How businesses can better retain their salespeople
How businesses can better retain their salespeople
The U.S. job market has largely stabilized since the historic disruption of the pandemic and the unusual fluctuations that followed. But the fact remains that employee retention is mission-critical for businesses. Retaining employees is still generally less expensive than finding and hiring new ones. And strong retention is one of the hallmarks of a healthy employer brand.
One role that’s been historically challenging to retain is salesperson. In many industries, sales departments have higher turnover rates than other departments. If this has been the case at your company, don’t give up hope. There are ways to address the challenge.
Lay out the welcome mat
For starters, don’t focus retention efforts only on current salespeople. Begin during hiring and ramp up with onboarding. A rushed, confusing or cold approach to hiring can get things off on the wrong foot. In such cases, new hires tend to enter the workplace cautiously or skeptically, with their eyes on the exit sign rather than the “upper floors” of a company.
Onboarding is also immensely important. Many salespeople tell horror stories of being shown to a cubicle with nothing but a telephone on the desk and told to “Get to it.” With so many people still working remotely, a new sales hire might not even get that much attention. Welcome new employees warmly, provide ample training, and perhaps give them a mentor to help them get comfortable with your business and its culture.
Incentivize your team
Even when hiring and onboarding go well, most employees will still consider a competitor’s job offer if the pay is right. So, to improve your chances of retaining top sales producers and their customers, consider financial incentives.
Offering retention bonuses and rewards for maintaining or increasing sales — in addition to existing compensation plans — can help. Make such incentives easy to understand and clearly achievable. Although interim bonus programs might be expensive in the near term, they can stabilize sales and prevent sharp declines.
When successful, a bonus program will help you generate more long-term revenue to offset the immediate costs. That said, financial incentives need to be carefully designed so they don’t adversely affect cash flow or leave your business vulnerable to fraud.
Give them a voice
Salespeople interact with customers and prospects in ways many other employees don’t. As a result, they may have some great ideas for capitalizing on your company’s strengths and shoring up its weaknesses.
Look into forming a sales leadership team to help evaluate the potential benefits and risks of goals proposed during strategic planning. The team should include two to four top sellers who are given some relief from their regular responsibilities so they can offer feedback and contribute ideas from their distinctive perspectives. The sales leadership team can also:
- Serve as a clearinghouse for customer concerns and competitor strategies,
- Collaborate with the marketing department to improve messaging about current or upcoming product or service offerings, and
- Participate in developing new products or services based on customer feedback and demand.
Above all, giving your salespeople a voice in the strategic direction of the company can help them feel more invested in the success of the business and motivated to stay put.
Assume nothing
Business owners and their leadership teams should never assume they can’t solve the dilemma of high turnover in the sales department. The answer often lies in proactively investigating the problem and then taking appropriate steps to help salespeople feel more welcomed and appreciated. We can help your company calculate turnover rate, identify and track its hiring and employment costs, and assess the feasibility of financial incentives.
Advantages of keeping your business separate from its real estate
Advantages of keeping your business separate from its real estate
Does your business require real estate for its operations? Or do you hold property titled under your business’s name? It might be worth reconsidering this strategy. With long-term tax, liability and estate planning advantages, separating real estate ownership from the business may be a wise choice.
How taxes affect a sale
Businesses that are formed as C corporations treat real estate assets as they do equipment, inventory and other business assets. Any expenses related to owning the assets appear as ordinary expenses on their income statements and are generally tax deductible in the year they’re incurred.
However, when the business sells the real estate, the profits are taxed twice — at the corporate level and at the owner’s individual level when a distribution is made. Double taxation is avoidable, though. If ownership of the real estate is transferred to a pass-through entity instead, the profit upon sale will be taxed only at the individual level.
Safeguarding assets
Separating your business ownership from its real estate also provides an effective way to protect the real estate from creditors and other claimants. For example, if your business is sued and found liable, a plaintiff may go after all of its assets, including real estate held in its name. But plaintiffs can’t touch property owned by another entity.
The strategy also can pay off if your business is forced to file for bankruptcy. Creditors generally can’t recover real estate owned separately unless it’s been pledged as collateral for credit taken out by the business.
