Monday, November 20, 2017

How to Keep an A+ Rating With the Better Business Bureau

The Better Business Bureau (BBB) is one of the largest and most respected independent business review organizations in North America, and their A+ rating is a fantastic testament to a business’s success and longevity. It boosts consumer confidence that your business has ethical and fair practices, and when things go wrong, you can rely on them to fix them.

Basically, a Better Business Bureau A+ rating is one of the best ways you can communicate your commitment to quality for your customers.

So once you’ve got it, what’s the best way to keep it? Here’s what you can do to ensure that your business stays recognized as A+.

What the Better Business Bureau Looks For

Even if you were accredited recently, it still pays to look over how the BBB rates your business, and understand what you need to do to push yourself over the A+ threshold.

Just like in school, the BBB letter grades are based on a score out of 100. To get an A+ rating, you need to get 97 points or more. The grade you get from the BBB represents the BBB’s degree of confidence that your business is operating in a trustworthy manner and will make a good faith effort to resolve any customer complaints. The BBB bases their rating on 13 elements:

  1. Complaint volume (weighted by complaint age)
  2. Unanswered complaints
  3. Unresolved complaints
  4. Complaint resolution delayed
  5. Time in business
  6. Failure to address complaint pattern
  7. Type of business
  8. Transparent business practices
  9. Failure to honor mediation/arbitration
  10. Competency licensing
  11. Government action (per action)
  12. Advertising review (per incident)
  13. BBB trademark infringement

But the way that the BBB scores it is that only 5 of the 13 elements get you points. Most of the requirements lose you points for failing to comply, so your reward for compliance isn’t points – it’s just not losing them. For example, if you comply with all government licensing, you get 0 points. If you don’t, then you lose 41 points.

Since the penalty for failing to comply for any one requirement is at least 21 points, putting you far outside the 97 point minimum for an A+ rating, we’re going to focus on the ways that you can get points. They are:

  1. Complaint Volume (Weighted by Complaint Age): 0 – 15 points
  2. Unanswered Complaints: 0 – 40 points
  3. Unresolved Complaints: 0 – 30 points
  4. Complaint Resolution Delayed: 0 – 5 points
  5. Time in Business: 0 – 10 points

It’s pretty simple. These add up to 100 points, and you need to get 97 points to get an A+ BBB rating. Before we drill into them, it’s worth noting a few things:

  • You need points from all of these categories to get an A+ rating
  • Most of the points (90 points) revolve around complaints
  • It’s considerably more important how you deal with complaints rather than how many complaints you have total

Now let’s look a little more closely.

Complaint Volume: 0 – 15 points

This measures how many complaints your business has had filed against you in the last three years. Your complaint volume score takes into consideration complaint age as well, so if you had two complaints 24 months ago they’ll count for less than if you have two complaints yesterday. The more complaints you have, the fewer points you’re going to be awarded. It is worth noting as well that your company size is also taken into account, so larger companies with more customers are at no disadvantage.

A low complaint volume is important to maintain an A+ rating, but not the most important. For starters, other than generally improving your business practices, there’s not really a lot you can do to get more points. And second, because it’s based on a formula of the BBB’s own device that weighs scores in an unknown way, it’s the hardest to predict what score you’re going to get ahead of time. Finally, it’s only worth 15% of the overall points, speaking again to the BBB’s focus on how your respond to complaints, rather than never getting any in the first place.

The key is to treat your customers with fairness and respect so you attract less complaints in general.                                                                                

Unanswered Complaints: 0 – 40 points

This is the first of two major categories (the other is unresolved complaints) which together make up 70% of the total points.

Unanswered complaints are complaints from customers that you haven’t provided an answer for. The less you have, the more points you get. In reality, to get an A+ rating, you need to have zero unanswered complaints. To know how to answer a complaint, you need to understand the BBB complaint process.

Every time someone files a complaint with the BBB against an accredited BBB business, the business is contacted and has 14 days to respond. If it’s still unanswered, the business gets another notice and a 14 day extension. Businesses are encouraged to address customer complaints at this stage directly with the customer. And for the vast majority of complaints, this should be easily achieved.

