Mike Jodon CPA CVA, Author at CironeFriedberg, LLP

What is my Business Worth?

April 18, 2022 by Mike Jodon CPA CVA

Why is it that most business owners don’t know when they need a business valuation? Most often, their answer is that they are not ready to sell. However, that is only one reason to get a valuation.

As a business owner, you may need a business valuation for any of the following reasons.

You wish to track your goals. Are you planning to buy a new office building, launch a new product, add staff, or expand internationally? You need a way to measure your progress and how your efforts impact the value of your business. A valuation gives you a starting point and can help aid in the planning process.
You are determining when you can retire. If you are counting on income from the sale of your business to support you in retirement, the sooner you determine and potentially improve the value, the better.
You desire to expedite a sale or acquisition. With a firm idea of what your business is worth, you are more inclined to price it attractively for interested buyers. Or you may want to merge with or acquire another company. Having an up-to-date valuation can allow you to move faster to take advantage of these opportunities.
You need to do estate planning. The value of your business may represent a sizable portion of your net worth. How do you work on an estate plan without an accurate valuation? What about your children who are involved in your business? How would this impact them?
You are looking to protect your family. If something happens to you, your family may have to deal with a potential sale or dissolution of the business. The information may be important in divorce proceedings, or if you want to buy out a partner or add one of your children.

A valuation will examine the general economic and industry conditions affecting your business, its financial performance, and business peers. The project will consider income, market and asset-based approaches to determining value, as well as where your business sits in the marketplace.

Don’t accept the common misperception that says your company is worth a multiple of earnings. For all, except the very small businesses, that does not take in the full picture. We can help you look at all the factors, discuss the various engagement options and reports, and get you started on a valuation project that is appropriate for your business. We want you prepared for the future, no matter what happens.

If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional. You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford) or email us at info@cironefriedberg.com.

Are You Concerned About Maximizing the Value of Your Business?

March 12, 2022 by Mike Jodon CPA CVA

Some business owners pass their businesses on to their adult children using estate-planning or gifting strategies. Others believe that the sale of their business represents a prudent way to maximize the value of their holdings. Yet, when it’s time to sell their business, they have only a vague idea of what the business is worth. Many business owners have developed tremendous skills needed to run their businesses but are unsure where they sit in the marketplace, and few have planned for their transition from the business.

Conduct a Strategic Review A smart first step is to hire an impartial third party to provide a strategic review. This review will reveal strengths and weaknesses of the business, which will help position the company when it’s time to sell. The current merger and acquisition process includes an intensive physical of a business. Buyers will take a deep dive into all aspects of the business. They will review documents and conduct interviews to confirm everything you tell them about your business. That means reviewing extensive financial, legal and human resource records.

Increase the Value of Your Business

Depending on the particulars of a business, companies can take advantage of dozens of strategies to boost their value. Following are just a few items to consider:

Pay attention to the income statement. When potential buyers evaluate your business’s worth, they’re concentrating on earnings, specifically cash flow. Revenues generated from products or services that are not profitable will hurt the value of the business because they reduce profit margins and increase overhead. Ultimately, the value of a business is derived from the transferrable cash flow and the ability to generate this cash flow in the future. The quality and sustainability of cash flow is evaluated during the sale process and will be scrutinized during the Due Diligence phase.
Understand your business and accentuate your strengths. Companies that build strong brands or serve market niches are usually more valuable than their counterparts that attempt to serve everyone. Evaluate your competitive advantage, concentrate on what can be improved, and play on your strengths. This builds value and will fuel financial performance.
Plan for a transaction before it takes place. You can’t start planning soon enough for the sale of your business. Typically, a sale takes 6–12 months to complete, and many people believe you should start planning at least two years before the process begins.

This is just the tip of the iceberg. Many other factors need to be considered when increasing the value of your business. Small steps now could lead to a more profitable and easier transaction in the future. Contact us today, and let our experienced professionals help you maximum the value of your business.

IRS Announces 2022 Limits for Retirement Plans

November 23, 2021 by Mike Jodon CPA CVA

The IRS has announced the new retirement plan numbers for 2022. Retirement limits for 401(k) and similar plans are up. The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased to $20,500, up from $19,500. IRA limits have changed for certain savers. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2022:

For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to $68,000 to $78,000, up from $66,000 to $76,000.
For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to $109,000 to $129,000, up from $105,000 to $125,000.
For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to $204,000 to $214,000, up from $198,000 to $208,000.
For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The limit on annual contributions to an IRA remains unchanged at $6,000. Roth IRA limits are changed. The income phase-out range for taxpayers making contributions to a Roth IRA is increased to $129,000 to $144,000 for singles and heads of household, up from $125,000 to $140,000. For married couples filing jointly, the income phase-out range is increased to $204,000 to $214,000, up from $198,000 to $208,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000. Savers Credit and SIMPLE are both up. The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $68,000 for married couples filing jointly, up from $66,000; $51,000 for heads of household, up from $49,500; and $34,000 for singles and married individuals filing separately, up from $33,000. The amount individuals can contribute to their SIMPLE retirement accounts is increased to $14,000, up from $13,500. Catch-up provisions remain unchanged. The IRA catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000. The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,500. Therefore, participants in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan who are 50 and older can contribute up to $27,000, starting in 2022. The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans remains unchanged at $3,000.

