Arthur G. Sharp
Life science companies face unique challenges in their operations that are often too complex for them to resolve alone. Among them are accounting for equity and debt financing transactions and licensing arrangements.
According to Scott Taylor of Burr Pilger Mayer LLP, “The main obstacles life science companies face are concerns about the amount of cash they ‘burn’ in doing their research and development work. They must raise capital financing constantly, unless they can raise significant amounts of funding all at once, which is difficult to do in these uncertain times.”
Ideally, then, companies can benefit from accounting professionals’ counsel as soon as they acquire their first sizable amount of equity financing or when they may be looking at a product launch in the near future that will generate taxable income.
Smart Business spoke with Taylor to get an idea of the benefits life science companies can derive from working with accounting professionals.
Why is it so difficult for life science companies to raise funds today?
Capital markets have become less fluid recently. That makes it difficult for life science companies to raise debt or equity financing. Therefore, they have to look at cutting costs to extend the time period in which their cash will last. In the biotech area, they have a lot of creative equity or debt instruments that have been developed for financing because of their need to raise capital for R&D.
What challenges exist for life science companies from a tax-planning perspective?
On the tax side, life science companies must grapple with the concept of stock-based compensation for employees. Companies will incur problems in the area of stock options if they don’t evaluate the fair value of their common stock frequently — preferably annually. Other areas that affect life science companies from a tax-planning view involve acquisitions, net operating losses (NOLs) and initial public offerings (IPOs). For instance, if a life science company is about to be sold, e.g., through an M&A transaction, or by going public, it might want to look at its NOLs closely for ‘changes in control’ (Section 382 limitations).
How do losses affect tax planning for life science companies?
Life science companies frequently incur losses when they are doing R&D work. In such cases, it helps them to let accounting professionals look at their NOLs to advise them on how to work with their losses most effectively so they can be used to offset future taxable income. Additionally, there can be a limit to how much of those NOLs they can use if they have a change in control.
An additional concern on the income tax side is that issues arise when a company is starting to see product sales. There will be income tax considerations at that point. When companies become profitable they may not have to pay income taxes if they can offset taxable income with NOLs.
Can life science companies doing qualified R&D work get a tax credit for it?
Yes. They have to determine in this case if they are properly capturing whether the qualified expense they are claiming is truly an R&D credit. That becomes an important consideration when a life science company turns profitable. Companies should not wait for that to happen, because contemporaneous documentation is normally required to sustain R&D expenses and tax credits.
How do accounting professionals help life science companies?
They can help companies from the start-up phase to IPO. Accountants can close the books on a monthly basis, provide reports to the board of directors and investors about the company’s financial performance, and do audits when required, for example, when there is venture capital equity financing involved. Remember, parts of the equity transaction documents for the stock financing often require an annual audit.
Once a life science company turns public, accountants can do its public company audits and assist with other SEC filings. These services help life science companies avoid the pitfalls that can trap them if they try to do their accounting, tax planning and compliance themselves.
What pitfalls exist?
The accounting requirements for stock-based compensation, stock options, restricted stock, preferred stock financing or licensing agreements have a lot of complexity under GAAP. Consequently, there is some likelihood that life science companies would misapply the proper
On the tax side, they might forget to take certain important elections that are often done in a company’s early years. They might not capture R&D tax credits properly or consider capitalizing and amortizing R&D costs properly in order to extend the deductibility of those expenses. There is no need for life science companies to run those risks — or incur the costly penalties that can result if a company submits incorrect income tax returns to the IRS that might get audited. In such cases, they might have a tax liability or a tax penalty.
Scott Taylor is a partner in the assurance services practice and co-leader of the life science group with Burr Pilger Mayer LLP. Reach him at (650) 855-6882 or firstname.lastname@example.org.
Selling a business can be one of the most challenging tasks that business owners face. Before they start the process, they have to ensure they are truly ready to sell, lest they suffer a serious case of “seller’s remorse.”
Robert A. Ranallo, CPA/ABV, JD, CVA, CFF, a partner at Skoda Minotti, stresses that selling a business is a process that no one should go through alone.
“Entrepreneurs should rely extensively on professionals who have been through the process in the past and can relate the positives and negatives about selling a business,” says Ranallo. “Business owners must have a solid strategy in place that will benefit everyone involved in the process.”
Smart Business spoke with Ranallo to learn how to develop an effective exit strategy, find buyers, maximize the sales price for the seller and avoid seller’s remorse — all after answering the key question: “Am I really ready to sell?”
