Basic Fee Structure, and Invoicing/Payment Policies

The following is Small Business Solutions, Inc.'s basic fee structure and payment policies. The fixed monthly fees listed below are for a "typical" client. Each client's specific needs will be considered and fee adjustments will be made to match individual client's needs. Small Business Solutions, Inc. has established a fixed monthly billing system to avoid a large invoice at the end of the year and eliminate hourly billings for miscellaneous services and expenses.

Small Business Solutions, Inc.'s fixed monthly fee for professional services includes routine phone calls for tax and business advice and miscellaneous expenses such as long distance phone charges, postage, copies, and other similar miscellaneous expenses. Our Fixed Fee Concept is to encourage clients to contact us with questions prior to problems arising and not incur an hourly charge for the question. The Fee Structure is based on the following business and personal profile:

• The Director, Officer, and employees of the company are all members of the same family.
• The company receives income that does not have taxes withheld (commonly referred to as 1099 income)
• The principle will normally use an automobile as a major part of the production of income.
• The principle will routinely incur travel and related business expenses in the pursuit of producing income.
• The company's customers or clients will from time to time reimburse the company for mutually agreed expenses.
• Assistance from other family members with the corporation's business.
• One spouse will be the Director, Officer, and Shareholder.
• The other spouse will be a salaried employee and a non-shareholder.
• The company has one basic business bank account.
• The company has one or more business credit cards.
• Optional: Possibly have miscellaneous commissions from brokering equipment.
• Optional: Maintain an office in your home.

In certain circumstances a second entity might be beneficial for tax planning purposes for a family group. A family partnership can be sometimes be used as part of a family tax plan.

Fixed Monthly Fees - One Entity: $235.00
The following services provided for a "typical" client are as follows:

• Periodic Review of routine accounting data
• NON-VENDOR COMPUTER SUPPORT
• ENTREPRENEURIAL RELATED ACCOUNTING, BUSINESS, AND TAX SERVICES
• Tax Planning
• Form 1120S Corporation Federal Tax Return
• Corporate State Income/Franchise Tax Return
        NOTE: Payroll and Bookkeeping Services NOT included

Second Entity if needed: $285.00
The following services provided for a "typical" client are as follows:

• Review of routine accounting entries
• Account Reconciliation(s)
• Reconcile Officer Receivable with Expenses
• Tax Planning
• Form 1065 Partnership and K-1s- Federal Tax Return
• Corporate State Income/Franchise Tax Return
        NOTE: Payroll and Bookkeeping Services NOT included

The monthly fee is invoiced and due as of the first of each month unless prior payment arrangements have been made that are mutually agreeable to both parties. The monthly invoices represent 1/12 of your annual fees. Bookkeeping and payroll tax services are optional. The monthly invoices are sent out by mail and/or by email on the first of each month. Invoices not paid with in the month will be subject to a late charge of 1½ % per month.

Clients have the option to maintain their own books and records. The records must be maintained using the current version of QuickBooks Pro® and ExpenseAble®; Payroll Tax Services are optional.

Client's Option - Bookkeeping Services
In many instances, data is not available for establishing a fixed monthly fee. In the case of a new client, we might have to provide services on an hourly basis for the first three to six months of data processing. After processing the actual data, a fixed fee can normally be determined.

Another instance is in preparing books and records for amended returns. Each individual circumstance will have to be evaluated on a case-by-case basis.

Our hourly Bookkeeping rates are as follows:

• Accounting &Bookkeeping Services $45.00
• Clerical Services $22.50
• Data Management $25.00
• Expense Report Processing $28.50
• File Management $35.00
• Quick Books Processing $28.50
• Review, Verification, &Related Services $45.00

Our Typical Fixed Monthly Bookkeeping rates is follows:

• Fixed Monthly Bookkeeping Services $95.00

The fixed monthly fee will vary with circumstances and volumes.

Payroll Services
The client has the option to process their own payroll using QuickBooks Pro.

If Small Business Solutions, Inc. provides payroll tax services the fees are as follows:

• The quarterly reports and services are at a set fee of $90.00.
• Monthly invoices for 1/3 or $30.00 are sent each month. The
• invoice is due on the first of each month.

