Business Column

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Legality of Mixing Personal and Business Charges

I had the following question on my post about 50 Fun Facts About Credit Cards that I wanted to float by you all and see if my answer was on point or off base.


Is it illegal to charge business and personal charges on the same credit card, if we pay each item separately from appropriate accounts? I have been doing this for years, and my accountant just informed me that it is not legal, which I think is wrong information, but cannot locate a place to find the answer — can you lend me some correct facts?? thanks — Lauren

I’m not a lawyer and so I can’t be certain of the legality but I don’t see why it would be illegal for you to charge business expenses on your credit card. Consider the situation where you’re an employee and you buy something for your employer. When you do that, you probably submit an expense report and your employer pays you back some time later. If the mixing of business and personal charges on the same credit card were illegal, then this wouldn’t ever happen.

Now, one reason why you wouldn’t want to mix the two is when you have a limited liability corporation (or some other entity) and you are trying to shield your personal assets from your business liability. In that case, you have to clearly delineate between your business and personal finances – mixing the two will blur that line and expose you to personal liability if something happens in your business. So, while charging business and personal to the same card is not illegal, it’s generally considered a bad idea because it takes away the only benefit an LLC provides – personal liability separation.

Anyone else care to weigh in?


Playing the eBay High Demand Gadget Game for Fun and Profit

Do you know what the eBay High Demand Gadget Game is? Well, it’s when a company offers a much anticipated, high demand product with a low supply and you snatch a few up so you can post them on eBay for a nice premium. It’s actually quite fun, I haven’t participated in it much recently, but I had done it in the past with much success if you do it right. If you do it wrong, you could actually take a perfect arbitrage and profit scenario and end up losing money.

Is It Actually Low Supply?
You know the Apple iPhone that was just released? People were standing in line to get one… but they could’ve just gone to the Apple Online Store and ordered the 4GB version for $499 and the 8GB for $599 – shipping in 2-4 weeks. It’s not like the Nintendo Wii which you still can’t buy, unless you want to overpay for a bundle, without calling up stores beforehand to check on their shipment schedules. Check with the manufacturer to see if they’re actually going to be in low supply or not…

Is It Worth It?
First you must gauge the actual demand, check eBay prices to see how they stack up and take a 20% premium off the closing prices. The 20% is to discount the hype, pre-release promises to deliver, and to account for some of your transaction costs (sales tax, gas). If it’s still worth it for you to stand in line for however many hours before the store opens, you better get a comfy chair read and some sandwiches.

Don’t Overpay
Check out this hilarious story about a woman who brought $16k to buy out a store’s supply of iPhones, paid the first kid $800 for his spot, and then found out she could only buy one phone (I thought the limit was 2, but it certainly wasn’t unlimited). She took a nearly winning proposition (8GB goes for around $700 on eBay, so she’d make maybe $150 or so after everything) and made it a losing one by paying out all these unnecessary incidental costs. The kid also got a phone too plus a few hundred bucks.

Don’t Buy On Secondary Market
So you see that hot gadget on eBay or Craigslist at a steal of a price and you figure you can turn around and resell it for a quick profit right? Avoid the temptation! Either something is wrong with that particular item or you’re going to get scammed, the seller has as much information as you and you’re likely walking into a bad scenario. If you want to invest in any secondary market, at least let it be the stock market so that when you lose money no one will make fun of you.

Sell It Immediately
Do not wait. Do not pass go. Sell it. Once you get it, get your butt on eBay or Craigslist and sell the sucker as soon as possible. eBay is nice because you can set a reserve and if it isn’t met to your satisfaction, you can simply return the product to the store and you’ll have lost nothing but eBay listing fees. Craigslist let’s you avoid all the fees of eBay, which can be hefty, but you do have to deal with people trying to wheel and deal and the occasional no-show at meets.

Why do I recommend selling it? There’s a reason why there’s a saying, “A bird in the hand is worth two in the bush” and that’s because it’s true more often than it is false. Think of all the people who could’ve sold a PS3 for over a thousand bucks when it was first released but decided to wait until Christmas because they thought the demand would spike along with prices. Unfortunately that didn’t come to fruition… take the money now.

