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Hobe & Lucas CPAs Adds Industry Veteran as New Director of Construction Practice Area

CLEVELAND, OH – August 28th, 2019

Hobe & Lucas CPAs, a full-service accounting and business consulting firm serving clients since 1978, adds Aaron Cook, CPA as Director of their construction practice area. This addition follows their most recent acquisition of Flask, Kusak and Company earlier this year and prepares them for new growth initiatives moving into 2020.

Aaron Cook has 20 years of experience in the construction and engineering industry providing a wide array of accounting, assurance and advisory services while representing construction contractors, engineering firms, project owners, sureties, and other stakeholders. Mr. Cook is well versed in the Northeast Ohio construction market and is seen as an expert through speaking engagements and published articles. Mr. Cook graduated from Butler University with a B.S. in Accounting.

“We are thrilled to bring on Aaron Cook as Director of our construction practice area. Aaron’s reputation in this industry is well-known and we are excited to see his results.” said William Wildenheim, Partner and Shareholder, “This move signifies our commitment to overall firm growth as we look to ramp up our client acquisition initiatives over the next 12-18 months.”

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About Hobe & Lucas CPAs

Hobe & Lucas Certified Public Accountants, Inc. is a full-service accounting and business consulting firm dedicated to providing clients with exceptional value. As one of the largest independent accounting firms in Northeast Ohio, we offer a broad portfolio of services and possess extensive expertise in a wide range of industries and specialty practices. We pride ourselves on delivering the personal attention, responsive communication and collaborative relationships our customers need to succeed. We listen. We learn. We lead you through the intricacies of your financial challenges and past potential pitfalls to keep you on a strong path forward.

For Media Inquiries, please contact:
Patty Austin, Office Manager
pattya@hobe.com 
216-524-8900

What is the Wayfair case, and what does it mean?

The Wayfair case was decided by the Supreme Court in June of 2018 (South Dakota v. Wayfair). It has largely changed the landscape for sales and use tax, not only in South Dakota, but across the country. Wayfair has established a standard of what is called economic nexus

Prior to the Wayfair case, the standard for being required to collect and remit sales tax came from the 1992 Supreme Court ruling in Quill Corp. v. North Dakota. In Quill, the Supreme Court ruled that in order to have sufficient nexus (connection) with a state, physical presence within the state was required. Wayfair has overturned the physical presence standard that we’ve relied upon for more than 25 years. 

In this new landscape, states are now establishing economic thresholds for the amount of sales dollars and / or number of transactions taking place within the state to determine if a taxpayer has created economic nexus. Now, not only does having a physical presence in a state create nexus, but strictly an economic presence,  meeting these thresholds, will legally require taxpayers to collect and remit sales tax to that state. 

In the past year, virtually every state that imposes a sales tax has enacted legislation to conform to the new economic nexus standard. Each state has established their own thresholds for economic nexus, including sales thresholds ranging from $10,000 to $500,000.  Additionally, some states do not impose a numerical threshold for the number of transactions taking place within the state. Furthermore, each state’s requirements for registration and filing vary, and many local jurisdictions impose a sales tax as well. For example, in California, there are over 2,500 different sales tax rates when considering the separate local jurisdictions!

What should businesses be doing in response to Wayfair?

Wayfair impacts any business, in any industry, that sells to or services out-of-state customers. 

The first step that should be taken is to gather information. A business with out-of-state customers should look at the states where they file income tax returns, states that sales representatives visit, and customer lists to determine where sales are ultimately being made. 

Once an organization has information about the states where they are transacting business, they can determine potential exposure for sales and use tax in those states. This can also serve as a monitoring tool going forward for states where economic thresholds may not currently be met. It will be important for businesses to continue this analysis on an ongoing basis as state laws and guidance are constantly being updated. 

After gaining an understanding of potential exposure, every business will need to formulate their own plan for compliance. When deciding how to move forward, some important considerations will be: (1) whether the organization has the personnel capable to prepare these new filings; (2) whether current accounting records are generating the most accurate information necessary; and (3) determining if the business may need new exemption certificates from customers. 

What can Hobe & Lucas do to help?

