Buy a business

It’s a Great Time to Buy a Business

As you look to purchase a business make sure you are doing it for the right reasons.  Don’t just say, “I want to get rich.”  That way of thinking probably won’t cut it, unfortunately. You need to make sure you have wisdom, passion, and a solid plan for your new business. Do your due diligence!

There are a number of factors that make this the best time in history to buy:

  • Supply and Demand
  • Capital Availability
  • Larger Companies Are Worth More
  • Strategic Savings

Supply and Demand

As baby boomers exit their companies, there are more sellers and less buyers which makes the selection of businesses to buy better than it has been in the past. Many Capital Advisors that provide buy side searches or sell side representation have access to websites that list companies for sale. This access makes it easy to find the appropriate demographic, niche, and value that buyers are looking for. When a business owner comes to a Capital Advisor for guidance, they receive information on numerous companies interested in selling and have more choices than they would have had in the past.

Capital Availability

Private equity groups, private investors, and banks have more money they want to put to use in the marketplace than ever before. Additionally, interest rates are at historic lows so borrowing capital to buy a business can be done efficiently.

Larger Companies Are Worth More

Acquiring 1 to 3 competitors and building your current company may change the multiple you get on an exit from 4x to 6x of EBITDA. Consider buying a smaller business for 3x the earnings. Later as you combine it with your business and resell the larger business in the future, you may be able to get a rate arbitrage on your purchase. Thus, the same business you bought for more than 3x. Some call this the buy-then-sell strategy.

Strategic Savings

If you own a company and acquire another one in the same industry, you could save 5 to 25 percent on expenses for the combined company. This means you could add more profit and cash flow than the prior owner. There are many expense categories that overlap. When the two companies are combined, you will not have to pay twice.

LBA Haynes Strand Capital Advisors can help you sucessfully buy a business. Contact us for a no-cost consultation!

529 IRA

Saving for College: Roth IRA or 529 Plan?

College is expensive and the cost continues to rise each year. As a parent, you want to be prepared and start saving for this expense early. There are a few tax-smart options to consider when saving for this expense – a Roth IRA or 529 plan. When you utilize an account that offers a tax break, you have the ability to stretch your money further. There are pros and cons for both of these options. Review the details to help decide which account would work best for you and your family.

Basic Overview
The Roth IRA was created to encourage people to save for retirement. The difference between a Roth IRA and other traditional retirement accounts is the ability to withdraw contributed money any time, free of taxes and penalties. 

529 plans are similar to Roth IRAs but were intended for people to save for college instead of retirement. As long as the money withdrawn from the plan goes to qualified education costs, you will not owe taxes or penalties.

Roth IRAs
While you are able to withdraw contributed money, keep in mind that you will owe taxes and a 10% penalty on any investment earnings you take out of this account before age 59 ½. However, an exemption could work in your favor. If you withdraw money to pay for qualified education costs, you will not owe the 10% penalty, but you will still owe taxes on any investment earnings withdrawn.

Many people prefer the Roth IRA because of the flexibility and variety of investment choices. If you aren’t 100% sure your children will attend college, this may be option for you. That way, you can save the money now and decide what to utilize it for later. 

529 Plans
While you will owe taxes when withdrawing investment earnings from a Roth IRA to pay for qualified education costs, you will not face the same dilemma with the 529 plan. However, if you withdraw money from a 529 plan and it goes to another purpose other than education, you will owe both taxes and a 10% penalty on investment earnings. With this being said, it may seem like the Roth IRA is the way to go just in case your child decides to forgo college. Here are a few more factors to consider:

  • Does your state offer a 529 tax break and a good 529 plan option? The deduction or credit is like free money.
  • Are you going to need financial aid? Roth withdrawals generally count as income when completing the Free Application for Federal Student Aid (FAFSA). Having more income translates into receiving less aid.

You should always consult a professional before making any financial decisions. We can help. Contact us today!