At this point, the complaint has been answered (if not resolved).

The key is to respond to complaints promptly. Even if it takes a long time to resolve, recognizing there’s a problem promptly helps you secure an easy 40 points and your A+ rating.

Unresolved Complaints: 0 – 30 points

Unresolved complaints are a little trickier, since this focus is on resolution instead of simple recognition. The score is simple – the less unresolved complaints you have, the more points you get.

Your first step is to try and resolve customer complaints directly with the customer. That much is obvious. But should you fail to reach an understanding, the BBB is there to help. They’ll first try to help informally, but they also have a huge number of trained resolution specialists should you need a little extra help.

This isn’t just about customer appeasement, the way a lot of other review sites are though. The BBB is absolutely willing to resolve cases even if the customer isn’t satisfied if they feel that the customer is being unreasonable. The focus is on fairness.

This score also includes your ability to deal with underlying themes in the complaints you’re getting. So if there is one sales representative who regularly accrues complaints against them but you refuse to fire them, that’s going to hurt your score.

The key is to work first with the customer and then with the BBB to resolve any complaints against you. Remember that even if you feel the customer is wrong, it’s still better to work with them to resolve the complaint and the root cause rather than ignore the issue.

Complaint Resolution Delayed: 0 – 5 points

This isn’t worth a huge amount but it’s an easy way to push you over the edge to A+. And given the high standard that’s expected for an A+ rating from the BBB, you need every point you can get.

This score is based on how quickly you start working on resolving complaints. A huge part of this is communication – responding to the BBB’s communication quickly, contacting the customer, and keeping them updated as the process unfolds.

The key is to be on top of your complaints. The BBB will email you when a complaint is filed – flagging those for immediate attention is a good idea so that nothing gets lost in email noise.

Time in Business: 0 – 10 points

This is a score assigned to you for however long you’ve been in business. The BBB doesn’t even rate companies until they’ve been in business for a year. After that, you get 2.5 points per year up to 4 years that you’ve been in business. So if you’ve been in business for 2 years, you get 5 points. 4+ years and you get the full 10 points.

The key is to provide documentation for how long you’ve been in business. If the BBB can’t determine when you were founded, they’ll take the date that you joined the BBB, slicing at least one year off your time.

At the end of the day, it’s not really about having a perfect, unblemished record of customer satisfaction (although that helps). Getting an A+ rating renewed is more about how you react to customer complaints.

Provide consistent, responsive, high quality customer service and care and you won’t have anything to worry about.



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Sunday, November 19, 2017

3 Reasons Why Your Startup Should Operate in a Coworking Space

In 2017, released an infographic on coworking statistics you might not know about. The infographic stated that by 2020, 40% of the current workforce will be made up of freelancers, solopreneurs, and independent contractors.

That’s less than three short years away!

While there’s no way to know yet where all of those independent workers will be conducting business from, it’s safe to assume many will be setting up shop in a coworking space.


For entrepreneurs starting up their own businesses, operating from a coworking space offers a series of advantages for both the entrepreneur and their startup. In fact, we advocate for small businesses to skip renting a traditional storefront in favor of embracing being a part of the sharing economy—at least in the early years of being in business.

Here’s a look at the goodness a shared workspace has to offer.

1. It’s Fairly Inexpensive

Anyone who has ever started their own business can tell you it’s not a cheap endeavor. Now’s the time to bootstrap, not spend money like it’s growing on trees. One area that easily adds up each month is buying or leasing an office.

Here, you’re paying for the space and depending on the area you’re in, you might be paying much more than anticipated. Add utilities, internet, furniture, and tech gadgets like computers into that bill.

You also probably need a cleaning service to keep everything tidy. Oh, and if any repairs need to be made on a clogged bathroom toilet or leaky roof that’s coming out of your wallet too.

Want to get out of the lease sooner if your bank account heads into the red? That might not be possible depending on the agreement you signed.

