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Planning for the Future: 5 Business Succession Options and Their Tax Implications

When it’s time to consider your business’s future, succession planning can protect your legacy and successfully set up the next generation of leaders or owners. Whether you’re ready to retire, you wish to step back your involvement or you want a solid contingency plan should you unexpectedly be unable to run the business, exploring different succession strategies is key. Here are five options to consider, along with some of the tax implications.

1. Transfer directly to family with a sale or gifts

One of the most common approaches to succession is transferring ownership to a family member (or members). This can be done by gifting interests, selling interests or a combination. Parents often pass the business to children, but family succession plans can also involve siblings or other relatives.

Tax implications:

Gift tax considerations. You may trigger the federal gift tax if you gift the business (or part of it) to a family member or if you sell it to him or her for less than its fair market value. The annual gift tax exclusion (currently $19,000 per recipient) can help mitigate or avoid immediate gift tax in small, incremental transfers. Plus, every individual has […]

By Linkenheimer LLP|2025-03-17T19:35:33+00:00March 17th, 2025|Advisor, succession planning|0 Comments

Understanding Financial Statements: A Guide for Small Business Owners

For small business owners, gaining a solid understanding of financial statements—balance sheet, income statement, statement of changes in equity, and statement of cash flows—is crucial. Financial statements provide insights into the business’s financial health, cash position, and profitability, and are prepared using specific accounting methods that impact how information is recorded and reported.

The two primary accounting methods are accrual accounting and cash accounting:

Accrual Accounting: In this method, income and expenses are recorded when they are earned or incurred, regardless of when cash changes hands. This approach, required by Generally Accepted Accounting Principles (GAAP), provides a more comprehensive picture of a company’s economic activities and financial obligations, though it can create timing differences between reported net income and cash flow.

Cash Accounting: This method records income and expenses only when cash is received or paid out. While cash accounting provides a straightforward view of cash on hand, it may not capture all assets, financial obligations and income as effectively. It is generally simpler and often […]

By Linkenheimer LLP|2024-11-05T21:18:50+00:00November 5th, 2024|Advisor, financial statements|0 Comments

Advisory Spotlight: The Importance of Succession Planning in a Business’s Future

In the fast-paced world of business, having a succession plan is not just a good practice; it’s a necessity. As business owners, departure is certain be it through retirement, sale, or unexpected events. This demands proactive planning to ensure the continuity and stability of your business. Succession planning is the process of identifying and developing new leaders to replace old leaders when they leave, retire, or pass away. Here’s why it’s essential for your business.

Ensuring Business Continuity

Succession planning is vital for maintaining the continuity of your business operations. A well-crafted succession plan ensures that the transition of leadership is smooth and that the business remains stable. This is particularly crucial for small to medium-sized businesses where the departure of a key role can significantly disrupt operations.

Without a succession plan, businesses may face operational downtime, loss of direction, and even financial instability. By planning ahead, you can mitigate these risks, ensuring that the business continues to thrive regardless of changes in leadership.

Preparation for Unexpected Events

One of the key benefits of succession planning is its role in preparing for unexpected events such as the sudden death or disability of key personnel. These unforeseen events […]

By Linkenheimer LLP|2024-09-27T16:53:22+00:00September 27th, 2024|Advisor, succession planning|0 Comments

Understanding Consulting vs. Advisory Services: What’s the Difference?

As businesses grow and evolve, the need for external expertise becomes increasingly vital. Whether it’s navigating complex financial landscapes, optimizing business processes, or planning for future growth, the right professional support can make all the difference. However, many business owners are unsure whether they need consulting or advisory services—or both. Understanding the differences between these two types of services can help you make the best decision for your business.

Consulting Services: Focused Expertise for Specific Challenges

Consulting services are typically project-based and designed to address specific challenges or opportunities within your business. A consultant is brought in as an expert to provide specialized knowledge and solutions for specific issues. For example:

Valuation Services: If you need an accurate valuation of your business for purposes such as a sale, merger, or acquisition, a consultant can provide an in-depth analysis of your financials, market conditions, and other factors to determine the fair market value of your business.

Process Improvement: Consultants can help streamline operations by analyzing your current workflows and implementing […]

By Linkenheimer LLP|2024-08-14T16:12:08+00:00August 14th, 2024|Advisor|0 Comments

Advisory Spotlight: Safeguarding Your Business- The Critical Need for Strong Internal Controls in Preventing Accounting Fraud

In the dynamic landscape of business, private companies are not immune to the growing threat of accounting fraud. Regardless of size or industry, accounting fraud can devastate a company’s financial health, reputation, and even its existence. For small to medium-sized enterprises (SMEs), the impact can be particularly severe. As stewards of their businesses, it is incumbent upon business owners to recognize these risks and fortify their defenses through the establishment and maintenance of robust internal controls.

Understanding the Risks

Accounting fraud encompasses a spectrum of deceptive practices aimed at misrepresenting financial information. From fictitious transactions to intentional misreporting of revenues or expenses, fraudulent activities can occur at any level within an organization. For SMEs, common types of fraud may include embezzlement, falsification of financial statements, or misappropriation of assets.

In Sonoma County, where businesses thrive in a vibrant economy, the risk factors for accounting fraud can escalate. Factors such as rapid growth, complex financial transactions, or reliance on manual accounting processes can create vulnerabilities ripe for exploitation. Moreover, the intimate nature of small businesses, often characterized by a close-knit workforce and less formalized structures, can inadvertently foster an environment conducive to fraudulent activities.

The Role of […]

By Linkenheimer LLP|2024-06-05T18:39:43+00:00June 5th, 2024|accounting, Advisor, fraud|0 Comments