Community Service

LBAHS Day 2019: Second Harvest Food Bank

Each year, our office doors close to provide employees with the opportunity to give back to a local organization. We call this “LBAHS Day.” This year, LBAHS Day took place at the Second Harvest Food Bank of Metrolina (SHFBM). This organization strives through education, advocacy, and partnerships to eliminate hunger. They do this by the solicitation and distribution of food throughout the Charlotte metro area.

Our LBAHS staff looks forward to this day each year. They jumped right in to help clean, organize, and sort donations throughout the warehouse. Kasey Mayfield, an associate, describes, “Despite being at different offices most days, we all got into an efficient rhythm while inspecting and sorting together. At one point, we had to organize the largest bin of canned goods I’ve ever seen. It started with five of us sorting but an assembly line formed and we knocked out the whole bin in around 30 minutes! Knowing there was a whole team of people there to give us help was an awesome feeling.”

Brandi Dunn, a senior associate, summarizes the day by saying,”It’s always fun to take a break from the office and able to help the community! I am glad our firm sees the value in this.”

To learn more about Second Harvest Food Bank and how you can help, click here!

In both 2017 and 2018, our team volunteered at Out of the Garden Project in Greensboro.

practice sales and use tax

Sales and Use Tax for Practice Owners

Over the past few years we have seen an increased focus by the North Carolina Department of Revenue (NCDOR) on dentists for the audit of sales and use tax compliance. With this in mind, we want to work with our Practice owners to educate and proactively prevent the massive impact these audits can cause.

Sales tax is what we all expect to pay when we purchase items in our day-to-day lives. As a Practice owner, it is necessary to charge sales tax on certain items like electric toothbrushes. As a general rule of thumb, we tell our dental clients: If it leaves in the patient’s mouth, the items and services are NOT subject to sales tax. With this being said, everything else that does not leave in the patient’s mouth may be subject to the tax. If you are unclear which items this applies to, our team will work with you to review your product offerings and determine which items sales tax should be added to.

When looking at use tax, this is what applies when you purchase items from a vendor and they do not charge you tax. If you receive invoices for supplies and equipment or office supplies, your Practice is responsible for reporting this information. In addition, you must pay the sales tax the vendor did not charge. For example, this could be when Practice owners purchase items from out of state suppliers, online vendors, or small retailers.

While it can be time consuming and difficult, compliance with both parts of the tax is necessary. For this reason, one of our main goals is to implement procedures to ease the compliance process for our clients.

Best Practices

Each month you should total the number of items sold by your Practice that were subject to sales tax and forward to your accountant. Remember, review your Practice Management software reports as this information may already be shown.

For use tax, we recommend you include your office manager or a trusted member of staff in this process. This staff member must review all invoices from your vendors to verify if sales tax was charged. If not, those invoices should be set aside for payment of Use Tax. This information needs to be shared with your accountant on a regular basis.

To learn more about how we can support your Practice in this process, contact us!

IRS Business Owners

Interacting with the IRS: New Business Owners

Did you start or acquire a new business this year? If so, you may feel a little overwhelmed with the new responsibilities and you could be a little intimidated interacting with the IRS for the first time. The first thing you should do as a new business owner is get a tax ID number or Employer Identification Number (EIN). You can apply for this directly through the IRS online.

Your Tax Responsibilities:
  • File your business’s annual income tax return
  • Pay estimated taxes for you if you own a pass-through entity or for your C Corporation
  • Payroll Tax Activities: withholding, depositing payments, and filing employer tax returns
  • Submit information returns if you have independent contractors, maintain qualified retirement plans, or offer other benefit programs to your staff

You can and sometimes must handle certain tax responsibilities electronically. Many online activities can be facilitated utilizing government provided resources listed below. Not everything listed below may apply to you so remember to consult your accountant if you have any questions.