Estate planning implications
Separating real estate from a business may give you some estate planning options, too. For example, if the company is a family business but all members of the next generation aren’t interested in actively participating, separating property gives you an extra asset to distribute. You could bequest the business to one member and the real estate to another.
Handling the transaction
If you’re interested in this strategy, the business can transfer ownership of the real estate and then the transferee can lease it back to the company. Who should own the real estate? One option: The business owner can purchase the real estate from the business and hold title in his or her name. One concern though, is that it’s not only the property that’ll transfer to the owner but also any liabilities related to it.
In addition, any liability related to the property itself may inadvertently put the business at risk. If, for example, a client suffers an injury on the property and a lawsuit ensues, the property owner’s other assets (including the interest in the business) could be in jeopardy.
An alternative is to transfer the property to a separate legal entity formed to hold the title, typically a limited liability company (LLC) or limited liability partnership (LLP). With a pass-through structure, any expenses related to the real estate will flow through to your individual tax return and offset the rental income.
An LLC is more commonly used to transfer real estate. It’s simple to set up and requires only one member. LLPs require at least two partners and aren’t permitted in every state. Some states restrict them to certain types of businesses and impose other restrictions.
Tread carefully
It isn’t always advisable to separate the ownership of a business from its real estate. If it’s a valuable move, the right approach will depend on your individual circumstances. Contact us to help determine the best way to minimize your transfer costs and capital gains taxes while maximizing other potential benefits.
Understanding your obligations: Does your business need to report employee health coverage?
Understanding your obligations: Does your business need to report employee health coverage?
Employee health coverage is a significant part of many companies’ benefits packages. However, the administrative responsibilities that accompany offering health insurance can be complex. One crucial aspect is understanding the reporting requirements of federal agencies such as the IRS. Does your business have to comply, and if so, what must you do? Here are some answers to questions you may have.
What is the number of employees before compliance is required?
The Affordable Care Act (ACA), enacted in 2010, introduced several employer responsibilities regarding health coverage. Certain employers with 50 or more full-time employees (called “applicable large employers” or ALEs) must use Forms 1094-C and 1095-C to report information about health coverage offers and enrollment for their employees.
Specifically, an ALE uses Form 1094-C to report each employee’s summary information and transmit Forms 1095-C to the IRS. A separate Form 1095-C is used to report information about each employee. In addition, Forms 1094-C and 1095-C are used to determine whether an employer owes payments under the employer shared responsibility provisions (sometimes referred to as the “employer mandate”).
Under the ACA mandate, an employer can be penalized if it doesn’t offer affordable minimum essential coverage that provides minimum value to substantially all full-time employees and their dependents. Form 1095-C is also used in determining employees’ eligibility for premium tax credits.
If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer isn’t an ALE for the current year. That means the employer isn’t subject to the employer shared responsibility provisions or the information reporting requirements for the current year.
What information must be reported?
On Form 1095-C, ALEs must report the following for each employee who was a full-time employee for any month of the calendar year:
- The employee’s name, Social Security number (SSN) and address,
- The Employer Identification Number (EIN),
- An employer contact person’s name and phone number,
- A description of the offer of coverage (using a code provided in the instructions) and the months of coverage,
- Each full-time employee’s share of the coverage cost under the lowest-cost, minimum-value plan offered by the employer, by calendar month, and
- The applicable safe harbor (using one of the codes provided in the instructions) under the employer shared responsibility or employer mandate penalty.
What if we have a self-insured plan or a multi-employer plan?
If an ALE offers health coverage through a self-insured plan, the ALE must report additional information on Form 1095-C. For this purpose, a self-insured plan also includes one offering some enrollment options as insured arrangements and other options as self-insured.
Suppose an employer provides health coverage in another manner, such as through a multiemployer health plan. In that case, the insurance issuer or the plan sponsor making the coverage available will provide the information about health coverage to enrolled employees. An employer that provides employer-sponsored, self-insured health coverage but isn’t subject to the employer mandate isn’t required to file Forms 1094-C and 1095-C. Instead, the employer reports on Forms 1094-B and 1095-B for employees who enrolled in the employer-sponsored, self-insured health coverage.
On Form 1094-C, an employer can also indicate whether any eligibility certifications for relief from the employer mandate apply.
