Month: January 2019

One thing in plentiful supply in today’s business world is help. Orbiting every industry are providers, consultancies and independent contractors offering a wide array of support services. Simply put, it’s never been easier to outsource certain business functions so you can better focus on fulfilling your company’s mission and growing its bottom line. Here are four such functions to consider:

1. Information technology. This is the most obvious and time-tested choice. Bringing in an outside firm or consultant to handle your IT systems can provide the benefits we’ve mentioned — particularly in the sense of enabling you to stay on task and not get diverted by technology’s constant changes. A competent provider will stay on top of the latest, optimal hardware and software for your business, as well as help you better access, store and protect your data.

2. Payroll and other HR functions. These areas are subject to many complex regulations and laws that change frequently — as does the software needed to track and respond to the revisions. A worthy vendor will be able to not only adjust to these changes, but also give you and your staff online access to payroll and HR data that allows employees to get immediate answers to their questions.

3. Customer service. This may seem an unlikely candidate because you might believe that, for someone to represent your company, he or she must work for it. But this isn’t necessarily so — internal customer service departments often have a high turnover rate, which drives up the costs of maintaining them and drives down customer satisfaction. Outsourcing to a provider with a more stable, loyal staff can make everyone happier.

4. Accounting. You could bring in an outside expert to handle your accounting and financial reporting. A reputable provider can manage your books, collect payments, pay invoices and keep your accounting technology up to date. The right provider can also help generate financial statements that will meet the desired standards of management, investors and lenders.

Naturally, there are potential downsides to outsourcing these or other functions. You’ll incur a substantial and regular cost in engaging a provider. It will be critical to get an acceptable return on that investment. You’ll also have to place considerable trust in any vendor — there’s always a chance that trust could be misplaced. Last, even a good outsourcing arrangement will entail some time and energy on your part to maintain the relationship.

Is this the year your business dips its toe in the vast waters of outsourced services? Maybe. Our firm can help you answer this question, choose the right function to outsource (if the answer is yes) and identify a provider likely to offer the best value.

© 2019

The dawning of 2019 means the 2018 income tax filing season will soon be upon us. After year end, it’s generally too late to take action to reduce 2018 taxes. Business owners may, therefore, want to shift their focus to assessing whether they’ll likely owe taxes or get a refund when they file their returns this spring, so they can plan accordingly.

With the biggest tax law changes in decades — under the Tax Cuts and Jobs Act (TCJA) — generally going into effect beginning in 2018, most businesses and their owners will be significantly impacted. So, refreshing yourself on the major changes is a good idea.

Taxation of pass-through entities

These changes generally affect owners of S corporations, partnerships and limited liability companies (LLCs) treated as partnerships, as well as sole proprietors:

• Drops of individual income tax rates ranging from 0 to 4 percentage points (depending on the bracket) to 10%, 12%, 22%, 24%, 32%, 35% and 37%
• A new 20% qualified business income deduction for eligible owners (the Section 199A deduction)
• Changes to many other tax breaks for individuals that will impact owners’ overall tax liability

Taxation of corporations

These changes generally affect C corporations, personal service corporations (PSCs) and LLCs treated as C corporations:

• Replacement of graduated corporate rates ranging from 15% to 35% with a flat corporate rate of 21%
• Replacement of the flat PSC rate of 35% with a flat rate of 21%
• Repeal of the 20% corporate alternative minimum tax (AMT)

Tax break positives

These changes generally apply to both pass-through entities and corporations:

• Doubling of bonus depreciation to 100% and expansion of qualified assets to include used assets
• Doubling of the Section 179 expensing limit to $1 million and an increase of the expensing phaseout threshold to $2.5 million
• A new tax credit for employer-paid family and medical leave

Tax break negatives

These changes generally also apply to both pass-through entities and corporations:

• A new disallowance of deductions for net interest expense in excess of 30% of the business’s adjusted taxable income (exceptions apply)
• New limits on net operating loss (NOL) deductions
• Elimination of the Section 199 deduction (not to be confused with the new Sec.199A deduction), which was for qualified domestic production activities and commonly referred to as the “manufacturers’ deduction”
• A new rule limiting like-kind exchanges to real property that is not held primarily for sale (generally no more like-kind exchanges for personal property)
• New limitations on deductions for certain employee fringe benefits, such as entertainment and, in certain circumstances, meals and transportation

Preparing for 2018 filing

Keep in mind that additional rules and limits apply to the rates and breaks covered here. Also, these are only some of the most significant and widely applicable TCJA changes; you and your business could be affected by other changes as well. Contact us to learn precisely how you might be affected and for help preparing for your 2018 tax return filing — and beginning to plan for 2019, too.

© 2018

A business can suffer economic damages arising from a variety of illegal conduct. Common examples include breach of contract, patent infringement and commercial negligence. If your company finds itself headed to court looking to recover lost profits, diminished business value or both, it’s important to know how the damages might be determined.

What methods are commonly used?

The goal of any economic damages case is to make your company, the plaintiff, “whole” again. In other words, one critical question must be answered: Where would your business be today “but for” the defendant’s alleged wrongdoing? When financial experts calculate economic damages, they generally rely on the following methods:

Before-and-after. Here, the expert assumes that, if it hadn’t been for the breach or other tortious act, the company’s operating trends would have continued in pace with past performance. In other words, damages equal the difference between expected and actual performance. A similar approach quantifies damages as the difference between the company’s value before and after the alleged “tort” (damaging incident) occurred.

Yardstick. Under this technique, the expert benchmarks a damaged company’s performance to external sources, such as publicly traded comparables or industry guidelines. The presumption is that the company’s performance would have mimicked that of its competitors if not for the tortious act.

Sales projection. Projections or forecasts of the company’s expected cash flow serve as the basis for damages under this method. Damages involving niche players and start-ups often call for the sales projection method, because they have limited operating history and few meaningful comparables.

An expert considers the specific circumstances of the case to determine the appropriate valuation method (or methods) for that situation.

What’s next?

After financial experts have estimated lost profits, they discount their estimates to present value. Some jurisdictions have prescribed discount rates, but, in many instances, experts subjectively determine the discount rate based on their professional opinions about risk. Small differences in the discount rate can generate large differences in final conclusions. As a result, the subjective discount rate is often a contentious issue.

The final step is to address mitigating factors. What could the damaged party have done to minimize its loss? Most jurisdictions hold plaintiffs at least partially responsible for mitigating their own damages. Like discount rates, this subjective adjustment often triggers widely divergent opinions among the parties involved.

Are you prepared?

You probably don’t relish the thought of heading to court to fight for economic damages. But these situations can occur — often quite unexpectedly — and it’s better to be prepared than surprised. Contact us for more information.

© 2019