Business Succession Planning Archives

Protect your Business with a Cybersecurity Assessment

Management Advisory Services & Business Consulting|November 17, 2021

Years ago, it may have seemed like only government agencies with top-secret intel or wealthy international banks had to worry about hackers. Nowadays, even the smallest small business could see its reputation ruined by a data breach, while larger companies could have their sensitive data taken hostage in a ransomware attack that costs millions to resolve.

A cybersecurity assessment can help ensure that your business is taking the proper steps to protect itself. It can also give you a competitive edge by demonstrating to customers and prospects that you take data privacy seriously.

More Tech, more Risk

Many of today’s companies are taking advantage of technologies that allow them to gather, track and analyze customer and financial data. This includes software for mission-critical activities such as payroll, accounts receivable and payable, supply chain management, HR and benefits, and on-site security.

These systems are often cloud-based, meaning the information is stored online so users can access it remotely at any time of day or night. The convenience and analytical power are breathtaking. They also create a tempting target for cybercriminals and raise the stakes of exposure exponentially.

In truth, the risk of a breach goes far beyond disclosure of confidential personal or financial information. It also raises serious concerns about potential personal injuries, property damage and work stoppage. Imagine the harm a hacker could cause by tampering with a building’s security or fire systems, or remotely manipulating vehicles or equipment.

Benefits of an Assessment

Conducting a formal cybersecurity assessment helps you:

Take inventory of your hardware and software,
Identify potential vulnerabilities (including access by vendors, partners, and current and former employees), and
Implement internal controls and other protections to reduce risk.

An assessment can also enable you to develop an incident response plan to mitigate the damage in the event of a breach.

There are several recognized cybersecurity standards and frameworks available to guide these efforts. These include those developed by the National Institute of Standards and Technology and the International Organization for Standardization. The U.S. Small Business Administration also offers cybersecurity assessment tips and best practices on its website.

If you’re particularly concerned, you might want to shop around for a qualified IT consultant to conduct a customized risk assessment. This may make sense if you’re in an industry subject to specific risks.

Become a Hard Target

Cybersecurity is important for every size and type of company. It may be comforting to think that the bad guys only go after the big guys. However hackers don’t always go after businesses with deep pockets. Sometimes they attack the softest target. Make sure you’re well-protected.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

4 Ways to Refine your Cash Flow Forecasting

Management Advisory Services & Business Consulting|October 26, 2021

Run a business for any length of time and the importance of cash flow becomes abundantly clear. When payroll is due, bills are piling up and funds aren’t available, blood pressure tends to rise. For this reason, being able to accurately forecast cash flow is critical. Here are four ways to refine your approach:

1. Know when you peak. Many businesses are cyclical, and their cash flow needs vary by month or season. Trouble can arise when an annual budget doesn’t reflect, for example, three months of peak production in the summer to fill holiday orders followed by a return to normal production in the fall.

For seasonal operations — such as homebuilders, farms, landscaping companies and recreational facilities — using a one-size-fits-all approach can throw budgets off, sometimes dramatically. To forecast your company’s cash flow needs and plan accordingly, track your peak sales and production times over as long a period as possible.

2. Engage in careful accounting. Effective cash flow management requires anticipating and capturing every expense and incoming payment, as well as — to the extent possible — the exact timing of each payable and receivable. But pinpointing exact costs and expenditures for every day of the week can be challenging.

Businesses can face an array of additional costs, overruns and payment delays. Although inventorying every possible expense can be tedious and time-consuming, doing so can help avoid problems down the road.

3. Keep an eye on additional funding sources. As your business expands or contracts, a dedicated line of credit with a bank can help you meet cash flow needs, including any periodic shortages. Interest rates on these credit lines, however, can be high compared to other types of loans. So, lines of credit typically are used to cover only short-term operational costs, such as payroll and supplies. They also may require significant collateral and personal guarantees from the company’s owners.

Of course, a line of credit isn’t your only outside funding option. Federally funded small business loans have been widely offered during the COVID-19 pandemic and may still be available to you. Look into these and other options suitable to the size and needs of your company.

4. Invoice diligently, run leaner. For many businesses, the biggest cash flow obstacle is slow collections. Be sure you’re invoicing in a timely manner and offering easy, convenient ways for customers to pay (such as online). For new customers, perform a thorough credit check to avoid delayed payments and bad debts.

