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  • 1467

Foreign Reporting Requirements: Navigating Harsh Penalties and Complex Compliance Rules

In today’s increasingly global financial environment, it’s common for U.S. taxpayers to hold accounts or receive income from foreign sources—whether that’s through overseas investments, inherited accounts, or rental income deposited in a foreign bank. But with this global reach comes a critical responsibility: complying with foreign reporting rules. Two key reporting obligations include the …

In today’s increasingly global financial environment, it’s common for U.S. taxpayers to hold accounts or receive income from foreign sources—whether that’s through overseas investments, inherited accounts, or rental income deposited in a foreign bank. But with this global reach comes a critical responsibility: complying with foreign reporting rules.

Two key reporting obligations include the Foreign Bank Account Report (FBAR) and IRS Form 8938, part of the Foreign Account Tax Compliance Act (FATCA). Understanding when these forms apply—and the steep penalties for getting it wrong—is essential for taxpayers with international financial ties.

What Is the FBAR (FinCEN Form 114)?

U.S. persons—including individuals, corporations, partnerships, trusts, and estates—must file an FBAR if they have a financial interest in or signature authority over one or more foreign financial accounts and the total value exceeds $10,000 at any point during the calendar year.

Accounts that may require FBAR reporting include:

  • Checking, savings, or brokerage accounts held outside the U.S.

  • Accounts associated with foreign rental income

  • Online gambling accounts maintained by foreign platforms

  • Accounts inherited from a non-U.S. resident

  • Joint accounts held with relatives abroad

Importantly, FBAR filings are submitted directly to FinCEN, not included with the taxpayer’s income tax return.

Who Must File?

FBAR filing isn’t limited to those who own accounts directly. You may also have a filing obligation if:

  • You own or benefit from a foreign account

  • You have signature or other authority over a foreign account, even if not in your name

  • You are listed on a foreign relative’s account, even without contributing funds

  • You inherited a foreign account with a balance over the threshold

  • You maintain a foreign rental property and deposit income into a local bank

The $10,000 threshold applies to the total value of all foreign accounts combined—not individually. If the combined value exceeds $10,000 for even a single day during the year, you’re required to file.

Common FBAR Exceptions

While FBAR requirements are extensive, a few exceptions exist:

  • Accounts at foreign branches of U.S. banks located in the U.S.

  • Accounts held on U.S. military banking facilities abroad

  • Jointly held spousal accounts, if reported by one spouse with proper documentation (Form 114a)

Even with these exceptions, it’s important to evaluate all accounts carefully to avoid underreporting.

FBAR Penalties: What’s at Stake?

Penalties for noncompliance can be severe:

  • Non-willful violations may result in civil penalties up to $10,000 per violation
    (Adjusted to $16,536 as of January 17, 2025)

  • Willful violations carry a penalty of the greater of $100,000 or 50% of the account balance
    (Adjusted to $165,353 as of January 17, 2025)

In cases of willful neglect, criminal charges and imprisonment are also possible. The statute of limitations for FBAR enforcement extends for several years, making it possible for past violations to surface during audits or investigations.

How Does Form 8938 Differ from the FBAR?

In addition to the FBAR, certain taxpayers may also need to file Form 8938, the IRS’s Statement of Specified Foreign Financial Assets under FATCA. While both forms address foreign holdings, they differ in how they are filed, what they include, and their thresholds.

Unlike the FBAR, Form 8938 is filed as part of your federal income tax return.

Thresholds for Filing Form 8938

The value of your foreign financial assets must exceed the following thresholds to trigger filing:

Filing Status Living in the U.S. Living Abroad
Married Filing Jointly $100,000 (end of year) / $150,000 (any time) $400,000 / $600,000
All Others $50,000 / $75,000 $200,000 / $300,000

To qualify as living abroad, a U.S. person must either be a bona fide resident of a foreign country for the entire year, or be physically present abroad for at least 330 full days in any 12-month period ending in the reporting year.

What Assets Are Reported on Form 8938?

Form 8938 captures a broad range of foreign assets, including:

  • Foreign checking, savings, and brokerage accounts

  • Investments in foreign stocks, bonds, or securities

  • Interests in foreign partnerships or mutual funds

  • Foreign retirement accounts or annuities

  • Other financial instruments with exposure to foreign markets

Although many of these assets may also appear on the FBAR, the definitions and thresholds differ—which is why both forms may be required.

Penalties for Failing to File Form 8938

The IRS can impose significant penalties for failing to file Form 8938:

  • $10,000 for failure to file when required

  • Up to an additional $50,000 for continued noncompliance (if not filed within 90 days of IRS notification)

These are in addition to any FBAR-related penalties and are not adjusted for inflation.

Where Do FBAR and Form 8938 Overlap?

Many taxpayers are surprised to learn they must file both the FBAR and Form 8938 for the same accounts or assets. For example:

  • A foreign bank account may need to be reported on both forms if the combined balance exceeds $10,000 (FBAR threshold) and also surpasses the FATCA threshold for Form 8938.

  • Foreign stocks, securities, or investment funds held in a foreign account may also fall under both reporting rules.

Because the definitions and thresholds are not identical, it’s important to review both sets of requirements closely.

Best Practices for Compliance

Given the complexity of foreign reporting, taxpayers should take a proactive approach:

Conduct a Full Review of All Foreign Assets

Evaluate all bank accounts, investments, and other assets held abroad—including those inherited or jointly held.

Understand the Different Thresholds

Keep in mind that FBAR uses a flat $10,000 threshold, while Form 8938’s limits depend on filing status and residency.

Monitor Foreign Currency Fluctuations

Because valuations are based on U.S. dollar equivalents, shifts in exchange rates can impact whether a filing is required.

