Archives For May 2010

Identifying Your Values

Corey —  May 31, 2010 — 2 Comments

       Last week, I talked about the importance of values. Now it’s time to identify your personal values. If you are married, have a partner, or your finances somehow involve other people, then you may want to do this exercise with the other people involved. This will elicit an important discussion and ensure you are in agreement or at least have an understanding about your guiding principles.

Identify Your Values

       To start this process, you will want to make sure you have time to focus. Sit down with some paper, and ask yourself this question: What is most important to me in life? Write down your values to answer this question. Try to make these one or two word phrases, and don’t worry about the order yet. I was able to get the major ones for me (Faith in God, Family, and Love) but I hit a road block trying to think of everything that’s actually important to me.

       If you’re like me and are having trouble listing specific values, you can try using a list of values as a starting point. Go through the list and find the values that you feel are most important. Try not to choose the values you think you should have, but choose the ones you find truly important in your life.

       To make it easy, I have included a link to a list of values in a Microsoft Word Document so you can edit it on the computer. Feel free to add other values or put them in your own words.

Prioritize Your Values

       Now try to narrow down this list by combining similar values into a single value (or two if you need to). You want to get this list down to no more than 10-15 values. Using the list of values mentioned above, I ended up with 59 on my list. I had a lot of cutting down to do! I eliminated the overlapping values to get it down to the phrases I thought summed up that particular group the best. For example, I eliminated ‘Education’ and ‘Knowledge’ and used ‘Learning’ instead. It took me a while, but I got my list down to 13 values.

       Then you need to prioritize your list of values. You can do this by listing your top value first, then your second highest value, and so on until you’ve prioritized your entire list. If you are having difficulty prioritizing this list, then you might want to try CNN Money’s “The Prioritizer” calculator. The Prioritizer allows you to list up to 15 items and then asks you a series of questions that forces you to choose between each possible pair of goals. Once you’re finished, the calculator will give you a list of your values in priority order according to your choices.

The Next Step: Examine & Evaluate

       Now you should have a list that reflects your personal values in order from most important to less important. The next step is to examine and evaluate these values. Make sure you’re here next week as I talk about how to examine and evaluate your values in light of your actions and goals in life. To make sure you don’t miss that article, sign up for free updates to Provident Planning. You can also enter your email address below to get updates sent directly to your inbox.

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       I borrowed The Complete Tightwad Gazette by Amy Dacyczyn from my local library a while back because I’d read so much about it on other personal finance blogs. I started reading through it, and I found so many good tips and ideas that I decided to buy a copy for myself from Amazon. This post is part of a series where I’ll share my take on some of my favorite tips from the book.

Calculating Your True Hourly Wage

       In discussing the net value of a second income, Amy brings up a useful technique that’s also discussed in Your Money or Your Life by Joe Dominguez and Vicki Robin. The idea is to calculate exactly how much money you’re making from your job after you account for all the related expenses. Divide that by the number of hours you spend working, getting ready for work, getting to work, and relaxing after work and you’ll have your real hourly wage.

       How much do you really make after you take out taxes, transportation costs, clothing, meals, the things you do to relax after a hard day at work, and all the things you pay others to do because you don’t have enough time? How many extra hours do you spend getting ready for work, driving through traffic, or watching TV to de-stress?

       This number is useful for two reasons. First, you’ll open your eyes to what you’re really bringing home from your job. Second, you can use this figure to decide if it’s worth it to pursue certain activities or to do things yourself instead of hiring someone.

What about Bob? (An Example)

       Let’s use a simple example to show how you’d do this calculation. Bob makes $18/hour working 40 hours a week at his job – making a total of $720 each week. First, we’ll take out taxes. His federal, state, and local taxes add up to about $110/week leaving him with $610/wk after taxes.

       Bob lives 10 miles from work and estimates he spends 2.5 hours driving every week and about $30/wk on gas & maintenance for his car. So now he’s down to $580/week for 42.5 hours spent.