Be aware that these reporting requirements may be more complex if your business is a member of an aggregated ALE group or if the coverage is provided through a multiemployer plan.
What are the W-2 reporting requirements?
Employers also report certain information about health coverage on employees’ Forms W-2. But it’s not the same information as what’s reported on 1095-C. The information on either form doesn’t cause excludable employer-provided coverage to become taxable to employees. It’s for informational purposes only.
The above is a simplified explanation of the reporting requirements. Contact us with questions or for assistance in complying with the requirements.
IT strategy showdown: Enterprise architecture vs. Agile
IT strategy showdown: Enterprise architecture vs. Agile
Few, if any, companies can operate successfully today without the right information technology (IT) strategy. And as businesses grow, their IT needs and infrastructures become even more complex and costly.
This push and pull of managing growth while grappling with tech has brought two broad approaches to IT strategy to the forefront: enterprise architecture and Agile. Let’s look at both so you can contemplate where your company stands and whether an adjustment may be warranted.
Following a blueprint
As its name implies, enterprise architecture is a strategic philosophy that focuses on mindfully designing or adapting a companywide framework for choosing, implementing, operating and supporting technology.
Think of an architect drawing up a blueprint for a commercial building — every aspect of that structure will be thought through ahead of time to suit the size, operational needs and mission of the company. So it goes with enterprise architecture, which seeks to ensure every IT decision and move:
Aligns with the goals of the business. Everything done technologically flows from the company’s current goals as established through ongoing strategic planning. So, for example, no new software acquisitions or upgrades can occur without approval from the enterprise architecture unit, which can be a dedicated department or a special committee.
Complies with standardization and organization protocols. Businesses using enterprise architecture construct their IT systems to integrate seamlessly and follow stated rules for access, use, upgrades, cybersecurity and so forth. They also organize their systems to support digital transformation (digitalizing all areas of the business) and adapt relatively quickly to technological changes.
In some cases, complies with an established framework. There are various widely accepted enterprise architecture frameworks for companies that don’t wish to do it all themselves or would like a starting point. These include The Open Group Architecture Framework, the Zachman Framework and ArchiMate.
Being project-focused
Rather than being a top-down blueprint for IT strategy, Agile generally approaches business tech on a project-by-project basis. The idea is to be as nimble as possible. Some of its key features include:
- Breaking up IT projects into small pieces (often called “sprints” or “iterations”),
- Collaborating closely with customers (whether internal or external),
- Using cross-functional teams, rather than only IT staff,
- Focusing on continuous improvement during and after projects,
- Emphasizing flexibility over strict protocols, and
- Valuing interpersonal collaboration over processes and tools.
Like enterprise architecture, Agile also has different time-tested versions that many types of organizations have used. These include Scrum and Kanban.
Leaning one way or the other
Not too long ago, many large companies began leaning away from enterprise architecture and toward Agile. Some experts attribute this to increased reliance on cloud-based storage and software, which tends to decentralize IT infrastructure.
Earlier this year, however, market research firm Forrester released the results of a survey of 559 technology professionals worldwide in its Modern Technology Operations Survey, 2023 report. Of respondents who work for large enterprises, 55% said their organizations had an enterprise architecture unit. That’s an 8% increase from the 47% reported in the 2022 version.
Some experts believe the renewed emphasis on enterprise architecture could be a reaction to a couple potential downsides of relying largely or solely on Agile. That is, businesses running small, speedy IT projects with little to no oversight may encounter higher “technical debt” — the predicament of getting suboptimal project results that lead to costly downtime and rework. Companies may also suffer from “vendor sprawl,” a term that describes having too many software providers because Agile project teams act independently.
Managing the costs
To be clear, enterprise architecture and Agile aren’t mutually exclusive. Many companies use both approaches to some extent. Work with your leadership team and professional advisors to devise and execute your best IT strategy. We can help you quantify, track and manage your company’s technology costs.
Businesses must stay on guard against invoice fraud
Businesses must stay on guard against invoice fraud
Fraud is a pernicious problem for companies of all shapes and sizes. One broad type of crime that seems to be thriving as of late is invoice fraud.