Depositing Taxes
  • If you have a payroll or make estimated tax payments, schedule your tax deposits in advance by using EFTPS.gov.
  • Transmit W-2s to the Social Security Administration
  • Submit copies of employees’ W-2s with an IRS transmittal form (Form W-3) to the Social Security Administration through the Business Services Online. This suite of services allows organizations, businesses, individuals, employers, attorneys, non-attorneys representing Social Security claimants, and third-parties to exchange information with Social Security securely over the internet. You must register and create your own password to access Business Services Online.
  • Remit Information Returns to the IRS
  • You may have to file annual information returns to inform the IRS about your payments to independent contractors you utilize. Complete this task through the Filing Independent Returns Electronically (FIRE) System
Filing Annual Retirement Plan Returns

If you want or need to file a form in the 5500 series electronically, do this through the Department of Labor’s EFAST2. This is an all-electronic system designed by the Department of Labor, Internal Revenue Service, and Pension Benefit Guaranty Corporation. The purpose is to simplify and expedite the submission, receipt, and processing of the Form 5500 and Form 5500-SF. These forms must be electronically filed each year by employee benefit plans to satisfy annual reporting requirements under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code.

If you need assistance with any of the required tasks above, our professionals can help. Click here to contact us today!

5 Important Cybersecurity Tips

As your team of trusted advisors, one of our main objectives is to provide you with the knowledge and resources to help you achieve your goals. In today’s digital world, we understand that you are susceptible to cybercrime and identity theft daily.

We have compiled a few cybersecurity tips to help protect you against these threats:
  1. Understand that you are a target. It is a mistake to assume that you will not be targeted by a hacker or cyber-criminal. If you let your guard down, you put your personal and financial well-being at risk.
  2. Update your devices and their software. It is important to keep your computer and any additional internet-connected devices such as your smart phone or tablet updated. These updates are sent out because vulnerabilities have been found.
  3. Keep your passwords strong and do not reuse them across multiple sites. Ensure that the passwords you are using are unique and would not be easily identified.
  4. Think before you click (or open). Be careful when clicking links or opening attachments within an email. If something seems suspicious, it probably is. In order to check, hover your cursor over a link before clicking. When doing this, you are able to preview the link allows to ensure you will be directed to a safe site.
  5. Physically protect your devices. Take every precaution to prevent your computer from being used or stolen by unauthorized individuals. Laptops are easy targets for theft so it is important to store them in a secure and locked location when not in use.

As your team of trusted advisors, we want to encourage you to take the necessary steps to protect you and your business against cybercrime. To begin protecting yourself, be proactive and have a complete understanding of the cybersecurity tips in this post.

LBA Haynes Strand aims to alert the public on any scam or fraudulent attempt to steal identities or gain access to important financial information. To automatically receive updates like these, subscribe to our newsletter.

Practice Health Insurance Options: Professional Employer Organizations

Your first question is likely, what is a PEO? Simply, it’s a Professional Employer Organization. That probably doesn’t help your understanding, does it? To define PEOs, we’ve brought in an expert in the industry, Jeff Wanner, to describe the components and advantages further.

What is a PEO?

PEOs (Professional Employer Organizations) have become a widely popular strategy for small and medium sized businesses across the country. PEO partnerships provide a great deal of value across an organization to greatly simplify administrative functions, contain employee benefit costs, and a streamlined strategy for compliance.

How does it work?

The role of the PEO is to co-employ their client’s employees, which is the primary mechanism for delivering everything previously mentioned. The responsibility to follow state to state employment regulations, payroll tax filings, worker’s compensation claims, and employee benefits administration falls squarely on the shoulders of the PEO.

These organizations work with clients across the country and accumulate massive buying power for things like medical benefits. Being a part of these groups allows for a much more consistent and predictable medical increase structure as years progress. Many PEOs have averaged less than 3% annual increases over the past 10 years, whereas the national average is well above 10%. With medical benefits being the largest employee-related expense (outside of salaries), it’s not difficult to see why this strategy is very appealing economically as the years go on.

I can use this for my Dental Practice?

