How Interest Rate Hikes Affect Personal Loan Investors – SmartAsset

How Interest Rate Hikes Affect Personal Loan Investors – SmartAsset

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In December 2015, the Federal Reserve raised the federal funds rate by a quarter of a percentage point. That was the first time the Fed had raised rates in nearly a decade. While federal funds rate changes don’t directly impact peer-to-peer (P2P) loan interest rates, lending platforms may begin increasing their rates. If you’re investing in peer-to-peer loans, it’s important to understand how that may impact your portfolio.

Rising Rates May Mean Better Returns

Personal loan investors make money by claiming a share of the interest that’s paid on the loans, in proportion to the amount that’s invested. If the platform you’re using raises rates for their borrowers, that means you’ll likely see higher returns.

That’s especially true if you’re open to funding high-risk loans. Peer-to-peer platforms assign each of their borrowers a credit risk rating, based on their credit scores and credit history. The loans that get the lowest ratings are assigned the highest rates. For example, Lending Club’s “G” grade loans (the loans that go to the riskiest borrowers) have interest rates of 25.72%.

Assuming borrowers don’t default on their payments, these investments can be more lucrative than lower-risk loans. Using Lending Club as an example again, F and G grade loans historically have had annual returns of 9.05%, which is nearly double the 5.22% return that investors earn from low-risk “A” grade loans.

The Downsides of a Rate Increase

While rising interest rates may put more money in investors’ pockets, there are some drawbacks to keep in mind. For one thing, it’s possible that as rates rise, borrowers could decide to explore other lending options. If that happens, there would be a smaller pool of loans for investors to choose from.

To compensate, peer-to-peer lenders may resort to issuing lower-quality loans as rates rise, but that could be problematic for investors who prefer to steer away from riskier borrowers. If the platform you use no longer offers the kinds of loan products you want to invest in, you’ll have to reallocate those assets elsewhere to keep your portfolio from becoming unbalanced.

Finally, rising interest rates could result in a higher default rate. Increased rates mean that borrowers have to pay a lot of money for taking out personal loans. If the personal loan payments become unmanageable, a borrower may end up defaulting on their loan altogether. Some platforms refund the fees that investors have paid, but they usually don’t refund their initial investments after borrowers default.

What Investors Ought to Consider

If you’re an active P2P investor or you’re thinking of adding P2P loans to your portfolio, you can’t afford to overlook the risk that’s involved. Financing the riskiest loans is a gamble, so it’s important to consider the consequences of putting money into those kinds of investments.

A good way to hedge your bets is to spread out your investments over a variety of loan grades. That way, if a high-risk borrower defaults you still have other loans to fall back on.

If you want more help with this decision and others relating to your financial health, you might want to consider hiring a financial advisor. Finding the right financial advisor that fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with top financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.

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Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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5 Things to Consider Before Getting a Personal Loan

Consider This Before Getting a Personal Loan – SmartAsset

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It’s a new year and if one of your resolutions is to get out of debt, you might be thinking about consolidating your bills into a personal loan. With this kind of loan, you can streamline your payments and potentially get rid of your debt more quickly. If you plan on getting a personal loan in 2016, here are some key things to keep in mind before you start searching for a lender.

Check out our personal loan calculator.

1. Interest Rates Are Going Up

At the end of 2015, the Federal Reserve initiated a much anticipated hike in the federal funds rate. What this means for borrowers is that taking on debt is going to be more expensive going forward. That means that the personal loan rates you’re seeing now could be a lot higher six or nine months from now. If you’re planning on borrowing, it might be a good idea to scope out loan offers sooner rather than later.

2. Online Lenders Likely Have the Best Deals

The online lending marketplace has exploded in recent years. With an online lender, there are fewer overhead costs involved, which translates to fewer fees and lower rates for borrowers.

With a lower interest rate, more money will stay in your pocket in the long run. Lending Club, for example, claims that their customers have interest rates that are 33% lower, on average, after consolidating their debt or paying off credit cards using a personal loan.

Related Article: How to Get a Personal Loan

3. Your Credit Matters

Regardless of whether you go through a brick-and-mortar bank or an online lender, you  likely won’t have access to the best rates if you don’t have a great credit score. In the worst case scenario, you could be denied a personal loan altogether.

You can check your credit score for free. And each year, you have a chance to get a free credit report from Experian, Equifax and TransUnion. If you haven’t pulled yours in a while, now might be a good time to take a look.

As you review your report, it’s important to make sure that all of your account information is being reported properly. If you see a paid account that’s still showing a balance, for example, or a collection account you don’t recognize, you’ll need to dispute those items with the credit bureau that’s reporting the information.