Sounds like it’s time to get a membership with a coworking space. Here, you’ll receive a workspace based out of a bigger building, loaded with amenities like WiFi and break rooms (including snacks and drinks), the ability to use office equipment like fax machines and printers, work out of common areas, and use meeting rooms for conferences with clients.

While prices for each coworking place vary depending on where you’re located, you can rest assured that on a yearly basis you’ll still be paying far less than you would with a private office.

2. You’ll Get Your Work Done—Happily

In open spaces like these, there’s always the worry that there will be too many distractions to keep from getting work done. You might even be concerned that you’ll spend too much of your time waiting to use certain rooms or pieces of equipment since it’s a shared environment.

However, Officevibe’s coworking infographic offers up a surprising amount of figures that contradict all of the above.


In a shared space, 92% of workers say that they are satisfied there. They’re able to get work done on time (64%), can focus (68%), and even feel healthier (70%) out of these spaces than they would a traditional office location.

Whether you’re working solo or with a team, you’ll have the flexibility and openness of the coworking space to thank for getting the job done and well.

3. You’ll Gain a Sense of Community

One of the downsides to working out of your own office or remotely from home is that it’s not uncommon to feel a little lonely. This is why so many listicles insist that solopreneurs make the time to get outside and walk around or work out of a coffee shop for a change of scenery.

At a coworking space, community is all around you. Take advantage of the fact that other entrepreneurs and freelancers work in close proximity to your company. Introduce yourself and get to know more about them and what they do while sharing your own elevator pitch about your business.

According to the infographic, 91% of workers have better interactions with others after coworking and 90% even admit to feeling more confident too.

Make it a point to step away from your screen and get to know your respective neighbors each week. You never know who you might meet in your coworking building—could be a potential collaborator, new employee, or possible investor who can help take your startup to the next level!

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Saturday, November 18, 2017

4 Ways Your Small Business Benefits from Referrals

As a small business, word of mouth marketing is a reliable and cost-effective way to grow your business. Fortunately, we live in a world where people generally root for and want to see small businesses succeed. And whether it be a face-to-face conversation, text or social media message, word of mouth has a way of... Read more

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How Will Your Business Respond to a Ransomware Attack?

The worldwide ransomware epidemic is getting worse all the time. Companies that fail to protect themselves risk losing important business data, including customer files, product designs, supplier contracts, and more.

You can take some specific steps to quickly recover digital business files following a ransomware attack—and it can be done without paying the ransom or dealing with cybercriminals.

But before we get into that, let’s talk about the scope of the ransomware problem and how to protect your business from the latest threats.

What Is Ransomware?

Ransomware is a category of malware—or malicious software—designed by cybercriminals to encrypt your computer files and paralyze your business. After your files are encrypted, the software displays a ransom note with instructions on how to pay the cybercriminals in exchange for a decryption key. Payment is usually made in the form of
Bitcoin, cyber-currency that’s nearly impossible to trace.

Ransomware is usually distributed via phishing emails with infected attachments or through dangerous web links. Cybercriminals are also known to exploit security vulnerabilities, hack into computer networks, and manually implant ransomware.

Market for Ransomware Skyrockets

The current ransomware epidemic began making headlines in 2013, and there’s no end to the scourge in sight. If you need proof, look no further than the dark web—where both experienced and amateurish cybercriminals buy and sell ransomware hoping to make a profit.

IT security firm Carbon Black monitored dark web forums over the last two years and analyzed the prices of individual ransomware viruses and do-it-yourself ransomware distribution kits. The company estimates that sales of ransomware increased from $250,000 to more than $6 million between 2016 and 2017.

The report also found that some ransomware vendors are personally taking in more than $100,000 per year, presumably tax free.

New Ransomware Threats Emerge


Ransomware viruses are abundant. Developers often come up with creepy sounding names for the file-encrypting menaces. Some of the most effective and well-known ransomware viruses include Locky, CryptoLocker, and Cerber.

And of course there was WannaCry, the ransomware that raced around the globe last May, infecting more than 200,000 computer systems in the process.