What exit strategies exist for owners selling their businesses?
Many options exist for selling a business. The key is to identify your objectives and then tailor your search for a prospective buyer to those with the requisite skills and abilities to ensure that those objectives are met. Potential buyers include unrelated third parties, family members, management, a group of key employees or in the right circumstances all the employees in an ESOP transaction. Absent a buyer, liquidation is always an option, but it is a last resort strategy. Liquidation deprives businesses of capturing goodwill, going concern or other intangible asset value.
Are there scenarios in which one strategy works better than another?
That depends on several factors, including the nature and complexity of the business, barriers to entry, the depth and qualifications of management, employees and/or family members, and the positioning and competitive landscape of the business within its sector. The best strategy is always structured around a realistic analysis of the strengths and weaknesses of the business. There may be no family members or employees who are qualified for or capable of owning and operating the business. In that case, a sale to a third party may be the preferred route. No matter what, the owners have to be realistic in terms of which strategy works best for them, and in virtually all instances, consultation with trusted advisers helps them gain a better overall perspective in this regard.
If owners sell or liquidate, how can they be sure they are getting the right amount of money for their business?
One way is to get an independent valuation of the business from a certified valuation analyst or an accredited business valuator. That gives the owners a working framework of value. This, in turn, is always impacted by prevailing market conditions. Owners often think the value of their business is higher than what a business valuation analyst will tell them. That is because owners have an emotional attachment to their businesses while valuators do not. The business valuation analyst will focus on benefit stream that prospective buyers would look at acquiring and then analytically determine what a prospective buyer might be willing to pay for that stream. An alternative approach would be to engage a qualified investment banker to help value and/or market the business.
Where can business owners look for buyers?
The universe of buyers is limited nowadays because of the lack of credit. Economically, we are in unprecedented times. Financing considerations aside, owners should look internally and externally for potential buyers. Internal buyers might include family members, management team members and/or employees. External buyers would typically include businesses in the same sector for whom the acquisition might include synergistic value or financial buyers who are making an acquisition purely for investment purposes. Competitors often are also good candidates. Going to market with the hopes of finding an external buyer is where investment bankers should be considered to identify candidates and run the process.
Who should be involved with the process?
At a minimum, the business’s attorney, CPA, board of directors and other trusted advisers who have worked with the owner should be involved. Other business associates, friends or acquaintances who have been through the selling process might be valuable members of the team. They will each have a different dimension to offer that is unique and will reflect their individual experiences, including some of the traps and pitfalls that may be encountered along the way.
What else should owners consider when selling their businesses?
‘Seller’s remorse’ is a primary consideration. Business owners can frequently sell their businesses and make more money than they ever dreamed. The day after they sell, however, two things happen almost without exception: the phone stops ringing and the owners have no place to go. That is often a difficult adjustment for business owners. In evaluating whether to sell, the owners must then ask themselves the most basic of all questions: Am I really ready to sell?
ROBERT A. RANALLO, CPA/ABV, JD, CVA, CFF, is a partner at Skoda Minotti. Reach him at email@example.com or (440) 449-6800.Robert A. Ranallo, CPA/ABV, JD, CVA, CFF
How to prepare your company for new tax changes
Recent economic conditions have ledto federal and state tax changesdesigned to provide tax breaks to companies as parts of stimulus packages. The changes range from simple oneslike increased mileage rates to complexrevisions regarding the expensing andcapitalization of property purchases.Whether they are simple or complex, onething is certain: the changes will change.
Because of this, Steven C. Hartstein,CPA, JD, a partner in the Tax Planning &Preparation Department of Skoda Minotti,advises companies to act quickly to takeadvantage of the tax breaks included inthe stimulus packages that hopefully willlead to an economic recovery.
“Allow the proper lead time to completeyour tax planning before the end of theyear, which isn’t that far off,” Hartsteinsays.
Smart Business spoke with Hartsteinabout the tax changes that will affectcompanies with this year’s tax returnsand how they can benefit from them nowand in the future.
Which federal tax changes will affect companies’ 2008 tax returns?
Congress passed several tax acts in 2008that affect companies. The mileage ratesincreased from 50.5 cents per mile effective Jan. 1 through June 30, 2008, to 58.5cents beginning July 1, 2008. This maychange again at some point, since oil prices have dropped precipitously recently. Itis something companies should keep theireyes on, as they should all tax changes.
