The Value of a CPA in Business Finance DecisionsPosted on April 16th, 2018
As a skilled and successful business owner, you are an expert in your industry. You have succeeded by using specialized knowledge and valuable ideas to grow your company. A financial advisor can help you when it comes to making business decisions based on financial analysis and tax strategies.
Even the most innovative entrepreneurs struggle to grasp the details involved with complex financial decisions. It can be overwhelming to try and navigate contracts, tax planning, and cash-flow management as it relates to new and ongoing business needs. When it comes to dealing with tax implications and cash flow, it makes sense to work with an advisor who specializes in business finances.
CPAs are Experienced Financial Advisors
Every company is unique, and its path to prosperity will not travel a straight line. There will be growing pains, setbacks, and periods of incredible growth, all based on managerial decisions and sound business decisions. Because a business’s ability to survive and prosper depends largely on strategic financial choices, it makes sense to work with a trusted advisor who specializes in helping companies plan. A CPA’s technical knowledge and their ability to predict financial outcomes make them an indispensable part of your advisory team.
CPAs are Experts at Dealing with Intermediaries
Whether you’re creating a start-up business from scratch, purchasing a new business, or selling an established company, you will be dealing with many intermediaries, all with different backgrounds, areas of expertise, and business interests. A CPA with a background in business advisory knows how to work with each of these outside parties. They will work with your team to navigate buying and selling, the due diligence process, and the financial oversight of every business transaction so that you can focus on the day-to-day operations of your business.
A CPA will Help You Create Actionable Plans for Your Business Goals
As an entrepreneur, you probably have a vision for your business, along with future goals and aspirations. Do you know what steps you will need to take to make your vision a reality? If you have plans for new business ventures, a financial advisor can help you develop a strategy to take your business where it needs to go. A sound plan for your business will be well defined, will generate profits and growth, and will be sustainable into the future. A CPA will base transaction strategies on a detailed financial analysis and will advise you on the steps you need to take to implement them. With the right resources and relationships, you can predict which business decisions will be successful and which should be avoided.
At Walker Advisory, our goal is to work with business owners who wish to step out of their comfort zone and take calculated risks based on sound financial data. Our team will work with you to create strategies, new ventures, and collaborations that will help your Wichita Falls business flourish. Give us a call today to learn how we can work together.
What is Business Transition Planning and Why is it Necessary?Posted on April 9th, 2018
Have you thought about what would happen to your business when you are no longer running the show? A well-crafted transition plan enables you to secure your legacy, whether your departure is due to an emergency, retirement, or a prearranged transfer of power. The process is often complex, requiring a CPA and possibly a lawyer to help create and implement the plan.
The purpose of planning for your business transition is to clearly define your goals to ensure that your company will remain viable into the future. Both succession planning and exit planning should be part of the transition plan, as there are important distinctions between the two.
A business succession plan is like a contingency plan that outlines what will happen to your business in the case of an emergency or an involuntary exit. Statistics show that small businesses and partnerships often fail when an owner or partner suddenly becomes incapacitated, leaves, or dies. This is especially true of family-run businesses where leadership decisions can be clouded by personal issues.
Your succession plan should be based solely on the needs of your business. The first steps are evaluating your business’ worth, identifying your successor, and then determining how to best transfer ownership. Depending on your unique situation, you may sell your shares or ownership interest to a co-owner, employee, or a third party. You may want to pass your company to an heir with an interest in the company. Drafting a succession plan early will reduce potential disputes between interested parties. Because there are tax implications to all your succession choices, it is important to consult with a CPA or business advisor before making any decisions.
When you plan your exit strategy you are planning for what happens when you intentionally step down from your role as a primary shareholder, decision maker, or owner of a company. The earlier an entrepreneur begins planning for the eventual transition of ownership, the smoother the change will be.
Your exit plan will ensure that you, your family, and your company are well taken care of when you remove yourself from the business. It will also ensure that your business retains value and security under new ownership. As with succession planning, there are tax implications to every decision you make regarding your exit strategy. The best decisions will be made in conjunction with a CPA, advisor, or transition team.
At Walker Advisory we specialize in helping businesses plan for major transitions no matter what the reason for the change is. Our goal is to help our client’s business succeed and thrive through all types of growth and change. Contact our Wichita Falls office to learn more about our transition planning services.
The Importance of Choosing the Right Business EntityPosted on April 2nd, 2018
One of the most important decisions you will have to make when starting a new business is which entity to be. Choosing the right entity determines how your business is controlled and managed, as well as how it pays taxes. Selecting an entity is such a critical decision that it is recommended you work with an experienced CPA. Each entity operates differently enough to provide different benefits and drawbacks, making the choice of entity at launch too important to make without expert assistance.
Setting up a sole proprietorship is very simple. There are fewer forms to file and very few formal accounting requirements. Business owners report all their business profits and expenses on their individual taxpayer federal form 1040 schedule C instead of filing separate tax forms. While sole proprietors can be up and running without much effort, they can be held personally liable for the financial obligations and debts of the business.
Partnerships are also easy to form and are used when two or more individuals go into business together. There are two types of partnerships to choose from, a general partnership or a limited partnership. With a general partnership all profits, responsibilities, and debt liability are shared equally among the partners unless otherwise specified. General partners may be held personally responsible for financial obligations of the company. In most states, there are no formal regulatory procedures for establishing a general partnership.
A limited partnership gives partners limited liability, which means they are only responsible for debt obligations up to a certain limit, depending on their investment contribution. To form a limited partnership, the associates must register their business in the state the business operates through the office of the Secretary of State.
Limited Liability Company (LLC)
An LLC is another simple structure that protects a business owner’s personal assets from debt, bankruptcy, or lawsuits. LLCs must register with the state, and members of LLCs are considered self-employed for tax purposes. LLCs can report profit and losses on their individual income tax returns, enabling them to avoid double taxation, but LLCs have limited growth potential.
A C corp is owned by shareholders who vote on policy issues and hold stock in the company. Operating decisions are made by a board of directors and shareholders are protected from financial obligations, debts, or lawsuits made against the company in most circumstances. C corporations are subject to corporate tax rates, and individual shareholders have to pay income taxes on any dividends they receive. C corps have a wide range of deductions and expenses available to them. With careful accounting procedures, their tax liabilities can be minimized.
The S corp allows shareholders to avoid the double taxation that C corporations experience by using the company as a pass-through entity. Profits and losses pass through an owner’s personal income without being subject to corporate tax rates. A company must have fewer than 100 shareholders to structure a business as an S corporation. Profits or losses are passed through to shareholders. This structure enables a company to avoid the double taxation that C corporations face.
At Walker Advisory, we help business owners decide on a business entity that will provide financial security and growth for their business. Whether you are starting a business in Wichita Falls from scratch, or restructuring your company, we can advise you on the tax implications, liabilities, and benefits of each business entity. Give us a call today to schedule your consultation.