Headlines:
Property Tax Liens in your IRA? |
Franchise Trends for 2007 |
Funding Your Current or Future Business with Your IRA
Free Webinars
Self-Directed IRA LLC – The Ultimate Wealth Building Tool
Date: March 13, 2007
Time: 10:00-11:00 am PST
Click Here to reserve your webinar seat today!
Funding a Business with your IRA or 401(k)
Date: March 15, 2007
Time: 10:30-11:30 am PST
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Spotlight Franchise
CertaPro Painters
CertaPro Painters is the largest painting company in North America and ranks as one of the most popular franchises for self-directed investors this quarter. Since 1992, CertaPro Painters has honored homes and the people who live in them by creating a customer experience that is unmatched. Their interior, exterior and specialty painting services compliment the lives and lifestyles of their customers. This level of service accounts for a 98% customer-referral rating.
CertaPro Painters believes in providing franchisees with powerful systems that fuel success. They offer both a comprehensive initial training and on-going support for building a successful home-based franchise. CertaPro provides extensive technological support that gives their franchisees a tremendous edge in the industry. Their data systems manage every aspect of the business. They also help each franchisee to develop custom, comprehensive marketing plans that attract both residential and commercial customers to ensure success.
For more information visit their website: http://www.painting-franchise-opportunity.com/
Spotlight Client
Roger Varner
Roger Varner recently became his own boss when he created a business plan and opened Hocking Hill Roasters, a coffee and fudge shop. Having only been open a few short months, Roger is already planning to expand his business to include a Wellness Clinic just a few doors down from Hocking Hills Roasters. He is very excited and motivated with hopes of continuing his expansion to open five more businesses in the next five years. "I think this type of funding is great for small businesses. It jump-started mine and helped me generate $45,000 in the first four months. I'm happily enjoying my new business' success!" Because of his achievements in expanding his business model and such high returns, Roger is our featured client for this edition.
To be considered as a featured client, please send your business success story to Lindsay Downing.
Spotlight Business Partner
Patty Norman
Patty Norman, our featured professional, has first-hand knowledge and experience in all faucets of the franchising industry. Patty is currently an independent consultant with FranChoice. FranChoice matches prospective franchise owners with experienced franchise consultants for free consultations. Before becoming a part of FranChoice Patty was a very successful franchisee of an American cuisine and bakery. Patty has always had a passion for helping others realize their dreams and FranChoice was the perfect place for her to share the knowledge she gained on her own entrepreneurial journey.
Patty can be reached by email at PNorman@FranChoice.com or by calling 888-406-0144.
Property Tax Liens in your IRA?
By Forrest Moore
Due to the unpredictability of the stock market, many investors are looking for alternative investments to generate wealth for their retirement. The growth of the self-directed IRA industry has contributed to many of these investments gaining popularity. One investment that is a leading beneficiary of money leaving the stock market in pursuit of security is tax liens.
Essentially every piece of real property has taxes assessed on it each year. This includes, but is not limited to raw land, residential homes, commercial property, skyscrapers and more. Each county in the United States levies property taxes, and each year the county will bill the property owner for taxes due. These taxes provide the capital for the county to ensure community services (e.g. – police, fire, schools, and libraries) have the necessary funding to operate.
If the taxes are not paid when due, the county will eventually place a lien on the property and then sell this lien to an investor. In most cases, the investor will take the first position lien on the property (in front of the first mortgage) and the lien will accrue interest and/or penalties from the date the investor makes the investment in the lien. Once the property owner repays the lien – the investor gets back their original investment plus the interest and/or penalties. If the property owner is unable to pay the taxes, in most states the property is defaulted to the lien investor.
Tax liens can be an exceptional investment because they are secured against real property, have predictable rates of return and are administered by the government. They are, however, illiquid for a period of time, which can range from 6 months to 2 years. Many states offer attractive interest rates; for instance, Arizona offers up to 16 per cent annually, while Texas offers 25% per year – secured against real property. Liens can range from a couple hundred dollars to well over a million. This gives all investors, big and small, an opportunity to invest in tax liens.
In the past five years, self-directed IRAs have gained traction within the investor community because of the flexibility offered through these accounts. Self-directed IRAs give the investor the ability use their retirement funds to purchase alternative investments such as real estate and tax liens, as well as stocks, bonds and mutual funds. Tax liens are a tremendous vehicle for building wealth; however, not every lien is a windfall purchase. Spend some time getting to know a county's lien system and do your due diligence before you purchase.
Forrest Moore is a recognized expert on self-directed retirement plans. For more information visit www.guidantfinancial.com or call 1.800.472.4455.
Franchise Trends for 2007
By Joel Libava
For many workers taking the plunge into owning their own business seems like an unattainable goal, but franchising has made it easier than ever to make this dream a reality. Currently, franchising spans 75 different industries, provides 18 million American jobs, and generates an overall economic output of $1.53 trillion, according to a study conducted by PricewaterhouseCoopers for the International Franchise Association.
Hot Trends
1. Baby Boomers and Franchising: It's growing increasingly more common for this generation to opt for the working rather than retirement route. According to HRMS.net, while 76 per cent of boomers intend to keep working and earning in retirement, on average they expect to "retire'' from their current jobs/careers at around 64 and launch into an entirely new job or career. Those who are disillusioned with corporate life, have been downsized, or are simply looking for a new challenge, want a form of safe self-employment that will sell when they're ready to let the business go.
2. Buying out from distressed industries: Distressed industries such as the automotive and airlines industries offer "buyout" packages and employees are able to seize the opportunity to transition it into their own business by using the funds from the buyout to finance all or a portion of their franchise.
