Business Tips

Crowdfunding is a tool that provides an alternative to more traditional forms of financing available from banks and other institutions. It has evolved to answer the needs of investors and entrepreneurs who have a desire to participate in a variety of investment opportunities but are severely limited by the amount of cash or credit they have available.

The crowdfunding model is based on the premise of bringing together a large number of individual contributors who individually do not have the resources to invest in an attractive project but together, with other contributors, are able to accumulate a sufficient critical mass. At that point, they join in a unique partnership with the project’s creators--often getting a front row seat of the project’s journey and getting exclusive updates as the project evolves--that they otherwise would not have been able to experience. In some cases there might even be a financial yield that contributors gain from a project much as they would in a more traditional investment situation. However, most crowdfunding projects are about having privileged access to a project’s development and receiving immediate incentives from the campaign along the way or at the completion of the project.

Crowdfunding has been a successful form of funding projects in real estate, start-up companies, philanthropic endeavors, civic projects, journalism, music and independent film projects. In many of the artistic projects, contributors give money to the project in order to receive immediate incentives (i.e. a signed copy of the album or some collectible that is only available through the crowdfunding campaign) instead of a future financial return. In this way, many crowdfunding campaigns differ from more traditional investments. They are not “investors” in the traditional sense: they are not trying to grow their wealth by investing and gaining a financial yield from a successful project.

The process of raising funds using the crowdfunding approach involves online platforms such as Kickstarter, Crowdfunder, or Indiegogo. The purpose of the platform is to provide the fundraiser with a place to setup a campaign where contributions can be received.

On April 17, 2014, The Guardian published a list of "20 of the Most Significant Projects" launched on the Kickstarter platform up to that time. The following is a sampling taken from a Kickstarter list, which demonstrates the potential magnitude of successful crowdfunded projects.

• The "Coolest Cooler" raised a total of $13,285,226 from 62,642 backers. The cooler features a blender, waterproof Bluetooth speakers and an LED light.

• Filmmaker Spike Lee raised US$1.4 million from 6,421 backers in August 2013 to produce Da Sweet Blood of Jesus.

• Writer Rob Thomas raised $5.7 million from 91,585 backers in April 2013 to create a feature film version of the defunct television series Veronica Mars. 

• Musician Amanda Palmer raised US$1.2 million from 24,883 backers in June 2012 to make a new album and art book.

• The highest reported funding by a crowdfunded project to date is Star Citizen, an online space trading and combat video game being developed by Chris Roberts and Cloud Imperium Games, which—as of 7 April 2016—claimed to have raised over USD $111,600,000, beating the previous record of $10,266,844. 

In a recent March 2016 article at Entrepreneur.com, Catherine Clifford noted how, after an analysis of 170,000 Kickstarter campaigns, there were three distinctive fundamentals that led to crowdfunding success:

• A potential backer of a crowdfunding campaign is making the decision to invest without any “in person” time with an entrepreneur. Therefore, the more visually engaging a crowdfunding page is the greater the likelihood that the campaign will achieve its goal.  

• Backing a crowdfunding campaign is not without its share of risk. This risk can be mitigated somewhat if the entrepreneur behind the campaign has a resume of successful projects.

• Reading the comments of campaign backers is a good source of worthwhile information.

Although the massive popularity of crowdfunding has saturated the field with campaigns--and this makes it harder to be effective--if you are diligent with the principles above, the effort could prove to be worth the hard work. 

Scan it.

A valuable tool for the average taxpayer to the small business owner that can be surprisingly simple to integrate into your life is scanner. From simple scanners built into your office printer to dedicated document scanners for documents, receipts and business cards, there are a lot of options out there in a variety of price ranges.

Regardless of the scanner you choose to purchase or how much money you spend on it, a scanner is only worthwhile if used consistently and set up properly. Here are some things to remember and rules to follow when you decide to start digitizing your financial documents with a scanner.

