Tuesday, August 15, 2017

Do A Business Valuation When You’re Ready To Sell Your Company


Well before you’re ready to sell your company, you’ll want to determine its fair market value as a starting point for negotiations. Of course, obtaining a reasonably precise value for your business is often a complicated and time-consuming task. Accurate appraisals must weigh a variety of factors and incorporate numerous assumptions. The more precise the underlying numbers and suppositions, the more likely the appraiser’s determination of fair market value will reflect what a willing buyer would actually pay. Here are two questions an appraisal should address.
  • How does your business compare? If you’re operating a service business, your valuation will differ – often substantially – from a company involved in light manufacturing or retail. Buyers will expect a reasonable return on their investment, a return that is often represented as some form of earnings multiplier. For example, your business may be valued at three times projected earnings. Once determined, that number can be compared to businesses of similar size in your market. Of course, accurate valuations must compare apples to apples. “Earnings” must be defined. Should “earnings” include or exclude the owner’s pay, interest expense, depreciation, or taxes? A careful appraisal will also scrutinize the balance sheet. The basis for valuing tangible and intangible assets (including non-compete agreements) and liabilities (such as mortgages, installment loans, and accounts payable) should be clearly laid out – before the business is put on the block.
  • Will present trends continue? The future may be difficult to predict, but a careful analysis should be based on conservative projections, assumptions, and common sense. If, for example, the business is expected to retain skilled management and employees, buyers may be willing to pay a premium. If, on the other hand, the company is overly dependent on a few products or customers, potential buyers may be scared off. Or they may require concessions to mitigate perceived risk. Again, a careful appraisal will consider many such factors and value the business accordingly.
Remember: an appraisal is merely a starting point for negotiations. The more accurate the appraisal, the more likely the business will be priced correctly and potential buyers will be attracted. Unfortunately, determining the fair market value of a business may be fraught with missteps and faulty assumptions. For that reason, hiring a trained and objective professional is often a worthwhile investment.

For more information, Visit: Accountants in New Jersey | Bookkeeping services NJ | Small business accounting

Monday, August 7, 2017

Four Tips For Building An Emergency Fund

Planning for business emergencies is like buying insurance: you pay into an account and hope you’ll never have to use it. But life happens. Equipment breaks down. Electrical problems occur. Employees leave. Having money in the bank to cover those unexpected expenses can reduce stress and keep you from relying on credit cards and loans to keep your business afloat.
Here are four easy and effective ways to establish and maintain an emergency fund for your business.
1. Start small. Many financial planners advise setting aside enough money to cover at least six months of expenses. That’s a worthy goal. But for many businesses, it’s also a daunting task, an objective that will take years – not months – to achieve. So, set a realistic and achievable amount for your emergency fund, and then get in the habit of contributing regularly. Then don’t touch the account except for real emergencies. Leave it alone and it will grow.
2. Pump it up. When you get a surplus of revenue, tax refund, or windfall, consider using a portion of that money to bolster your emergency account. Fight the temptation to increase spending with every new dollar that comes along.
3. Make it automatic. With online banking, it’s easy to set up routine transfers from your businesses’ primary account to a separate savings account. Consider allocating a portion of each quarter’s earnings to an emergency fund. Consider establishing the account at a financial institution other than your regular bank. As the saying goes, “Out of sight, out of mind.” If the money never shows up in your regular checking account, you’ll be less likely to use it for everyday business expenses.
4. Slash expenses. Take a hard look at your budget and consider everything fair game: expensive client dinners, extravagant business parties or trips, and so on. You may find that a surprising number of dollars can be freed up and stashed away in savings. The key, of course, is to direct those savings – immediately, if possible – away from regular spending and into your emergency account.
If you’d like more ideas for setting financial goals or building up an emergency fund for your business, give us a call.

