Young Adults are Too Broke for Loans

Young adults are facing less debt than they were 10 years ago, but that is not necessarily a good thing.

The lack of debt is not a product of legions of young Americans becoming suddenly fiscally responsible, but instead a result of their inability to procure loans. Americans under the age of 35 are faced with shaky economic foundations, which prevent them from qualifying for loans or even thinking about applying for financing.

“It’s a strong indicator of economic struggle, not economic success,” claims Richard Fry, senior economist at the Pew Research Company. “Young Americans don’t have a mortgage because they don’t have a house.”

The Pew Research Center found that young adults’ debt levels plummeted nearly 15% between 2001 and 2010 while increasing almost 65% for those aged 35 and older, according to a recent study undertaken by Pew.

The ramifications of this trend are staggering; the share of younger homes owning a primary residence fell to 35% in 2011, down from 40% in 2007. Only two-thirds of young adults leased or owned at least one automobile in 2011, down from 73% in 2008. Additionally, credit card balances have also dropped significantly.

The only debt on the rise for young Americans is student loans. In 2007, just over 35% of young homes possessed outstanding student loan debt—this figure spiked to 40% in 2010.

The prominent reason for the decline in debt is the weak job market for young adults. Unemployment rates for Americans under the age of 35 are more than 2 percentage points greater than subsequent generations according to federal labor figures. And those lucky enough to land employment are either making less than they expect or are concerned about getting laid off.

“The younger generation has less debt because they are less likely to secure the American Dream of owning a car, a home and starting a family,” said Evan Feinberg, CEO of Generation Opportunity, an advocacy group for young adults.

The young adult generation is seeing signs of financial distress all around them, whether in the form of high college costs, foreclosures or job insecurity. These dwindling prospects are ultimately changing the way young adults look at acquiring debt.

Source: CNN

Martha Stewart Back in Court Again

On Tuesday, the home decorating and banking icon appeared before the New York State Supreme court to defend her choice to sign a contract with J.C. Penney even though she struck up a similar deal with rival department store Macy’s.

“We thought, and I hope correctly so that we were allowed to engage in such an activity,” said Stewart, dressed in a brown skirt and matching dress.

When asked whether the public really buys or needs to purchase two enamel casserole dishes at both the rival department stores, Stewart said: “Maybe they have two houses and need two enamel casserole dishes.”

J.C. Penney and Macy’s are fighting in court over whether they can both feature Martha Stewart-branded home appliances and goods in their respective department stores.

The feud dates back to December of 2011, when J.C. Penney purchased a 16.6 percent stake in the Martha Stewart Living line. The transaction was meant to establish mini Martha Stewart stores, within J.C. Penney locations throughout the United States. As part of the agreement, J.C. Penney agreed to pay $38.5 million for its stake.

However, Macy’s already had an agreement with Martha Stewart Living to produce, market and sell the line. As a result of their established agreement, Macy’s struck back by filing suits against both companies. Macy’s claimed its 2006 agreement with the Martha Stewart line gave it an exclusive license to sell and manufacture certain Stewart products, including dinnerware and bedding.

“Our company has invested significant sums, taken risks and endured disappointing results to rebuild the Martha Stewart brand and grow it in several product categories,” said Macy’s spokesman Jim Sluzewski. “J.C. Penney is attempting to harvest the field that was already planted and cultivated by Macy’s.”

Macy’s CEO Terry Lundgren took to the stand early last week to say that he was baffled when he found out that Stewart signed a deal with one of its chief rivals. “I was sick to my stomach,” he told the court.

Although the hurt between Lundgren and Stewart is real, the Macy’s CEO said that the department store has no plans to remove Stewart’s brand in stores.

Eight years ago, Martha Stewart severed five months in prison after being convicted on criminal charges of lying and obstructing justice to federal investigators during an insider trading probe for her role in the sale into the sale of ImClone Systems stock she owned.

Meanwhile, J.C. Penney CEO Ron Johnson is busy attempting to turn J.C. Penney around; the strategies haven’t gone so well thus far as shares have plummeted nearly 50% over the past three years.

Source: CNN

Berkshire and 3G Capital Purchase Heinz for $23 Billion

Buffet, the CEO of Berkshire Hathaway, announced on Thursday that it plans to purchase the food giant for roughly $23 billion, adding Heinz Ketchup to the conglomerate’s stable of respected brands.