4. Personal Loan Scams Are Common

As more and more lenders enter the personal loan arena, the opportunity for scammers to cash in on unsuspecting victims also increases. If you’re applying for a loan online, it’s best to be careful about who you give your personal information to.

Some of the signs that may indicate that a personal loan agreement is actually a scam include lenders who use overly pushy sales tactics to get you to commit or ask you to put up a deposit as a guarantee against the loan. If you come across a lender who doesn’t seem concerned about checking your credit or tells you they can give you a loan without doing any paperwork, those are big red flags that the lender may not be legit.

Related Article: How to Avoid Personal Loan Scams

5. Not Reading the Fine Print Could Cost You

Before you sign off on a personal loan, it’s best to take time to read over the details of the loan agreement. Something as simple as paying one date late could trigger a fee or cause a higher penalty rate to kick in, which would make the loan more expensive in the long run.

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Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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What Is Financial Planning and Analysis (FP&A)?

What Is Financial Planning and Analysis (FP&A)?

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Financial planning and analysis (FP&A) is the process businesses use to prepare budgets, generate forecasts, analyze profitability and otherwise inform senior management decisions of how to implement the company’s strategy most effectively and efficiently. The FP&A functions can be accomplished by an individual or a team working alongside other finance professionals such as the controller and treasurer and reporting to the chief financial officer (CFO). While FP&A is often performed by people with an accounting background, it differs from accounting by focusing primarily on forward-looking information as opposed to historical data.

Typical members of an FP&A team include financial analysts and one or more FP&A managers charged with coordinating the work of the analysts. In larger organizations, a director or vice president of FP&A oversees the overall process and strategic direction and communicates with the CFO, CEO and members of the board of directors.

FP&A Functions

To fulfill its function of providing information and insight connecting corporate strategy and execution, FP&A performs a wide range of activities. These can be divided into a few broad categories including planning and budgeting, forecasting and management reporting.

The central output of the FP&A process consists of long- and short-term plans. The job requires using financial and operational data gathered from throughout the company. A key part of the FP&A process is collecting and combining a wide variety of figures from operations, sales, marketing and accounting departments to produce a unified view of the entire business that can guide strategy decisions by senior executives and board members.

Producing budgets is a big part of the FP&A planning function. Budgets describe expectations for the timing and amounts of arriving income, cash generation, disbursements to pay bills and debt reductions. Budgets may be monthly, quarterly and annually. Often FP&A creates a rolling budget for the following 12-month period that will be reviewed, adjusted and extended at the end of each quarter. FP&A also creates income statements and cash flow statements.

One of the performance reporting functions of FP&A is identifying variances when actual numbers reported by business units don’t match up to the budgeted amounts. In addition to identifying and quantifying variances, FP&A can offer recommendations for strategies that could be used to bring actual results in line with expectations.

Reports and forecasts from FP&A may be presented to the board of directors, to the CEO or other senior executives or to outside stakeholders such as lenders and investors. At a strategic level, decision makers use these analyses to choose how best to allocate the company’s resources.

Public companies reply on FP&A to provide shareholders and analysts with guidance on revenue and profits for upcoming quarters and fiscal years. The accuracy of the guidance supplied to the markets can have a sizable effect on stock prices.

Decision Support

Along with the ongoing responsibility to produce budgets, plans and forecasts, FP&A may also be called upon to support specific management decisions. For instance, it might analyze a merger or acquisition proposal to enable management to decide whether to pursue it or not. Other special projects delegated to FP&A could include analyzing internal incompatibilities and bottlenecks and making recommendations about how to improve the company’s processes.

Initiatives to find ways to trim costs and make a business more efficient are also likely to involve input from FP&A specialists. Because it is in constant communication with all areas of the company in order to gather data for its budgets and plans, FP&A is well suited to optimization efforts.

FP&A’s responsibilities could extend to nearly any department in the company, from operations to marketing to finance. For instance, FP&A may conduct internal audits, research markets or evaluate individual customer profitability. FP&A could also be called upon to provide risk management insights or assess the financial impact of tax policy decisions.

Bottom Line

Financial planning and analysis involves gathering financial and other data from throughout a business’s various departments and using that to generate projections, forecasts and reports to help executives make optimum business decisions. Annual and quarterly budgets and forecasts, profit-and-loss statements, cash flow projections and similar decision-making tools are all produced by FP&A.

Tips for Small Business Owners

  • Financial planning and analysis is a job best handled by an experienced financial advisor. Finding the right financial advisor who fits your needs doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors in your area in five minutes. If you’re ready to be matched with local advisors who will help you achieve your financial goals, get started now.
  • The 80/20 Rule can help businesses gain insight into issues and opportunities so they can respond more effectively and efficiently. By identifying elements contributing most to a given outcome, businesses can better target resources to remove obstacles and exploit openings.

