Outsourcing human resources can give your not-for-profit’s staff more time to spend on core duties and mission-driven programs and it may be cost-effective. Here are some suggestions if you’re thinking about outsourcing part or all of your HR tasks.
First, decide which segments of the HR function to farm out. Take a look at payroll, recruiting, training, benefits planning and administration, compliance monitoring, leave management and performance reviews. These are all labor-intensive responsibilities where expertise counts. Transferring all or some of them to the right outside party can vault your organization to a higher level of professionalism and efficiency.
Next, perform a cost-benefit analysis. Even if the cost is more to outsource, you may decide that the extra dollars are worth freeing up staff hours for other initiatives.
Factor in the drawbacks to outsourcing. Certain tasks may require an understanding of your organization’s culture and history to be effective. Also think about the impact of letting go any HR people currently on staff.
Questions to ask
Before you contact outsourcing service providers, make sure you have buy-in from your staff and board of directors. The Nonprofit Coordinating Committee of New York suggests asking several questions of potential HR service providers:
- What is the scope of your service?
- How long have you been in business?
- Where are your services typically provided: on-site, off-site or a combination?
- How many nonprofit clients do you have in our area, sector and size?
- How do you charge for services — hourly or on retainer?
- Whom will we be directly working with?
- What will you expect of our organization, including the board and staff?
Once you’ve met with outside service providers and selected one, ask your attorney to review the contract. Before you make the big change, be sure that you have controls in place to monitor the quality of the new arrangement. We can assist you with this. © 2019
Have you recently started a new business? Or are you contemplating starting one? Launching a new venture is a hectic, exciting time. And as you know, before you even open the doors, you generally have to spend a lot of money. You may have to train workers and pay for rent, utilities, marketing and more.
Entrepreneurs are often unaware that many expenses incurred by start-ups can’t be deducted right away. You should be aware that the way you handle some of your initial expenses can make a large difference in your tax bill.
Key points on how expenses are handled
When starting or planning a new enterprise, keep these factors in mind: Start-up costs include those incurred or paid while creating an active trade or business — or investigating the creation or acquisition of one.
Under the federal tax code, taxpayers can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs in the year the business begins. We don’t need to tell you that $5,000 doesn’t go far these days! And the $5,000 deduction is reduced dollar-for-dollar by the amount by which your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized over 180 months on a straight-line basis.
No deductions or amortization write-offs are allowed until the year when “active conduct” of your new business commences. That usually means the year when the enterprise has all the pieces in place to begin earning revenue. To determine if a taxpayer meets this test, the IRS and courts generally ask questions such as:
- Did the taxpayer undertake the activity intending to earn a profit?
- Was the taxpayer regularly and actively involved?
- Has the activity actually begun?
Examples of expenses
Start-up expenses generally include all expenses that are incurred to:
- Investigate the creation or acquisition of a business,
- Create a business, or
- Engage in a for-profit activity in anticipation of that activity becoming an active business.
To be eligible for the election, an expense also must be one that would be deductible if it were incurred after a business began. One example would be the money you spend analyzing potential markets for a new product or service.
To qualify as an “organization expense,” the outlay must be related to the creation of a corporation or partnership. Some examples of organization expenses are legal and accounting fees for services related to organizing the new business and filing fees paid to the state of incorporation.
An important decision
Time may be of the essence if you have start-up expenses that you’d like to deduct this year. You need to decide whether to take the elections described above. Recordkeeping is important. Contact us about your business start-up plans. We can help with the tax and other aspects of your new venture. © 2019