A significant tax change involvesSection 179 of the Internal Revenue Code.IRC 179 allows taxpayers to elect todeduct the cost of certain types of property as an expense, rather than requiring theproperty to be capitalized and depreciated. In 2007, companies could expense$125,000 of their purchases, providingthey did not purchase more than $500,000worth of property. In 2008, that amount is$250,000, and the maximum annual qualifying property purchase amount is$800,000. That represents a substantialsavings for companies considering buyingproperty — but they have to acquire it by the end of this year to qualify. Just for therecord, that qualifying amount is scheduled to drop back to $125,000 in 2009 and2010, and down to $25,000 in 2011.
Congress did a second thing. Not onlydoes it allow companies to write off newpurchases, but it also provides a bonusdepreciation. That concept developedafter Sept. 11, 2001, when the governmentwas looking for ways to stimulate theeconomy. Congress provided a bonusdepreciation that allowed companies toaccelerate the depreciation allowed on anew purchase. The Economic StimulusAct, which passed in 2008, allows companies to deduct up to 50 percent of additional depreciation on qualifying property.
This means companies can actuallydeduct 60 percent of the total purchaseprice of most new tangible property aftertaking into account the bonus and normaldepreciation. In addition, if the companycan use the aforementioned Section 179,it may be able to deduct 80-90 percent ofthe new purchase. That is one ofCongress’ ways of stimulating the economy, by allowing companies to take amuch larger depreciation deduction onproperty purchases.
Are there any changes in Ohio law that willaffect companies?
There are a couple noteworthy changes.One applies to monthly sales tax returns.Now, they need to be filed online at OhioBusiness Gateway. Also, it is important torealize that, after 2008, Ohio will no longerhave personal property tax returns, andthe state is phasing out the franchise taxreturn. The state’s franchise tax return isnow 20 percent of the total tax liabilitythat would have been there under the oldfranchise tax rules. That is because threeyears ago the state replaced both the personal property tax and the franchise taxwith the Commercial Activity Tax (CAT),which has raised a great deal of revenuefor Ohio. So, beginning with the secondquarter of 2009, the CAT rises to its finaltax rate of .26 percent on all gross receiptsin excess of $1 million.
What happens to companies that are not prepared to deal with these new tax changes?
They will pay more taxes than they haveto, and they may miss out on certaindeductions and breaks that they areafforded. They should not have to doeither, if they prepare properly to takeadvantage of the breaks offered by thetax changes — and they should bepreparing every day of the year.
Should companies work with professionalfinancial advisers to help them account forthe new tax changes?
As state and federal tax codes becomemore and more complex, it is increasingly important for companies to stay current on the various tax laws. Companiescan utilize financial professionals’ knowledge and experience and let their ownstaff members work at running the company. The relationships that result savecompanies time, money and the aggravation of coping with the tax changes thatcan have adverse effects on their profits ifthey don’t stay current.
STEVEN C. HARTSTEIN, CPA, JD, is a partner in the Tax Planning & Preparation Department of Skoda Minotti. Reach him at(440) 449-6800 or firstname.lastname@example.org.
One of the hardest decisions business owners have to make in business planning is their form of entity.
Choices abound, such as a partnership, limited liability company (LLC), or sole proprietorship, and each has advantages and disadvantages, depending on the type of business.
Type notwithstanding, owners should not downplay the significance of choosing the entity that will best suit their businesses’ needs. For owners, making the right decision means taking the time upfront to identify precise goals and objectives and partnering with the best qualified professional advisers to help them through the selection process. Bypassing these important steps can expose business owners to myriad risks that can lead to adverse conditions for them and their companies.
Smart Business spoke with Michael R. Milazzo, CPA, MBA, a partner with Skoda Minotti, to learn more about how the selection of an appropriate form of entity can enhance business owners’ chances of success and improve their possibilities of selling their companies.
What is the connection between goals and objectives and the selection of an entity?
Form of entity has a large number of implications for a business. It affects legal liability, current taxation, the type of tax forms companies are required to file and owners’ exit strategies. That’s why it is important for owners to carefully think about why a specific entity is best for them, rather than just pulling a structure out of the proverbial hat.
If one entity selection doesn’t work out, can owners change it?
Generally, a company can change its form of entity at any time. But, depending on the original form of entity, there could be significant tax consequences associated with a change. For example, if a business opens its doors as a C corporation, which is a taxpaying entity in itself, and changes to an LLC, which in most cases is not a tax-paying entity in itself, but a flow-through entity in which all the income flows through to the individual members on to their individual tax returns, there will be differences in how the entity is taxed. Moreover, there could be significant additional tax incurred by the C corporation from the change because the tax rules treat the change as a deemed liquidation of the C corporation. Nevertheless, companies do change entities frequently for a variety of reasons, such as to alleviate administrative burdens or to accommodate their future exit strategies.