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Mark Henricks Mark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.
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S Corp vs. LLC: Which Is Best for Your Business?

S Corp vs. LLC: Which Is Best for Your Business? – SmartAsset

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So you own a business and you’re looking to incorporate. Two of the most popular business structure are the S Corp and the LLC. Which is best for your business can depend on many factors, such as what you do for a living, your tax situation and more. We’ll walk through the key characteristics of the two, and how to decide between them.

Why Incorporation Is Important

In most cases, the best reason to incorporate is liability. When you create a corporation, you separate your personal assets from your company’s assets. If someone wants to collect a debt or, at worst, file a lawsuit, they can only do so against the company and any assets in that company’s name. In turn, your personal savings remain protected. Both LLCs and S corporations can effectively protect your home life from a downturn in your professional world.

What Is An LLC?

A limited liability company, or LLC, is a type of corporate entity. It’s one of the most basic business types, and chiefly serves to separate the assets of the business owner(s) from the business itself.

If you opt to create an LLC, you will have created an entity that exists entirely separate from yourself. Clients will do business with this entity, which will have its own assets, debts and liabilities. If someone collects a debt or sues the LLC, they cannot pass that debt on to you.

What Is An S Corporation?

An S corporation is a tax status that allows a company to pass all profits directly through to its owner(s). This allows a small business to distribute profit-based income without double taxation.

Under the standard corporate form, known as a C corporation, a company first pays its corporate income tax. It then pays its owners and workers, who in turn pay personal income tax on that salary. This works well when a company functions entirely separately from the people who own and operate it.

However, in many small businesses, owners will take the profits entirely as their personal income. This creates a problem of double taxation, because in this case a business owner’s corporate income tax and personal income tax are one and the same. An S corporation allows the company’s owners to pay taxes only once via their personal income tax forms.

S Corp vs. LLC: Similarities and Differences

It is important to note that, because one is a corporate form and the other a tax status, LLCs and S corporations can, and do, overlap. To be clear, an LLC can file for S corporation tax status. Conversely, if you have S corporation tax status, you can also incorporate as an LLC. These forms do share a number of similar features, though, including:

  • Asset Protection – Both S corps and LLCs protect your personal assets from debt, bankruptcy, legal liability and other possible losses incurred by the corporation.
  • Double Taxation – All corporate profits pass along to the owners of LLCs and S corps without incurring corporate income taxes. This helps you avoid being taxed twice.
  • Multiple Members – LLCs and S corps can each have anywhere from one to multiple members, though an S corporation caps out at 100 shareholders. Further, only U.S. citizens and legal residents can be members of an S corporation.

In practice, one of the largest differences between LLCs and S corporations lies in how they assign payment. Under a default LLC operating as a sole proprietorship/general partnership, profits and expenses pass entirely through to the taxes of the individuals involved. Each participant both deducts business expenses and claims all profits on their personal income taxes. The LLC itself does not have any tax filings.

Under an S corporation, the members assign themselves a salary that the company pays out of its operating budget. This income must be reasonable for their position and industry. Then, after the company pays all expenses, it passes along any additional profits as a distribution to its members.

Here’s an example that illustrates these differences. Sue is a freelance programmer. She currently has an LLC that she operates. Last year she made $100,000 in income and had $10,000 in business expenses. Here’s how her tax situation plays out under the two statuses:

  • Sole Proprietorship LLC – Sue would claim $100,000 of personal income on her income taxes. She would reduce her taxable income by the $10,000 in expenses she incurred, leaving her with $90,000 in taxable personal income.
  • S corporation LLC – Sue has determined that a reasonable salary is $75,000. She would report that $75,000 as earned income. Her corporation would then pay the $10,000 in expenses and pass the remaining $15,000 as a profit distribution to Sue, who would report and pay taxes on it as corporate profit income.

Operating requirements for a multi-member S corporation are also significantly more complex than they are for an LLC. An S corporation must adopt bylaws which meet IRS guidelines and must have a corporate governing body that includes a board of directors and officers.

How Taxes Affect S Corps and LLCs

Most Americans pay a FICA tax of 7.65% of their income under $132,900, encompassing contributions to both Social Security and Medicare. Their employer pays the same 7.65% on their behalf. The self-employed, however, pay both sides of this tax, creating what’s known as the “self-employment tax.” This combines the aforementioned rates to the tune of a 15.3% tax on all self-employment income beneath the $132,900 limit.

