Net pay
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[quote=American Flag]
[quote=LoveInvesting]Hulk, you are paying 55k or more annually for a full time assistant? Wow, that seems high. Mine is around 41k and very generous at that. American Flag makes some excellent points. It is all about revenue, ringing the bell, making it rain. The net pay will flow from that, and your lifestyle will be good whether indy or edj. I would add that staying with your first or second firm for a very long time helps too. These FA's who are constantly switching every five or seven years, to presumably get a big check each time, will see erosion of their clients and erosion of their gross.[/quote]
Absolutely true, I have noticed when a Rep hits three or more firm changes, there business is burnt.
Therefore, if you are thinking making a change, try as much as possible to make sure it's the right move. There is no way to know for sure, only time will tell. But the decision to leave is irrevocable, you can't go back. That's why I'm trying to talk back to some of the facile arguments given here as to why Independent is better. It is in some cases, but not in others.
Regarding taxes, last I remember EJ really trimmed back what was eligible for the Business Expense Plan. So more is deductible if you are an Independent contractor. However... tax preparation is very complicated, and if you have it done professionally you're looking at $2500 a year. And you have to take the taxes out yourself, which is a pain. I suspect the math on taxes works in your favor as an Indy, but it is more work. The Jones way is nice and simple, a net paycheck.
This brings me to what I think is the biggest advantage to being Indy, but I am not going to talk about it here, because I have not yet tried it and made it work. When I do, I'll share the idea.
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I would disagree with this. I record my income and expenses in Quickbooks, which is basically just keeping a copy of my checkbook register. At year end the accountant has to transfer that to a schedule C. I would argue that once you figure out how taxes are calculated, making estimated payments is easier than withholding at year end. It allows me to pay taxes more accurately in the current year, and I get to keep the funds in my account throughout the entire quarter, rather than sending them out monthly with each paycheck. My return is prepared by a quality CPA firm and I pay $500/year, which includes my personal return.
Have all of you independents forgotten one of the biggest benefits??? Ownership of your practice. You do not and never will have ownership at Jones. A book of business has legitmate equity value from 1 to 3 times your trailing 12 depending on your practice.
LP is exactly what it says, LIMITED partnership.
Are you selling it the day after you've completed the transition? Next week? Next month?
What if it is twenty years or more? Then growth of the book is more important than the notion of selling it.
I beg to differ American...the value of your book NOW needs to be considered. I have a buy/sell agreement with my partner that spells out the value of my book of business and the proceeds are payable to my estate in the event of my untimely death. If I were still at EJ, my clients would revert to EJ and my spouse would receive Obama..(0).
[quote=American Flag]
Personal, corporate and payroll taxes?
[/quote] Just a schdule C because I'm an LLC. Most tend to over-do structure in my opinion, had the max SS taxable income is already a reasonable portion of my overall total, so to justify a smaller figure would be pushing it IMO, and in the opinion of my tax advisor. Plus to your point the tax savings is eaten by additional admin. expense.
[quote=Donedrinkin]
I beg to differ American...the value of your book NOW needs to be considered. I have a buy/sell agreement with my partner that spells out the value of my book of business and the proceeds are payable to my estate in the event of my untimely death. If I were still at EJ, my clients would revert to EJ and my spouse would receive Obama..(0).
[/quote]
So you and your partner have bought life insurance, huh? Wow, we are really screwed over here. They won't let us buy life insurance...
[quote=Incredible Hulk]
[quote=Donedrinkin]
I beg to differ American...the value of your book NOW needs to be considered. I have a buy/sell agreement with my partner that spells out the value of my book of business and the proceeds are payable to my estate in the event of my untimely death. If I were still at EJ, my clients would revert to EJ and my spouse would receive Obama..(0).
[/quote]
So you and your partner have bought life insurance, huh? Wow, we are really screwed over here. They won't let us buy life insurance...
[/quote]
I'm not sure you're following Hulk. When an Indy dies, x% of revenue goes to his/her spouse over a specified period of time. Since I have a clean book that is very efficient, systemetized, and recurring revenue based, 25% of all of my revenue goes to my spouse for 1.5 years. In other words she gets 150% of my gross payout from the BD, i.e. 85% of my overall gross revenue. Each advisor gets to structure their own deal (while living) based on the successor's perceived value of the business, and gets to determine who succeeds him/her, rather than the b/d firm.
This is certainly worthy of serious consideration when compared to EJ or another wire/regional firm.
"So you and your partner have bought life insurance, huh? Wow, we are really screwed over here. They won't let us buy life insurance..."
Shhhhhh Hulk..the adults here are trying to have a conversation.
My mistake, I assumed you funded your buy sell agreement with life insurance. You know, the way we typically advise other small businesses with partners to. I assume that since you don't fund your own buy/sell with insurance then you don't advise other businesses to use life insurance either.
I also didn't realize that all Indy's were partnered up either. Hmm, who knew?
[quote=Incredible Hulk]
My mistake, I assumed you funded your buy sell agreement with life insurance. You know, the way we typically advise other small businesses with partners to. I assume that since you don't fund your own buy/sell with insurance then you don't advise other businesses to use life insurance either.
I also didn't realize that all Indy's were partnered up either. Hmm, who knew?
[/quote]
Well, I suppose I could buy insurance on the guy I am in line to replace if I wanted to, but why since it's our business is all cash flow and no inventory? Plus if he decides to do a crappy job with clients and they all bail, it's his estate's loss, and not mine.
If I wanted to do it the Jones way I suppose I could write out an agreement that says "my BD can have all of my clients and assign them to whoever they feel like it". Sorry Jones just can't match the Indy world on this one.
The question is: how long are you willing to wait for the guy you are replacing to leave or die? I guess I am on board with the concepts of being indy and being able to own your book and sell it, but really, who among the newbies has the resources and willingness to actually buy a book and pay for it???
[quote=LoveInvesting]
The question is: how long are you willing to wait for the guy you are replacing to leave or die? I guess I am on board with the concepts of being indy and being able to own your book and sell it, but really, who among the newbies has the resources and willingness to actually buy a book and pay for it???
[/quote]
You are looking at it the wrong way. The ability to name a successor is is a benefit to the seller, not the buyer. As far as buying a business goes, through transition or emergency succession, as I said earlier it's all cash flow, so the cash flow can be shared between the buyer and seller to fund the purchase. I'm not sure why this is so hard to understand.