Be secure. Make sure you are uploading your documents to a protected folder on a backed up hard drive or a secure cloud based server. You don’t want these documents being lost or corrupted, and you also don’t want them to be accessible to the wrong people.
Set your scanner up to upload your documents directly to a location that is dedicated to financial organization. Having a file full of unorganized documents hidden somewhere on your hard drive is about as useful as having them stuffed away in a drawer or filing cabinet.
File your documents immediately. Don’t let them pile up, if you make this a routine it will be easier and you will see the benefits quickly come tax season or during that surprise audit.
Create a file naming legend and follow it, upload your documents, rename them and file away for later.

Make Your Calendar Work For You

Spending time and money getting your financial documents organized is a great first step. The next step is making the organization work for you. Having all of your financial documents accurately filed away is great, but how can you access those documents when you need them on the go? We’ve already talked about uploading those files to a cloud server such as google drive to make them accessible to you at all times as well as desktop. Another great tool for financial organization is a cloud based calendar.

A cloud based calendar that you synch with all of your devices will keep you on track with all of your financial responsibilities. Because it is stored on the cloud rather than scribbled in a calendar somewhere, you aren’t dependent on having your datebook in hand. Whether it’s your work computer, smartphone, tablet, or even your personal computer at home, you will be kept up to date on what’s going on in your financial universe.

• To begin with, sit down and choose a calendar service, it’s a good idea to choose one that is linked with your email account, if you use Gmail, you might want to go with Google Calendar.
• Start off by going through the big events that you are going to encounter during the next year. These are dates that probably won’t change and that aren’t flexible, such as tax filing dates and lease renewals. Input these events into your calendar and set reminders.
• The next step is recurring reminders, these are events that happen repeatedly over the course of the year. For instance, payroll and recurring bills. You can add all of these at once, or add them as you go through a typical month. Once these events are added into your calendar, your calendar will start working for you, keeping you on top of your financial organization.

If you’re starting a new business, you may need an EIN (Employer Identification Number) from the IRS. Here’s how to determine whether or not you need one as well as how to get it.

If you’re a sole proprietor or in some states, a single owner of an LLC, the good news is that getting an EIN is free! This is a relief if you’ve already had to pay for the LLC, business insurance, and city business licenses. More details on costs coming up.

What is an EIN?

Essentially, an EIN is like a Social Security Number for a business—at least in regards to paying taxes. You’ve more than likely had to enter an EIN on your 1040 from your W-2.

Do you need an EIN?

You need an EIN if you meet any of the following criteria laid out by the IRS:

• You have or are planning to have employees in the next year
• You are a corporation or are set up as a partnership
• You withhold income tax on anyone you pay that’s not a resident alien
• You have a Keogh Plan (a pension/retirement plan for a self-employed individual)
• You are involved with:
  • Trusts, except certain grantor-owned revocable trusts
  • IRAs
  • Exempt Organization Business Income Tax Returns
  • Estates
  • Real estate mortgage investment conduits
  • Non-profit organizations
  • Farmers' cooperatives
  • Plan administrators

EIN Costs

• Sole Proprietors are free.
• A non profit may have a fee up to $150 depending on the state and that fee is paid to the
• Secretary of State.
• An LLC or Corporation may have a fee of $100 depending on the state.
• A business partnership also may have a fee of $100 that’s determined at the state level.

Is that all?

If you don’t meet any of the above criteria, you’ll probably still want to get an EIN for a few other reasons.

• You want to get a bank account for your business. Sometimes banks will want to see your EIN and sometimes not.
• Business credit cards also will sometimes ask for your EIN.
• You may also need an EIN to get business permits and licenses.
• If you ever hire an independent contractor, you’ll need to to have an EIN in order to furnish them a 1099 in January.

You can get your EIN online in less than 10 minutes more than likely. So, you’re better off just going ahead and getting one. Let us know if you have any questions or need any help at all making sure you’re tax structure is right for you and your business.