Bookkeepers

Often considered by accountants and CPAs as just technicians or clerks, bookkeepers perform some of the same daily tasks as do accountants and certified public accountants. Many bookkeepers work as freelancers for small businesses in need of financial recordkeeping. Bookkeepers maintain daily accounting records, posting debits and credits, generating invoices for clients and checks for vendors as well as handling payroll. Many small business owners often double as bookkeepers. Bookkeepers typically lack the education of an accountant or CPA, as they gain on-the-job experience. Professional organizations for bookkeepers help to improve professional recognition for bookkeepers by accounting professionals as well as providing certification programs of abilities and skills.

Accountants

Accountants have a four-year college degree. While many accountants have an educational background in accounting, some are more general business majors. Companies that generate more than a million dollar in sales each year might have an accountant on staff or hire the services of a professional accountant from an accounting firm managed by a certified public accountant. As the company grows, the accounting department expands to handle the increased fiscal responsibilities within the organization. Accountants work with accounting clerks and technicians who handle daily financial entries. Accountants oversee or perform billing, make general ledger entries, review accounts payable activity completed by clerks or technicians or handle payroll. A mid-level position in the accounting department, accountants report to accounting managers, company controllers or financial directors, all of whom might be certified public accountants.

 

Certified Public Accountants

Certified public accountants have a focused education in accounting and must pass the Uniform Certified Public Accountant Examination. CPAs must meet state education and experience requirements before they can sit for the exam. Accountants not meeting these requirements cannot use the CPA designation legally. A CPA can work within a company or create his own company to offer accounting services to the public. Certification is renewable every two years, subject to state requirements. CPAs have a higher level of responsibility than bookkeepers or accountants; because of their certification, they perform auditing, tax and financial services for individuals, corporations and other business or nonprofit organizations. CPAs work with accountants and bookkeepers, auditing and overseeing financial records.

Differences

Though a bookkeeper might perform the same duties as an accountant, accountants and CPAs often do not consider bookkeepers as accounting professionals. But when a bookkeeper signs checks or handles payroll, she has the same liability as an accountant or a CPA with the same responsibilities under IRS law. In an accounting organization or department, duties are segregated to reduce fraud, errors or misappropriation of funds and to ensure strong financial control under generally accepted accounting principles. Working for a small organization, a bookkeeper might handle the duties of several jobs that would be segregated in an accounting or corporate environment.

-Laurie Reeves

What is business succession planning? Business succession planning refers to the practice of using estate planning strategies to increase the chances for the survival of your family business when you retire or die unexpectedly.

1. How do I know if I need business succession planning? The following questions will help you decide if you need business succession planning?
   
2. If you die unexpectedly, can your family continue to run your business? If your family cannot run your business, who can?
   
3. If you die unexpectedly, will your family have sufficient liquid resources to hire someone to replace you? If your family cannot run your business without you, you should consider their liquidity needs. If there is no money to hire someone to run the business, perhaps life insurance is needed.
   
4. If you die unexpectedly, and have partners, will they pay your family a fair price for your business? When you are gone, you need a mechanism to ensure that your family is treated fairly by your partners.
   
5. How do you protect your family in the event of your early death? The most effective form of protection for your family, or you, if you survive to retirement, is a well prepared buy sell agreement.
   
6. How do you know if your buy sell agreement is well prepared? Does your buy sell agreement provide which events trigger the requirement that the remaining owners purchase the interest of the departing shareholder. These should include at least:
   • Death
   • Disability
   • Incapacity
   • Bankruptcy
   • Loss of a professional license
   • Failure to properly carry out the owner’s expected duties
   • Retirement
7. Does is your buy sell agreement require the remaining owners to purchase the departing owner’s interest when a “triggering” event occurs? There are two fundamental types of buy sell agreements, voluntary agreements and mandatory agreements. A voluntary agreement means that at your death or retirement, your partners will negotiate the purchase of your interest from your estate or you. A mandatory agreement mandates that the remaining owners purchase your interest. The problem with a voluntary agreement, is that it is merely an agreement to agree and does not adequately protect you or your family.
   
