15 May / 2015
You’ve worked hard to create opportunities for your loved ones, and you want to make sure they enjoy the benefits as part of your legacy. So, how do you decide what amount to leave them? A Merrill Lynch survey of high-net-worth individuals says that they believe for every $100 million, $26 million is too little for one child, but $63 million is too much. Estate planning isn’t only about how to mitigate your estate tax burden or the quantity to bequeath, but in what form to leave it, in what increments, and how to prepare benefactors to make the most of their futures with it.
These are tough, emotionally charged questions every affluent family is faced with at some point, whether they have $100 million or $10 million to bequeath to one or more children, nieces and nephews, or grandchildren. Leave too much and it’s possible to create a sense of entitlement; leave too little and you could spark resentment. The right number is decidedly a personal one, both from a philosophical standpoint and in regards to each family’s tax profile.
As we noted in an earlier post, in the U.S. alone, $6.04 billion will be transferred to the next generation over the coming 30 years. These assets could be subject to as much as 40 percent of their value in inheritance taxes, with state taxes ranging between zero and 16 percent. The individuals surveyed in Bank of America Corp.’s Merrill Lynch unit all had a minimum of $5 million in investible assets, very close to the threshold at which the estate tax is triggered.
What’s right for the next family isn’t necessarily the best course of action for yours. One might have a business to sell or to designate a successor for, another may have real estate investment property across multiple state lines. These situations require different courses of action in order to retain as much value for benefactors instead of the IRS. In some cases, beginning the distribution process during one’s lifetime via gifts and other vehicles may be the best choice after considering all parties’ interests.
Money figures aside, affluent families are tasked with ensuring heirs are properly educated on the full scope of management responsibilities for the types of assets inherited, and that they have time to recover from natural missteps that come with the territory. Structuring an inheritance in stair-step fashion based on factors such as age is one approach some families take in hopes of protecting heirs against permanent losses.
The only real way to arrive at the right number, structure and tax strategy for you and your benefactors is by discussing your options with the help of estate planning professionals. Whether your children are 5, 15, or 25, it’s not too early or too late to get started. The more time you build into the process, the longer you have to prepare everyone involved, including yourself.
Accounting software is a must-have for managing day-to-day bookkeeping, but it makes up just one part of the total package for effective financial decision-making. A CPA-trained business consultant can give you deeper insight into key decisions made on a regular basis, such as buying or renting office space, hiring independent contractors or full-time employees, renting or leasing equipment, and much more. Here are three questions from dozens you might ask to help you get the most out of your relationship.
What’s the Best Way for Me to Track, Monitor and Improve Cash Flow? Whether you’re running a startup or an established business, properly projecting your cash flow is essential to maintaining its health and navigating out of challenging periods. An accountant can help you develop an effective cash flow model to improve receivables, manage payables, and work through shortfalls. Experienced business advisory teams also alert leaders to damaging missteps and profit maximization opportunities that may not be immediately apparent.
Am I Taking Advantage of Opportunities Unique to My Industry? Advisors like those at Talley and Company have decades of experience working with a number of different industries, from retail to construction to high tech, and can spotlight opportunities that apply to specific businesses. For example, companies in the tech industry can take advantage of certain R&D, facilities and manufacturing tax credits or exemptions. Working with your advisor can ensure you’re following industry best practices and managing your business competitively.
What Are My Options for Securing Capital for Growth? There are more financing options today than ever before, from equity vs. debt financing, loans, grants, venture capital, angel investing, crowdfunding, peer-to-peer lending, and of course friends, family and colleagues. Depending on the intended use for the capital, the urgency of the need, the state of your industry, the strength of your management team, and many other factors, experienced advisors can help you assess your financial situation and discover whether one option might suit your needs better than another. The right team can also help you prepare your business to be considered favorably by banks, lenders and investors when outlining your plan for the next five years and showing what your revenue stream will look like.
These are only some of the areas in which Group 11 Advisors can offer business and tax advice throughout the year. Meet with us to learn more about how we can offer specialized information pertaining to your business and industry, save you money, and help you budget for periods of growth and constriction.
