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Category: Business Accounting

Benefits of Taking a Vacation from Work

Nearly 40% of Americans aren’t using all of their allotted vacation time. Why? Two reasons. 40% of workers stress about the pile of work they’ll find on their desk when they return, and 67% feel like their company doesn’t promote taking time off. Despite the negative connotations sometimes associated with using PTO for vacation, here are 6 benefits of unplugging and taking some much-needed time off:

  1.  Gain a new perspective. As you step away from the immediate demands of the workplace and ponder a question that’s been on your mind, you’re more likely to gain a clear answer. An example of this, according to CNN, would be when you ask your friend for advice on a situation. The friend is removed from the scenario, and thus can offer advice more easily.
  2. Better physical health. A little time away from the office reduces stress and can even improve your physical health. According to studies on cardiovascular health, men who didn’t take a vacation for several years were 30% more likely to have heart attacks compared to men who did not take time off. Women who vacation only once every six years or less were eight times more likely to develop heart disease compared to women who vacation twice a year. Combine that with lower blood pressure and smaller waistlines, and you owe it to yourself to take a break from the office once in a while!
  3. Better mental health. According to a study performed by the University of California Irvine, vacations can reset and refresh our minds. They reported that “if we had a huge amount of brain power in reserve, we might not need vacations. We could just tap those beach-lolling brain cells. But we don’t. Time off tunes up a well-functioning brain.”
  4. Closer family relationships. Perhaps the most important benefit of vacation time is the bonds we establish with those we love. Psychology expert Susan Krauss Whitborne said, “Shared family memories and time spent together isolated from ordinary everyday activities (school, work and so on) help to promote these positive ties. Though family vacations can have their own share of stress, the benefits outweigh the risks, even in families that are not particularly close.”
  5. Increased productivity. The best way to get more done may be to spend more time doing less. A study from Harvard University shows that sleep deprivation costs American companies an estimated $63.2 billion a year in lost productivity. Vacations help you unwind, recharge, and rest up. In fact, those who vacation more often score higher on end-of-year performance ratings from their supervisors.
  6. Receive inspiration about your work. The best ideas often come when you’re not actively looking for them. Creativity is sure to blossom as you reconnect with nature, family, and friends, rather than under the immense pressure that comes from meeting work deadlines and attending meetings. Take it from Rieva Lesonsky, the CEO of GrowBiz Media: “Vacations help us change the view, which can spark an idea or kick start creative thinking.”

It can happen to any of us. In fact, it often does–and never at a convenient time. Hackers are working around the clock to infest millions of websites. So how do you keep your small business safe on the internet?

Protect information, computers, and networks

 

Here are the top 5 security tips to keep your company safe in an increasingly paperless world.

    1. Protect information, computers, and networks. As annoying as all those “updates available” pop-ups can be in the middle of your work day, making sure you have the latest version of all browsers and security software will keep your computers running properly and protect you from cyber security threats.
    2. Make backup copies of all business data and information. All of your important data such as word processing documents, spreadsheets, databases, financial records, and human resource files should be backed up either on a removable device or in the cloud. It is best to backup data automatically if possible, or at least do so weekly.
    3. Protect passwords. Require employees to use unique passwords and change them every 3-6 months. Do not store your passwords on a word document, but rather, write them down and keep them in a locked desk drawer or other safe place. If password security has been an issue for your business before, consider implementing another level of authentication that requires additional information beyond a password to gain access to important company information.
    4. Take measures to secure mobile devices. Mobile devices often create cyber security challenges, especially for small businesses. If employees regularly access any company information on their phones or tablets, require passwords to protect their devices, encrypt their data, and install security apps to prevent information from being stolen.
    5. Keep payment card information safe. Perhaps the only thing worse than a cyber security threat on your company information is for a hacker to gain access to your credit card and financial information as well. Work with your bank to ensure the most trusted and validated anti-fraud services are being used. Isolate payment systems from other, less secure programs and don’t use the same computer to process payments and surf the Internet.