The proposed purchase, which comes fast on the heels of a $24 billion buyout of computer giant Dell, points to a possible reemergence of the merger market. In addition to these two mammoth transactions, a number of smaller deals and the prices being paid for said companies mark a far cry from the exorbitant heights of the financial boom throughout the early and mid-2000’s. That said, an improving stock market, mounting piles of cash held by private equity firms and corporations, and growing confidence among the industry’s top players, point to a return of widespread deal-making.

Berkshire Hathaway is partnering with 3G Capital Management–a Brazilian investment firm that owns a majority stake in Burger King.

Under the terms of the transaction, 3G and Berkshire will pay $72.50 a share or roughly 20 percent above Heinz’s closing price on Wednesday. Including the company’s debt, the transaction is valued at approximately $28 billion.

Mr. Buffet, when talking to CNBC on Thursday morning claimed the deal and partner involved were “ideal.” Buffet praised Heinz as a company with fantastic brands and long-term stability.

Heinz fits Buffet’s deal criteria in several ways; the company has widespread brand recognition and long-term stability. Moreover, the company has performed well over the last year, rising nearly 17%.

Buffet told CNBC that he had been tracking Heinz since 1980; however, the genesis of the deal was pushed by 3G, an investment firm backed by numerous wealth Brazilian families.

One of the firm’s primary backers, Jorge Pablo Leman, brought the idea of purchasing Heinz to Berkshire two months ago. The proposal was well received as the two sides approached Heinz’s CEO, William R. Johnson, concerning the proposed purchase of the company.

3G and Berkshire will each contribute approximately $4 billion in cash to pay for the company, with Berkshire contributing an additional $8 billion for preferred shares. The rest of the cost will be covered through debt financing efforts by Wells Fargo and JP Morgan Chase.

The company’s headquarters will remain in Pittsburgh, PA where Heinz has called home for over 120 years. Heinz’s stock, in reaction to the news, rose nearly 20 percent in morning trading.

CME Group Software Engineer Guilty of Stealing Trade Secrets

On September 19, 2012, the US Attorney’s Office in the Northern District of Illinois reported that Chunlai Yang pleaded guilty of two counts theft of trade secrets after working for CME Group for 11 years.

Yang admitted to downloading over 10,000 files of CME source code which provide significant amounts of information about the Globex electronic trading platform. The U.S. Attorney’s Office states that Yang made plans “to improve an electronic trading exchange in China as well. All in all, the government estimates the potential loses between $50 million and $100 million, and Yang is arguing the potential losses were under $55.7 million.

During his time at CME Group, Yang was responsible for writing code. Because of his position, Yang had access to programs that maintained the Globex electronic trading platform. The software programs were property of CME Group, but Yang had proceeded in downloading manuals and instructions on how the computer files operate.

The U.S. Attorney’s Office concludes that Yang and two unnamed business affiliates were planning to open a business in China called the Tongmei Futures Exchange Software Technology Company (Gateway). The purpose of the company was to increase trade volume to the Zhangjiagang Exchange, a Chinese chemical electronic trading exchange. Yang was as far as contract negotiations with the Shangjigang Free Trade Board.

Yang faces a maximum penalty of 10 years in prison and a $250,000 for each count. The plea agreement will place Yang in prison for 70 to 87 months. The sentencing is scheduled for February 20, 2013.

In addition, Yang agreed to forfeit his personal computers, electronic storage equipment, and more. The personal computers and USB equipment contained the files he stole from CME Group.

The United States is being represented Assistant United States Attorneys Barry Jonas and Paul Tzur.

Source: Federal Bureau of Investigation

Department of Justice and Federal Trade Commission Sign Memorandum with Two Indian Authorities

On September 27, 2012, the US Department of Justice and the Federal Trade Commission signed a memorandum of understanding with the Government of India Ministry of Corporate Affairs as well as the Competition Commission of India. The antitrust memorandum encourages increased cooperation between competition agencies in each country.

The first key part of the MOU addresses cooperation. The provision states that U.S. antitrust agencies and Indian authorities will cooperate and inform each other about competition policies and changes to enforcement in specific jurisdictions. If the United States and India are investigating a similar matter, the two countries have agreed to cooperate.