Maintain Complete Documentation

Both FinCEN and the IRS recommend keeping supporting records for at least five years—including statements, ownership documents, and balances.

Seek Professional Guidance

Due to the penalties involved, working with a tax advisor who understands international reporting is often the best way to ensure accuracy and peace of mind.

Final Thoughts

For U.S. taxpayers with overseas financial interests, compliance with FBAR and FATCA (Form 8938) reporting is critical. These rules apply in a variety of scenarios—from receiving rental income abroad, to holding signature authority over a family member’s account, to participating in online gambling platforms hosted overseas.

Given the significant risks—including steep civil penalties and potential criminal exposure—taxpayers should take foreign reporting obligations seriously. If you’re unsure about your filing responsibilities, the team at DeBoer, Baumann & Company is here to help you navigate the complexities and stay in compliance.

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  • 2154

Unpredictable Weather Leaves Northern Michigan Apple Growers in Limbo

Apple growers across Northern Michigan are facing a season filled with uncertainty as they monitor how their orchards respond to lingering winter conditions and a slow start to spring. While some signs are encouraging, cooler temperatures are raising concerns about pollination, fruit development, and ultimately, the fall harvest.Emma Grant of Cherry Bay Orchards in …

Apple growers across Northern Michigan are facing a season filled with uncertainty as they monitor how their orchards respond to lingering winter conditions and a slow start to spring. While some signs are encouraging, cooler temperatures are raising concerns about pollination, fruit development, and ultimately, the fall harvest.

Emma Grant of Cherry Bay Orchards in Leelanau County summed up the current mood among growers: “I wish the unpredictability is what is predictable, that every year is going to be different, every spring is going to be different, every growing season and harvest is going to be different.”

Growers began to see apple trees bloom roughly two weeks ago, but lower-than-average temperatures have stalled further development. According to Grant, “It’s just been kind of a drawn-out bloom as these cooler temperatures came in, things aren’t really moving along.”

While the extended winter helped replenish ground moisture—a benefit for the growing season—it also brought challenges. One of the biggest concerns is the reduced bee activity, which plays a vital role in pollination. Without adequate pollination, fruit set could be limited.

Describing the uneven bloom patterns, Grant noted, “I’ve got trees where, clusters are open, some are starting to go into petal fall, and then there’s other clusters that are still at pink and haven’t even begun to open flowers yet. So it’s going to be interesting to see what the fruit set does.”

Nikki Rothwell of the Northwest Michigan Horticulture Research Center also emphasized the uncertainty surrounding the season. “I feel like we’re kind of still playing a waiting game which seems unbelievable considering it’s gonna be June soon,” she said.

Rothwell encourages growers to take a hands-on approach when evaluating their trees. “We’ve been recommending getting out of the truck and actually walking, looking at the tree, look high in the tree which usually has more fruit than the bottom part of the tree and then start to make those thinning decisions.”

As temperatures begin to rise, growers are hopeful that more clarity will come in the days ahead. Grant explained, “In a week or so, we should start to see that fruitlet development to start getting into like four millimeter, six millimeter, the size of the fruit, where you start to look at your thinning numbers. So we should be able, by the end of next week to know a little better what we have out there, and then take that into account as we look at thinning.”

It’s not just apples that are affected. Cherry growers throughout the region are also navigating a critical period, with some orchards reporting weather-related damage while others remain largely unaffected.

For now, many growers remain in a holding pattern, closely watching their crops and hoping the weather cooperates as the season progresses.

To read the full article by Marc Schollett, visit this link: https://upnorthlive.com/news/local/northern-michigan-apple-growers-face-uncertain-season-amid-weather-challenges

At De Boer, Baumann & Company, we’re proud to serve the agricultural community. If you need help navigating seasonal challenges or planning for long-term farm sustainability, our team is here to support your goals.

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  • 1988

Why It Pays to Start Your Retirement Plan Early

When it comes to retirement, timing is everything—especially for farmers who often prioritize reinvesting in their operations over setting money aside for the future. But the earlier you begin saving, the greater the payoff thanks to the power of compound interest. Starting your retirement plan early not only helps secure your financial future but …

When it comes to retirement, timing is everything—especially for farmers who often prioritize reinvesting in their operations over setting money aside for the future. But the earlier you begin saving, the greater the payoff thanks to the power of compound interest. Starting your retirement plan early not only helps secure your financial future but can also ease the eventual transition of your farm to the next generation.

 

The Power of Compound Growth

Compound interest is a powerful tool that rewards consistency and time. One way to think about compounding is the “Rule of 72”—if you divide 72 by your expected annual return, the result is the number of years it will take your investment to double. For instance, with a 3% return, your money doubles in 24 years; at 8%, it doubles in just 9.

This difference becomes even more meaningful the earlier you start. Let’s compare two farmers who each invest $10,000 into a retirement plan—one at age 20, the other at 40—and assume they let the funds grow until age 70:

  • At a 3% return:

    • Investment at age 20 grows to $469,016

    • Investment at age 40 grows to $100,627

  • At a 10% return:

    • Investment at age 20 grows to $1,173,909

    • Investment at age 40 grows to $174,494

That’s a significant difference—and it all comes down to starting earlier, even with the same initial amount.

 

Low Costs, High Value

One reason many farmers shy away from retirement plans is the perception that they’re expensive or complicated. But maintaining a solo 401(k) or contributing to an IRA is typically low-cost and straightforward. For married couples, contributing up to $14,000 annually across two IRAs is often an easy first step.

It’s also wise to invest in low-cost exchange-traded funds (ETFs) or mutual funds. These options typically have lower fees, which means more of your money stays invested and working for you over time.

 

Most Growth Happens Later—So Start Now

Interestingly, the majority of earnings in a retirement account often occur in the final decade before retirement. That’s why it’s so important to start early—even small contributions made in your 20s or 30s can grow significantly by the time you reach retirement age.