The self-employment tax applies to all pass-through income as well. It does not apply to corporate profit distributions, though. The profit distributions will likely be taxed as ordinary income, while you may be able to classify them at the lower dividend income rate. In the end, you will not pay any payroll taxes on them.

S corporation members do not pay self-employment taxes on their profit distributions either. As a result, these members usually try to minimize the income portion of their earnings in favor of profit distributions. This is entirely valid as long as your income remains within a reasonable range. If you attempt to reduce your income too much, you will likely trigger an audit.

Continuing our previous example, Sue’s LLC earned $100,000 and spent $10,000 in business expenses last year. Under the S corporation form, Sue would save herself more than $2,000 in payroll taxes. Here’s how things would shake out:

  • Sole Proprietorship – Sue will claim the $100,000 of income and the $10,000 of expenses herself. This will lead to her having $90,000 of taxable income. She will pay the 15.3% self-employment tax on all of it, leading to $13,770 in self-employment taxes.
  • S Corporation – Sue takes a salary of $75,000. Her LLC will pay $10,000 in expenses and send her $15,000 as a corporate profit distribution. Sue and her LLC will pay the full combined 15.3% tax on her salary earnings, coming to $11,475. She will pay no payroll taxes on her profit distribution.

Bottom Line

In most cases, if you do business as an individual or a partnership, you should consider forming an LLC. This corporate form is inexpensive and highly flexible. Unless you anticipate major growth involving external shareholders and outside investment in the future, an LLC is a good way to protect your personal assets.

For an individual operator, the choice to elect S corporation tax status is largely a matter of accounting. If you would save a meaningful amount of money in self-employment taxes, it is likely worth electing S corporation status.

For a partnership, consider the operating requirements of an S corporation carefully. Would it significantly affect your business to adhere to bylaws and corporate governance? Do you have few enough members, and will you likely keep that membership group small? If so, once again, consider whether an S corporation would create enough tax savings to justify the costs of filing and paperwork.

Tips for Managing Your Finances

  • In-depth budgeting is a worthwhile strategy to adopt if you’re looking to improve your long-term finances. It may, however, be difficult to build a budget if you have little to no experience doing so. To get some help, stop by SmartAsset’s budget calculator.
  • Many financial advisors specialize in financial and tax planning for business owners. You can find a financial advisor today using SmartAsset’s financial advisor matching tool. Simply fill out our short questionnaire and you’ll be matched with up to three fiduciary advisors in your area.

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Eric Reed Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
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How to Add Your Business to Yelp and Optimize Your Listing

If you’re like most Internet users, you’ve used a business listing or directory website to find a restaurant, specialty store, tax preparer, or other service provider in your area.

Yelp, arguably the most popular business information directory for customer-facing services businesses, welcomes many millions of unique visitors per month. According to Expanded Ramblings, Yelp draws more than 175 million monthly visitors, with mobile traffic accounting for the majority.

Consumers use Yelp to search for service providers near them, navigating to its website or mobile app for a few minutes at a time and closing out when they’ve found what they’re looking for. But business owners have a much more intimate relationship with business directory sites like Yelp. For many small, independent outfits, business listings represent a significant source of new customers — far more than word of mouth marketing alone. If your small business doesn’t yet have a listing, it could be time to set one up.

Yelp for Business Owners: Does It Make Sense to List Your Company?

Yelp isn’t ideal for every type of business. Generally speaking, the most popular Yelp searches pertain to businesses that offer sensory experiences, such as restaurants, bars, venues, and specialized experience providers like tour companies. Searches for retailers — both independent and those tied to a larger chain — are popular as well.

Other popular Yelp categories include:

  • Hotels and travel services
  • Beauty shops and spas
  • Automotive
  • Home services, such as house cleaning, plumbing, and general contracting
  • Health and medical

Yelp also segments listed companies by location: county, municipality, and sometimes neighborhoods (mostly in bigger cities). If your business lives and dies by the number of people who walk into its physical location — for instance, you run a restaurant or retail outlet that does a large amount of business through a storefront — a business directory listing is basically mandatory.

On the other hand, if your company doesn’t have a storefront or doesn’t rely on one to drive sales — for instance, if you sell things online — then other means of driving customers to your business, such as social media marketing techniques or a listing on an e-commerce website like Etsy, are likely to offer a better payoff.

Pros of Listing Your Business on Yelp

Listing a business on Yelp has some key benefits, including legitimacy for businesses who’ve claimed their listings, high search rankings for Yelp business profiles and business owner accounts, and value for customer research.