8. Is your buy sell agreement adequately funded? Every buy sell agreement should have provisions for the payment of the price of the departing owner’s interest by the remaining owners. The typical methods are:
• Installment sale based on the current earnings of the business
• A sinking fund whereby a certain amount of funds from the business are invested to provide for a future purchase
• Cash from borrowings at the date of purchase
• Life insurance - By far the safest method is the use of life insurance. The rest depend upon the financial solvency of the business or the other owners at the time that a purchase is mandated.
9. How is the price of the departing owner’s interest determined? Perhaps the most sensitive, and equally as important as the funding method, is the method to determine the price of the departing owner’s interest. The most frequently used methods are:
   • By appraisal
   • Book value
   • A multiple of annual earnings
   • Replacement cost of hard assets
   • As agreed upon annually
   Book value, multiple or earnings, whatever “earnings” means, and replacement cost of hard assets are susceptible to manipulation, when you may no longer be around to protect your family, and are therefore risky. Appraisal and as agreed upon annually will generally aid in reducing the potential for conflict when a purchase is mandated.
   
10. Will you have enough income when you retire? As every financial professional will tell you, it is never to early to begin accumulating wealth for retirement. In family businesses, this is especially crucial because younger family members taking over the reins will resent the senior generation if they take and unreasonable amount of money from the business because they didn’t plan ahead.
    
11. Do you have a management succession plan in place? Family business owners are notorious for neglecting to have a management succession plan in place. By management succession plan is meant a realistic determination of who in the family is capable, if anyone is, of taking over the business when the senior generatio n retires.
    
12. Does your succession plan accommodate siblings with different skill levels or interest in the business? For a succession plan to be successful, it is necessary for the senior generation to take into account the differing skill levels, or interest in the business, of siblings. If there is a daughter who is clearly the one to take over, that does not mean the son who is interested in the business is ignored. Planning must be in place to avoid family conflict that could destroy the business.
    
13. Have you considered the impact of estate taxes on your family business? As the goal of business succession planning is to transfer the family business to the junior generation in a manner that increases the probability of success, estate taxes are a prime consideration.
    
14. Do you have an estate planning team familiar with business succession planning? Business succession planning is a very complex area, it involves accounting, insurance for liquidity, professional investment advice and the aid of an estate planning attorney.
    
15. Are you willing to pay the costs of protecting your business for your family? As with all things, “you get what you pay for.” It is without a doubt that the current costs of a business succession plan are greater than the costs of not planning. However, the current savings are likely minimal when you consider the costs of not planning. What are the costs of not planning? The costs include:
    • A loss of the family business to estate taxes
    • A loss of the family business due to a lack of liquidity to tide the business through the period following an unexpected death
    • A loss of the family business because there is no formalized arrangement to transfer
      ownership of a decedent’s interest to the decedent’s heirs d. A loss of the family business because no one has been trained to replace the senior generation
    • A loss of the family business because the retiring owners demand too much from the business to allow the junior generation to earn a reasonable income for their services
    • A loss of the family business because sibling rivalry was not planned for
      
16. Have planned how transfer your family business to your heirs? Imagine, you awake at 65 years of age and decide that you would like to turn over the reins to your children. Your business is worth in excess of $1,000,000. How do you now transfer it to your children? Transferring a family business is a very time sensitive matter. The earlier one starts, the lower the estate and gift tax risks.
    
17. Are you willing to make gifts of interests in the family business to your children, or trusts for their benefit, if you can maintain management control? Unfortunately, many family business owners do not appreciate the fact that they may begin transferring interests in the business when their children are four years old and still maintain absolute control. Estate planning attorneys have devised strategies that enable a parent to give it away, but control it absolutely. This is one of the circumstances where the question of, are you willing to pay the costs of business succession planning comes into play.
    