 

Protection from Risk

Aside from long-term savings, retirement accounts offer protection against financial risk. For farmers—whose livelihoods often come with market volatility and external pressures—this added layer of security is especially valuable.

Retirement funds held in employer-sponsored plans like a 401(k) are fully protected in the event of bankruptcy. While IRAs aren’t entirely exempt, the protected limit is substantial. As of April 1, 2025, the exemption amount increased to $1,711,975, effective through March 31, 2028.

This means most farmers with IRA balances under that threshold will retain access to their retirement savings—even in the worst-case scenario. In many states, IRAs are either fully or partially protected as well. These accounts don’t just help you save—they provide peace of mind.

 

Build a Better Financial Future

Starting a retirement plan may feel like a big step, but it’s one of the smartest financial decisions a farmer can make. With time on your side, even modest contributions can grow into a reliable source of income and protection. Planning for retirement also makes future succession planning easier by reducing financial dependence on the farm.

To read the full article by Paul Neiffer, visit: https://www.agweb.com/news/business/succession-planning/best-time-start-your-retirement-plan

Need help determining how retirement planning fits into your overall financial strategy? At De Boer, Baumann & Company, we can help you explore tax-advantaged savings options, assess long-term needs, and make the most of your future investments.

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  • 2185

Planning Ahead: A Practical Guide to Farm Succession

Preparing to Pass Down the Farm? Here’s What to KnowYour farm is more than a business—it’s a legacy built through years of dedication, sacrifice, and hard work. Whether you envision passing it down to the next generation or transitioning ownership to someone outside the family, having a succession plan is essential. It not only …

Preparing to Pass Down the Farm? Here’s What to Know

Your farm is more than a business—it’s a legacy built through years of dedication, sacrifice, and hard work. Whether you envision passing it down to the next generation or transitioning ownership to someone outside the family, having a succession plan is essential. It not only protects the future of your operation but also helps avoid disruption and financial uncertainty.

Farm succession planning goes beyond simply handing over the reins. It’s about setting up the next chapter with purpose and clarity. Here’s what to consider as you begin the process.

 

Start with Your Long-Term Vision

Before any formal planning begins, take time to reflect on your long-term goals. What do you want your legacy to look like? Do you hope to keep the farm in the family, or are you open to selling it? Will you remain involved in day-to-day operations, or are you ready to step back completely?

These types of questions can help shape the direction of your succession strategy:

  • Do you want to pass the farm to a family member or someone outside the family?

  • What income will you need in retirement?

  • How do you envision the farm evolving under future leadership?

Once you’ve outlined your vision, it’s time to start the conversation with those who will be impacted.

 

Communicate Early and Openly with Family

If the plan involves family, communication is key. Having open discussions with your loved ones now can help reduce misunderstandings and emotional strain later. Some family members may be eager to take over, while others might not want to be involved at all.

During these conversations, try to address:

  • Who is interested in managing or operating the farm?

  • How will responsibilities and decision-making be shared?

  • What role will non-involved family members play, if any?

If no one within the family is interested in taking over, consider exploring alternatives like selling to a trusted partner or another successor outside the family.

 

Assess Financial and Legal Considerations

A solid farm succession plan must also account for the financial health of the business. Reviewing your finances now will help ensure the farm remains viable and that your own financial needs—such as retirement income—are met.

Here are a few key items to evaluate:

  • Financial Status: Take stock of current assets, debts, and cash flow.

  • Legal Readiness: Review land titles, business structures, and any existing agreements to ensure they support your goals.

Addressing these items early can help prevent legal or financial issues down the road and give you peace of mind about your future.

 

Document Your Succession Plan

Once your vision is clear and you’ve had conversations with those involved, it’s time to put the plan on paper. A written plan ensures everyone is on the same page and helps eliminate confusion or conflict during the transition.

Your written succession plan should address:

  • Leadership Transition: Who will take on day-to-day management, and when?

  • Ownership Transfer: Will the farm be gifted, sold, or transitioned gradually?

  • Training and Mentorship: What steps will prepare the next generation for success?

Having a clear plan in place not only guides the process but also builds confidence among everyone involved.

 

Get Guidance from Professionals

Farm succession planning can be complex. Seeking guidance from qualified professionals can help you navigate the many tax and financial implications.

Consider working with:

  • Agricultural Lenders: For financing options that support your transition.

  • Financial Advisors: To help you plan for retirement and maintain farm cash flow.

  • Estate Planners: To ensure your succession plan aligns with your overall goals.

Professional insight can be the difference between a smooth handoff and a stressful one.

 

Explore All Succession Strategies

Not every farm follows the same path. If a traditional family transfer isn’t the best fit, there are several other approaches that can keep your operation running successfully.

Some options include:

  • Gradual Transfer: Transitioning ownership over time while remaining involved.

  • Shared Management: Having multiple generations manage together during the transition period.

  • Lease-to-Own: Letting a successor lease land or equipment with the option to purchase later.

  • Non-Family Successors: Transitioning the farm to a partner or trusted outside party.

Exploring these alternatives now gives you more flexibility and helps secure your farm’s future.

 

Secure Your Farm’s Future Today

Creating a farm succession plan doesn’t happen overnight—but starting early will make the process easier for everyone involved. Having honest conversations, getting your finances in order, and putting your plan in writing are all steps that help safeguard your legacy.

Remember, your farm’s future deserves just as much care and intention as the years of work that built it.

To read the full article by Conterra Ag, visit this link: https://www.conterraag.com/planning-for-the-future-a-practical-guide-to-farm-succession

Need help navigating your farm’s succession strategy? At De Boer, Baumann & Company, we’re here to support you every step of the way—from financial planning to transition support and more.