Another common obstacle is poor resource management. Redundant machinery, misguided investments and oversized offices are just a few examples of poorly managed expenses and overhead that can negatively affect cash flow.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

EIDL Program Retooled for Still-Struggling Small Businesses

Tax Prep, Planning & Strategy|October 14, 2021

For many small businesses, the grand reopening is still on hold. The rapid spread of the Delta variant of COVID-19 has mired a variety of companies in diminished revenue and serious staffing shortages. In response, the Small Business Administration (SBA) has retooled its Economic Injury Disaster Loan (EIDL) program to offer targeted relief to eligible employers.

A Brief History

The EIDL program was in place well before 2020. However, the federal government has ramped up the initiative’s visibility while trying to help small businesses during the pandemic.

With the entire country essentially declared a disaster area, the CARES Act established an enhanced EIDL program for small businesses affected by COVID-19. It offered lower interest rates, longer repayment terms and a streamlined application process.

The American Rescue Plan Act upped the ante, offering eligible companies targeted EIDL advances that are excluded from the gross income of the person who receives the funds. The law stipulates that no deduction or basis increase will be denied, and no tax attribute will be reduced, because of this gross income exclusion.

Latest EIDL Enhancements

The SBA’s most recent enhancements to the EIDL program offer “a lifeline to millions of small businesses who are still being impacted by the pandemic,” according to SBA Administrator Isabella Casillas Guzman. (Eligible employers include not only small businesses, but also qualifying nonprofits and agricultural companies in all U.S. states and territories.)

First and foremost, the loan cap has increased from $500,000 to $2 million. Eligible small businesses can use these funds for almost any operating expense, including payroll and equipment purchases. Funds can also be applied for certain debt payments. Specifically, the SBA has expanded the allowable use of EIDL funds to prepay commercial debt and pay down federal business debt.

In addition, the agency has implemented a new deferred payment period under which borrowers can wait until two years after loan origination to begin repaying their COVID-related EIDLs.

EIDL Application Details

If you believe your small business could qualify and benefit from these newly enhanced EIDLs, first identify how much money you need and how soon you need it. The SBA is offering a 30-day “exclusivity window” to approve and disburse loans of $500,000 or less. Approval and disbursement of loans of more than $500,000 will begin after this 30-day period.

The agency has also rolled out a streamlined application process that establishes “more simplified affiliation requirements” modeled after those of the Restaurant Revitalization Fund. The deadline for applications remains December 31, 2021. As is the case with any government loan, it’s better to apply earlier rather than later in case funds run out.

Help with the Process

For further details about the new and improved COVID-related EIDL program, go to sba.gov. And don’t hesitate to contact us. We can help you determine whether your small business qualifies for one of these loans and, if so, assist with completing the application process.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

Opening a New Location Calls for Careful Planning

Tax Prep, Planning & Strategy|October 7, 2021

The U.S. economy has been nothing short of a roller-coaster ride for the past year and a half. Some industries have had to overcome seemingly insurmountable challenges, while others have seen remarkable growth opportunities arise.

If your business is doing well enough for you to consider adding a location, both congratulations and caution are in order. “Fortune favors the bold,” goes the old saying. However, strained cash flow and staffing issues can severely disfavor the underprepared.

Ask the Right Questions

Among the most fundamental questions to ask is: Will we be able to duplicate the success of our current location? If your first location is doing well, it’s likely because you’ve put in place the people and processes that keep the business running smoothly. It’s also because you’ve developed a culture that resonates with your customers. You need to feel confident you can do the same at subsequent locations.

Another important question is: How might expansion affect business at both locations? Opening a second location prompts a consideration that didn’t exist with your first: how the two establishments will interact. Placing the two operations near each other can make it easier to manage both, but it also can lead to one operation cannibalizing the other. Ideally, the two locations will have strong, independent markets.

Run the Numbers

You’ll need to consider the financial aspects carefully. Look at how you’re going to fund the expansion. Ideally, the first location will generate enough revenue so that it can both sustain itself and help fund the second. But you may still need to take on debt, and it’s not uncommon for construction costs and timelines to exceed initial projections.

You might want to include some extra dollars in your budget for delays or surprises. If you must starve your first location of capital to fund the second, you’ll risk the success of both.

Account for the tax ramifications as well. If you own the real estate, property taxes on two locations will affect your cash flow and bottom line. You may be able to cut your tax bill with various tax incentives, such as by locating the second location in an Enterprise Zone. But the location will first and foremost need to make sense from a business perspective. There may be other tax issues as well — particularly if you’re crossing state lines.

Assess the Risk

For some businesses, expanding to a new location may be the single most impactful way to drive growth and build the bottom line. However, it’s also among the riskiest endeavors any company can take on. We’d be happy to help you assess the feasibility of opening a new location, including creating financial projections that will provide insights into whether the move is a reasonable risk.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

Is an LLC the Right Choice for your Small Business?

Management Advisory Services & Business Consulting|August 31, 2021

Perhaps you operate your small business as a sole proprietorship and want to form a limited liability company (LLC) to protect your assets. Or maybe you are launching a new business and want to know your options for setting it up. Here are the basics of operating as an LLC and why it might be appropriate for your business.

An LLC is somewhat of a hybrid entity because it can be structured to resemble a corporation for owner liability purposes and a partnership for federal tax purposes. This duality may provide the owners with the best of both worlds.

Personal Asset Protection

Like the shareholders of a corporation, the owners of an LLC (called “members”) generally aren’t liable for the debts of the business except to the extent of their investment. Thus, the owners can operate the business with the security of knowing that their personal assets are protected from the entity’s creditors. This protection is far greater than that afforded by partnerships. In a partnership, the general partners are personally liable for the debts of the business. Even limited partners, if they actively participate in managing the business, can have personal liability.

Tax Implications of an LLC

The owners of an LLC can elect under the “check-the-box” rules to have the entity treated as a partnership for federal tax purposes. This can provide a number of important benefits to the owners. For example, partnership earnings aren’t subject to an entity-level tax. Instead, they “flow through” to the owners, in proportion to the owners’ respective interests in profits, and are reported on the owners’ individual returns and are taxed only once.

To the extent the income passed through to you is qualified business income, you’ll be eligible to take the Code Section 199A pass-through deduction, subject to various limitations. In addition, since you’re actively managing the business, you can deduct on your individual tax return your ratable shares of any losses the business generates. This, in effect, allows you to shelter other income that you and your spouse may have.

An LLC that’s taxable as a partnership can provide special allocations of tax benefits to specific partners. This can be an important reason for using an LLC over an S corporation (a form of business that provides tax treatment that’s similar to a partnership). Another reason for using an LLC over an S corporation is that LLCs aren’t subject to the restrictions the federal tax code imposes on S corporations regarding the number of owners and the types of ownership interests that may be issued.

Review your Situation

In summary, an LLC can give you corporate-like protection from creditors while providing the benefits of taxation as a partnership. For these reasons, you should consider operating your business as an LLC.

As always, please do not hesitate to call our offices for additional information and to speak to your representative to discuss in more detail how an LLC might benefit you and the other owners.

IRS Extends Administrative Relief for 401(k) Plans

Industries|August 5, 2021

As mitigation measures related to COVID-19 ease, it will be interesting to see which practices and regulatory changes taken in response to the pandemic remain in place long-term. One of them might be relief from a sometimes-inconvenient requirement related to the administration of 401(k) plans.

A virtual solution

In IRS Notice 2021-40, the IRS recently announced a 12-month extension of its temporary relief from the requirement that certain signatures be witnessed “in the physical presence” of a 401(k) plan representative or notary public.

The original relief, which appeared in IRS Notice 2020-42, was provided primarily to facilitate plan loans and distributions under the CARES Act. However, the relief could be used during 2020 for any signature that, under regulations, had to be witnessed in the physical presence of a plan representative or notary public. This included required spousal consents. The relief was subsequently extended through June 30, 2021, under IRS Notice 2021-03.

Under the notices, signatures witnessed remotely by a plan representative satisfy the physical presence requirement if the electronic system uses live audio-video technology and meets four requirements established under the original relief:

Live presentation of a photo ID,
Direct interaction,
Same-day transmission, and
Return with the representative’s acknowledgment.

Signatures witnessed by a notary public satisfy the physical presence requirement if the electronic system for remote notarization uses live audio-video technology and is consistent with state-law requirements for a notary public.

