here is likely a canned answer for this, but I couldn’t seem to find anything. I am starting a S-Corp in Saint Paul, MN. We are looking at buying a duplex to rent out (the particulars of the purchase are taken care of, and getting started does not look to be a problem right now). As it is, I am looking at putting 30,000 into starting this business (which will cover 25% of the purchase price of the property plus operating expenses to get started). This will not be my full time job, but a side business, as I have property managers all lined up.

The question is, does anyone know of business grants that I can look into? I know money does not grow on trees, but I have heard of some small businesses getting grants. We’re actually looking at purchasing vacant homes (which I think is good for the city), though I imagine if grants did exist for this kind of venture, they would be swooped up pretty quickly.

Does anyone have advice on where I can look to find said grants? Who to typically contact with the city?

I work at an SBA and we always tell people no. Unless you are disabled, a minority, a veteran, then its not worth your time looking for one. You can look into your city’s chamber of commerce on the off chance there is but don’t count on it. Instead, create a solid business plan and apply for a loan.

My wife and I are planning to start looking for a house to buy. We’re in no hurry, and may not end up buying for another 6-12 months, but want to be ready if a good opportunity comes along, so we’ve started getting pre-qualified for a mortgage and finding a buyer’s agent. We’ve talked to a mortgage broker who was highly recommended by several friends. Last week, she quoted us a 30-year fixed rate of 6.375-6.5% and 0.5-1 points (for a conforming jumbo loan with 20% down). This was better than the rate quoted by the banks and credit unions we talked to, so we had her send us an application. Yesterday, we got the loan application and the rate is up to 6.75% and 1 point. She said that rates had gone up, but we’re not locked into a rate until we find a house to buy so this number isn’t going to be our interest rate. However, we realized we have no idea what causes mortgage interest rates to go up or down.

The fed has been lowering the funds rate over the last year, but that doesn’t seem to have corresponded to lower mortgage interest. They raised the cap on conforming loans, but again with little effect. Are there systematic factors that determine mortgage interest rates, e.g. the stock market, the bond market, dollar strength, etc.? Or is it just a matter of the banks being freaked out by the subprime/credit crisis and not wanting to loan money for housing regardless of the credit risk? We’d really to understand the underlying factors better so we can try to form educated guesses on whether current rates are inflated or a good deal.

Most fixed-rate debt is quoted as a spread to the funding cost, which is almost always LIBOR and changes due to a complex number of things, among them the money market (i.e., the fed funds rate). You also have to consider credit spreads, which can widen or narrow based on sentiment in the credit markets. Corporate credit spreads have actually be compressing lately, but I think the most recent RMBS data I saw suggested that while residential mortgage defaults were trending sideways, they weren’t exactly improving (I think I read that we’re actually at a historic high for the number of people upside down on their houses).

Basically, I want to know how exactly renter’s insurance would apply in a situation such as this. My landlord decided suddenly that she wanted to replace the carpets in my apartment, and I reluctantly agreed to let her. As a result of a number of factors, the people installing the carpet ended up damaging several pieces of furniture and some relatively expensive festival tickets are now missing. My landlord gave me the typical runaround, saying that stuff was already damaged and that I should just file a claim with my renter’s insurance… basically telling me to shove it and make someone else deal with it.

However, the total cost of the damage is probably <$300, and I was under the impression that a deductible for renter’s insurance would be higher than that anyway, not to mention the fact that it seems to me that she should deal with this problem in the first place. Needless to say I probably should have gotten renter’s insurance, but am I wrong in thinking that she should be the one to cover the damage caused by a service that she shoved into my house?

Unless you bought insurance from Joe’s Incredible Insurance Barn, any decent carrier would deal with this. That’s (basically) how renter’s insurance works: “My personal property was here / not broken, and now it isn’t because something outside of my control happened.”

Of course, the insurance carrier is most likely going to harass the landlord or carpet company’s insurance carrier for the actual payout, but the actual renter isn’t.

It isn’t unheard of to have a low or zero deductible policy, especially on renters insurance, because it tends to be ridiculously cheap to begin with.

But in any case, having the landlady summoned to small claims court is probably all it would take to get the problem resolved.