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  • 1467

Spring Clean Your Business Finances: 7 Tips to Improve Cash Flow and Cut Costs 

Spring isn’t just for closets. It’s for your business finances too.  And just like you wouldn’t leave last year’s mismatched socks sitting in your drawer, you shouldn’t let old subscriptions, bloated expenses, or outdated processes keep piling up in your books.  Because here’s the truth: Small financial leaks turn into big problems over time. But the good …

Spring isn’t just for closets. 
It’s for your business finances too. 

And just like you wouldn’t leave last year’s mismatched socks sitting in your drawer, you shouldn’t let old subscriptions, bloated expenses, or outdated processes keep piling up in your books. 

Because here’s the truth: 
Small financial leaks turn into big problems over time. 
But the good news? You can plug those leaks with a bit of spring cleaning. And it doesn’t require a full financial overhaul—just a few focused tweaks that can free up cash and sharpen your operations fast. 

Let’s walk through it together. 

  1. Audit Your Subscriptions (Yes, All of Them)

That software you signed up for during COVID? The design tool you thought you’d use? The double-billed Zoom accounts? 
They’re all eating into your margins. 

Go line-by-line through your credit card statements and flag: 

    • Duplicate tools 
    • Trials that never got canceled 
    • Apps your team hasn’t touched in 3+ months 

Then cut them loose. It’s one of the fastest ways to reclaim hidden cash. 

  1. Renegotiate Vendor Contracts

Prices have gone up, but that doesn’t mean you have to just accept it. 
Call your vendors. Ask about loyalty pricing. Bundle services. Request bulk discounts. 
You’d be surprised how often you can shave off 5–15% just by asking the right questions. 

Pro tip: If you’ve been a reliable client, you have leverage. Use it. 

  1. Update Your Financial Systems

If you’re still using spreadsheets to manage cash flow or entering receipts manually… 
It’s time to upgrade. 

Modern cloud-based systems can: 

    • Track expenses in real time 
    • Forecast cash flow with clarity 
    • Sync with your bank and payroll in seconds 

Investing in the right tools now saves you hours later—and gives you better insight into where your money is going. 

  1. Revisit Your Pricing Strategy

When was the last time you raised your rates? 
If it’s been over a year, your profit margin might be quietly shrinking behind the scenes. 

Run the numbers: 

    • Are you still profitable after cost increases? 
    • Are your competitors charging more? 
    • Could you offer value-based packages instead of hourly rates? 

A small adjustment here could unlock a big bump in revenue—with no added workload. 

  1. Review Your Staffing Costs

Whether you have employees or contractors, spring is a great time to check: 

    • Are the roles and tasks still aligned with your goals? 
    • Are you paying for work that no longer needs to be done? 
    • Could automation or smarter processes reduce time spent? 

Sometimes, trimming costs doesn’t mean letting go of people—it means redefining what needs to get done and how. 

  1. Collect on Outstanding Invoices

Unpaid invoices? That’s your money sitting in someone else’s account. 

    • Set up clear payment reminders. 
    • Add late fees. 
    • Offer early payment discounts. 
    • And if clients are chronically late, consider a retainer or an upfront model. 

Don’t be afraid to chase what you’re owed—it’s part of doing business. 

  1. Work with a Financial Advisor Who Gets It

Yes, you could do all of this yourself. 
But should you? 

The fastest way to spot inefficiencies, uncover savings, and set yourself up for stronger cash flow is to have a second set of (expert) eyes on your numbers. 

That’s where we come in. 

Let’s Tidy Up Those Finances—Together 

Spring is the season of renewal—and your business finances deserve a refresh too. 

Whether you’re drowning in subscriptions, stuck with outdated systems, or just want someone to walk you through a smart, streamlined plan for the months ahead, we’re here for that. 

Contact us today to schedule your spring financial check-up. 
We’ll help you clean house, cut waste, and build a more profitable path forward. 

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  • 1723

How to Choose the Perfect Business Entity for Your Venture 

Choosing the right business entity is a critical decision for entrepreneurs and business owners. The type of entity you select can have significant implications for liability, taxation, and the overall management of your business. In this article, we will explore the pros and cons of various business entities, including sole proprietorships, partnerships, limited partnerships, …

Choosing the right business entity is a critical decision for entrepreneurs and business owners. The type of entity you select can have significant implications for liability, taxation, and the overall management of your business. In this article, we will explore the pros and cons of various business entities, including sole proprietorships, partnerships, limited partnerships, limited liability companies (LLCs), C corporations, and S corporations which are the most common business structures. We will also discuss liability issues, self-employment taxes, owner limitations, taxation, formation, and dissolution for each entity type. 

The business structure one chooses influences everything from day-to-day operations to taxes and how much of their personal assets are at risk. One should choose a business structure that provides the right balance of legal protections and benefits. 

 

GENERAL OVERVIEW OF COMMON BUSINESS STRUCTURES 

Business structure 

Ownership 

Liability 

Taxes 

Sole proprietorship 

One person 

Unlimited personal liability 

Self-employment tax Personal tax 

Partnerships 

Two or more people 

Unlimited personal liability unless structured as a limited partnership 

Self-employment tax (except for limited partners)  

Personal tax 

Limited liability company (LLC) 

One or more people 

Owners are not personally liable 

Self-employment tax Personal tax or corporate tax 

Corporation – C corp. 

One or more people 

Owners are not personally liable 

Corporate tax 

Corporation – S corp. 

100 people or fewer can include certain trusts and estates. But no partnerships, corporations, or non-resident aliens 

Owners are not personally liable 

Personal tax 

Corporation – B corp.* 

One or more people 

Owners are not personally liable 

Corporate tax 

Corporation – Nonprofit* 

One or more people 

Owners are not personally liable 

Tax-exempt, but corporate profits can’t be distributed 

* Further information about B corporations and B- corporations not included in this material. 

