Accounting

Craft Brewery Sells for $1 Billion

Ballast PointWhen a craft brewery that most of us have never heard of sells for $1 billion dollars, then you realize that it’s no longer a tiny niche business.

Craft beer accounted for 11% of U.S. beer sales in 2014 and market share is rapidly increasing. Just this week, the owner of Corona and Modelo, Constellation Brands, purchased Ballast Point for roughly $1 billion.

Ballast Point started selling beer commercially in 1996 and growing at a rate of 80% over the past two years. According to Brewer’s Assn, it is the 31st largest craft brewer in the country. Ballast Point is available for sale in 30 states and Sculpin IPA is their hot seller. Overall, Ballast Point produces approximately 300,000 barrels annually and the sale does not include Ballast Point Spirits, which makes rums and whiskeys.

Ballast SculpinTo put this into perspective, Constellation Brands will be paying 20 times Ballast’s revenue in 2014. And if Ballast’s revenue increases 100% in 2015, then the multiple is 10 times revenue, which is still a stiff premium.

And while demand for craft brews explodes, demand for watered down national brands like Bud, Miller, and Coors is flat which is creating a trend towards consolidation. For example, AB InBev’s takeover of SABMiller for $107B.

While the acquisition of craft brews is nothing new, the valuation on this purchase is eye opening.

Roe CPA is an Atlanta CPA Firm servicing all types of business owners that would like to sell their business for $1B or more.  If you are searching for an accountant to help you with the next phase of growth, call 404-504-7051 and ask for John Charles Roe.  Our initial consultation is free.

For additional expertise, Roe CPA Firm has a concentration amongst restaurant owners, brew pubs and lodging businesses.

Why you should contribute more to your 401(k) in 2015

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Contributing to a traditional employer-sponsored defined contribution plan, such as a 401(k), 403(b) or 457 plan, offers many benefits:

  • Contributions are pretax, reducing your modified adjusted gross income (MAGI), which can also help you reduce or avoid exposure to the 3.8% net investment income tax.
  • Plan assets can grow tax-deferred — meaning you pay no income tax until you take distributions.
  • Your employer may match some or all of your contributions pretax.

For 2015, you can contribute up to $18,000. If your current contribution rate will leave you short of the limit, consider increasing your contribution rate through the end of the year. Because of tax-deferred compounding, boosting contributions sooner rather than later can have a significant impact on the size of your nest egg at retirement.

If you’ll be age 50 or older by December 31, you can also make “catch-up” contributions (up to $6,000 for 2015). So if you didn’t contribute much when you were younger, this may allow you to partially make up for lost time. Even if you did make significant contributions before age 50, catch-up contributions can still be beneficial, allowing you to further leverage the power of tax-deferred compounding.

Have questions about how much to contribute? Contact us. We’d be pleased to discuss the tax and retirement-saving considerations with you.

 

The 5 Biggest Challenges Facing Small Businesses Today

Small Biz - BikesAs a small business owner, you may think that simply getting every task completed that is necessary each and every day is a challenge in itself, and you’d be right, but there are five challenges that stand out among them all.

Liquidity

Most small businesses deal with a lack of cash flow at one time or another, and this tends to be the number one problem for all small businesses and is the major reason for a business to fail. Often, new business owners start out assuming money will come poring in, and they can reinvest it in their business, but this rarely happens. Instead, determine the amount you need on hand for the first two years as most businesses will not see a profit during this time.

Information Overload

While information is a good thing, too much information can be paralyzing. With new technology coming out almost daily, new laws being placed on the books, and new regulations on a continuing basis, it can be difficult to move forward in your business.

To keep yourself safe from information overload, determine what is truly important and what can wait. Also, be sure to check where the information is coming from and whether or not the source can be trusted.

Working in the Business not on the Business

It is often too easy to get caught up in the day-to-day tasks that need to be completed to keep your business afloat, from dealing with customers to ordering supplies to working on endless paperwork.

Don’t forget to take time to analyze what is working and what needs changed. Take a look at cash flow averages, update any stakeholders, plan how you want to move forward in your business, and be sure to connect with your employees. Learn to delegate what you can and work on what you can’t.

Time Management

Chances are one of the reasons you started your own business was so you didn’t have to punch someone else’s clock. You wanted to be your own boss and work on your own schedule. Just keep in mind, as a business owner it is easy to get overwhelmed with all of the tasks before you. Scheduling and planning are your new best friends. They will help ensure you get everything done and done on time.

Marketing

Do you know who your buyer is? You need to understand your target audience before you can market to them. Once you understand who they are, determine where they are. Do they hang out on social media? Are they reading industry journals? Perhaps they like technical white papers. By understanding your audience, you can determine where to place your marketing dollars for the most return.

Cost Segregation – Tax Savings Tool

Cost Seg StudyCost segregation is the process of identifying your assets and classifying those assets correctly for the purpose of paying federal taxes. In this process, personal assets that are mixed with real property assets are separated out, so all assets can be depreciated properly and potentially increase your bottom line.

Cost Segregation Studies
A cost segregation study is performed to determine which assets can be claimed as personal property instead of real property. These items usually include indirect construction costs, non-structural elements of buildings, and exterior land improvements.

By separating these assets, they can be depreciated over a shorter term which will reduce your current income tax liabilities and increase cash flow. This decreased depreciation period is typically between five and fifteen years instead of the twenty-seven and a half to thirty-nine years for non-residential real property.

For example, items such as carpeting, wall paper, parts of the electrical system, and even sidewalks and landscaping all qualify for the shorter depreciation periods.

