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Limits on Tax Deduction of Business Losses
Starting a business has the obvious aim of generating income, but you might experience losses in some years. Although spending more than your revenue is particularly common in the initial year of operation, it can occur whenever unusual circumstances arise that reduce profitability below zero.

Business profits are reported on the personal income tax returns of proprietors, partners in a partnership and shareholders of S-corporations. These are the most common business structures for tax purposes. Business losses are typically deducted on the income tax returns of owners. A business loss offsets income from other sources, thus reducing your overall taxable income. However, the amount of business loss an owner may deduct is limited by at-risk rules.

This means that you must identify how you paid for a business loss. You are at risk for the amount of personal funds invested in the enterprise as well as debt for which you're personally liable or have pledged property to secure a loan (other than property already used by the business).

You're only allowed to deduct the losses of a business to the extent you lost your own money and are therefore at risk of not getting it back from future profits. Moreover, a loss you can deduct reduces your at-risk amount in the business for the subsequent year. Fortunately, a loss denied from not being at risk carries over to succeeding years for deduction when you are personally at risk. Determining your at-risk amount is therefore an annual process to conduct with your tax accountant.
How to Win Big in Today's Economy

The altered economic landscape presents innovative and nimble businesses with opportunities to thrive.

Find out how by requesting my free report "How to Win Big in Today's Economy."

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5 Secrets to Getting Great Referrals
Referrals are the most reliable low- or no-cost way to generate the highest-quality leads while building a steady stream of business. Here are the best secrets to receiving (and requesting) great referrals.

Customer referral program. Creating a self-sustainable referral program includes more than simply asking for referrals. The core of successful referral programs is making the request when the customer is in the "moment of delight" after a job well done. Remember to not just incentivize clients to give the initial referral, but, more importantly, to also incentivize the new referral to act.

Nextdoor. Neighbors ask for referrals for anything from contractors to mechanics on this social community platform. Create your listing in the Nextdoor business directory and search for posts that match your offerings. Only reply offering your services in the comments. Any self-promoting posts will be removed.

The "passive referral." Gain online visibility and credibility by asking for a "passive referral." Each "like" on your business page will boost your online rankings and search engine optimization. Offer a small one-time point-of-purchase discount for customers to "like" your business page or write a quick online review.

Be shareable. Make it easy for clients to show potential referrals your quality of work or product. Taking videos or pictures while a job is in progress and requesting user-created reviews of your product make for an easily edited video that can be shared and showcased across the web. Your client will enjoy the HGTV-style video for years to come.

Create an ecosystem. Building relationships with industry partners with complementary products or services creates a network of trusted vendors for clients while also creating a seamless referral system for you. That's a rare "win-win-win" scenario for you, your partners and your clients.
Worth Reading
Four Simple
Ways to Find
By Brad Sugars
Finding the right customers to quick-start
cash flow is the first priority when
starting any new business. It doesn't
take a well-lined purse if you play it
smart and focus on targeted touch
points through paid media and
industry networks. Especially relevant
for service-based industries, here
are four simple ways to start
building a profitable Rolodex.
Read More
3 Simple Steps to Manage Stress–and Save Your Business in the Process
By Larry Robertson
The complexities of today's unique stressors wear on even the most rational-minded executive. While carrying on is key to survival, failure to acknowledge and manage stress levels creates a chain reaction of adverse mental and physical side effects. Effectively managing this starts from the top down. From how to communicate to how to make the tough calls, here's a gentle guide to help bring back balance.
Read More
The Connection between Sleep, Leadership
and Business Success
Nearly 30 percent of Americans get less than six hours of sleep. When focusing in on leaders, the situation becomes staggeringly worse, with nearly 45 percent considered sleep-deprived.

Researchers are reminding us about the repercussions of skimping on sleep and sending an alert message to corporations that it's time to make sleep a priority. Here's how even a few hours of lost sleep is adversely affecting you, your team and your bottom line:

Health. Increased blood pressure and susceptibility to infection leads to increased healthcare visits and employee absenteeism. The World Health Organization (WHO) even classifies occupations that require night shifts as a carcinogen.

Cognitive function. Impaired memory and focus, poor judgment and increased errors: the cognitive cost of sleep loss can make or break job performance. The correlating decrease in creativity and innovation could cost your business millions in lost revenue.