All small businesses need a cyber security strategy to protect their own business, their small business bookkeeping, their customers, and their data from growing cyber security threats; and, unfortunately, all companies are at risk. Protect your company by using these best cyber security practices.

All small businesses need a cyber security strategy

FAQs about Cyber Security Tips:

Why is keeping software updated important for cyber security?

Regular updates patch vulnerabilities that hackers exploit. Ensuring browsers and security software are up-to-date enhances protection against cyber threats.

Why should small businesses backup their data?

Backing up data safeguards against data loss due to cyber attacks or system failures. Automatic backups or cloud storage provide secure redundancy for crucial information.

How can businesses enhance password security?

Encourage unique passwords changed every 3-6 months. Avoid storing passwords digitally; opt for secure offline storage. Consider implementing multi-factor authentication for added security layers.

Why is securing mobile devices crucial for small businesses?

Mobile devices pose security risks due to data access. Implement password protection, data encryption, and security apps to mitigate threats and prevent data breaches.

How can businesses safeguard payment card information?

Collaborate with banks for trusted anti-fraud services. Isolate payment systems from less secure programs. Implement stringent security measures to prevent unauthorized access to financial data.

As an entrepreneur, one of the first things on your to-do list should be to open a business bank account for your newly formed business. Even if you’re not yet making money, you’re likely investing at least a small amount in getting things up and running. A business bank account isn’t just a place to hold the millions of dollars you’re sure to make, it’s a record of transactions that will become invaluable to you as you carry on your new business venture. A business bank account helps you track expenses, show proof of transactions if you were to be audited by the IRS, and find deductions for your small business you may have otherwise missed. We’ll walk you through the steps of choosing a bank that’s right for you, getting your account set up, and using your bank statements to help with bookkeeping and accounting tasks.

5 Steps to Open a Business Bank Account

1. Choose the bank that’s right for your small business. The decision to go with a large corporate bank, credit union, or regional bank for your small business account can be quite overwhelming. All offer a plethora of loans, credit cards, fees, etc. and all would be happy to house your money for you. Here are a few points to consider when choosing the right bank:

      • Fees. All banks have them, and there is really no escaping them for a business bank account. Depending on the size and needs of your business, your bank fees should be manageable. Larger corporate banks normally offer lower rates to start up businesses because of their volume of clients. When choosing a bank, be sure to ask about ATM fees, checking and savings account fees, maintenance fees, and any fees that may increase in the future. Make sure if you sign up during a promotional period, your bank fees won’t skyrocket when the promotion ends.
      • Minimum Balances. Some banks require that small business owners keep a minimum balance in their account at all times. Be sure to check what this fee is for each bank–whether it is $25 or $1,000, it’s best to be in the know before making a commitment.
      • Lending Opportunities. If you need a small business loan, this will be especially important. Ask several banks about their small business loans and the availability of them. A loan officer can help determine if you qualify for a small business loan, interest rates, and how much they are able to offer you. Typically, regional banks and credit unions are able to offer more flexibility in small business loans.
      • Online Accessibility. In our increasingly mobile world, online features and ease can be a huge relief to small business owners. If online banking is important to you, be sure to compare and contrast features offered from each bank. Mobile check deposits, withdrawals, transfers, and online bill pay are a few of the most commonly offered features small business owners take advantage of.

2. Gather the necessary documents to open a business bank account. Here’s a quick checklist on what you’ll need to bring with you to the bank when you go to open your account.

      • EIN. You should have requested an Employer Identification Number from the IRS that identifies your business in the tax world. If you don’t have this number yet, you can request one here and receive it immediately.
      • Identification. Bring your driver’s license or another form of ID to prove that you’re you.
      • Certification of Business Identity. After you’ve filed paperwork to establish your business with the state, you’ll need to bring this proof to the bank. If you set up an LLC, you’ll need Articles of Organization. If you set up a proprietorship, you’ll need your DBA (Doing Business As) papers. If you set up a corporation, you’ll need to bring your Articles of Incorporation. Have questions about how to choose an entity and establish your business with the state? We can help.
      • Business License. Many states require a business license to operate. If it’s required in your state, the state will let you know, instruct you on how to obtain one, and the bank will need to see it before you can open your business bank account.

