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UHY LLP News Stories - July 2012 |
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Earn-Out Considerations--Do They Seal the Deal?
By: Aaron Witalec
Earn-outs are becoming more popular as part of the structure in the sale of a company. They're particularly fitting in the sale of early-stage companies where historical profits may be low, potential performance is promising and owners are themselves a significant business asset. However, earn-outs are being used increasingly in the purchase structure of mature companies-especially entities that have weathered the downturn and are experiencing an uptrend in sales and profitability. This uptrend sometimes leads to discrepancies in what the buyer and seller deems is fair value.
An earn-out generally consists of additional post-close payments to the seller that are contingent upon the achievement of future events and serves as a particularly useful tool to facilitate the consummation of transactions. Overall, sellers feel they are receiving appropriate value for their business and are able to participate in upside after closing. While on the other hand, buyers feel they are protected from overpaying and split the future performance risk with the seller. This structure is most often proposed by the acquirer, who is motivated to conserve cash, reduce the need for debt, mitigate risk and incentivize the seller to tie a portion of the purchase price to pre-defined performance targets. While the advantages to a buyer are obvious, contingent consideration runs counter to perhaps the seller's most important financial objective of the deal-which is to achieve the highest possible price with the most cash up-front.
Earn-outs are rather simple in theory and quite useful to bridge a valuation gap, although their presence can create an antagonistic relationship due to the misalignment of goals and the broad range of interpretations. Moreover, earn-outs are a frequent source of litigation after closing and it is important for the seller to consider various elements that can be put in place prior to closing the deal to prevent litigation during the earn-out period. Earn-outs can be both legally and financially complex. Addressing the following points can help you avoid certain pitfalls: definition, accounting policies to be used, audit rights, term & timing, carryforward & cap, use of escrow, protective covenants and beneficial tax planning.
For more information or questions on this topic, please contact your professional at UHY LLP in Farmington Hills (248) 355-1040 or Sterling Heights (586) 254-1040 or visit us on the Web at uhy-us.com.
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Identifying Phishing Attacks
By: John Neall
Phishing is when someone sends an email to you posing as someone else. But what elevates it to the category of "phishing" is when the message body contains links that attempt to get you to give up information (passwords, credit card numbers, personal information, etc.) or attempts to "trick" you into installing malware or a virus. Because it looks legitimate, the email convinces you to click on a hyperlink pointing at somewhere you don't want to go. If the link you are being asked to click doesn't match up with what you would normally expect, you can be fairly certain that the email is a phishing attack. This can be particularly harmful in a company setting where individual computers share multiple interoffice networks. Here are some quick tips to help identity these attacks:
- Hover your mouse over any link in the email (but don't click!): You should see a pop-up with the actual address of the hyperlink. If you don't, then you can be fairly certain this is a phishing attack.Sometimes the attacker will mix in valid hyperlinks with invalid ones or send a hyperlink with a misspelled URL. Be sure to look very closely at the pop-up before you can safely decide to click on it.
- Verify https (SSL): Whenever you are passing sensitive information such as credit cards or bank information, make sure the address bar shows "https://" rather than just "http://" and that you have a secure lock icon at the bottom right hand corner of your Web browser. You can also double-click the lock to guarantee the third-party SSL certificate that provides the https service. Many types of attacks are not encrypted but mimic an encrypted page. Always look to make sure the Web page is truly encrypted.
- Don't enter sensitive or financial information into pop-up windows: A common phishing technique is to launch a bogus pop-up window when someone clicks on a link in a phishing e-mail message. This window may even be positioned directly over a window you trust. Even if the pop-up window looks official or claims to be secure, you should avoid entering sensitive information because there is no way to check the security certificate. Close pop-up windows by clicking on the X in the top-right corner. Clicking cancel may send you to another link or download malicious code.
- Make sure you have good anti-virus software/spam blocker: There are millions of these phishing attacks created every day and identifying them and blocking all of them is nearly impossible. Having the right software to handle multiple attacks is crucial.
- Knowledge is power: Be very cautious when clicking on links in an email. If it doesn't look right, delete the email or forward to someone in your IT department to see how they can help.
Don't get 'hooked' by these phishers. Following these steps will help make your online experiences more safe and secure.
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Backup Withholdings Requirements
By: Jeff Carroll
Beginning in 2011, the IRS included a question on all business returns and individual returns asking whether or not the taxpayer made any payments that would require them to file Form 1099 and if so, were all required Form 1099's filed? The IRS also increased the late filing penalty for 1099's up to $100 for all information returns with a maximum penalty reaching $1,500,000.