Dental practices have found this strategy to be very appealing over the past 5+ years. As you know, dentists are extremely busy business owners that don’t benefit from adding complexity to their practices. Dentists aren’t students of state to state employee regulations and compliance. With one evaluation, they are able to turn the key on essentially every aspect on the employee side of their practice. The only challenge is picking the right partner for your practice!

Companies like PairPEO are great resources for these evaluations and will even help through the implementation process for your practice. This is a good resource to start with to ensure the correct partner is brought to your practice.

If you have questions or would like to connect with a health insurance partner in your area, contact us today!

Practice Health Insurance Options: QSEHRA

Historically, small businesses, including dental Practices, have met the need for employee insurance with a traditional group plan or providing an increase in salary to allow employees to purchase their own insurance. With the work of Congress, there is a new option in the marketplace. This option is the qualified small employer health reimbursement arrangement (QSEHRA).

Through QSEHRA, businesses with 50 employees or less are able to offer employees a monthly allowance of tax-free money. Sounds easy, right? Maybe. Employees then must choose and pay for their own health care, potentially including personal insurance policies, and the business reimburses them up to their allowance amount.

This allows businesses to keep control over their budget while offering a meaningful benefit to their employees. At first glance, Practice owners always love this option but the devil is in the details so, let’s review those.

How it works:

Step 1: Practices set the allowance. Practices choose a monthly, per-employee allowance of tax-free money to make available. Currently, there are no minimum contribution requirements and Practices are able to offer different allowance amounts based on an employee’s family status. In 2018, QSEHRA contribution limits allowed businesses to offer up to $420.83 a month for single employees and $854.16 a month for employees with a family.

Step 2: Employees make purchases. Employees with a QSEHA are permitted to buy what fits their personal health needs. There are a variety of expenses eligible for reimbursement, including personal health insurance premiums, copays, deductibles, prescription drugs, and many more.

Step 3: Employees submit proof of expenses. After incurring an eligible expense, employees are required to submit proof to the Practice through documents that include: a description of the product or service, the cost of the expense, and the date the employee incurred the expense.

Step 4: Practices review and reimburse employees’ expenses. After an employee submits an expense, the Practice or an approved third party should review the documentation and reimburse the employee from their monthly allowance.

With the QSEHRA, reimbursements are free of payroll tax for both the Practice and its employee. Reimbursements can be free of income tax for employees if the employee is covered by a policy providing minimum essential coverage (MEC).

Often, the QSEHRA is a good option for Practices to consider since it allows for complete personalization. Understanding your staff, their incentives, and their needs will be a priority when exploring this option.

If you have questions or would like to connect with a health insurance partner in your area, contact us today!

podcast

Fueling Deals Podcast: Acquisitions

John Bly, CEO of LBA Haynes Strand, is on Corey Kupfer’s Fueling Deals Podcast today sharing his deal-making strategy. “It wasn’t until my fifth acquisition that I ran into trouble. I enjoyed sharing my story and the importance of research with Corey,” describes John. Listen to the full podcast episode by clicking this link!

The Fueling Deals podcast showcases interviews of entrepreneurs and experts who have great stories about deals they have done or failed to do. Corey strives to have guests who are open, honest and authentic. Topics include negotiating, structuring, finding, valuing, closing and integrating deals. In addition, they discuss all the related issues, opportunities, benefits, pitfalls and lessons learned during the process.

John is a dynamic international business consulting speaker. In addition, he is the author of Cracking the Code: An Entrepreneur’s Guide to Growing Your Business Through Mergers and Acquisitions for Pennies on the Dollar. When you’re facing a complex business decision, John helps you determine the best possible outcome. He focuses on developing a strategic plan and works with you to take advantage of opportunities, overcome obstacles, and deliver the best results possible. John’s emphasis on being a proactive business partner empowers him to deliver insightful information and practical advice to circumvent challenges before they arise.

If you want more information on how John can support and guide you through a merger or acquisition, contact us today!