3. Fill out your business bank account application. Each bank has their own specific application, but all will require paperwork to be filled out with basic information. You can pick up the application beforehand and fill it out at home so you’re sure to do it correctly.

4. Sit down with a banker to open your account. After you’ve chosen a bank, gathered all the necessary paperwork, and filled out your business bank account application, you’re ready to sit down with a banker and open your account. They’ll walk you through the process, check your credit score, advise you on best business banking practices, and provide you with a bank account number and any other information relevant to your account. The banker will be able to help you choose the right account to meet your small business needs.

5. Receive a check card and temporary checks. The bank will likely provide you with a temporary ATM or debit card, in addition to temporary checks that can be used immediately after your account has been opened. They will then mail you an official check card and checkbook shortly thereafter.

A business bank account will not only help you track expenses and income throughout the year, it will act as a second record in addition to your small business bookkeeping tasks. Any transaction you may have forgotten to record will show up on your bank statements. A business bank account will also help you avoid these common business accounting mistakes.

Any experienced small business owner will testify that it’s best to keep your business and personal bank accounts separate to avoid confusion. Read here and here for more accounting tips on tracking and separating business and personal expenses while your business is in its infant stage.

 

This October, the EMV liability shift will virtually eliminate fraud by generating a one time code for transactions that take place with a chipped credit or debit card within a store. The code changes with each transaction, rather than the traditional magnetic striped cards with unchanging information, which makes it nearly impossible to steal information.

After October 1, 2015, the liability for card-present fraud will shift to whichever party is the least EMV-compliant in a fraudulent transaction. While the EMV liability shift date will bring peace of mind to consumers, financial institutions, and merchants, it will also come with some expense and adaptation to those updating their technology to make the switch.

EMV Liability Shift

For merchants and financial institutions, (many of which have already done so) the update to EMV means adding new in-store credit card chip technology and internal processing systems, and complying with new liability rules.

If you offer an in-store, card present transaction, you will need to make the following changes to be compliant with the EMV liability shift rules:

  • Purchase a new card reader. You’ll need an updated card reader to read consumers’ chipped cards. Rather than the traditional swiping method of a magnetic card, the new device will require customers to “dip” their card in order for the chip technology to be activated. A new card reader will cost your business a few hundred dollars, depending on which device you purchase.
  • Update your processing system. You may or may not need to update your POS system, depending on the card reader you purchase. Check with the company you purchase your card reader from to see if your processing system needs updated as well.
  • Train employees to use and troubleshoot the new technology. There are two transaction types employees need to know about with the EMV technology. The most common method will be with contact cards where the chipped card is inserted into the reader, and the consumer either enters a pin or provides their signature to authorize the transaction. There is also a “contactless” EMV, where consumers use their phone or mobile wallet to pay, such as ApplePay.
  • Familiarize yourself with the new liability rules. After October 1, 2015, if a customer uses their chipped card in your store and their information is stolen, your business will be liable. Click here for a detailed explanation of the new liability rules from the US Treasury.

If your business accepts card-not-present payments, such as payments made online or by phone, the credit card chip technology does nothing to heighten security in those instances. If you accept only online payments, you do not need to do anything to prepare for the upcoming EMV liability shift and it will not affect you at this time.

Keep in mind that with a significant reduction of in-store credit card fraud (France claims an 80% deduction), it is likely that fraudsters will get more creative. Online payment information may become more compromised as it will be easier to access than financial information on in-store purchases with the chip technology. Do all that you can now to protect customers’ payment information submitted to your business online.

Update your processing system

While the EMV liability shift date may bring a bit of stress and expense to your business now, it will protect your business and your small business bookkeeping in the long run. If you simply update your systems to be compliant with the new standards, you will not be liable for any fraud that may happen in your store.

Read more about the EMV liability shift:

What is Credit Card Chip Technology and the EMV Liability Shift?