New ransomware variants are emerging all the time. Here’s a quick look at a few of them:

Locky Gets a Powerful Makeover

Locky was once the most prevalent form of ransomware, but then infections seemed to taper off last year. Well that’s all over because Locky is back and meaner than ever.

Security researchers in September discovered a new version of Locky that was used in 20 million attempted ransomware attacks in one day alone. The goal of such widespread attacks is to cast a wide net and snare as many ransomware victims as possible.

Troll Encrypts Everything

The Microsoft Windows Defender Security Intelligence team in September spotted a new form of ransomware—dubbed Troll—that targets Microsoft Windows users and encrypts every file on the victim’s computer regardless of its location or file extension. Security researchers warn that this could lead to Windows failing.

Magniber Could Spread Fast

Cybercriminals are using a technique called “malvertising” to spread a new form of ransomware called Magniber. Malvertisements are disguised as legitimate advertisements on a website. But when a victim clicks on the ads, they unleash a ransomware attack that encrypts their files and demands a ransom.

Magniber is currently being used to target victims in South Korea, but as we’ve seen in the past, it could spread quickly.

How to Prevent a Successful Ransomware Attack


The number-one way to prevent a successful ransomware attack is to exercise extreme caution before opening an email attachment or clicking on links embedded within the body of an email.

Cybercriminals have gotten very good at creating deceptive emails that appear to come from your bank, your credit card provider or other legitimate companies. They may also appear to come from friends or relatives.

Do not open any attachments or click on links unless you’re absolutely certain the email comes from a trustworthy source. Here are a few other ways to prevent a ransomware attack:

  • Use firewall and antivirus software and keep it up-to-date.
  • Educate yourself and employees on how to avoid the dangers of phishing emails.
  • Apply the latest security patches to operating systems and business applications.

How to Respond to a Ransomware Attack

When all else fails and your computer becomes infected with ransomware, you can get your files back without paying the ransom. But it only works if you take the initiative and back up your computer files to the cloud before a ransomware attack occurs.

If your files are backed up to the cloud and your computer gets infected with ransomware, take the following steps. Please note that these instructions apply to Microsoft Windows-based computers, but the steps for Mac users are very similar:

  1. Remove the infected computer from the network so the ransomware can’t spread to other computers. If the computer is not running on a network, skip this step.
  2. Shut down the computer by holding down on the power button.
  3. Turn the computer back on and select “Safe Mode with Networking.”
  4. Reconnect to the internet. Then download and run a malware detection and removal tool such as Malwarebytes or Norton Power Eraser.
  5. Once the virus is removed, delete all encrypted files and restore clean versions from your cloud backup service.

Remember, if your computer files are properly backed up, you’ll never have to pay the ransom.

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Friday, November 17, 2017

Is There a Chase Sapphire Business Card?

What’s not to love about the Chase Sapphire cards?

With stellar rewards programs and optimal returns on dining and travel, it’s easy to wonder, “Can I get the Chase Sapphire’s rewards for my business spending?”

Technically speaking, there is no Chase Sapphire business card. The Chase Sapphire cards are both consumer cards, although you can use them for business spending, they’ll always be under your name as an individual. Plus, you’ll likely gain access to a lower credit line than you would with a business credit card.

That said, there are business credit cards that offer similar, perhaps even better, rewards to the Chase Sapphire Cards.

But, for starters, let’s dive into the details of what theChase Sapphire Preferred and the Chase Sapphire Reserve can offer to its cardholders:

The Chase Sapphire Preferred

The first of the two Sapphire cards is the Chase Sapphire Preferred. Let’s run through the key features:

  • 50,000 bonus rewards points when you spend $4,000 during your first three months
  • This could mean $625 worth of free travel if redeemed through Chase Ultimate Rewards
  • 2x every dollar you spend on travel and dining
  • $95 annual fee (Chase will waive your first annual fee)

Bottom line: If you’re looking for a consumer card with a mid-range annual fee and high-level rewards, the Chase Sapphire Preferred could be your best bet.

