Exit alternatives ranked behind growth capital as a top concern among our nearly 100 attendees, a result being driven largely by impending tax changes, said Tim Moore, managing partner and leader of the Houston investment banking arm of Doeren Mayhew firm TR Moore & Company.

“Capital gains tax rates set to increase from 15 percent to 20 percent at the end of 2012, paired with the potential Medicare tax of 3.8 percent, could mean nearly $90,000 in additional tax on every $1 million in proceeds,” Moore said.

Read the full release.

Stay tuned for more boot camp clips on YouTube, and visit our Events & Seminars page for more information on the remaining sessions in our 2012 Boost Your Business Value Boot Camp series.

Interesting in attending or sponsoring our next session? Read more about Boost Your Business Value Boot Camp: Building a Sellable Business on our website, and contact Geoff Gallo or Melinda Genitempo for more details.

Pictured from left: Bank of Texas' James Ogonosky and Christopher Gerow; speakers Jennifer Mailhes of TR Moore & Company and CJ Coolidge of Insperity; and Iscential's Warren Barhorst

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With hurricane season officially a month away, have you reviewed the disaster recovery plan for your business? What’s that … you don’t even have a disaster plan in place? If you think you don’t need to plan for a disaster, welcome to the comfortable majority. In Symantec’s annual survey of small to mid-sized businesses, half of respondents did not have a plan in place to ensure business continuity following a disaster.

Have you thought about how the following forms of disaster might impact your business?

• A fire, flood, hurricane, tornado or ice storm that damages, destroys or isolates your business’ premises.
• A power surge that fries your computer systems and the intellectual property it contains.
• A virulent computer virus.
• A power failure that leaves a warehouse full of perishable goods susceptible to decay.
• A business disaster, taking the form of a sudden bankruptcy of a major client or supplier, or a sudden and serious illness to a key team member who has irreplaceable knowledge.
• The direct or indirect effects of a terrorist attack.

All together, the odds of being affected by a disaster at some time in your business life are not insignificant. Neither are the costs – the 2011 study cited the average cost of downtime during a disaster at $12,500 per day.

Analyzing the Business as a First Step

When considering financial matters, your accounting firm can help you analyze your business to determine insurance needs as well as how much to spend on disaster recovery.

Insurance can cover not only your loss of property, but also the costs related to income interruption. This will depend on, for example, the financial consequences of catastrophic failure in various parts of your operation.

With your CPA, work out the amount of time you can afford to be shut down, which will give you a better idea of how to invest in procedures to get your business up and running again.

Planning to Ensure Your Business Can Navigate a Crisis

How quickly your company can get back to business after a disaster depends on emergency planning done today. Ready.gov offers the following considerations when devising your plan:

Which staff, materials, procedures and equipment are absolutely necessary to keep the business operating?

• Identify operations critical to survival and recovery.
• Include emergency payroll, expedited financial decision-making, and accounting systems to track and document costs in the event of a disaster.
• Establish procedures for succession of management. Include at least one person who is not at the company headquarters, if applicable

Which suppliers, shippers, resources and other businesses must you interact with on a daily basis to run the business?

• Develop professional relationships with more than one company to use in case your primary contractor cannot service your needs. A disaster that shuts down a key supplier can be devastating to your business.
• Create a contact list for existing critical business contractors and others you plan to use in an emergency. Keep this list with other important documents on file, in your emergency supply kit and at an off-site location.

What will you do if your building, plant or store is not accessible?

• Consider if you can run the business from a different location or from your home.
• Develop relationships with other companies to use their facilities in case a disaster makes your location unusable.

How will you ensure payroll continuity?

What will your crisis management procedures be, and who will carry them out?

• Make sure those involved know what they are supposed to do.
• Train others in case you need back-up help.

With whom do you need to share your plan?

• Ensure the plan is communicated to all staff, with emphasis on those with responsibilities within the plan.
• Meet with other businesses in your building or industrial complex.
• Talk with first responders, emergency managers, community organizations and utility providers.
• Plan with your suppliers, shippers and others you regularly do business with.
• Share your plans and encourage other businesses to set in motion their own continuity planning and offer to help others.