In the second quarter of 2024, accounts payable software provider Medius released the results of a survey of 1,533 senior finance executives in the United States and United Kingdom. Respondents reported that their teams had seen, on average, 13 cases of attempted invoice fraud and nine cases of successful invoice fraud in the preceding 12 months. The average per-incident loss in the United States was $133,000 — which adds up to about $1.2 million annually.
Typical schemes
Invoice fraud can be perpetrated in various ways. Among the most common varieties is fraudulent billing. In billing schemes, a real or fake vendor sends an invoice for goods or services that the business never received — and may not have ordered in the first place.
Overbilling schemes are similar. Your company may have received goods it ordered, but the vendor’s invoice is higher than agreed upon. Duplicate billing, on the other hand, is where a fraud perpetrator sends you the same invoice more than once, even though you’ve already paid.
Employees sometimes commit invoice fraud as well. This can happen when a manager approves payments for personal purchases. In other cases, a manager might create fictitious vendors, issue invoices from the fake vendors and approve the invoices for payment.
Such schemes generally are more successful when employees collude. For example, one perpetrator might work in receiving and the other in accounts payable. Or a receiving worker might collude with a vendor or other outside party.
Best practices
The good news is there are some best practices that businesses can follow to discourage would-be perpetrators and catch those who try to commit invoice fraud. These include:
Know with whom you’re doing business. Verify the identity of any new supplier or vendor before working with that entity. Research its ownership, operating history, registered address and customer reviews. Also, ask for references so you can contact other companies that can vouch for its legitimacy.
Follow a thorough approval process. Establish a firm “no rubber stamp” policy for invoices. Train accounts payable staff to review them for red flags, such as unexpected changes in the amounts due or unusual payment terms. Manual alterations to an invoice should require additional scrutiny, as should the first several invoices from new vendors.
Instruct employees to contact an issuing vendor if anything seems strange or inaccurate about its invoice. In cases where the response lacks credibility or raises additional concerns, your business should decline to pay until the matter is resolved.
Implement additional antifraud controls as well. For instance, before approving payment, accounts payable staff should confirm with your receiving department that goods were delivered and check invoices against previous ones from the same vendor to ensure there are no discrepancies. Also, you may want to require more than one person to approve certain invoices for payment — such as those at or above a specified amount.
Leverage technology. Automating your accounts payable process can help prevent and detect invoice fraud. And, as you might expect, artificial intelligence (AI) is having an impact here.
One AI-driven technology called optical character recognition (OCR) can scan and read invoices to verify that line items and charged amounts match those vendors quoted you per your company’s financial records. OCR minimizes employee intervention, hinders collusion and makes diverting payments to personal accounts harder.
Decisive action
As the aforementioned survey indicates, invoice fraud is likely widespread. Be sure to put policies and procedures in place to prevent it as well as to respond swiftly and decisively if you suspect wrongdoing. Our firm can help you assess your accounts payable processes for efficiency, completeness and security.
Help ensure your partnership or LLC complies with tax law
Help ensure your partnership or LLC complies with tax law
When drafting partnership and LLC operating agreements, various tax issues must be addressed. This is also true of multi-member LLCs that are treated as partnerships for tax purposes. Here are some critical issues to include in your agreement so your business remains in compliance with federal tax law.
Identify and describe guaranteed payments to partners
For income tax purposes, a guaranteed payment is one made by a partnership that’s: 1) to the partner acting in the capacity of a partner, 2) in exchange for services performed for the partnership or for the use of capital by the partnership, and 3) not dependent on partnership income.
Because special income tax rules apply to guaranteed payments, they should be identified and described in a partnership agreement. For instance:
- The partnership generally deducts guaranteed payments under its accounting method at the time they’re paid or accrued.
- If an individual partner receives a guaranteed payment, it’s treated as ordinary income — currently subject to a maximum income tax rate of 37%. The recipient partner must recognize a guaranteed payment as income in the partner’s tax year that includes the end of the partnership tax year in which the partnership deducted the payment. This is true even if the partner doesn’t receive the payment until after the end of his or her tax year.
Account for the tax basis from partnership liabilities
Under the partnership income taxation regime, a partner receives additional tax basis in his or her partnership interest from that partner’s share of the entity’s liabilities. This is a significant tax advantage because it allows a partner to deduct passed-through losses in excess of the partner’s actual investment in the partnership interest (subject to various income tax limitations such as the passive loss rules).