Compare general traits of these business structures, but remember that ownership rules, liability, taxes and filing requirements for each business structure can vary by state. The following material is a general overview of these business structures and it is best practice to consult with your legal counsel and this office before making a final decision.  

 

Sole Proprietorship – A business is automatically considered to be a sole proprietorship if it is not registered as any other kind of business. Thus, the sole proprietor’s business assets and liabilities are not separate from personal assets and liabilities. As a result, sole proprietors can be held personally liable for the debts and obligations of the business. A sole proprietor may also find it difficult to raise money since banks are hesitant to lend to sole proprietorships. 

NOTE: If the business owner is the sole member of a domestic limited liability company (LLC) and elects to treat the LLC as a corporation, then it is not a sole proprietorship. 

  • Pros: 
    • Simplicity and Cost-Effectiveness: Sole proprietorships are the simplest and least expensive business entities to establish. They require minimal paperwork and are easy to manage. 
    • Complete Control: A sole proprietor has full control over all business decisions and operations. 
    • Tax Benefits: Income and expenses are reported on the individual’s personal tax return, simplifying the tax process. The sole proprietor may also qualify for certain tax deductions available to small businesses. 
  • Cons: 
    • Unlimited Liability: Sole proprietors are personally liable for all business debts and obligations, which means personal assets are at risk if the business incurs debt or is sued. 
    • Limited Growth Potential: Raising capital can be challenging, as a sole proprietorship cannot sell stock or bring in partners. 
    • Self-Employment Taxes: Sole proprietors are responsible for paying self-employment taxes, which cover Social Security and Medicare contributions. 
  • Formation and Dissolution: 
    • Formation: Establishing a sole proprietorship is straightforward, often requiring only a business license or permit. 
    • Dissolution: Dissolving a sole proprietorship is equally simple, involving the cessation of business activities and settling any outstanding debts. 

 

Partnership – A partnership is the relationship between two or more people in a trade or business together. Each person contributes money, property, labor or skill, and shares in the profits and losses of the business.  Partnerships represent the simplest structure for two or more people to be in business together.  Two of the most common types of partnerships include:  

  • Limited Partnerships (LP): Which have one general partner with unlimited liability. The other partners have limited liability and generally have limited control over the business.   

Partnerships are pass-though entities, meaning the partnership does not pay taxes. Instead, income, losses, credits and other tax issues are passed through to the partners in proportion to their partnership ownership and reported on their individual returns.   

  • Limited Liability Partnerships (LLP): A limited liability partnership is also a pass-through entity.  The only difference is all the partners have limited liability from debts of the partnership, and the actions of other partners.  
  • Pros: 
    • Shared Responsibility: Partnerships allow for shared management and financial responsibility, which can ease the burden on individual partners. 
    • Flexibility: Partnerships can be structured to suit the needs of the partners, with varying levels of involvement and profit-sharing. 
    • Tax Advantages: Partnerships are pass-through entities, meaning profits and losses are reported on the partners’ personal tax returns, avoiding double taxation. 
  • Cons: 
    • Joint Liability: In a general partnership, each partner is personally liable for the debts and obligations of the business, including those incurred by other partners. 
    • Potential for Conflict: Disagreements between partners can arise, potentially leading to business disruption. 
    • Self-Employment Taxes: Partners who aren’t limited partners must pay self-employment taxes on their share of the profits. 
  • Formation and Dissolution: 
    • Formation: Partnerships are formed through a partnership agreement, which outlines the terms of the partnership, including profit-sharing and management responsibilities. 
    • Dissolution: Dissolving a partnership requires settling debts, distributing assets, and notifying relevant authorities. 

 

Limited Liability Company (LLC) – A Limited Liability Company (LLC) is a business structure allowed by state statute. Each state may use different regulations, and those considering an LLC should check with the state before starting a Limited Liability Company. A business must register with the state and pay LLC fees to become an LLC. 

Owners of an LLC are called members. Most states do not restrict ownership, so members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single member” LLCs, those having only one owner. Generally, banks and insurance companies cannot be an LLC, and generally there are special rules for foreign LLCs. 

  • Pros: 
    • Limited Liability: LLC owners, known as members, are protected from personal liability for business debts and obligations. 
    • Flexible Taxation: LLCs can choose to be taxed as a sole proprietorship, partnership, or corporation, providing flexibility in tax planning. 
    • Operational Flexibility: LLCs have fewer formalities and regulations compared to corporations, allowing for flexible management structures. 
  • Cons:     
    • Regulations: LLCs are subject to varying state laws, which can complicate operations if the business operates in multiple states. 
    • Self-Employment Taxes: Members may be subject to self-employment taxes on their share of the profits. 
    • Cost: Forming and maintaining an LLC can be more expensive than a sole proprietorship or partnership due to state filing fees and annual reports. 
  • Formation and Dissolution: 
    • Formation: LLCs are formed by filing articles of organization with the state and creating an operating agreement. 
    • Dissolution: Dissolving an LLC involves filing dissolution documents with the state and settling any outstanding obligations. 

 

C Corporation – A corporation is a legal entity that’s separate from its owners. Corporations can make a profit, be taxed, and held legally liable. 

Corporations provide strong protection to its owners from personal liability, but the cost to form a corporation is higher than other structures.  

Unlike sole proprietors, partnerships, and LLCs that are pass-through entities, corporations pay income tax on their profits. In some cases, corporate profits are taxed twice. This happens when the corporation distributes profits to its shareholders in the form of dividends which are taxable to shareholders on their personal tax returns. 

Corporations have a separate life from its shareholders. Corporate ownership is in the form corporate stock which can be purchased and sold without disturbing the corporation.  

