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Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How are the $1 salaries that CEOs sometimes take considered legal? ### Answer: Taxable fringe benefits are included in taxable wages for the purpose of FLSA. So when those executives get to use company cars or company jets that value is "wage" even if it isn't salary. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How hard for US customers make payments to non-resident freelancer by wire transfer? ### Answer: Can you tell me please, is it really hard to make international wire transfer for payment my job and can i resolve this problem without using third party services? This is mostly a barrier, the form at times is quite complicated. For Russia, one has to enter "Purpose of remittance" ... at times select intermediate banks, give BIC and other details. This can become unnerving to people who are not used to it. The other option you can try is set-up a credit card gateway and get funds via cards. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How hard for US customers make payments to non-resident freelancer by wire transfer? ### Answer: For most major banks, wire transfers are simple, if expensive, to arrange. For example, I can initiate an international wire transfer from my online banking portal. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How hard for US customers make payments to non-resident freelancer by wire transfer? ### Answer: I would look for an alternative wire transfer service that will charge less. I use ofx, but note that they don't do transfers to roubles. The rate adjusts by amount being transferred and there is a $15 fee for under $5000. Upside is it is bank-to-bank. 2 days tops. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How hard for US customers make payments to non-resident freelancer by wire transfer? ### Answer: You are right in insisting upon a proper B2B contract in any business relationship. You wish to reduce your risk and be compensated fairly. In addition to the cost and complexity of international wire transfers, the US companies may also be considering the fact that as an international contractor in a relatively hard-to-reach jurisdiction, payments to you place the company at higher risk than payments to a domestic contractor. By insisting upon PayPal or similar transmitters, they are reducing their internal complexity and reducing their financial exposure to unfulfilled/disputed contract terms. Therefore, wire payments are "hard" in an internal business sense, as well as in a remittance transfer reporting sense. The internal business procedure will likely be the hardest to overcome--changing risk management is harder than filling out forms. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Will a credit card issuer cancel an account if it never incurs interest? ### Answer: While technically true, a card issuer can cancel your card for almost any reason they want, it's highly unlikely they'll cancel it because you pay your bills! There are many, many people out there that pay their bills in full every month without ever paying a cent in credit card interest. I wouldn't ever purposefully incur any interest on a credit card. Related anecdote: I used to have a credit card that I only used for gas purchases because they gave 5% off for fuel. The issuer eventually discontinued the program (I assume because people like me took advantage of it.) So while they didn't cancel my card, the bonus eventually went away. I miss that card. My conclusion: if you can take advantage of promotional rates, by all means, go for it. You don't owe them any favors. Enjoy it as long as it lasts. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Will a credit card issuer cancel an account if it never incurs interest? ### Answer: Remember, the card company gets a percentage at the time of purchase, as well as any interest you let them collect from you. Yes, they're still making a profit on our accounts, and they can always hope that at some point we'll run up a high enough bill to be willing to pay some interest. They may kill completely inactive cards, since they need a bit of income to pay for processing the account. But if you're actively using it, they aren't very likely to tell you to go away (though they may change which plan(s) they offer you). ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Will a credit card issuer cancel an account if it never incurs interest? ### Answer: Credit card companies are businesses. Businesses will make any decision that makes them money. So does it make them money to cancel your account? It's a simple cost-benefit analysis: you having an account with them will probably give them some benefit for very little cost to them. The only real cost associated with an open account is someone who uses the card but doesn't pay, but they're pretty sure you won't be doing that. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Will a credit card issuer cancel an account if it never incurs interest? ### Answer: I would think it extremely unlikely that an issuer would cancel your card for having an ADB of approximately zero. The issuer charges the vendor that accepts a card a percentage of the transaction (usually up to ~3%, AMEX is generally higher) - so they are making money even if you carry no balance on your card (the specific language for various vendor-side (acceptor) credit card agreements boils down to "we are essentially giving you, the vendor, a short-term loan and you will pay us for it). This why you see credit-card minimum purchase amounts at places like hot-dog stands - they're getting nailed on the percentage. This is also why, when given the choice between "Debit or Credit" for a particular card, I choose where to put the hit on the company I like less - the retailer or the bank. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Will a credit card issuer cancel an account if it never incurs interest? ### Answer: Speaking from personal experience: I have had a credit card canceled for exactly this reason. It's happened to me three times, with two different providers (NatWest and Nationwide). After the third instance I stopped bothering to even carry a credit card. It's worth noting that all three were "free" cards in the sense that I paid no flat fee or subscription to get the cards. The only way the issuer could make a profit on them was through interest. I was also not a frequent user, carrying the card for convenience more than anything else, although I did make purchases on all three. So it's certainly a possibility. But I live in the UK and I'm guessing most of your other respondents do not. It may be a practice that's more common here than in the US. That might even explain the origin of the rumour. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Will a credit card issuer cancel an account if it never incurs interest? ### Answer: Technically, yes but, in practice, no. I use a card for everything and pay it off every month. Sometimes, several times a month depending on how the month is going. In the last 10 years, I've paid a total of $8 in interest because I legitimately forgot to pay my balance before the statement came out when I was out of town. I wasn't late, I just didn't beat the statement and had a small interest charge that I couldn't successfully argue off. In the same time period, I've had one card cancelled at the banks request. The reason was that I hadn't used it in two years so they cancelled me. I never pay annual fees, I get cards with great rewards programs and I (almost) never pay interest. If your bank cancels your card because you're too responsible, find a better bank. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Will a credit card issuer cancel an account if it never incurs interest? ### Answer: When you buy something with your credit card, the store pays a fee to the credit card company, typically a base fee of 15 to 50 cents plus 2 to 3% of the purchase. At least, that's what it was a few years back when I had a tiny business and I wanted to accept credit cards. Big chain stores pay less because they are "buying in bulk" and have negotiating power. Just because you aren't paying interest doesn't mean the credit card company isn't making money off of you. In fact if you pay your monthly bill promptly, they're probably making MORE off of you, because they're collecting 2 or 3% for a month or less, instead of the 1 to 2% per month that they can charge in interest. The only situation I know where you can get money from a credit card company for free is when they offer "convenience checks" or a balance transfer with no up-front fee. I get such an offer every now and then. I presume the credit card company does that for the same reason that stores give out free samples: they hope that if you try the card, you'll continue using it. To them, it's a marketing cost, no different than the cost of putting an ad on television. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Will a credit card issuer cancel an account if it never incurs interest? ### Answer: No, they won't cancel it because you pay your card on time. When a company offers a promotion like that they are banking on making money on average, not in every case. On average including all the benefits including transaction fees, deals for partnering with best buy, etc. Of course some people pay their credit card in full each month and never incur interest charges. However, credit card companies more than cover that with other people who aren't responsible. If it wasn't worth while they would end the card program or change it. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Will a credit card issuer cancel an account if it never incurs interest? ### Answer: Credit card merchant fees are $0.15 - $0.40 per transaction plus 1.5-4% of the amount charged. Card issuers are competing to get to be the card in your pocket that you use on a daily basis. If you were a card issuer, wouldn't you like to get 1.5-4% of every transaction I make for the rest of my life? As a side note, ever since I became a business owner and saw how much we are all paying for credit card merchant fees, I've patronized a lot more cash-only businesses. The best ones pass the savings directly on to the consumer. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Will a credit card issuer cancel an account if it never incurs interest? ### Answer: Some years ago a call center operator told me a bit more than they probably should have. They like to see a lot of money go through the card, but very little staying on the card. Yes, they make money on the interest but one card defaulting blows away the profit on a lot of other cards. The 3% take from the merchants is both reliable and up-front, not 6 months down the line when (and if) you pay the interest. So if you want to make your credit card company happy, pay your bills in full every month. I have credit far beyond my actual means because I run work expenses on my personal card, I was told they didn't care (and had already guessed) that it wasn't my money. The point was I was handling things in a way they liked. Not quite at Palladium status, but cards with $200 annual fees are mine for the asking, and I haven't paid interest since the early 1990's. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Will a credit card issuer cancel an account if it never incurs interest? ### Answer: I've got a card that I've had for about 25 years now. The only time they charged me interest I showed it was their goof (the automatic payment failed because of their mistake) and they haven't cancelled it. No annual fee, a bit of cash back. The only cards I've ever had an issuer close are ones I didn't use. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can LLC legally lend money to a friend? ### Answer: One thing I would add to TTT's answer: One of the benefits of using an LLC for your business is right there in the name - "limited liability". It provides a level of protection for your personal assets should your business go bankrupt, get sued, and so forth. However, if someone can show that there's no real separation between your LLC's activities and your personal activities, then they can "pierce the corporate veil" and go after your personal assets. If this loan is really purely personal and not related to your business activities, you may create a paper trail that can later be used in this way. My advice would be to just avoid the whole thing and make the loan from personal funds. I don't see any upside to doing this out of the LLC funds. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can LLC legally lend money to a friend? ### Answer: Legally, I can't find any reason that the LLC could not lend money to an individual. However, I believe the simplest course of action is to first distribute money from your company to your personal account, and then make it a personal loan. Whether the loan is done through the business or personally, financially I don't think there is much difference as to which bucket the interest income goes into, since your business and personal income will all get lumped together anyway with a single person LLC. Even if your friend defaults on the loan, either the business or you personally will have the same burden of proof to meet that the loan was not a gift to begin with, and if that burden is met, the deduction can be taken from either side. If a debt goes bad the debtor may be required to report the debt as income. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can LLC legally lend money to a friend? ### Answer: I can't say if there is anything specific that makes lending illegal, but if your company goes bankrupt, you might end up in trouble. First, it's a loan. It must be repaid. It must be in the books as a loan, and if your company couldn't pay its bills, you would have to ask for the money back. If the company goes bankrupt, your creditors will ask for the loan to be repaid. Now if things are worse, your company goes bankrupt, and the person cannot pay back the money, then you could get into real trouble. Creditors won't like that situation at all. They will claim that you moved that money aside to protect it from creditors. They might be able to force you personally to pay, or even start criminal charges against you if you can't pay either. In the UK (and probably elsewhere) it's criminal for the company to pay dividends if that means it cannot fulfil its financial obligations. If there is no money left because of that loan, then you can't get dividend payments from your company. So as long as your company's finances are fine, and that person's finances are fine, you will be Ok (except I don't know if you would need a license), but if there are financial problems then being an LLC might not protect you. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can LLC legally lend money to a friend? ### Answer: The answer to your question is...it depends. Depending on the state you, your friend, and the LLC are located in, it can be very easy to run afoul of state banking laws, or to somehow violate some other statute pertaining to the legal activities an LLC may undertake by doing something like a loan. It is not unusual (or illegal) for officers or employees of a business entity to be loaned money by the company they work for, so something of this nature wouldn't be an issue with regulatory agencies. Having your LLC loan money to a friend who isn't an employee or officer of your LLC just might not be kosher though. The best advice I can give is that you should call the state banking commission or similar agency in your state and ask them whether what you want to do is alright. The LAST thing you want is to end up with auditors or regulators sniffing around your business, even if you haven't done anything wrong, and you certainly don't want to run the risk of accidentally "piercing the corporate veil", as someone else here astutely pointed out. Good luck! ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Can LLC legally lend money to a friend? ### Answer: Tax accountant here. The money is yours and you can do what ever you want with it. Just make sure to put it on the books as Loan Receivable and have an Interest Income account. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is there ACH analogue in Asia? ### Answer: ACH as offered in US is a very broad and versatile network used for a range of business case. There is no other network as versatile. In Europe UK has BACS as equivalent about 50-70% of what US-ACH offers. Most European countries also have ACH [Collectively Called ACH, have 90% of the layouts that are identical, called by different names domestically, different business capabilities and rules]. Most countries in Asia also have similar networks. For example in India there is ECS now replaced by NACH. In Singapore/Indonesia/Thailand/Malaysia they have Giro's. China has CNAPS and BEPS. So essentially every country has addressed the business need differently and bis.org has a decent over-view country wise on the clearing systems available. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What is the purpose of endorsing a check? ### Answer: I actually had to go to the bank today and so I decided to ask. The answer I was given is that a check is a legal document (a promise to pay). In order to get your money from the bank, you need to sign the check over to them. By endorsing the check you are attesting to the fact that you have transferred said document to them and they can draw on that account. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What is the purpose of endorsing a check? ### Answer: The best reason for endorsing a check is in case it is lost. If the back is blank, a crooked finder could simply write "pay to the order of " on it and deposit it in his own account. You do not need a signature for the endorsement. The safest way to endorse a check is to write "FOR DEPOSIT ONLY" followed by an account number, in which case the signature is not needed. most businesses make up rubber stamps with this and stamp it the minute they receive a check. That way it has no value to anyone else. Depositing checks is increasingly going the way of the dodo. Many businesses today use check truncation - the business scans the check in, sends the digital image to the bank, and stores the check. I was surprised that Chase already has an applet for iPhones that you can use to deposit a check by taking a picture of it! ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What is the purpose of endorsing a check? ### Answer: In my experience, you don't need to endorse a check with a signature to deposit it into your account. You do if you are exchanging the check for cash. Businesses usually have a stamp with their account number on them. Once stamped, those checks are only able to be deposited into that account. Individuals can do the same. I have had issues depositing insurance and government checks in the past that had both my and my wife's name on them. Both of us had to endorse the check to be able to deposit them. I think this was some kind of fraud prevention scheme, so that later one of us couldn't claim they didn't know anything about the check. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What is the purpose of endorsing a check? ### Answer: Paper trail of who did the deposit. Less significant for a personal account, but a bigger deal for accounts that are used by multiple people (e.g. a corporate checking account). ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What is the purpose of endorsing a check? ### Answer: So the bank can (theoretically) compare that signature to the ID you provide, showing that the names and signatures match and that you are the person to whom the check was written. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What is the purpose of endorsing a check? ### Answer: I believe the banks are protecting themselves when they "require" your endorsement. Years ago. they used to ask for your endorsement, and not require it. If you endorse the check, it legally authorizes them to debit your account, if the check is later returned for non-sufficient funds (NSF). It mostly protects the bank, and not the customer. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What is the purpose of endorsing a check? ### Answer: When the check is deposited, the bank verifies the signature in the check matches your signature in file. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Credit card statement dates follow pattern? ### Answer: My guess: they are giving you a constant number of days between when the bill is sent and when it is due. Due dates are usually set either: same date each month IE the 3rd of each month. same day IE first thursday of the month. Note: due date might vary based on weekends. Number of days in the month - date on bill should be pretty constant if due date option #1 is being used. Note how Feb dates were usually earlier, since it is a shorter month. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Credit card statement dates follow pattern? ### Answer: Check with your bank, usually a statement is either at the same day of month (e.g.: every 15th of the month), or every 30 days (e.g: March 15th, April 14th, May 14th, so forth). From my experience, most credit cards use the same day of month strategy. Keep in mind that if the day is not a business day (e.g.: weekend), the statement is closed either the previous or the next business day. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Credit card statement dates follow pattern? ### Answer: Each bank is different. Usually in my experience for newer credit card accounts, there is a specific number of days in a billing cycle (something like 28) and then a 20-25 day grace period. Older accounts usually have 30+ day billing cycles. Back in the 90's, many cards also had 30-40 day grace periods. The language specific to your card is in the card agreement. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Which credit card is friendliest to merchants? ### Answer: Cash is king. PIN-based debit transactions are cheap. In terms of credit cards, a regular (ie. not a gold card) with no rewards has the lowest rates. Bigger merchants with lots of card volume likely have better deals that make the differences less pronounced. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Which credit card is friendliest to merchants? ### Answer: Please don't waste any more time feeling bad for merchants for the charges they incur. I don't know who supported the lobby for this rule, but issuers no longer can demand that merchants accept all transactions (even the unprofitable ones). I discussed this at length on my blog. Merchants accept credit cards for one reason, and one reason only: it brings them more business. More people will buy, and on average they'll buy more. They used to take the occasional hit for someone buying a pack of gum with a credit card, but they don't have to anymore. The new law restricts issuers from imposing minimum transactions that are less than $10. I use a rewards card wherever possible. I get a cheaper price. In most cases I don't care what the merchant has to pay. They've already factored it into their prices. But if you are concerned, then as fennec points out in his comment, cash is the way to go. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Which credit card is friendliest to merchants? ### Answer: Accepting cash isn't free to the merchant's either. It needs to be counted, reconciled, stored, and taken to the bank each day. There is a certain amount that needs to be on-hand, not in the bank earning interest. There is more of a worry about employees taking cash from the register. There is the chance of inadvertently accepting counterfeit currency. I'm not sure how the cost of cash compares to the cost of accepting credit card, but there is a cost that cannot be ignored. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Which credit card is friendliest to merchants? ### Answer: From experience, Mastercard and Visa charge vendors about the same (around 2%-5%) while American Express and Diners Club are astonishingly expensive (6%-10%) and you'll find that few small retailers are very comfortable accepting these. The variation comes from the volume of trade that vendors provide. A big retailer will negotiate a very low rate while smaller businesses will be hit with higher charges. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Which credit card is friendliest to merchants? ### Answer: Back when they started, Discover undercut Visa and Amex fees by about a point. This was also true when I worked for a mail-order computer retailer in the '90s: if a customer asked us which credit cards we took, we were told to list Discover first (and AmEx last) because Discover had the lowest merchant charges. Possibly this is no longer true today, but for quite a while it was a significant selling point of the Discover card to merchants, and a reason why many did sign on. (A reason some stores did not sign on was that Discover was owned by Sears, and many businesses that competed with Sears didn't like the idea of sending any of their profits to the competition.) Today, Discover also owns Diners Club and the fees for those cards are higher. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Which credit card is friendliest to merchants? ### Answer: Merchants that accept American Express should have decided that the extra costs are worth the increased business (many business travelers only have an Amex Corporate Card). To complain about people actually using it after they've explicitly decided to accept it is a sign that they made the wrong decision, or that they are very short-sighted. No one is forcing them to take a particular card. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How to properly collect money from corporate sponsors? ### Answer: http://www.legalzoom.com/business-management/starting-your-business/turn-your-calling Answering this, but I expect an expert to give an answer with some insight too There are many more steps, but not having done them personally I suggest you read the legalzoom.com site. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How to properly collect money from corporate sponsors? ### Answer: If this is something you plan to continue doing it would make sense to create it as it's own business entity and then to get non-profit status eg: 501c3. Otherwise I'm pretty sure you have to think of it as YOU receiving the money as a sole proprietor - and file a couple more tax forms at the end of the year. I think it's a Schedule C. So essentially if you bring in $10,000, then you spend that $10,000 as legit business expenses for your venture your schedule C would show no profit and wouldn't pay taxes on it. BUT, you do have to file that form. Operating this way could have legal implications should something happen and you get sued. Having the proper business entity setup could help in that situation. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Does longterm investment in index funds still make sense in a reality of massive algotrading? ### Answer: What the automation mostly does is make short-term trading that much more difficult. Day trading is a zero-sum game, so if they win more, everyone else wins less. Long term trading (years to decades) is a positive-sum game; the market as a whole tends to move upward for fairly obvious reasons (at its basis it's still investing, which in turn is based on lending, and as long as folks make fairly rational decisions about how much return they demand for their investment and the companies are mostly producing profits there will be a share of the profit coming back to the investors as dividends or increased share value or both. Day-to-day churn in individual stocks gets averaged out by diversification and time, and by the assumption that if you've waited that long you can wait a bit longer if necessary for jitters to settle out. Time periods between those will partake of some mix of the two. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Does longterm investment in index funds still make sense in a reality of massive algotrading? ### Answer: There is a difference between trading which is short term focussed and investing which is longterm focussed. On the long term what drives stock prices is still the overall economy and the performance of the underlying business aspects. I do not think that any trading algorithms will change this. These are more concerned with short term profits regardless of the underlying business economics. Therefore I think that longterm investing using index funds is still a viable strategy for most private investors. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Does longterm investment in index funds still make sense in a reality of massive algotrading? ### Answer: Why wouldn't you expect a long-term profit? Say you buy 100 shares of company X, selling for$1/share today. You hold it for 20 years, after which it's worth $10/share (in inflation-adjusted dollars). So you've made a profit, only making two trades (buy & sell). What the algorithmic traders have done with short-term trades during those 20 years is irrelevant to you. Now expand the idea. You want some diversification, so instead of one stock, you buy a bit of all the stocks on whatever index interests you, and you just hold them for the same 20 years. How has what the short-term traders done in the intervening time affected you? ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why is the stock market price for a share always higher than the earnings per share? ### Answer: Think about the implications if the world worked as your question implies that it "should": A $15 share of stock would return you (at least) $15 after 3 months, plus another $15 after 6 months, plus another after 9 and 12 months. This would have returned to you $60 over the year that you owned it (plus you still own the share). Only then would the stock be worth buying? Anything less than $60 would be too little to be worth bothering about for $15? Such a thing would indeed be worth buying, but you won't find golden-egg laying stocks like that on the stock market. Why? Because other people would outbid your measly $15 in order to get this $60-a-year producing stock (in fact, they would bid many hundreds of dollars). Since other people bid more, you can't find such a deal available. (Of course, there are the points others have brought up: the earnings per share are yearly, not quarterly, unless otherwise noted. The earnings may not be sent to you at all, or only a small part, but you would gain much of their value because the company should be worth about that much more by keeping the earnings.) ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why is the stock market price for a share always higher than the earnings per share? ### Answer: When you buy a stock, you're really paying for a STREAM of earnings, from now till whenever. The job of an investor is to figure out how large that stream will be in the future. But if the stock price were the same as "earnings" (for one year), it would mean that you would get all future earnings for "free." That's not likely to happen unless 1) the company is in liquidation," meaning "no future" and 2) it earned ALL of the money it ever earned in the past year, meaning "no past." If there are likely to be any earnings in the future, you will have to pay for those future earnings, over and above what was earned in the most recent year. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why is the stock market price for a share always higher than the earnings per share? ### Answer: First, the earnings are per year, not per quarter. Why would you expect to get a 100% per year return on your money? The earnings can go one of two ways. They can be retained, reinvested in the company, or they can be distributed as a dividend. So, the 'return' on this share is just over 5%, which is competitive with the rate you'd get on fixed investments. It's higher, in fact, as there's the risk that comes with holding the stock. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why is the stock market price for a share always higher than the earnings per share? ### Answer: Earnings per share are not directly correlated to share price. NV Energy, the company you cited as an example, is an electric utility. The growth patterns and characteristics of utilities are well-defined, so generally speaking the value of the stock is driven by the quality of the company's cash flow. A utility with a good history of dividend increases, a dividend that is appropriate given the company's fiscal condition, (ie. A dividend that is not more than 80% of earnings) and a good outlook will be priced competitively. For other types of companies cash flow or even profits do not matter -- the prospects of future earnings matter. If a growth stock (say Netflix as an example) misses its growth projections for a quarter, the stock value will be punished. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why is the stock market price for a share always higher than the earnings per share? ### Answer: Stock prices are set by supply and demand. If a particular stock has a high EPS, say, $100, then people will bid more for that stock, driving up its price over one with a $10 EPS. Your job as an investor is to find stocks with low share prices, but which will give you high earnings (either in dividends, our future share price). This means finding stocks which you believe the market has priced incorrectly, for whatever reason (as an example, many bank stocks are being punished right now, even if the underlying banks are in good shape financially). If you want to beat the market indices, be prepared to do a lot of research, because you're trying to outsmart the market as a whole. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why is the stock market price for a share always higher than the earnings per share? ### Answer: Imagine a stock where the share price equals the earnings per share. You pay say $100 for a share. In the next year, the company makes $100 per share. They can pay a $100 dividend, so now you have your money back, and you still own the share. Next year, they make $100 per share, pay a $100 dividend, so now you have your money back, plus $100 in your pocket, plus you own the share. Wow. What an incredible investment. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Why is the stock market price for a share always higher than the earnings per share? ### Answer: What you have to remember is you are buying a piece of the company. Think of it in terms of buying a business. Just like a business, you need to decide how long you are willing to wait to get paid back for your investment. Imagine you were trying to sell your lemonade stand. This year your earnings will be $100, next year will be $110, the year after that $120 and so on. Would you be willing to sell it for $100? ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What could a malicious party potentially achieve by having just a name, account number, and sort code? ### Answer: I think the answer to this must differ from country to country. I have lived in several countries where the normal everyday way of making a payment is to instruct my bank to transfer the money to the recipient's account. Of course this means I must know his name, SC and account number – but this is an accepted part of the system; businesses routinely display that information on invoices and correspondence. It is simply not regarded as confidential. DumbCoder's comment suggests that if he has that information he can take money from my account without my permission – in other words, my bank will pay money out of my account on someone else's request, without my authority. Is this correct? In which country or countries can this happen? (I must go there quickly and begin stealing people's money.) ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What could a malicious party potentially achieve by having just a name, account number, and sort code? ### Answer: When you want to pay a bill on line there are several ways to do it. You can give them your credit card details: Name on Card, zip code, credit card number, and 3 or 4 digit security code on the back. Most of the information is available on the card or via an easy Google search. If the crook has your card they can use it to buy something. You can contact your bank's website and establish a one time or recurring transfer. You provide the information about the person/company. Your bank knows who you are because you used a secure system and your password. Their bank accepts the money because who would refuse money, they don't care who you are. You can provide the company with your bank info (bank number, your account number, and your name). If your bank limits their transactions via this method only to legitimate organizations, then your money will only be sent to legitimate organizations. But if the organization has no way of knowing who is on the other end of the phone or webpage, they may be withdrawing money from a bank account without the account owners permission. In the example article a person found a charity that had lax security standards, they were recognized by the bank as a legitimate organization, so the bank transferred the money. The charity will point to the form and say they had permission from the owner, but in reality they didn't. The subject of the article was correct, all the info required is on every check. It is just that most people are honest, and the few security hurdles that exist do stop most of the fraud. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What could a malicious party potentially achieve by having just a name, account number, and sort code? ### Answer: I disagree with Dumbcoder's response. Setting up a DD is not easily approved by the banks as you must prove a existing business cash flow. And secondly you cannot empty someone's account via DD as they are protected by the DD mandate. (Money goes out, complaint is made, money goes back in, the registered business with the DD facility has some serious explaining to do to the bank and FCA). Dumbcoder you likely work in a middle position of a company.. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What's the difference between a high yield dividend stock vs a growth stock? ### Answer: I think Fidelity has a very nice introduction to Growth vs Value investing that may give you the background you need. People love to put stocks in categories however the distinction is more of a range and can change over time. JB King makes a good point that for most people the two stocks you mentioned would both be considered value right now as they are both stable companies with a significant dividend. You are correct though Pfizer might be considered "more growth." A more drastic example would be the difference between Target and Amazon. Both are retail companies that sell a wide variety of products. Target is a value company: a established company with stable revenues that uses its income to give a fairly stable dividend. Amazon is a growth company: that is reinvesting its revenues back into the corporation to grow itself as fast as possible. The price of the Amazon stock reflects what people think will be future growth (future income) for the company. Whereas Target's price appears to be based on the idea that future income will be similar to current income. You can see why growth companies like Amazon might be more risky as that growth you paid a high price for may not be realized, but the payout may be much higher as well. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What's the difference between a high yield dividend stock vs a growth stock? ### Answer: The two are not incompatible. This is particularly true of Glaxo and Pfizer, two drug companies operating in roughly the same markets with similar products. Many "good" companies offer a combination of decent yields and growth. Glaxo and Pfizer are both among them. There is often (not always), a trade-off between high yield and high growth. All other things being equal, a company that pays out a larger percentage of its profits as dividends will exhibit lower growth. But a company may have a high yield because of a depressed price due to short term problems. When those problems are fixed, the company and stock grows again, giving you the best (or at least the better) of both worlds. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What's the difference between a high yield dividend stock vs a growth stock? ### Answer: The general difference between high dividend paying stocks and growth stocks is as follows: 1) A high dividend paying stock/company is a company that has reached its maximum growth potential in a market and its real growth (that is after adjustment of inflation) is same (more or less) as the growth of the economy. These companies typically generate a lot of cash (Cash Cow) and has nowhere to really invest the entire thing, so they pay high dividends. Typically Fast Moving Consumer Goods (FMCG) ,Power/Utility companies, Textile (in some countries) come into this category. If you invest in these stocks, expect less growth but more dividend; these companies generally come under 'defensive sector' of the market i.e. whose prices do not fall drastically during down turn in a market. 2) Growth stocks on the other hand are the stocks that are operating in a market that is witnessing rapid growth, for example, technology, aerospace etc. These companies have high growth potential but not much accumulated income as the profit is re-invested to support the growth of the company, so no dividend (you will be typically never get any/much dividend from these companies). These companies usually (for some years) grow (or at least has potential to grow) more than the economy and provide real return. Usually these companies are very sensitive to results (good or bad) and their prices are quite volatile. As for your investment strategy, I cannot comment on that as investment is a very subjective matter. Hope this helps ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What's the difference between a high yield dividend stock vs a growth stock? ### Answer: There can be the question of what objective do you have for buying the stock. If you want an income stream, then high yield stocks may be a way to get dividends without having additional transactions to sell shares while others may want capital appreciation and are willing to go without dividends to get this. You do realize that both Pfizer and GlaxoSmithKline are companies that the total stock value is over $100 billion yes? Thus, neither is what I'd see as a growth stock as these are giant companies that would require rather large sales to drive earnings growth though it may be interesting to see what kind of growth is expected for these companies. In looking at current dividends, one is paying 3% and the other 5% so I'm not sure either would be what I'd see as high yield. REITs would be more likely to have high dividends given their structure if you want something to research a bit more. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What's the difference between a high yield dividend stock vs a growth stock? ### Answer: If you are looking to re-invest it in the same company, there is really no difference. Please be aware that when a company announces dividend, you are not the only person receiving the dividend. The millions of share holders receive the same amount that you did as dividend, and of course, that money is not falling from the sky. The company pays it from their profits. So the day a dividend is announced, it is adjusted in the price of the share. The only reason why you look for dividend in a company is when you need liquidity. If a company does not pay you dividend, it means that they are usually using the profits to re-invest it in the business which you are anyway going to do with the dividend that you receive. (Unless its some shady company which is only established on paper. Then they might use it to feed their dog:p). To make it simpler lets assume you have Rs.500 and you want to start a company which requires Rs 1000 in capital : - 1.) You issue 5 shares worth Rs 100 each to the public and take Rs 100 for each share. Now you have Rs 1000 to start your company. 2.) You make a profit of Rs 200. 3.) Since you own majority of the shares you get to make the call whether to pay Rs.200 in dividend, or re-invest it in the business. Case 1:- You had issued 10 shares and your profit is Rs 200. You pay Rs. 20 each to every share holder. Since you owned 5 shares, you get 5*20 that is Rs.100 and you distribute the remaining to your 5 shareholders and expect to make the same or higher profit next year. Your share price remains at Rs.100 and you have your profits in cash. Case 2:- You think that this business is awesome and you should put more money into it to make more. You decide not to pay any dividend and invest the entire profit into the business. That way your shareholders do not receive anything from you but they get to share profit in the amazing business that you are doing. In this case your share price is Rs. 120 ((1000+200)/10) and all your profits are re-invested in the business. Now put yourself in the shareholders shoes and see which case suits you more. That is the company you should invest in. Please note: - It is very important to understand the business model of the company before you buy anything! Cheers, ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Income At the Sell or Reception? ### Answer: It looks like fair-market value when you receive your virtual currency is counted as income. And you're also subject to self-employment tax on that income. Here's an FAQ from the IRS: Q-8: Does a taxpayer who “mines” virtual currency (for example, uses computer resources to validate Bitcoin transactions and maintain the public Bitcoin transaction ledger) realize gross income upon receipt of the virtual currency resulting from those activities? A-8: Yes, when a taxpayer successfully “mines” virtual currency, the fair market value of the virtual currency as of the date of receipt is includible in gross income. See Publication 525, Taxable and Nontaxable Income, for more information on taxable income.Q-9: Is an individual who “mines” virtual currency as a trade or business subject to self-employment tax on the income derived from those activities? A-9: If a taxpayer’s “mining” of virtual currency constitutes a trade or business, and the “mining” activity is not undertaken by the taxpayer as an employee, the net earnings from self-employment (generally, gross income derived from carrying on a trade or business less allowable deductions) resulting from those activities constitute selfemployment income and are subject to the self-employment tax. See Chapter 10 of Publication 334, Tax Guide for Small Business, for more information on selfemployment tax and Publication 535, Business Expenses, for more information on determining whether expenses are from a business activity carried on to make a profit. You'd of course be able to offset that income with the expense of mining the virtual currency, depreciation of dedicated mining equipment, electricity, not sure what else. Edit: Here's a good resource on filing taxes with Bitcoin: Filling in the 1040 Income from Bitcoins and all crypto-currencies is declared as either capital gains income or ordinary income, for example from mining. Income Ordinary income will be declared on either your 1040 (line 21 - Other Income) for an individual, or within your Schedule C, if you are self-employed or have sole-proprietor business. Capital Gains Capital gains income, or losses, are declared on Schedule D. Since there are no reported 1099 forms from Bitcoin exchanges, you will need to include your totals with Box C checked for short-term gains, and with Box F checked for long-term gains. Interesting notes from that article, your first example could actually be trickier than expected if you started mining before there was a Monero to USD exchange. Also, there can also be capital gains implications from using your virtual currency to buy goods, which sounds like a pain to keep track of. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Opening a bank account with cash: How should bills be presented? ### Answer: I currently have the twenties in 6 rolls of 5 I don't know what "roll" means to you (perhaps it's another word for grouping). I think of it as money rolled into a circular shape. Do not do that. Place all the money flat and together. Possibly hand them the hundred and twenties separately if you want to emphasize that. An envelope with the amount on it is a good idea. Flat, not folded, not rolled, not separated by paperclips or rubber bands. A simple pile of money is best. Folding the money once to put in your pocket is fine but unfold it to hand it to the teller. The reason for flat money is that it will most easily go through the money counters. Rolling makes the money curved and increases the chance of a jam. And I apologize if that was just a turn of phrase. But I can easily envision some poor teller sighing with exasperation on being handed rolled money that then needs to be flattened to go through the machine. Particularly if the person handing it over grouped it that way in an attempt to be helpful. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Opening a bank account with cash: How should bills be presented? ### Answer: In the US, banks, businesses and the government stack cash. That's how you should present it to them. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Opening a bank account with cash: How should bills be presented? ### Answer: Banks have electronic money counters so the order really doesn't matter. When I make a cash deposit that's large, I usually just put it in an envelope and hand it over. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Return of value to shareholders in an ISA ### Answer: You will receive a combination of Verizon shares and cash whether you chose option B or C. Option B means that your "Return of Value" will be treated as capital - ie: as a capital gain. Option C means that your "Return of Value" will be treated as income - ie: as a dividend. As your ISA has favourable tax status, you don't end up paying any capital gain tax or income tax on dividend income. So it won't matter which option you chose. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: When filing for an NOL, do you have to file the amended previous years' returns after the NOL return? ### Answer: Your CPA doesn't need to file anything, so don't worry about him being sidetracked. You are the one doing the filing. Since the amended returns have to be filed on paper, you'll actually go and mail a package to the IRS (each return in a separate envelope). The reason the CPA suggests to file the amended returns after the current one, is to ensure the NOL is registered in the system before the amended returns are processed. The IRS doesn't have to automatically accept the amended returns, and if there's no NOL on the current year they may just bounce the amended returns back to you. Keep in mind that since you haven't filed your return by the due date (including extensions), you're now unable to forego the carry-back. I don't know if you discussed this with your CPA, but you're allowed, if you chose so, to not apply the NOL to prior years, and instead to apply it forward for the next 20 years (or until it runs out). Depending on your income pattern, that might have been something you could have considered, but you can only chose this if you file a statement before the due date (with extensions), which is now passed. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How much cash on hand should one have? ### Answer: You seem to have a grasp of the basic principles involved, but your estimation of the risk you are taking seems a bit low. Your non-investment reserves are unlikely to cover your expenses for more than a month, so the chance that you would need to sell investments to cover additional expenses is high. You mention that I am flexible with the 'cash on hand' amount. For instance, for about three months I put a very tight spending/investing freeze on my life because I knew I'd be leaving jobs and moving (I already had the other job lined up). Those savings presumably went toward moving expenses, as your usual savings were insufficient. In the event that you are laid off suddenly, you might find yourself in the same position again, with added unplanned expenses like fees for breaking a lease. Your current plan involves selling investments to cover the gap. Based on your age you have probably only invested in a predominantly positive market, so the chance that you might need to sell investments for cash seems like a reasonable trade-off for the added potential gains. Your perception might change if the markets go south and you are forced to sell into a down market, possibly at a significant loss. You also don't indicate if your investments are currently sufficient to cover an extended period of unemployment. You are taking on a lot of risk under your current plan. Essentially you are trading possible investment gains for flexibility and time. By making small changes like saving at least enough to move as you did previously, you can give yourself time to react to job loss or other unexpected financial need. Rather than give the traditional emergency funds advice, I suggest you look at the broader picture. The total amount of savings/risk is up to you, but you should consider your current savings as insufficient to rely on as a safety net. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How much cash on hand should one have? ### Answer: There are two or three issues here. One is, how quickly can you get cash out of your investments? If you had an unexpected expense, if you suddenly needed more cash than you have on hand, how long would it take to get money out of your Scott Trade account or wherever it is? I have a TD Ameritrade account which is pretty similar, and it just takes a couple of days to get money out. I'm hard pressed to think of a time when I literally needed a bunch of cash TODAY with no advance warning. What sudden bills is one likely to have? A medical bill, perhaps. But hey, just a few weeks ago I had to go to the emergency room with a medical problem, and it's not like they demanded cash on the table before they'd help me. I just got the bill, maybe 3 weeks after the event. I've never decided to move and then actually moved 2 days later. These things take SOME planning. Etc. Second, how much risk are you willing to tolerate? If you have your money in the stock market, the market could go down just as you need the cash. That's not even a worst case scenario, extreme scenario. After all, if the economy gets bad, the stock market could go down, and the same fact could result in your employer laying you off. That said, you could reduce this risk by keeping some of your money in a low-risk investment, like some high-quality bonds. Third, you want to have cash to cover the more modest, routine expenses. Like make sure you always have enough cash on hand to pay the rent or mortgage, buy food, and so on. And fourth, you want to keep a cushion against bookkeeping mistakes. I've had twice in my life that I've overdrawn a checking account, not because I was broke, but because I messed up my records and thought I had more money in the account than I really did. It's impossible to give exact numbers without knowing a lot about your income and expenses. But for myself: I keep a cushion of $1,000 to $1,5000 in my checking account, on top of all regular bills that I know I'll have to pay in the next month, to cover modest unexpected expenses and mistakes. I pay most of my bills by credit card for convenience --and pay the balance in full when I get the bill so I don't pay interest -- so I don't need a lot of cushion. I used to keep 2 to 3 months pay in an account invested in bonds and very safe stocks, something that wouldn't lose much value even in bad times. Since my daughter started college I've run this down to less than 1 months pay, and instead of replacing that money I'm instead putting my spare money into more general stocks, which is admittedly riskier. So between the two accounts I have a little over 2 months pay, which I think is low, but as I say, I'm trying to get my kids through college so I've run down my savings some. I think if I had more than 6 months pay in easily-liquidated assets, then unless I expected to need a bunch of cash for something, buying a new house or some such, I'd be transferring that to a retirement account with tax advantages. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How much cash on hand should one have? ### Answer: Less than 2 1/2% of all US currency actually exists. The rest is digital entries. In a financial crisis you'll need lots of rare cash. Twenty dollar bills are the best choice. Stash as many as you can afford to. Best to stash in a anchored security safe. And for goodness sakes, don't tell anyone. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Do overall 401(k) contribution limits sum across employers? ### Answer: Let me first start off by saying that you need to be careful with an S-Corp and defined contribution plans. You might want to consider an LLC or some other entity form, depending on your state and other factors. You should read this entire page on the irs site: S-Corp Retirement Plan FAQ, but here is a small clip: Contributions to a Self-Employed Plan You can’t make contributions to a self-employed retirement plan from your S corporation distributions. Although, as an S corporation shareholder, you receive distributions similar to distributions that a partner receives from a partnership, your shareholder distributions aren’t earned income for retirement plan purposes (see IRC section 1402(a)(2)). Therefore, you also can’t establish a self-employed retirement plan for yourself solely based on being an S corporation shareholder. There are also some issues and cases about reasonable compensation in S-Corp. I recommend you read the IRS site's S Corporation Compensation and Medical Insurance Issues page answers as I see them, but I recommend hiring CPA You should be able to do option B. The limitations are in place for the two different types of contributions: Elective deferrals and Employer nonelective contributions. I am going to make a leap and say your talking about a SEP here, therefore you can't setup one were the employee could contribute (post 1997). If your doing self employee 401k, be careful to not make the contributions yourself. If your wife is employed the by company, here calculation is separate and the company could make a separate contribution for her. The limitation for SEP in 2015 are 25% of employee's compensation or $53,000. Since you will be self employed, you need to calculate your net earnings from self-employment which takes into account the eductible part of your self employment tax and contributions business makes to SEP. Good read on SEPs at IRS site. and take a look at chapter 2 of Publication 560. I hope that helps and I recommend hiring a CPA in your area to help. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Indie Software Developers - How do I handle taxes? ### Answer: I think the best advice you're going to get on the subject is: If you made $250k in half a year, you definitely have enough to hire an accountant! Get professional help on the subject, and they'll make sure you don't end up getting in any legal trouble. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Indie Software Developers - How do I handle taxes? ### Answer: This is not an end-all answer but it'll get you started I have been through accounting courses in college as well as worked as a contractor (files as sole proprietor) for a few years but IANAA (I am not an accountant). Following @MasonWheeler's answer, if you're making that much money you should hire a bean counter to at least overlook your bookkeeping. What type of business? First, if you're the sole owner of the business you will most likely file as a sole proprietorship. If you don't have an official business entity, you should get it registered officially asap, and file under that name. The problem with sole proprietorships is liability. If you get sued, not only are your business' assets vulnerable but they can go after your personal assets too (including house/cars/etc). Legally, you and your business are considered one and the same. To avoid liability issues, you could setup a S corporation. Basically, the business is considered it's own entity and legal matters can only take as much as the business owns. You gain more protection but if you don't explicitly keep your business finances separate from your personal finances, you can get into a lot of trouble. Also, corporations generally pay out more in taxes. Technically, since the business is it's own entity you'll need to pay yourself a 'reasonable salary'. If you skip the salary and pay yourself the profits directly (ie evade being taxed on income/salary) the IRS will shut you down (that's one of the leading causes of corporations being shut down). You can also pay distribute bonuses on top of that but it would be wise to burn the words 'within reason' into your memory first. The tax man gets mad if you short him on payroll taxes. S corporations are complicated, if you go that route definitely seek help from an accountant. Bookkeeping If you're not willing to pay a full time accountant you'll need to do a lot of studying about how this works. Generally, even if you have a sole proprietorship it's best to have a separate bank account for all of your business transactions. Every source/drain of money will fall into one of 3 categories... Assets - What your business owns: Assets can be categorized by liquidity. Meaning how fast you can transform them directly into