The new JOBS Act—the Jumpstart Our Business Startups Act of 2012—is designed to promote growth among small businesses. Under the law, entrepreneurs will be able to raise cash without jumping through the usual hoops for the Securities & Exchange Commission (SEC). Here are the key provisions.
A privately owned company with revenue of less than $1 billion can sell up to $50 million in shares through an initial public offering (IPO) without registering with the SEC. Also, companies in this category are exempt from having to commission independent audits of their internal controls for up to five years.
Small companies may have as many as 2,000 shareholders (up from 500) or 500 unaccredited investors without registering with the SEC. An accredited investor is defined as someone who has a net worth of more than $1 million (not counting a primary residence), earnings of at least $300,000 ($200,000 for single filers) for the past two years, or is a general partner, director, or executive officer of the company issuing the IPO.
The new law allows “crowdfunding” to attract cash from large pools of small investors. Investments are limited to the lesser of $10,000 or 10% of the income of an investor.
Consult with a professional if you’re interested in issuing an IPO or acquiring shares of one.
Now that the “payroll tax holiday” has been extended through the rest of 2012, can we expect other significant tax legislation from Congress? Not before the national elections.
Although our nation’s lawmakers may still act to keep several other expiring tax provisions, it seems unlikely Republicans and Democrats will reach consensus on the best tax policy for the country before November. Once voters have been heard, Congress will probably get down to business.
Their task is daunting. Several key tax law breaks are scheduled to be scaled back in 2013 if there’s no congressional action.
The two top tax brackets for ordinary income in 2012 are 33% and 35%. Absent new legislation, the two top rates in 2013 will rise to 36% and 39.6%, respectively.
Currently, the maximum tax rate on long-term capital gains and qualified dividends is 15%. These “Bush tax cuts” are set to expire after 2012 when the capital gains rate will jump to 20% and dividends will be taxed at ordinary income rates.
For 2012, the maximum estate tax exclusion is $5.12 million, and a surviving spouse may take advantage of any leftover exclusion of the spouse who died. But that “portability” is scheduled to end next year, and the exclusion will revert to $1 million.
We still could see wholesale changes in these tax rules...but not until later in the year.
An improving jobs picture sent consumer confidence up for six straight months through February, as Americans gained hope the economy is improving. Even people who said their own finances remained in poor shape felt more hopeful about the overall economy.
The University of Michigan’s Consumer Sentiment Index rose to 75.3 in February, up from a 31-year low of 54.9 in August 2011. That followed news that America’s unemployment rate had fallen to 8.3% in January. It had been at 9.1% in August, down from a 2009 high of 10%.
Consumer sentiment rose despite the fact that more households said their income had dropped from the previous month, and a majority said they did not think their income would grow during the next year.
Most economists are backing up this consumer optimism. A survey by the National Association for Business Economics in late February showed economists expect unemployment to remain at 8.3% this year. That’s a significant improvement from their November forecast of 8.9%.
The economists also predict job growth will accelerate next year and the jobless rate will fall to 7.8%. They forecast the U.S. economy will grow 2.4% this year, up from 2011, when economists believe the economy grew 1.6%.
The improving outlook among consumers and economists bodes well for 2012, as stock markets tend to rise on positive sentiment.
Do you need to update your life insurance protection? You may be surprised to learn that your existing policies are no longer sufficient to meet your needs.
If you’re like many people, you probably took care of your life insurance years ago. You bought as much coverage as you felt you needed, and then you stashed the contract in a drawer or safe somewhere and pretty much forgot about it. But it would be unusual if your family financial situation hadn’t changed significantly since then. For example, you might now have too little insurance if you’ve added another child or two to your brood. But it could also work the other way. If your children have left the family nest or you’ve retired, you may be able to cut the amount of your coverage.
Now is as good a time as any to dust off that old policy and review it. You may find it doesn’t reflect one or several major life events you’ve experienced since you acquired the coverage. Those might include:
You have married, divorced, or separated;
There has been a birth, death, disability, marriage, or divorce involving someone else in your family;
One or more of your children has completed college or graduate school;
You bought or sold your principal residence, a vacation home, or investment real estate;
You switched jobs, started your own business, or retired; or
There has been a big shift in your financial or business circumstances.
Other family changes could also have an impact. For instance, you may have taken on the care of an elderly or disabled relative, thus adding to your financial commitments and increasing the amount of replacement income that would be needed if you died. Meanwhile, if you’ve paid off your mortgage, you may be able to reduce your coverage.
When you review your policy, examine it as if you were buying life insurance for the first time. It’s your projections for the future that are the crucial factors—not the way things were a few years earlier. And don’t forget to review all of your life insurance policies, including any group coverage you get through your employer (or your spouse’s employer), taking into account recent estate tax law changes.
The amount of coverage you need is likely to drop as you get older, and you may eventually decide you can do without life insurance, though it could also play a role in your estate plan. Also, consider the return you may receive on cash value, especially with whole life policies. What’s certain is that your financial situation will continue to evolve, so it makes sense to make an insurance review a regular event—if you mark it on your calendar each year, you won't forget to conduct this important checkup.
You probably already understand the importance of having life insurance. The proceeds from a life policy can help cover your family’s current expenses and may provide a cushion for the future if you die prematurely. But another kind of coverage—disability income (DI) insurance—is often ignored or neglected. And that’s a mistake, because DI insurance can be even more vital than life insurance in maintaining a family’s financial well-being. A new white paper from the Council for Disability Awareness, an independent nonprofit group, provides these six startling facts.
1. More than one in four of today’s 20-year-olds will become disabled before they retire. (Source: Social Security Administration, Fact Sheet, March 18, 2011)
2. Some 8.5 million disabled U.S. wage earners were receiving Social Security Disability Insurance (SSDI) benefits at the end of September 2011. (Source: Social Security Administration, Office of Disability and Income Security Programs)
3. Ninety percent of new long-term disability claims are the result of an illness, not an accident, and fewer than 5% of claims are work-related. (Source: 2011 Council for Disability Awareness Long-Term Disability Claims Study)
4. The average long-term disability claim lasts 31.2 months. (Source: 2010 GenRe Disability Fact Book)
5. New applications for Social Security Disability Insurance (SSDI) benefits increased 27% from 2008 to 2010. (Source: Social Security Administration, Office of Disability and Income Security Programs)
6. About 100 million workers lack private disability income insurance. (Source: Social Security Administration, Fact Sheet, March 18, 2011)
If you don’t have DI insurance, either through a policy from your employer or one you’ve bought on your own, you can choose from among a wide array of products whose costs and benefits vary widely. Here are several factors you’ll need to take into account.
How a policy defines “disability” is crucial. The best policies pay benefits if you can’t work in your chosen profession, and they don’t consider the nature of an injury.
DI insurance policies generally require a waiting period before paying benefits, and a shorter waiting period normally translates into higher premiums.
Typically, a policy will state how long and under what circumstances it will pay disability income benefits. It could, for example, provide benefits only until you qualify to receive Social Security retirement benefits.
If you opt for a noncancellable policy, the insurer can’t drop you off its rolls if your health declines.
Finally, don’t be seduced by the low costs of a fly-by-night operation. You’ll be better off opting for an experienced company with a good reputation.