The second key part of the MOU stresses communication. The provision states that United States and India will keep each other updated about all competition enforcement and policies addressing enforcement. The provisions also states that the United States and India will engage in meetings from time to time in order to discuss policy and enforcement information.

Joseph Wayland, the Acting Assistant Attorney General, stated, “We value our relationship with the Indian Ministry of Corporate Affairs and the Competition Commission of India. We know that this memorandum of understanding will enhance that relationship in the years ahead, as we work together to ensure that markets are open and competitive, by identifying and remedying anticompetitive behavior.”

The memorandum was signed by Wayland, Chairman Jon Leibowitz under the FTC, Nirupama Rao, the Indian Ambassador to the United States for the Indian Ministry of Corporate Affairs, and CCI Chairman Ashok Chawla.

Chairman Leibowitz commented, “We are delighted to enter into this memorandum of understanding with the Indian Ministry of Corporate Affairs and the Competition Commission of India. It will strengthen the already excellent relations among the U.S. and Indian competition authorities by further facilitating cooperation on policy and enforcement matters.”

Source: Department of Justice

Employer Identification Numbers

What is an Employer Identification Numbers?

An Employer Identification Number, often just called an EIN is a number that is used as a way to identify and individual or a company that needs to pay withholding taxes on their employees.

An Employer Identification Number can also be referred to as a:

• Federal Tax Identification number

• Tax Identification number (TIN)

• Federal Employer Identification number (FEIN)

An Employer Identification Number is a nine digit number written in form XX-XXXXXXX. It is unique to a particular employer and is assigned by the Internal Revenue Service for identification purposes.

The two digit prefix of an Employer Identification Number indicates which campus assigned the Employer Identification Number. Before 2001, the two digit prefix indicated the geographic area of the business. However, this is no longer applicable.

Employer Identification Numbers are used by sole employers, corporations, government agencies, sole proprietors, partnerships, trusts, nonprofit organizations, estates of decedents, certain individuals without employers, and other business entities. Each of these only requires one FEIN number

An employer needs an Employer Identification Number if an employer:

• Has employees

• Is involved in trusts, estates, non-profit organizations, real estate mortgages investment conduits, plan administrators, or farmers’ cooperatives

• Runs the business as a partnership or corporation

• Has a Keogh plan

• Files Excise, Employment, or Alcohol, Tobacco, and Firearms tax returns

• Withholds taxes other than wages on a non-resident alien employee

If the employer does at least one of these things, a FEIN is required.

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An Employer Identification Number can obtain by completing an application either online, through a toll-free telephone service, through fax or by mail with From SS-4. The internet application is the preferred method for EIN application by customers. Once completed, the FEIN is issued immediately. However, an immediate EIN number can also be received through by phone from 7AM to 10PM local time during the weekdays. Applying by fax takes up to four business days while a mail application takes up to one month.

In certain circumstances, a business may need a new Employer Identification Number. Generally this is due to any sort of structure change or just a change in ownership. Some changes that require Employer Identification Number changes include:

For Sole Proprietors

• Being subject to a bankruptcy proceeding

• Taking in partners and becoming a partnership

• Incorporating

• Purchasing or inheriting an existing business that will be operated as a sole proprietorship

For Corporations

• Receiving a new charter from the secretary of state

• Being or becoming a subsidiary of a corporation using a parent’s EIN

• Changing to a sole proprietorship or partnership

• Creating a new corporation after a statutory merger

For Partnerships

• Partnership becoming a sole proprietorship

• Incorporating

• Ending an old partnership and beginning a new partnership

Avoiding Common FEIN Problems

Many of the common problems involving an Employer Identification Number are experienced by incorrectly filling out paperwork. In order to prevent this, remember to:

• Always include an Employer Identification Number, SSN, or ITIN on Form SS-4

• Use a full legal name on Form SS-4 as well as the EIN provided consistently

• Inform the IRS of business name changes

• If the company uses a P.O. Box, use that instead of the physical address as the mailing address

Dodd-Frank Act

The Dodd-Frank Act & Consumer Protection Act

The Dodd-Frank Act & Consumer Protection Act, or just the Dodd-Frank Act, is a federal statute that was passed into United States law and signed on July 21, 2010 but President Barack Obama. The point of passing the Dodd-Frank Act is for the act to create financial reform in result of the financial crisis that occurred between 2007 to 2010. This crisis led to calls for changes and reform in the regulatory system, and because of this President Barack Obama approved this bill

The Dodd-Frank Act is broken down into sixteen titles and creates 243 rules, issues 22 periodic reports, and conduct 67 studies with the purpose of promoting financial stability of the United States economy by fixing the transparency and accountability that should be in the financial system. It also works to end bailouts and help to protect consumers from different abusive practices in various financial services.