Warning: The Craigslist Sale
If you do arrange a meeting, be sure to do it in a public place (not your house) and don’t bring the product with you, leave it in your car that is also in a public place. If you have a friend who you don’t mind imposing on, get them to come with you. Only take cash – accept nothing else. There are many unsavory characters who would love to come to you house or a dark alley, beat the crap out of you, and steal that gizmo. Be very very careful with this.

There you go, enjoy the life lessons from a recovering eBay junkie, go forth, and play the eBay High Demand Gadget game and rake in the cold hard cash!

 Business, Reviews 

Review: You Call The Shots by Cameron Johnson

You Call The Shots by Cameron Johnson

When you start the book, you might be tempted to think that You Call The Shots will be just one big lovefest about Cameron Johnson, how awesome he is, how enterprising he was, and how just gosh darn great it was that a young guy like him was able to do so much. In fact, the beginning of the book goes pretty heavy on the credentials, which is a fair way to start a book if you think that you’re going to learn all the great business ideas from someone in their early twenties, but I see the value of the book elsewhere.

You Call The Shots breaks down your traditional thinking about working, earning a living, and making money by taking you along a journey started by a kid who didn’t know he wasn’t supposed to be successful starting businesses online. Cameron Johnson isn’t some child prodigy who was given a head start either, he started as a kid not willing to fit what society thinks children should do, and he just did whatever he wanted – and it worked. He became a sales manager at his family Ford dealership through hard work, not nepotism (in fact, he said that being the son of the owner probably made his ascension much harder, which is probably right), and he started multiple businesses just because he had an idea and the moxie to execute.

Sure, the book offers 19 secrets to entrepreneurship (and they are excellent secrets framed with even better anecdotal recounts) and it follows the wild ride that was and is Cameron Johnson’s life, but the value is really in that it shows what happens when you’re willing to ignore what other people think you should be doing and doing that which you love.

I really enjoyed reading this book and it’s one of the few books that I’ve reviewed where I’ve read it from cover to cover, in part because I identify with him and his personality and also because I’m a sucker for these anecdotal books. If you are the enterprising, entrepreneurial type, I strongly recommend picking this book up and reading it (and to date, I don’t think I’ve given as strong a recommendation for any book I’ve reviewed).


How to Spot an Online Business Scam

The internet really has only been a place of commerce for about a decade now, and still people are searching to find their gold mine on the internet. A lot of people want to strike it rich, yet a lot of digital miners end up finding nothing but fool’s E-Gold. There are a lot scams for businesses on the internet, and you need to avoid them like the plague. But how does one know that a business is a scam? There are some big red flags that you will notice about a company to determine whether or not it is a scam. If a company has any of these red flags, you should be very wary about dealing with them.

(click here to continue reading…)

 Business, Personal Finance, Taxes 

Calculating and Paying Quarterly Estimated Tax Payments

So I did my taxes over the weekend and found that I had a significant tax shortfall (more than I’ve ever had as a rebate, but I see it as a good thing) as a result of not paying quarterly estimated tax payments last year. Now, I wasn’t assessed a penalty because I paid more tax than I did the year before (I wasn’t within 90% of what I owed, which is the other ‘get out of jail free’ card) but this year I will have to be paying these estimated payments in order to avoid penalties. If I hadn’t paid more than last year, I would’ve had about a hundred and fifty bucks in penalties, which isn’t bad on an absolute scale but terrible when you consider it’s a completely avoidable loss. So, here is my rough and tumble guide to calculating and paying your quarterly estimated taxes.

Calculating How Much Tax You Owe
You must make quarterly estimated tax payments on any self-employment income you earn and the process of calculating the amount of that tax isn’t tricky but does require a calculator. The first thing you need to do is to figure out what your average tax rate is, which you can find on your previous year’s tax return by dividing your income tax (line 43 on your Form 1040) by your adjusted gross income (line 37 on your Form 1040), that is your average tax rate. As a self-employed person, you need to tack on an additional 15.3% for Social Security and Medicare. Now, you take that tax rate and multiple it by your quarterly profits and that’s the amount you need to pay.

Another safe way to go about it is to see how much you paid in taxes last year, estimate how much you’ll have withheld and subtract that value from your tax paid, add some buffer to that and divide it by 4. If your business is growing, you’ll still experience a tax shortfall but you’ll avoid penalties. So, if you have a tax liability of $10,000 for 2006, your job withheld $6,000 last year, then your shortfall was $4,000. Add some buffer, say another $400, and you should send in $1,100 each quarter. That means for 2007, you’ll have paid $11,600 in taxes which is more than the $10,000 you owed last year – penalties avoided.