Eligibility and Advantages of Cost Segregation
To be eligible for cost segregation, a building must have been purchased, remodeled, or constructed since 1987. This method of tax reduction is best used on new construction, but it can be used retroactively on older buildings as well.

Beyond the benefits of reduced tax liability and increased cash flow, a cost segregation study will provide your business with an audit trail of all costs and asset classifications. This will help put to rest any unwanted inquiry from the IRS in its early stages. Finally, during this process, you may identify possible ways to reduce your real estate tax liabilities as well.

While there are some costs associated with performing a cost segregation study, as long as the assets in question are valued over $200K, it’s worth the time and expense to complete the study and categorize these assets correctly.

Roe CPA focuses on lowering your tax liability legally and cost segregation is just one of those tools to lower your taxes.  We service businesses throughout Atlanta with convenient offices in Lenox Square and Norcross.  Call 404-504-7051 and ask for John Charles Roe.

Roe CPA has additional expertise for hotels, real estate, restaurants, and golf courses.

Corporate Inversion – Why This Loophole Sucks

A corporate inversion, simply put, is a method corporations use to reduce their tax responsibilities. While this loophole may present a sound tax solution for the corporation in question, it has a direct impact on tax revenue collected by the United States government, as well as on competition between companies.Corp Inversions

A corporate inversion takes place when a U.S. corporation renounces it’s citizenship by merging with a smaller company in a foreign country. This country typically has a more favorable corporate tax structure as well as tax rules that allow the U.S. corporation to reduce its tax burden.

Once the corporation merges with the foreign entity, it declares the new country as its place of residency. At that point, the United States can no longer impose or collect taxes on the corporation for future or past income. While this may be a positive situation for the company, it does has a negative effect as it reduces tax revenue for the U.S. as well as creates an atmosphere of unbalanced competition between corporations that have transacted an inversion and those that have not.

Over the last decade, corporate migration has increased to the point that now only one-tenth of total tax revenues collected come from corporations. That’s down from one-third in the 1950s. In fact, in the past ten years, a total of 47 U.S. corporations have performed corporate inversions and changed their legal residences to countries outside of the United States.

While it stands to reason that a corporation should do all it can to reduce its tax burden, and it could even argue that doing so is its fiduciary responsibility to its shareholders, this particular tax loophole is stripping tax revenues from the U.S. government at an unsustainable rate.

In addition it is also pitting the corporations that have made an inversion against the corporations that have not creating a toxic business environment which is why this is one loophole that needs to be fixed.

Roe CPA services businesses throughout Atlanta from our office in Buckhead and Norcross.  If you’d like to lower your tax liability legally, call 404-504-7051 and ask for John Charles Roe.

Why you should max out your 2013 401(k) contribution

Contributing the maximum you’re allowed to an employer-sponsored defined contribution plan, such as a 401(k), 403(b) or 457 plan, is likely a smart move:

  • Contributions are typically pretax, reducing your modified adjusted gross income (MAGI), which can also help you reduce or avoid exposure to the new 3.8% Medicare tax on net investment income.
  •  Plan assets can grow tax-deferred — meaning you pay no income tax until you take distributions.
  •  Your employer may match some or all of your contributions pretax.

For 2013, you can contribute up to $17,500 — plus an additional $5,500 if you’ll be age 50 or older by Dec. 31.

If you participate in a 401(k), 403(b) or 457 plan, it may allow you to designate some or all of your contributions as Roth contributions. While Roth contributions don’t reduce your current MAGI, qualified distributions will be tax-free. Roth contributions may be especially beneficial for higher-income earners, who are ineligible to contribute to a Roth IRA.

Please feel free to call me at 678-969-0523.

Owners of leasehold, restaurant and retail properties must act soon to enjoy extended depreciation-related breaks

In January, Congress extended some depreciation-related tax breaks that can benefit owners of leasehold, restaurant and retail properties:

50% bonus depreciation. Congress extended this additional first-year depreciation allowance to qualifying leasehold improvements made in 2013.

Section 179 expensing
. Congress revived through 2013 the election to deduct under Sec. 179 (rather than depreciate over a number of years) up to $250,000 of qualified leasehold-improvement, restaurant and retail-improvement property.

The break begins to phase out dollar-for-dollar when total asset acquisitions for the tax year exceed $2 million.

Accelerated depreciation
. Congress revived through 2013 the break allowing a shortened recovery period of 15 — rather than 39 — years for qualified leasehold-improvement, restaurant and retail-improvement property.
If you’re anticipating investments in qualified property, you may want to make them this year to take advantage of these depreciation-related breaks while they’re available. It’s currently uncertain whether they’ll be extended to 2014.

Roe CPA, Atlanta, GA

Renting out your vacation home brings tax complications, Atlanta GA

If you rent out your vacation home for 15 days or more, you must report the income. But exactly what expenses you can deduct depends on whether the home is classified as a rental property for tax purposes, based on the amount of personal vs. rental use. Adjusting your personal use — or the number of days you rent it out — might allow the home to be classified in a more beneficial way.

With a rental property, you can deduct rental expenses, including losses, subject to the real estate activity rules. You can’t deduct any interest that’s attributable to your personal use of the home, but you can take the personal portion of property tax as an itemized deduction.

With a nonrental property, you can deduct rental expenses only to the extent of your rental income. Any excess can be carried forward to offset rental income in future years. You also can take an itemized deduction for the personal portion of both mortgage interest and property taxes.

We can help you determine how your vacation home rental will affect your tax bill — and whether there are steps you can take to reduce the impact.  Give me a call at 678-969-0523.  Roe CPA, Atlanta, Georgia