The Chase Sapphire Reserve

On the other hand, if you’re looking for astronomical rewards rates, and you’re not afraid of a substantial annual fee, then the Chase Sapphire Reserve might be a better fit for you. Let’s run through the highlights: 

  • 50,000 bonus rewards points when you spend $4,000 during your first three months with the card
  • 3x rewards on all of your travel and dining purchases
  • Get 50% more value when you redeem for airfare, hotels, car rentals, and cruises through Chase Ultimate Rewards. that means, 50,000 points are worth $750 toward travel
  • No blackout dates or travel restrictions—as long as there’s a seat on the flight, you can book it through Chase Ultimate Rewards
  • There’s a $400 annual fee, but that’s waived for the first year and offset by a $300 yearly travel credit

As we said, the Chase Sapphire Reserve is a great option for those looking for high rewards but aren’t afraid of a high expense.

Is There a Business Version of the Chase Sapphire Cards?

As a reminder, there is no business-specific Chase Sapphire card. That said, Chase offers one business credit card in particular that does a great job of emulating the Sapphire cards’ incredible rewards rates and signing bonuses— the Chase Ink Preferred.

The Rundown on the Chase Ink Preferred

As the Sapphire credit cards indicate, Chase knows how to package a sweet credit card deal. And its business credit cards are no exception.

The Chase Ink Preferred offers a hefty welcome bonus and incredible rewards rates. Not to mention, it also gives the cardholder access to the same Chase Ultimate Rewards that the Sapphire cards do.

But it’s time we take a look at the details: 

  • 80,000 bonus rewards if you spend $5,000 during your first three months
  • This is worth $1,000 of free travel when redeemed through Chase Ultimate Rewards
  • 3x rewards for the first $150,000 you spend within certain categories
  • After that cap and outside of those spending categories, you’ll earn 1x rewards for each dollar you spend.
  • Despite the top-of-the-line rewards it offers, the Ink Preferred’s annual fee is only $95

Where the Ink Preferred Excels

So, you started out this article asking if there was a Chase Sapphire business credit card. Though, as you quickly found out, there isn’t a Sapphire business card, all things considered, the Chase Ink Preferred is likely a better bet for your business spending anyway.

For starters, the Ink Business Preferred comes with a bigger signing bonus—you’ll get 30,000 more bonus points in than you would with the Sapphire Preferred of the Sapphire Reserve.

Additionally, the Ink Preferred comes with more business-friendly top earning categories than the Sapphire cards. Instead of just dining and travel, the Ink Preferred lets you earn more for travel, advertisement, shipping, and communication services, which are all purchases that small businesses often shell out a lot of cash on.

Not to mention, because the Ink Preferred is a business credit card and not a personal one, additional employee cards will come free and you’ll likely be able to access a higher credit limit.

All in all, there are more than a few reasons why the Ink Preferred would be a better fit for your business spending than a Chase Sapphire card.

What the Ink Preferred Lacks

Still, there are a few things you would miss out on if you opted for the Chase Ink Preferred over the Chase Sapphire Cards.

One in particular is the elevated reward points worth that you can access through the Chase Sapphire Reserve card. When you redeem your points through Chase Ultimate Rewards, the points you earn with a Sapphire Reserve are worth 50% more, whereas they’re only worth 25% more with the Chase Ink Preferred.

Plus, you won’t be able to have your first annual fee waived with the Chase Ink Preferred as you would with the Sapphire Preferred. A first year without an annual fee is the perfect way to try a credit card out without committing any money to it, but you won’t be able to have that option with the Chase Ink Preferred.

As no credit card is perfect, the Chase Ink Preferred admittedly leaves some things to be desired, most of which, the Sapphire cards step up to the plate to fulfill.

Is the Ink Preferred the Perfect Business Counterpart to the Sapphire?

Both the Chase Ink Preferred and the Chase Sapphire cards are pretty stellar in their own ways.