1. Claimed Listings Confer Legitimacy

Regardless of how much effort you put into optimizing and curating it, the simple act of claiming your business directory listing can change how prospective customers see your business. On most business directories, including Yelp, unclaimed listings are plainly displayed as such. To the man or woman on the street, a highly visible prompt to claim a particular listing — which takes a matter of minutes — doesn’t inspire confidence that the listed business is well-run, or that the owner cares about courting new customers.

Although this is an admittedly subjective measure of an owner’s buy-in or a business’s quality, I know that I personally shy away from businesses with unclaimed directory listings unless they’re backed by a recognizable brand or I’m familiar with them by other means, such as word of mouth.

2. Listings Typically Rank Well in Organic Search (Good for SEO)

Although the details of popular search engines’ algorithms are proprietary and ever-changing, it’s clear that online directory listings rank highly in organic search results — the lists you see when you type a search term into the Google or Bing search bar.

The upshot of this: Unless its name can easily be confused with common or generic terms like “Tasty Pizza,” a typical business’s Yelp listings are likely to appear on the first results page of a search engine — an important point, since most searchers never make it to subsequent results pages. And because Yelp is a well-known and ostensibly unbiased source of information, searchers who want to get the unvarnished truth on a given business are likely to click on the results for its listings.

3. Consumers Rely Heavily on Directory Listings for Research

Despite a recent study reported by PCMag that found roughly 40% of online reviews to be bogus, 60% of consumers consider online review sites as useful as recommendations from real-life acquaintances, according to a 2017 ReportLinker survey. In an increasingly jaded world, that’s a pretty high mark — and a strong case for creating and maintaining listings on popular directory sites.

Cons of Listing Your Business on Yelp

Listing your business on Yelp does have some drawbacks, including a significant time component, limited control over reviews, and the potential for abuse.

1. Maintaining Your Business Profile Takes Time and Resources

Claiming or creating a business listing doesn’t take much time or effort. You can handle either in a spare moment.

However, optimizing and maintaining your listing is not so easy. Even free activities such as uploading photos, analyzing customer data, and responding to reviews all take time that you likely don’t have as a busy entrepreneur. If you have other social media accounts or an online store, your digital responsibilities could become overwhelming, diverting your attention from more immediate business needs.

One solution is to hire a part- or full-time marketing employee or social media manager, but that requires a new addition to the payroll — not always a realistic proposition for cash-poor small business owners. Another option is to retain an outside firm to handle your digital marketing needs, although that can be just as expensive as hiring a part-time employee.

If you currently lack the time or resources to produce a first-rate business directory profile, there’s no shame in concluding that it’s better to wait until you do have those luxuries. If you can’t do it right, don’t feel pressured to do it at all.

2. May Not Display All Users’ Yelp Reviews (or Any at All)

In the late 2000s and early 2010s, some online business directories — particularly Yelp — took lots of blowback for failing to do their part to contain the untold millions of fake reviews spreading across the Internet. Fake directory reviews came in several different flavors, but it was particularly common for listed businesses to purchase positive reviews — typically with gushing praise and the highest possible ratings — for their own listings, or post positive reviews themselves using dummy accounts. In competitive markets, less scrupulous companies likewise had no qualms about posting fake negative reviews on competitors’ listings.

Although they haven’t totally eradicated fake reviews, online directory sites have definitely cracked down on the practice. In fact, the crackdown has been so good that some legitimate reviews don’t make it through the directories’ quality filters, which are controlled by proprietary algorithms similar to those used by search engines.

If you want the opportunity to see — and ensure that your customers see — every review of your business, good or bad, this is a big drawback. And although the particulars of directories’ visibility-controlling algorithms aren’t public, one can envision an algorithm deciding that an overly enthusiastic but legitimate positive review is a fake while allowing a tepid review to be seen.

3. Directory Listings Contain Sensitive Information

If you need your customers to come to your physical place of business, they need to know where it’s located and how to contact it. A restaurant can’t survive if no one’s coming in to eat or calling to order takeout.

On the other hand, there are times when it’s better to conceal your business location, and possibly contact information, from the public. For instance, say you provide white-collar services, such as accounting or legal advice, to local businesses — but you typically visit with clients at their offices and don’t want them to know you work out of a home office or coworking hub. Listing your home address as your business address reveals where you live, while listing a coworking space can lead judgmental clients or your competitors to conclude that you can’t afford a “real” office.

Note that if an unclaimed listing already exists for your business, you may need to claim it and edit out sensitive information or request its removal altogether.

4. Your Listing Could Attract Abuse

Even if you’re not paranoid about people knowing where you live or looking down on you for basing your company out of a coworking space, there’s another reason to eschew a public business directory listing: the prospect that your listing could become a venue for abusive or hateful reviews.