Mood and engagement. Difficulties regulating emotional responses, greater levels of stress and increased irritability negatively impact employee engagement levels, leading to lower overall job satisfaction. This goes further, impacting the quality of customer service your team is able to provide.

It's a viral culture. Leaders set the tone for accepted (and expected) organizational behavior. When a manager is sleep-deprived, the likelihood that the entire organization suffers rises drastically.

The prescription. Set a consistent sleep routine. Avoid caffeine after noon, skip the nightcap, and forgo that midnight snack. Keep your emails and work hours within a normal workday; late-night email replies lead to late nights for teams.

Naps are perhaps the most overlooked prescription. Research shows that even eight minutes significantly improves memory; 20 minutes provides meaningful levels of restoration and improved quality of work.
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Links You Can Use - Content Creation
Simple, powerful and consistent imagery is key to creating a recognizable brand. A one-sized approach does not fit all industries, budgets or social media platforms. Here are some resources to help you create powerful visuals that attract customers and stand out from the crowd:
Always Up-to-Date
Guide to Social Media
Image Sizes

Format. Refer to this evergreen
guide when resizing and
formatting images for different
social media platforms.

Read More
23 Tools and Resources
to Create Images for
Social Media

Customize. Adding advertising text and branding elements to imagery is a cinch with the amazing technology available at your fingertips.

Read More
20 Photography Hacks
That Will Get You
Amazing Results

Experiment. Create your own lightbox or use your laptop's wallpaper image as a whimsical backdrop. Here are some tips to tap into your inner artist.

Read More
11 Places to Find Royalty-Free Background Music for Marketing Videos

Enhance. Bring your
brand to life
with the
sound of music.

Read More
How to Determine the Value of a Major Purchase
As with any industry, accountants have their own jargon, but a general understanding about some of it is not beyond comprehension for the ordinary entrepreneur and can be quite useful as well as occasionally crucial to sound decision-making. One such area is summarized by the term "discounted cash flow." This encompasses vital methods for identifying if a major business purchase makes sense.

Determine When the Benefit Arrives

A large amount of spending for your business could be for new equipment or a new product line or an expanded location. But it might simply entail soft costs for an advertising campaign or revamped website. The aim for any of these investments is increasing revenue. The problem is that you spend the money upfront and then wait for the cash to flow in later. Hence, the reference to "discounted cash flow" takes into consideration this time value of money. It recognizes that cash today is more valuable than the same amount of money in the future.

In fact, the expectation of receiving a certain amount of cash next year is more valuable than receiving that same quantity of cash in 10 years. The longer the length of time you expect before generating higher business revenue, the more you have to discount its value.

Present Value of Future Benefits

Identifying the present value of an amount in the future is the whole point of most discounted cash flow determinations. All the future cash flows are discounted by some specified rate. The selected rate, therefore, depends on the length of time before your large expenditure is expected to deliver results.

In the simplest case, you might use a rate you have to pay for borrowing the money to spend. For example, if you borrow money at a 5% interest rate for one year, you want to spend it on something that will generate revenue over the next year that is at least 5% more than the amount you're spending. Most discounted cash flow calculations are, of course, more complicated than this. They typically require assistance from an accounting professional.

Calculating present value necessitates estimating the revenue expected from making a major purchase. This normally entails gradual revenue increases, which may continue for an extended period but escalate less over time. A discounted cash flow model to determine net present value applies the discount rate to each of the periods over which revenue rises.

Rate of Return

Not all discounted cash flow calculations are made using net present value. That's because an expenditure can be quite profitable but still have a slightly negative net present value because it returns less than the discount rate.

To correct for this deficiency, accountants deploy another discounted cash flow technique known as the "internal rate of return." This method identifies the rate that results in a net present value of zero. All the present values of future revenue will equal the money spent at the beginning. This tool is useful when the expenditure occurs over time along with the future incoming cash flow. The internal rate of return also tells you how much is an acceptable interest rate for borrowing the capital needed for a major purchase.
This newsletter and any information contained herein are intended for general informational purposes only and should not be construed as legal, financial or medical advice. The publisher takes great efforts to ensure the accuracy of information contained in this newsletter. However, we will not be responsible at any time for any errors or omissions or any damages, howsoever caused, that result from its use. Seek competent professional advice and/or legal counsel with respect to any matter discussed or published in this newsletter.

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