What do I Need to do to Prepare my Business for the EMV Liability Shift Date?

Frequently Asked Questions

What is the EMV liability shift, and how does it impact businesses?
The EMV liability shift, effective from October 1, 2015, transfers liability for card-present fraud to the least EMV-compliant party in a fraudulent transaction.

What changes do I need to make to my business to comply with the EMV liability shift?
To comply, businesses must purchase new card readers, update processing systems if necessary, train employees on new technology, and understand the new liability rules.

What is the process for transitioning to EMV technology in-store?
Businesses need to acquire updated card readers, potentially update their POS systems, train employees on using the new technology, and understand the new liability rules.

How does the EMV liability shift affect businesses that accept card-not-present payments?
For businesses accepting card-not-present payments, such as online or phone transactions, the EMV liability shift does not directly impact security measures in those instances.

How can businesses protect themselves from potential fraud post-EMV liability shift?
Businesses should stay vigilant, update systems to comply with new standards, and focus on safeguarding online payment information to mitigate potential fraud risks.

This October, the United States will be joining many other countries in the world who have made the change to EMV chip technology to protect consumers’ financial information. Hundreds of thousands of chipped credit and debit cards have already been sent to customers, but businesses are not required to have the updated credit card chip technology that protects the financial information on chipped cards until October 1, 2015. At this time, businesses are expected to have updated card readers and processing systems that generate a one-time code for each transaction with a chipped card. The code makes it virtually impossible for financial information to be duplicated or stolen.

While only 32% of small business owners are aware of the pending change, even less are aware of the steps they need to take to prepare their business for the EMV liability shift date. If your business doesn’t have the updated credit card chip technology this October, your business will be responsible for fraudulent charges.

business for the EMV liability shift date

Here Are the Steps to Successfully Prepare Your Business for the EMV Liability Shift Date:

  • Make a list of your current hardware. If you haven’t already, you’ll need to purchase new card readers for your checkout terminals. Make a list of all the current hardware your store has so that you can compare and get the best deal when purchasing new equipment. If you don’t accept mobile or contactless payments, now may be the time to consider upgrading so you don’t have to again in the next few years.
  • Discuss EMV hardware options with your vendors. Your business’ merchant acquirer can help you compare and recommend payment processors that will accept chipped cards. Rather than the traditional swiping method, the new EMV technology will be a “dip” method that generates the one-time code needed to process the transaction. These payment processors are usually around a few hundred dollars. If you use a customized POS system in your business, your independent software vendor can help you become EMV compliant and make sure any updated POS and software systems will be compatible with new card readers.
  • Purchase new hardware for your business. After you’ve taken the time to shop around, compare devices, and make your decision, you’ll need to purchase new payment processing hardware for your business. This will likely be done through your current technology vendor. While most businesses will get away with simply swapping out their current card readers for EMV compliant ones, this is also a time to consider upgrading your entire payment processing system. Coupling an updated card reader with inventory or customer-loyalty functionality, along with being able to accept mobile or contactless payments (such as ApplePay or Android Pay) may give you the most bang for your buck in the long term.
  • Get your terminals EMV certified (if applicable) before the EMV liability shift date. Your technology merchant or vendor should be able to tell you if you need to participate in EMV Level 3 Certification. This will likely only need to be done if your business operates on a highly customized POS system.
  • Train your employees. Like any new technology, there will be a learning curve with the EMV liability shift. A few key things employees will need to be trained on:
    1. Know the difference between “chip-and-signature” and “chip-and-pin” transactions and how they work.
    2. The transaction amount must be entered into the terminal before the chipped card is inserted.
    3. If the card is pulled out before the transaction is completed, the transaction must be cancelled and started over.

start the change now before the EMV liability shift date

It’s best to start the change now before the EMV liability shift date becomes effective on October 1, 2015. What may feel like a costly hassle to you now will save you time and money in the long run.

Read more about the EMV liability shift:

What is Credit Card Chip Technology and the EMV Liability Shift?