Does a company’s form of entity make a difference when it is involved in the buying or selling process?
Definitely. Consider the opposite forces that are at work in a typical M&A transaction. In most cases, buyers want to purchase assets because they want to limit their exposure to the target’s liabilities and be able to write-off the excess purchase price via amortizable goodwill. On the other hand, sellers want to sell stock because they want to generate long-term capital gains, which are currently subject to favorable individual tax rates. As a result, the form of entity has a significant effect on the buying and selling process.
What it boils down to is that a flow-through form of entity (i.e., partnership, LLC, or S corporation) is generally better in the selling process because these entities are not subject to tax at the entity level. Therefore, it is possible to structure a transaction with a flow-through entity that satisfies the goals of the buyer and seller — amortizable goodwill for the buyer and long-term capital gain for the seller. The C corporation form of entity is not usually a favorable structure for an asset sale because the C corporation is subject to entity level taxes, and the individual shareholders are subject to tax again upon distribution of the funds from the sale. Owners who recognize the importance of form of entity early in their formation process can improve their exit strategies, which can result in increased after-tax proceeds from a sale.
What risks do entrepreneurs face when they do not devote the necessary time to selecting a form of entity in their business planning?
One significant risk is the potential for personal liability. Owners who offer products or services that can result in personal liability should be extremely careful in choosing a form of entity and must involve their corporate counsel in the decision. Likewise, owners of entities that are very profitable and choose C corporation status simply because it seems like a good choice at the time can run into problems when they try to sell. Again, buyers generally want to purchase assets. That means the C corporation seller can lose over 50 percent of the consideration just in taxes if the business is not structured properly on the front end. Consequently, the business owner may find herself in a position where she wants to sell the company, but finds that the tax ramifications are too high. That can happen when owners do not structure their businesses viably up front.
One of the best ways for business owners to avoid risks like these is to work closely with professional advisors when choosing a form of entity — and get them involved early in the business planning process.
MICHAEL R. MILAZZO, CPA, MBA, is a partner with Skoda Minotti. Reach him at (440) 449-6800 or email@example.com.
You’ve heard the buzzwords during this presidential campaign year — universal health care, individual mandate, the uninsured, the underinsured, and so on. As candidates draw up their plans and big businesses lobby to lower their costs, small business owners are struggling to keep their employees insured and their doors open.
“Small businesses have seen a staggering 70 percent cost increase in health insurance in the last five years, making it unaffordable for more than half of small businesses with 10 or fewer employees,” says Steve Millard, president and executive director of the Council of Smaller Enterprises (COSE).
“The cost of health insurance is threatening the very existence of small business,” adds Millard. “In an economy that depends on small business to create all new jobs, the current state is simply not sustainable.”
But, there is hope — scenario planning, a new approach that could serve as the launch pad for a more informed national debate.
Smart Business learned more from Millard about COSE’s health care scenario planning effort and the changes that must happen regarding health care and small businesses.
In a nutshell, what led us to the current state of the health care system?
For the last 60 years, the system has developed expectations of unlimited care and boutique services primarily on the tab of employers or government. Putting people in charge of making decisions for which they reap benefits or accept consequences is key to reducing costs — and long overdue. After all, as consumers, we don’t let other people make decisions for us about buying a house or a car. Why should we let someone else make a decision regarding our health and our health care?
Today, the health care system is fundamentally broken, and we’ve concluded that no less than a complete overhaul will suffice.
What specific changes to the health care system should be pushed?
We’ve concluded that change must occur in two major areas no matter what political party wins the presidency or whose plan takes center stage. The first is the health care marketplace itself. We need vast improvements in the way the health care marketplace operates; for example, the development of an IT infrastructure that can make information about provider quality readily available to consumers. Availability and transparency of data can lead to improvement in care, reduction of waste and inefficiencies, improved prescription accuracy and service/cost transparency to consumers.
Secondly, the consumer mindset must change. We must take charge of our own health, starting with avoiding to the extent possible the three biggest cost drivers — obesity, smoking and depression. We must also take an active role in making the system work through responsible use of health care. By making better decisions, such as not using emergency rooms for primary care and avoiding lifestyle prescription drugs, we as consumers can make a significant impact.
What is ‘scenario planning’?
