Success Stories
SUCCESS STORY
Forming the Right Business Entity, Saving Tax Dollars
SITUATION
A client and his business partner invested in a new venture, importing products from Europe. Their attorney set up a limited liability company (LLC) for this new business without considering the tax implications.
The business turned a large profit the first year. But as an LLC, the self-employment taxes were exorbitant. In fact, the business owners owed $18,000 each in self-employment taxes.
In addition, the owners were paying large quarterly estimated taxes.
ACTION
Jeffrey Etzin, CPA determined that being an S Corporation instead of an LLC would save them many thousands in self-employment taxes. We couldn’t affect the first year. However there was time before the deadline to file the paperwork to convert the LLC into an S Corp for subsequent years. We:
Prepared the government filings to request the conversion to an S Corp.
Placed the owners on payroll, allowing them to pay biweekly taxes.
RESULTS
The change to S Corp was approved and as a result the payroll taxes owed were cut in half in the second year. The new payroll and income tax structure also reduced the burden of the quarterly estimated tax payments.
SUCCESS STORY
Monitoring a Business to Reduce Taxes and Improve Efficiencies
SITUATION
These clients (see First Success Story above) were so happy with the outcome of working with Jeffrey Etzin, CPA that they retained us to monitor their profits throughout the year.
ACTION
We implemented mid-course corrections as business conditions changed. We also helped them identify improvement opportunities and modified their payroll and withholdings in real time.
RESULTS
Their tax burden and exposure to tax penalties were reduced. We also improved business efficiencies via our timely financial information.
SUCCESS STORY
Deciding Against a Business Acquisition, Averting Disaster
SITUATION
Our client who owns a fire equipment business was in a stable financial position with no debt. He also had a strong cash position since he did not over-extend himself for the sake of growth. Overall, he managed his business conservatively.
At one point, he considered buying another fire equipment business in order to expand his market share. He found a business owner who wanted to sell. This business looked great:
Sales were increasing 20% per year
Profits were also increasing
The owner requested guidance from Jeffrey Etzin, CPA.
ACTION
We conducted an investigation of the prospect’s financial statements. I learned a long time ago that if you know how to listen, the numbers will speak to you and they did.
Sales and profits were increasing. Here’s what else we found:
The company had no money, because the owner was taking excessive distributions.
Its debt was growing.
Profits looked good, but there was no expense deduction for the owner’s compensation, thereby artificially inflating the bottom line.
Employee benefits increased every year out of proportion to payroll increases. These benefits included large expense accounts and expensive car leases.
Sales were increasing, but so were purchases, because the company had to buy more inventory, putting a strain on its cash flow.
Rent went up significantly every year. Turns out, the business owner also owned the building. He was charging excessive rent and would require any buyer to stay there as his tenant.
All the equipment was leased. The company owned nothing.
RESULTS
Our analysis revealed the financials of the company were not as strong as they first appeared. In addition, we could see that the business owners had very different philosophies and the company cultures were incompatible. We advised our client not to acquire this company, helping him avoid a very bad situation.
SUCCESS STORY
Decreasing Business Complexity
SITUATION
A law firm client had several bank accounts. Having been opened at different times and by different partners, they were also at different banks.
ACTION
We:
Identified this situation as a resource drain. Being at several banks created extra work to manage cash flow and reconcile the accounts.
Helped the law firm select the criteria on which to judge potential banks to be their sole bank.
Interviewed bankers to see if they could address the firm’s priorities.
Determined which was the best fit for the law firm.
Helped them consolidate their accounts.
RESULT
The law firm reduced administrative work, improved cash flow and has a more productive banking relationship.
SUCCESS STORY
SAVING MONEY, MAKING BUSINESS EASIER
SITUATION
A chiropractor client has 3 offices. Some employees work in one office only, some work in two and some in all three. The chiropractor had separate payroll in all three, so he had to provide multiple W-2s to people who worked in more than one office.
Not only was this inefficient, he was also paying his payroll processing service more fees than were necessary. In addition, he was paying duplicate payroll taxes on some of his employees.
ACTION
We reconfigured this client’s payment system, so each employee would get one W-2, no matter how many offices they worked in.
RESULT
The client is now paying a lot less in taxes. He also has a more efficient payroll system, saving him time and money.