columbus Archives - Whalen & Company, CPAs

Factors to Consider in Selling a Restaurant

bberry on May 15, 2013

Selling a restaurant is a serious undertaking. As a hardworking owner/operator, the decision to sell your business is your opportunity to cash in on all of the time, money, effort and improvements you’ve put into the restaurant over the years. Selling a restaurant is your final payday for that location, so make it count!

Long-term planning is key to any successful business sale. The more you prepare, the more successful the outcome is likely to be. While every transfer of business is unique, owner/operators should consider these items in planning for a sale:

Review your P&L Opportunity Report. There is no better way to increase the selling price of your restaurant than to run an optimal P&L. If you can better manage the restaurant costs, you will add to the restaurant’s cash flow. A prospective buyer is going to purchase your restaurant based on the future cash flows of the restaurant. The higher the cash flow, the higher the selling price. You should also get the cost controls in place and have P&L reports that support this position for at least one to two years. Taking these steps will give you a better opportunity to realize a higher selling price.

How many years do you have remaining on your franchise term? If it is less than 10 years, a corporation may give the prospective buyer a new 20-year franchise term. If it is more than 10 years, the prospective buyer usually takes over your remaining franchise term. A term of 20 years would typically offer more security to the prospective buyer than a term of closer to 10 years and could result in a higher selling price. So time your sale accordingly.

Money is cheap right now and the brand is strong. You should have no shortage of prospective buyers. There is also a long list of banks that make loans to franchisees at near record-low interest rates. So when you combine the low cost of borrowing money, the availability of banks willing to make loans, and the number of strong operators looking for growth opportunities, you have the recipe for maximizing your selling price.

In our next newsletter, learn about considerations for making a “quick sale,” when your planning horizon is limited.

If you have questions about any of these suggestions or would like additional information, contact Bruce Berry, Director. Bruce works closely with franchise restaurant owner/operators.

Review ATRA for Possible Tax-Saving Opportunities

bberry on May 15, 2013

It’s been about six months since Congress passed the American Taxpayer Relief Act (ATRA) of 2012. The legislation prevented many of the tax hikes that were scheduled to go into effect in 2013 and retained a number of tax breaks that were scheduled to expire. On the negative side, individual income tax rates rose with the top rate increasing from 35 percent to 39.6 percent.

While much focus was given to ATRA at the start of the year, it’s probably a good time to review some of the bill’s provisions and determine if there are still opportunities for you and your business:

Section 179 Expense Deduction – Section 179 Expense was increased to $500,000 for both 2012 and 2013 (2012 was previously scheduled to be $139,000, and 2013 was only $25,000)

Bonus Depreciation – Bonus Depreciation was extended through December 31, 2013. This will allow the business to depreciate 50 percent of the asset cost in 2013 for equipment, fixtures, furniture, signage and land improvements.

Luxury Auto Depreciation – $11,160 is now allowed for first-year depreciation for luxury autos placed in service in 2013.

Restaurant Improvements Depreciation – The 15-year write-off for “qualified restaurant” improvements was reinstated and extended through December 31, 2013.

WOTC – The Work Opportunity Tax Credit was extended through December 31, 2013. The maximum credit is generally $6,000, but can be as high as $12,000, $14,000, or $24,000 for qualified veterans depending on service connected disability, amount of time unemployed and when the period of unemployment occurred.

Enhanced Deduction for Food-Inventory Donation – This deduction was reinstated and extended through December 31, 2013. The donation must be wholesome and be for the ill or needy. An owner/operator can get 150 percent of their basis in the donation as a charitable contribution.

Empowerment Zone – If your restaurant is located in a Federal Empowerment Zone, you can potentially qualify for a tax credit. The tax credit was extended through December 31, 2013.

If you have questions about any of these provisions or would like additional information, contact Patrick McClary, Director/Tax Department, or Bruce Berry, Director/Accounting Department.