3. The "Semi-Absentee" Owner: Running a franchise as a business on the side is becoming very popular. With the use of technology like online real-time tracking of store activity, absentee owners are able to have a business that doesn't tie them down. Since 9/11 people have begun to prioritize quality of life above income. For these people, semi-absentee ownership is an attractive option because it allows them to pursue other interests like time with family and hobbies.
4. Female Business Owners: Nationwide, female entrepreneurs have found increasing fortunes. The Center for Women's Business Research estimates that between 1997 and 2004, women-owned firms with no employees grew at 18 percent, twice the rate of all non-employer firms. During the same period, the revenues for women-owned firms without employees grew 66 percent, compared with 42 percent for all firms without employees.
5. Low Cost / Low Overhead: Entrepreneurs are becoming more averse to risk and investing in low -cost opportunities with low overhead, like businesses that they can run from home or with relatively few employees or inventory.
Hot Concepts
1. Coffee Houses: According to the Specialty Coffee Association of America, specialty coffee was a $11 billion industry in 2005, up from $9.6 billion in 2004. The cafe segment of the specialty coffee industry continues to grow. And, even in a world where Starbucks is king of coffee, franchises are reaching for their share of the (coffee) pot. If you think there's no room left for you to be a part of the specialty coffee market, think again. "We expect it to continue to grow," says Libava. "Saturation must exist, theoretically; we just don't know what it looks like."
2. Staffing and Business Services: According to the Bureau of Labor Statistics, staffing services will be one of the fastest-growing industries over the next five to ten years. Finding and recruiting talent is not a skill that most businesses excel at, but one that greatly affects a business's performance. Businesses that provide these services are in high demand, especially as the pool of talented workers shrinks. Other business services franchises will also be hot in 2007. Since small businesses play such a big role in our economy, business services franchises continue to grow.
3. Niche Gyms: Fitness Centers specializing in kids, teens, seniors and even 24-hour gyms for the all round busybody are big. People are investing more time and money into organizations that specialize in accommodating them.
4. Non-Medical Healthcare: According to the Census Bureau, 13 percent of the population will be over the age of 65 by 2010. That figure jumps to almost 20 percent in 2030. For the aging baby-boomer, in-home personal care is becoming more popular. Services are now available that can provide not only in-home care, but also provide other home needs such as yard care, general cleaning, and all-around handy work.
5. Education and Tutoring: Another concept that grows exponentially as schools become more competitive. Whether it's online tutoring, subject-specific,
or even for the youngest bunch of pre-schoolers, parents are willing to throw down big bucks to ensure their child has the extra edge. Many of these tutoring franchises are even being hired by schools due to the No Child Left Behind Act that requires schools to provide tutoring services if their programs don't meet performance standards.
Joel Libava is President of Franchise Selection Specialists Inc. located in Cleveland, Ohio, and a member of FranNet, an international franchise consulting group. Joel can be reached at 216-831-2610, or you may e-mail him at franpro@sbcglobal.net.
Funding Your Current or Future Business with Your IRA
More and more individuals are looking to make the jump from corporate America to entrepreneurship. Often, financing a business purchase is a topic that people do not address early enough in the process. Although there are many great business opportunities available, how you finance your business venture often determines the level of success you will enjoy. Traditionally, there are four ways that people finance a business:
Home Equity Line of Credit (HELOC) - These are variable loans that are paid over a fairly long lifetime. In order to obtain this form of financing you will have to pledge your residence and credit as collateral.
Bank Loan – Tell a bank that you want a loan to start a new business;
odds are you won't get any money unless you can prove you don't need the loan. That means collateralizing the business with other assets such as cash, stocks, home equity – and your credit. Most banks will require a significant down-payment.
|
Early Distribution* |
Direct IRA Funding |
| Available Retirement Funds |
$100,000 |
$100,000 |
| Manditory Withholding (20%) |
($20,000) |
$0 |
| Income Tax (30% assumed) |
($30,000) |
$0 |
| State Tax (2% assumed) |
($2,000) |
$0 |
| Early Distribution Penalty (10%) |
($10,000) |
$0 |
| Net Cash Available ** |
$58,000 |
$100,000 |
| *For illustrative purposes only and calculations are general assumptions. Your situation may vary depending on your personal situations and location. Contact a qualified tax professional for advice as to whether this form of business funding is right for you. **Not including mandatory withholding. |
SBA (Small Business Administration) Loans – The SBA doesn't lend money! The SBA guarantees loans for the bank, not the person. An SBA loan will likely be more expensive (and time consuming) to obtain than other methods (45-120 days).
Retirement Funds – Many entrepreneurs will take a taxable distribution from their retirement plan in order to come up with the necessary capital to purchase a business. In doing so they are subject to taxes and penalties of approximately 50 per cent. There is, however, a funding solution that can be performed where your retirement account invests directly into your business purchase.
There are few companies that facilitate such a transaction. Guidant Financial Group, the largest provider of this type of funding solution, helped over 1000 new businesses last year alone. Guidant's CEO, David Nilssen expressed that their clients typically use this financing option because this process can mitigate, if not eliminate the amount of debt incurred and interest paid to a bank; it limits overhead; provides access to retirement fund dollars without taxes or penalties; and allows entrepreneurs to make higher contributions to their retirement plan… tax deferred. Nilssen continued, "Their retirement plan uses tax-deferred funds to provide the necessary start-up capital for the purchase and development of the new business. By using retirement funds, individuals can redirect their retirement funds from the volatile stock market to a more predictable business model. It empowers entrepreneurs to dramatically impact the value of their retirement.
Retirement funds are available to many investors looking to finance a business,
and the benefits of this type of funding are significant. With this process it is important that the consumer educates themselves, since many professionals are unaware of this funding strategy. Each individual's situation will vary, so the more knowledge that can be gathered on all options, the better off the business will be.