Because business directory sites allow rank-and-file Internet users to post reviews on a given business’s listing without proving that they’ve actually interacted with the company in real life, it’s relatively easy to organize a negative publicity campaign utilizing Yelp or another directory site that permits user reviews. (Directories occasionally step in to delete or moderate obscene or threatening reviews, particularly in response to user flags, but you shouldn’t bank on this to single-handedly keep vitriolic reviews off your listing.)

These negative campaigns typically center around a major service gaffe or prominent public support for a controversial political position. A great example: In early 2015, the owners of a small-town Indiana pizzeria called Memories Pizza made headlines when they said they would follow the letter of the state’s recently passed Religious Freedom Restoration Act, which many observers interpreted as giving businesses wide latitude to discriminate on the basis of sexual orientation. The ensuing backlash saw thousands of sarcastic, occasionally obscene comments posted on Memories Pizza’s website. The Indianapolis Star reported that the shop closed shortly thereafter, with the owners citing safety concerns.

In the past, lower-profile incidents of a similar nature have hit businesses expressing opposition to state minimum wage increases or support for creationism and intelligent design. To be fair, some argue that the old saying, “All press is good press,” applies here, as negative directory campaigns sometimes spark a backlash that pays off for the affected business. It’s worth noting that, as reported by Forbes, Memories Pizza raised more than $800,000 in a GoFundMe crowdfunding campaign in the four days following its closure.


How to Claim or Create Your Yelp Listing

Yelp uses publicly available and user-submitted information to generate listings for operational businesses. If you’ve been open for some time, there’s a good chance you’re already in Yelp’s database. Yelp allows the legitimate owners of such a business to “claim” their existing profile.

Claiming your profile provides certain privileges:

  • Updating Listing Information. You can edit critical information about your business, including its physical address, phone number, business hours, and website address. This is important because Yelp doesn’t guarantee that its unclaimed business listings are accurate.
  • Adding Photos and Links. You can upload photos of your storefront, merchandise, and the inside of your business. This is great for restaurant owners who want to show off tasty-looking menu items, or service providers who want to display photos of a van or truck bearing a distinctive logo, which users are more likely to recognize than a faceless storefront or generic uniform.
  • Interacting With Reviewers. Claimed profile owners can respond to user-generated reviews, either by sending the user a private message through Yelp’s system or making a public post on the comments feed. This is particularly useful for owners who want to address negative feedback from users and contain issues that could hurt business. Note that you can’t edit or delete negative reviews, which might call Yelp’s objectivity into question, but you can respond to them.
  • User Views and Leads. Yelp tracks your listing’s page views and displays this information to verified business owners. It also creates Customer Leads, which provide hints about how customers are interacting with your business. Data sources for Customer Leads include:
    • Mobile check-ins
    • Mobile calls made directly to your business using Yelp’s on-site click-to-call feature
    • Map views
    • Click-throughs from your Yelp listing to your company website
    • User-uploaded photos on your business page
    • Bookmarks placed on your listing using Yelp’s bookmark feature

Claiming an Existing Business Listing

To get started, click Yelp’s “Claim Your Listing” button, then type in your exact business name and city. This takes you to a results page that displays similarly named businesses nearby and indicates whether they’ve been claimed. If your business is listed, it should say that it hasn’t been claimed.

To claim your listing, you need to create a Yelp account with your first name, last name, email address, and password. Make sure the phone number on your listing is accurate, then click “Call Me Now.” This prompts Yelp to robo-call the listed business number with a unique verification code.

Once you receive that code, you can enter it into the proper field and start editing your listing. If you’re unable to complete the phone verification process for any reason, you can also manually verify your identity as the business owner by emailing Yelp’s support team.

Creating a New Business Listing

If your business doesn’t have an existing listing to claim, you need to create one. At the bottom of the business search results page, click the “Add a Business” button and enter as much information as possible into the fields on the next screen: your business name, exact address, phone number, and website at a minimum.

After you submit this information, it takes Yelp some time — usually no more than two business days — to verify that the business exists and add it to its listings. Once added, you can search for it as described and claim the listing as your own.


How to Optimize Your Yelp Listing

Claiming or creating a Yelp listing is an important first step. However, building a top-notch Yelp presence takes time and effort.

These tips and resources are useful as you work to set your listing apart from your competitors’:

1. Fill Out Your Profile Completely

The more complete your listing is, the better it looks to Yelp’s internal algorithm — and the higher it’s likely to appear on Yelp’s search results pages. There’s no reason not to fill out your profile completely.

2. Use Google Keyword Planner or a Similar Tool

Yelp listings are visible to Google and other search engines, so it pays to use a keyword planning tool — such as Google Keyword Planner, which requires a free Google AdWords account to use — to identify keywords that relate to your company.

For instance, if you specialize in Neapolitan-style pizza and discover that your company website ranks highly for the term “Neapolitan pizza,” make sure that keyword appears at least once in your business listing.

3. Add Lots of Photos

Photos breathe life into your Yelp listing and boost customer engagement. An internal Yelp study found that consumers linger on photo-enhanced Yelp pages for two and a half times as long than on pages with no photos.

Photos are especially useful for showing off your logo — particularly if it’s already plastered on your company’s vans or outdoor advertising properties, and thus recognizable to prospective customers — as well as for highlighting particular products, especially food. If your business is open to the public, include pictures of its interior and outdoor seating areas to give visitors a sense of what to look forward to.

4. Solicit and Respond to Customer Reviews

Yelp frowns on businesses that court reviews by giving away free stuff or offering special deals to those who post positive reviews — it sees this behavior as a form of manipulation. However, you can skirt this prohibition and stay in Yelp’s good graces by placing the Yelp logo in a visible location in your store (such as at checkout or on a menu), linking to your Yelp page from your company website, and straight-up asking for reviews with no strings attached.

Separately, be sure to respond to detailed, thoughtful reviews, whether they’re good or bad. It’s especially important to respond to negative feedback, which shows other page visitors that you’re willing to address service issues and other problems. Just remember to follow social media etiquette best practices at all times.

5. Try Yelp Deals and Gift Certificates

Yelp Deals and Gift Certificates can help you monetize your Yelp listing and generate buzz around your business. Like Groupons and other social deals, both offer heavy discounts on transactions with the issuing business. Yelp Deals focus on discounts for specific local services — for instance, “20% off a haircut-and-shave package.” Yelp Gift Certificates offer across-the-board discounts — for example, “$20 in merchandise for $10.”

In both cases, Yelp takes a cut of the proceeds: 30% of face value for Deals and 10% of face value for Gift Certificates, subject to change with company policy.

6. Consider Buying Ads

If you can afford another line item in your marketing budget, consider buying ad space on Yelp. Yelp ads appear above the first non-promoted listing in Yelp’s internal search results pages, similar to the paid search ads you see on Google and other search engines.

Although they’re clearly marked “Ad,” they’re highly visible and appear only with relevant search terms, so they’re great for attracting people actively searching for what you have to offer. And because they effectively give you priority placement over competitors, they’re great if you operate in a crowded market.

Costs vary widely depending on your location and industry, but expect to spend at least $50 per month for a high-visibility ad campaign.


Final Word

Yelp isn’t the only business listing site worth looking into. There are dozens of other sites that could get your company’s name in front of potential customers. Listings on some of these sites are free to claim, while others require a one-time or monthly fee. Each has its own set of benefits and drawbacks.

Rather than spend significant amounts of time and marketing dollars going after them all, take a weekend or evening to research the options that work best for your business’s needs. Don’t be afraid to talk to other business owners in your industry, even if you’d normally be reluctant to share trade secrets with them. After all, with everything else you need to keep track of, the last thing you need is to make an investment with little to no chance of paying off.

Source: moneycrashers.com

Are Social Security Disability Benefits Taxable?

Are Social Security Disability Benefits Taxable? – SmartAsset

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Social Security benefits, including disability benefits, can help provide a supplemental source of income to people who are eligible to receive them. If you’re receiving disability benefits from Social Security, you might be wondering whether you’ll owe taxes on the money. For most people, the answer is no. But there are some scenarios where you may have to pay taxes on Social Security disability benefits. It may also behoove you to consult with a trusted financial advisor as you navigate the complicated terrain of taxes on Social Security disability benefits.

What Is Social Security Disability?

The Social Security Disability Insurance program (SSDI) pays benefits to eligible people who have become disabled. To be considered eligible for Social Security disability benefits, you have to be “insured”, which means you worked long enough and recently enough to accumulate benefits based on your Social Security taxes paid.

You also have to meet the Social Security Administration’s definition of disabled. To be considered disabled, it would have to be determined that you can no longer do the kind of work you did before you became disabled and that you won’t be able to do any other type of work because of your disability. Your disability must have lasted at least 12 months or be expected to last 12 months.

Social Security disability benefits are different from Supplemental Security Income (SSI) and Social Security retirement benefits. SSI benefits are paid to people who are aged, blind or disabled and have little to no income. These benefits are designed to help meet basic needs for living expenses. Social Security retirement benefits are paid out based on your past earnings, regardless of disability status.

