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succession planning untimely death

Business Succession Planning: Unexpected Death

While planning for retirement is a fun part of the succession planning discussion, we must also cover the less pleasant subject of planning for an untimely death. Most of this information also applies to a permanent disability as well. According to Forbes, three out of five business owners are left vulnerable to consequences of an unexpected tragedy.

It’s April 30 and a business owner client of mine (Bill) has passed away and his spouse calls me. The spouse (Maria) is in a panic. She has never been active in the software Bill owned. Bill died of a stroke just 3 days prior. Maria just came to the realization that she didn’t know if there was money in the bank for payroll on May 4.

Together, we went through a series of discussions that day. I was able to give her all the contacts Bill and I shared with the law firm and financial planner. I was also able to provide information for his payroll service, banker, and the bookkeeper that worked on Bill’s software company. Bill’s management team shared the same concern. Who would run the company, oversee decision making, and make sure clients did not leave?

Planning for this situation, is a challenge as people do not like planning for these unfortunate events. However, there are a number of basic questions and scenarios to consider now. This will help make the situation easier on your surviving family members and employees.

Questions and Scenarios to Consider
  • Do you have life insurance in place that goes to the business to provide a boost to the company’s cash flow should something happen to you?
    • These funds could be used to hire a CEO or consultant to run the company while things are figured out.
  • Have you thought about what you want to happen to the business if you pass away?
    • If so, have you documented it in writing and shared it with your spouse, advisors, and/or management team?
      • Things like:
        • Would you want the management team to use life insurance to buy shares from your estate and run the business as owners?
        • Do you want to leave the business to your children and have them run it? Or hire a CEO to run it?
        • Should the business be liquidated and sold through an M&A transaction? If so, how do you incentivize the management team to stay during this time?

It is impossible to plan for every scenario a business could go through but it is helpful to consider a few possibilities. It is a business that you have built and no one knows better what you want the next phase to be of your legacy, than you. Begin this process today. Have discussions and documentation to help build a succession plan that stands up to many scenarios but provides flexibility as your life and business grow and change. Let us know if you need help with your business succession planning – set up a no-cost consultation today!

South Dakota v. Wayfair, Inc. Tax Implications

On Thursday June 21, 2018, the Supreme Court issued its much anticipated opinion in the landmark case of South Dakota v. Wayfair, Inc., fundamentally changing the sales tax landscape in the United States.

The Case

South Dakota enacted a law requiring out-of-state sellers to collect and remit sales tax as if the seller had a physical presence in the state. The law only applied to sellers who, on an annual basis, delivered more than $100,000 of goods or services into the state or engaged in more than 200 separate transactions for the delivery of goods or services into the state.

South Dakota sought to enforce the law against Wayfair, Inc. and other online retailers who exceeded the limits of the law. Each of the retailers had no employees in the state and owned no real estate in the state.

Based on prior precedents (National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U.S. 753, and Quill Corp. v. North Dakota, 504 U.S. 29), the lower courts ruled that the law was not enforceable due to the lack of substantial nexus* with the state under the “Physical Presence” test outlined in these cases.  That test allowed states to require retailers to collect and remit sales tax if the retailer had a physical presence (e.g., employees or operating an office) in that state. The mere shipment of goods into the state did not satisfy the physical presence test.

The Result

In a 5-4 verdict, the Supreme Court explicitly overruled the prior cases and held that, while physical presence provided substantial nexus, such nexus also included a certain level of business (delivery of goods or services) conducted within the state.

The Court found that, in this case, the nexus is clearly sufficient based on both the economic and virtual contacts the retailers have with South Dakota. The state law applies only to sellers that deliver more than $100,000 of goods or services into South Dakota or engage in 200 or more separate transactions for the delivery of goods and services into the state on an annual basis.  This quantity of business could not have occurred unless the seller availed itself of the substantial privilege of carrying on business in South Dakota.  The retailers are large, national companies that undoubtedly maintain an extensive virtual presence.  Thus, the substantial nexus requirement is satisfied.

The Implications

Will you now be required to collect and remit sales taxes in states to which you deliver goods or services?

South Dakota v. Wayfair, Inc. allows all states to enact laws requiring out-of-state sellers to collect and remit sales taxes on sales to customers in that state provided the law applies a safe harbor to those who transact only limited business in the state.  While South Dakota chose an annual $100,000/200 transaction limit that the Court found sufficient, the Court created a level of uncertainty by leaving it up to the states to decide what safe harbors might be sufficient.  We expect we will see a great deal of activity as various states make their statutes consistent with the court’s ruling so nexus can be asserted.  For states that already have similar statutes in place, it is unclear whether they will set a future date for enforcement or take the position that the statute has been enforceable since it was put in place.

*Nexus – When referring to sales tax, means that a company is connected to a state and because of that connection, a company must collect tax, fill out a tax return, and send the collected tax to a state.

Given that sales tax laws are established on a state-by-state basis, all businesses making sales of goods or services to customers in multiple states should evaluate the impact of the Court’s holding. 

This ruling is just the beginning of the process and over the coming months we will be monitoring which states are adopting these types of nexus rules and when they will become effective. If you would like more information on how this may impact your business, contact us today.

Breaking: Businesses Are Partnering With CPA Firms To Run Accounting Departments

The hiring of CPA firms as the accounting function of companies is growing. Once thought to be contained to smaller businesses, the use of a CPA firm as an accounting department is spreading to mid-sized companies.  Whether it is going to be called an “epidemic”, a “pandemic”, or an “outbreak” is yet to be seen.  The good news is business owners now have options on how to run their business.  In fact they have more options than at any point in history.

What does this mean?

