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.
Every business owner knows that maintaining a healthy cash flow is essential to a company’s success. But there are a variety of ways to accomplish this objective. One way is to accelerate inflows and decelerate outflows, thereby shortening your cash flow cycle. Truncating this cycle by 10 to 15 days can significantly boost your working capital.
When it comes to inflows, you need to manage collections. Doing so includes enforcing your credit terms and aggressively going after delinquent accounts. If your payment terms are net 30 days and payment hasn’t been received, someone in your accounting department should be contacting the customer (by either email or phone) on Day 31.
On the outflows side, take full advantage of your suppliers’ payment terms. If they’re offering net 30 day terms, use electronic banking to make the payment on Day 30. Also, negotiate with suppliers for extended payment terms: Will they stretch net 15 terms to net 30 days — or net 30 day terms to net 45 days?
For more-specific suggestions on shortening your company’s cash flow cycle, please contact us. We can assess your inflows, outflows and overall cash standing to identify ways to strengthen your business.
A business can offer many things as fringe benefits. So it’s a good idea to occasionally review the possibilities to see whether you might be missing something that could help you attract and retain the best employees. Two broad categories that are generally deductible by the employer and tax-free to employees are:
1. Working-condition fringe benefits. These are expenses that, if employees had paid them, they could have deducted on their personal tax returns. Examples include employer-paid subscriptions to business periodicals or websites and employer expenditures for some types of on-the-job training.
2. De minimis fringe benefits. Included here is any employer-provided property or service that has a value so small in relation to the frequency with which it’s provided that accounting for it is “unreasonable or administratively impracticable,” according to the IRS. Some examples of these items are group meals; occasional coffee, doughnuts or soft drinks; and permission to make occasional local telephone calls.
Also worth looking into are qualified transportation fringe benefits. These include covering expenditures (up to certain limits) related to commuter transportation, such as mass transit, van pooling, parking and bicycling.
Bear in mind that various rules must be followed to ensure the tax-advantaged treatment of fringe benefits. And that’s where we come in. Please contact us for help not only choosing the right offerings for your size and type of business, but also ensuring that the tax consequences will be what you expect.
Turning to independent contractors can be a smart option in a number of situations, such as when you have a seasonal upswing in workload or need a specialized skill for a short period. But independent contractors come with potential risks, too. They may not help you trim your total workforce costs if you use them excessively. More important, there can be tax and legal ramifications if you mishandle the relationship.
The IRS has long scrutinized employers’ use of independent contractors as a way to avoid payroll tax obligations. If the IRS recharacterizes an independent contractor as an employee, you could be on the hook for:
- Back payroll taxes you should have paid,
- Back payroll and income taxes you should have withheld, and
- Interest and penalties.
Also, earlier this year, the Department of Labor renewed its focus on employee misclassification. Its Wage and Hour Division released Administrator’s Interpretation No. 2015-1, which includes six factors to help employers determine proper classification and warns of serious potential penalties.
Independent contractors can give you flexibility to even out the peaks and valleys of your workforce needs. But these arrangements have risks. We can help you understand the tax implications and work with your legal advisors to keep you in compliance. Contact us today!
Like race car drivers, business owners need to monitor gauges on their dashboards to keep an eye out for serious operational failures before a total breakdown occurs. These gauges are commonly referred to as key performance indicators (KPIs).
There are two broad categories of KPIs: financial and nonfinancial. Financial KPIs often take the form of ratios, such as:
Debt to Equity: Total Debt / Shareholder’s Equity,
Current Ratio: Current Assets / Current Liabilities, and
Days Sales Outstanding: Number of Days × Accounts Receivable / Credit Sales.
Nonfinancial KPIs may include measurable metrics in the areas of customer service, sales and marketing. For example, if a company’s goal is to improve its response time to customer complaints, its KPI might be to initially respond to complaints within 24 hours, and to eventually resolve at least 80% of complaints to the customer’s satisfaction.
KPIs differ from one company to the next based on industry, company type (B2B or B2C, for example) and, most important, strategic objectives. Your KPIs will stem mainly from your mission statement and your short-, medium- and long-term goals.
We can help you target the KPIs best suited to your business, and ensure the calculations are accurate and based on the timeliest financial data. Contact us today!