A certified public accountant (CPA) is a tremendous resource to small businesses and their owners. The right CPA can free up business owners to run the business. CPAs runs the financial side. They fix the “pain points” for the business owners.
A CPA Is a Trusted Professional
Each CPA has passed a detailed and difficult examination to demonstrate professional knowledge. CPAs must maintain their skills by attending courses to meet continuing professional education (CPE) requirements. Ethics classes are included in the CPE requirements to ensure CPAs maintain their integrity. States license CPAs, and CPAs must comply with their state’s laws and regulations.
Do You Have the Right
Legal and Tax Structure?
Your CPA can assist in selecting the right type of entity for your business. The LLC and S-Corp both offer protection from liability and lawsuits. But they have different tax benefits and consequences. In both cases, however, the business is not taxed. The owners pay the taxes.
The C-Corporation is another option. But the company and the owners are both taxed. Still, there may be reasons to go this route.
Operating as a sole proprietor is the simplest but offers the least liability protection. Proper insurance is key, but you may want more.
How Are You Keeping Your Books?
There are several popular bookkeeping software packages. Each offers benefits over the others. A CPA can assist in picking the one that is the best for your business. It is not one size fits all.
There is more. Your CPA will make sure that the bookkeeping software is implemented correctly and that business transactions are posted properly.
Making Sense of
The bookkeeping system can generate many different reports on a monthly or quarterly basis. Your CPA can select the proper time periods and reports. He or she can run and review the reports. Here is where your CPA makes the invisible become visible.
There will be variances. Your CPA knows what benchmarks to use and what variances are important. The key is to provide the owner with timely, accurate and useful information. The owner and CPA should review this regularly. Many things come out of it.
Your CPA can help you set goals and show you how you are meeting them. For instance, are there opportunities to grow? Is now the time to expand—add a location, add a product or service, add staff? Do you need more financing? CPAs know banks and non-bank lenders. They know how to present information to them.
Are there costs to be cut? CPAs can see which expenses look out of line. Do you need to buy less of something or are your vendors charging too much? CPAs negotiate with suppliers on behalf of their clients and help change suppliers when necessary.
CPAs know a great many business people and can refer clients to trusted insurance brokers, real estate agents, office supply companies, energy brokers, recruiters, payroll services, employee benefits and retirement specialists and many more.
Family Businesses—Succession Planning
Family businesses have their own needs. As the “older” generation prepares to retire, CPAs can help with succession planning. What do you do if none of the adult children in the “next” generation want to be involved in the business or if some do and some do not or if all want to be involved? Each scenario is different.
You want to take care of all the children whether they are involved in the business or not. You can bring in professional management, deal with any conflicts or sell the business. In each case, you need valuations, business agreements, wills, trusts and tax planning. A CPA can handle these and quarterback with attorneys when needed to help you achieve the outcome that is best for you and your family.
Buying a Business, Selling a Business, Adding Partners
Whatever your reason for buying a new business, selling your existing one and/or adding new partners, your CPA is a key resource. Your CPA will make sure the business is properly valued, payments are structured the way you want, taxes are minimized and the agreements protect your interests.
CPAs prepare individual and business tax returns including income, estate, gift, payroll, sales, property and others. One type of tax can affect others. For instance, business and personal income taxed in one state is generally not taxed in another even though there are exceptions. How you give, sell or bequeath your business, investments and other property can have future income tax consequences. CPAs help you stay out of trouble and resolve tax disputes and audits. CPAs perform tax planning so there are no surprises.
PPP Loans, Employee Retention Credit (ERC) and Economic Injury Disaster Loans (EIDL)
There is an interplay between Paycheck Protection Program (PPP) loan forgiveness and any ERC you are entitled to. Both PPP and ERC are very complicated and taken together, they are extremely complicated! Additionally, EIDL money still is available to businesses that qualify. A CPA who knows these programs can get the most out of them. Significant benefits continue to exist.
These are just some of the often overlooked areas where CPAs help businesses and their owners achieve their financial goals.
Paul N. Mendelsohn, CPA, is a sole practitioner in Livingston. He provides accounting, bookkeeping, tax, advisory and fractional CFO services to businesses. He assists businesses with PPP and EIDL loans and the Employee Retention Credit. Mr. Mendelsohn serves as a CFO and advisor for special projects and on a continuing or retainer basis. He prepares individual tax returns and performs tax planning. Contact him at [email protected], www.mendelsohncpa.com or 973-943-1713.