Where one card lacks, another will fill in. Luckily, these cards are far from mutually exclusive. In fact, they work wonderfully in tandem, because Chase allows you to transfer your business rewards points to your personal account and vice versa.

Though the Sapphire cards are some of the best consumer credit cards on the market, the Ink Preferred outpaces them, especially when it comes to business spending.

The way we see it, business owners should be asking themselves if there’s a Chase Ink Preferred consumer card, and not the other way around.


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Downsize Your Office Space to Save Money and Boost Productivity

There was a time when having a big, luxurious office meant your company was winning. But leasing large amounts of commercial space, like using paper, is increasingly becoming a thing of the past for many successful businesses, particularly small businesses.

For one, office space costs money. Depending on where your business is based, you could be paying as much as $14,800 a year per employee in office space (assuming 200 square feet of space per employee, according to The Square Foot in 2015—and that number has likely gone up since then).

Even less expensive cities like Houston and Atlanta require you to shell out thousands of dollars a year to rent space.

But large, traditional office layouts—complete with corner offices and staid conference rooms—can cost you in other ways as well.


Over the last few years, companies around the country have redesigned their office spaces to boost productivity, such as 22squared in Atlanta, which gave up some of its leased space in a Midtown building to gain a brighter, inventive, more collaborative office.

It can be difficult to go from more space to less, particularly if you had your heart set on a certain office, or you expanded to fit the space (by buying excess furniture, or artwork, or whatever other items that you feel are important but are more than likely superfluous).

Here’s how to do it.

Recognizing Your True Office Space Needs

Paula Welsh, CEO and president of 7 Charming Sisters, an ecommerce fashion jewelry company, found herself with too much office space not long after starting up.

“During our startup phase, we had a very large office space with a host of larger fixed costs associated with it,” Welsh tells Fundera. “As we settled into the business, a bunch of people would work from home a few days here and there, and finally it dawned on us that our needs in terms of space were really a third of what we actually had.”

It’s not that the space was bleeding 7 Charming Sisters dry—Welsh says the company was leasing 8,000 square feet for about $8,500. It gave them all the typical trappings, such as offices, conference rooms, packaging and receiving, and a reception area, as well as “extras” like a photography studio and glam room for prop storage.

But after about a year, the company realized that the need for the space they were renting simply wasn’t there.

“The first year was a lot of trial and error, as we refined processes,” Welsh says. “We realized that for some tasks we didn’t need full-time positions, and it was easier to outsource, such as our photography.” 

The biggest realization in regards to space wasn’t just that things could be outsourced. It was that full-time employees didn’t need to be at the office every day.

Embracing a Remote Workforce


Remote work is hot right now: More Americans than ever are working remotely, and they’re doing so for longer periods of time. Last year, 43% of adults surveyed said they worked remotely at least part of the time, and those who reported working remotely four to five days a week jumped from 24% (in 2012) to 31% (in 2016).

“Many people preferred to work at home and, we found they were actually more productive there,” says Welsh of her employees, echoing a sentiment that many workers are self-reporting.

“We ended up reducing our office space as well as utility and insurance costs associated with it. Our office now includes office space for management who needs to be accessible, temporary space for staff who need it for a few hours or days, and several conference rooms for our twice weekly meetings.”

Whether or not working from home actually makes people more productive is the subject of intense debate, and depends greatly on what the company considers “productive.” But if the set-up works for your business (and some industries simply can’t embrace remote work the same way that others can), why not run with it?

“It was never our intention to work remotely, but it wasn’t something that we were against either,” says Welsh. “I’ve always been a person who worked from my home office about three days a week, and I’m probably 30% more productive when I do so. As other people worked from home for one reason or another, we realized, that with one or two exceptions, we were all more productive at home offices.”

As a result, 7 Charming Sisters paid a small fee to their original landlord to get out of their original space, and moved into a 2,500 square foot office.

“Our realized savings annually comes to about $70,000 in office rent and another $10,000 in related utility, maintenance and insurance costs,” Welsh reports.

Managing a Remote Workforce


Of course, the switch to a more remote workforce comes with its own set of challenges and costs. Expect the transition to be a little smoother if your business already uses lots of web-based or cloud-based applications.