15 years ago, 21-year old Floyd Mayweather was already being termed by many as the “best boxer in the world.” With an Olympic medal around his neck and a professional fight record of 24-0, Mayweather showed great promise to live up to that title.
Recognizing Mayweather’s potential both as a boxer and revenue generator, HBO offered him a six-fight, $12.5 million contract extension, an eye-whopping amount for the young boxer that many critics thought would be foolish to turn down. So what happened? Mayweather had bigger plans for himself and his personal brand.
Mayweather was willing to say “no” to a great opportunity. His promoter at the time, Top Rank, wanted to mold Mayweather into becoming the next De La Hoya or Sugar Ray Leonard and take the HBO deal. Mayweather saw it differently, recognizing that he was destined to rise far above boxers in his midst and that his potential value far exceeded HBO’s $12.5 million offer. He soon parted ways with Top Rank and signed on with a promoter & advisory team that shared his “bigger, better” vision of himself and executed upon his goal to build upon his dominance in the world of boxing. The results speak for themselves: 15 years later, Mayweather is undefeated (47-0) as a professional, a five-division world champion, the world’s highest-paid athlete, and is predicted to make a record-breaking $200 million on his upcoming bout with Pacquiao.
Surround yourself with the right advisory team. “There’s a lot of smart businessmen around me. You can’t do it by yourself,” Mayweather says. Having a trusted team of advisors you can turn to can make the difference between spinning your wheels and making decisions that allow you — and your business — to grow and thrive.
At Group 11 Advisors, we understand the challenges facing both professional athletes and entrepreneurs when it comes to generating and protecting income earned in the ring, on the field or in the boardroom. Whether you’re looking to improve your tax position, build your brand through a business transaction, or wish to guarantee a legacy for your family, Talley & Company is uniquely equipped to provide the technical and managerial expertise to help you plan, negotiate, structure and execute upon your goals.
Many business leaders resolved to build something new this year—whether a business in itself or a product, culture, team or process within one. To keep moving forward on your plans, icons like Elon Musk and others who’ve been through the entrepreneurial journey can offer valuable insight on making the most of each step. Here are some of their ideas to think about as you continue to turn your vision into reality.
Spend more time looking forward, not back.
The “look forward” approach to business was initiated at MGM Resorts International by founder Kirk Kerkorian. Later, chairman/CEO Jim Murren, who oversaw the $8.5 billion CityCenter development, worked from this same mantra, the idea being that past successes (or failures) provide little more than context for future business choices. According to Murren, “Creating teams that have an understanding of not only what they are doing but, most important, why they are doing it, is critical.”
Hire resilient people.
Real estate mogul Barbara Corcoran built a $6 billion business, The Corcoran Group, using $1,000 she borrowed from a boyfriend and unconventional wisdom she gleaned from her homemaker mom. Early on, Corcoran learned who would make a great salesperson in her real estate team based on one key trait: resilience. The superstars most likely to succeed in an industry with big successes tamed by hard losses, she discovered, were the ones that after taking a hit, “didn’t take a long time to get back up.”
Focus on investing, not spending.
Sales influential Grant Cardone became a self-made multimillionaire founding three companies. His mission now is helping others apply the wealth-building principles he learned. Among other nuggets of advice, he says, “The rich don’t spend money; they invest. They know the U.S. tax laws favor investing over spending. You buy a house and can’t write it off. The rich, in contrast, buy an apartment building that producescash flow, appreciates and offers write-offs year after year. You buy cars for comfort and style. The rich buy cars for their company that are deductible because they are used to produce revenue.”
Establish a feedback loop.
The founder of Tesla and SpaceX, Elon Musk doesn’t just think outside the box; he ventures outside the universe. The consummate disrupter says, “I think it’s very important to have a feedback loop, where you’re constantly thinking about what you’ve done and how you could be doing it better. I think that’s the single best piece of advice: constantly think about how you could be doing things better and questioning yourself.”
Be persistent but flexible.
After PayPal and other ventures, Reid Hoffman went on to create the social tech company he’s best known for now: LinkedIn. He tells entrepreneurs to “Be persistent, and hang on to your vision. And at the same time, be flexible.” Because these two simultaneous mantras can at times be diametrically opposed, Hoffman recommends leaders build a network of trusted advisers to talk to at different decision-points. He says, “The most successful entrepreneurs bring in advisors, investors, collaborators, and early customer relationships.”