How Does the EMV Liability Shift Effect my Business?

Frequently Asked Questions:

  1. What is EMV chip technology and why is it important? EMV chip technology provides enhanced security for credit and debit card transactions by generating a unique code for each transaction, making it difficult for financial information to be stolen.

  2. When is the deadline for businesses to adopt EMV chip technology? The deadline for businesses to adopt EMV chip technology is October 1, 2015. After this date, businesses without the updated technology may be liable for fraudulent charges.

  3. What steps do I need to take to prepare my business for the EMV liability shift? To prepare for the EMV liability shift, you should:

    • Assess your current hardware
    • Discuss EMV hardware options with vendors
    • Purchase new hardware if necessary
    • Get your terminals EMV certified
    • Train your employees on chip-and-signature and chip-and-pin transactions.
  4. Do I need to upgrade my entire payment processing system or just the card readers? While upgrading card readers is essential, it’s also a good time to consider upgrading your entire payment processing system. This may include adding features like inventory management or accepting mobile payments for future-proofing.

  5. What happens if my business doesn’t adopt EMV chip technology by the deadline? If your business doesn’t adopt EMV chip technology by the deadline, you may be held responsible for fraudulent charges incurred through non-chip transactions. It’s crucial to take action to protect your business and customers’ financial information.

 

credit card chip technology

This October, merchants will be required to make the change to the new EMV (Europay, Mastercard, and Visa) credit card chip technology. With 1.24 billion payment cards and 15.4 million POS terminals currently in use, there is certainly a need for heightened security of credit card and banking information. This fall, the EMV liability shift will deliver just that.

This technology will be in your wallet with new chipped debit and credit cards, as well as in stores’ card readers at their checkout terminals. The chipped cards will protect in-store payments by generating a one-time code needed for each transaction to be approved. This EMV chip technology makes it virtually impossible to counterfeit cards or steal credit card information upon checkout because the code connected to the consumer’s card changes with each transaction.

While this technology has been available for some time, the EMV liability shift date is what will cause the greatest change on October 1, 2015. At this time, if a customer uses a chipped card to pay for a transaction at a store, and their information is stolen, either the merchant or the financial institution (whoever has not adopted the EMV technology) will be liable. Up until now, if a customer uses a magnetic striped card to pay for their transaction and their information is stolen, the merchant is not liable for the damage, but rather the banking or financial institution.

The EMV liability shift date is October 1, 2015. However, the liability shift for fuel dispensers and ATM transactions is not effective until October 2017. The EMV liability shift is applicable to all businesses–large and small–regardless of size.

When both parties adopt the new credit card chip technology, in-store fraud is virtually eliminated and both customers and merchants can enjoy peace of mind knowing their financial information is protected.

Read more about the EMV liability shift:

How Does the EMV Liability Shift Effect my Business?

What do I Need to do to Prepare my Business for the EMV Liability Shift Date?

There’s nothing better than being able to save a little extra time and money as a real estate agent. Finding an efficient and cost-effective way to take care of your real estate bookkeeping and accounting is imperative to doing just that.

First, let’s make a distinction between bookkeeping and accounting. Sometimes the terms are used interchangeably, but that is incorrect. Bookkeeping and accounting are two parts of the same financial cycle.

Bookkeeping involves the recording of daily transactions for your business including:

  • Posting debit and credit card expenses
  • Recording all financial transactions
  • Issuing invoices
  • Balancing bank accounts and checkbooks
  • Payroll duties

Accounting is a higher-level process that takes all of your bookkeeping information and makes sense of it by creating financial documents that give you insights about your business. Accounting includes:

  • Preparation of financial statements
  • Profit and loss reports
  • Financial analysis of the company—operational costs, determining where money can be saved, and analyzing financial data over time
  • Filling out small business tax forms and returns.

So how can you save time and money on these two time-intensive tasks as a real estate agent or realtor? Here are a few tips to help you out:

  • Do it right the first time.