Our office can work with you to complete a nexus study in which we will evaluate the states in which your business may have nexus. This can be done from both a sales and use tax perspective as well as an income tax perspective. While the Wayfair case doesn’t impact nexus standards for income tax purposes, as states seek to capitalize on new revenue, it can be a good idea to revisit filing requirements that may not have been thought about in recent years. 

Additionally, for businesses that prefer to take a more DIY approach, we can be involved to help with specific jurisdictional research as well as assistance with voluntary disclosure agreements. For states that have Wayfair effective dates that may have already passed, many states offer an opportunity to become compliant through a voluntary disclosure agreement. Our office can work with you to make sure that these applications are prepared completely and accurately for the best outcome in each scenario. 

For many businesses, the cost and effort of compliance will prove to be quite burdensome. In that case, we can provide referrals to third party providers that can facilitate automated sales and use tax compliance. 

This area of tax law is changing rapidly, and if you have questions or concerns about how this will impact your business, we invite you to contact our office for assistance. 

WHEN TO FILE A FORM 5500 FOR YOUR HEALTH AND WELFARE PLAN

Employee health and welfare benefit plans are established to provide medical, sickness, accident, disability, and many other benefits to employees or former employees and their dependents and beneficiaries. Plans with more than 100 participants on the first day of the plan year must file Form 5500 each year whether funded or unfunded.

A funded plan receives contributions from active or former employees and/or uses a trust to hold plan assets or act as a conduit for the transfer of plan assets. Conversely, an unfunded plan has its benefits paid as needed directly from the general assets of the employer rather than a separate trust account.

It’s important to know these differences when it comes to understanding when a Form 5500 needs to be filed. In fact, most insurance companies will provide a Form 5500, Schedule A, but fall short of preparing the full Form 5500. Failure to do so can result in penalties of $1,100 per day from the date the filing was due until it is paid. 

Considering the penalties could add up, we wanted to walk you through a complete understanding to make sure your company had the facts.

First, who is considered a participant when understanding if a Form 5500 is required?

The Department of Labor considers the following groups to be counted as participants when contributing to whether or not your company needs to file:

  • Active participants (employees)
  • Participants retired or separated from service receiving benefits 
  • Other participants retired or separated from service and entitled to future benefits 
  • Deceased participants whose beneficiaries are receiving or entitled to receive benefits

Second, which plans are considered exempt from any filing requirements?

Typically, forms need to be filed, except for the following:

  1. A welfare benefit plan that covered fewer than 100 participants as of the beginning of the plan year and is unfunded, fully insured, or a combination of insured and unfunded.
    1. A fully insured plan has its benefits provided exclusively through insurance contracts or policies, the premiums of which must be paid directly to the insurance carrier by the employer from its general assets or partly from the company’s general assets and partly from contributions by its employees.
    2. An example of a combination plan would be one that provides medical benefits as an unfunded plan and life insurance benefits from a fully insured plan.
  2. A welfare plan maintained outside of the United States primarily for participants who are nonresident aliens.
  3. A governmental welfare plan
  4. An unfunded or insuranced or insured welfare plan maintained for a select group of management or highly compensated employees.
  5. An employee benefit plan maintained only to comply with workers’ compensation, unemployment compensation or disability insurance laws.
  6. A welfare benefit plan that participates in a group insurance arrangement that files a Form 5500 on behalf of the welfare benefit plan
  7. An apprenticeship or training plan
  8. An unfunded dues financed welfare benefit plan
  9. A church plan
  10. A welfare benefit plan maintained solely for (1) an individual or an individual and his or her spouse who wholly own a trade or business or (2) partners or the partners and their spouses in a partnership.

As shown, it can be a bit confusing trying to decide if your health and welfare plan needs to file a Form 5500.  We can help! Let us cut through the tax laws and provide you with a clear answer. And if you do need to file, we can prepare the filing for you.

Whether you need to file a Form 5500 for your health and welfare plan or if you need to file a Form 5500 for your retirement plan, we can provide timely service and the answers you need while being cost effective. And, if you are looking to consult on what type of retirement plan is best for you, we would be glad to discuss your needs and what type of plan and plan provisions would best serve your needs. For more information, contact us at info@hobe.com.

Hobe & