BofA Tells Clients to Bet Against Mexico Peso as Recession Looms
Bank of America Corp. is telling clients to bet on declines in Mexico's peso against the euro, warning of risks including an economic downturn at home and a proposed tax on remittances from the US.
The Wall Street bank, one of the first to call the currency 'super peso' ahead of a massive rally in 2023, said that recent gains have left it almost 10% overvalued relative to its macroeconomic fundamentals.
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Forbes
an hour ago
- Forbes
Solos, Corporations, And LLCs: What Works Best For Your Business?
Getting the choice of entity right at the start is crucial, since switching later can have tax and other consequences. When you're getting started in business, it can be tempting to rush through to get to the good stuff. After all, you have a cool idea and an even cooler sounding name. Can't you just tack 'LLC' onto the end using one of those online services? The short answer is no. Entity selection is more important than you think. Your choice of entity can affect the number and identity of shareholders and partners, equity structure, control and management, as well as the type of funding you may be eligible to receive. I know what you're thinking: why not just pick something to get started and change it if it doesn't work? Getting it right from the beginning is crucial. While it's true that you can make a switch later on, there could be tax and other consequences that may impact you in the long run. The best plan is to get it right the first time. When making a choice about an entity, there's a lot to consider, including two key things: Entity choice can get pretty complicated. There are several key factors to consider, including liability, organizational control, potential funding sources, and tax implications. What follows is a brief primer on the most common forms of entity (with a focus on taxes, of course): The sole proprietorship is the simplest form of business entity. There is no formal procedure to establish a sole proprietorship—no forms to fill out, no agreements to sign, and no documents to file with the state. With few formal accounting requirements, transferring personal and business assets in and out of the business is easy. However, the absence of formal requirements means that the owner of the sole proprietorship can be personally liable for the business's debts and obligations, including tax bills and legal awards. When creditors, including the IRS, attempt to collect, they may be able to reach personal assets, like your house, to satisfy judgments. For federal tax purposes, taxpayers do not file a separate tax return for a sole proprietorship. Income and expenses from the business are reported on an individual taxpayer's Form 1040 on Schedule C. In some cases, that produces a less favorable tax result—but on the plus side, losses from your business can be used to offset other taxable income. Establishing a partnership (or general partnership) is nearly as easy as creating a sole proprietorship—it's just an association of two or more individuals who agree to run a business for profit. As with a sole proprietorship, most states do not require formal procedures to establish a partnership—there are no forms to complete, no agreements to sign, and no documents to file, even though having these is advisable for business and legal purposes. In a general partnership, partners share liability for business obligations (typically, jointly and individually). For federal tax purposes, although a partnership is required to file a separate return (Form 1065), the income and losses associated with the partnership pass through to the individual partners. Items of income or loss retain their character and are reported to each partner in proportion to their interest, as determined by statute or the partnership agreement. Each partner is then responsible for reporting that information on their individual tax returns. A limited partnership is typically defined as a partnership formed by one or more general partners and one or more limited partners. General partners are treated much like what we think of as "typical" partners—they have joint and several liability for the partnership's debts and often exercise control over the partnership. The 'limited' in a limited partner means that those partners may enjoy limited liability protection from the partnership's liabilities (this depends on state law), but it also tends to mean that those partners have a lesser role in operations and decision making. For federal tax purposes, a limited partnership is treated as a pass-through entity, similar to a general partnership. A limited liability partnership (LLP) is similar to a general partnership, but unlike a general partnership, which can exist informally, an LLP must be registered with the state. The benefit of registration—a formal