A few years ago I bought a car I couldn’t afford. Long story short, it got repossessed, and I owe the balance of what wasn’t paid at the auction – around $4k plus interest.

They tried to garnish my wages, which I didn’t contest, but they couldn’t as at the time I made less than a certain amount which was allowed by the state.

I haven’t received a letter or phone call from them in about 8 months. The last letter I received stated that they were trying to garnish my wages again, at the same job as before, but I hadn’t worked there in 6 months so they obviously didn’t get that. As I haven’t heard from them since, I wonder what my obligations are?

On a certain level, I want to pay what I owe. I fucked up, I made bad decisions, and it’s my burden to pay the collection agency. However, they haven’t contacted me in 8 months, and I don’t go through any pains to be unreachable. My credit is already ruined, I am not worried about that too much at this point. What are the chances they’ve given up and “written me off”? Will they send me a letter 5 years from now stating that I owe the original balance + 5 years interest? Is it up to me to contact them to make arrangements?

The statue of limitations varies for state to state, but it is usually a couple years. They will keep tacking on interest until you pay. If they don’t collect the debt, it will be recorded as uncollected on your credit report. They can still pursue the debt even after they mark it as uncollected on your credit report.

Go to Annual Credit Report to view your credit report and the collection agencies information.

You may be able to negotiate with them to settle for a lesser amount.

I’m going to join an already established LLC owned by a friend and a partner. How does liability for an LLC work? If I own 5% of the LLC what is my personal responsibility (tax and otherwise) if the company makes say $1k. What about if the company ends up owing $1k? The LLC is based in New York, but I live in Pennsylvania, does this complicate things and if so how? Also, the eventual goal is to get venture funding. How difficult is it to move to a C-corp? What about an S-corp? (What’s the difference? I didn’t really understand a difference from reading Wikipedia)

With an LLC, the company doesn’t actually make any money (tax-wise). Instead, the income that the company makes flows through to you. For example, if your company makes $1k and you have a 5% share, you add $50 to your tax return and to your tax return only. Losses flow through the same way, basically.

As for company debts, you’re not personally liable for them.

I’m not sure about venture funding, but generally, S-Corps are better than C-Corps. The difference between them is that you’ll generally get double taxed with a C-Corp (company pays tax on its income, then you pay tax on what you receive from the company), while S-Corps have the same flow through as LLCs.

Restrictions on S-Corps include:

-shareholder limit (~100, depends on state laws I think)
-can’t be owned by corporations, partnerships and trusts, only individuals and estates

Posted in Business Advice | No Comments »
How To Handle a Debtor
January 31st, 2009

A few years ago I bought a car I couldn’t afford. Long story short, it got repossessed, and I owe the balance of what wasn’t paid at the auction – around $4k plus interest.

They tried to garnish my wages, which I didn’t contest, but they couldn’t as at the time I made less than a certain amount which was allowed by the state.

I haven’t received a letter or phone call from them in about 8 months. The last letter I received stated that they were trying to garnish my wages again, at the same job as before, but I hadn’t worked there in 6 months so they obviously didn’t get that. As I haven’t heard from them since, I wonder what my obligations are?

On a certain level, I want to pay what I owe. I fucked up, I made bad decisions, and it’s my burden to pay the collection agency. However, they haven’t contacted me in 8 months, and I don’t go through any pains to be unreachable. My credit is already ruined, I am not worried about that too much at this point. What are the chances they’ve given up and “written me off”? Will they send me a letter 5 years from now stating that I owe the original balance + 5 years interest? Is it up to me to contact them to make arrangements?

The statue of limitations varies for state to state, but it is usually a couple years. They will keep tacking on interest until you pay. If they don’t collect the debt, it will be recorded as uncollected on your credit report. They can still pursue the debt even after they mark it as uncollected on your credit report.

Go to Annual Credit Report to view your credit report and the collection agencies information.

You may be able to negotiate with them to settle for a lesser amount.

I was with WaMu for a long time but closed my account there because a job I had gotten (and no longer have) needed me to have CitiBank to be eligible for direct deposit. Since I no longer have that job, CitiBank is absolutely atrocious and I need to get the hell out of it.

I wanted to go back to WaMu, but after hearing a horror story from a fellow friend, I figured I’d see what the rest of you have to say about banks and go from there.