Scenario planning is the process of bringing together experts and stake-holders, identifying large uncertainties, and envisioning potential scenarios or futures that can play out down the road.
Rather than advocating for a specific solution, we engaged some of the best minds in the country and took this new approach to look at the issue in a comprehensive way. Our experts included representatives from national and regional organizations like The Leapfrog Group, The Cleveland Clinic, University Hospitals, Michigan and California small business groups, big insurers, academics, big businesses, former government policy makers and small business owners. Our goal is to envision potential futures in health care in 2015.
What conclusions or solutions have come from this process?
This process did not result in any one specific solution — rather, it provides a glimpse at the various issues that must be considered in any effort to reform the health care system, and one thing is clear: comprehensive reform of the U.S. health care system is no longer optional. The hemorrhaging has gone on far too long for an incremental, or band-aid, approach to be sufficient or acceptable.
STEVE MILLARD is the president and executive director of the Council of Smaller Enterprises (COSE), one of Ohio’s largest small business support organizations. Comprised of more than 17,000 members, COSE strives to help small businesses grow and maintain their independence. COSE has a long history of fighting for the rights of all small business owners, whether it’s through group purchasing programs for health care, workers’ compensation or energy, advocating for specific changes in legislation or regulation to benefit small business, or providing a forum and resource for small businesses to connect with and learn from each other.
In the 1990s, strong economic growth out-paced the rate of growth in the nation. That prompted an increase in demand for recruiting/staffing firms that supply direct-hire recruitment to their clients and temporary help services to fill short- or long-term positions during peak seasons, absences, vacations and medical leaves. For nearly 15 years, there has been an increasing demand for such temporary help services. According to the American Staffing Association, at least 90 percent of companies in the U.S. use some form of temporary staffing. The demand for temporary help persists because staffing services have proved invaluable in helping businesses cut costs while still maintaining a functional employee base.
Smart Business spoke with Cindy Biter of Delta Dallas to learn more about how temporary staffing firms can send employers the candidates they need and prepare those candidates to function successfully with employers, and how employers and recruiting firms can work together to satisfy current staffing needs.
How do temporary staffing firms benefit companies?
In a constantly fluctuating economy, temporary help services can provide qualified workers on short notice and on an as-needed basis by matching an employer’s work-flow needs to economic ups and downs. Temporary help services can offer a variety of short- and long-term savings for businesses and organizations. These could include: controlling recruitment costs, saving on benefits and taxes, and even managing long-term personnel costs. It is important for an employer to partner with a recruiting firm that can aid in the evaluation and streamlining of present recruitment processes and costs.
What are the primary criteria when selecting a recruiting firm to fill temporary positions?
Let’s face it, companies look to partner with recruiting services that have their best interest at heart. The primary concern when searching for a recruiting firm is to ensure its screening process will bring you the best temporary help available. It is important to make sure that firms are screening candidates thoroughly. Each firm has its own procedural policies for sourcing candidates, and you should deal only with firms that have thorough criteria for both their recruiters and the candidates that are sent to you.
1. Is your recruiter certified in temporary staffing? (Certified Temporary Specialist) 2. How does the firm ensure the temporary candidates sent to you have the skills you need? (How does the firm test candidate skill sets?) 3. Does the firm guarantee the quality of its temporary employees? (Does it monetarily stand by its screening process?)
What criteria do staffing firms look for when selecting well-qualified temporary employees to present to companies?
Reputable staffing firms will adhere to a strict set of tangible and intangible attributes in their hiring criteria. Other than the obvious assets, such as punctuality, a skill set compatible with the job requirements and a professional appearance, there are a number of intangible items the staffing agency looks for when selecting temporary employees. Clients often report that it is, in fact, the intangibles that count when it comes to temporary employees. For employers, temporary employees who demonstrate positive attitudes and have a strong work ethic set themselves apart from ordinary workers who are simply looking to the short-term payday at the end of the week.
How important is a temporary employee’s attitude in the hiring process?
Quite possibly, the No. 1 attribute of a good temporary employee is attitude. A good attitude will carry a candidate through the toughest situations and potentially to a full-time opportunity. Even if the employee doesn’t like an assignment, optimism and a proactive attitude will help him or her stand out from the crowd. Every temporary assignment is an opportunity for an employee to learn new skills. Even if employees are not ultimately offered a full-time position, they can still walk away with expertise that will help them in the future.
Do temporary employees gain anything from their assignments?