acknowledgment of the entity—is that the LLP assumes a form of limited liability similar to that of a corporation. Typically, this means that partners aren't liable for the wrongful actions of the other partners, though the level of liability can vary from state to state. Generally, there is unlimited personal liability for the partnership's contractual obligations, like promissory notes and mortgages. For federal tax purposes, an LLP is treated as a pass-through entity, similar to a general partnership. Just over half of U.S. states recognize a limited liability limited partnership (LLLP). You can think of an LLP as a general partnership with limited liability, so adding that extra 'L' typically results in an LLLP being treated as a limited partnership with that same limited liability. That means that the primary advantage of an LLLP is limited liability protection for the general partner. For federal tax purposes, an LLLP is treated as a pass-through entity, similar to a general partnership. The limited liability company (LLC) remains the most popular type of business in the U.S.—approximately four in 10 small businesses will form as an LLC. Here's what makes it so popular: it offers the liability protection of a corporation while allowing for taxation as either a partnership or a corporation. An LLC consists of members, rather than shareholders. Individual members are generally protected from liability as long as corporate formalities are maintained. LLCs must typically register with the state and are often required to comply with additional requirements, such as annual reports. Even with the extra paperwork, LLCs typically have considerably fewer corporate formalities than other corporations. For federal tax purposes, the default tax treatment of an LLC is that it operates as a pass-through entity (meaning that it will file a partnership tax return). However, an LLC can opt to be treated differently by making an election. There may be instances where corporate tax treatment is more desirable (for example, when the individual members are foreign nationals) or when it makes sense to be taxed as an S corporation (typically related to compensation). It's worth noting that states may impose additional corporate taxes on LLCs, even if they are otherwise considered partnerships, which can increase the costs associated with being an LLC. A single-member limited liability company (SMLLC) is just what it sounds like: an LLC with a single member. An SMLLC retains the advantages of an LLC for most purposes—except when it comes to tax. For federal tax purposes, an SMLLC is treated as a "disregarded entity.' This means that the owner does not file a separate tax form for the business. Instead, income and expenses are reported on an individual taxpayer's Form 1040, Schedule C, just like a sole proprietor. While all states recognize SMLLCs, the tax treatment is not the same in every state (meaning that not all states treat SMLLCs as disregarded entities). A C corporation—which gets its name from Subchapter C of the Internal Revenue Code—is what most people consider when thinking about a business. In a typical C corporation, the business is owned by individual shareholders who hold stock certificates or shares (yes, we still call them certificates even though it's rare to have an actual piece of paper in hand). Shareholders vote on policy issues, but the decisions regarding company policy are left to the Board of Directors. The catch? The Board of Directors is typically elected by the shareholders. The day-to-day operations of running the company are performed by the officers of the corporation—think chief executive officers (CEOs). The primary advantage of a C corporation is limited liability—individual shareholders are typically not responsible for the company's debts, obligations, and actions. For federal tax purposes, a C corporation is a separate taxable entity that figures income or loss each year and pays tax on taxable income. The current federal corporate income tax rate is a flat rate of 21% (before 2017, the rate was 35%). Shareholders also pay tax at their individual income tax rates for any dividends or taxable distributions paid out during the year. Since tax is already paid on the company's profits, this is where the term "double taxation" originates. A professional corporation (PC) is a type of corporation limited to specific occupations, typically service professions such as law, medicine, and architecture. A PC is generally not allowed to extend its services beyond those for which it was specifically incorporated with the state. For example, a PC for law cannot offer design services. In most states, this also means that individuals who are not licensed in the profession may not be shareholders—this rule applies not only to employees but also to potential investors and family members. For federal tax purposes, a PC may elect to