Supplemental Security Income generally isn’t taxed as it’s a needs-based benefit. The people who receive these benefits typically don’t have enough income to require tax reporting. Social Security retirement benefits, on the other hand, can be taxable if you’re working part-time or full-time while receiving benefits.

Is Social Security Disability Taxable? 

This is an important question to ask if you receive Social Security disability benefits and the short answer is, it depends. For the majority of people, these benefits are not taxable. But your Social Security disability benefits may be taxable if you’re also receiving income from another source or your spouse is receiving income.

The good news is, there are thresholds you have to reach before your Social Security disability benefits become taxable.

When Is Social Security Disability Taxable? 

The IRS says that Social Security disability benefits may be taxable if one-half of your benefits, plus all your other income, is greater than a certain amount which is based on your tax filing status. Even if you’re not working at all because of a disability, other income you’d have to report includes unearned income such as tax-exempt interest and dividends.

If you’re married and file a joint return, you also have to include your spouse’s income to determine whether any part of your Social Security disability benefits are taxable. This true even if your spouse isn’t receiving any benefits from Social Security.

The IRS sets the threshold for taxing Social Security disability benefits at the following limits:

  • $25,000 if you’re single, head of household, or qualifying widow(er),
  • $25,000 if you’re married filing separately and lived apart from your spouse for the entire year,
  • $32,000 if you’re married filing jointly,
  • $0 if you’re married filing separately and lived with your spouse at any time during the tax year.

This means that if you’re married and file a joint return, you can report a combined income of up to $32,000 before you’d have to pay taxes on Social Security disability benefits. There are two different tax rates the IRS can apply, based on how much income you report and your filing status.

If you’re single and file an individual return, you’d pay taxes on:

  • Up to 50% of your benefits if your income is between $25,000 and $34,000
  • Up to 85% of your benefits if your income is more than $34,000

If you’re married and file a joint return, you’d pay taxes on:

  • Up to 50% of your benefits if your combined income is between $32,000 and $44,000
  • Up to 85% of your benefits if your combined income is more than $44,000

In other words, the more income you have individually or as a married couple, the more likely you are to have to pay taxes on Social Security disability benefits. In terms of the actual tax rate that’s applied to these benefits, the IRS uses your marginal tax rate. So you wouldn’t be paying a 50% or 85% tax rate; instead, you’d pay your ordinary income tax rate based on whatever tax bracket you land in.

It’s also important to note that you could be temporarily pushed into a higher tax bracket if you receive Social Security disability back payments. These back payments can be paid to you in a lump sum to cover periods where you were disabled but were still waiting for your benefits application to be approved. The good news is you can apply some of those benefits to past years’ tax returns retroactively to spread out your tax liability. You’d need to file an amended return to do so.

Is Social Security Disability Taxable at the State Level?

Besides owing federal income taxes on Social Security disability benefits, it’s possible that you could owe state taxes as well. As of 2020, 12 states imposed some form of taxation on Social Security disability benefits, though they each apply the tax differently.

Nebraska and Utah, for example, follow federal government taxation rules. But other states allow for certain exemptions or exclusions and at least one state, West Virginia, plans to phase out Social Security benefits taxation by 2022. If you’re concerned about how much you might have to pay in state taxes on Social Security benefits, it can help to read up on the taxation rules for where you live.

How to Report Taxes on Social Security Disability Benefits

If you received Social Security disability benefits, those are reported in Box 5 of Form SSA-1099, Social Security Benefit Statement. This is mailed out to you each year by the Social Security Administration.

You report the amount listed in Box 5 on that form on line 5a of your Form 1040 or Form 1040-SR, depending on which one you file. The taxable part of your Social Security disability benefits is reported on line 5b of either form.

The Bottom Line

Social Security disability benefits aren’t automatically taxable, but you may owe taxes on them if you pass the income thresholds. If you’re worried about how receiving disability benefits while reporting other income might affect your tax bill, talking to a tax professional can help. They may be able to come up with strategies or solutions to minimize the amount of taxes you’ll end up owing.

Tips on Taxes

  • Consider talking to a financial advisor as well about how to make the most of your Social Security disability benefits and other income. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s financial advisor matching tool can help. By answering a few simple questions you can get personalized recommendations for professional advisors in your local area in minutes. If you’re ready, get started now.
  • While you don’t have to reach a specific age to apply for Social Security disability benefits or Supplemental Security Income benefits, there is a minimum age for claiming Social Security retirement benefits. A Social Security calculator can help you decide when you should retire.

Photo credit: ©iStock.com/kate_sept2004, ©iStock.com/JannHuizenga, ©iStock.com/AndreyPopov

Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She’s worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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