Practice Health Insurance Options: Association Health Plans

A new rule issued by the Department of Labor in 2018 expanded the availability of association health plans (AHPs) for small businesses. AHPs allow small businesses to band together within industries, professions, or geographic regions to either purchase large-group coverage or self-insure.

In North Carolina, this is a popular option and it exists in many state for Dental Associations. The NC Dental Society offers an Association plan that allows a Practice owner to open up “group” insurance to his or her staff. More information about the plan specifics can be found here

Once the benefit is in place, it works much like a regular group policy or self-funded health insurance benefit would. However, AHPs aren’t subject to the ACA’s rating rule, which prevents insurers from varying costs in a specific region based on things like sex, age, or health status. They also don’t need to cover the essential health benefits that ACA-compliant policies do.

Administration is typically done by the association, rather than by the small business members.

AHPs can help cut costs, often by between $1,900 and $4,100 per employee per year. However, AHPs achieve these cost savings not only by widening the risk pool, but also by cutting out standard coverage items. The AHP may not cover essential health benefits, such as prescription drugs, maternity care, or mental health services.

The NC Dental Society plans are competitive to group policies and offer a valid option for Practice owners. If you make the decision to offer the plan, you still need to understand your option on how you pay for the plan for employees and yourself – both of which have tax implications.

If you have questions or would like to connect with a health insurance partner in your area, contact us today!

Practice Health Insurance Options: Traditional Group

The traditional choice for most businesses is a group health insurance policy. This business chosen plan provides coverage to employees, and potentially, employees’ dependents. Depending on your Practice size, this traditional option may still be a good fit for you. However, for the majority of single doctor locations, this proves to be prohibitively expensive and is not the right solution. Practices that offer group health insurance pay a fixed premium for the policy, and then, pass on a portion of the premium cost to employees. For example, the employer may pay 50% of the premium and the employee is then responsible for paying 50%.

Where should you look for and acquire this type of insurance? There are 3 basic options:

Many Practices find that their staff likes the traditional option because it’s familiar to them. It is how many of us have had insurance for the majority of our lives. However, Practices also find the cost to be higher than one can afford. Your employee census and the benefits chosen will drive the cost. We suggest Practices at least consider this option and shop the pricing as a baseline to compare to other options discussed later.

If you have questions or would like to connect with a health insurance partner in your area, contact us today!

3 Ways Startups Benefit from Outsourced Accounting

The accounting function should be a main priority for startup businesses. According to the Small Business Administration (SBA) Office of Advocacy, about 80% of small businesses survive the first year. This seems like a high percentage considering the common belief is that most businesses fail within the first year. About half of those small businesses reach the five-year mark and only one in three makes it to 10 years. When starting a business, it is important to take advantage of every opportunity to help you become successful. By outsourcing your accounting, the financial portion of your business will be headed in the right direction from day one.

Correct Set-Up

If you start outsourcing your accounting from the beginning, you can feel confident knowing your business financials will be set up correctly. When you start by doing your own accounting, it becomes difficult and expensive to migrate your data to a firm later.

Save Time & Energy

As a new business owner, your time is valuable. You should focus your time and energy on ideas, employees, products, and services instead of finances. Having an expert on your side will help you make important decisions on what accounting software should be used and ensure you are complying with tax and accounting standards. In addition, your outsourced accounting team will guarantee that your books are maintained properly and provide you with support in case of an audit.

Team of Professionals

Hiring an in-house finance team is both expensive and time consuming. There are many factors that go into choosing how many employees to hire and what qualifications they should have. As a business owner, you would also be responsible for training and managing these employees. When you outsource your accounting, you avoid these costs and time spent on the hiring and training process. Outsourcing allows you to work with professionals who have years of industry experience and are able to provide valuable insight to help you make the best business decisions.

Want to learn more about the benefits of outsourced startup accounting? Click here to start the conversation about the future of your business with LBA Haynes Strand.