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Wednesday, July 15, 2015

Two Pearls of Business Wisdom - Alternative Financial Companies and Buying Out Your Partner













An alternative financial company generally refers to credit unions. A credit union is non-profit organization that differs from a traditional financial institution (i.e. bank) in that the credit union's owners are account holders in the credit union. A credit union's primary goal is to improve its members' financial stability by allowing them to borrow money at low interest rates. Once an individual deposits money into his or her account, the individual becomes part owner of this union and shares in its profits.

Like traditional financial institutions, alternative financial companies offer checking and savings accounts, credit cards, and loans. However, these unions generally have a lower profitability than banks, which indicates that credit unions are more concerned with the well being of its members. Credit unions also enjoy federal and state tax exemptions provided to non-profit organizations, unlike traditional financial companies.

Membership to an alternative financial company is regulated by government standards. Membership is restricted to defined geographic locations, members of specific non-profit associations, employees of specific companies, or certain occupations. In most cases, once an individual becomes a member of this union, he or she is considered a member for life. Membership is not revoked when the individual moves, changes jobs, or discontinues membership from an association. However, if an individual decides to cancel membership with the credit union, there is no guarantee that he or she will be able to regain membership into the alternative financial company.

Buying out your partner generally refers to business owners looking to purchase another partner's shares of the same business. A partner may choose to leave a business if he or she is moving, retiring, or otherwise no longer be a part of the business and its profits. Before deciding whether or not to buy out a partner, a business owner must consider several factors

The first thing to consider before buying out your partner is the value of the partner's share of the business. Some partnerships have business agreement contracts that outline the duties and obligations of each partner. These agreements may also indicate a pre-determined value in the case of a buy out. Businesses that did not determine the selling price of a partner's share can use an asset valuation (current market value minus current market debt) or rely on the business's earnings to settle a price for the buy out.

Another factor to consider before buying out your partner is how to finance the buy out. Most lenders do not provide loans specifically for buy outs, but they do offer loans that can be used for any business purpose. For large loans, lenders usually require applicants to supply personal and business financial documents, a business plan, and credit reports. If a business has a poor financial history, it may be unable to obtain a large loan at a low interest rate.

Please visit these links for more information on Limited Liability Companies and this link for information on Limited Business Partnerships

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When the Fraudster Is Your Business Partner













Too often, I see partnerships end with costly devastation. To find out that your trusted partner was misappropriating company funds for their own personal gain has to be the worst feeling of all. It's hard enough to find out an employee was embezzling money, but a partner is on a completely different relationship level.

If you or anyone you know is in or is entering into a partnership make sure they start it by following some foundation rules.

Don't just download an operating agreement from the Internet. Your operating agreement is an agreement among all parties and should be drafted or at least reviewed by an attorney.

1. If you don't have it drafted by an attorney, make sure you aren't leaving items out just because you don't want to hurt your Partners feelings.

2. Have your operating agreement and fraud policy notarized.

3. Some important items to discuss with your partner and include in your operating agreement.
a. Who is going to run the business?
b. What specific job does each partner have?
c. How often are the meetings going to be?
d. How much will the salaries be?
e. How will you address raises?
f. What benefits will be covered?
g. Are those benefits for employees as well?
h. How much financial power or obligation does each partner have?
i. Whose credit is going to be used? (If you don't want your partner to apply for company credit using your information without your knowledge, it would be a good idea to include this.)
j. Can one partner open or close a bank account or do they all need to do it together?
k. Are there going to be ATM or credit cards provided and if so, how many?
l. What is acceptable or not to purchase using the business credit or ATM card?
m. What financial responsibilities does each partner have?
n. If the partnership doesn't work, how do you exit?
o. If the partner commits fraud, what will happen to their portion of the partnership?

If your company whether a partnership or not, has employees but does not have a fraud policy in place, it could end up costing you more in the long run. A good defense attorney could argue that the employee or partner didn't know what they were doing was wrong because no one told them not to do it. A fraud policy should be signed by the employer and employee or all partners and it should clearly state what actions the company will take against fraud. It should also include what it considers to be fraudulent and the consequences of the fraud. A fraud policy signed by both partners and then notarized will give you more credibility if you ever need to prove that a partner was misappropriating assets.

Some major "Dont's" in a partnership: The second you see it happening, have a board meeting and put a stop to it!

1. Never allow any partner to use the business account (bank and credit) as a personal checkbook.
2. Don't allow the partner to apply for credit in your name.
3. Do not allow excuses for missing or lack of data.
4. If a partner is using company funds for personal use don't ignore it, discuss it and end it immediately.
5. Don't get too busy not to look at the books.
6. Don't ignore your gut instinct.
7. Don't ignore unhappy employees.

What your partnership needs to be doing:
1. If you are a silent partner, you MUST be involved in monthly meetings to review financials.
2. Have an internal control system set in place that shows accountability and procedures that back up all activity.
3. Have your procedures mandate signatures by authorized partners upon reviewing important data.
4. Any errors or questions regarding the business operation and financials are addressed immediately and do not linger on.
5. Listen to your employees. Sometimes they are afraid to talk because of retaliation, especially from a bully.
6. If a partner needs to borrow money, write-up a loan agreement or an employee advance agreement and have all partners sign it.
7. Know how the partnership is doing.
8. Have a fraud hotline or "hot" email address where anyone can contact you with concerns without fear of retaliation.

If you know someone who is already in a partnership, it's never too late to start implementing foundation rules and procedures. It could be the difference between running a successful partnership or finding out you were a victim of fraud.

Julie A. Mucha-Aydlott is a Certified Fraud Examiner and owner of Business Fraud Prevention, LLC. Visit - http://www.businessfraudprevention.org to protect your small business from fraud. Start now by gaining control of your internal controls and download our free risk assessment PDF file at - http://www.thevitalicsystem.com/free_risk_assessment_form.html

Copyright 2012 - Julie A. Aydlott, CFE All Rights Reserved Worldwide.

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How to Manage a Better Credit Score With Marriage and Issues With Name Changes








Marriage changes the life in different ways and some people like to change their name slightly and add the better half's name as a suffix or prefix. Here you have to be a bit careful that you may lose your credit history because of the change of the name. So when you change your name for any reason take care that it is reflected in the accounts so that credit sheet will be updated accordingly.

If you open joint account during marriage make sure that the information is passed to credit reporting agencies. If you are a women and changed your name during the marriage you have the right to have credit report on your own name or on new name or on both names. Decide first on what name you want your credit information report and request the agency as per that desire.

Your marital status shall not be an obstacle in getting the loan as per the rules and no one shall ask about your spouse income when your income is sufficient to get the required loan. If your partner has a legal judgment against him or her it will be reflected on other one credit report and you are liable to pay the debt made with joint accounts during or after the marriage.

If you are not sure about the abilities of money management of your partner then try to have your own credit ratings and reports and make it independent from the partner. This will help you in making your personal report better and it will not be affected because of the other partner mismanagement. Any way divorce is not going to make your financial report better and it shall not be the option to be used as a tool for making better credit report. Put all your incomes together,plan all your commitments and debt to be paid by sitting together and this shall make the life happier. The courts divides debt between the partners and until then creditors will be keep calling and troubling about the commitments that your partner has made.

My Money and Finance blog deals with different topics of credit score issues like Highest Credit Score, savings for retirement and Check My File. It is a complete blog about money management. I welcome your comments on it further.

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