The Dodd-Frank Act changes aspects of the current regulatory structure, for example by creating a variety of new agencies in order to make an effort to make the regulatory process for efficient. Other changes of the Dodd-Frank Act include increasing oversight of systemic risk, making amendments to the Federal Reserve Act, and other changes to promote transparency.

Highlights of the Dodd-Frank Act

• Independent and Authoritative Consumer Protection

o Creating a new independent organization under the Federal Reserve that has the authority to ensure that American consumers receive accurate information that is needed in order to carefully look for credit cards, mortgages, or other financial products while protecting them from any abusive terms, hidden fees, and deceptive practices.

• End of Bailouts

o Eliminates the chance taxpayers bailing out financial firms by creating safer ways to liquidate any failed financial firms, setting tough new capital or leverage requirements, updating Federal authority to allow for system-wide support without supporting individual firms, and creating rigorous supervisions and standards to protect American consumers and the economy as well as, investors and businesses.

• Advance Warning System

o Sets up a council in order to identify and address potential risks created by large, complex companies, activities or products before they have the ability threaten the economy’s stability.

• Transparency and Accountability for Exotic Instruments

o Eliminates the loopholes that allow for risky or abusive practices continue unregulated and unnoticed.

• Executive Compensation & Corporate Governance

o Give shareholders with their own say on corporate affairs and pay through a non-binding vote on golden parachutes and executive compensation.

• Protects Investors

o Create tough rules for accountability and transparency for credit rating bureaus and agencies in order to protect businesses and investors.

• Enforces Regulations on the Books:

o Empowers oversight and allows regulators to more aggressively attack financial fraud, interest conflicts and system manipulation that is in favor of special interests while being at the expense of businesses and families.

Small Business Plan

Creating a Small Business Plan

The U.S. Small Business Administration provides helpful information for individuals who need to figure out a small business plan. One of the most helpful things they have created is the business plan template.

Helpful Pointers before Starting

The first thing to do with figuring out a small business plan is making sure to understand the purpose of the business. There needs to be a reason for the business in order for it to succeed. It also requires a clear plan that describes objectives and goals that apply to the business. It is important to incorporate discipline and logic into a business and should be updated to keep up with changes.

Writing an Executive Summary

The first actual part of the small business plan is to write the executive summary which should give a good idea of the objective of the business. This should be done concisely within two pages and it should create enthusiasm in the reader as well as give an idea of what the business will be about.

Business Description and Vision

In the next part of the small business plan, the mission statement should be made clear as well as the vision of the company as a whole. This will give a change to explain the key principals of the company and describe how that fits with the goals and objectives. This makes it easier to understand what the business stands for and what the potential of the company is.

Defining the Market

To define the market in a small business plan, it is important to figure out where the market fits in with the business. By identifying the target market and the business’ needs within that market, it is possible to define the general profile of the business’ target. Using a small business plan helps the reader see what customer needs are being fulfilled and the potential of the market.

Explaining the services or products

It is important to know just what product or service will be provided before jumping into a business. The small business plan suggests describing the product in detail and explaining what makes it more unique and competitive to the consumer.

Management of the Business

A company needs to have defined legal ownership as well leaders and a flow chart of operations. Furthermore it is important to understand the legal structure of the business and what licenses or permits will the business require.

How to Market the Products

Even know knowing the market, there still has to be an organized plan of marketing the product to the consumer. This includes how it will be promoted, priced, what products will be available, and how it will be distributed. Taking this step of the small business plan explains the market and just how to reach it.

Financial Management

The final section needs to explain in detail how money is involved in the process of starting or running the business. If starting, there needs to be estimations of the start-up costs and the projected income and cash flow for the first year. When looking at an existing business, these also have to evaluated, but both for the previous years and future ones. This will help explain the financial potential of the company.

