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INTERNAL CONTROLS
With all of the recent scandals in the headlines, it has become clear that significant business benefits flow from strengthened internal controls. Our trusted advisors can help determine if you have the right controls in place and assess the effectiveness of your current controls.
Contact your UHY professional today.
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MICHIGAN DEFINES "ACTIVELY SOLICITS" FOR CORPORATE INCOME TAX
Written by Liz DeNoyer, CPA
As more and more companies become multi-state, the terms of what creates nexus with a state are consistently changing. Nexus is one of the tests a company must go through to determine if they are required to file a return for the state. Michigan has gone through an overhaul of the taxing structure, moving recently from the Michigan Business Tax (MBT) to a more simplified method of reporting, the Corporate Income Tax (CIT). As part of the CIT nexus determination, the newly released Revenue Administrative Bulletin (RAB) 2013-9 defines the term "Actively Solicits" for purposes of determining if a taxpayer has nexus with Michigan.
"The CIT defines 'actively solicits' to mean either of the following:
(i) Speech, conduct, or activity that is purposefully directed at or intended to reach persons within this state and that explicitly or implicitly invites an order for a purchase or sale; or
(ii) Speech, conduct, or activity that is purposefully directed at or intended to reach persons within this state that neither explicitly nor implicitly invites an order for a purchase or sale, but is entirely ancillary to requests for an order for a purchase or sale.
Active solicitation includes, but is not limited to, solicitation through: (1) the use of mail, telephone, and e-mail; (2) advertising, including print, radio, internet, television, and other media, and; (3) maintenance of an internet site over or through which sales transactions occur with persons within Michigan."
Keep in mind the State of Michigan has identified the following as forms of active solicitation: sending credit applications, sustaining an internet site with online shopping, services or subscriptions, distribution of mail order catalogs, and media advertising.
Determining nexus with any state is never an easy task. To assist with your state needs, please contact a member of our firm's SALT Practice in Farmington Hills 248-355-0280 or Sterling Heights 586-254-8141 or visit us on the web at www.uhy-us.com.
Source: Revenue Administrative Bulletin 2013-9
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MAXIMIZING VALUE FOR MIDDLE MARKET OWNERS
Written by Alex Conti, FINRA
There are several reasons a business owner plans an exit including retirement, liquidity, lack of generational succession, and diminished competitive position to name a few. All things considered, one could make a strong case that 2013 represents the optimal value for many middle market businesses. Current favorable M&A conditions include, but are not limited to:
Availability of Financing - Senior financing creates a solid base of lower-cost debt for buyers to begin building the capital structure and ultimate purchase price for the transaction. For middle market companies in the U.S., current senior debt to LIBOR spreads are competitive and senior debt / EBITDA multiples were 2.2x in Q1 of 2013.
Positive Financial Trends - Many businesses show an attractive and accelerating trend of financial performance from 2009 to current date, which can assist in the creation of a compelling growth story.
Competitive Marketplace - Financial and strategic buyers are very active, which creates a highly competitive environment that drives value for sellers. Aggregate M&A transaction value for U.S. companies in Q1 2013 was $222.7 billion, up nearly 61% compared to $138.6 billion over the same period in 2012.
Historical Market Cycles - The M&A market is highly volatile and cyclical with three to four years separating peaks and toughs and six to seven years to span a full cycle. The most recent bull cycle peaked in 2006-2007 and the market trough was last seen in 2009-2010. Given the acceleration through 2011-2012, 2013 could be an optimal period for an exit.
If you are considering a purchase, sale or recapitalization of your business, please contact a member of our firm's Transaction Services Group at 586 254 1040 or visit us on the web at www.uhy-us.com.
Source: GF Data Resources LLC; FactSet
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NEW FINANCIAL REPORTING FRAMEWORK FOR SMES
Written by Greg McEvoy, CPA
Last month, the AICPA released a new financial reporting framework (FRF) for small and medium-sized entities (SMEs) that are privately-held and not required to report under US GAAP. This FRF is not intended to be a replacement for US GAAP when US GAAP reporting is required.
The AICPA anticipates that this new framework may be used by closely-held, for-profit entities, external financial statement users with direct access to management or SMEs that are not required to report under US GAAP. Some examples that highlight the differences from US GAAP include simplification of lease accounting, derivatives, revenue, goodwill and consolidation of subsidiaries. This may be a cost-effective option for some SMEs who do not deal with complex transactions yet are burdened by cumbersome reporting requirements of US GAAP.
The Private Company Council, which operates under the Financial Accounting Standards Board, also has undertaken the task of modifying US GAAP for SMEs and currently is working with the AICPA to overcome any differences.
If you have any questions 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 www.uhy-us.com.