Be prepared for the health care act’s “play or pay” provision

rlewis on May 7, 2013

The Patient Protection and Affordable Care Act of 2010’s shared responsibility provision, commonly referred to as “play or pay,” is scheduled to take effect Jan. 1, 2014. It doesn’t require employers to provide health care coverage, but it in some cases imposes penalties on larger employers that don’t offer coverage or that provide coverage that is “unaffordable” or that doesn’t provide “minimum value.”

A large employer is one with at least 50 full-time employees, or a combination of full-time and part-time employees that’s “equivalent” to at least 50 full-time employees. The nondeductible penalties generally are $2,000 per full-time employee.

Although the shared responsibility provisions don’t take effect until 2014, employers will use information about the workers they employ in 2013 to determine whether they’re subject to the provisions and face the potential for penalties in 2014. The rules are complex, so contact us today to learn how they may affect your business and what steps you can take to avoid, or at least minimize penalties.

Hearings Taking Place on Legislation to Simplify Ohio’s Municipal Income Tax System

rlewis on May 7, 2013

Proponents Emphasize the Goal Is to Reduce the Cost Burden on Small Businesses

Proponents and opponents of legislation seeking to establish a uniform, cost-effective set of rules and regulations governing the municipal income tax system are expressing their views before Ways and Means Committee members of the Ohio House. Hearings are continuing during the week of May 6.

House Bill 5, the latest legislative effort to simplify the state municipal income tax system, was introduced in January. It has support from business groups, including the Ohio Society of CPAs, a coalition of organizations and individual taxpayers. They contend that the administrative burden and costs for many Ohio businesses impedes them from creating more jobs across Ohio.

Ohio is just one of a few states in which municipalities impose an income tax on individuals and businesses. Those businesses must track and comply with as many as 600 different sets of tax ordinances, depending on where they conduct business.

The proposed legislation would establish a more uniform municipal tax code that all municipalities assessing a tax on businesses or individuals would follow, including a uniform definition of income, withholding, penalties and interest, and all related rules and regulations other than tax rate and reciprocity rate.

The bill creates the Municipal Tax Policy Board charged with creating a uniform form. It may also recommend rules. The board will be comprised solely of seven city representatives with no business or taxpayer representatives.

Five of the seven members are required to be local tax administrators. Of the two remaining members, one must be an employee of the Regional Income Tax Authority (RITA) and one must be an employee of the Central Collection Agency (CCA). Both RITA and CCA are agencies that currently collect municipal taxes for a number of cities and villages throughout Ohio.

In addition to unifying some of the definitions for income and deductions, the bill also requires not counting anything less than a half-day as a workday for income tax purposes. It also would expand the number of days that someone must work in a community before he or she is liable for any income tax there. Currently, the threshold is 12 days per year. The proposal would expand that to 20 days.

Opponents, largely from cities, insist that the cost of compliance with the current municipal tax laws is overstated. Proponents contend that Ohio’s current municipal tax system presents compliance problems for individual and business taxpayers, costs existing employers resources that could be redirected to growing their businesses and creating more jobs, and puts Ohio at an economic disadvantage for attracting new employers.

The proposed legislation does not call for a centralized collection system, nor is it looking to reduce the amount of tax that individuals and businesses must pay.

Two Clients Recognized for Promoting Health of Their Employees

rlewis on April 23, 2013

Two clients were recognized in Columbus Business First’s inaugural Healthiest Employers of Central Ohio Awards Program. Award recipients offer health and wellness initiatives that promote a culture of staying active, eating right, managing stress and offering preventative disease screenings.

Hondros College was honored among the medium employers (101 to 500 employees) and Portfolio Creative was recognized among the small employers (two to 100 employees).

Employees of the companies who applied to participate in the awards program completed a health assessment survey and the company completed a questionnaire that covered six key areas of workplace wellness: culture and leadership; commitment, foundational components; strategic planning; communications and marketing; programming and interventions; and reporting and analysis.

All of the award recipients were featured in a supplement to the March 29 Business First.

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News & Tech Tips

Factors to Consider in Selling a Restaurant

Review ATRA for Possible Tax-Saving Opportunities

Be prepared for the health care act’s “play or pay” provision