Paying That Quarterly Estimated Tax
As for paying it, you have two options – the 1980 way of writing a check, or the 2000 way of sending payment through the Electronic Federal Tax Payment System. I recommend the EFTPS because you won’t lose a payment in the mail but if you use a check, be sure to make out the check to United States Treasury, your social security number on the check, and include a copy of Form 1040-ES. The due dates for payment are April 15th for the first quarter, June 15th for the second quarter, September 15th for the third quarter, and January 15th (of the following year) for the fourth quarter. Obviously, keep copies of all your checks, forms, etc. for tax time next year.

Now, another question I had was whether the payments have to be equal and they aren’t required to be equal but they should. I don’t know what the ramifications are if they aren’t equal but as long as you do a pretty good job of estimating, a small deviation probably isn’t a big deal.

(As with anything you read on blogs, please consult a tax professional before you take any action)

 Business, Personal Finance, Retirement, Taxes 

Can I Deduct My SEP-IRA Contributions?

This was a question posed to me by a recent reader:

Hi Jim,
I see that you’ve written a lot about sep-ira’s and I had a question I hoped you could answer, I was going to make a contribution to my sep-ira, can I deduct that on my taxes?


The answer is yes but where you deduct it will depend on your situation.

Self-Employed Persons
If you are self-employed, you can contribute to an SEP-IRA as either an employer or an employee. When you contribute to the SEP-IRA as an employer, you can deduct that contribution but you deduct it from your business/self-employment income. If you contribute to the SEP-IRA as an employee, you can deduct that contribution from your own income.

Not Self-Employed Persons
If you work for a business that offers a SEP-IRA, you’re going to be contributing as an employee and subject to the rules of a Traditional IRA. So, again you will be able to deduct the contribution but you will be deducting it against your own income.

So to recap, if you are a self employed and contributing as an employer, you deduct it against your business’ income (you are still subject to self employment tax). If you are self-employed and contributing as an employee or you are not self-employed, you deduct it from your own taxes.

Anyone want to add anything? (or fix something I may have gotten wrong?)

 Banking, Business 

PayPal Offering SecureID Keys

PayPal is offering (it’s supposed to start in 2007 but you can’t get one yet) these slick new SecureID tags that will definitely help improve security in PayPal accounts. The idea behind SecureID is that it will display a six digit number that changes every thirty seconds and that number will be required every single time you log into your account. Why is this more secure? Well security comes down to three things – what you know, what you have, and who you are. Your user name and password satisfy the ‘what you know’ part and the key will satisfy the ‘what you have’ part.

This will protect you against phishing because even if thieves find out your user name and password, without the SecureID code they cannot access your account.

The key is only $5.00 but it’s absolutely free for Business accounts!

PayPal Security Key Site (thanks Consumerist!)

 Business, Credit, Personal Finance 

50 Fun Facts About Credit Cards

I was a little bored one day and thought I’d try to find fifty fun facts about credit cards that I didn’t know before hand and put them all in once place for you all to munch on and enjoy over the weekend. Some of the things I already knew, like the AMEX Centurion card has a $2500 annual fee and a $250,000 annual spend requirement, but others I didn’t, like how American Express started off as a shipping company and later branched out into financial services.

I broke the fun facts into these general categories: Historical Nuggets (with subcategories for each major card company), Useful Things That Make You Go Hmmmm…, Technobabbliciousness, Legal Ways You’ve Been Hosed & Un-Hosed, and Department of Holy Crap They Make A Ton of $$$$$. Historical Nuggets obviously covers the history of cards and the various companies. The Useful Things That Make You Go Hmmmm… covers some useful consumer information that may one day come in handy in your daily life. Technobabbliciousness covers some interesting facts about the technology behind credit cards. Legal Ways You’ve Been Hosed & Un-Hosed covers various court rulings and other legalese that explain why the environment is the way it is (like ridiculous fees and interest rates!). Finally, Department of Holy Crap They Make A Ton of $$$$$ is just a collection of mind-boggling statistics that should make you think twice about starting your own credit card company.

(click here to continue reading…)

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