Ownership in the form of stock gives corporations the advantage of being able to raise capital through the sale of stock, and employee stock options can be a benefit in attracting employees. 

  • Pros: 
    • Limited Liability: Shareholders are protected from personal liability for corporate debts and obligations. 
    • Unlimited Growth Potential: C corporations can raise capital by issuing stock, making them attractive to investors. 
    • Tax Advantages: Corporations can benefit from various tax deductions and credits not available to other entities. 
  • Cons: 
    • Double Taxation: C corporations face double taxation, where profits are taxed at the corporate level and again as dividends to shareholders. 
    • Complexity and Cost: Corporations require more formalities, including a board of directors, bylaws, and regular meetings, which can be costly and time-consuming. 
    • Regulatory Requirements: Corporations are subject to stringent regulatory requirements and reporting obligations. 
  • Formation and Dissolution: 
    • Formation: C corporations are formed by filing articles of incorporation with the state and creating corporate bylaws. 
    • Dissolution: Dissolving a corporation involves a formal process of liquidating assets, settling debts, and filing dissolution documents with the state. 

 

S Corporation – S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level. 

To qualify for S corporation status, the corporation must meet the following requirements: 

  • Be a domestic corporation 
  • Have only allowable shareholders 
  • May be individuals, certain trusts, and estates and 
  • May not be partnerships, corporations or non-resident alien shareholders 
  • Have no more than 100 shareholders 
  • Have only one class of stock 
  • Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations) 

To become an S corporation, the corporation must submit Form 2553, Election by a Small Business Corporation signed by all the shareholders.   

  • Pros: 
    • Limited Liability: Like C corporations, S corporation shareholders are protected from personal liability. 
    • Pass-Through Taxation: S corporations avoid double taxation by allowing income, deductions, and credits to pass through to shareholders’ personal tax returns. 
    • Tax Savings on Self-Employment: Shareholders can receive a salary and dividends, potentially reducing self-employment taxes. 
  • Cons: 
    • Ownership Restrictions: S corporations are limited to 100 shareholders, and all must be U.S. citizens or residents. 
    • Complex Formation and Maintenance: S corporations require adherence to strict IRS requirements and ongoing compliance with corporate formalities. 
    • Limited Flexibility in Profit Sharing: Profits and losses must be distributed according to share ownership, limiting flexibility in profit-sharing arrangements. 
  • Formation and Dissolution: 
    • Formation: S corporations are formed by filing articles of incorporation and electing S corporation status with the IRS. 
    • Dissolution: Dissolving an S corporation involves liquidating assets, settling debts, and filing dissolution documents with the state and IRS. 

 

Choosing the right business entity is a crucial decision that can impact your business’s success and your personal financial security. Each entity type offers distinct advantages and disadvantages, and the best choice depends on your specific business goals, risk tolerance, and financial situation. It’s essential to consult with legal and financial professionals to ensure you select the entity that aligns with your long-term objectives and provides the most benefits for your business. Consult with us to go over relevant issues before making a choice.  

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Understanding the Role of Donor-Advised Funds in Modern Fundraising

In recent years, donor-advised funds (DAFs) have become a powerful tool in the nonprofit sector, significantly increasing the amount of charitable donations. In 2023 alone, DAFs facilitated over $54 billion in grants to charitable organizations, marking a second consecutive year of exceeding $50 billion in grants. However, despite their growing influence, DAFs have faced …

In recent years, donor-advised funds (DAFs) have become a powerful tool in the nonprofit sector, significantly increasing the amount of charitable donations. In 2023 alone, DAFs facilitated over $54 billion in grants to charitable organizations, marking a second consecutive year of exceeding $50 billion in grants. However, despite their growing influence, DAFs have faced criticism for being primarily used for tax advantages. What often gets overlooked, though, is that the funds in DAFs can only be used for charitable purposes, making them a legitimate and powerful means of giving.

What Are Donor-Advised Funds?

At their core, DAFs are philanthropic accounts that allow individuals to make tax-deductible donations to a fund, from which they can then recommend grants to specific nonprofits. Whether through workplace giving or traditional DAFs, this giving model offers donors a straightforward way to contribute to causes they care about. This method of giving not only simplifies the donation process but also helps donors keep track of their charitable contributions over time.

Since DAFs are a relatively new concept (with 81% of them being established after 2010), they may seem intimidating or unfamiliar to some donors and fundraisers. However, the reality is that donors using DAFs are incredibly engaged and committed to supporting nonprofits over the long term, making them an important group to include in fundraising strategies.

Why Donors Choose DAFs

DAF donors are often more intentional and committed to supporting nonprofits for extended periods. Research shows that DAF donor retention is 15% higher than that of non-DAF donors, meaning DAF donors are more likely to contribute over the years. For many, DAFs represent an ongoing commitment to specific causes, unlike one-time donations made sporadically over their lifetime.

Donors who use workplace giving programs often contribute a portion of their paycheck to a DAF, making it a reliable way to fund charitable causes regularly. Even after leaving the workforce, many of these donors continue their giving through DAFs, ensuring that their support for nonprofits remains uninterrupted.

How DAFs Support Corporate Social Responsibility

Many companies now offer workplace giving programs that allow employees to contribute to DAFs, often matching donations to amplify the impact. These programs not only enhance employee engagement but also demonstrate the company’s commitment to making a positive difference in the community. In turn, employees feel more connected to their workplace’s mission and are more likely to continue supporting the nonprofits their company backs.

Corporate-sponsored volunteer events, paired with workplace giving, also help employees connect with nonprofits on a deeper level, which can lead to continued support even after they leave the company.

The Amplified Impact of DAFs

DAFs offer a unique advantage for donors who want their funds to grow before being disbursed. Contributions to a DAF are invested, which can increase the total amount available for charitable giving. This compounded growth allows nonprofits to receive larger donations over time, benefiting from a more consistent flow of funding.