If you’re managing your real estate business bookkeeping and accounting yourself, don’t take shortcuts thinking you’ll save time or money. Turn bookkeeping into a regular habit, just like checking your email each day or setting weekly goals for yourself. Decide how often you’ll take care of bookkeeping tasks—ideally at least once per month, and set aside time specifically for this task

  • Keep all records.

The golden rule for any accurate small business bookkeeping. Whether you prefer hard copy receipts or everything digital, find the quickest, easiest, and safest place to keep your receipts and financial records. Keep a folder or envelope in your office, car and/or wallet where you put all your business receipts. If you prefer a digital method, you can take photos of receipts and upload them to an app such as Expensify or Hello Expense.

  • Familiarize yourself with common accounting terms.

Accounting jargon can sometimes seem like another language, especially if you’re not familiar with business accounting. Terms like accounts receivable, balance sheet, cash flow, ledger, accrual, and Return on Investment aren’t words that often grace everyday speech. Learn the basic business accounting terms and what they mean, here.

  • Keep business and personal accounts separate.

Nothing creates a financial mess at the end of the year quite like personal or business expenses charged to the wrong account. By keeping your realtor business and personal accounts separate, your bookkeeping will go much more smoothly and you’ll be able to keep your business’ professional image in tact. For end-of-year accounting, you will need to review your personal account for possible business deductions such as portions of your phone bill or even your mortgage payment. Meanwhile, keep small business purchases on a personal account to an absolute minimum.

  • Invest in bookkeeping software that’s right for you.

If you plan to manage your own business accounting and bookkeeping, you’ll likely end up needing more features than an excel spreadsheet can provide. Research several types of accounting software and find one that fits your needs. Some are tailored to realtors specifically, but many realtors find success using general accounting software such as Quickbooks. Remember, you can always try our Quickbooks alternative.

  • Hire an accountant.

If you really wanted to, you could probably tackle any accounting or bookkeeping question that came your way. However, most realtor and real estate agents find that it’s not worth their time to spend hours each month doing bookkeeping when they could be focused more on the money-making aspects of their business. Instead of trying to muddle through on your own, you’re better off to hire a professional accountant to take care of your small business accounting needs. Not only will an accountant save you time, but they can also save you money by finding more business deductions during tax season, catch any accounting errors you may have made or overlooked, and advise you on how to save or invest your money. Vyde provides bookkeeping and accounting services for realtors and real estate agents, and unlimited accounting advice from real CPAs, all for less than $100/month. Give us a call today, we’d love to discuss your real estate agent accounting questions.

 

Other posts that might interest you:

How to Legally Structure a Real Estate Partnership or Agency

How to Track & Separate Business and Personal Expenses as a Realtor or Real Estate Agent

The Top 10 Tax Deductions for Realtors and Real Estate Agents

What You Can and Cannot Deduct for Advertising Your Real Estate Business

Top 4 Tips on Tracking Mileage and Deducting Vehicle Expenses as a Real Estate Agent

How to Calculate Self-Employment Taxes for Real Estate Professionals and Agents

How Do I Figure My Estimated Quarterly Taxes? For Realtors, Real Estate Brokers, and Property Managers

How to Develop an Exit Strategy for Your Real Estate Agency Partnership

How to Develop a Succession Plan for Your Real Estate Partnership

 

 

Any individual engaged in a trade or business as a sole proprietor, partnership, or part of an LLC must pay self-employment taxes on net earnings. If you’re a real estate professional, you most likely belong in one of these categories and are also subject to this tax.

Self-employment taxes, as referred to by the IRS, include Social Security and Medicare. The term is not all-inclusive and does not include any other taxes that self-employed individuals may be required to file.

Calculate Self-Employment Taxes

 

Here’s what you need to know:

1. The self-employment tax rate for 2015 is 15.3%.

  • 4% going toward Social Security
  • 9% going toward Medicare
  • The income limit on this rate is $118,500. If your income as a real estate professional exceeds this amount, you will be required to pay an additional 0.9% in Medicare tax.