Sure. Staffing firm personnel encourage candidates to see the networking opportunity in every temporary assignment. They may not be offered a full-time job with an employer that temporarily utilizes their talents, but good news travels fast. If temporary employees perform well for a company, their supervisors will give positive feedback to the staffing agency.
Should temporary employees maintain contact after their jobs are completed?
Temporary employees should stay connected with their staffing firm and specifically their staffing professional throughout their job search. If temporary employees stay connected to their recruiter, it is an indication of communication skills, diligence and professionalism. All of these are qualities a recruiter will feel confident presenting to its clients.
CINDY BITER is vice president of business development with Delta Dallas. Reach her at (972) 788-2300 or firstname.lastname@example.org.
Preparing tax forms is a job few individuals or business owners enjoy. Yet, once a year, like clockwork, we have to do it. Some people put it off so long that they find themselves applying for extensions every April. That may be as much a problem of lack of preparation as it is procrastination — and it can be avoided.
All taxpayers have to do is prepare adequately for the inevitable form filing by keeping careful records all year, and their tax tasks will be less onerous. The filing process will flow along more smoothly, and careful preparation may help taxpayers avoid penalties and audits.
Smart Business spoke with Steve Gross, a principal with Skoda Minotti, to get a few tips on what tax records to keep, in what form they should be kept, how long they should be retained and how taxpayers will benefit from staying ahead of the game.
How do taxpayers benefit from keeping and organizing records for tax purposes?
Careful record keeping simplifies the tax return preparation process. The more organized a taxpayer is, the less time it takes to prepare the returns, and the less costly it becomes for people who work with tax preparers. Remember, the longer it takes to prepare a return, the more money it is going to cost to have it prepared. That applies to individuals and business owners alike because, as the adage goes, ‘Time is money.’
What types of records should taxpayers retain from year to year?
One key document is last year’s return and the information it contains. This is helpful for individuals and tax preparation professionals who can use them as a guide for this year’s forms. On the income side, you should keep 1099s that show dividend and interest earned as well as brokerage statements. W-2 forms provided by your employers not only reflect income but also federal, state and local taxes withheld. If you invest in partnerships or S corporations, you should retain the K-1s reflecting your share of income and deductions. On the deduction side, you should keep 1098 forms that reflect interest paid to banks as well as real estate taxes. You should also keep outof-pocket medical receipts, college tuition receipts and employee unreimbursed business expenses.
Should taxpayers keep records of donations to charitable organizations?
This is a hot topic. For calendar years beginning in 2007, no deduction is allowed for contributions of cash, checks or other monetary gifts, regardless of the amount, unless the donor maintains either (1) a bank record, such as cancelled checks or (2) a receipt, letter or other written communication form the donee. Contributions of $250 or more must be substantiated by written acknowledgement from the charitable organization. There are other special rules for non-cash contributions, such as clothing and furniture, in excess of $500, and more stringent rules relating to the donation of used vehicles to charity. You may want to seek the advice of a tax professional in these cases.
Is the manner in which tax records are kept and stored important?
Most importantly, organize the data and store your tax records in a safe place. In the event you receive the dreaded letter from the IRS that you have been selected for audit, not only will you save time but any anxiety that you may have will be reduced knowing you have the records they request. For the current year’s taxes, I suggest a file folder or large envelope to keep receipts received during the year. This makes it easy to gather the date needed in order to prepare the tax return.
What consequences might befall taxpayers who don’t keep accurate tax records?
Tax authorities may disallow deductions during an audit if the proper documentation is not available to them. This would include such items as rental property expenses and unreimbursed employee business expenses. This will cause additional taxes due as well as penalties and interest. This also may cause an agent to decide to audit a previous or subsequent year. Another reason for keeping accurate tax records is that this ensures all income has been reported and that no deductions have been omitted.
For how long should taxpayers keep records?
I tell clients to keep their tax records for a minimum of four years and a maximum of six years. Generally a tax return is open for audit by the Internal Revenue Service for three years from the original due date of the return or the date it was actually filed, whichever is later. An exception to the general rule stated above is if a taxpayer omitted 20 percent or more of his or her income. Then the tax return would be open for audit for a period of six years.
STEVE GROSS is a principal with Skoda Minotti, which is based in Mayfield Village, Ohio. Reach him at (440) 449-6800 or email@example.com.
Companies seeking candidates to fill open positions can do the hiring themselves or work with staffing firms to complete the process. If they choose the latter route, they have options. One is to work with firms that employ certified staffing professionals, rather than those that do not. There may not be any significant differences in the fees charged or the time consumed in the hiring process either way. However, there may be some in the quality of the services provided. That is because certified specialists offer significant benefits to clients that are a step above those provided by their noncertified counterparts.