Different rules apply to recourse and nonrecourse liabilities to determine a partner’s share of the entity’s liabilities. Provisions in the partnership agreement can affect the classification of partnership liabilities as recourse or nonrecourse. It’s important to take this fact into account when drafting a partnership agreement.
Clarify how payments to retired partners are classified
Special income tax rules also apply to payments made in liquidation of a retired partner’s interest in a partnership. This includes any partner who exited the partnership for any reason.
In general, payments made in exchange for the retired partner’s share of partnership property are treated as ordinary partnership distributions. To the extent these payments exceed the partner’s tax basis in the partnership interest, the excess triggers taxable gain for the recipient partner.
All other payments made in liquidating a retired partner’s interest are either: 1) guaranteed payments if the amounts don’t depend on partnership income, or 2) ordinary distributive shares of partnership income if the amounts do depend on partnership income. These payments are generally subject to self-employment tax.
The partnership agreement should clarify how payments to retired partners are classified so the proper tax rules can be applied by both the partnership and recipient retired partners.
Consider other partnership agreement provisions
Since your partnership may have multiple partners, various issues can come into play. You’ll need a carefully drafted partnership agreement to handle potential issues even if you don’t expect them to arise. For instance, you may want to include:
- A partnership interest buy-sell agreement to cover partner exits.
- A noncompete agreement.
- How the partnership will handle the divorce, bankruptcy, or death of a partner. For instance, will the partnership buy out an interest that’s acquired by a partner’s ex-spouse in a divorce proceeding or inherited after a partner’s death? If so, how will the buyout payments be calculated and when will they be paid?
Minimize potential liabilities
Tax issues must be addressed when putting together a partnership deal. Contact us to be involved in the process.
It’s time for your small business to think about year-end tax planning
It’s time for your small business to think about year-end tax planning
With Labor Day in the rearview mirror, it’s time to take proactive steps that may help lower your small business’s taxes for this year and next. The strategy of deferring income and accelerating deductions to minimize taxes can be effective for most businesses, as is the approach of bunching deductible expenses into this year or next to maximize their tax value.
Do you expect to be in a higher tax bracket next year? If so, then opposite strategies may produce better results. For example, you could pull income into 2024 to be taxed at lower rates, and defer deductible expenses until 2025, when they can be claimed to offset higher-taxed income.
Here are some other ideas that may help you save tax dollars if you act soon.
Estimated taxes
Make sure you make the last two estimated tax payments to avoid penalties. The third quarter payment for 2024 is due on September 16, 2024, and the fourth quarter payment is due on January 15, 2025.
QBI deduction
Taxpayers other than corporations may be entitled to a deduction of up to 20% of their qualified business income (QBI). For 2024, if taxable income exceeds $383,900 for married couples filing jointly (half that amount for other taxpayers), the deduction may be limited based on whether the taxpayer is engaged in a service-type business (such as law, health or consulting), the amount of W-2 wages paid by the business, and/or the unadjusted basis of qualified property (such as machinery and equipment) held by the business. The limitations are phased in.
Taxpayers may be able to salvage some or all of the QBI deduction (or be subject to a smaller deduction phaseout) by deferring income or accelerating deductions to keep income under the dollar thresholds. You also may be able increase the deduction by increasing W-2 wages before year end. The rules are complex, so consult us before acting.
Cash vs. accrual accounting
More small businesses are able to use the cash (rather than the accrual) method of accounting for federal tax purposes than were allowed to do so in previous years. To qualify as a small business under current law, a taxpayer must (among other requirements) satisfy a gross receipts test. For 2024, it’s satisfied if, during the three prior tax years, average annual gross receipts don’t exceed $30 million. Cash method taxpayers may find it easier to defer income by holding off on billing until next year, paying bills early or making certain prepayments.
Section 179 deduction
Consider making expenditures that qualify for the Section 179 expensing option. For 2024, the expensing limit is $1.22 million, and the investment ceiling limit is $3.05 million. Expensing is generally available for most depreciable property (other than buildings) including equipment, off-the-shelf computer software, interior improvements to a building, HVAC and security systems.