As the Consulting Partner at Doeren Mayhew firm TR Moore & Company, Jennifer Mailhes  is a Houston CPA who guides business owners and their management teams in areas such as strategic planning, CFO services and accounting analysis, and business advisory services. For more information, contact us.

Mutual funds, the IRS states, include partnership interests in hedge funds, private equity funds and other investments that are organized under foreign laws. These entities may be owned directly or indirectly through a U.S. fund that has invested in a foreign fund.

Why is it necessary?

Anyone who is a citizen of or resident in the United States, or has a business there, is generally allowed to own a foreign account. But the FBAR is a tool to help the federal government identify those who may be using foreign financial accounts to circumvent various U.S. laws.

Investigators use FBARs to help identify, or trace, funds used for illicit purposes — or to identify unreported income kept or generated abroad. Here’s an overview of what the form requires.

Who must file — and when?

Specifically, you’re required to file the report if:

1. You or your business has either a financial interest in or signature authority (or something comparable) over one or more accounts in a foreign country, and
2. The aggregate value of those accounts exceeds $10,000 at any time during the calendar year.

The law applies to most areas outside the United States, Puerto Rico and U.S. territories and possessions, such as the U.S. Virgin Islands and Guam.

FBAR reports are normally due annually on June 30 and cover the previous calendar year. So, for example, a report for the period of Jan. 1, 2011, to Dec. 31, 2011, is due on June 30, 2012.

The IRS is responsible for investigating possible civil violations, assessing and collecting civil penalties and issuing administrative rulings. The Department of Justice is responsible for criminal violations.

Penalties vary by severity, but can climb to $100,000 for willful civil infractions ($10,000 for nonwillful infractions) and to $500,000 and 10 years in prison for criminal violations.

Where can I find out more?

Visit the IRS online, and contact a Houston CPA firm such as TR Moore & Company for help assessing your particular situation.

• Under-reporting of FICA makes up $14 billion
• Under-reporting of self-employment tax accounts for $39 billion
• Under-reporting of unemployment tax accounts for $1 billion

Because the existing worker classification rules are complex and ambiguous, much uncertainty surrounds their interpretation and  application. The lack of a single, definitive test for classifying workers as either employees or independent contractors contributes significantly to the worker classification problem.

Understanding the difference between an employee and an independent contractor is very important. If you are an employer, you are required to withhold and contribute a matching amount of FICA and Medicare taxes from your employee’s income. However, if your workers are independent contractors, you are only required to report payments of $600 or more on a Form 1099-MISC (Miscellaneous Income). Failing to make the right classification could cost you money.

Employee or Contractor?

If you have workers who make substantial financial investments in tools, equipment or a place to work, or undertake some entrepreneurial risks, they are probably independent contractors. However, when you control and direct the workers who perform services for you as to the end result and how it will be accomplished, you are probably involved in an employer-employee relationship.

The Consequences of Misclassification

Unless there is a reasonable basis for treating your employees as independent contractors, failing to withhold income and employment taxes from their wages can result in severe penalties and interest, in addition to the back taxes owed. Of course, penalties for intentional worker misclassifications are harsher than they are for inadvertent mistakes.

Your benefit plan may also be in jeopardy if any eligible employees have been misclassified as independent contractors. Since these employees have been excluded from plan participation, your retirement plan may lose its tax-favored status. The problem is compounded when excluded employees seek restitution for lost benefits not only due to their exclusion from the benefit plan, but also for health coverage and other employee benefits.

Relief for Employers

In September of 2011 the IRS announced the launch of a new Voluntary Classification Settlement Program that allows employers to resolve past worker classification issues and achieve certainty under the tax law at a low cost, by voluntarily reclassifying their workers.

Since the potential liability is considerable, be sure to verify that your workers are properly classified. If misclassifications are discovered, a Houston CPA firm such as TR Moore & Company can help you minimize your exposure through use of Section 530 relief or the VCSP. It is important that your employment tax records are in compliance with IRS guidelines, especially in the event of an audit. Read more about this issue on our website, and contact us for more information.