On top of this late filing penalty, any entity failing to file Form 1099 may find that they owe backup withholding to the IRS and penalties for failing to impose the withholdings on a timely basis.
Backup withholdings are treated as a type of income tax withholding and are only applicable in certain situations. However when these situations occur, they require the payer to withhold a flat 28% from the pay. These specific situations include:
- Payee does not give the payer his or her TIN in the required manner
- The IRS notifies the payer that the TIN provided by the payee is incorrect
- Payee is required, but fails, to certify that he or she is not subject to backup withholding
- The IRS notifies the payer to start withholding on interest or dividends because the payee has underreported interest or dividends on their income tax return. The IRS will do this only after it has mailed the payee four notices over at least a 210-day period.
The backup withholding is reported on Form 1099 as "federal income tax withheld." Failure to withhold and pay over backup withholding will subject the payer to liability for these taxes. In addition to being liable for the tax, a payer who fails to backup withhold when required may be subject to civil penalties.
In order to avoid this potential liability, payers should be collecting a Form W-9, Request for Taxpayer Identification Number and Certification, from all payees prior to making payment to the payee.
For more information or questions on this topic, please contact your professional at UHY LLP in Farmington Hills (248) 355-1040 or Sterling Heights (586) 254-1040 or visit us on the Web at uhy-us.com.
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Events Calendar
9/12 Petroleum & C-Store Briefing Webinar Series: Succession Planning
Please join us for this quick hitting lunch hour geared towards petroleum and c-store business owners, chief executives and chief financial officers. Is your succession plan in order? 2012 may be the final year to take advantage of the $5 million gift tax exclusion. Tune in as our experts address your questions. Webinar will conclude with an open discussion.
Wednesday, September 12, 2012
12:00 PM-1:00 PM EST
CPE credit will be offered. Pre-registration for this complimentary webinar is required. Multiple registrations are welcome. Please contact Courtney Gray via email cgray@uhy-us.com or phone 586-843-2533 to register. Log-in information will be sent via email to each registered attendee a few days prior to event.
Save the date! More UHY events coming up...
7/28 6th Annual Cruisin' for Charity Car Show
10/16 UHY BRIC Series-International Roundtables
10/23 UHY LLP Annual Construction Outlook
11/1 UHY LLP Annual Manufacturing Outlook
12/5 UHY LLP Annual Accounting & Regulatory Update
12/5 UHY Advisors Annual Tax Forum
Contact Courtney Gray via email cgray@uhy-us.com or phone 586-843-2533 to save your spot or for more information.
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Special Announcements
Recruiting Update
UHY Michigan is actively looking for experienced candidates to fill key positions in both our Sterling Heights and Farmington Hills office. Please review the openings below, split up by office, and if you know someone who may be interested in any of these roles please reach out to Rina Madias, Recruiting Manager, via email rmadias@uhy-us.com or phone 248-204-9331.
Sterling Heights:
Tax Managers
Senior Tax Staff
Tax staff
SALT Manager
Audit Manager
Customer Service Associate
Farmington Hills:
Consulting-Senior staff accountant (2-4 experience with CPA)
Tax Manager
UHY Goes Mobile
I would like to share some very exciting news! UHY has gone mobile. That's right, we have just released the UHY Mobile site, making it easier to access www.uhy-us.com through your mobile device. This is another illustration of what our pledge to 'The Next Level of Service.' To access the UHY Mobile site, simply type www.uhy-us.com into your mobile device and you will automatically be redirected to our new mobile enhanced web pages. Please make sure to bookmark the page. Enjoy!
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Published by UHY LLP News. Copyright � 2011 UHY LLP. All rights reserved.
Our firm provides the information in this newsletter as tax information and general business or economic information or analysis for educational purposes, and none of the information contained herein is intended to serve as a solicitation of any service or product. This information does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
UHY Advisors, Inc. provides tax and business consulting services through wholly owned subsidiary entities that operate under the name of "UHY Advisors." UHY Advisors, Inc. and its subsidiary entities are not licensed CPA firms. UHY LLP is a licensed independent CPA firm that performs attest services in an alternative practice structure with UHY Advisors, Inc. and its subsidiary entities. UHY Advisors, Inc. and UHY LLP are U.S. members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. "UHY" is the brand name for the UHY international network. Any services described herein are provided by UHY Advisors and/or UHY LLP (as the case may be) and not by UHY or any other member firm of UHY. Neither UHY nor any member of UHY has any liability for services provided by other members. |
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