18. Do you know how to give it away, but still maintain control? Probably not, but your estate planning attorney does. There are various estate planning strategies that allow you to reduce your ultimate taxable estate yet retain control over family business decisions.
    
19. How does your estate planning attorney allow you to give it away but maintain control? That is a part of business succession planning that involves the choice of entity in which to operate the family business.
    
20. Do you know what the entity of choice is? Actually, there are two that are very similar to one another. They are the family limited partnership and the limited liability company. They are the entities of choice because of their superior asset protection characteristics and their income tax flexibility. 
    
21. Do you know why a family limited partnership or a limited liability company has superior asset protection characteristics than a corporation? Assume you own stock in a corporation and are the general partner in a family limited partnership and you are successfully sued and the creditor obtains a judgment. If the creditor so desires, he or she can take your stock. However, all the creditor could do to your partnership interest, is to receive distributions that you would otherwise have received. The creditor may not vote, act as a general partner or even look at the partnership’s records. A somewhat hollow victory when compared to the loss of your stock. 
    
22. How would your estate planning attorney use a partnership or limited liability company to enable you to give it away but maintain control? Your estate planning attorney would prepare an agreement, assume a family partnership, and have you transfer your financial and investment real estate into the partnership in return for 2% general partner interests and 98% limited partner interests. You would then begin the process of making gifts of the limited partnership units to your children or trusts for their benefit. But because you retain the 2% general partnership interest, you are in control. You can give it away but maintain control.
    
23. Do you have an overall estate plan in place? All of your estate planning documents must be carefully designed to fit together to create a business succession plan that works. In fact, it is likely that your revocable trust will be the owner of the general and limited partnership interests that you will own. In that manner, you, or your successor trustee in the event of your incapacity, are able to manage the partnership without the necessity of a conservator or guardian. 
    
24. Do you know how your living trust will be designed to carry out your business succession plan?Assume your daughter is the one that should run the family business when you are unable to due to an early death or incapacity prior to your retirement. With the general partnership interests owned by your living trust, you daughter can be appointed by the terms of the trust as the successor trustee who is to take over as the general partner. In this method, sibling conflicts are reduced so as to protect the business.
    
25. Are you willing to give up some control over the business? It is very important that children who are to succeed to the management of the business be given increasing management authority in proportion to their skill and experience. It not only provides for trained management replacements, it gives them the knowledge that you have respect for them and confidence in their abilities. 
    
26. Are you and your spouse in agreement as to the ultimate disposition of the family business? All too often, the spouse who performs most of the management of the family business fails to take into consideration the wishes of the inactive, or less visible, spouse. This may cause the business succession planning efforts to take longer, be more costly or perhaps even fail. One example is the management spouse schedules a business succession planning meeting with the estate planning attorney and does not invite the less active spouse. 
    
27. Are you willing to face the reality that you will die or retire at some time? First generation family business owners are rare and unique breed of entrepreneur. Typically, both spouses have long and hard for the family business. They have sacrificed much to grow the family business so as to leave a legacy to their family. However, when it comes time to begin the planning, there are always too busy. It seems there is no sense of mortality and many plan “to die in the saddle.” 
    
28. Are you willing to pay the costs of business succession planning? Business succession planning may entail more professional costs than the typical business owner is used to paying, other than litigation costs. One reason is that there needs to be a team of professionals working to design and implement a plan for you and your family that will be successful. This is not the time to be “penny wise and pound foolish.” A sound business succession plan is an investment that will pay off for you and your heirs for generations to come.
    
29. Are you willing to deal with a certain amount of complexity in your business succession planning?It is without question true, that there are tremendous estate and gift tax savings to be had from a more complex business succession plan than a simple one. However, in the final analysis, you must be comfortable with the business succession strategies that you adopt to protect your family. Otherwise, the plan will fail. 
    