Smart Business spoke with Dana Lee, CTS, to gain an understanding about the certification process that staffing specialists undergo and how the certification designation can benefit hiring companies.
What is the purpose of certification in the staffing industry?
Viewed as a whole, certification is a means of self-regulation for the staffing industry. On the individual level, it allows staffing professionals to expand their expertise in employment law, changing regulations, best business practices and ethical standards. Both of these purposes translate to more efficient services from staffing firms. Remember, certification is as important in the staffing industry as it is in any other professional field. For example, people who retain a professional to calculate their income taxes might be better off hiring a CPA rather than someone fresh out of an accounting class in college. That professional certification makes a lot of difference. The same holds true in the staffing industry.
How do staffing professionals earn their certifications?
After the initial required classroom training and testing, certification is ongoing. Staffing professionals are not only responsible for attaining initial certification but maintaining it as well. Certification can be earned through various national professional associations, such as the National Association of Personnel Services and the American Staffing Association. NAPS awards two designations of certification: the Certified Temporary Staffing Specialist (CTS) and the Certified Personnel Consultant (CPC). The ASA grants a Certified Staffing Professional Designation to enhance professionals’ competency and knowledge of labor and employment law.
Should clients look for certification designations when retaining hiring firms?
Actually, the firm you are working with will not hold the certification. It is the staffing professionals in the firm that are responsible for attaining their certification. Therefore, clients should be looking at the certified staff members’ profiles for certification designations when retaining staffing firms. You can begin by asking your staffing professional if he/she is certified. My suggestion is to deal exclusively with firms in which staff certification is a key objective. At Delta Dallas, we have found that getting and maintaining the knowledge required for certification makes a big difference in the day-to-day operations of the firm as a whole. In the end, certification becomes an asset to the staffing professional, the firm, and, ultimately, their clients and candidates.
What are the benefits of working with certified staffing professionals?
Above all, clients know they will be working with people who are dedicated to their profession. They have to earn their designations through rigorous training programs, testing and continuing education courses, so they are not likely to take lightly the responsibilities that are inherent to certification. Also, certified staffing professionals stay current on the latest trends, employment laws, human resources practices, etc., regarding job markets. Staffing specialists who have attained certification are generally among the most experienced personnel in the industry, in large part because of their dedication. Individuals who spend the time and effort to earn their certifications are not likely to leave their professions. So, in the end, you have a staffing professional who not only has experience but also has pertinent knowledge regarding the intricacies of the hiring process.
How can certified staffing specialists help clients?
Certified specialists can provide service at a deeper level than noncertified staffing personnel. Certified specialists can take on the role of a consultant. They are qualified to do more than simply fill an order, they can help their clients understand the relevant issues associated with the positions they are filling. This could include issues like EEOC regulations, best hiring practices, employment trends, ADA questions, FMLA concerns and more. A certified specialist will take all of these regulations into consideration when negotiating on behalf of a client. The client provides the requirements of the position and the certified specialist can guide his or her client through the hiring process in light of regulations and trends in each of these areas.
DANA LEE, CTS, is a senior associate with Delta Dallas and TAPC’s Top Producer for 2006. Reach her at (972) 788-2300 or firstname.lastname@example.org.
As recently as 12 months ago, it was not difficult for companies to find employees willing to work on a temporary basis. At the time, it did not matter what the salary was or how long the assignment would last. Temporary job opportunities were limited, and there was little risk that the temporary would leave for a full-time job. With a thriving job market, things have changed and temporary employees now have multiple temporary job opportunities from which to choose. Consequently, recruiting firms and companies that rely on supplemental work forces are having to educate themselves on how they can attract and retain sought-after temporary employees.
Smart Business talked with Michelle Cook, vice president at Delta Dallas, to learn more about how to attract and retain temporaries in this market and how companies and staffing firms can adapt to it.
How do companies benefit from hiring temporaries?
Some of the benefits include flexibility, reduced liability, and time and cost savings. Whether it is a temporary job lasting a few hours or several years, using a temporary allows companies to adjust their work forces to meet their ever-changing needs and to remain fully staffed during busy times. Since temporary employees are fully employed by the staffing firm, companies are not financially responsible for their unemployment or workers’ compensation claims. That translates into reduced liability and costs for them should problems arise. Companies also save time by working with a staffing firm to design a screening process that fits their hiring strategies. It might include personality tests, credit checks, background checks, drug tests, and/or software evaluations. As a result, companies will only see qualified candidates saving them time from going through resumes and interviewing unqualified candidates.