       Bob doesn’t have to wear anything special for work, but he does have a tendency to eat out instead of bringing his lunch from home. Additionally, he usually ends up eating out for supper twice a week because he just doesn’t feel like cooking after getting home from work. His lunches and eating out cost him about $80/week. While he could eliminate those expenses now, Bob is honest with himself and admits he probably won’t do that as long as he’s still busy from work. This drops his net pay down to $500/week.

       Bob figures he must have at least an hour every evening in front of the TV just to relax after work. He could do something else if he didn’t feel so stressed out from work, so he adds 5 hours/week to his total bringing it to 47.5 hours. Additionally, Bob spends Friday and Saturday nights going out with his friends to get away from thinking about how much he hates his job. He figures this costs him about $40/week and 2.5 hours. (Now he’s at $460/week and 50 hours for those playing at home.)

       Finally, Bob pays about $20/week in services he buys because he doesn’t have enough time due to his job. These are things like home maintenance, simple car repairs and maintenance, and someone to mow his yard. So he’s down to $440/week for 50 hours of effort – or $8.80/hour. That’s less than half of what he “earns” at his job!

Your Own Situation

       Bob’s calculations aren’t going to work for you. But you can follow the same sort of process to figure out your real hourly wage. Carefully consider all the expenses and time attached to what you do to earn money but also try to be realistic. This can be an especially eye-opening exercise for two-income households with kids. If both parents work and you have to hire babysitters or pay for child care, you could easily be better off if one parent quits their job to stay home with the kids.

       Make sure the expenses you relate to your job will actually go away if you quit your job. If you’re not willing to do some of those things, that’s not going to change if you work less. This is especially true when thinking of the frugal activities you could pursue if you had more time. You have to be willing to actually do them or you’re not saving any money at all!

       Finally, don’t take my example of Bob too seriously. There are definitely things he could do to improve his real hourly wage by making some simple choices (like brown-bagging his lunch). But the point is that Bob’s job pushes him to do those things because of stress, time constraints, or whatever other reasons keep Bob from eliminating those extra expenses.

Sign Up for Free Updates!

       If you want some more good ideas on saving money from The Complete Tightwad Gazette, make sure you sign up for free updates from Provident Planning. I write on a wide variety of personal finance topics, so even if you’re not interested in frugality I’m sure you’ll find something useful here.

       About a month ago, my wife and I canceled our satellite TV subscription and did not replace it. I’m here to report that we have survived this terrible experience and are doing quite well.

TV Is Not the Secret of Life

       I say “terrible experience” because many people simply cannot imagine living without TV (cable, satellite, antenna, whatever). How will I get on without my favorite shows? What will I do when I get home from work/school? What will I do with my spouse without TV? Because we’re so dependent on TV for automatic, easy, and mindless entertainment, we can’t imagine going without it. But TV is not essential for life, and it is possible to live beyond American Idol and (Glee/Chuck/Psych/NCIS/enter your favorite show here).

Free Alternatives

       Now, I’m not claiming that my wife and I are the ultimate example of giving up television. We still have our TV – just no subscription. I’ve hooked up a computer that I got by bartering my time with a friend. We can watch shows that are available online and we occasionally borrow DVDs from our library. We also use our laptops to watch shows when we’re not watching together. But we have significantly reduced our time in front of the TV/TV shows, and I think it’s a good thing.

       So how do we live without a cable or satellite subscription? It’s not as difficult as you might think. My wife has been able to find most of her favorite shows online using Google’s video search. Many of the networks now have full episodes on their websites as well. As I mentioned before, we sometimes borrow DVDs from our library. And many of the shows/videos I like to watch have been available for free online for quite some time. (I find a lot of interesting talks on TED.com even though I don’t agree with the views of most speakers.)

Finding Better Things to Do with Your Time

       But beyond replacing the cable/satellite subscription with free* alternatives, we’ve found other activities to replace the time spent in front of the TV. My wife is reading more books than before and finding new hobbies to explore. I’ve been working on my business more, studying the Bible, and reading about theology and other subjects I find interesting. We’ve been working to find things we can do together. But most of our shared interests are outdoor activities and the weather hasn’t been nice enough to do much hiking or kayaking lately.

