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Your Credit Card Calls: When To Buy Now And Pay Later

Finance

When making a purchase, the ultimate decision when you open your wallet is to decide whether to use cash or pay by credit card. While credit cards can provide benefits through rewards programs and building up credit, credit cards can be the gateway to heavy debt if improperly used. Cash may be king, but if you stick to a cash-only rule, you could be doing your credit score a disservice.


The Convenience Factor

If you are looking for the convenience factor, using your credit card may come in handy. If you are consistent in paying your credit card balances in full each month, and you are properly budgeting to ensure that you are on track with timely payments, then putting some purchases on your card is an easy and convenient way to make transactions. For example, making purchases online using a credit card that may be saved on file could give you a quick check-out process. However, if you tend to run high balances or can't pay your credit card balances in full, you should probably use your debit card instead; which is also convenient but functions as cash. If the purchase you want to make is on sale, and you use a credit card that carries a balance, this may negate any savings you might get with the interest that will be incurred.

Using Cash May Be Cheaper

In some cases using cash may get you a better price. For example, when you are ready to fill up your gas tank, you may notice that if you pay by cash, you will get a cheaper price per gallon.

Some restaurants may also give discounts for cash paying customers, so if you are dining out, it won't hurt to ask! Paying for purchases using cash instead of a credit card will also save you from accruing interest on your next credit cards bill if you are unable to pay your entire monthly balance in full.

Cash And Carry

If you like to have cash on hand at all times, consider making your ATM withdrawals at the beginning of each week. Decide on an amount to withdraw that fits within your budget. You don't want the temptation to overspend because having cash in your wallet is so easily accessible. You can also try leaving your debit card at home if you would prefer to make purchases during the week with the allotted cash amount. The cap you give yourself will not only keep you in line with your budget, but it will also put you at less of a risk of overspending. Using cash tends to force us to be a little more frugal about parting with our money because it's so tangible.

Your Credit History And Reporting

While carrying cash is a great option to avoid credit card interest, it won't help improve your credit score or build credit if you stick to an “all cash, all the time" rule. If you use your credit card responsibly and pay your credit card balance in full each month and on time, you will size up a healthy credit score.

A good credit score is an important tool in creating a positive financial future. Utilizing cash as your only payment option and not having any activity on your credit cards, could keep you from obtaining a car loan, mortgage or an apartment rental. Also keep in mind, that if you are traveling and want to rent a car, it can be very inconvenient to do so without a credit card as most car rental establishments won't accept cash deposits upon rental.

The Safety Component

Keeping a combination of both cash and credit cards is an important element to your personal safety or even the safety of your loved ones. You may be put into a situation in which cash is your only option to get you out of a predicament. Should you be put into an emergency situation, having both cash and credit cards on hand could keep you from making your situation more difficult. Keep cash as a back-up even if you don't intend to use it. Your credit card company can also offer you protection against identity theft and fraudulent transactions. Again, when renting a car when traveling, your credit card company may have benefits that would cover you in case you get into an accident. Before embarking on your travels, find out what travel benefits your provider offers.

So what's better to use: cash or credit? There is no definitive answer as it actually depends on where you are and what type of purchase you are going to be making. With proper budgeting and using cash and credit in combination responsibly, you'll stay in good financial shape now and into the future.

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Choosing the Right Corporate Structure: Which Business Entity Should You Go With?

Business entities can be defined as the corporate, tax and legal structures which an organization chooses to officially follow at the time of its official registration with the state authorities. In total, there are fifteen different types of business entities, which would be the following.


  • Sole Proprietorship
  • General Partnership
  • Limited Partnership or LP
  • Limited Liability Partnership or LLP
  • Limited Liability Limited Partnership or LLLP
  • Limited Liability Company or LLC
  • Professional LLC
  • Professional Corporation
  • B-Corporation
  • C-Corporation
  • S-Corporation
  • Nonprofit Organization
  • Estate
  • Cooperative Organization
  • Municipality

As estates, municipalities and nonprofits do not concern the main topic here, the following discussions will exclude the three.

Importance of the State: The Same Corporate Structure Will Vary from State to State

All organizations must register themselves as entities at the state level in United States, so the rules and regulations governing them differ quite a bit, based on the state in question.

What this means is that a Texas LLC for example will not operate under the same rules and regulations as an LLC registered in New York. Also, an LLC in Texas can have the same name as another company that is registered in a different state, but it's not advisable given how difficult it could become in the future while filing for patents.

To know more about such quirks and step-by-step instructions on how to start an LLC in Texas, visit howtostartanllc.com, and you could get started with the online process immediately. The information and services on the website are not just limited to Texas LLC organizations either, but they have a dedicated page for guiding fresh entrepreneurs through the corporate tax structures in every state.

