Succession PlanningGary N Cooper CPA PC and Forward Results, LLC www.garycoopercpa.com
Succession Planning•Business point guard.•Understanding of processes and procedureswithin the business.•Understanding of clients human resources.•Understanding of financial position.•Understanding of results of operations.•Understanding of cash flow issues.•Understanding of company capitalization orlack of.•Overall market, industry and economic issues.
Succession PlanningAnalysis of Market and Industry• Does your client have a succession plan? • Is it in writing • How defined is the plan?• Are they in a market with potential buyers?• Options for succession: • Family members • Employees • Third party.
Succession PlanningOrganization of Financial Data: Balance sheet cleanup Understanding of inventory levels Accounts receivable - collectable Fixed assets - detail/market value Do all of the above compare and agree with the underlying supporting documentation?
Succession Planning Capitalization Is the business well capitalized? Have they used short-term money to purchase long assets? Is this a good opportunity to recapitalize the company with long-term debt? Do they have minority shareholders or partners that need to be bought out?
Succession Planning Income Statement Need for business segments? Classes if QuickBooks. Potential need for multiple entity structures or separation strategies. Common size analysis Year-to-yearcomparatives Industry comparatives Revenue recognition defined and corrected for future growth. Percentage of completion Accrual / cash.
Succession PlanningEntity Structure Double taxation C- Corporation Minority shareholders Take out before transaction Built in gate analysis Conversion to S-Corporation Separation of hot assets. Building Equipment
Succession PlanningM&A (mergers and acquisition) Does the detail underlying documentation compare and agree to amounts reported on the financial statements. The importance of non-financial data. MD&A Forecast to actual Operating data Month-to-month analysis. Balance Sheet and Income Statement Forecast to actual analysis. Source document build up for total support
Succession PlanningFinancial audit The value of having a financial audit to increase the market place of potential purchasers. Reduces the amount of due diligence that will be performed by the purchaser. Creates creditability with all financial data. Third party support for amounts reflected in the financial data.
Succession PlanningTaxes Double taxation. Current filings are correct. General ledger compares to tax returns. How aggressive has your client been in deducting personal expenses? M1 analysis book to tax differences. Are they adhering to current tax laws?
Succession PlanningTax Ramifications – the transaction Asset allocation. Total recognition or installment sale. Computing basis. Short tax year. Asset versus stock purchase Comparing deprecation, recapture, and the asset allocations number of years of depreciation versus good will. PV analysis on savings.
Succession PlanningConclusion Would you consider using a team ofprofessionals to assist you with your clientssuccession needs?Succession planning could last up to 10 years sothe team of professionals could assist withincreasing client cash flow by implementingprocesses and procedures in all aspects of theclients business.Questions or comments?
Succession PlanningConclusion Have you ever discussed succession planningwith your client?How close are you to your clients financialrecords.Do you have regular meetings with your client todiscuss their financial position and results ofoperations?Do you have a clear picture of their goals andobjectives?Do they understand the value of their businesswith our without their involvement?
Gary N. Cooper CPA PC1703 W. 12st StreetHouston, TX 77008713-243-8590www.garycoopercpa.comwww.forwardresults.com