What is the Structure of a Corporation?
Each state has different stipulations concerning what defines a corporation, but there are some commonalities across the country. Businesses must file Articles of Incorporation with the Secretary of State in the state of their home office, which detail the proposed structure of the business, before their status as a corporation can be approved. Each corporation is going to be different, of course, and each state has slightly different laws delineating the structure and bylaws that corporations must adopt. Continue reading...
Why Do You Want to Own the Shares of a Publicly Traded Corporation?
The idea is that a shareholder’s interest in a growing publicly traded company will become more valuable over time. The simplest answer is: to make money! Owning shares of a company’s stock is known as taking a long position, and this is done in the belief that the company is going to increase its earnings and profit margin into the future, or will at least remain steady. There are three ways to make money on stocks: Continue reading...
What is an Income Trust?
Income trusts are a type of company that has been structured to pass through all earnings to shareholders. A trust is a legal entity, that seeks to use assets in the best interest of beneficiaries. Some pooled investments are categorized as trusts, and they pass all income (and the tax implications) on to investors. Examples include a real estate investment trust (REIT), a royalty trust, a utility trust, or a business investment trust (also known as a master limited partnership, or MLP). Mutual funds can also fall into this category, but they are not necessarily designed just for income. Continue reading...
Who Can Participate in an HSA?
In order to be eligible for an HSA, you must be enrolled in a high deductible health plan (HDHP) that is HSA-eligible. You must also not be enrolled in Medicare and you cannot be claimed as a dependent on someone else’s health plan. Your health insurance must also be part of a high deductible plan with substantial out-of-pocket costs. How Does a Health Savings Account Work? Where Should I Put my Healthcare Savings? What is Medicare and Medicaid? Continue reading...
What is Mortgage Refinancing?
Refinancing a mortgage means to get a new mortgage agreement with a different interest rate. If the prevailing interest rate environment has changed, or if a person’s credit history has strengthened since signing the original mortgage agreement, a homeowner might benefit from refinancing their mortgage with a new arrangement. The bank or lending institution would effectively pay off the first mortgage with the new one, and give the client a different interest rate or mortgage term (length) or monthly payment amount. Continue reading...
What is Bankruptcy Court?
Bankruptcy court is a special judicial proceeding which determines how a debtor can settle accounts and move on. Bankruptcy courts are always federal, and not state, courts. They were established in the Constitution and given structure by the Bankruptcy Reform Act of 1978. They give debtors a means of moving beyond debts that cannot be fully repaid. There are several kinds of bankruptcy filings (found here — ‘chapter 7-15’, some for individuals, some for businesses, some involving foreign entities or persons operating in the US. Some are for absolution and the dissolution of a business entity, and other filings are requests for partial debt forgiveness and reorganization of the entity. Continue reading...
What is a currency symbol?
Currency symbols are characters written or typed in a specific arrangement alongside the numerical values of a currency amount, to denote the kind of currency in which the amount of money is held. An example would be the dollar sign ($), which is placed at the beginning of the numbers which describe the amount of currency in question, despite the fact that in most languages the word “dollars” follows the numbers when spoken. Many currencies have their own symbol but not necessarily all do. Continue reading...
What is Chapter 7?
Chapter 7 is a type of bankruptcy filing that allows an individual to liquidate enough assets to repay their debts and to then be free and clear of debt obligations. This can help get a credit rating back on track sooner than another type of filing such as Chapter 13. Chapter 7 is for people with incomes below their state’s median income. By liquidating enough assets to pay off creditors, a debtor can use Chapter 7 to take care of all debts at once, or to have some of the debts forgiven if the debtor does not have adequate assets for liquidation. Continue reading...
What is a REPO?
REPO is shorthand for Repurchase Agreement. It is a money-market practice where two entities agree to buy/sell government securities overnight and reverse the transaction the next day for the sake of providing the selling entity with short-term cash. Repurchase Agreements provide the selling party with short term liquidity, and are considered a money-market instrument. A third party usually acts as a clearing agent. Continue reading...
Will my target mutual funds miss their targets?
Surprisingly, target funds seem to be doing their jobs well enough, despite their ‘one-size-fits-all’ style. There are many target date mutual funds that have appeared in the past 5-10 years, which are supposed to simplify your investment decisions. These target funds are nothing more than carefully selected asset allocations, based on historical models and a client’s time horizon. For example, Target Retirement 2018 will probably consist of 70% Fixed Income Funds, and 30% of Equity Funds, and Target Retirement 2028 will probably consist of 50% Fixed Income Funds and 50% Equity Funds, etc. Continue reading...