Mid-Sized companies are facing many of the same issues that smaller businesses are going through.  They are wanting to run leaner businesses with less overhead, and are wanting to do so more efficiently.  This means that companies are continuing to look outside their own company for help.  Sure accounting firms have been offering accounting services to companies for decades – but what is new is that we are now offering accounting solutions to business owners.

Business owners are now asking, “Why would I pay a lone individual to handle my company’s accounting duties, when I can instead hire an entire team of professional accountants at a CPA firm to handle my accounting at a fraction of the cost?”

Good question – and one that every business owner needs to ask his or herself.  Hiring a CPA firm with an accounting solutions department is the here and the now, but also the future.

Accounting Solutions: What You Need To Know

There are many benefits to hiring an accounting solutions team.  The list of accounting solutions offered include: AP management, AR management, budget development, credit card processing, financial statement preparation and analysis, payroll management, QuickBooks support, and much more!  Companies aren’t just looking to maintain the status quo anymore, they are looking to better themselves and find competitive advantages over their competitors.  Companies are demanding efficiency and experience out of their accounting departments – when these demands are going unmet – you need solutions.

If hiring a CPA firm to be your accounting team is something that you are considering, be sure to consult with a number of CPA Firms and choose the one that best fits your company and your vision.  Make sure that they have the right staff in place to handle your needs, make sure you are not going to be charged by the hour, and make sure you choose a firm that you feel comfortable with.  You want to be able to call your CPA at any time throughout the year with questions, so make sure you feel comfortable with your accountant.  This person is going to effectively become a member of your team, so finding a CPA that meshes well with your personality and can fit into your office culture is an important part of the process.

Remember – you are running your organization.  When you use an independent accounting firm, you are in a better position to do so.  Let your CPA handle your daily accounting functions and you can better focus on the core competencies of your business!

Ready to learn more about the Accounting Solutions team at LBA Haynes Strand? Contact us for your free consultation!

What’s New At LBA Haynes Strand? Introducing The Accounting Solutions Group

LBA Haynes Strand, PLLC has decided to fill a need in the business marketplace and offer our clients with not just accounting services, but to offer legitimate accounting solutions. Our firm has announced the creation of an “Accounting Solutions Group” that will focus on offering flexible, scalable accounting and bookkeeping solutions for businesses and institutions of every size.

Principal Member David D. Fraser, CPA will lead a highly trained, qualified staff offering a streamlined accounting support and infrastructure that local businesses and organizations desperately need. Fraser had this to say about the group, “We have seen an increasing need in the marketplace for a third party accounting function in businesses. While we do look to provide services to these businesses, we are more focused on providing real world accounting solutions to the business community.  We are excited about this offering and look forward to helping start-ups and established companies grow.”

The Accounting Solutions Group at LBA Haynes Strand will offer the following menu of solutions:
  • AP management
  • AR management
  • Budget development
  • Business plans and forecasting support
  • Chart of accounts clean-up
  • Consulting services
  • Credit card processing
  • Deposit management
  • Expense reimbursements
  • Financial statement preparation & analysis
  • General ledger review
  • Monthly or Quarterly meetings to review
  • Payroll management
  • QuickBooks support
  • Sales and use tax reporting
  • Year End 1099s

Business owners will now have a third party to go to that supplies them with a full team of accountants and professionals that have the accounting knowledge of an entire accounting department at a fraction of the cost. The firm looks forward to taking the accounting off of stressed business owners hands and allowing those business owners to re-focus on leading and running their businesses.

To learn more about the Accounting Solutions Group, contact us for your no-cost consultation!

Recent Tax Changes That Will Affect Your Business Decisions

There have been two recent changes in tax laws that affect business decisions.  One is the increase in De Minimis Safe Harbor Expensing Threshold in IRS Notice 2015-82 and the other is the Protecting Americans from Tax Hikes Act of 2015 (PATH Act).

De Minimis Safe Harbor Expensing Threshold: 

There was a change in the repair and expensing rules in 2014.  Under those rules many of you signed a policy to expense items that cost under the de minimis safe harbor of $500.  This allowed you to deduct the cost of items under $500 instead of capitalizing and depreciating those items.  The IRS now allows you to change your policy so that you may deduct in 2016 the items costing less than $2,500.  If you did sign a policy under the previous rules, you may want to change your policy to deduct items costing up to $2,500.  This policy should be in writing and signed as soon as possible. 

PATH Act:

The PATH Act was passed by the US House and the US Senate and signed into law by the President on December 18, 2015.  Some of the provisions in the act are permanent and others are for a limited amount of time.  The following are some of the provisions that may affect you.

Code Section 179 Depreciation:

The Code Section 179 expensing was scheduled to revert back to a limit of $25,000 for 2015.   The Path Act permanently sets the expensing limit at $500,000 with a $2,000,000 investment limit for tax years beginning in 2015 and subsequent years.  These amounts will be indexed for inflation for 2016 and subsequent years.

Bonus Depreciation: 

The Path Act extends the bonus depreciation under a phase-down schedule for calendar years 2015 through 2019.  Bonus depreciation is 50% for 2015-2017; 40% in 2018; and 30% in 2019.

Other Tax Credits and deductions:

  • The research and development (R & D) tax credit has been permanently extended with an increase from 14% to 20% of qualified costs.
  • The 100% exclusion allowed for gain on the sale or exchange of qualified small business stock held for more than five years is made permanent.
  • The PATH Act makes permanent the 5 year recognition period for built-in gain following conversions from a C corporation to an S corporation.
  • The Work Opportunity Tax credit is extended through 2019.

These are important updates that could affect your 2016 business year.  If you have any questions, please click the button below to start your conversation with a CPA at LBA Haynes Strand today!