Comments requested

As mentioned, IRS Notice 2021-40 further extends the relief — subject to the same conditions — through June 30, 2022. The notice also requests comments regarding whether permanent modifications should be made to the physical presence requirement. Comments are specifically requested regarding:

The costs and other effects of the physical presence requirement and its temporary waiver,
Whether the relief has resulted in fraud, coercion or other abuses,
How the witnessing requirements are expected to be fulfilled as the pandemic abates,
What procedural safeguards should be instituted if the physical presence requirement is permanently modified, and
Whether permanent relief should use different procedures for witnessing by plan representatives or notary publics.

Comments should be submitted by September 30, 2021.

More information

Going forward, the need for a signature may often relate to spousal consents. If your business recently established a 401(k), the plan may be designed to limit or even eliminate the need for spousal consents.

However, plans that offer annuity forms of distribution are still subject to the spousal consent rules. And other 401(k) plans must require spousal consent if a married participant wants to name a nonspouse as primary beneficiary.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

10 Fact: Pass-Through Deduction for Qualified Business Income

Tax Prep, Planning & Strategy|August 4, 2021

Are you eligible to take the deduction for qualified business income (QBI)? Here are 10 facts about this valuable tax break, referred to as the pass-through deduction, QBI deduction or Section 199A deduction.

It’s available to owners of sole proprietorships, single member limited liability companies (LLCs), partnerships and S corporations. It may also be claimed by trusts and estates.
The deduction is intended to reduce the tax rate on QBI to a rate that’s closer to the corporate tax rate.
It’s taken “below the line.” That means it reduces your taxable income but not your adjusted gross income. But it’s available regardless of whether you itemize deductions or take the standard deduction.
The deduction has two components: 20% of QBI from a domestic business operated as a sole proprietorship or through a partnership, S corporation, trust or estate; and 20% of the taxpayer’s combined qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership income.
QBI is the net amount of a taxpayer’s qualified items of income, gain, deduction and loss relating to any qualified trade or business. Items of income, gain, deduction and loss are qualified to the extent they’re effectively connected with the conduct of a trade or business in the U.S. and included in computing taxable income.
QBI doesn’t necessarily equal the net profit or loss from a business, even if it’s a qualified trade or business. In addition to the profit or loss from Schedule C, QBI must be adjusted by certain other gain or deduction items related to the business.
A qualified trade or business is any trade or business other than a specified service trade or business (SSTB). But an SSTB is treated as a qualified trade or business for taxpayers whose taxable income is under a threshold amount.
SSTBs include health, law, accounting, actuarial science, certain performing arts, consulting, athletics, financial services, brokerage services, investment, trading, dealing securities and any trade or business where the principal asset is the reputation or skill of its employees or owners.
There are limits based on W-2 wages. Inflation-adjusted threshold amounts also apply for purposes of applying the SSTB rules. For tax years beginning in 2021, the threshold amounts are $164,900 for singles and heads of household; $164,925 for married filing separately; and $329,800 for married filing jointly. The limits phase in over a $50,000 range ($100,000 for a joint return). This means that the deduction reduces ratably, so that by the time you reach the top of the range ($214,900 for singles and heads of household; $214,925 for married filing separately; and $429,800 for married filing jointly) the deduction is zero for income from an SSTB.
For businesses conducted as a partnership or S corporation, the pass-through deduction is calculated at the partner or shareholder level.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

Tax Advantages of Hiring your Child at your Small Business

Tax Prep, Planning & Strategy|July 15, 2021

As a business owner, you should be aware that you can save family income and payroll taxes by putting your child on the payroll.

Here are some considerations.

Shifting business earnings

You can turn some of your high-taxed income into tax-free or low-taxed income by shifting some business earnings to a child as wages for services performed. In order for your business to deduct the wages as a business expense, the work done by the child must be legitimate and the child’s salary must be reasonable.

For example, suppose you’re a sole proprietor in the 37% tax bracket. You hire your 16-year-old son to help with office work full-time in the summer and part-time in the fall. He earns $10,000 during the year (and doesn’t have other earnings). You can save $3,700 (37% of $10,000) in income taxes at no tax cost to your son, who can use his $12,550 standard deduction for 2021 to shelter his earnings.

Family taxes are cut even if your son’s earnings exceed his standard deduction. That’s because the unsheltered earnings will be taxed to him beginning at a 10% rate, instead of being taxed at your higher rate.

Income tax withholding

Your business likely will have to withhold federal income taxes on your child’s wages. Usually, an employee can claim exempt status if he or she had no federal income tax liability for last year and expects to have none this year.