* (I say free even though the online videos require an Internet connection because I need the Internet connection for my business. Since it’s something we’d have anyway, I consider it a sunk cost and the online alternatives to TV as essentially free. If you wouldn’t have the Internet connection anyway, these wouldn’t be free alternatives for you.)

Saving Time, Saving Money

       My point is that you can save a significant amount of time and money by cutting out your TV subscription/addiction. As Ben Franklin said, “In short, the way to wealth, if you desire it, is as plain as the way to market. It depends chiefly on two words, industry and frugality; that is, waste neither time nor money, but make the best use of both.”

       The money you save from cutting out TV can help you reach your goals. And the time you save by not watching so much TV can help you improve yourself, start a part-time business, pick up extra time at work, pursue a hobby, spend time with your family, volunteer, or do a number of other more meaningful activities.

       As Christians, we know that much of what we find on TV isn’t worth watching at all. It does little to strengthen us spiritually, and there are certainly better ways we can spend our time if we want to glorify God and be a witness to His love and grace. That alone is a good enough reason to go cold turkey on TV. The time and money savings just makes the deal even better.

       We’ve become a nation of people who think life is hardly worth living without constant entertainment. But my wife and I, along with many others, are proof that life is possible without TV. Give it a try. You have nothing to lose. I’m sure the shows you might miss will be back in reruns…

The Importance of Values

Corey —  May 25, 2010 — 4 Comments

What Are Values, and Why Are They Important?

       Why do you do what you do? What motivates you? Why is it important to plan for the future? What are you planning for and why? These are just some of the questions I start asking myself when I begin thinking about my goals and my future. Figuring out my goals isn’t very important if I don’t know why they are my goals in the first place.

       These are questions we often fail to ask ourselves when we’re rushing around to keep up with the day-to-day of life. But the answers to these questions are quite important, and we need to know our own personal answers by heart. The key is to identify your values.

       Values are principles, standards, or qualities you consider worthwhile or desirable. Values will vary greatly from person to person. Your values will depend on your personal judgment, outlook, upbringing, and a variety of other factors. What principles, standards, or qualities do you consider worthwhile or desirable? In other words, what are your personal values?

       If you cannot answer this question confidently, keep reading. Knowing your personal values is extremely important. If your relationships, behavior, choices, and personal identity do not align with your values, you’re going to continue feeling like something isn’t quite right in your life.

Compass by seany @ flickr        We are easily distracted with all of the busyness and media in our lives today. It’s far too easy to get sidetracked and led away from your values. This is why it’s vitally important to know your personal values. Those values can serve as your compass for the decisions you must continually make. They help you find your place on the map of life.

       As Christians, identifying our values and making sure we live them out is doubly important. We must compare our values with God’s values. Wherever they differ, we must seek God’s help in gaining His values and letting them guide our decisions. Then, to truly follow Christ and honor God, we have to actually use those values in everyday life. Simply saying that we value compassion means absolutely nothing if we are not willing to help people in need.

The Role of Values in Personal Finance

       Now why would I be discussing values on a personal finance website? Isn’t that more of a personal development topic? Well, yes – it is. But the truth is that your values will have an impact on your financial decisions. There is no use in looking at numbers, giving you advice, or talking about investments until you can list your personal values. That would be like going on a great journey to some unknown land without a compass or any sense of direction. How will you know you got to the place you wanted to arrive?

       For a lot of people retirement is a goal. The question I ask is: Why? Why do you want to retire? Well, someday you won’t be able to work because you’ll be older and your health could be declining. You don’t want to be a burden on your family, so you want to plan ahead for retirement. You would also like a time of rest from paid work, when you no longer have to work for money. That’s not to say you won’t be working. On the contrary, you may spend a lot of time volunteering or working for charities. Which gets into another important question. What are you going to do when you retire? And why do you need to wait until retirement to do those things? The answers that align with your values will lead you to a more fulfilling retirement than blindly forging ahead.

       As I mentioned above, your values need to shape everything about you if you want to live your life and not the life someone else is telling you to live. Your values must affect your behavior and choices. And your behavior and choices affect your personal finances. Therefore, you must recognize and understand your values before you can really start to work on your personal finances.