Sole Proprietorship: Default for Freelancers and Consultants

There is only one owner or head in a sole proprietorship, and that's what makes it ideal for one-man businesses that deal with freelance work and consulting services. Single man sole proprietorships are automatic in nature, therefore, registration with the state is unnecessary.

Sole proprietorships are also suited to a degree for singular teams such as a small construction crew, a group of handymen, or even miniature establishments in retail. Also, this puts the owner's personal financial status at jeopardy.

Due to the fact that a sole proprietorship entity puts all responsibilities for paying taxes and returning loans, it directly jeopardizes the sole proprietor's personal belongings in case of a lawsuit, or even after a failed loan repayment.

This is the main reason why even the most miniature establishments find LLCs to be a better option, but this is not the only reason either. Sole proprietors also find it hard to start their business credit or even get significant business loans.

General Partnership: Equal Responsibilities

The only significant difference between a General Partnership and a Sole Proprietorship is the fact that two or more owners share responsibilities and liabilities equally in a General Partnership, as opposed to there being only one responsible and liable party in the latter. Other than that, they more or less share the same pros and cons.

Registration with the state is not necessary in most cases, and although it still puts the finances of the business owners at risk here, the partnership divides the liability, making it a slightly better option than sole proprietorship for small teams of skilled workers or even small restaurants and such.

Limited Partnership: Active and Investing Partners

A Limited Partnership (LP) has to be registered with a state and whether it has just two or more partners, there are two different types of partners in all LP establishments.

The active partner or the general partner is the one who is responsible and liable for operating the business in its entirety. The silent or investing partner, on the other hand, is the one who invests funds or other resources into the organization. The latter has very limited liability or control over the company's operations.

It's a perfect way for investors to put their money into a sector that they are personally not experienced with, but have access to people who do. From the perspective of the general partners, they have similar responsibilities and liabilities to those in a general partnership.

It's the default strategy for startups to find funding and as long as the idea is sound, it has made way for multiple successful entrepreneurial ventures in the recent past. However, personal liability still looms as a dangerous prospect for the active partners to consider.

Limited Liability Company and Professional LLC

Small businesses have no better entity structure to follow than the LLC, given that it takes multiple good ideas from various corporate structures, virtually eliminating most cons that are inherent to them. Any and all small businesses that are in a position to or are in requirement of signing up with their respective state, usually choose an LLC entity because of the following reasons:

  • It removes the dangerous aspect of personal liability if the business falls in debt or is sued for reparations
  • The state offers the choice of choosing between corporation and partnership tax slabs
  • The limited legalities and paperwork make it suited for small businesses

While more expensive than a general partnership or a sole proprietorship, a professional LLC is going to be a much safer choice for freelancers and consultants, especially if it involves risk of any kind. This makes it ideal for even single man businesses such a physician's practice or the consultancy services of an accountant.

B, C and S-Corporation

By definition, all corporation entities share most of the same attributes and as the term suggests, they're more suited for larger or at least medium sized businesses in any sector. The differences between the three are vast once you delve into the tax structures which govern each entity.

However, the basic differences can be observed by simply taking a look at each of their definitive descriptions, as stated below.

C-Corporation – This is the default corporate entity for large or medium-large businesses, complete with a board of directors, a CEO/CEOs, other executive officers and shareholders.

The shareholders or owners are not liable for debts or legal dispute settlements in a C-Corporation, and they may qualify for lower tax slabs than is possible in any other corporate structure. On becoming big enough, they also have the option to become a publicly traded company, which is ideal for generating growth investments.

B- Corporation – the same rules apply as a C-Corporation, but due to their registered and certified commitment to social and environmental standards maintenance, B-Corporations will have a more lenient tax structure to deal with.

S-Corporation – Almost identical to a C-Corporation, the difference is in scale, as S-Corporations are only meant for small businesses, general partnerships and even sole proprietors. The main difference here is that due to the creation of a pass-through entity, aka a S-Corporation, the owner/owners do not have liability for business debt and legal disputes. They also are not taxed on the corporate slab.

Cooperative: Limited Application

A cooperation structure in most cases is a voluntary partnership of limited responsibilities that binds people in mutual interest - it is an inefficient structure due to the voluntary nature of its legal bindings, which often makes it unsuitable for traditional business operations. Nevertheless, the limited liability clause exempts all members of a cooperative from having personal liability for paying debts and settling claims.

This should clear up most of the confusion surrounding the core concepts and their suitability. In case you are wondering why the Professional Corporation structure wasn't mentioned, then that's because it has very limited applications. Meant for self-employed, skilled professionals or small organizations founded by them, they have less appeal now in comparison to an LLC or an S-Corporation.