The high dollar ceilings mean that many small and midsize businesses will be able to currently deduct most or all of their outlays for machinery and equipment. What’s more, the deduction isn’t prorated for the time an asset is in service during the year. Even if you place eligible property in service by the last days of 2024, you can claim a full deduction for the year.
Bonus depreciation
For 2024, businesses also can generally claim a 60% bonus first-year depreciation deduction for qualified improvement property and machinery and equipment bought new or used, if purchased and placed in service this year. As with the Sec. 179 deduction, the write-off is available even if qualifying assets are only in service for a few days in 2024.
Upcoming tax law changes
These are just some year-end strategies that may help you save taxes. Contact us to customize a plan that works for you. In addition, it’s important to stay informed about any changes that could affect your business’s taxes. In the next couple years, tax laws will be changing. Many tax breaks, including the QBI deduction, are scheduled to expire at the end of 2025. Plus, the outcome of the presidential and congressional elections could result in new or repealed tax breaks.
6 key elements of a business budget
6 key elements of a business budget
Every business needs a budget, but not every budget looks the same. Some companies have intricately detailed ones, others rely on simple templates generated with off-the shelf software, and still others forego formal budgets in favor of a “fly by the seat of your pants” approach. (That last option isn’t recommended.)
Because budgeting is such an essential part of running a business, it’s easy to take for granted. You may fall into a routine that, over time, doesn’t keep up with your company’s evolving needs. To identify areas of improvement, here are six key elements of a business budget and some best practices to consider:
1. Current overview. You may think you’ve created a sound budget, but its usefulness will be limited if it’s based on what your business looked like and how it operated five years ago. Compose an up-to-date description of your business. This should include its strategic goals, sales targets, the state of your industry and market, and impactful economic factors.
2. Budget rationale. Explain in clear language how the budget supports your company’s mission, vision, values, goals and objectives. To be included in the budget, every line item (see below) must support all five of those factors. If one doesn’t, question its merit.
3. Detailed line items. Naturally, the “meat” of every budget is its line items. These typically include:
- Revenue, such as sales income and interest income,
- Expenses, such as salaries and wages, rent, and utilities,
- Capital expenditures, such as equipment purchases and property improvements, and
- Contingency funds, such as a cash reserve.
An important question to ask is: Are we including everything the business spends money on? Although maintaining a detailed budget can be tedious, it’s imperative to managing cash flow.
4. Selected performance metrics. Among the primary purposes of a budget is to compare projected spending to actual spending — making adjustments as necessary. As part of the budgeting process, establish precisely which metrics you’ll use to determine whether you’re making, breaking or beating the budget.
5. Supporting appendices. Discuss with your leadership team whether your budget would be more useful with additional information. Commonly attached supporting appendices include historical budget and results analyses, department spending summaries, tables and graphs depicting market and cost trends, organizational charts, and glossaries of terminology.
6. Executive summary. This brief written snapshot, which usually appears at the very top of the budget report, is intended to provide a concise overview of the chief objectives and major sections of the budget. If you’re not already using one, consider it. For you and other internal users, an executive summary can serve as a quick reference and help you set your expectations. Perhaps more important, it can make your budget easier to understand for outside parties such as lenders and investors.
Your current budget may not include all six of these elements — and that’s OK. As mentioned, companies are free to create budgets in whatever format suits their size and needs. But you should approach budgeting with an eye on continuous improvement. And to that end, please contact us. We can assess your budgeting process from start to finish and suggest ways to perform this critical business function more efficiently and effectively.
Reasons an LLC might be the ideal choice for your small to medium-size business
Reasons an LLC might be the ideal choice for your small to medium-size business
Choosing the right business entity is a key decision for any business. The entity you pick can affect your tax bill, your personal liability and other issues. For many businesses, a limited liability company (LLC) is an attractive choice. It can be structured to resemble a corporation for owner liability purposes and a partnership for federal tax purposes. This duality may provide the owners with several benefits.
Like the shareholders of a corporation, the owners of an LLC (called members rather than shareholders or partners) generally aren’t liable for business debts except to the extent of their investment. Therefore, an owner can operate a business with the security of knowing that personal assets (such as a home or individual investment account) are protected from the entity’s creditors. This protection is far greater than that afforded by partnerships. In a partnership, the general partners are personally liable for the debts of the business. Even limited partners, if they actively participate in managing the business, can have personal liability.
