Year End Action Items for Business Owners

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The end of the year can be a busy time for most business owners, so we’ve created a list to help you make sure your business is ready for the New Year!

1. Internal Documentation:
   • Review your Minute Book
     1. FIND IT!
     2. Is it up to date?
     3. Have officers and directors been properly authorized?
     4. Have significant business activities been memorialized in minutes?
        • Loans
        • Leases
        • Significant contracts
        • Significant purchases
   • Go through your leases:
     1. Are they written?
        • Particularly important for “home offices”
        • Even if owned by related parties (example owner of the business is also the owner of the property)
     2. Do you have significant upcoming dates
        • Renewal clauses
        • Termination provisions
   • Non-compete and/or Non-disclosure Agreements
     1. Have key employees signed them?
     2. Are signed copies on file?
   • Consider Employee Issues
     1. Review employee handbook
     2. Update job descriptions
     3. Review Employee benefits
        • Adopt or amend a Deferred Compensation Plan for key employees
        • Options for employees to purchase business equity
   • Buy/Sell Agreements (if there is more than one owner)
     1. Establish an agreement if there is not one in place
     2. Establish an “agreed price”
     3. Review insurance policies for adequacy of coverage
2. Establish or update a succession plan
   • Never too late or too early to start
   • Internal succession plan
     1. Stock purchase plan-
        • Creating an opportunity for key employees to buy-in
        • Terms need to be carefully documented
     2. Gifts to family members
     3. Most efficacious for family businesses
     4. “Grooming” of the successor is as important as the plan itself:
        1. Train the successor
        2. Introductions are important
           • Key clients
           • Key vendors
        3. Regular meetings are key
     5. Written Buy/Sell agreement is necessary if things don’t work out
   • External succession plan
     1. Selling the company to a third party
     2. Merger with a third party
     3. MOST commonly these involve a competitor or other companies seeking market share-Get to Know Them

3. Tax Matters-MEET WITH YOUR TAX ADVISOR
   • Don’t postpone purchases-Section 179 Depreciation
     1. Up to $500,000 can be expensed rather than depreciated
     2. Must be “placed in service” before 12/31
   • The WAY your accounting is measured for tax purposes matters
     1. Cash basis
        • Revenue is recognized when it is received
        • Expenses are deducted when they are paid
     2. Accrual basis
        • Revenue is recognized when “all events” have transpired to create right to revenue
        • Deduction is allowed when “all events” have transpired to create liability
     3. IF YOU ARE ON THE ACCRUAL BASIS-Determine (and document) Bonuses (these must be paid by March 15^th)
     4. IF YOU ARE ON THE CASH BASIS- Pay all of your outstanding bills
   • Plan now for tax elections for 2016
     1. Should your business elect to be an “S” Corporation for tax purposes?
     2. Should you change your basis of accounting?

 

If we can be of assistance with your internal documentation, succession plans, or other business matters, Please contact the Kreamer Law Firm, P.C. at 515-727-0900 or info@Kreamerlaw.com. At the Kreamer Law Firm, P.C.: We get things done®