When it comes to building your network or structuring tax-favorable investments as suggested by some of these leaders, we hope you’ll consider Talley & Company and Group 11’s advisors part of your team. Our expertise in tax, legal, and business financial planning can help you fulfill your goals for this year and beyond.
January 9, 2015
While most of us were settling back into the office this week, Teresa Giudice from the infamous reality TV show “The Real Housewives of New Jersey” was settling in to her new home at the Federal Correctional Institution in Danbury. She’ll be trading the opulent, Italian-style divans inside her NJ mansion for a shabby, not-so-chic cot in a jail cell for the next 15 months (if she actually serves her full sentence).
According to the New York Daily News, Teresa and husband Joe were convicted of mail, wire and bankruptcy fraud. They took out millions in falsified mortgage and construction loans to support their lavish lifestyle. Joe was also convicted of tax fraud, since he failed to file a return in 2004 and admitted he didn’t pay taxes on some $1 million in income between 2004 and 2008.
At sentencing, Judge Esther Salas was infuriated by the Giudice’s lack of transparency in their pre-sentencing disclosure documents. Among the omissions the judge seemed to think had dubious justifications were the estimates of the family’s furnishings and jewelry. The courts and the IRS have increasingly sophisticated tools for identifying discrepancies in stated earnings and assets, but in this case a simple paperwork trail proved enough.
That’s because when declaring bankruptcy in 2009, the Giudices listed $60,000 in furnishings, but only $25,000 on sentencing day. Other recreational vehicles, cars and construction equipment seemed also to be missing from the probation office report that managed to make it to the Feds. When asked why no jewelry assets were reported, the Giudice’s lawyer said Teresa wore only the costume type.
Judge Esther Salas gave Teresa 15 of the maximum 27 months but allowed her to spend the holidays with family. The judge also allowed Teresa’s husband to begin his sentence after hers expressly to maintain a parent in the household for their four children.
For Joe the sentence is 41 months, but even then he may not be altogether free. Although he has lived in New Jersey for most of his life, he never became a U.S. citizen and will likely face deportation.
Albeit this couple offers an egregious example of misconduct, it goes to show the seriousness with which the courts take tax and bankruptcy fraud. Particularly if, as some believe, the judge in this instance was being lenient, whether owing to the couple’s fame or other reasoning.
Should Teresa miss the spotlight facilitated by Bravo, she can take heart knowing she’s staying at the prison made famous by the Netflix original series “Orange is the New Black.” The reality of it all is that she’s likely to be back in the limelight fast, though maybe not at her NJ home since it was put up for sale. Once she’s free to go, she may very well pick up her hair extensions on the way out and get back to the celebrity life.
December 19, 2015
In a heated bidding war that ended last week, the Chicago Cubs scored big by signing left-handed pitcher Jon Lester with a $155 million deal for six years and a vesting option for a seventh. Lester’s annual $25.8 million earnings will put him in second place for the highest annual salary paid to a pitcher, behind only Clayton Kershaw with $30.7 million. To draw Lester to Wrigley Field, the Cubs raised their bid from $135 to $155 million in the final inning, and yet this wasn’t the highest offer Lester received.
The San Francisco Giants’ last bid gave him the largest potential contract: A seven-year deal for around $168 million. Lester’s pros and cons list with each team was sure to be a long one. On the money side, while the Giants offered the highest figure, California taxes would have put Lester in the 12.3 percent tax bracket and since his income is over the $1 million threshold, subject to an additional 1% tax due to the Mental Health Services Tax. With the Cubs, Lester will instead enjoy a rate less than half that, thanks to Illinois’ 5 percent flat state income tax.
So even with the $13 million premium the Giants were willing to pay, Lester’s take-home salary in Chicago will be at least $1 million more when factoring in state taxes. That’s more money he could give to his favorite charities. (Since Lester’s battle with lymphoma at 22, he has actively advocated for the pediatric cancer community.) As a free agent, Lester has been quoted saying, “I want to go to a place that appreciates what I do on the field and off the field, as far as with our charitable work, how we represent the team in the community.”