       For example, let’s say you want to start using a budget to track your spending and find ways to save money. If your values include frugality, thrift, and organization, then this will probably be an easy goal. But if your top values include extravagance and liberation, you’re probably going to run into some problems trying to stick to a budget.

       So before you spend any more time reading about personal finance, take some time to identify your personal values. There are a variety of ways to do this. But if you come back next week, I’ll share the method I’ve used. To make sure you don’t miss that article, sign up for free updates to Provident Planning. You can also enter your email address below to get updates sent directly to your inbox.

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       Last month, I posted an update about how my wife and I are raising a cow for beef. This is a summary of our activity and costs for month 9. As always, let’s first check Bambi’s growth. Here he is at eight months old:


Bambi - 8 Months Old


       And here he is at nine months old:


Bambi - 9 Months Old


       A few weeks ago we checked Bambi’s weight. He was around 520 pounds then, so he should be close to 550 by now. I think he’s growing quite well for a Jersey, and I’ve had several farmers comment that he looks like he’s doing well. Despite his increasing size, he’s still easy to handle most days. Even when he gets to acting up, it doesn’t take much for me to calm him down again.

Costs & Time

       I’m still taking Bambi out to graze every day except when the weather is especially bad. He’s actually become quite handy because I’ve been using him to mow down the weeds behind the barn. If he’s not out there, he’s in specific places in our yard (the places we don’t walk much…).

       We only had to buy feed this month. I estimate I spent a couple more hours this month than last because I’ve been taking Bambi out nearly every day. It takes time to move his stake and the blocks I use to hold his water bucket in place. Plus, I have to deal with trying to get him where I want him to go and then back to the barn in the evening. (Though I’ve gotten pretty good at that part now.)

  • Feed – $40.06
  •        

  • Time – 11 hours



       And here are our total costs over the past nine months:

  • Cost of Bambi – Free!
  •        

  • Castration & Dehorning – $16.00
  •        

  • Milk Replacer – $45.54
  •        

  • Miscellaneous – $46.87
  •        

  • Feed – $281.84
  •        

  • Hay – $88.00
  •        

  • Straw – $20.00
  •        

  • Medicine – $5.00
  •        

  • Total Spent – $503.25
  •        

  • Time – 83 hours



       After nine months we’ve spent a total of $503.25 and 83 hours raising a cow for beef. We’ve finally broken the $500 mark and Bambi’s pushing 550 pounds. It’ll be interesting to see what my final totals are and how much meat we get. I’ll have to figure out how I’ll measure the value of that meat later.

       Cleaning Bambi’s stall is going easier just as I expected. More time outside means less manure in the barn. This is a very good thing. I could have been finished in less than half an hour the last time if I hadn’t turned the compost pile first (which isn’t really composting very well). I guess time spent turning compost isn’t an actual cost for raising Bambi, but I wouldn’t have the compost pile if it weren’t for him.

       That’s it for this month. If you have any questions or comments, please leave them below. And make sure you sign up for free updates to Provident Planning if you’re interested in knowing what it takes to raise a cow for beef!

       In January 2009, I incorporated a company called Crackerjack Greenback for my original website. I later set up Provident Planning, Inc. as a fictitious name (like a DBA). I’m Chairman of the Board, President, Secretary, Chief Financial Officer, and owner of my very own corporation. And I incorporated for a total cost of $260! How did I do it? Through research and a couple helpful websites, I was able to find all the information I needed to incorporate without the help of a lawyer or paid incorporation service. (Their fees would be on top of the $260 I had to pay.)

       This guide is a review of the steps I took to incorporate in Pennsylvania. This guide is primarily for people who want to do business in Pennsylvania and want to incorporate in Pennsylvania as well, though most states have a similar process. (You don’t have to incorporate in the state you do business in.) While this guide is not a replacement for specific advice from an attorney and an accountant, it should familiarize you with the process of incorporation and prepare you for the steps you’ll need to take. I incorporated on my own, but I have a pretty good understanding of accounting, taxes, and business law due to my training in financial planning. You may or may not wish to do everything on your own. Regardless of what you choose, I am not responsible for what you do with the following information. This information is not to be taken as legal advice. This also does not mean that I recommend everyone incorporate when starting a business. Your specific situation and needs will determine the best business structure for you.