Workplace DAFs are even more beneficial due to employer matching contributions. In some cases, a company’s match can double or triple the impact of an employee’s donation, which increases the value of each charitable contribution.

Overall, DAF donors tend to give significantly more compared to non-DAF donors, with some reports showing that DAF donors give nearly 96% more annually than they did before using the fund. This generosity shows how committed these donors are to causes they care about.

DAFs Are Reshaping Philanthropy

Although DAFs are still a relatively new concept in the world of charitable giving, they are growing rapidly. Between 2019 and 2023, grants from DAFs grew 214 times faster than those from non-DAF sources, which illustrates the increasing role they play in modern fundraising. As DAFs continue to gain traction, nonprofits should actively encourage contributions through these funds and incorporate them into their fundraising strategies.

In conclusion, DAFs offer a tremendous opportunity for nonprofits to tap into a growing and committed donor base. By understanding how DAFs work and integrating them into long-term fundraising plans, nonprofits can maximize their impact and create lasting relationships with their donors.

To read the full article by Matt Nash, please visit Modern Fundraising And The Impact Of Donor-Advised Funds.

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Building Capacity Without Breaking the Budget: Smart Strategies for Nonprofits

Nonprofit organizations often face the challenge of doing more with less, especially in an economic climate where budgets are tight and inflationary pressures continue to impact costs. Whether it’s managing a nonprofit or any other type of organization, the need to stretch limited resources is constant. However, there are proven strategies that can help …

Nonprofit organizations often face the challenge of doing more with less, especially in an economic climate where budgets are tight and inflationary pressures continue to impact costs. Whether it’s managing a nonprofit or any other type of organization, the need to stretch limited resources is constant. However, there are proven strategies that can help nonprofits increase their capacity while keeping expenses in check.

1. Regularly Review Your Budget

Budgeting shouldn’t be a once-a-year task. To keep up with economic changes, it’s essential to review your budget on a quarterly basis. Take a close look at every line item—not just the major expenses like salaries and rent. Small costs, such as office supplies, subscriptions, and equipment, can add up quickly over time. A regular budget review can help identify areas where you might still be paying for unused services or unnecessary expenses.

2. Invest in Revenue-Generating Activities

While reducing costs is important, nonprofits must also focus on generating income to balance their budgets. Revenue-generating activities, such as donor appeals, grant writing, and major donor cultivation, should be central to your strategy. By strategically investing in activities that increase revenue, you can address financial shortfalls and sustain your operations effectively.

3. Focus on Donor Retention

Donor retention is a far more cost-effective strategy than acquiring new donors. Research indicates that retaining a donor costs approximately 10 times less than finding a new one. To build long-term success, it’s critical to maintain strong relationships with existing donors. Regularly evaluate your donor engagement practices to ensure you’re connecting effectively with supporters and encouraging repeat donations.

4. Communicate Transparently

Transparency is key in building trust with your donors and stakeholders. By sharing both your successes and challenges, you demonstrate resilience and the ability to navigate difficult situations. Open communication helps strengthen relationships, making it easier to maintain support without incurring additional costs. Transparency should be a cornerstone of your communication strategy to foster deeper connections with your community.

5. Expand Capacity Creatively

When your organization faces capacity gaps, think creatively about how to fill them. Solutions like staff swaps or hiring fractional professionals—such as part-time CFOs, HR specialists, or grant writers—can provide the expertise you need without the expense of hiring full-time employees. These flexible, cost-effective options allow you to expand your organization’s capacity while keeping expenses low.

These strategies can help your nonprofit build capacity without inflating costs. By regularly reviewing your budget, focusing on revenue generation, retaining donors, communicating transparently, and thinking creatively about expanding capacity, you can position your organization for long-term success even during challenging economic times.

To read the full article by Staci Gilpin, Ph.D. and Charity Anderson, Ph.D., please visit https://thenonprofittimes.com/npt_articles/building-capacity-without-breaking-the-budget/.

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Strengthening Partnerships with the Board: Three Critical Areas for Nonprofit Leaders

Nonprofit leaders are passionate about their mission to create meaningful change, but despite their dedication and hard work, many find themselves struggling to achieve the desired results. To overcome these challenges and lead their organizations toward greater success, nonprofit leaders must focus on three key areas: building strong relationships with staff, fostering active partnerships …

Nonprofit leaders are passionate about their mission to create meaningful change, but despite their dedication and hard work, many find themselves struggling to achieve the desired results. To overcome these challenges and lead their organizations toward greater success, nonprofit leaders must focus on three key areas: building strong relationships with staff, fostering active partnerships with board members, and effectively communicating the organization’s impact. By honing these aspects, nonprofit leaders can drive real, lasting change in their communities.

1. Building Strong Internal Relationships

One of the most important aspects of leadership is creating positive, supportive relationships within your team. Successful nonprofit leaders strive to make their employees feel valued and heard. Leaders who excel in this area can inspire their team to perform at their best by acknowledging their contributions and fostering an environment where all voices are respected.

As Maya Angelou famously said, “People will forget what you said, people will forget what you did, but people will never forget how you made them feel.” Listening to your employees and demonstrating that you care about their concerns and contributions can significantly boost morale and create a cohesive team. Leadership isn’t about formal authority; it’s about building trust through genuine care and support.

2. Creating Strong Partnerships with the Board

A successful nonprofit leader also knows how to work closely with their board. While it’s essential to understand the board’s fiduciary responsibilities, the most effective leaders know how to create a strong, collaborative relationship with board members. Engaging your board as true partners in achieving strategic goals is key to organizational success.