However, exemption from withholding can’t be claimed if: 1) the employee’s income exceeds $1,100 for 2021 (and includes more than $350 of unearned income), and 2) the employee can be claimed as a dependent on someone else’s return.

Keep in mind that your child probably will get a refund for part or all of the withheld tax when filing a return for the year.

Social Security tax savings

If your business isn’t incorporated, you can also save some Social Security tax by shifting some of your earnings to your child. That’s because services performed by a child under age 18 while employed by a parent isn’t considered employment for FICA tax purposes.

A similar but more liberal exemption applies for FUTA (unemployment) tax, which exempts earnings paid to a child under age 21 employed by a parent. The FICA and FUTA exemptions also apply if a child is employed by a partnership consisting only of his or her parents.

Note: There’s no FICA or FUTA exemption for employing a child if your business is incorporated or is a partnership that includes non-parent partners. However, there’s no extra cost to your business if you’re paying a child for work you’d pay someone else to do.

Retirement benefits

Your business also may be able to provide your child with retirement savings, depending on your plan and how it defines qualifying employees. For example, if you have a SEP plan, a contribution can be made for the child up to 25% of his or her earnings (not to exceed $58,000 for 2021).

Contact us if you have any questions about these rules in your situation. Keep in mind that some of the rules about employing children may change from year to year and may require your income-shifting strategies to change too.

Free Webinar: Getting a 360° Perspective on your Business

NEWS|April 29, 2021

Join our very own GrowthWheel Certified Advisor – Joni Peebles, CPA as she hosts a FREE GrowthWheel webinar on key steps to growing your business Friday, May 7, 2021 from 1-3pm!

Please register here to reserve your spot and take the first step to improving your business!

Workshop: Getting a 360^o Perspective on Your Business — Make decisions and plan actions for growth

This webinar is about addressing the four lasting challenges of any business and learning how to make a plan for growth. Join a group of fellow entrepreneurs, small business owners, and a GrowthWheel Certified Advisor in this 2 hour workshop about finding your biggest barriers to growth! Explore the options for improving your business concept, customer relations, organization, and operations.

Get to know the GrowthWheel 360° Perspective here.

Who should Attend?

This webinar is for startup and growth companies in all life stages and within all industries.

Purpose of the workshop:

Introduce the GrowthWheel concept for making business decisions
Determine current challenges and what you can do to overcome them
Learn the actions steps you can take to kick start the growth of your business
Make a plan to move forward

Takeaway from the workshop: When the workshop is over you will walk away with:

A tool stack to work with your growth plan
A 30-60-90 Days Action Plan for your next steps
Ideas and feedback from other entrepreneurs

If you have any questions please contact us!

American Rescue Plan: More Details on Tax Credits Available

NEWS|April 26, 2021

The IRS and Treasury Department announced today further details of tax credits available under the American Rescue Plan. These credits aim to help small businesses and include paid leave for employees receiving COVID-19 vaccinations.

The American Rescue Plans allows for small businesses to claim refundable tax credits that reimburse them for the cost of providing paid time off for employees receiving the vaccine, providing paid time off for anytime needed to recover for the vaccine and providing paid sick and family leave due to COVID-19.

News release IR-2021-90 details these credits here. You can also find even more in depth information on tax credits available to small employers on the fact sheet provided by the IRS.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

Protect your Business with a Cybersecurity Assessment

More Tech, more Risk

Benefits of an Assessment

Become a Hard Target

4 Ways to Refine your Cash Flow Forecasting

EIDL Program Retooled for Still-Struggling Small Businesses

A Brief History

Latest EIDL Enhancements

EIDL Application Details

Help with the Process

Opening a New Location Calls for Careful Planning

Ask the Right Questions

Run the Numbers

Assess the Risk

Is an LLC the Right Choice for your Small Business?

Personal Asset Protection

Tax Implications of an LLC

Review your Situation

IRS Extends Administrative Relief for 401(k) Plans

A virtual solution

Comments requested

More information

10 Fact: Pass-Through Deduction for Qualified Business Income

Tax Advantages of Hiring your Child at your Small Business

Shifting business earnings

Income tax withholding

Social Security tax savings

Retirement benefits

Free Webinar: Getting a 360° Perspective on your Business

American Rescue Plan: More Details on Tax Credits Available

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