Today I dive into the topic of tax reform with my guest, James Markham. James is the Global Tax Middle Market Leader for EY (Ernst & Young Global Limited.) We discuss this exciting time in U.S. business history. Some people are thrilled about the upcoming tax reform (it takes effect this year) and others are scared stiff. James and I try to take some of the confusion and misunderstandings out of the new tax laws. So, hopefully, we are able to ease your mind about the new changes.
If you have plans to sell your company this year or you are just a little nervous about the 2018 tax reform, join us to get some perspective!
This week we’re talking taxes. Typically on the show, I like to cover topics that help owners survive the selling process, particularly in terms of what comes next. Today, we’re going to talk about how taxes impact the sales process, why making a quick choice to save some money now could negatively impact your sale price and what you can do to minimize the risks of changing your tax strategy.
Tax laws have changed, and we need to keep up. While some changes are exciting and titillating, they are rather complicated. Things cannot continue as they were, right down to that weekly round of golf you play with your top clients on Thursday afternoons. Essentially, you are no longer going to be able to entertain your clients like you used to.
The new tax laws stipulate that you can expense meals, but not the entertainment that often goes alongside them. While many of us groan at the initial thought, the impact is actually much greater than simple inconvenience on our parts, personally, as the business owner. While trying to cater to high-end clients by taking them to one of the top golf courses in the area or out on the boat along the beach is very common and oftentimes expected on the clients’ part, you can no longer expense this. So your golf club membership, sail boat, box seats, etc. now much be paid out-of-pocket. Can you still afford these expenses? Will the businesses you used to frequent (and pay for out of the company’s coffers) survive after having lost your usual patronage?
One other change that will have a definite impact on your business is the ability to 100% expense a purchase immediately—but is that going to be the game-changing tax break you’re looking for? Well, maybe. But maybe you’d rather have the tax break over the course of several years. On either side, your expensing choice comes down to what you and your business need.
The impact of these changes will be far-reaching. While it’s not possible to predict all of the effects we will see on our community, or our country, we can at least better inform ourselves and possibly protect the integrity of our businesses.
Congratulations, you have entered the bonus round where every question comes quickly and wrong answers are penalized heavily. Before now, you’ve been able to expense nearly anything in the name of your client; now, you need to reign in your entertainment expenses if you want to avoid nasty fees when you hand in your deductions next year. There is a way around these nasty expenses—one which will allow you to find the loopholes.
As James self-deprecatingly said, “Now is a good time to be an accountant.” You need to be in contact with the people who understand the law and work with it the closest. James and EY actually work with people who worked at the IRS and who understand the changes from the ground up. While not every accountant can claim that level of intimacy, all have more knowledge about what your taxes can do for you and can guide you through the tricky and complex wording of the new tax laws.
You’ll want to do this for two reasons: one, on a personal level, you’ll want to protect yourself at tax time and ensure you’re doing everything you can (and claiming everything you can) to give yourself the best outcome possible—your tax rate has dropped from 35% to 21% as an individual, and while that is good on its own, it can also be more multilayered; and two, on a business level, you’ll want to keep your business in as good of standing as possible—particularly if you’re looking to sell in the next 3-5 years.
James has some further cautionary points for business owners looking to sell in the next 3-5 years. Sometimes changing how you operate (S-corp or C-corp, for example) can impact your selling price because your taxation (and value or cash flow) will change. This is a very intricate bit of taxation law, however, and the best people to help you figure out what’s best for you is to talk to your accountant and your M&A intermediary.
Your accountant can help you structure your books, based on what are the best taxation options available, and your M&A advisor can show you where to dial in your efforts to make your business more appealing.
Before making any major moves, one way or the other, you should consult with your advisors so you don’t make a costly mistake. We can avoid some stiff fees or taxes if we structure our taxes properly, in advance. Until these changes are second nature, we need to be looking to those who have the most experience and industry expertise to give us better footing for the long-run.
James Markham is the EY Global Tax Middle Market Leader, after serving as the EY Global Tax Leader – Strategic Growth Markets for the past few years. He has 33 years of experience and concentrates on tax, accounting for income taxes, acquisitions, joint ventures and foreign expansion planning. He helps companies with tax minimization strategies, especially in mergers and acquisitions and international expansion.