Wednesday, August 2, 2017

Don’t Assume It’s Correct, Just Because It’s The IRS

Quotes from actual IRS correspondence received by clients:
“Our records show we received a 1040Xfor the tax year listed above. We’re sorry but we cannot find it.”
“Our records show you owe a balance due of $0.00. If we do not receive it within 30 days, appropriate collection steps will be taken.”
“Payment is due on your account. Please submit payments on or before June 31 to avoid late payment penalties and interest.”
It’s pretty tough to pay a balance due of $0.00 or submit a payment on June 31 when June has only 30 days. The message should be clear. If you receive a notice from the IRS, don’t automatically assume it is correct and then submit a payment to make it go away. The same is true for errors in any state tax agency notices. They are often in error. So what should you do?
Stay calm. Try not to overreact to the correspondence. This is easier said than done, but remember, the IRS sends out millions of notices each year. The vast majority of these notices attempt to correct simple oversights or common filing errors.
Open the envelope. You’d be surprised how often clients are so stressed by receiving a letter from the IRS that they cannot bear to open the envelope. If you fall into this category, try to remember that the first step in making the problem go away is to open the correspondence.
Review the letter. Make sure you understand exactly what the IRS thinks needs to be changed and determine whether or not you agree with their findings. Unfortunately, the IRS rarely sends correspondence to correct an oversight in your favor, but it sometimes happens.
Respond in a timely manner. The correspondence received should be very clear about what action the IRS believes you should take and within what timeframe. Ignore this information at your own risk. Delays in responses could generate penalties and additional interest payments.
Get help. You are not alone. Getting assistance from someone who deals with this all the time makes going through the process much smoother.
Correct the IRS error. Once the problem is understood, a clearly written response with copies of documentation will cure most IRS correspondence errors. Often the error is due to the inability of the IRS computers to conduct a simple reporting match. Pointing the information out on your tax return might be all it takes to solve the problem.
Certified mail is your friend. Send any response to the IRS via certified mail. This will provide proof of your timely correspondence. Lost mail can lead to delays, penalties, and additional interest on your tax bill.
Don’t assume it will go away. Until you receive definitive confirmation that the problem has been resolved, assume the IRS still thinks you owe the money. If you don’t receive correspondence confirming the correction, send a written follow-up.

Monday, July 31, 2017

Five Home Office Deduction Mistakes

If you operate a business out of your home, you may be able to deduct a wide variety of expenses. These may include part of your rent or mortgage costs, insurance, utilities, repairs, maintenance, and cleaning costs related to the space you use.
It can be a tricky area of the tax code that’s full of pitfalls for the unwary. Here are some of the top mistakes people make:
Not taking it. This is probably the biggest mistake those with home offices make. Some believe the deduction is too complicated, while others believe taking a home office deduction increases your chance of being audited. While the rules can be complicated, there are now simple home office deduction methods available to every business.
Not exclusive or regular. The space you use must be used exclusively and regularly for your business.
Exclusively: If you use a spare bedroom as a business office, it can’t double as a guest room, a playroom for the kids, or a place to store your hockey gear. Any kind of non-business use can invalidate you for the deduction.
Regularly: It should be the primary place you conduct your regular business activities. That doesn’t mean that you have to use it every day nor does it stop you from doing work outside the office, but it should be the primary place for business activities such as record keeping, billing, making appointments, ordering equipment, or storing supplies.
Mixing up your other work. If you are an employee for someone else in addition to running your own business, be careful in using your home office to do work for your employer. Generally, IRS rules state you can use a home office deduction as an employee only if your employer doesn’t provide you with a local office to work at.
Unfortunately, this means if you run a side business out of your home office, you cannot also bring work home from your employer’s office and do it in your home office. That would invalidate your use of the home office deduction.
The recapture problem. If you have been using your home office deduction, including depreciating part of your home, you could be in for a future tax surprise. When you later sell your home, you will need to account for this depreciation. This depreciation recapture rule creates a possible tax liability for many unsuspecting home office users.
Not getting help. There are special rules that apply to your use of the home office deduction if:
– You are an employee of someone else.
– You are running a daycare or assisted living facility out of your home.
– You have a business renting out your primary residence or a vacation home.
The home office deduction can be tricky, so be sure to ask for help, especially if you fall under one of these cases.
Things to remember
Recognizing the home office deduction complexity, the IRS created a simplified “safe harbor” home office deduction. You simply take the square footage of your office, up to 300 square feet, and multiply it by $5. This gives you a potential $1,500 maximum deduction. However, your savings could be much greater than $1,500, so it’s often worth getting help to calculate your full deduction.
Finally, if you are concerned about a potential future audit, take a photo or two of your home office. This is especially important if you move. That way if you are ever challenged, you can visually attempt to show your compliance to the rules.

