As a business owner, you shoulder many responsibilities — but have some perks as well. One benefit worth considering is setting up your own retirement plan that allows you to make larger contributions than you could as an employee.
For example, the maximum 2015 employee contribution to a 401(k) plan is $18,000 — $24,000 if you’re age 50 or older. Compare these limits to the amounts available to a business owner (that is, a “self-employed” individual) under:
- A profit-sharing plan, for which the 2015 contribution limit is $53,000 — $59,000 if you’re age 50 or older and the plan includes a 401(k) arrangement, or
- A defined benefit plan, for the maximum future annual benefit toward which 2015 contributions can be made is generally $210,000.
More good news: As long as you set up one of these plans by December 31, 2015, you can make deductible 2015 contributions to it until the 2016 due date of your 2015 tax return.
Additional rules and limits do apply. For instance, your employees generally must be allowed to participate in the plan, provided they meet the requirements for doing so. Intrigued? Please contact us to learn which plan would work better for you.
When you start envisioning all of the potential threats to your company, it’s easy to get overwhelmed. A good way to get a handle on risk management is to break down the overall task into focus areas. Examples include:
Competitive risk. Identify your top three to five competitors. Then devise the strategy it will take to get or stay ahead of them. Think in terms of innovation, production and marketing.
Compliance risk. Many business sectors are now subject to increased regulatory oversight. Be it health care benefits, hiring processes, independent contractor policies or waste disposal, factor the latest compliance requirements into your business objectives.
Internal risk. The economy is far better than it was several years ago. But fraudsters still have plenty of other excuses for malfeasance from which to draw. Re-evaluate and reinforce your internal controls to protect what’s yours.
A divide-and-conquer approach such as this can make risk management much easier. And you don’t have to take on this critical challenge alone. Let us help you choose the right focus areas and then pinpoint risks specific to your company.
When you started your business, or otherwise assumed ownership of it, you more than likely created a business plan. This critical document provides management, investors and lenders with an overview of the company’s game plan as well as an assessment of current operations. Complete plans traditionally include six components:
- Executive summary,
- Business description,
- Industry and marketing analysis,
- Management team description,
- Implementation plan, and
Some owners might balk at compiling a comprehensive business plan, but it’s an absolute imperative when running a company. Why? Because your business plan can predict the future — or at least it should.
If the plan includes the six components above, adheres to sound strategies and contains accurate data, your company’s future (or a fair approximation thereof) will be spelled out in black and white. But if what’s described is unrealistic or no longer applicable, the future of your business will be just as murky.
Need some help in determining whether your business plan is still the crystal ball it needs to be? Please contact us. We’d be happy to assess your plan and offer constructive feedback based on our firm’s experience and know-how.
If your company wants to acquire another business, you’ll need to anticipate many challenges. To improve your odds of success, it’s important to devote resources to intensive tax planning before — and after — your deal closes.
During deal negotiations, you and the seller will likely discuss issues such as to what extent each party can deduct their transaction costs and how much in local, state and federal tax obligations the parties will owe upon signing the deal. Often, deal structures (such as asset sales) that typically benefit buyers have negative tax consequences for sellers and vice versa.
Tax management during integration is also important. It can help your company capture synergies more quickly and efficiently. You may, for example, have based your purchase price on the assumption that you’ll achieve a certain percentage of cost reductions via post-merger synergies. But if your tax projections are flawed or you fail to follow through on earlier tax assumptions, you may not realize such synergies.
Negative tax consequences of an acquisition can haunt a company for years. Let us help you avoid them and identify tax benefits that can improve the acquisition as a whole. Please contact us for more information.
Many employers with long-established 401(k) plans hesitate to add automatic enrollment. (Under an “auto-enroll” feature, eligible participants automatically join the plan unless they affirmatively elect otherwise.) Employers’ hesitation may arise from unfamiliarity or just a reluctance to rock the boat. Yet there are several good reasons to “bother” with auto-enroll:
Broader participation. First and foremost, many statistical studies over the years have shown that auto-enroll boosts plan participation. This, in turn, increases a 401(k)’s value to both your organization and its staff. It can also improve retention — especially if you match contributions.
Boosted productivity. Higher participation means more employees are funding their retirements. Therefore, they’re more likely to retire rather than stay on the job indefinitely to pay living expenses. A dynamic workforce tends to be more productive than a stagnant one.
