing arrangement that allows, for example, payments to be made from the business’s cash flow according to specific formulas. This allows the current owners to fix the price and terms of purchase, thereby reducing or eliminating the personal conflicts that could otherwise arise.
  4. Protect the Withdrawing Partner: The buy-sell protects the deceased partner’s estate from negotiating price and share from a disadvantage. By requiring the surviving partner(s) to buy back the deceased’s interest, it provides a source of income for payment of estate taxes and forestalls disputes with surviving spouses and heirs. In another situation, the agreement guarantees the disabled or retired owner a needed source of cash or a lump sum that fits a financial plan with tax treatment favorable to the withdrawing partner.

Designing Buy-Sell Agreements

There are a variety of ways that a buy-sell agreement can be structured. Typical formats include:

  • A Cross Purchase Agreement works best with four or fewer partners. The owners each own life insurance policies on the lives of each of the others, and in the event one of them dies, the surviving owners use the proceeds of the life insurance policy to buy the deceased owner’s share of the business.
  • A Trusteed Cross-Purchase Agreement creates a revocable or irrevocable trust with a third party owner-administrator and fewer insurance policies. The agreement contractually obligates the trustee to buy the interest of the deceased or departing owner, and the departing owner (or the estate) to sell the interest to the trustee. When using life insurance, the owner(s) can be confident that some or all of the money needed to complete the purchase will be available at the death of an owner.
  • A Partnership Among Shareholders transfers the funding from life insurance policies into a partnership.

It is never wise to enter into a buy-sell agreement without professional advice and assistance. Before you and your partners hang out your “business open” sign, have your lawyers and insurance professionals design the plan that best serves all your interests.

Dave Perez is a risk advisor at Texas Associates Insurors and specializes in property and casualty risk assessments for business owners.

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Oct 30 2013
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Healthcare Reform

Small Employer Tax Credit Changes for 2014

The small employer tax credit was created in 2010 upon the passage of the Affordable Care Act. Next year, a few key aspects of the tax credit will change.

For 2014 and later taxable years, the maximum credit increases to 50 percent of premiums paid for taxable small employers and 35 percent of premiums paid for tax-exempt small employers. But those credit percentages are based on the average premium in the small group market in the rating area where employees sign up, instead of the specific premium chosen by employees.

Also beginning in 2014, the health care tax credit is only available to an employer for two consecutive taxable years, and cannot start before the 2014 taxable year. Finally, the new rules require employers to obtain group coverage through an Exchange to claim the credit.

Please contact Texas Associates Insurors for more information on the small employer tax credit.

 

 

Dana Rostro is the Director of Employee Benefits Sales and Operations at Texas Associates Insurors.

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Oct 16 2013
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Healthcare Reform

5 Ways the Affordable Care Act Affects Small Businesses

Small Businesses have been cited by the White House as the ‘backbone’ of the United States Economy. That backbone of 28 million small employers saw dramatic changes  October 1, when the Health Insurance Exchanges opened, giving way to a new era of Health Care in the United States. So how exactly will the Affordable Care Act, which takes full effect on January 1, 2014 affect the ‘backbone’ of the US Economy? Here are 5 ways America’s small businesses will be affected by ‘Obamacare.’ health care benefits

Health Insurance

First and foremost, the Affordable Care Act provides for every single US citizen to purchase Health Insurance of some form or another come January 1, or else face hefty fines. This is the first step in what is expected to be a long, long road to nationwide coverage, along which businesses, big and small, will have a major role to play.

Come January, big businesses (50 employees or more) will be legally obliged to provide health insurance or pay a tax of $2,000 per employee (for all but the first 30 employees) starting January 2015. Smaller businesses (less than 50 employees) will also have to provide health insurance but will not be subject to fines, provided their employees get tax credits through an exchange. For small businesses with less than 25 employees, a tax credit of 35% will be made available to contribute towards health insurance provision.

Workplace Wellness

The Affordable Care Act will also create new incentives promoting workplace wellness programs, encouraging employers to take greater interest and more opportunities to support the health and well-being of employees. Funding will be provided as part of this preventative measure which has already been embraced by many businesses nationwide.

A study titled ‘Employee Benefits: Today and Beyond’ which surveyed US businesses found that: “almost half of employers (44%) are already increasing the use of wellness programs to improve the health of employees. Among these companies that have already implemented this approach, 33% have been very successful in achieving their desired cost savings.”

The Affordable Care Act will allow Businesses with workplace wellness programs, effective after 1, 2014, an tax credit increase of up to 20%, and a further 10% of the cost of health coverage if programs are designed to prevent or reduce tobacco use.

New Tax Credits

As mentioned above, one of the key factors in the implementation of the Affordable Care Act is the introduction of new tax credits, designed to help make Health Insurance readily accessible to US citizens. This includes tax credits for Businesses, aimed at helping employers provide coverage for employees.

The small business tax credit, for example aims to help businesses with less than 50 employees afford the cost of healthcare coverage. The Affordable Care Act aims to raise this tax credit to 35% for by 2015 for businesses that purchase coverage through the SHOP marketplace which opens October,1.

SHOP Marketplaces

Those SHOP (Small Business Health Insurance Options Program) Marketplaces will offer Small Businesses a portal through which to shop for health coverage on a competitive marketplace. These marketplaces include web portals that provide standardized, easy-to-understand information, making comparing and purchasing coverage easier for businesses.

The new SHOP Marketplaces will also allow small groups to pool risks and reduce administrative complexity and subsequently increase their purchasing power while reducing costs.

Employer’s Mandate

All that said and done, the Employer’s Mandate has now been pushed back to 2015, so Businesses will not feel the full effects of the Affordable Care Act for at least another 18 months. Instead, the initial Health Care Reform procedure will be regarded as ‘real-world testing’ ahead of full implementation in 2015. This has caused an increased level of doubt among critics and supporters of how Health Care Reform will take full shape, if at all. Businesses are now in a state of concern thanks to mixed messages. While employers may have initially felt relieved that they would have more time to fully prepare for the introduction of the new legislation, President Obama has hinted that fines could swell for Companies that view the Employer Mandate delay as a let-off.

To conclude, this shroud of uncertainty should prompt employers to consult their Insurance Agents about the Affordable Care Act, its provisions and what it means for their business. The facts are there, it is now up to Businesses to assess the situation and consider what the best Insurance option for them instead of treating the Employer’s Mandate delay as a let-off.

If you are unsure of how the Affordable Care Act will affect your Business, or if you’re unsure of what to look for in the SHOP exchanges, speak to an expert directly for free.

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