Leaders can foster this partnership by encouraging open dialogue about the challenges and opportunities the organization faces. Board members should feel empowered to contribute their unique knowledge and skills. One useful approach is to ensure that at least half of your board meetings focus on open discussions about strategic issues. For instance, after committee updates, the board chair could ask engaging questions such as, “What impact are we making on the people we serve?” or “How can we differentiate ourselves from other organizations?”

3. Measuring and Communicating Organizational Impact

Nonprofit leaders must continuously measure their success and communicate the impact of their work. Many leaders fall into the trap of thinking their organization’s work is well-known when, in fact, they may be the “best-kept secret” in town. To build a successful nonprofit, you must consistently highlight the positive outcomes your organization is creating for its beneficiaries.

Ask yourself: If your nonprofit had a “stock price,” what would it be selling for today? This metaphor emphasizes the importance of understanding and communicating the tangible value your organization provides. Constantly assess and measure the impact you’re making, and ensure that you share those results with your community and stakeholders.

Being transparent about your organization’s impact can help attract more support and involvement. Remember, “donors give to success, not distress.” When you communicate the positive influence your nonprofit is having, you demonstrate your organization’s strength and attract the resources needed to continue making a difference.

Key Takeaways for Nonprofit Leaders: Strengthening Internal Relationships and Board Engagement

To lead a nonprofit to greater success, it is essential to cultivate strong relationships within your organization, engage your board in meaningful ways, and consistently communicate your impact. By doing so, you’ll foster a culture of success and growth that will propel your organization forward. Don’t let your nonprofit remain a secret—share your achievements, measure your impact, and keep your mission at the forefront of all you do.

To read the full article by Dennis C. Miller, please visit https://thenonprofittimes.com/npt_articles/partnering-with-the-board-3-key-areas-to-develop/.

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Agricultural Climate Resiliency Program Funds Four New Projects

The Agricultural Climate Resiliency Program is expanding its impact with an additional $5.1 million in funding for four new research and outreach projects. This initiative, a collaboration between Michigan State University (MSU), the Michigan Plant Coalition, and the Michigan Department of Agriculture and Rural Development (MDARD), aims to address long-term climate and water challenges …

The Agricultural Climate Resiliency Program is expanding its impact with an additional $5.1 million in funding for four new research and outreach projects. This initiative, a collaboration between Michigan State University (MSU), the Michigan Plant Coalition, and the Michigan Department of Agriculture and Rural Development (MDARD), aims to address long-term climate and water challenges in Michigan’s plant agriculture sector.

Established in 2024, the program is administered by MSU AgBioResearch and MSU Extension, supporting research efforts focused on water efficiency, soil health, carbon sequestration, and environmental conservation. Each of the four selected projects will receive $1.275 million over three years to develop innovative, science-based solutions for Michigan farmers.

Advancing Agricultural Resilience

MDARD Director Tim Boring emphasized the importance of these investments, stating, “Supporting Michigan’s agricultural resilience is a top priority. Thanks to Gov. Whitmer’s bipartisan budget, we are funding cutting-edge projects that provide practical solutions for farmers. These initiatives will help the agricultural industry adapt to challenges today and build a sustainable future for generations to come.”

A panel of experts from MSU, the Michigan Plant Coalition, and MDARD evaluated 18 proposals before selecting the four funded projects for 2025. George Smith, director of MSU AgBioResearch, highlighted the significance of these efforts, saying, “The first two years of proposals have been extremely impressive. The selected projects will lay the groundwork for long-term, practical solutions that benefit Michigan’s growers.”

2025 Funded Projects

  1. Climate-Resilient Cropping Systems

    • Researchers are developing a modeling platform to help farmers, food producers, and government agencies make data-driven management decisions. The goal is to optimize inputs and enhance economic, environmental, and social outcomes in agriculture.

    • Lead Researcher: Bruno Basso, John A. Hannah Distinguished Professor, MSU Departments of Earth and Environmental Sciences and Plant, Soil and Microbial Sciences.

  2. AI-Powered Agricultural Forecasting

    • This project leverages artificial intelligence to create a forecasting tool for four key crops in Michigan’s Lower Peninsula: corn, potatoes, soybeans, and wheat. By analyzing climate trends, the platform will assist farmers in developing adaptive strategies to enhance resilience.

    • Lead Researcher: Jiquan Chen, Professor, MSU Department of Geography, Environment, and Spatial Sciences.

  3. Mitigating Nutrient Runoff

    • Addressing one of the leading causes of harmful algal blooms in Michigan’s waterbodies, this initiative focuses on developing advanced tools for nutrient management in corn and soybean farming. Research will include water quality monitoring, conservation practices, and farmer decision-support tools.

    • Lead Researcher: Subhasis Giri, Assistant Professor, MSU Department of Biosystems and Agricultural Engineering.

  4. Enhancing Soil and Water Conservation Through Regenerative Agriculture

    • With Michigan farmers facing increasing uncertainty due to extreme weather, this study will model how regenerative practices can improve soil health, enhance water retention, and reduce runoff. Researchers aim to quantify the benefits of soil water-holding capacity, aquifer recharge, and nutrient retention.

    • Lead Researcher: Jeremiah Asher, Assistant Director, MSU Institute of Water Research.

 

Research Meets Real-World Application

A critical component of these projects is ensuring that research findings are directly applied to Michigan’s farming communities. MSU Extension Director Quentin Tyler highlighted the program’s commitment to practical implementation: “Strong partnerships with agricultural industries and growers are the backbone of our work. The outreach component of this program ensures research-based recommendations are accessible and actionable.”

For more information about the Agricultural Climate Resiliency Program and ongoing research efforts, visit canr.msu.edu/climate-resiliency.

To read the full article by Cameron Rudolph, please visit Agricultural Climate Resiliency Program funds 4 new projects – Michigan Farm News.

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