       The most helpful website I found for starting a corporation in Pennsylvania came from the Citizen Media Law Project. Their page about forming a corporation in Pennsylvania is quite extensive. However, I’m reviewing the steps I took for my benefit and yours. I’m also linking to a better source of the Pennsylvania Consolidated Statutes. (The links they use at Citizen Media Law Project are slow and difficult to navigate.)

1. Choose the Business Name

       When you choose a name for your business, you need to consider two aspects. First, you have the marketing aspect. Does your business name describe your product or service effectively and help you achieve your marketing goals? Entrepreneur.com has a good article about how to name your business which covers the marketing aspect and some of the legal aspects.

       From a legal perspective, you need to make sure that your business name meets the following requirements:

  • Meets State Law Requirements – In Pennsylvania, a corporation’s name must contain the word “corporation,” “company,” “incorporated” or “limited,” an abbreviation of any of these words, or words or abbreviations of like import in languages other than English. There are also some limitations on which words your corporate name can contain. You can find all of those limitations in 15 Pa. Cons. Stat. § 1303.
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  • The Name Is Available – You can check to see if the name is being used by another corporation in Pennsylvania using the Corporation Search from the Department of State. Your name must be distinguishable from other corporate names according to the guidelines outlined here. The Department of State also has additional information regarding name availability.
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  • Does Not Violate Federal or State Trademarks – Read up a little on trademark law. Then you’ll want to search for trademarks that others may have registered. You can search for federal trademarks using TESS, the federal trademark database. Pennsylvania does not have an online database of registered trademarks. To check for trademarks in Pennsylvania, you’ll have to call the Department of State at (717) 787-1057.



       You may want to register a trademark for your business name. You can find out more information in Citizen Media Law Project’s article about registering trademarks. If you’re going through the trouble of registering a trademark for your business, you might as well register federally with the U.S. Patent and Trademark Office. I didn’t do this for my business. There is some common law protection for unregistered trademarks, but it can be prudent to register your trademarks.

2. Recruit a Director or Directors for the Corporation

       Pennsylvania requires all corporations to have at least one director. Directors must be at least 18 years old, but they do not need to be residents of Pennsylvania or shareholders in the corporation. You can set requirements for directors in your corporate bylaws, but they are not necessary. When you write the corporate bylaws (in a later step), you should state how many directors the corporation will have. If you don’t state how many directors you will have, Pennsylvania law requires 3 (three) directors. You can be the director of your corporation and hold all the offices for the corporation. I chose to be the director of my corporation.

3. File the Articles of Incorporation

       In Pennsylvania, you can file your articles of incorporation online through the Online Business Registration Interview (OBRI). Most of the application process is self-explanatory, but here are a few key things to keep in mind:

  • Most corporations will be “for profit” “stock” corporations. If you’re creating a different kind of corporation, this guide will not cover everything you may need to know.
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  • When choosing how many shares you will authorize, 1500 is a good number because it is easily divisible by 2, 3, 4, 5, 6, 10, 12, 15, 20, and 25.
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  • If you choose to publicly trade your stock, you will need to meet additional requirements that are not covered here. For a small business run by a single owner, you do not need to publicly trade your stock.
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  • During the registration process, you are asked if the corporation will be an S corporation. There are some advantages to making your corporation an S corporation. You can read more than you’ll ever want to know about S corporations with a simple Google search. It’s relatively easy to elect S corporation status if you meet the requirements, and an S corporation is taxed similar to partnerships. That means the corporation doesn’t pay income taxes. It all flows through to the shareholders. I elected S corporation status for Crackerjack Greenback, Inc.
  •  