Source: CCH IntelliConnect

by Bruce Knapp, CPA, ABV, CVA, CFF, Director, Litigation Support & Forensic Services Group, TR Moore & Company, A Doeren Mayhew Firm

A key function of a financial expert is to provide effective rebuttal to the opposing expert’s analysis and opinions. Accordingly, counsel must gather foundational information about the opposition’s opinions, including a complete understanding of their methodology, information, sources, authorities and assumptions. Here are two key considerations:

1. Use the Deposition to Your Advantage
   To ensure your expert witness has full knowledge of your case, ask him or her to prepare questions for the opposing expert’s deposition. You may even want your valuator to attend the deposition, in which case he or she should be familiar with, and be prepared to respond to, questions about the opposing expert’s opinions.If your expert doesn’t attend the deposition, make sure he or she reviews the opposing expert’s deposition transcript before trial to point out any weaknesses or inconsistencies with the expert’s written report.
   
2. Connect With the Case
   Someone is bound to disagree with your expert’s opinions, so the key is to connect your expert’s opinions with the case at hand. The expert witness must show the judge and jury why a particular expert opinion applies to the case.This may also involve showing why the opposing expert’s views aren’t relevant to the case. It may be clear that the opposing expert is unfamiliar with the plaintiff’s industry, or that the particular expertise doesn’t pertain to the business under discussion.One valuable piece of information is the opposing expert’s workpaper file. Your camp might inspect the other expert’s files to uncover the documents reviewed, assumptions made and other underlying details of the work. This step can be especially fruitful if the report is brief, vague or hard to follow.Understanding the opposing expert’s testimony and report (if any) should be an important part of your expert’s work. In addition to clarifying his or her own financial analyses, your expert can also critique the opposition’s report — either formally in a rebuttal report or informally in a verbal discussion or a memo format. This critique will likely expose the other side’s technical flaws.

   These are just some of the factors that can affect the outcome of your case. The more you and your expert know about the opposing expert’s knowledge, methods and assumptions, the more effective your team will be in critiquing and responding to your analysis and opinions.

   Leading the Litigation Support & Forensic Services Group for TR Moore & Company parent firm Doeren Mayhew, CPA Bruce Knapp offers more than 25 years experience in consulting, forensic accounting, expert witness, economic loss and business valuation services to assist Houston litigants. Contact us for more information.

You can see that a 5 percent favorable change in each of the four factors, without a consequential unfavorable impact on each of the other three, would more than double your profit from $1,000 to $2,190: a 119% improvement.

While you may want to take issue with the assumption that there are no consequential impacts, it’s a fact that small improvements made to each of the four factors that determine your profit can combine to give a staggering overall impact. And of course, the reverse is also true. If you discount your price, allow your sales volume to fall, fail to control your overhead costs or let your variable costs get away from you, then you can quickly destroy your profitability.

For more examples, a profit improvement case study and a list of the key performance indicators most commonly used to measure business performance in relation to the four profit-determining factors, download our e-paper: Boosting the Profitability of Your Business.

Thursday, May 3, 11:30 a.m. to 1:30 p.m.
The Downtown Offices of Haynes and Boone, LLP

Join us for lunch and our fourth annual M&A INSIGHT, where our mergers and acquisitions panel will explore who is buying, what deals are being structured, when is the right time to sell and how much sellers can expect in after-tax proceeds. New to this year’s panel are:

• Moderator Ken Jones of the University of Houston’s Wolff Center for Entrepreneurship
• Jim Cohen, who has helped Consolidated Graphics grow by more than 50 percent through acquisitions
• Haynes and Boone‘s Capital Markets Practice Group Chair Bill Nelson

Topics and an audience Q&A will address:

• Viewpoints from a financial buyer and an active strategic acquirer
• Financial considerations
• Alternative deal restructures
• Buyer multiples
• How to maximize value through preparation
• Impending tax changes
• The role of the seller post-transaction

Our panel:

• David Magdol, Chief Investment Officer, Main Street Capital Corporation
• Jim Cohen, EVP, Mergers & Acquisitions, Consolidated Graphics
• Bill Nelson, Partner, Corporate Section Co-Head & Capital Markets Practice Group Chair, Haynes and Boone, LLP
• Tim Moore, Managing Partner, TR Moore & Company
• Ken Jones, Associate Director & Clinical Professor, UH Wolff Center for Entrepreneurship

Who should attend? Business owners and C-level staff

To register: Contact Erika Yanez via email or at 713.789.7077.