Better bargaining. The greater the participation rate and dollars in the plan, the more leverage employers have to negotiate with service providers. So auto-enroll can simply lead to a better 401(k).
Converting to auto-enroll does entail some work. You’ll need to adopt a written plan document, arrange a trust for the plan’s assets, potentially upgrade your recordkeeping system and formally give notice to employees about the change. Interested? Please let us know how we can help you further consider auto-enroll and undertake the process of adding it to your 401(k).
It’s easy to fall into the trap of thinking about a succession plan as being about only two people: you and your successor. But a truly graceful passing of the baton to the next leader hinges on total staff buy-in — or, at least, acceptance. Getting managers and key employees involved in the planning can help you garner that buy-in and, ultimately, ensure a successful transition.
Remember: Misinformation, rumors, threats about quitting or refusals to support the new boss are often inevitable in a succession. To help keep potential sources of conflict in check, identify stakeholders who may have strong concerns about the next leader or the succession planning process itself. Then work out problems with them early on. You may want to start with the easiest of the bunch and work your way up to the individual who appears most dead-set in his or her opposition.
In reality, a succession plan isn’t just a plan — it’s actions as well. Please contact us for help devising the best approach and executing it every step of the way.
Year-end tax planning for businesses often focuses on acquiring equipment, machinery, vehicles or other qualifying assets to take advantage of enhanced depreciation tax breaks. Unfortunately, two “classic” depreciation breaks expired on December 31, 2014:
1. Enhanced Section 179 expensing election. Before 2015, Sec. 179 permitted companies to immediately deduct, rather than depreciate, up to $500,000 in qualified new or used assets. The deduction was phased out, on a dollar-for-dollar basis, to the extent qualified asset purchases for the year exceeded $2 million. Because Congress hasn’t extended the enhanced election beyond 2014, these limits have dropped to only $25,000 and $200,000, respectively.
2. 50% bonus depreciation. This provision allowed businesses to claim an additional first-year depreciation deduction equal to 50% of qualified asset costs. Bonus depreciation generally was available for new (not used) tangible assets with a recovery period of 20 years or less, as well as for off-the-shelf software. Currently, it’s unavailable for 2015 (with limited exceptions).
Lawmakers may restore these breaks retroactively to the beginning of 2015. If they do, quick action may be needed to take maximum advantage. Qualifying assets will have to be purchased and placed in service by December 31. Please check back with us for the latest details.
Skilled workers are invaluable and often difficult to find. Increasingly, well-qualified job candidates in today’s workforce are “Millennials” — that is, between the ages of 18 and 35. As you welcome this generation into your organization, you’ll get more out of them with the right management approach. Winning moves include:
Plenty of feedback. Generally, Millennials received regular feedback and praise while being raised and educated. So an annual performance review isn’t going to cut it. Train managers to provide copious feedback, even in simple formats such as emails or brief conversations.
Technological integration. Millennials are the first generation to truly grow up with mobile technology. First and foremost, prioritize technological upgrades. Beyond that, give Millennials multiple avenues to integrate technology into their job duties.
Involvement with causes. This generation doesn’t want to work for only a good company — they want to work for a business that does good. Millennials tend to gravitate toward companies that align themselves with charitable causes. Offer team-based opportunities for them to contribute time and skills to charity.
Staffing issues can substantially impact the profitability of a business. We can help you leverage a strong management approach to boost productivity and control employment costs. Give us a call.
When it comes to next year’s budget, you don’t have to reinvent the wheel. But you should do more than simply recycle this year’s version. Your financial statements can help. They offer three places to start looking for the right numbers:
1. Your income statement. Here you’ll see information on sales, margins, operating expenses, and profits or losses. If sales have faltered this year, consider allocating dollars to regain the volume that will bring profits back up.
2. Your cash flow statement. This shows you where cash is coming from and where it’s going. Under- or unbudgeted asset purchases can undermine a budget, as can having just one or two departments rack up excessive expenses. If either of these problems adversely affected your current budget, reinforce your company’s policies regarding purchases and departmental expenses.
3. Your balance sheet. Your company’s assets, liabilities and owner’s equity within the given period are expressed here. Look closely at how liabilities compare with assets. If debts are mounting, cutting discretionary expenses (such as bonuses or travel costs) may be a good objective for next year.
A sound budget can act as a road map to success and an early-warning system for when things are going awry. Please let us know how we can help with the planning and execution of yours.