2. Deduct the employer-equivalent portion of your self-employment tax in figuring your adjusted gross income.

  • This means you can subtract ½ of your self-employment tax from your total net earning for the year.
  • Example: if you owe $3,000 for self-employment tax, you can claim an adjustment of $1,500, which reduces your income tax by $375 if you’re in a 25 percent tax bracket.

3. This is the amount you pay quarterly.

  • While it may seem like you’re getting taxed in every direction for being your own boss, keep in mind that self-employment taxes are actually the same taxes that are being withheld from a standard employee’s paycheck. You can calculate your own self-employment tax by using a Schedule SE.
  • If you are operating your real estate business as an individual and have not formed a partnership, you will report your net profit on a Schedule C which can be included on a Form 1040.

self-employment tax rate

 

These payments should be included in your estimated quarterly tax payments, your small business bookkeeping and paid throughout the year. Federal estimated quarterly tax payment dates are due April 15, June 15, September 15, and January 15 each year.

 

Other posts that might interest you:

How to Legally Structure a Real Estate Partnership or Agency

How to Track & Separate Business and Personal Expenses as a Realtor or Real Estate Agent

The Top 10 Tax Deductions for Realtors and Real Estate Agents

What You Can and Cannot Deduct for Advertising Your Real Estate Business

Top 4 Tips on Tracking Mileage and Deducting Vehicle Expenses as a Real Estate Agent

6 Ways to Save Time and Money on Bookkeeping and Accounting as a Realtor or Real Estate Agent

How Do I Figure My Estimated Quarterly Taxes? For Realtors, Real Estate Brokers, and Property Managers

How to Develop an Exit Strategy for Your Real Estate Agency Partnership

How to Develop a Succession Plan for Your Real Estate Partnership

 

You just formed a real estate partnership. As hard as it is to imagine an ending to your newly formed venture, an exit strategy belongs in every business plan. Adding an exit strategy to your real estate partnership ensures protection for both partners. It will also reinforce that the business venture is a professional relationship, not a personal one.

There are several possible reasons for needing an exit strategy for your real estate partnership.

How To Get Out of a Real Estate Partnership

Here are a few possibilities to consider when developing an exit strategy with your real estate business partner.

  • Resignation. Your exit strategy should clearly define what happens if one partner decides to resign from the business. How will the partners be compensated if one walks away? What will happen if the business is sold or acquired by someone else?
  • Disagreement. Fighting and disagreement are one of the most unpleasant ways to dissolve a partnership, yet surprisingly common. If the only solution is to split, then partners should know ahead of time how they will handle things.
  • Financial Conflict. Differing ideas on how to spend, distribute, or invest money made in a partnership can be a tricky task. Involving an accountant in the development of your exit strategy for your real estate partnership can ensure that business finances run smoothly, even if the partnership dissolves.
  • Merging or Selling. The exit strategy for your real estate partnership should address how to handle the business if it grows, either through merging or selling.
  • Buy-out. A good exit strategy includes the possibility of one partner wanting to buy the other partner out. Planning ahead for a buy-out will create a smooth financial transaction.
  • Death. Details should include what the financial compensation package should be for the surviving family members. You should also decide who will own the deceased partner’s portion of the business. Will the new stakeholder continue in the business? The new stakeholder and surviving partner can decide this later.
  • Divorce. Your exit strategy should also include guidelines for what happens if one of the real estate partners gets divorced. If you don’t anticipate the possibility of divorce, then you may find yourself with an ex-spouse as a new partner.
  • Disability. An exit strategy should include clear guidelines about what path the business will take if one partner becomes disabled. This part of the strategy can be the most difficult to develop because while a partner may be disabled—mentally, physically, or even financially—they still have a stake in the business. Disability points to discuss should include transfer of ownership, short and long-term disability payments, and finally, health insurance coverage for the disabled partner and his or her dependents.

 

exit strategy for your real estate partnership

Why you absolutely need an exit strategy for your real estate partnership.

A clearly defined exit strategy in a real estate partnership does more than just determine answers for the “what if” questions. It provides peace of mind for both partners. It ensures a fair outcome when the partnership comes to an end. Have your accountant help you draft and/or review your exit strategy for your real estate partnership.