Thursday, May 10, 8:30 a.m. to 1 p.m. (includes breakfast and lunch plus four hours of CPE credit)
University of Houston Campus

Working hard but not generating as much profit as you’d like? Attacked every item you can think of to improve the bottom line, but wonder if there’s more you could be doing? Wonder if you’re achieving your true profit potential?

Join us in this half-day session where profitability experts will give you and your key employees insights and action steps you can apply to your business immediately, as we explore:

• How to determine the true profit contribution of each of your product and service lines
• The four areas where profits are hidden in your company, and how small changes in each can significantly impact your potential
• How to build a profit-focused culture
• The dreaded expense of taxes and how to minimize their drain
• How investing in product quality can improve volume and profitability even if pricing increases
• Three overlooked assets and how investing in them can improve profitability
• How even your “best” customers may be limiting your company’s potential
• Real client solutions to common profit problems
• And more

Our speakers:

• Jennifer Mailhes, CPA and Consulting Partner advising hundreds of mid-sized businesses at TR Moore & Company
• Tim Moore, CPA and Managing Partner at TR Moore & Company on innovative tax savings strategies
• CJ Coolidge, veteran Business Performance Advisor at Insperity and author, Squaredime Letters

Who should attend? Owners of mid-sized businesses and their C-level staff.

Sponsored by: TR Moore & Company, Insperity, Bank of Texas, Iscential and University of Houston

To register: Contact Geoff Gallo or Melinda Genitempo via email or at 713.789.7077.

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As the marketplace continues to gain momentum, primarily in the manufacturing and oil and gas sectors, TR Moore & Company is seeing increased interest in exit and growth through acquisition from our client base. And with tax hikes expected for 2013 and private equity players anxious to invest, 2012 may be the year to transact. Consider these two factors working in your favor in 2012:

Buyers Are Ready

With the capital overhang that remains and urgency by private equity investors to deploy it, we expect 2012 to remain a seller’s market. Representing possibly the largest prospective pool of business buyers today, these investors are estimated to be holding some half trillion dollars in uninvested cash. Likewise, financial buyers who sat out the economic downturn are ready to begin growing through acquisitions once again.

Taxes Are Increasing

On the tax front, a potential double whammy awaits businesses in 2013:

1. The capital gains tax rate will rise from 15 percent to 20 percent if the Bush-era tax cuts aren’t renewed at the end 2012.
2. Additionally, a recent Tax Policy Center blog post points out that taxpayers also face a 3.8 percent tax on investment income greater than $250,000, including capital gains on transactions, as a result of 2010’s health care reform legislation.

Together, this represents a total increase from 15 percent to nearly 25 percent in capital gains tax. Consider what the potential scenarios mean for after-tax proceeds on a business sale:

As the chart illustrates, for every $1 million in proceeds, businesses selling in 2013 face an additional $38,000 in tax due to health care reform, and another $50,000 in increased capital gains taxes – a difference of nearly $100,000.

Keep in mind that these numbers are based on a perfect sale scenario – your tax may be even greater depending on factors such as your entity type, deal structure and estate planning situation.

The bottom line is that it’s a great time to sell and there are plenty of hungry buyers for your deal. We’re looking forward to helping our sellers find the right one in 2012. 

Tim Moore is managing partner at TR Moore & Company, the Houston location of top CPA firm Doeren Mayhew. Leveraging nearly 30 years experience, Tim also leads the firm’s Mergers & Acquisitions Division, specializing in building business value, marketing companies for sale, analyzing after-tax proceeds and negotiating on behalf of the client.

Securities Offered Through Grant Williams, LP. Member FINRA & SIPC.