Electing classification
LLC owners can elect, under the “check-the-box rules,” to have the entity treated as a partnership for federal tax purposes. This can provide crucial benefits to the owners. For example, partnership earnings aren’t subject to an entity-level tax. Instead, they “flow through” to the owners in proportion to the owners’ respective interests in the profits and are reported on the owners’ individual returns and taxed only once. To the extent the income passed through to you is qualified business income (QBI), you’ll be eligible to take the QBI deduction, subject to various limitations.
In addition, since you’re actively managing the business, you can deduct on your individual tax return your ratable shares of any losses the business generates. This, in effect, allows you to shelter other income that you (and your spouse, if you’re married) may have.
An LLC that’s taxable as a partnership can provide special allocations of tax benefits to specific partners. This can be an important reason for using an LLC over an S corporation (a form of business that provides tax treatment that’s similar to a partnership). Another reason for using an LLC over an S corporation is that LLCs aren’t subject to the restrictions the federal tax code imposes on S corporations regarding the number of owners and the types of ownership interests that may be issued. (For example, an S corp can’t have more than 100 shareholders and can only have one class of stock.)
Evaluate the options
To sum up, an LLC can give you protection from creditors while providing the benefits of taxation as a partnership. Be aware that the LLC structure is allowed by state statute, and states may use different regulations. Contact us to discuss in more detail how use of an LLC or another option might benefit you and the other owners.
Brand audits can help companies in a variety of ways
Brand audits can help companies in a variety of ways
A strong brand can help boost revenue, while a weaker one may reduce sales opportunities and stifle growth.
Like many business owners, you’ve probably spent considerable time and energy crafting your company’s brand. Doing so has likely involved coming up with a memorable business name and logo, communicating with customers in a distinctive manner, and, above all, building a strong reputation in your market.
So, how’s all that going? Although your bottom line can certainly tell you a thing or two about the current success of your business, brand strength can be a little trickier to put a finger on. That’s why many companies conduct brand audits — essentially, formal reviews of a brand’s efficacy and market standing.
Data to gather
There are many ways to conduct a brand audit. The optimal steps for your business will depend on factors such as your industry, your company size and the popularity of your brand.
But most audits have certain things in common. For starters, they generally rely on information you already have on hand or could easily generate. Examples include:
Sales data. One objective of a brand audit is to identify sales-related key performance indicators and trends that may relate to branding. Essentially, if sales have slumped, is your brand partly to blame? And if so, why?
Website analytics. Brand audits usually investigate whether site traffic is trending upward or downward. They also typically determine how much time visitors spend on your site and on which pages. A strong brand will draw consistent visitors who tend to stick around. A weaker one is often indicated by a large number of accidental visitors who leave quickly.
Social media interactions. Although social media has its challenges and downsides, one enormous benefit is that each of your accounts should provide a wealth of interaction data. Brand audits can analyze this information over time to assess brand strength — and determine whether it’s rising or falling.
Customers and employees
Most brand audits also involve gathering the thoughts and opinions of two major constituencies: customers and employees.
Customers, of course, represent the richest source of insight into brand strength. Brand audits can involve surveys that posit various questions to customers and prospects about your brand. But such a survey needs to be carefully designed. You’ve got to keep it short, clear and easy to complete. Most are now conducted online.
Employees can also tell you things about your brand that you might not know or haven’t thought about. Your sales staff, for instance, could be getting feedback — positive or negative — from customers and prospects. So, an employee survey focused on brand-related issues can be a useful part of an audit.
More than marketing
Generally, brand audits are conducted for marketing purposes. They can help your marketing department determine how to enhance your brand — or potentially even whether you need to undertake a full-blown rebrand. But regular brand audits can also benefit strategic planning. You may even discover that someone has been using your brand fraudulently!
Precisely who should conduct a brand audit typically depends on business size. Larger companies with sizable internal marketing teams may be able to do it themselves. But many small to midsize businesses turn to marketing consultants or agencies to do the job. Our firm can help you assess the costs of a brand audit, as well as gather and analyze some of the financial data involved.