Year-End Tax Planning for Individuals

November 20, 2021 by Mike Jodon CPA CVA

In a time where many Americans have been coping with the overwhelming anxiety surrounded by the COVID-19 pandemic, adding year-end tax planning to the mix can seem downright unfair. While the below items only begin to scratch the surface of the 2021-2022 tax picture, it will hopefully serve as a checklist of items to keep in mind as we approach the New Year.

Charitable Deductions – For the 2020 tax year, a new above-the-line deduction was allowed for up to $300 of charitable cash contributions, even if you claimed the standard deduction on your tax return. The deduction has been extended through 2021, and increased to a $600 limit on a married filing joint (MFJ) return (still $300 for single and married separate filers). In 2020, a cash contribution made by an individual to a qualifying public charity was generally limited to 60% of the individual’s adjusted gross income (AGI) with excess contributions being carried forward up to five tax years. The AGI limit for cash contributions made to qualified charities has been increased to 100% through 2021.

Required Minimum Distributions (RMD) – Seniors were allowed to skip their RMD in 2020 without penalty. However, there is no waiver for the RMD in 2021. Anyone at least 72 years old by the end of 2021 must take an RMD to avoid the 50% penalty (if you turned 72 during 2021, you have until April 2022 to take your first RMD). Taxpayers at least 70 1/2 years old should consider making qualified charitable distributions (QCD) of up to $100,000 per year directly from a non-Roth IRA to a qualified charity to reduce AGI. QCDs count toward RMDs. We suggest that you review your federal and state tax withholdings that are set up with your financial institution. If you have historically not had taxes withheld from your distribution, you may want to consider having taxes withheld or making additional estimated payments by January 15, 2022 depending on your 2021 estimated taxable income. We are prepared to assist you with your year-end tax planning.

Child Tax Credit (CTC) – For eligible taxpayers in 2021, the CTC was increased and became fully refundable. Previously, taxpayers could only claim $2,000 per child under 17, and the credit was reduced as AGI went over $200,000 ($400,000 for MFJ). Only $1,400 of the credit was refundable. The American Rescue Plan Act (ARPA) increased the credit to $3,000 per child and $3,600 per child under 6. The credit is now fully refundable for all children 17 and under. The enhanced credit under ARPA phases out for those with AGI over $75,000 ($150,000 MFJ), and for taxpayers over those limits, the old CTC of $2,000 per child applies. The ARPA also called for 50% of the credit to be paid in advance for the expected 2021 CTC, based on 2020 income tax filings. These payments are spread evenly from July through December 2021. When providing your 2021 tax information, please confirm the amount of your advanced CTC.

Recovery Rebate Credit (3rd Stimulus Payment) – Earlier in 2021, the federal government issued the third round of stimulus checks for up to $1,400 ($2,800 MFJ) plus $1,400 for each qualifying dependent. When filing your 2021 return, you will need to provide the amount of your third stimulus check to determine how much of the recovery rebate is available. Similar to your 2020 return, a “true-up” calculation will be done with your 2021 return if you were eligible for more than you actually received.

Social Security Tax – Self-employed individuals and household employers who deferred half of their Social Security taxes for the 2020 year must repay half by December 31, 2021. The remainder is due by December 31, 2022. The repayment should be made with a separate tax payment and noted that is for “deferred Social Security tax” to be correctly applied. The Social Security Administration has also recently announced that the wage base for computing Social Security tax will increase to $147,000 for 2022 (up from $142,800 in 2021). Wages and self-employment income above this threshold are not subject to Social Security tax.

Cryptocurrency Transactions – The evolution of virtual currency continues on a daily basis, and the IRS is continuing to monitor these virtual assets. As virtual currency grows in popularity, the IRS is expanding its examination of these assets and transactions. If investing in these virtual assets is something you are involved in, the emphasis continues to be on record-keeping to ensure you are meeting any reporting requirements.

What is my Business Worth?

Are You Concerned About Maximizing the Value of Your Business?

IRS Announces 2022 Limits for Retirement Plans

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