James has a master’s degree in Tax and an undergraduate degree in Accounting from Brigham Young University. He is a member of the American Institute of CPAs.
Brent Beshore is the CEO of Adventur.es, a private equity firm. Adventur.es has a totally different approach to private equity that makes them stand out in the industry. Brent and his team have even written a book to help business owners navigate the tricky and messy world of Mergers and Acquisitions. We discuss the book and why Brent thought it was important to write it. He explains why he prefers employees who don’t have previous experience in the private equity space, and how it makes Adventur.es different from the traditional private equity firm. What you will learn: How Brent stumbled into private equity. How Adventur.es raises money. The lessons Brent learned in the early days of his business. Why Brent and his team wrote The Messy Marketplace. What makes Adventur.es unique in the market. The benefits of over-communicating with your clients. How Brent treats his clients. What normally goes wrong in a private equity firm’s approach. The 4 key elements Adventur.es keeps in every deal. You shouldn’t need a Ph.D. to understand your deal structure. Why Adventur.es doesn’t use traditional financing. The broken private equity system what it means for the market. Why lower markets can’t get traction in this culture. Brent’s “do no harm” rule. Takeaways: M&A is a messy world and Brent’s book is a great resource to help business owners get a grip on the complicated ins and outs of private equity. Do your due diligence and take the time to really research your prospects before you jump into anything. If you are interested in the accelerator program, then you can reach out to me at [email protected] or LinkedIn. We also have a page on the website with more information. Links and Resources: GEXP Collaborative GEXP Accelerator Program ...
Today on the Life After Business podcast, we’re talking to Tim Hall. Tim’s story is so amazing that I just had to get him on the show. Tim was an executive at Cartoon Network and worked at Hasbro. Then Tim had the opportunity to buy the division of Intel. He was able to grow that business to 85 million dollars in revenue, but when the business climate changed and the economy went into a recession, Tim realized he’d missed his exit. Sit back and relax as you listen to what Tim would have done differently, opportunities he didn’t take, and much more. In This Episode You’ll Learn: Tim’s career journey, full of twists and turns, beginning when he was a young teenager. How Tim jumped feet-first into Intel, which is what he considers his foray into entrepreneurship. How he kept the cash flowing in his early days at Intel, later called Digital Blue, when he bootstrapped through the first five years. How factoring works: Tim explains recourse and nonrecourse factoring and how it differs from traditional lines of credit. Tim’s top priorities when the company’s revenue quadrupled. How the recession in 2007 and 2008 hurt Tim’s business, as well as what he would have done differently. Backdrop of The Missed Exit: While Tim was in Corporate America working toys and electronics with Proctor & Gamble, Hasbro, and was a top Executive at Cartoon Network he helped launch the Jurassic Park toys, pitched Star Wars toys to George Lucas and even worked ...
Welcome to the first episode of my three-part series about evaluating your company. I start my series with Brandon Hall, the owner and founder of BGH Valuation. Brandon and his team access businesses so they can comfortably go to the negotiation table. We discuss how Brandon evaluated businesses and that means for the business owner and their company’s prospects. It is important for you to know your company’s worth. Brandon can help you get your numbers and be more confident when you approach buyers, loan officers, other legal processes (such as divorce.) What you will learn: The other guests I will be including in my 3 part series. Brandon’s beginnings in accounting and the beginning of BGH. Why people come to Brandon and his team. What is a certificated valuation? How technology has changed valuations. Common misconceptions about the process. Why people need valuations. How valuations are like investments. The role EBITA plays in a valuation. The two things owners need to consider during an evaluation. How the income method works. What to look at when comparing markets. The importance of defined end goals. Takeaways When you get an evaluation of your company, you need to consider your buyer’s point of view. Don’t make it complicated and know when to ask for help. Educate yourself on the process so you aren’t blindsided. Visit our GPX site for some resources and look into valuation. Links and Resources GEXP Collaborative BGH Valuations Brandon’s email763-777-7140 About Brandon Brandon Hall, the owner of BGH Valuation Services, LLC, resides in Monticello, MN with his wife, Gloria and four children Piper, Rowan, London, and Leo. Brandon worked for various small construction companies growing up and has always possessed an entrepreneurial spirit. Brandon received his Bachelor of Science in Accounting ...