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SHAREHOLDER LOANS 101: HAVING PROPER, SUFFICIENT DOCUMENTATION
Written by Jeff Goins, CPA
Shareholder loans and the required accompanying documentation are facing increasing scrutiny by the IRS. Any potential deduction that may arise from a worthless shareholder loan must be substantiated by documentation confirming a valid loan exists. When entering into loan agreements with related parties it is important that all notes are expressed in the form of a written formal note, indicate a reasonable interest rate, and authorized in the corporate minute book. Besides having the written documentation, the taxpayer is also responsible to be sure that the terms of the note are being adhered to.
A recent court case, Shaw, T.C. Memo 2013-170, disallowed a bad debt deduction due to the taxpayer not being able to prove that loans were actually bona fide loans or that they became worthless in the year deducted. Although a note was executed and contained a reasonable interest rate, no interest or principle was ever paid. The service will often consider payments made to a related entity as capital contributions. In this case, the court found that Shaw's behavior was unlike that of a bona fide lender as she made no formal attempt to collect on the loan.
The Shaw case is an example of not establishing a debtor-creditor relationship. Common factors which will be considered when the validity of loans are in question include, but are not limited to, documentation of the existence of the transaction, affixed schedule of repayment, whether interest is required on the loan, whether collateral is obtained or requested, whether demand for repayment is made, and the financial condition of the debtor. As was the case in the Shaw decision, the financial condition of the company and lack of collateral did not satisfy the third party lender requirement and therefore they failed to establish a valid debtor-creditor relationship between related parties. The debt was reclassified as a capital contribution.
It is common for shareholders to loan entities money during cash flow shortfalls and times of increasing growth. Therefore, it is very important that shareholders are protecting themselves by following the standards set forth by the IRS. When entering into related party loans, try to place the same scrutiny upon your loan as an unrelated lender would. Ask yourself if a third party would see you as a bona fide lender conducting an arm's length transaction and most importantly seek the guidance of your professional advisors.
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 www.uhy-us.com.
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EVENTS CALENDAR
10/24 UHY LLP Annual Construction Outlook
Save the date! UHY LLP is pleased to announce Construction Outlook 2014 that will be held in UHY's Farmington Hills training center. Join us to learn more about the latest industry trends and recent financial and tax developments. Topics, speakers and keynote will be announced shortly.
Thursday, October 24, 2013
7:00AM-10:30AM EST
CPE credit will be offered. Pre-registration for this complimentary program is required. Breakfast will be provided. Space is limited. Multiple registrations are welcome. To RSVP contact Shannon Gnesda via email sgnesda@uhy-us.com or phone 586 843 2637. Formal invitation to follow.
11/13 UHY LLP Annual Manufacturing Outlook
Save the date for Manufacturing Outlook 2014 "Made in America: Growing Demand Fuels Optimism". Join us either onsite in UHY's Farmington Hills training center or online via webcast to learn more about developing industry trends including automotive, economic and banking. Topics, speakers and keynote will be announced shortly.
Wednesday, November 13, 2013
Onsite Breakfast Program Online Webinar
Central Time 7:30AM-10:45AM 8:00AM-10:45AM
Eastern Time 8:30AM-11:45AM 9:00AM-11:45AM
CPE credit will be offered. Pre-registration for this complimentary program is required. Breakfast will be provided. Space is limited. Multiple registrations are welcome. To RSVP contact Shannon Gnesda via email sgnesda@uhy-us.com or phone 586 843 2637. Please declare either onsite or online. Formal invitation and webinar instructions will be released at a later date.
Save the date! More UHY events are just around the corner...
9/25 UHY Advisors SALT Forum Part I: Remote Sellers & Sales Tax
10/30 UHY Advisors SALT Forum Part II: Establishing NEXUS
12/4 UHY LLP Annual Accounting & Regulatory Update
12/4 UHY Advisors Annual Tax Forum
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SPECIAL ANNOUNCEMENTS
Macomb County's Largest Accounting Firm
The UHY LLP Sterling Heights office is proud to be Macomb County's largest accounting firm. Explore its history, involvement in the community, and plans to renovate and remodel to make room for the growth ahead. Click here to read the full press release.
Experienced Recruiting Update
UHY Michigan is actively looking for experienced candidates to fill key positions in our local offices. Please review the openings below and if you know someone who may be interested in any of these roles please reach out to Rina Henning, Recruiting Manager, via email rhenning@uhy-us.com or phone 248 204 9331.
Sterling Heights
Tax Managers
Audit Seniors (2-5 years of experience)
CSA (full charge bookkeeper with 1040 experience)
Farmington Hills
Tax Manager
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Published by UHY LLP News.
Copyright � 2013 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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