be taxed as either a C or S corporation. Most PCs are considered personal service corporations (PSC) by the IRS. However, the terms don't mean the same thing—a PC is the legal entity, while a PSC is the tax classification. Currently, a PSC is taxed at a flat rate of 21%. A benefit corporation, also known as a B corporation, is a legal entity recognized in most states. It enables a corporation to consider social and environmental impacts when making management decisions as part of a broader public benefit. This differs from other for-profit corporations, which typically have a duty to shareholders to prioritize profits—it also means that some benefit corporations are less attractive to investors. Well-known benefit corporations include King Arthur Flour and Patagonia. For federal tax purposes, there is no difference between a B corporation and a C corporation—they are taxed the same. Don't confuse a benefit or B corporation with a B Corp. Although they sound the same, a B Corp is a business certified by B Lab, a third-party organization. To certify as a B Corp, a business must meet specific requirements, including achieving high social and environmental performance scores. You can certainly be a B Corp as a benefit corporation (see again King Arthur), but the terms are not interchangeable. Importantly, a B Corp doesn't confer any particular legal status. For federal tax purposes, a B Corp does not result in any tax benefit. You are taxed according to your entity status and federal tax elections. An S corporation is often misunderstood. It's not a legal entity—it's a tax election that gets its name from Subchapter S of the Internal Revenue Code. To be considered an S corporation, a business must be formed as a separate legal entity (such as a corporation or LLC) at the state level. Then, an election is made at the federal level to be taxed as an S corporation. Under federal law, an S corporation must be a domestic corporation with shareholders who are domestic individuals, trusts, or estates (no partnerships, corporations, or non-resident alien shareholders). An S corporation can have no more than 100 shareholders, and most offer only one class of stock. Additionally, certain types of businesses, such as certain financial institutions, insurance companies, and domestic or international sales corporations, aren't eligible to elect S-status. Those limitations mean that an S corporation may not be a good fit for companies expecting to grow quickly and seek outside investment. For federal tax purposes, S corporations are considered pass-through entities, though not quite like partnerships. There is a separate tax return for an S corporation (Form 1120-S) that reflects key differences in how income and losses are accounted for compared to a partnership. However, like a partnership, most items of income or loss retain their character and are reported to shareholders in proportion to their interest. A considerable appeal of S corporations is that they allow owners to take both a salary and a distribution from the business. Since distributions aren't subject to payroll taxes (Social Security and Medicare), the result can sometimes result in tax savings—it can also create an incentive to shrink wages and inflate distributions. The IRS insists that owners be paid reasonable compensation—being greedy can land you in hot water. A corporation sole can be a legitimate entity organized for religious (non-profit) purposes in some states. However, despite what scammers suggest, a taxpayer cannot use a corporation sole created simply to avoid paying tax. The IRS has issued warnings about these scams for decades, but taxpayers still bite—often in a failed bid to secure protection from creditors. For federal tax purposes, a bona fide corporation sole may be exempt from tax. However, individual taxpayers who claim tax benefits based on a corporation sole scheme will not only have to pay the tax due (plus penalties and interest) but may also face substantial civil and criminal penalties. Small businesses have lots of choices when it comes to selecting an entity and making tax elections. However, not every choice is interchangeable with another, and where you live might limit your options. Additionally, your facts and circumstances—including your plans for future investment—can mean that one choice is necessarily better than another. Consult with a professional before taking action.
Bloomberg
2 hours ago
- Bloomberg
BofA's Hartnett Says Stocks Are Close to Setting Off Sell Signal
Global stocks are close to triggering a sell signal as both fund inflows and the market breadth are running too hot, says Bank of America Corp. strategist Michael Hartnett. He cited a data point that stock and high-yield bond inflows have totaled 0.9% of fund managers' overall assets in the past four weeks. In his view, investors should sell if the ratio increases to more than 1%.