Along with having a plan for exiting your partnership, you should also create a succession plan.  Succession planning identifies and develops internal and external individuals to potentially fill key business leadership positions in the future.  This makes sure that individuals are prepared for the future and gives peace of mind to all players that a plan is in place.  Read more here about succession planning and how a good accountant and virtual bookkeeper can help with this important part of your real estate business.

 
Other posts that might interest you:

How to Legally Structure a Real Estate Partnership or Agency

How to Track & Separate Business and Personal Expenses as a Realtor or Real Estate Agent

The Top 10 Tax Deductions for Realtors and Real Estate Agents

What You Can and Cannot Deduct for Advertising Your Real Estate Business

Top 4 Tips on Tracking Mileage and Deducting Vehicle Expenses as a Real Estate Agent

6 Ways to Save Time and Money on Bookkeeping and Accounting as a Realtor or Real Estate Agent

How to Calculate Self-Employment Taxes for Real Estate Professionals and Agents

How Do I Figure My Estimated Quarterly Taxes? For Realtors, Real Estate Brokers, and Property Managers

How to Develop a Succession Plan for Your Real Estate Partnership

 

As you enter a real estate partnership, it is important to cover all your bases in regards to potential changes in your business’ future. A solid succession plan for your real estate partnership will ease the process of changing leadership roles as your business evolves.

The change in leadership reflects the character and effectiveness of the business as whole. Which is why a succession plan is essential. A succession plan outlines how one leader will replace another within a business. You will want a written succession plan to ease confusion. It’s usually best to use internal candidates to fill leadership positions. There are numerous benefits of having a succession plan. A clearly defined succession plan for your real estate partnership reduces potential conflict. It also helps partners decide which employees are prepared to move into leadership roles.

Here are a few tips on developing a Succession Plan for your Real Estate Partnership:

  1. Assess internal candidates. As you train and mentor other real estate agents within your business, note their positive qualities. Also, look for leadership qualities in each candidate. Don’t single out a favorite employee and put them on a pedestal. Consider all candidates and try to view the situation objectively.
  2. Develop criterion.  Don’t wait for a crisis to occur before deciding the which characteristics are essential in leading your real estate business. Create a list of necessary and preferred qualifications, and consider the benefits of differing viewpoints and backgrounds. Put these criterion in your succession plan. When your real estate partner and you discuss potential candidates you can refer to the agreed criterion.
  3. Consider all stakeholders. The real estate business is competitive. As you are developing the succession plan for your real estate partnership, consider how any changes will affect the other partner and the employees that work for your business. Consider these questions as you plan: Is there an emergency candidate who could take the reins if you or your real estate business partner were to leave tomorrow? Which employee could you invest in now so that he or she is prepared to take over? Is the company organized enough to handle the transition of a new leader? Do you have a seasoned real estate agent who is willing to coach a potential successor?
  4. Prepare the potential candidates. Perhaps the most neglected step in the succession planning process is preparing the candidate for his or her new responsibilities. There is no such thing as a “ready now” candidate. All candidates will need mentoring and training to assume a leadership role. Make sure the candidate for the position has the support they need to learn, grow, and stretch their capabilities.
  5. Consult a professional. Choosing future leaders for your company will primarily be done by you and your real estate business partner; however, professional, objective, advice is important to the process. A good accountant can help you analyze potential profitability of a candidate. He or she can also suggest how much to invest int the candidate to prepare them to take on a new role.
  6. Refresh as needed. The succession plan for your real estate partnership should be a living document. Change and modify your succession plan as market conditions and strategies change. It should go beyond the traditional position description and delve deeply into the knowledge, skills and abilities required for the next leader. You can then use the succession plan to objectively grate succession candidates.

Developing a solid succession plan now can help ease the transition of changing roles later on. In addition to a succession plan, you and your real estate partner should develop an exit strategy to ease any future transitions within your business. Read more about how to develop an exit strategy, here.

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