Communication and collaboration apps such as Google Drive, Trello, Slack, and Salesforce are particularly well-known for maintaining the bonds between remote workers.

From a management perspective, Welsh notes that the biggest adjustment comes from supervising people and making sure what needs to get done gets done.

“Because I was used to seeing everyone at one time, I managed by walking around deliberately. Once most people were remote, I had to make sure I collaborated, monitored, and supervised with everyone on a consistent basis. Skype and sticking to a meeting schedule was crucial,” Welsh says.

Welsh also invested in one new application that helped her feel more secure in how much work was getting done.

“All of our technology has been web-based from the very beginning, so we’ve always been able to work from anywhere. We’ve had very little change in that area with the move to a smaller space,” she says. “However, we did add a web-based application called Worksnaps for our employees. Worksnaps monitors and records their time working as well as provide snapshots of their actually work product. It’s incredibly affordable given its value.” 

7 Charming Sisters now employs 16 people in all, including 12 remote workers. And Welsh reports actually seeing, in person, how effective her workforce can be while working remotely.

“I’ve watched one of the ladies complete two weeks worth of email marketing on her iPhone 6+ while we had a four-hour delay at the airport,” she says.

Creating a Happier, More Productive Office


Some companies find that they can work remotely 100% of the time. Others, most famously IBM, have decided that working from home isn’t good for the company, and have insisted on their workers’ physical presence. For 7 Charming Sisters, the right balance is somewhere in the middle.

“We have used Skype and Google Hangouts, but there are times that in-person meetings are more effective, especially when working through problems or new developments,” says Welsh.

The most important thing to consider isn’t whether your employees are in the office or out at any given moment, but how productive they’re being wherever they are.

Fostering a positive work-life balance for employees is just one of the ways companies are finding helps create a happier—and thus more productive—workforce.

Happy employees are more collaborative, more engaged, and less likely to quit (and thus less costly). Letting them work remotely doesn’t necessarily translate into making them happy, but it does give them more flexibility and freedom—perks that younger workers in particular treasure.

That’s what many look for when  choosing an employer and sticking with them. Deloitte’s 2017 Millennial Survey concluded that millennials want “freelance flexibility with full-time stability,” which includes flexibility on time, location, role, and recruitment.

The takeaway here is that remote working appears to be the future for many businesses. The cost savings of not needing vast office space is the icing on the cake.


Downsizing your office space and transitioning to a more remote workforce isn’t an automatic recipe for increased productivity and success—it requires investing in new programs, and adjusting to new schedules and ways of doing business.

It does, however, guarantee that you’ll spend less on leasing your spot, as well as related insurance and utility costs. That right there is enough to make thousands of dollars worth of difference—and if the result is employees that are happier in and out of the office, more collaborative when they do work together in person, and more likely to stick around while you iron out the kinks, that’s an unbeatable bonus.    

The way we work is expected to change rapidly in the next few years—by 2020, offices could look completely different than how we see or imagine them today. Now might be the time to get out ahead of the curve and see what a more fluid workforce can do for you.  

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What Is a Disregarded Entity and How Does It Affect Your Taxes?

When starting a business, one of the most important decisions is deciding what type of business entity it will be. Depending on your choice, you can face either significant legal liability, high tax burdens, or both.

Sole proprietors, for example, can be personally liable on their contracts and debt obligations, while dividends for C corporation shareholders are subject to double taxation.  

There is, however, a workaround for owners and businesses seeking lower tax burdens and enhanced legal protections.

To do this, business owners, S corporations, and real estate investors can choose to adopt any one of the three forms of “disregarded entities” recognized under federal tax laws—the most popular form being the single-member limited liability company, or SMLLC. These types of entities offer unique advantages for slashing the amount of business taxes you owe the IRS.


What Are Disregarded Entities?

Disregarded entities serve a best-of-both-worlds approach for ensuring favorable tax and liability treatment. From the IRS’s perspective, the disregarded entity does not exist, and you include your LLC activities on your Form 1040 Schedules C, E, and F.  