Quarterly and Annual Payroll Services and Fees

• Calculation of Payroll Tax Deposits (if required) $20.00
• Payroll Tax Deposit Completion $20.00
• Form 940 FUTA $40.00
• Form 941 - Quarterly Report $40.00
• Form 1099-Per Contractor $ 6.00
• Form W2 - Per Employee $ 7.50
• W2 Recap/Transmittal $25.00
• State Quarterly Payroll Tax Report $30.00

The approximate annual fee for 1099s and W-2's for a "typical" client is $75.00.

For payroll services you will receive an invoice for the 1st, 2nd and 3rd quarters and an annual payroll invoice, which is based on the number of W-2's and 1099's that are prepared.

Consulting Services - Special Projects
If Small Business Solutions, Inc. is requested to perform professional services beyond the service covered by the fixed fee, the hourly billing rate will be $200.00. Pre-approved expenses will be reimbursed based on the actual out of pocket expenses.

One Time Fees

Start Up Fees: $900.00
The following start up services are provided as follows:

• Form SS-4 - Employers ID#
• Form 2848 - Power of Attorney
• Form 2553 - Election to be an S Corporation
• Chart of Accounts - Preparation and Editing
• Computer Training in Industry, TX
• Training Class on how to utilize an "S" Corporation - In Industry, TX (6 to 8 hours)
• Client Clerical Services
• New Employee File
• Assistance in Starting a New Company

First Year Conversion For Proprietorship To "S" Corp
The fees and payment schedule for the initial year that you retain Small Business Solutions, Inc. will be jointly determined. Two of the considerations will be the status of your current year return (whether if it has or has not been filed) and the month during the calendar year that you retain our services. We will establish a plan for the start-up year that is mutually acceptable to both parties based on the individual circumstances.

Section 351 Transfer: $900.00
An IRS Code Section 351 Transfer is a tax-free exchange of personal business and related assets and liabilities to a corporation. The taxpayer exchanges personal business in exchange for stock in a corporation. The transfer has to be for eighty (80%) percent or more of the then outstanding stock of the corporation. The transfer can include the assumption on debt of the personal business and/or debt where the assets being transferred are used as collateral to secure the debt. Normally, it is recommended that the transfer be completed in the first month of the corporation's existence to add support to the business's "purpose." The transfer has to be filed with personal and corporation tax returns in the year of the transfer.

The offer is made under a "Transferees Statement under Regs. 1.351-3(a)" of the Internal Revenue Code of 1954 as Amended. The documents needed to affect the tax-free exchange are as follows:

• Representations
• Offer
• Consideration for Transfer
• Transfer of Business, Execution of Documents
• Bill of Sale and Agreement
• Transferees Statement Under Regs. 1.351-3(a)
• Statement of Assets, Liabilities, and Net Assets
• Promissory Note
• Related Exhibits

The charge for a Section 351 Transfer is a fixed fee of $875.00. Payable when documents are completed.

Prior Years Tax Returns
Prior years' tax returns, which are for periods prior to incorporating, will be billed on a case-by-case basis. Preparation of amended returns for prior years can be provided for a fixed fee, an hourly fee, or a contingent fee basis. Our standard contingent fee is 1/3 of the refund payable when the refund is received. If Small Business Solutions, Inc. did not prepare your prior year returns the IRS regulations allows for our fee to amend the returns to be on a contingent fee basis. Each circumstance will have to be examined to determine the economically feasibility of amending prior year returns. Bookkeeping fees are not normally part of our contingent fees. If bookkeeping is not included in the contingent fee then the amount of the contingent fee will be greater.

Scanning Documents
The client is responsible for scanning all of their documents before transmitting them to Small Business Solutions, Inc. If the client authorizes Small Business Solutions, Inc. to copy their documents the service will be provided at the rate of $22.50/hr.

We request that all clients only send copies and not originals to prevent the loss of documents in shipment.

Shipment of Documents
The safest way to send any information to Small Business Solutions, Inc. is via UPS ground. UPS stops daily at our office around 11:30 a.m. Central Standard Time.

Our ground address is:

1241 Post Oak Point Road
New Ulm, TX 78950

Our Mail Address is:

P.O. Drawer 340
Industry, TX 78944-0340

For more information on the services listed above, please contact our office.