Lester may also have chosen the Cubs for the chance to reunite with two executives who drafted him back in the day for the Red Sox: now-Chicago president Theo Epstein and general manager Jed Hoyer.
The Boston Red Sox made a lower final offer of six years for $135 million after starting with a low-ball $70 million contract that led to his trade to Oakland this past summer. Still, the star pitcher might have had sentimental reasons to head back, since it was with the Red Sox that he took two World Series Championships. But even the Giants’ prestige of having won the World Series three times in the last five seasons wasn’t enough. Lester still chose the Cubs, who in striking contrast haven’t won a World Series in over 100 years.
It’s not likely Lester’s decision hinged entirely on taxes, nor should any major life decision we make. But that doesn’t mean Lester or any of us can afford NOT to know what the tax impact of a particular choice holds. Having this knowledge in hand, regardless of which way we choose to go with a major decision, can help us find other ways to mitigate tax liabilities and preserve income.
In the event of any upcoming life or business change, whether planned or unexpected, consult with an advisor from the Talley & Company team to understand how your tax profile might be affected.
December 5, 2014
Target Leverages Big Data to Predict Customer Pregnancies
Leveraging buying trends into dynamic strategies is nothing new to the retail industry, though some companies have turned it up a notch in recent years. Target, for example, has found a way to data-mine your purchases to figure out whether you have a baby on the way long before you are stocking up on diapers So let’s take a closer look at Target’s usage of “Big Data”—and what you can learn from this impressive feat.
With copious amounts of highly detailed data on shoppers’ behaviors and preferences, Target’s marketing specialists saw an opportunity to take the information a step further and developed a specific profile that took note of how women’s shopping habits evolved when they first learned they were pregnant. Identifying 25 new indicator products purchased within a defined period, Target is able to assign each shopper a “pregnancy prediction” score and can estimate a due date with a high level of accuracy.
With this information, a mail-out campaign of coupons and discounts is disbursed with each specific stage of pregnancy. Perhaps a bit unsettling to some, but it’s hard to argue with success.
The important element/lesson of this strategy, applicable to most businesses large or small, is seen in how Target converted “Big Data” into proactive data.
By the same token, accounting reporting systems reveal how a business is operating and deserve the owner’s attention. How are you looking at them: as a collection of numbers on a spreadsheet—or are you analyzing trends and how they impact your business? You may find a few surprises with a closer look.
“If you can measure it, you can manage it.”
Being able to construct an accurate and flexible system that can adapt as new market forces, trends and opportunities arise in real-time, versus waiting until month’s end may mean the difference between achieving your revenue forecast or moving beyond it at a time when cash flow is critical.
Until just recently only large corporations had both the time and resources available to dedicate toward leveraging Big Data into producing meaningful results…Today the entrepreneur utilizes Big Data solutions to help level the playing field. Several factors, including recent technological advancements and the affordability of both cloud computing and outsourced business solutions keep new businesses competing well enough. Entrepreneurs can click on their Smart Phone, iPad or laptop anywhere in the world and access this information at will, particularly if owner and accountant have set up various protocol profiles in the form of customized data.
Now, more than ever, the small business owner has the ability to develop the same Big Data analysis as larger corporations—an important step in achieving a competitive position.
Talley & Company and its affiliate, Group 11 Advisors, keep clients on track with how to properly leverage technology to meet the needs of their growing businesses. From outsourced accounting solutions to management information, analysis and reporting, we are the premier business consulting practice to entrepreneurs and their closely-held businesses.
For more information on how to leverage your business’ data technology, contact Talley & Company today to explore your opportunities.
28 Nov / 2014
November 28, 2014
Creating a Charitable Giving Plan for Your Business
In the spirit of Thanksgiving, many of us are not only giving thanks for all that we have, but also giving back. Entrepreneurs in particular may feel the call: 89 percent donate money to charitable causes, while 70 percent also donate their time. Giving through your business can be a great way to make a difference while also placing your brand in a favorable light. Whether you choose to pursue this path by giving time or a percentage of profits, understanding how the IRS treats contributions from a tax-deduction perspective can help you maximize your dollars and efforts. Here’s what you need to know.