GLBA

GLBA or the Gramm-Leach-Bliley Act

The Gramm-Leach-Bliley Act or the GLBA is an extremely comprehensive federal law that affects various financial institutions. Under the GLBA, these institutions have to develop, utilize, and maintain physical, technical, and administrative safeguards in order to protect the integrity, security and confidentiality of any customer information available.

GBLA is applicable to savings and loans, banks credit unions, securities firms, and insurance companies. The law even includes certain retailers along with automobile dealers that can collect and share personal information about a consumer when they extend or arrange credit to them.

Personal information that is often considered private by an individual such as bank balances or account numbers is often sold and bought by credit card companies, banks and financial institutions. The GLBA, which was also called the Financial Services Modernization Act of 1999, gives limited privacy protections to the consumer against the sale of these pieces of private financial information. Furthermore, the GLBA codifies protections against obtaining the information through any false pretenses.

The hope of the GLBA was to modernize financial services by ending regulations that stopped the merger of banks, insurance companies and stock brokerage companies. The removal of the regulations, however, increased significant risks of these new financial institutions accessing a large amount of consumer personal information, without restrictions upon its use.

Before the GLBA, an insurance company that kept a consumer’s health records was very separate from the bank that provided a mortgage along with the stockbroker that handled the stocks. After these companies merged, they could consolidate, analyze and then sell the personal information of their customers.

Because of these potential risks, the GLBA put in three easy requirements to protect personal data of the individuals:

• Banks, insurance companies and brokerage companies must securely keep personal financial information

• These institutions must advise a customer of their policies on any sharing of personal financial information

• They must also give the individuals the chance to deny sharing of personal financial information.

Compliance with the GLBA is mandatory. Even if a financial institution does not disclose information, there needs to be a policy set to protect information from any foreseeable threats in data or security integrity.

The major components of the GLBA are set to govern the disclosure, collection and protection of the consumers’ personal information and include:

• Financial Privacy Rule: requires financial institutions to give each consumer a privacy notice at the time the relationship with the consumer is established and every year thereafter explaining the information obtained about the consumer, where the information is shared, how it is used, and how it is protected as well as the consumer’s individual right to deny having his information shared with third parties as said in the Fair Credit Reporting Act.

• Pretexting Protection: Protection from someone trying to obtain access to personal information without the proper authority to have it, for example by impersonating the impersonating the account holder, or by phishing

• Safeguards Rule: a written information security plan that talks about how a company is prepared for, and will plan to keep protecting clients’ personal information

Business Checking Account

Using a Business Checking Account

Setting up a business checking account is an important step in starting a small business. While there may be some business owners who will be tempted just use an existing personal checking account, doing this is typically a bad idea for many reasons. It is much easier to just have a separate business checking account, especially during tax season. Any legitimate business should have a business checking account.

This includes home-based businesses, sole proprietors, and even tiny micro businesses can benefit greatly from having a business checking account. Conveniently, it is relatively simple to open a business checking account.

Steps to Opening up a Business Checking Account

Gather the appropriate documentation needed by the financial institution that will set up the business checking account. The following will be required:

• Articles of Incorporation for C-corporations or S-corporations

• Articles of Organization for LLCs

• Business License if required

• Funds to for the opening account balance deposit

• Social Security Number and an Employer Identification Number

• Two forms of identification with one of them having photo identification and other having a name and signature

After obtaining the necessary documentation, visit a local credit union or bank in a convenient area to set up the business checking account. Doing so in person can help start a relationship with the bank which can be important if later in the future the business needs to grow or expand. A better relationship means a better chance of getting more lines of credit or a small business loan.

Completing an application for a business checking account is fairly simple and only requires basic information such as a name, personal address, business name and address, social security number, and an employer identification number.

Next, it is important to make an initial deposit into the business checking account either by cash, money order, or check. It’s possible to find banks with very low prices for an initial deposit, for example as little as $100, but many will need larger initial deposits that can be around $500.

After the account is created, the bank’s representative will suggest ordering checks, but it may not be necessary to do through the bank since bank rates for purchasing checks are typically very high. It is best to first get the initial checks and then order more from a discount provider. Ordering them will require different pieces of information on the bank branch, the business, and account information.

The last step is to just start using the business checking account for payments and deposits for the business. It is important to keep in mind that if there will be another signer to the account, that person should be present when setting up the account and should have all the proper personal information as well.