cash. Just because a company is worth a lot doesn't necessarily mean it has a lot of cash. Some assets depreciate (lose value over time) whereas some are very hard to transform back into cash based on the value and/or market fluctuations (like property). Liabilities - What you owe others and what others owe you: Everything you owe and everything that is owed to you gets tracked. Just like credit cards, it's completely possible to owe more than you own as long as you can pay the interest to maintain the loans. Equity - the net worth of the company: The approach they commonly teach in schools is called double-entry bookkeeping where they use the equation: In practice I prefer the following because it makes more sense: Basically, if you account for everything correctly both sides of the equation should match up. If you choose to go the sole proprietorship route, it's smart to track everything I've mentioned above but you can choose to keep things simple by just looking at your Equity. Equity, the heart of your business... Basically, every transaction you make having to do with your business can be simplified down to debits (money/value) increasing and credits (money/value) decreasing. For a very simple company you can assess this by looking at net profits. Which can be calculated with: Revenues, are made up of money earned by services performed and goods sold. Expenses are made up of operating costs, materials, payroll, consumables, interest on liabilities, etc. Basically, if you brought in 250K but it cost you 100K to make that happen, you've made 150K for the year in profit. So, for your taxes you can count up all the money you've made (Revenues), subtract all of the money you've paid out (Expenses) and you'll know how much profit you've made. The profit is what you pay taxes on. The kicker is, there are gray areas when it comes to deducting expenses. For instance, you can deduct the expense of using your car for business but you need to keep a log and can only expense the miles you traveled explicitly for business. Same goes for deducting dedicated workspaces in your house. Basically, do the research if you're not 100% sure about a deduction. If you don't keep detailed books and try to expense stuff without proof, you can get in trouble if the IRS comes knocking. There are always mythical stories about 'that one guy' who wrote off his boat on his taxes but in reality, you can go to jail for tax fraud if you do that. It comes down to this. At the end of the year, if your business took in a ton of money you'll owe a lot in taxes. The better you can justify your expenses, the more you can reduce that debt. One last thing. You'll also have to pay your personal federal/state taxes (including self-employment tax). That means medicare/social security, etc. If this is your first foray into self-employment you're probably not familiar with the fact that 1099 employers pick up 1/2 of the 15% medicare/social security bill. Typically, if you have an idea of what you make annually, you should be paying this out throughout the year. My pay as a contractor was always erratic so I usually paid it out once/twice a year. It's better to pay too much than too little because the gov't will give you back the money you overpaid. At the end of the day, paying taxed sucks more if you're self-employed but it balances out because you can make a lot more money. If as you said, you've broken six figures, hire a damn accountant/adviser to help you out and start reading. When people say, "a business degree will help you advance in any field," it's subjects like accounting are core requirements to become a business undergrad. If you don't have time for more school and don't want to pay somebody else to take care of it, there's plenty of written material to learn it on your own. It's not rocket surgery, just basic arithmetic and a lot of business jargon (ie almost as much as technology). ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Indie Software Developers - How do I handle taxes? ### Answer: First of all, consult an accountant who is familiar with tax laws and online businesses. While most accountants know tax laws, fewer know how to handle online income like you describe although the number is growing. Right now, since you're a minor, this complicates things a bit. That's why you'll need a tax accountant to come up with the best business structure to use. You'll need to keep your own records to estimate your quarterly taxes. At the amount you're making, you'll want to do this since you'll pay a substantial penalty at the end of the year if you don't. You can use a small business accounting software package for this or just track everything using Excel or the like. As long as taxes are paid, you won't go to jail. But you need to pay them along with any penalties by April 15, 2013. If you don't do this, then the IRS will want to have a 'discussion' with you. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Indie Software Developers - How do I handle taxes? ### Answer: First of all congrats... very nice work indeed.. Secondly, i do not offer this as legal advise.. lol.. anyhow.. you need to make sure to hang on to as much as possible, being a single earner, our Uncle (Sam) is going to want what's due... That being said, you should probably look into investments, for starters, purchase a primary residence or start a business, or purchase a primary residence and use that as a business residence (both).. what you basically want are write-offs.. you need to bring your "taxable" income as low as possible so you pay minimal taxes.. in your case, you're in danger of paying a hefty sum in taxes... i'm sure you can shield yourself with various business expenses (a car, workplace, computers, etc.. ) that you could benefit from, both professionally and individually.. and then seriously bro... making 250k leads me to believe you've got at least more than half a brain, and that you're using more than half of that.. so dude.. get an accountant... and one you can trust.. ask your parents, colleagues, people you've worked with in the past.. etc.. there are professionals who are equally as talented in helping you keep your money as you are in making it.. -OR- you could get married, make sure your wife stays at home and start popping out kids asap... those keep my taxable (and excess) income pretty low.. LOL!!! I'm going to add to this... as a contractor, i've generally put any "estimated" taxes into some kind of interest accruing account so i can at least make a little money before i have to give it away.. in your case, i'd say put away at least 2/3's into some kind of interest earning account.. start by talking to your personal banker wherever your money is.. you'll be surprised at how nice they treat you... you ARE going to have to pay taxes.. so until you do, try to make a little money while it sits.. again, nice problem to have! ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Indie Software Developers - How do I handle taxes? ### Answer: The "hire a pro" is quite correct, if you are truly making this kind of money. That said, I believe in a certain amount of self-education so you don't follow a pro's advice blindly. First, I wrote an article that discussed Marginal Tax Rates, and it's worth understanding. It simply means that as your income rises past certain thresholds, the tax rate also will change a bit. You are on track to be in the top rate, 33%. Next, Solo 401(k). You didn't ask about retirement accounts, but the combined situations of making this sum of money and just setting it aside, leads me to suggest this. Since you are both employer and employee, the Solo 401(k) limit is a combined $66,500. Seems like a lot, but if you are really on track to make $500K this year, that's just over 10% saved. Then, whatever the pro recommends for your status, you'll still have some kind of Social Security obligation, as both employer and employee, so that's another 15% or so for the first $110K. Last, some of the answers seemed to imply that you'll settle in April. Not quite. You are required to pay your tax through the year and if you wait until April to pay the tax along with your return, you will have a very unpleasant tax bill. (I mean it will have penalties for underpayment through the year.) This is to be avoided. I offer this because often a pro will have a specialty and not go outside that focus. It's possible to find the guy that knows everything about setting you up as an LLC or Sole Proprietorship, yet doesn't have the 401(k) conversation. Good luck, please let us know here how the Pro discussion goes for you. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Indie Software Developers - How do I handle taxes? ### Answer: Congratulations! I would start with an attorney. As a 17 year old, you legally cannot sign contracts, so you're going to have to setup some sort of structure with your parents first. Get attorney references -- your parents can ask around at work, if you're friendly with any business owners, ask them, etc. Talk to a few and pick someone who you are comfortable with. Ask your attorney for advice re: sole proprietor/S-Corp/LLC. You have assets, and your parents presumably have some assets, so you need advice about isolating your business from the rest of your life. Do the same thing for accountant references, but ask your attorney for a reference as well. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Are Index Funds really as good as “experts” claim? ### Answer: I actually love this question, and have hashed this out with a friend of mine where my premise was that at some volume of money it must be advantageous to simply track the index yourself. There some obvious touch-points: Most people don't have anywhere near the volume of money required for even a $5 commission outweigh the large index fund expense ratios. There are logistical issues that are massively reduced by holding a fund when it comes to winding down your investment(s) as you get near retirement age. Index funds are not touted as categorically "the best" investment, they are being touted as the best place for the average person to invest. There is still a management component to an index like the S&P500. The index doesn't simply buy a share of Apple and watch it over time. The S&P 500 isn't simply a single share of each of the 500 larges US companies it's market cap weighted with frequent rebalancing and constituent changes. VOO makes a lot of trades every day to track the S&P index, "passive index investing" is almost an oxymoron. The most obvious part of this is that if index funds were "the best" way to invest money Berkshire Hathaway would be 100% invested in VOO. The argument for "passive index investing" is simplified for public consumption. The reality is that over time large actively managed funds have under-performed the large index funds net of fees. In part, the thrust of the advice is that the average person is, or should be, more concerned with their own endeavors than they are managing their savings. Investment professionals generally want to avoid "How come I my money only returned 4% when the market index returned 7%? If you track the index, you won't do worse than the index; this helps people sleep better at night. In my opinion the dirty little secret of index funds is that they are able to charge so much less because they spend $0 making investment decisions and $0 on researching the quality of the securities they hold. They simply track an index; XYZ company is 0.07% of the index, then the fund carries 0.07% of XYZ even if the manager thinks something shady is going on there. The argument for a majority of your funds residing in Mutual Funds/ETFs is simple, When you're of retirement age do you really want to make decisions like should I sell a share of Amazon or a share of Exxon? Wouldn't you rather just sell 2 units of SRQ Index fund and completely maintain your investment diversification and not pay commission? For this simplicity you give up three basis points? It seems pretty reasonable to me. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Are Index Funds really as good as “experts” claim? ### Answer: Why would it not make more sense to invest in a handful of these heavyweights instead of also having to carry the weight of the other 450 (some of which are mostly just baggage)? First, a cap-weighted index fund will invest more heavily in larger cap companies, so the 'baggage' you speak of does take up a smaller percentage of the portfolio's value (not that cap always equates to better performance). There are also equal-weighted index funds where each company in the index is given equal weight in the portfolio. If you could accurately pick winners and losers, then of course you could beat index funds, but on average they've performed well enough that there's little incentive for the average investor to look elsewhere. A handful of stocks opens you up to more risk, an Enron in your handful would be pretty devastating if it comprised a large percentage of your portfolio. Additionally, since you pay a fee on each transaction ($5 in your example), you have to out-perform a low-fee index fund significantly, or be investing a very large amount of money to come out ahead. You get diversification and low-fees with an index fund. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Are Index Funds really as good as “experts” claim? ### Answer: Picking yourself is just what all the fund managers are trying to do, and history shows that the majority of them fails the majority of the time to beat the index fund. That is the core reason of the current run after index funds. What that means is that although it doesn’t sound so hard, it is not easy at all to beat an index consistently. Of course you can assume that you are better than all those high-paid specialists, but I would have some doubt. You might be luckier, but then you might be not. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Are Index Funds really as good as “experts” claim? ### Answer: The point of buying an index fund is that you don't have to pick winners. As long as the winners are included in the index fund (which can include far more than 500 stocks), you benefit on average because of overall upward historical market performance. Picking only the top 50 capitalized stocks in the S&P 500 does not guarantee you will successfully track the S&P 500 index because the stocks in the tail can account for an outsized amount of overall growth; the top 50 stocks by market capitalization change over time, and these stocks are not necessarily the stocks that perform better. As direct example, the 10 year average annual return for the S&P top 50 is 4.52%, while the 10 year average annual return for the S&P 500 is 5.10%. Issues of trading and balancing to maintain these aside, these indices are not the same. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Are Index Funds really as good as “experts” claim? ### Answer: Two main points to answer this in my opinion. First, most people don't start with say half a million dollar to buy all the stocks they need in one shot but rather they accumulate this money gradually. So they must make many Buys in their lifetime. Similarly, most people don't need to withdraw all their investment in one day (and shouldn't do this anyway as it cuts the time of investment). So there will be many Sells. Performing a single buy or sell per year is not efficient since it means you have lots of cash sitting doing nothing. So in this sense, low cost indexing lets you quickly invest your money (and withdraw it when needed after say you retire) without worrying about commission costs each time. The second and most important point to me to answer this is that we should make a very clear distinction between strategy and outcome. Today's stock prices and all the ups and downs of the market are just one possible outcome that materialized from a virtually uncountable number of possible outcomes. It's not too hard to imagine that tomorrow we hear all iPhones explode and Apple stock comes crashing down. Or that in a parallel universe Amazon never takes off and somehow Sears is the king of online commerce. Another item in the "outcome" category is your decisions as a human being of when to buy and sell. If that exploding iPhone event does occur, would you hold on to your stocks? Would you sell and cut your losses? Does the average person make the same decision if they had $1000 invested in Apple alone vs $1M? Index investing offers a low cost strategy that mitigates these uncertainties for the average person. Again here the key is the word "average". Picking a handful of the heavyweight stocks as you mention might give you better returns in 30 years, but it could just as easily give you worse. And the current data suggest the latter is more likely. "Heavyweights" come and go (who were they 30 years ago?) and just like how the other 450 companies may seem right now as dragging down the portfolio, just as easily a handful of them can emerge as the new heavyweights. Guaranteed? No. Possible? Yes. Jack Bogle is simply saying low cost indexing is one of the better strategies for the average person, given the data. But nowhere is it guaranteed that in this lifetime (e.g. next 30 years) will provide the best outcome. Berkshire on the other hand are in the business of chasing maximum outcomes (mid or short term returns). It's two different concepts that shouldn't be mixed together in my opinion. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Are Index Funds really as good as “experts” claim? ### Answer: Comparing index funds to long-term investments in individual companies? A counterintuitive study by Jeremy Siegel addressed a similar question: Would you be better off sticking with the original 500 stocks in the S&P 500, or like an index fund, changing your investments as the index is changed? The study: "Long-Term Returns on the Original S&P 500 Companies" Siegel found that the original 500 (including spinoffs, mergers, etc.) would do slightly better than a changing index. This is likely because the original 500 companies take on a value (rather than growth) aspect as the decades pass, and value stocks outperform growth stocks. Index funds' main strength may be in the behavior change they induce in some investors. To the extent that investors genuinely set-and-forget their index fund investments, they far outperform the average investor who mis-times the market. The average investor enters and leaves the market at the worst times, underperforming by a few percentage points each year on average. This buying-high and selling-low timing behavior damages long-term returns. Paying active management fees (e.g. 1% per year) makes returns worse. Returns compound on themselves, a great benefit to the investor. Fees also compound, to the benefit of someone other than the investor. Paying 1% annually to a financial advisor may further dent long-term returns. But Robert Shiller notes that advisors can dissuade investors from market timing. For clients who will always follow advice, the 1% advisory fee is worth it. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Are Index Funds really as good as “experts” claim? ### Answer: Here is my simplified take: In any given market portfolio the market index will return the average return on investment for the given market. An actively managed product may outperform the market (great!), achieve average market performance (ok - but then it is more expensive than the index product) or be worse than the market (bad). Now if we divide all market returns into two buckets: returns from active investment and returns from passive investments then these two buckets must be the same as index return are by definition the average returns. Which means that all active investments must return the average market return. This means for individual active investments there are worse than market returns and better then market returns - depending on your product. And since we can't anticipate the future and nobody would willingly take the "worse than market" investment product, the index fund comes always up on top - IF - you would like to avoid the "gamble" of underperforming the market. With all these basics out of the way: if you can replicate the index by simply buying your own stocks at low/no costs I don't see any reason for going with the index product beyond the convenience. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Are Index Funds really as good as “experts” claim? ### Answer: A lot of it boils down to these key points: ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Are Index Funds really as good as “experts” claim? ### Answer: Simply put, you cannot deterministically beat the market. If by being informed and following all relevant news, you can arrive at the conclusion that company A will likely outperform company B in the future, then having A stocks should be better than having B stocks or any (e.g., index based) mix of them. But as the whole market has access to the very same information and will arrive at the same conclusion (provided it is logically sound), "everybody" will want A stocks, which thus become expensive to the point where the expected return is average again. Your only options of winning this race are to be the very first to have the important information (insider trade), or to arrive at different logical conclusions than the rest of the world (which boils down do making decisions that are not logically sound - good luck with that - or assuming that almost everybody else is not logically sound - go figure). ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Should you check to make sure your employer is paying you the correct superannuation amount? [Australia] ### Answer: As poolie mentioned, you should get online access to your account. This will do a couple of things: Also, consolidate any super you have with different companies. Now. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Should you check to make sure your employer is paying you the correct superannuation amount? [Australia] ### Answer: Yes, there are checks and balances. Employers can be, and have been, prosecuted for failing to pay super before the statutory timeline, which is three months from the pay date. However, it is still in your interests to check for yourself. The most common point for missing super to be discovered is when the company goes broke, at which point it's too late for you. What you should do is Check on your payslips that the right amount is allocated to super. It should be 9% of gross, plus any salary sacrifice or additional component. Check your super fund's half-yearly statements line up the deductions given on your payslip. Consider getting online access to your super account so you can check more quickly. If something is missing, call your super fund and/or payroll office. Resources: ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Depositing a check with a DBA on the title ### Answer: Assuming it's your business, endorse the check as yourself and your DBA name, payable to your personal account ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Value of a collateralized asset ### Answer: You're not missing any concepts! It sounds like you are contributing a piece of collateral to the business, and you want to know a fair way to value how much this contribution of collateral is worth. Technically the economic answer would be the difference in interest between a secured loan and an unsecured loan. So for example suppose that the business could get a loan at 17% without the collateral (maybe just on a credit card) but with the duplex as collateral it is able to get the loan at 10.5%. In principle, the value of this collateral is (17% - 10.5%) or 6.5%, because it has allowed the business to pay 6.5% less interest on its loan. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What do brokers do with bad stock? ### Answer: Market makers, traders, and value investors would be who I'd suspect for buying the stock that is declining. Some companies stocks can come down considerably which could make some speculators buy the stock at the lower price thinking it may bounce back soon. "Short sellers" are out to sell borrowed stocks that if the stock is in free fall, unless the person that shorted wants to close the position, they would let it ride. Worthless stocks are a bit of a special case and quite different than the crash of 1929 where various blue chip stocks like those of the Dow Jones Industrials had severe declines. Thus, the companies going down would be like Apple, Coca-Cola and other large companies that people would be shocked to see come down so much yet there are some examples in recent history if one remembers Enron or Worldcom. Stocks getting delisted tend to cause some selling and there are some speculators may buy the stock believing that the shares may be worth something only to lose the money possibly as one could look at the bankrupt cases of airlines and car companies to study some recent cases here. Circuit breakers are worth noting as these are cases when trading may be halted because of a big swing in prices that it is believed stopping the market may cause things to settle down. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What do brokers do with bad stock? ### Answer: You have to consider a case where you just cannot sell it. Think of it as a bad piece of real estate in Detroit. If there are absolutely no buyers, you cannot sell it (until a buyer shows up) ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: What do brokers do with bad stock? ### Answer: For every seller, there's a buyer. Buyers may have any reason for wanting to buy (bargain shopping, foolish belief in a crazy business, etc). The party (brokerage, market maker, individual) owning the stock at the time the company goes out of business is the loser . But in a general panic, not every company is going to go out of business. So the party owning those stocks can expect to recover some, or all, of the value at some point in the future. Brokerages all reserve the right to limit margin trading (required for short selling), and during a panic would likely not allow you to short a stock they feel is a high risk for them. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: UK Tax - can I claim expenses against a different tax year? ### Answer: In some circumstances losses from self-employment can be offset against total income and/or capital gains. If this applies to you may be able to claim back some of the tax taken by PAYE from your day job. You can also to some extent carry the loss backwards into previous tax years or forward into the next one if you can't use it fully this year. HMRC have some information available on the current rules: When you can claim losses You can claim: But You can’t claim: ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Is it possible for an individual to refuse a cheque in France? ### Answer: In any country, individuals (and shops) can reject any form of payment that is not Legal Tender - defined by law as a payment form that must be accepted. Shops are typically more generous, because they want to do business with you, but individuals are in a different position. In France, only official coins and bills are declared as Legal Tender (so if they don't want to, individuals don't even need to accept bank transfers). This is for doubts you need to pay. In addition, as you are not forced to do business with them, people and shops can require whatever they feel like to require - if you want to buy their car, they can ask you to stand on your head and spit coins, and if you don't like it, they don't sell to you. (They won't do much business then, probably) ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How do I estimate my taxes when I have only 1099 income? ### Answer: As long as you paid 100% of your last year's tax liability (overall tax liability, the total tax to pay on your 1040) or 90% of the total tax liability this year, or your underpayment is no more than $1000, you won't be penalized as long as you pay the difference by April 15th. That's per the IRS. I don't know where the "10% of my income" came from, I'm not aware of any such rule. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: How do I estimate my taxes when I have only 1099 income? ### Answer: So there are a lot of people that get into trouble in your type of self employment situation. This is what I do, and I use google drive so there are no cost for tools. However, having an accounting system is better. Getting in trouble with the IRS really sucks bad. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Will my current employer find out if I have a sole proprietarship/corporation? ### Answer: Tell your employer during your initial contract Terms of Service discussions. Ordinarily, this is boilerplate but you should ask for a rider in your contract which says - in some form - I already have IP, I will continue to work on this IP in my own time, and any benefit or opportunity derived from this IP will continue to be entirely mine. I requested exactly such a rider when I took up a new job just over a year ago and my employer was extremely accommodating. That I already had a company in which that IP could reside actually made the process easier. As @JohnFX has already mentioned, not telling your employer is both unethical as well as storing up potential legal hassles for you in the futre. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Will my current employer find out if I have a sole proprietarship/corporation? ### Answer: I can see why you'd be reluctant to tell them, but I think you need to be open and honest with them about what you're doing and where you see it going. If the roles were reversed, what would you want your employee to do in this situation? If it were me, I'd be much happier to be told up front than to find out some other way later. If I found out later, I'd feel somewhat betrayed and angry. With the Internet, it seems unlikely that they wouldn't find out eventually, so I think being up front about it is your best option. I also suggest you have a backup plan in case they say no. Perhaps you'd need to find another full-time job that is more tolerant (or even encouraging) of side businesses. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Will my current employer find out if I have a sole proprietarship/corporation? ### Answer: I would have thought that if you are doing it in your own time using your own resources it really has nothing to do with your current employer, so there is really no need at all to keep it from them. By being open and transperant you might even get some business from your work mates. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Will my current employer find out if I have a sole proprietarship/corporation? ### Answer: Some governments offer business information search for corporations in their jurisdiction. The search results may show the director information for the company. If this information is made publicly available, keep in mind there are websites that make money from indexing publicly available information to show in Google search results. I don't mean to scare you as this is a likely a slim possibility. It really depends on the privacy practices in place at the jurisdiction you're in. But do keep in mind if you're planning on doing business on the side for a few years policies may change. I would call Service Ontario (or whichever province you're incorporating in) or Corporations Canada if federally incorporating and ask them if they offer a business search service and exactly what information they make public. You might be able to reach a Privacy Officer and find out what exactly their policy is. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: standard method for learning more about a specific sector? (particularly biotech sector) ### Answer: The important piece here is not necessarily understanding intimate details of biological engineering per se, but rather understanding how the business operates as a singular unit. It is also important to understand the business case for a firm, the evolution of demand for its products/services and the cost of its revenue. To understand a particular sector of the market, you should begin by studying how that sector interacts with and is influenced by the larger market and economy as a whole, both domestic and abroad. From there, you should study individual companies and again see how they interact with one another, the sector, market, etc. Many biotech firms have a different offering and meet different business and consumer demands. Some are near term solutions to existing problems, some long. It is important to see how the firms collectively interact with the consumer base and then differentiate on an individual level. ###end
Below is an instruction that describes a task. Write a response that appropriately completes the request. ### Question: Are my parents ripping me off with this deal that doesn't allow me to build my equity in my home? ### Answer: It's a little unusual, but I don't think the financial terms are completely unreasonable on their face. What you describe is similar to an interest-only loan, where you make payments that only cover the interest due each month, and the entire principal is due as a single "balloon payment" on a specified date (in this case, the date on which the condo is sold). Your monthly payment of $500 on a principal of $115K is equivalent to an annual interest rate of 5.22%, which at least is not completely usurious. With a traditional mortgage you might pay a rate as low as 3%, if you had sufficient income and excellent credit - but I don't know, from what you've said, whether that's the case. Did you make the current arrangement because you were unable to get a loan from a bank? The main difference here is that instead of the balloon payment being a fixed $115K, it's "75% of the gross proceeds of the sale". If the condo eventually sells for $155K, that would be $116,250, so that's slightly advantageous to them (assuming that "gross proceeds" means "before deducting commissions for either the buyers' or sellers' realtors or any other costs of the sale"), and thus slightly disadvantageous to you. If the condo appreciates in value, that's more of a win for them and more of a relative loss for you. But it's also possible that the value of the condo goes down, in which case this arrangement is better for you than a fixed balloon payment. So this deal does prevent you from getting a larger share of any gains in the value of the property, but it also helps insulate you from any losses. That's important to keep in mind. There's also the issue of needing their consent to sell. That's potentially problematic - usually in a joint ownership scheme, either owner has the right to demand to be bought out or to force a sale. I guess it depends on whether you think your parents would be likely to consent under reasonable circumstances, or to insist on holding the property against your best interests. It's true that you aren't building equity with this arrangement, and if you thought you were, you are mistaken or misled. But let's compare it with other options. If you would qualify for a traditional 30-year fixed mortgage at 3%, your monthly payment would be slightly lower ($484), and you would be building some equity because your payments would reduce the principal as well as paying the interest. But a 30-year loan builds equity very slowly at first - after 7 years you'd have only about $20,000 in principal paid down. If we assume that 5.2% represents the interest rate you'd otherwise pay based on your creditworthiness, then your monthly payment would be $631. So compared to that, you have an extra $130 per month that you can save or invest in whatever you want - you're not forced to invest it in your house. Note that in either case you'd still be paying the condo fees, property taxes, insurance, and maintenance yourself. So we might as well eliminate those from consideration. It might be a good idea to find out what other options you would have - perhaps try to get an interest rate quote on a traditional mortgage from a bank, based on your income and credit history. Then you can decide what to do, taking into account: your financial situation; how much of a monthly payment could you afford? your relationship with your parents; are they likely to be reasonable about renegotiating? Do they in general tend to respect your wishes? Would it harm your relationship if you tried to get out of the deal, and how important is that to you? To what extent do you actually want to pay for equity in this property? Do you really believe it's a good investment, and have evidence to support that? Your options include: Try to renegotiate the terms of the loan from your parents Try to "refinance" the loan, by getting a loan from a bank and paying off some agreed-upon amount of principal to your parents Try to force the sale of the condo and move to another house, financing it some other way Consult a lawyer as to whether your agreement with your parents is legally enforceable. For instance, do they have a lien on the property? ###end

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