  • As long as your corporation will not do business under any name other than its legal name, you do not need to file a fictitious business name registration.
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  • You do not need a commercial registered office provider unless you do not have a physical location or mailing address in the Commonwealth of Pennsylvania.
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  • You can register for taxes and some licenses in OBRI as well. You’ll need to sign up for at least the Employer Withholding Tax, Unemployment Compensation, and Workers’ Compensation. Even as an officer of the corporation, you will be considered an employee and you’ll have to pay employer withholding taxes and unemployment compensation taxes. However, there is an exception for Workers’ Compensation for those employees who are officers and shareholders of the corporation. You’ll need to call the Bureau of Workers’ Compensation at (717) 783-5421 and request forms LIBC-509 and LIBC-513. You may need to sign up for additional taxes and licenses, and this is where an accountant or attorney may be able to help you. This guide does not cover every possible situation.
  •  

  • The fee for filing your articles of incorporation is $125.


4. File a Docketing Statement

       After you file your articles of incorporation, you’ll want to send in a Docketing Statement. It’s a very simple, one-page form. You should send it in to the Corporation Bureau. Their contact information is on this page. Once your application has been received and approved, you’ll receive an official acceptance letter from the Department of State. However, your corporation’s existence begins when you file the articles of incorporation – not when the Department of State accepts them.

5. Fulfill the Advertising Requirement

       Your next step is to fulfill the advertising requirement. You are required to publish notice of incorporation in two newspapers of “general circulation”, one of which should be a legal journal if possible. This just means you need to publish in your closest major newspaper and the legal journal for your region. Your notice must simply state the name of the corporation and the fact that you have incorporated or will incorporate under the laws of Pennsylvania. You can see examples by checking the legal notices section of your local newspaper. Here’s my example:

Notice is hereby given that: Crackerjack Greenback, Inc. has been incorporated under the provisions of the Pennsylvania Business Corporation Law of 1988.



       Since I’m in Lancaster County, I published in the Lancaster newspaper through their website. You’ll want to publish in the legal notices section of the classifieds. The Pennsylvania Department of State has a geographical listing of legal publications with contact information for legal journals. It cost me about $30 to publish in the local newspaper and $78 to publish in the legal journal for Lancaster County.

       You don’t need to send in proof of publication to the Department of State. Just make sure you file it away with your corporate documents. I created a folder to hold all my important corporate documents: articles of incorporation, corporate bylaws, meeting minutes, corporate resolutions, and other important papers.

6. Write the Corporate Bylaws

       There are no requirements for your corporate bylaws, but they’ll typically cover things like: existence and responsibilities of corporate offices (the officers), size of the board of directors and how they’re elected, length of term for a director, how and when board and shareholder meetings are held, who may call the meetings, and how the board of directors will function. The Citizen Media Law Project has more information about corporate bylaws.

       To save you some time, I’m going to share the corporate bylaws for Crackerjack Greenback, Inc. with you. These may not include all of the bylaws you’ll want for your corporation, but they’re a good start. I’ve also highlighted all of the sections you may want to change to fit your needs. I’ve listed four corporate offices in my bylaws: Chairman, President, Secretary, and Chief Financial Officer (or Treasurer). The names don’t matter very much, but the duties of the offices must be completed by someone. See 15 Pa. Cons. Stat. § 1732 for more information. Click the link to download a copy of Crackerjack Greenback, Inc.’s Corporate Bylaws in Microsoft Word Document format.

7. Purchase a Corporate Seal

       Many documents will require the Corporate Seal to prove that the board of directors has officially adopted, signed, or otherwise recognized the document as binding to the corporation. You can purchase a Corporate Seal online quite easily for about $30. I purchased a self-inking stamp for about $27 after adding shipping and handling. Your corporate seal must have your corporation’s full legal name, the year of its incorporation, and the words “Corporate Seal” and “Pennsylvania”. You’ll need it to officially adopt your meeting minutes and issue stock certificates in the steps below.

8. Hold the Organization Meeting

       The first official meeting for your corporation will be the organization meeting. This meeting allows the incorporators or initial directors (if named in the articles of incorporation) to adopt the corporate bylaws, elect directors if they are not listed in the articles of incorporation, and handle any other business necessary. You must keep formal meeting minutes to prove that this meeting actually occurred and that the corporation is being run correctly. Failure to do so could dissolve your corporate status in a future lawsuit.