30. Are you willing to accept the advice of professionals? Owners of family businesses are the bedrock of the American economic system. They employ most of the employees in the country and are responsible for many innovations. Remember, Microsoft was a family owned business. However, entrepreneurs may also be difficult to counsel. They are typically confident and skilled decision makers. Unfortunately, the skills necessary for successful business successioin planning are likely somethibg the owner is unfamiliar with. It takes a leap of faith to accept the advice of others. It is also necessary to protect the family business. 
    
31. Are you concerned enough to take action? The skills of your advisors or the importance to your family of business succession planning are meaningless, unless you take action. The most important aspect of business succession planning is for the owners to become convinced that they need to take positive steps or have their family business disappear due to a lack of planning. Do not let that happen to your family business.

Original Source: http://wealthcounsel.com/articles/2015/business-success-planning-checklist?utm_content=buffer24eec&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer

If your business has any employees, you’re not only responsible for issuing paychecks on a set schedule, but also for deducting and paying all applicable federal, state, and local income taxes to the government. Some people are intimidated by this responsibility, but the truth is that once you have a payroll system in place, it’s not that difficult to keep it running smoothly, especially with the help of your accountant. Here are the steps you should take to set up a system that will streamline the process.

Apply for an Employer Identification Number

An Employer Identification Number (EIN) identifies you as a business entity that’s responsible for paying payroll taxes to the government. According to the IRS, if you have employees (not just independent contractors), you’ll need to apply for one. To do so, go to the IRS website and print out Form SS-4 [PDF] if you plan to submit it by mail or fax. If you are an international applicant, you can apply by phone. You can also complete and submit the form online.

Learn Your State's Withholding Requirements

In addition, some states require that you withhold state income tax, disability, or unemployment taxes from your employees' paychecks. Your state may require their own, separate, employer number and also an Account Number for unemployment purposes. The IRS offers a list of all state government offices where you can find your state’s requirements. Your accountant will be able to help with any questions or concerns you have with this process.

Get the Required Paperwork from Employees

You’ll need to have each of your employees fill out a Federal Income Tax Withholding form W-4 [PDF]. This will allow you to withhold the right amount of income tax from their paychecks.

Decide How Often You’ll Pay Employees

Next, you’ll need to decide how often to pay your employees. In addition to what’s convenient for you, you’ll need to adhere to your state's laws. (Every state has laws that determine how long you can go in between paychecks.) The typical pay schedule is every week, or every-other week.

Choose Your System

Next, you’ll need to decide which type of payroll system to use. Many business owners choose to calculate and record their payroll themselves manually. This option may seem lucrative, as it is the cheapest method, but it is also the most labor intensive and the most prone to error, leading to headaches during tax season and possible fines from the IRS.

Using an online payroll service saves time and makes it easier to track important details such as employee hours, overtime, vacations, health care premium deductions and retirement contributions. In addition, the online system calculates the amount of the paycheck and tax withholdings, files the required tax forms, and pays your payroll taxes.

If you’re like most small-business owners, time is your most valuable asset -- which is why many choose to completely outsource their payroll system to an accountant. Hiring an accountant to handle your payroll takes all calculations, reporting, and check issuing off of your plate and allows you to focus on other more pressing matters.

Run the Payroll

After you’ve set up your system, you’re ready to run payroll. If you use a desktop software program, you’ll have to enter the required information and print out the checks. If you choose an online payroll service, you simply enter the hours, and then either print the checks yourself or use the free direct-deposit feature. All that’s left is to report the payroll taxes to the appropriate tax agencies, paying them within the required time period. If you have chosen to outsource your payroll to an accountant, the process will run without you having to worry about it. All checks or direct-deposits will go out, plus all payroll taxes will be reported and paid within the required time period.