(In case you’re wondering, CitiBank charges me more a month than what they had said they would when I first signed up, charged me for checks when I told them I don’t need checks and refused to reimburse me for quite a long time, and has the shittiest customer service that I’ve ever encountered.)

I don’t really know what to look for in a bank. All I know that I really need is a Debit Card since I hate carrying more cash than necessary, and yeah. I live in Southern California if that changes what banks are around here, but I’m sure most banks are all over the place that it wouldn’t help.

Any other information I need to provide, just ask.

Look into the credit unions in your area. Probably some are good and some suck, but in general they work more in your interest than the big banks. You can usually qualify for membership just by being in the same zip code, even if you wouldn’t think so based on the name of the CU.  Credit unions. Also, Robert Prechter’s newsletter and TheStreet.com have bank ratings by state. If I was a WaMu customer, I’d consider staying on or going back, as JPMorgan is much stronger than Citi or Wells. I think a ten year CD at WaMu yields 2.15% nowadays, so perhaps banks in general aren’t the answer!

You really need to look at what you need as far as services. Personally I have had a hard time finding a CU which has a good billpay program. Mostly they use third party companies who do an ACH w/d from your checking and send it in, but have had nothing but problems with it, same with my GF.

Small disclaimer, I work at Wells Fargo and I moved my banking over to Schwab. I’m actually a banker at Wells and there is nothing that pisses me off more than having to tell customers they have to talk to three sets of people to get a problem fixed (it’s not passing the buck, you really HAVE to) . The basic problem is that there was human error or the products are just annoyingly complicated. If you’re a private bank client (IE $1 mil plus) Wells is amazing, and if you’re into day-trading and have loans/deposits over 25k, it’s also pretty good (100 free trades a year). I just wouldn’t suggest it if your banking needs are simple.

With schwab it’s pretty basic if you have direct deposit, odds are you can go years without having to talk to anyone who works at the bank. I won’t go over the same stuff antishock did, but just add a couple things. My personal fav is the fact that the debit card has a warranty extender (yea they take extra effort, but well worth the time) and other features you normally only see on a higher end credit card. And they offer credit cards… Also you can set it up to pull money out of a local bank via ACH if you don’t like to mail deposits.

Credit unions are awesome if you have more complicated financial situations and want to build a relationship with a local bank. I still know people who talk to their CU managers to get loans approved, about the only thing branch managers can do for major banks is reverse overdraft fees. But if all you need is a direct deposit bucket, why deal with the crappy online banking?

One last thing, Wells Fargo will charge you $2 for calling and speaking with a banker to get your balance or do transfers if you open your account in California, however they are one of the few companies who has SMS banking, so if your phone doesn’t have a browser or you don’t have a data plan, that’s another thing to consider.

At the start of this year, we Canadians have a new weapon in the fight against poverty or something.

The Tax Free Savings Account or TFSA is an account that provides tax benefits for saving in Canada. Contributions to a TFSA account are not deductible for income tax purposes but investment income, including capital gains, earned in a TFSA are not taxed, even when withdrawn.

The TFSA works like the opposite of a Registered Retirement Savings Plan (RRSP). After-tax income of up to $5,000 per year can be placed into a TFSA.[11] This money can then be withdrawn at any point of time, without penalty. Unlike RRSP’s, which must be withdrawn after the holder turns 71, the TFSA does not expire.

From Wikipedia (http://en.wikipedia.org/wiki/Tax_Free_Savings_Account)

This isn’t something you should maybe think about doing. This is something that you should take advantage of, period. This is an absolute no-brainer.

Here’s the official government page: http://www.tfsa.gc.ca/ which links to A helpful Howto.

I’ve gotten the RBC brochure and talked about it quickly with an agent. Aside from that, I haven’t really done much research. I’ll probably just stick to a high interest savings account at first.

ING offered one starting back in either November or December of last year (they paid double the interest on any balance to cover the taxes you would have had to pay). I don’t have anywhere near the amount in saving that I need to worry about paying taxes on it, but I opened an account anyway and ended up making a few bucks extra because of their “double interest”. Right now I’m just using it as a regular savings account, but eventually when I’m making more money it will be a very good thing to have.