       Pennsylvania law requires that the incorporator who calls the organization meeting notify all other incorporators in writing at least 5 days prior to the meeting. However, there is a provision in the law for any corporate meeting that allows the attendees to sign a written waiver of notice to get around this formality. I’m including here a copy of the minutes of the organization meeting for Crackerjack Greenback, Inc. which has a written waiver of notice included. You’ll want to read through it carefully to understand the minimum that should happen at your organization meeting and to determine if you’ll need to conduct additional business. Click the link to download a copy of the Minutes of the Organization Meeting of the Incorporators of Crackerjack Greenback, Inc. in Microsoft Word Document format.

9. Hold the First Meeting of the Board of Directors

       Immediately after you have held the organization meeting and have elected the directors, the directors may hold their first meeting. If you’re the only director, feel free to meet with yourself. Just keep the arguments to a minimum. During the first meeting of the board of directors, you’ll approve the minutes of the organization meeting, elect corporate officers, adopt a stock certificate form, adopt your corporate seal, give the corporate officers the power to open a bank account, and authorize the issuance of stock certificates.

       Again, I’ll offer you the meeting minutes, stock certificate forms, and bank resolution I used for Crackerjack Greenback, Inc. First, the Minutes of the First Meeting of the Board of Directors for Crackerjack Greenback, Inc. in Microsoft Word Document Format. Next, a blank stock certificate in Adobe PDF format that meets the requirements of 15 Pa. Cons. Stat. § 1528. Finally, a sample bank resolution in Microsoft Word Document format authorizing the officers to open a bank account for the corporation.

       The price you issue your stock certificates for will depend on how much initial capital you need to have in your corporation. You can always contribute more and increase the shareholder’s capital contributions account, but if you don’t understand that concept you’ll want to hire an accountant. Make sure you fill out the stock certificate correctly by filling in the shareholder’s name and address, the number of shares, the full legal name of the corporation, and the date. Have the President of the corporation sign the certificate and affix the corporate seal. The Secretary of the corporation should then record this information in the corporate stock ledger including the date the shares were issued, the shareholder’s name and address, the price per share, and the total number of shares. You may also want to track the shareholder’s Social Security number, especially if you’ll be electing S corporation status (you’ll need all shareholders’ Social Security numbers).

10. Request a Federal EIN for the Corporation

       You can do this easily via the IRS online application. There is no fee and you can print your confirmation letter after you complete the application. The IRS will let you know which tax forms you will need to file and when. If you need help with the tax and accounting side of things, hire an accountant.

11. Take Care of Employee Hiring Paperwork

       Any time you hire an employee, there are certain steps you must take to gather information about them. Corporate officers are considered employees of the corporation. The IRS requires that you complete a Form I-9 (Employment Eligibility) and a Form W-4 (Withholding Certificate) for each employee. You don’t need to file these with the IRS, but you should keep them with your other records.

       Each state has new hire reporting requirements to enforce child support orders. Here is Pennsylvania’s New Hire Reporting website. You’ll need to report all employees (including corporate officers).

12. Open a Bank Account for the Corporation

       You should keep all of the corporations finances separate from your own. The best way to do this is to open a separate bank account for the corporation. You’ll most likely need your Federal EIN, a copy of your articles of incorporation, and either your own or the bank’s version of a corporate resolution. If your business is small and won’t involve a lot of financial transactions each month, you may want to look into a free business checking account. Just about every major bank offers a free business checking account, and your local bank may offer one as well. Check around to find one that suits your needs.

S Corporation Election

       If you’ve decided that becoming an S corporation is right for you, you’ll just need to fill out Form 2553 (instructions here)and send it in to the IRS. If you’re going to elect S corporation status, you should do it within 2 months and 15 days after filing your articles of incorporation in Pennsylvania. Federal S Corporations are automatically considered S corporations in Pennsylvania, so you’ll need to let the Pennsylvania Department of Revenue know if you don’t want to be taxed as an S corporation in Pennsylvania. Once you receive confirmation from the IRS for your S corporation election, send a copy to the Pennsylvania Department of Revenue to notify them. You should send notification to:

PA DEPARTMENT OF REVENUE
BUREAU OF CORPORATION TAXES
PA S UNIT
PO BOX 280705
HARRISBURG PA 17128-0705



       If you don’t understand the accounting and tax requirements for an S corporation, hire an accountant.

