<p>My husband has a non-medical private practice. The value of the office furniture, machines, and supplies he uses is probably not more than 10K second-hand, and we don't own the building. His taxes (prepared by a professional accountant) show that his net is something less than half his gross. I read somewhere that the PROFILE penalizes small business owners. Have other parents found this to be true?</p>
<p>Well, yeah, apparently. They may refigure the deductions you have used on your taxes so that his “net” is more than his 1040 net, depending on what you have used. Your physical assets would appear to be small, but does the business have a value that could be sold?</p>
<p>The problem with having a business is that the NPC are not going to be accurate so it’s difficult to see what the PROFILE colleges are going do with the situation. Yes, PROFILE schools tend to assess the small business owner more than the IRS does, adding back deduction and also giving the business a value. There have been cases here on this board where those in this situation have been blindsided after running NPCs and feeling that they are going to get aid , end up with a big fat goose egg because the schools did not see it the same way.</p>
<p>Demeron2, I am assuming your H is a LLC or PLLC in terms of business structure?
My husband and I own a company but because it is a C-corp and we’re W2 employees, my son’s school did not ask for the small business supplement portion of the CSS (we even contact them to be certain they didn’t need it). So apparently it depends on what the legal structure of your small business is, and perhaps this varies to a degree by school.</p>
<p>Can anybody direct me to a PROFILE calculator? I filled out the EFC calculator, I think it was the college board site… anyway, it said it used federal and institutional methods. This is a solo specialist psychology practice-- I’ve never heard of selling such a practice, as you can’t exactly sell the practitioner with it. Net profit is after rent, billing service, employee pay, etc.</p>
<p>PROFILE calculators are private and used internally by Financial Aid office of each school. There are NPC calculators that you can use in a lot of schools websites but the complaint is that those calculators do not handle these situations with small business very well. They instead get a surprise when the internal PROFILE calculator numbers are presented.</p>
<p>"Your physical assets would appear to be small, but does the business have a value that could be sold? "</p>
<p>This really kills me, how in the world does anyone think that a family, whose lives depend on the small business they have, should sell their business to extract the value to pay for their kids college?</p>
<p>It’s not an LLC-- for his line of work an LLC would not protective him from liability, so there seemed no reason to structure it that way. I can’t remember the proper name but essentially it’s the simplest form.</p>
<p>Sole proprietorship?</p>
<p>Pick a school and ask if they will do a pre read of your financial situation and what sort of package they would give. I know CMU would do so. Tell them it’s for possible ED and they will meet full need as they define it. That gives you insight as to how a PROFILE school might look at your situation. </p>
<p>Because it isn’t important what the details are on how your DH’s company or any business is set up, in terms of any of US knowing. All that matters is how the PROFILE schools would look at it. And the milage may vary greatly among them, but pick one and it’'ll enlighten you more than where you are right now. It’s not a matter of fair or right or anything, but the way the PROFILE schools tend to look at those businesses owned by a parent that counts.</p>
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<p>I’d guess the expectation is not that you’d sell the business, but, rather, borrow against it.</p>
<p>Sole proprietorship, that’s it!</p>
<p>I own a sole-prop consulting business. My D’s applications were from a couple years ago, before the NPC. But yeah, Cost of attendance at high-priced LACs minus our EFC seemed to indicate that our D would get SOMETHING in FA from the schools she was admitted to–but the schools felt not. And she was a top applicant, not just a barely-squeeked in admit. But all the LACs felt we could swing 55k+/year. Hah. Not. I’m pretty sure they took my retirement contribution and added that back, along with the accounts receivable and cash on hand for the business, which of course was needed to run the business–so we were considered full pay.</p>
<p>You might want to call some of the schools in question to see how they assess things.
If you’re talking this admissions cycle, hopefully you have some financial safeties on the list. I’ve yet to hear of a small business owner who feels that worked to their FAVOR.</p>
<p>Good luck!</p>
<p>"I’d guess the expectation is not that you’d sell the business, but, rather, borrow against it. "</p>
<p>Sure, if your business is doing ok or reasonably well, but a lot of businesses are not doing well, barely breaking even or getting by. Let’s even assume that you can even get whoever to lend you the money, how are you going to pay off the loan afterwards?</p>
<p>Then let’s say, you go and borrow 10-30k a year, then the next year the debt does not count towards the PROFILE, you still have the value in the business that you can’t sell that the PROFILE sees. Maybe you can’t borrow again because you are tapped out.</p>
<p>Yes you can “sell” a physician practice…even if it’s one physician…it’s happening every day. Part of accountable care has to deal with managing patient populations and practice purchase and consolidation is occurring across all specialties.</p>
<p>Our family is one example of a self-employed, small business that was favorably treated by a private college. My husband is the only employee of a self-owned professional practice. The firm is set up as a C-corp for liability purposes. To value the firm for FA purposes, I total the current value of all hard assets (last year it was only one of our cars and and computer equipment) and add in the value of all current professional services contracts. The business has no long-term liabilities and has not made a profit (nor has DH taken a salary) for about three years. We do run some reasonable household expenses through the business.</p>
<p>The past two years, the college has corrected our FAFSA to reduce the value of the business to $0, thereby reducing our EFC. I presume that this adjustment is also made to whatever Profile FA calculation is made. All three years our EFC has been assessed at almost exactly our FAFSA EFC and the school has met full need up to that amount (with institutional grants and direct student loans).</p>
<p>We may be the only ones in the college FA world that this happens to, but I do caution folks not to assume that they will be penalized for having a small business. As always…YMMV.</p>
<p>Archiemom, the problem isn’t so much with FAFSA as it is for PROFILE. I believe FAFSA made some changes to be more favorable to those self employed. It really isn’t really a problem with PROFILE per se, but how the various PROFILE schools are using the information. Some of the most generous schools that guarantee to mee 100% of need are defining need in a way differently from the way FAFSA 's EFC calculators would. </p>
<p>It’s great that your student is in a college that uses FAFSA only and still gives 100% of need for him using the FAFSA EFC to determine need. The problem is that getting full need met from a school using FAFSA only is not guaranteed and does not often happen. Look at the stat sof the college your student attends, and you’ll the percentage of need met, and also the percentage of kids getting full need met. Some kids in the mix, like yours will get full ned met, but not likely most.</p>
<p>archiemom, is that a FAFSA only school you are dealing with? The penalty for small business comes into play mostly when dealing with schools that use the PROFILE/CSS.</p>
<p>Schools using the PROFILE can also calculate there expected contributions more favorably for business owners. The problem is that many do not I had heard somewhere that some of the Catholic schools do use a different methodology and may treat family businesses more like PROFILE would. But no verification, no idea which schools.</p>
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Wouldn’t they count the debt because the “net” value of the asset would then be 10-30K less than it was before you borrowed?</p>