Wednesday, July 26, 2017

Reap The Benefits Of Hiring Your Child For The Summer


Hiring your children to work in your business can be a win-win situation for everyone. Your kids will earn money, gain real-life experience in the workplace, and learn what you do every day. And, you will reap a few tax benefits in the process. Before you decide if hiring your child is the right thing for your business, learn if it can work for you.
Generally, if your child is doing a legitimate job and the pay is reasonable for the work, his or her salary can be a tax-deductible business expense. Your child’s income can be tax-free to them up to the standard deduction amount for a single tax payer ($6,350 in 2017). Wages earned in excess of this amount are typically taxed at your child’s rate, which is likely lower than your rate.
The following guidelines will help you determine if the arrangement will work in your situation:
  • Make sure your child works a real job that he or she can reasonably handle, no matter how basic or simple. Consider tasks like office filing, packing orders, or customer service.
  • Treat your child like any other employee. Expect regular hours and appropriate behavior. If you are lenient with your child, you risk upsetting regular employees.
  • To avoid questions from the IRS, make sure the pay is reasonable for the duties performed. It’s not a bad idea to prepare a written job description for your files. Include a W-2 at year-end.
  • Record hours worked just as you would for any employee. Pay your child using the normal payroll system and procedures your other employees use.
  • Hiring your children works best if you are a sole proprietor. It has additional tax benefits not available if your business is organized as a C corporation or an S corporation.
If you have questions, give us a call. Together we can determine if hiring your child is the right course of action for your business and your family.
See more at : http://www.bas-pc.com/

Monday, July 17, 2017

Get to Know These Tax-Saving Terms


As you begin to think about scheduling your midyear tax planning appointment, refresh your memory on the meanings of terms that can save you money. Here are three.
  • Exclusion. Exclusions are items that would generally be included on your return, but are specifically excluded by a tax law provision. For example, gifts and inheritances you receive are excluded from your income – you simply don’t report them on your federal tax return.
  • Deduction. By definition, a deduction means an amount is subtracted from your income. Tax deductions fit into four general categories.
Above the line deductions, such as alimony paid, can be claimed even if you don’t itemize.
Itemized deductions are a specific group of expenses, including amounts you pay for certain taxes, medical costs, charitable donations, mortgage interest, and disaster losses.
The standard deduction is a simplified substitute for itemized deductions. It’s a flat amount you can use to reduce your gross income instead of itemizing each allowable expense.
Business deductions are the ordinary and necessary expenses required for carrying on your trade or business.
  • Credit. Income tax credits are subtracted from the tax you owe. Note the difference from the definition of deductions, which reduce your income and indirectly reduce your final tax bill.
Tax credits can be refundable, meaning you’ll get money back if the credit exceeds the amount of tax you owe. Nonrefundable credits can only reduce your tax to zero.
These terms can be confusing. Call if you have questions about these tax-savers and how including them in your midyear planning can benefit you.

See more at : http://www.bas-pc.com/

Wednesday, July 5, 2017

Five Reasons to Incorporate Your Business



Most new businesses start with no thought about legal structure. In the eyes of the IRS, the default structure is a “sole proprietor,” in which your business profits are taxed on your personal tax return. This can serve you well to start, but there are several reasons you may want to consider incorporating as your business grows.


  • To protect your personal assets from creditors. When you operate your business within a corporation, creditors are often limited to corporate assets to satisfy a debt. Your home, savings, and retirement accounts are no longer fair game.
  • To provide a personal liability firewall. The corporate form can help protect you against claims made by others for injuries or losses arising from actions of your business.
  • To issue shares of stock. You can help build your business by issuing shares to new investors, or by offering stock options to key employees as a form of compensation.
  • To gain tax flexibility. A corporation can provide you with more tax flexibility. Deliberate planning can help optimize the taxable division between corporate income, dividends, and your personal wages.
  • To enhance your business presence. Being incorporated sends a signal that your business is a serious enterprise, and it could open doors to opportunities not offered to sole proprietors. Consumers, vendors, and other businesses often prefer to do business with incorporated companies.

If you are still going over the pros and cons of incorporating your business, give our office a call. Together, we can complete a thorough tax review that will help shed light on the impact such a move will have on your business situation.

See more at : http://www.bas-pc.com/