Not Every Charity is Eligible with the IRS
If you have a cause in mind that aligns with your company’s overall mission, you can determine if it’s an eligible 501(c)(3) for tax-deduction purposes using this IRS search tool.
What You Can and Can’t Deduct
There are many types of tax-eligible contributions, and the IRS handles them all differently. These are some general guidelines:
Donating Money – Typically, monetary contributions made within the current tax year can be claimed for a deduction and itemized on Schedule A of your return.
Donating Inventory or Property – You can deduct the fair market value of inventory or property donated, but the contribution must be made to the organization. For example, backpacks made by your company and donated to children at a youth center would not be ineligible, but if provided to the youth center itself to distribute, they would. The fair market value must be assessed for anything over $500, and items over $5,000 generally require an appraisal. Your tax attorney can help you properly value and classify all kinds of donations based on very specific IRS rules.
Volunteering – While the monetary value of services your business renders can’t be claimed, some expenses incurred for performing them can. For example, if your marketing firm has agreed to assist with the design and printing of invitations, t-shirts and flyers for an upcoming charity auction, the cost of t-shirts, printing, and mileage to and from the event can be deducted. However, your normal rate for designing and developing those projects cannot.
Getting Something in Return – If you receive something as a result of making a contribution, your efforts may be classified as something other than a donation. For example, let’s say your company makes soccer balls and you donate to a local soccer league that, in return, runs an ad for your business at their facility. This is now an advertising expense that can be deducted on Schedule C. Here’s a different scenario: You make a contribution of $1,000 to an organization and, in return, receive admission to a sporting event for which a ticket would normally cost $300. The IRS allows you to deduct the difference, which in this case would be $700.
Limits, Deadlines and Paperwork
No more than 50 percent of your income can be claimed as a tax deduction, and all donations must be paid by the end of the tax year. The IRS also requires a written statement from the organizations you contribute to showing the place, date, amount and nature of the expenses claimed.
Because this is a complex issue with many variables, the only way to get specific advice on how your contributions fit into your business’s overall tax profile is to consult with your tax attorney. So enjoy your holiday meal, get through the food coma, and then go ahead and give Talley & Company a call.
21 Nov / 2014
November 21, 2014
Resolve to Get These 3 Things Done in 2015
Yes, you have it right: It’s not quite time for turkey yet and we’re pressuring you about resolutions already—but for good reason. With just a handful of weeks left before the official end of 2014, outlining your new year’s resolutions now, with ample time to establish a definitive game plan, can set you up for success. Waiting for Jan. 1 to tackle projects that have been on your to-do list for as long as you can remember won’t. It’s time for all of us to take action, whether we resolve to eat better and get more exercise or develop concrete growth tactics for our businesses.
Here are three things you’ll want to be sure are on your list, along with the easiest ways to get moving on them.
Organize Your Taxes – We’re not just talking about keeping all your papers together so they’re handy come tax time later, although that’s a great start. We’re talking about creating a real strategy for both your household and business that takes a holistic view of your assets, income, revenues and expenses. A 360 view will give you the best options for creating tax savings in full accordance with IRS rules. Want to see a few examples of how this works? Call us and we’ll show you.
Optimize Your Bookkeeping and Accounting – If you haven’t automated these tasks, doing so can free up time and energy for you to conquer more strategic jobs in 2015. If you’re already utilizing software or outsourcing to a professional, make sure you’re accessing data from your financials. Already got that done? Then you’re ready to translate as much of that data as possible into real-world decision-making. If you’re using your statements to create a business plan for the months and years ahead but aren’t sure you’re properly interpreting everything your financials are telling you, consult with a Talley & Company advisor to increase your knowledge base.
Establish a Will and Build an Estate Plan – If you haven’t secured your family’s future yet, spending the holidays surrounded by your loved ones might be the extra reminder you need to finally accomplish this task. If you’ve already created an estate plan, well done, but when was the last time you reviewed it? Be sure your plans suit your family’s present needs.