Ongoing Maintenance of the Corporation

       You should continue to hold the board of directors meetings and annual shareholders’ meetings as outlined in the corporate bylaws. Additionally, Pennsylvania law requires that certain records be kept at the corporation’s place of business. See 15 Pa. Cons. Stat. § 1508 for a list of the required documents. These documents must be made available to any shareholder who wishes to examine them.

Final Thoughts

       If you’re starting a simple one-person corporation, you can probably follow these steps and do just fine. However, if your situation is more complicated in any way you may want to hire an attorney. If you don’t understand the accounting and tax requirements of running a corporation, then strongly consider hiring an accountant to help you. It’s not worth going through all the trouble of incorporating if you’re going to neglect the requirements you need to meet to maintain the corporate veil of limited liability.

       I hope you found this guide helpful. If you have any suggestions or additional notes, please feel free to leave them in the comments section below.

       This article is the sixth in a series on how to get out of debt. If you haven’t already, you should check out the previous articles:


Step 6 – Make a Plan to Pay Off Your Debt

       Now that you have your starter emergency fund in place, it’s time to start using the extra money you’ve found/earned in Step 4 to pay off your debts. But to do this effectively, you need to come up with a plan. How are you going to pay off your debts? Which ones will you pay off first? How will you determine your next target debt?

       There are several ways to set up your debt payoff plan. All of them, however, require that you know the interest rate, balance, and minimum payment for all of your debts. Then, you can rank them using one of these three methods:

  • Highest Interest Rate First – Start your list with the debt that has the highest interest rate. Then put the debt with the second highest interest rate below that. Keep doing this until all your debts are listed. This is the best way to pay off your debts if you’re looking at the numbers only. (This is the method I recommend because you’ll pay the least amount of interest this way. If you use another method, you’ll pay more interest. If you need more than numbers to motivate you, it may be better to use a different method so you’ll actually stick with it.)
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  • Lowest Balance First – Start your list with the debt that has the lowest balance. Then put the debt with the second lowest balance below that. Keep doing this until all your debts are listed. This method feels good psychologically because you’ll get some small wins fast, but it could cost you quite a bit in the amount of interest you’ll end up paying. (Depending on the interest rates of your debts and their balances, this method could cost you much more in interest because you could be paying higher interest rates for a longer period of time.)
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  • Highest Stress Level First – Start your list with the debt that worries or stresses you the most. List the next highest stress debt below that. Keep doing this until all your debts are listed. This could be a good way if you worry a lot about your debts, but it could also cost you a lot in interest payments.

       Regardless of how you list your debts, how you’ll pay them off won’t change. You’ll have to pay the minimum payment on all of them regardless of where they’re listed. Then any extra money you can find will go toward paying the first debt on your list. After that one is paid off, you’ll take that first debt’s minimum payment plus any extra money and put it toward paying off the second debt. You’ll keep repeating this process until you’re debt free!

       If you’re behind on your debts and your creditors are starting to tell you they’ll foreclose or send your debt to a collections agency, you’ll need to come up with a plan for how you’ll deal with the situation. Do not go to a debt management service. They cannot do anything that you can’t do by yourself. They’ll want to charge you fees for their service, and that’s the last thing you need while trying to get out of debt. You can negotiate with your creditors by yourself, but you’ll need to remain calm and be ready to compromise. You’ll have to work with your creditors to come to an agreement that’s good for both of you.

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       If you want to keep getting tips on how you can get out of debt and manage your personal finances well, make sure you sign up for free updates to Provident Planning! I’ll be continuing this series throughout the year while I also explore other aspects of personal finance.

       What’s your plan for paying off your debt? Let me know in the comments below!