How can companies attract and retain temporary employees to be competitive in this tightening labor market?
In order to attract temporary employees, companies need to know why someone would want to work for them and should be able to communicate the reasons clearly. Those reasons are typically the same ones that attract permanent employees. Pay and perks are high on the list. Regarding pay, temporaries are becoming more educated on their market value. The pay of a temporary position should be in line with the salary the company would pay for the position if it were full time. Taking the annual salary for the position and calculating it on an hourly basis is a practical approach. In the current employment market, candidates are shopping around, so perks such as paid parking, casual dress codes or even free lunches are attractive.
Should companies interview for temporary positions?
If your company is requiring interviews for temporary positions chances are you are losing out on top talent. Those candidates will take other temporary positions that start immediately and do not require interviews. The person you should be interviewing is your staffing firm or H.R. Department. Making sure that they have a clear understanding of your needs and expectations will result in a successful selection for that position. After all, that is what you are paying them for.
Once temporary employees are aboard, companies are now faced with ways to retain them. It is always a good idea to do a modified orientation for them and cover items like parking, bathroom and break room locations. Anything you can do to make a temporary employee feel more at home will benefit you greatly.
Is mentoring more important than training?
With retention as the ultimate goal, training and mentoring are equally as important. Companies need to make sure they clearly define the goals and objectives of the job, thereby setting the expectations from the beginning. This will help ensure that companies get the best ROI. Providing a mentoring program can be a nice addition. This means designating someone in the company to whom the temporary employee can go to for guidance and answers to any questions they may have.
Remember, attracting and retaining qualified temporary employees is all about supply and demand.
MICHELLE COOK is vice president of Delta Dallas. Reach her at (972) 788-2300 or email@example.com.
The growing number of people in the United States who speak a language other than English as their first language has caused many business owners to consider establishing “English-only” policies in their workplaces. Such policies are justified as long as they are implemented for nondiscriminatory reasons and to satisfy a business necessity.
But such policies are often inadvisable. Employers must make sure that the business reasons for English-only policies justify the burdens placed on individuals because of their language skills or national origin. And employers should take care to design their policies with specific business needs and court guidance in mind.
Smart Business spoke with Jo Vorpahl of Porter Hedges LLP to learn how employers can design and implement legally acceptable English-only policies, when such policies are advisable, who can assist them in the process, and how they, their employees, and their customers can benefit from them.
Can an employer implement a policy that requires employees to speak English on the job?
Generally speaking, English-only rules that apply at all times in a workplace are considered suspect under the law and raise national origin discrimination concerns. Court cases arising under federal anti-discrimination law have provided guidance in determining when such language restrictions are appropriate. Employers should not implement an English-only policy until they have thought it through carefully. But as long as a policy is carefully drafted and consistently applied, its existence and the circumstances when English is required are made known to all employees, and the policy addresses an articulable business need, it should withstand challenge.
How can attorneys help employers decide if English-only policies are advisable?
The best advice attorneys can give employers regarding English-only policies may be to avoid them unless they are absolutely necessary to the business. If employers do want to develop such policies, attorneys can help in several ways.
One such way is to educate employers about workplace situations that justify English-only policies and EEOC guidelines that influence language-related terms and conditions of employment.
Another is to draft policies that address business necessity but do not disparately affect employees on the basis of race or national origin.
A third is to insure that an employer’s policy remains in step with any changes in the law.
And, of course, attorneys can defend employers should legal challenges to their policies arise.
What are some of the circumstances in which English-only policies are permissible?
Some of the typical circumstances include communicating with customers, coworkers and supervisors who speak only English; addressing emergencies or other situations in which workers must speak a common language to promote safety; engaging in cooperative work assignments in which an English-only rule is needed to promote efficiency; and enabling a supervisor who speaks only English to monitor the performance of employees whose job duties require communication with coworkers or customers.
Again, the key is business necessity. If your business needs require that employees speak English, the policy is probably justified under those circumstances; if they do not, an English-only policy is likely neither warranted nor advisable.
How can I decide whether to adopt an English-only policy?
An employment attorney can discuss with you the circumstances that cause you to believe such a policy might be warranted and assist you in preparing and implementing a policy that is tailored to your specific business needs.
JO VORPAHL is a partner with Porter & Hedges LLP. Reach her at (713) 226-6601 or firstname.lastname@example.org.