But for businesses that get sued, business creditors and adverse parties are in most instances limited to recovering from the LLC’s assets only. All you need to do in order to form one is file articles of organization with the secretary of state’s office in the state you want to conduct business in—and, if necessary, appoint an agent to receive process on your behalf in the state you’re organizing in—and draft an operating agreement for managing the internal affairs of your LLC.  

The two other types of disregarded entities are QSub subsidiaries—which can be formed by S corporations only—and REITs, a type of disregarded entity used as a vehicle for real estate and real estate debt investing. Both corporations and individual entrepreneurs can become owners of single-member LLCs.

Legal benefits aside, forming a disregarded entity does entail some important tax considerations.  Here are a few you should know about if you’re considering forming a disregarded entity:

You will be taxed as a sole proprietor with flow-through taxation benefits.

This is perhaps the biggest benefit to organizing as a disregarded entity. Under the single-member LLC structure, business owners can take advantage of flow-through taxation treatment on income received through the LLC.

This means that owners’ LLC incomes are not taxed twice at the business entity level and individual level as it would in a C corporation. QSubs and REITs are also not subject to an entity-level tax, as profit flows to the corporation or investment company respectively.

The LLC itself is responsible for employee and excise taxes.  

If your LLC hires employees, the LLC is responsible for reporting and paying employment taxes. These rules changed in 2009 to prevent owners of disregarded entities from withholding and paying employment taxes at the owner level.  

So, SMLLCs are responsible for:

  • Withholding, reporting, and depositing FICA and FUTA taxes
  • Obtaining unique EIN numbers
  • Registering for tax excise activities
  • Paying and reporting excise taxes
  • Claiming refunds, credits and payments if they’re considered employers under federal tax laws

You need to use your social security number or parent company’s EIN number on W9 forms.

If you’re a freelancer, chances are you’ve been asked to submit at least one W9 form to clients. And you needed to supply your social security number—even if your business already has an EIN number. But for businesses that own the disregarded entity, it should provide its EIN number on the W9 instead.  

You are still responsible for self-employment tax.

As with other partnership, sole proprietor, and LLC entities, single-member LLC owners are required to pay self-employment taxes.  

Unlike employees, owners need to pay roughly 15% in taxes toward social security and Medicare combined if they earn over $400 and roughly 92.35% of their net earnings are self-earned.  

Despite this, you can apply your self-employment taxes as a deduction toward your personal reported income, though at a 50%-57% cap.


If you live in a community property state, you could choose how the IRS can tax your business.  

For residents of the nine states that treat assets earned during marriage as community property—this includes California, Arizona, and Louisiana—the IRS lets you choose whether to have your LLC taxed as a disregarded entity or as a partnership.  

This is because in these states, any property created during marriage is equally owned by each spouse—which can prove problematic for tax purposes as there’s more than one owner. The IRS allows this as long as:

  • The business is jointly owned by the spouses as community property at state law
  • No other owners are involved in the company other than the husband, wife, or both
  • The spouses did not elect to have their business taxed as a corporation

You could lose your disregarded entity status.  

While it’s simple to form disregarded entities, it can be just as easy to lose their protections. Most cases where this occurs is when the owner doesn’t follow the formalities of the LLC. Some behaviors that could compromise your status include commingling your personal funds with business funds and personally guaranteeing loans, or signing agreements as yourself personally and not on the entity’s behalf.  

You can also lose your sole proprietor tax treatment rights by adding members to your LLC—causing it to be taxed as a partnership—or electing to have it taxed as an S corporation or C corporation.


Regardless of how you decide to organize your business, you should consult with experienced attorneys and accountants to get a better sense of whether your business should be organized as a disregarded entity.  

For entrepreneurs, S corporations, and real estate investors looking for favorable tax and liability treatment, it’s a business decision worth considering.

The post What Is a Disregarded Entity and How Does It Affect Your Taxes? appeared first on Fundera Ledger.

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