Monthly Archives: December 2017
You’ve devoted time and money and poured heart and soul into building a successful family business. But do you have a succession plan? If not, you should. Without a plan for transferring your business to the next generation, anything could happen.
Deciding on Your New Role
Start by deciding how much or how little you want to be involved in the business after the transfer is complete. Are you picturing a clean break? Or a period of shared responsibilities and gradual transfer? This is an important decision because it will likely influence other decisions, particularly financial ones.
Choosing a Successor
This can get tricky, especially if there are several family members who may have an interest in — or expectation of — taking over the business. If there’s one clear candidate, that makes it easier. But don’t just assume someone (e.g., your oldest son) is the right successor. Do what’s best for the business. The best choice may be a grandchild, a niece, or even a relative paired with a trusted employee.
Estate planning is an important sidebar to a family business succession plan. There may be children who have no interest in being involved in running the business and are happy to let their siblings take over. However, they probably expect equal treatment when it comes to inheritances. If this is a likely scenario, make sure everyone communicates as clearly as possible and develop a plan you think is fair.
Grooming a Successor
Spend time grooming your successor, even if it’s a son or daughter who knows the business. He or she should understand how every part of the business operates. Before your successor starts representing your business publicly, make sure he or she meets your business contacts (clients, vendors, financial partners, etc.).
Figuring Out the Money
You probably don’t want to give your business away, even to your own offspring. Figure out how much you’re going to need to finance your next venture (retirement, a new business, etc.), and come up with an arrangement that meets your needs.
Take charge of your financial future. Give us a call, today, to find out how we can assist you and your business.
If your company is organized as an S corporation, you may wonder whether it is better to take income from the company as salary or as cash distributions. Of the two options, distributions carry the least tax cost because they are not subject to employment taxes. But that doesn’t mean you shouldn’t take a paycheck from your firm.
Over the years, the IRS has made a point of warning S corporations not to attempt to avoid federal employment taxes by having corporate officer/shareholders treat their compensation as cash distributions, payments of personal expenses, or loans instead of as wages. According to the IRS, distributions must be treated as wages to the extent the amounts are reasonable compensation for services rendered to the corporation.
What Is a “Reasonable” Salary?
To avoid problems with the IRS, you should be sure to take a reasonable amount of salary if you receive any direct or indirect payments from your company. However, the tax law has no hard-and-fast guidelines regarding what is considered “reasonable.” When the issue has come up in court, the determination has been based on the facts and circumstances of the particular case. Various factors have come into play, including:
- Duties and responsibilities
- Time and effort devoted to the business
- Training and experience
- What comparable businesses pay for similar services
- Timing and manner of paying bonuses to key people
- Payments to employees who are not shareholders
- The corporation’s dividend-paying history
- Compensation agreements
- The use of a formula to determine compensation
What about an S corporation officer who doesn’t perform any services for the corporation — or whose services are very minor? In this relatively unusual situation, assuming the officer receives no direct or indirect pay, he or she would not be considered an employee.
For more help with individual or business taxes, connect with us today. Our team can help you with all your tax issues, large and small.
Finding the best candidate to hire is often costly and time consuming. But, if your new hire turns into a loyal, hardworking, long-term employee, your investment may be worth every cent and minute.
How do you find good people? In the past, people who were job hunting would look in the “help wanted” section of the newspaper or go from store to store filling out applications. Today, most people use a computer and a mouse and search the Internet for jobs. So if you’re not posting your openings on online job boards and industry blogs and websites, you may be missing talented candidates. Note: Running classified ads may still be a good way to reach out (especially to fill jobs requiring local candidates) since many local newspapers also have an online job board for posting classifieds.
Another way to attract candidates is to add a recruiting page to your website. In addition to posting job openings, you can use the page to attract qualified candidates by highlighting the benefits of working for your company.
And last, but certainly not least, you can use social media to announce openings and solicit job applicants. There’s no better way to reach a large number of people almost instantaneously.
Make an Attractive Offer
If you’re hoping to hire top talent, you’ll want to make sure the benefits you offer are competitive — or better. According to government analysis of private industry data, 86% of full-time workers had access to employer-provided medical care and 76% had access to a retirement plan.*
Keep Employees on Board
Once you’ve assembled a group of valuable employees, an attractive and competitive benefit package will help ensure they stay. Your financial professional can provide insights and help you review your firm’s benefit package for cost efficiency and competitiveness.
For more tips on how to keep business best practices front and center for your company, give us a call today. We can’t wait to hear from you.
* Bureau of Labor Statistics, March 2015
A few years ago, Governor Snyder signed a law that annually increased the minimum wage. Under this law, the minimum wage effective January 1, 2018 is $9.25 per hour. Beginning in January 2019, the minimum wage will be indexed for inflation. The minimum wage increase for each year will not take effect if the unemployment rate in Michigan is 8.5% or more in the year prior to the year of the minimum wage increase.
Training Wage is Still Available
As existed under prior law, an employer may pay a new employee who is under age 20 an hourly training wage of $4.25 for the first 90 days of that employee’s employment. After 90 days has passed, the employee must be paid at least minimum wage.
Minor Minimum Wage is Still Available
The minimum wage for an employee who is less than 18 years of age is 85% of the general minimum wage listed above. The training wage for 2018 is $7.86 (85% of $9.25). This is not a new rule.
Minimum Wage for Tipped Employees
The current minimum wage for tipped employees is $3.38 per hour. It will increase to $3.52 per hour in 2018. To qualify for this lower rate, the following must occur:
- the employee receives gratuities in the course of employment
- the tipped minimum wage plus the gratuities received must be at least equal to the general minimum wage (i.e., in 2018 the tips received per hour plus the tipped minimum wage of $3.52 must be at least equal to the general minimum wage of $9.25). If there is a shortfall, the employer must pay the shortfall to the employee.
Overview of Minimum Wage Rates
The schedule of minimum wage increases under the law:
|Minimum Wage for Tipped Employees||Minimum Wage
Training Wage (first 90 days only)
|Prior to September 1, 2014||
|September 1, 2014||
|January 1, 2016||
January 1, 2017
|January 1, 2018||
If you have any questions on how this applies to you, please feel free to give us a call.
Buzzkill Disclaimer: This post contains general tax information that may or may not apply in your specific tax situation. Please consult a tax professional before relying on any information contained in this post.