“The market optimism is understandable. After a long spell of zero interest rates, a baton transfer from monetary manipulation to fiscal stimulus and pro-growth chutzpah can be an exciting regime change…But investors’ hopes could be misplaced. It would be one thing if there were shovel-ready infrastructure projects or proposed tax cuts on the table that could quickly boost spending. Instead, Republicans propose, for example, changing the basis for corporate tax from location of operations to location of sales. The aim is to encourage domestic production and exports, but the plan could hurt companies that import materials or goods. Will big importers like [big box stores] pass the tax hit onto consumers by raising prices?”

For contrarians, record highs for U.S. stock markets (both the Standard & Poor’s 500 Index and NASDAQ closed at new highs last week) and strong bullish sentiment (Barron’s reported, “The Investors Intelligence survey of newsletter writers showed the bullish herd swelling above 60 percent…”) are red flags, signaling an inflection point may be near. No matter which camp you fall into, there is a lot of uncertainty. Which policies will the new administration pursue? Will China’s growth slow more quickly than expected? How quickly will the Federal Reserve raise rates? Will interest rates continue to move higher? Will a stronger dollar negatively affect emerging markets? In the face of so much uncertainty, it’s important to be diversified.

Are You Thinking About Starting A Business?

Small businesses in the United States employed 56.8 million people or 48 percent of the private workforce in 2013 (the latest numbers available), according to the U.S. Small Business Administration. That’s pretty remarkable when you realize that 34 percent of small businesses employ fewer than 100 people. If you’re thinking of starting a business, the AARP suggests you carefully consider legal and tax issues, including:

• Business structure. Will you be a sole proprietor? Or will you establish a corporation, limited liability company, or partnership? The structure of your business will affect taxes, liability, and other matters.
• Licensing. Many cities and states require a new business to register, apply for a business license, and pay an annual fee to do business.
• Tax payments. Talk with a tax professional to determine whether you need to make quarterly tax payments. Also, be aware that people who work for themselves pay both the employer and employee portions of Social Security and Medicare taxes. You’ll want to factor that in when deciding pricing for products or services.
• Recordkeeping. In many cases, your business will need its own bank account and credit cards. You’ll also need a system for tracking business receipts and expenditures. Investing in business accounting software can make recordkeeping a lot easier.
• Contracts. Contracts specify deadlines, terms of payment, and other particulars, ensuring everyone shares the same understanding and expectations. If your client asks you to sign a contract or asks you to provide a contract, consult with your attorney.
• Liability insurance. Professional liability insurance protects you if you’re ever sued, and some clients may require you to have coverage. Talk with your financial or insurance professional to determine what type of coverage you may need.

Of course, when you work for yourself, it’s critical to set money aside for retirement. Contact your financial and/or tax professional to discuss options that might work for you. ]]>