Some need to know, with a bit of WealthDesign nice to know thrown in.

Thinking of starting a business?

Going into business is like a marriage – sunshine, lollipops and roses …. at the start. But as we know, humans are all weird, strange and difficult characters – just ask anyone who’s been married for a while! There is always some level of conflict and business is no different, hence the need for rules – I’m talking about ‘shareholder and partnership agreements’. These agreements need to set out the rules of engagement. They need to cover the rules around set up, effective running and how to blow the business to bits (if things go pear-shaped).

The agreement should cover:

  • How the business was funded and how much each shareholder’s capital is at risk
  • The number of shares held
  • How shares are valued, transferred or sold
  • The rules around the board meetings
  • How directors are appointed and removed
  • What decisions the directors can make and what needs shareholders’ sign off
  • How profits are distributed
  • How disputes are resolved
  • What happens if someone becomes disabled or dies.

Lots of people go into business with only stars in their eyes – life often throws a curve ball and things don’t always go according to plan. Being in love is great, but getting divorce sucks, and business is no different. Having spent the time getting the rules set in stone, is prudent. It will make a bust up so much easier and cheaper – expect the best, and plan for the worst!

A good legal firm will have a standard framework to follow and you can then personalise this document to suit your individual circumstances.

As a side thought, even if you work for your own company, have a job description and employment contract. If you have an income insurance claim, it just makes things so much easier!

My advice is, get advice! Ideally, have a financial round table, with you at the top of the table, and your advisers around the table. Think lawyer, accountant and financial planner (someone who actually runs a real business and who has been around a while); they are handling these situations all the time.

And I know it’s tempting, but don’t write your own agreement – an unfortunate problem we see far too often, which can end in tears.

I’m only a phone call away, and am happy to help – don’t hesitate to reach out.

Remember if it isn’t written down – it doesn’t exist.

John Barber
WealthDesign – a life well planned

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The price of razor blades – extreme!

As most of you either know, or can tell from my mugshot, I have little use for shampoo; yes – I shave my head to give an aesthetically pleasing appearance for those who are looking my way!

 

So if you have a full head of hair, along with a gargantuan meaty beard, this blog post will probably be irrelevant to you! Good for you – some of us don’t have the luxury of choice on this one.

I go through razor blades rapidly. I don’t know about you, but I wonder what has happened, relatively speaking, to the price of quality razor blades?

Anyway, recently my interest was piqued when the Dollar Shave Club company appeared front and centre of my computer screen. I couldn’t resist trying them out, and as assured, my $11 razor kit turned up. For $11 per month, the Dollar Shave Club will send me a month’s supply of razors – and what I love is that I didn’t even need to leave my desk.

Again, another way businesses are innovating to create value to their customers – and anything that makes life easier (in a world that has upped the intensity on everything), is surely going to fill a gap in the market.

Early days yet, as I see how the service plays out of the Dollar Shave Club, but so far I’m eagerly trying out my new blades!

 

John Barber
WealthDesign – a life well planned (and a head well shaved)

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You may think that cryptocurrency (think Bitcoin) gains are tax free. Oops – you would be wrong. The IRD treat Bitcoin and the like, as property, very much like they treat investment in gold. These assets don’t generate an income, so the IRD basically thinks that investors are obviously buying these asset to make capital gains, meaning it’s taxable income.

Yes, some investors have made a lot of money out of buying these cryptocurrencies and haven’t known or wanted to tell the IRD about their winnings. Having poor records or pleading ignorance isn’t going to be a defence if the IRD coming knocking. 

There are more types of cryptocurrency than just Bitcoin. Not all of them can be valued in New Zealand dollars. If the cryptocurrency can’t be valued in New Zealand dollars, then investors need to value them in American dollars, and then record the purchase and sale value, based on the New Zealand/American dollar value. The difference is profit, and needs to be accounted for in one’s IRD tax returns.

Don’t be fooled into thinking the IRD can’t find out about past transactions. They have a whole department dedicated to tax avoidance and if they put resources into this area, the unaware could be in for a horrid tax surprise. Remember the IRD can go back seven years and can add some hefty penalties if they deem it appropriate.

If this applies to you and you have bought some cryptocurrency, my advice is to visit the IRD site for more details, or talk to your accountant.

John Barber
Managing Director
WealthDesign – a life well planned

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KiwiSaver – income for your future self

Maximising the income that will provide the lifestyle for your future self, is how to approach your KiwiSaver. And you may be surprised to learn that if you don’t have your finger on the pulse of your KiwiSaver scheme, your future self may be a little short-changed.

The KiwiSaver initiative is not a set and forget sort of deal, with a ‘bells and whistles’ app on your phone that gives you your balance instantly (can you tell I think the sales pitch for this gimmick is utter BS? But that subject can wait for another day!). It needs managing as it’s an investment like any other long term investment.

An example arose recently when a client’s tax rate was 28%, rather than 10.5% At 6% return on his money, he had paid $1050 more than he needed to. Unfortunately the app on the phone doesn’t prompt you to manage your KiwiSaver scheme balance wisely, it just tells you what’s in the account at any given time.

When was the last time there was a rendezvous between you and your KiwiSaver scheme balance? If you have over $50,000 in yours, recent research (by Westpac) reveals you are in the top 13% of men and the top 4% for women in New Zealand. And if your balance is over $30,000, you are in the top 27% for men and the top 15% for women in New Zealand.

These are scary statistics when you consider a 65 year old male will need enough money to live on for another 19 years from his 65th birthday. It is even worse for women, as they tend to out-live the guys, yet their KiwiSaver scheme balances are on average, much lower than males.

Here’s what’s important.

Join KiwiSaver as soon as possible. When is the right time to join? Yesterday. When is the next best right time? Right now.

If you know you are in KiwiSaver and you’re not sure where yours is at, contact IRD and they will give you the relevant details. Or click here to find out more.

Secondly, ensure you’re in the right fund for you, plus you have the right tax rate for you. How do you know? Give me a call – I’m here to help.

It really makes my day when I ensure people are optimising their KiwiSaver investment.  So come and talk to me about your KiwiSaver scheme – your future self will thank you!

 

John Barber
WealthDesign – a life well planned

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