By Andrew Keyt
Mon, 2015-06-15 15:20
 
A person born into a family business is a person born into a story—one that’s ongoing and generations old. Like any good story, there are heroes: parents, grandparents and great-grandparents, whose legacy, mythologized over time, casts a long shadow. This shadow weighs heavy on the next generation. Do I have what it takes? Will I be a great a leader or will I fail? The expectation to succeed, to live up to the past and honor its heroes… even the most resilient successor can be crushed by the pressure.

There are other obstacles, too. The myths of leadership. Idioms and phrases that at first, sound wise but at heart are akin to nonsense. For example, “leaders are born and not made.” How shortsighted to think that there’s only one iconic style of leadership bestowed upon a lucky few. That leadership is what? Somehow given to a person at birth, like some fairy godmother’s spell? Myths like these slowly chip away at successors and, like the weight of the family shadow, can undermine their confidence, capability and talent.

The topic of succession is one I hold near and dear. For almost 20 years, I’ve watched graduates from our Next Generation Leadership Institute go on to become confident and successful leaders within their family business. I’ve also had the fortune of interviewing 28 family business successors, all chronicled in my book, Myths and Mortals: Family Business Leadership and Succession Planning. All of these experiences have brought me to this understanding: that while it’s true we’re all born with certain leadership traits, those we lack can be developed and strengthened through hard work and education.

When on the road to becoming a successor to a family business, here are some traits to consider.

Self-Awareness

A successful successor is aware of their strengths and weaknesses and leverages their strengths for the good of the family and the business.

Belief in Oneself

The family shadow can lead them to believe that credibility and worth comes from their family name rather than individuality and identity. Successful successors aren’t afraid to make mistakes. Nor are they afraid to learn from these mistakes. This process teaches them to believe in themselves, while at the same time, building a personal record of achievement. Credibility must be built on personal and professional actions, not a family name.

Credibility with Others

Belief in oneself isn’t enough to become a successful successor; others must believe in them too. They’ll recognize a successor’s credibility in the same way a successor recognizes it within themselves: through actions, ability to lead and track record. Christie Hefner described it this way, “True power is given by the people that you lead, not by the people who gave you the job.”

Clear Sense of Values

Successful successors reflect on their parents’ values and, in turn, establish their own set of values. Some may be shared with parents, while others may be unique to them. Think of values as a map; they keep the business on a set course. When we reach a fork in the road, values help us decide which path to follow.

Decision Making

Successful successors are skilled problem solvers. They know how to make difficult decisions and act decisively for the betterment of the family and the business. Laying off parts of the workforce, for example, can be an extremely difficult decision, especially when employees feel like part of the family. But it’s a decision that sometimes must be made to keep the family business afloat.

Commitment to the Family

Survival isn’t just about money. Research shows that centuries-old family businesses have survived for so long, not because of financial success, but because of strong relationships. Families enjoy being together and have a sense of pride and commitment to each other and the business. Successful successors come to know that “we” is more important than “me.”

Commitment to People

Successors shouldn’t let their family shadow diminish contributions by employees, trusted advisors and other family members. Successful successors aren’t blinded by the shadow; instead, they shine a light on the contributions of others. (S)he should commit to the growth and development of his/her employees. Give credit where it’s due, celebrate success, admit mistakes and take responsibility when things go wrong.

Commitment to Continual Learning

Successful successors are life-long learners. They enjoy discovery and new perspectives, taking some initiative to learn and be curious.

Ability to Deal with Ambiguity

Leading in a family business is often fraught with uncertainty and ambiguity. There’s often no clear right or wrong. Successful successors are comfortable in this middle-zone; while others are paralyzed with indecision, they seek clarity.

Successors face many challenges; from the family shadow to the myths of leadership, overcoming these challenges is no easy feat. A successor will need to make a concerted effort to strengthen their leadership traits over time so they can build a legacy larger than themselves.


Source URL: http://wealthmanagement.com/family-business/key-leadership-traits-family-business-successors