CNBC
2 hours ago
- CNBC
Russia's ruble rockets: The curious case of the world's best-performing currency this year
In the midst of a long-drawn war, declining oil prices, stiff sanctions, and an economy that's on the downhill, Russia's ruble has been rising. In fact, it is the world's best-performing currency so far this year, according to Bank of America, with gains of over 40%. The ruble's stunning rally in 2025 marks a sharp reversal from the past two years when the currency had depreciated dramatically. What's powering the Russian currency? The strength in the ruble has less to do with a sudden jump in foreign investors' confidence than with capital controls and policy tightening, market watchers told CNBC. The weakness in the dollar comes as an added bonus. Brendan McKenna, international economist and foreign exchange strategist at Wells Fargo, lists three reasons for the ruble's rally. "The central bank has opted to keep rates relatively elevated, capital controls and other FX restrictions have tightened a bit, and [there's been] some progress or attempt at progress in finding a peace between Russia and Ukraine." Russia's central bank has maintained a restrictive stance to curtail high inflation, keeping domestic interest rates high at 21% and tightening credit. The steep borrowing costs are deterring local businesses from importing goods, in turn reducing demand for foreign currency among Russian businesses and consumers, said industry watchers. There's been a decline in foreign currency demand from local importers, given weak consumption and the adequate supply of ruble, said Andrei Melaschenko, an economist at Renaissance Capital. That decline has given the ruble a boost as banks don't need to sell rubles to buy the dollar or yuan. Russian exporters need to be paid in rubles, or at least convert dollar payment into rubles, thereby increasing demand. Importers, on the other hand, have stopped purchasing foreign goods, and so do not need to sell rubles to pay in dollars. In the first quarter of 2025, there was an "overstocking" in consumer electronics, cars and trucks which were actively imported in the second half of last year in anticipation of the increase in import duties, said the Moscow-based economist. The consumer activity cooldown was primarily in the durable goods sector, which made up a sizable portion of Russia's imports, Melaschenko said. Another key reason the Russian ruble has strengthened this year is that Russian exporters, in particular the oil industry, have been converting foreign earnings back into rubles, analysts said. The Russian government requires large exporters to bring a portion of their foreign earnings back into the country and exchange them for rubles on the local market, according to the government. Between January and April, the sales of foreign currencies by the largest exporters in Russia totaled $42.5 billion, data from CBR showed. This is almost a 6% jump compared to the four months before January. CBR shrinking money supply is also supporting ruble, said Steve Hanke, professor of applied economics at Johns Hopkins University. In August 2023, the rate of growth in the money created by the CBR was soaring at 23.9% per year, he said. This figure has turned negative since January — currently contracting at a rate of -1.19% per year, said Hanke. Further, hopes for a peace deal between Ukraine and Russia following the election of U.S. President Donald Trump had also sparked some optimism, said Wells Fargo's McKenna. Expectations of Russia's reintegration into the economy had prompted some capital flows back into ruble-denominated assets, in spite of the capital controls, which have supported the currency's strength to some extent. Despite the ruble's current strength, analysts caution that it may not be sustainable. Oil prices—a major pillar of Russia's export economy — have fallen significantly this year, which could weigh on FX inflows. "We believe that the ruble is close to its maximum and may begin to weaken in the near future," Melaschenko said. "Oil prices have fallen significantly, which should be reflected in a decrease in export revenue and the sale of its foreign currency component," he added. While peace talks between Russia and Ukraine recently have not wielded any concrete developments, McKenna also noted that a concrete peace deal could erode ruble's strength as the controls such as the FX restrictions that have supported the currency might be lifted. "Ruble can selloff pretty rapidly going forward, especially if a peace or ceasefire is reached," he said. "In that scenario, capital controls probably get fully lifted and the central bank might cut rates rather quickly," he added. Exporters are also seeing slimmer margins, industry analysts noted, in particular the country's oil sector against the backdrop of declining global oil prices. The government, too, is feeling the squeeze — lower oil prices combined with a stronger ruble are eroding oil and gas revenues. The government's finances are highly sensitive to fluctuations in crude prices, with oil and gas earnings making up around 30% of federal revenues in 2024, according Heli Simola, senior economist at the Bank of Finland. "The Ministry of Finance has been forced to lean more heavily on the National Welfare Fund to cover spending," Melaschenko said. "And there may be further cuts to non-priority expenditures if this trend continues." That said, aside from the oil trade, Russia has been mostly isolated from the global marketplace. "Meaning, a weaker RUB does not add much to Russia's trade competitiveness," said McKenna.
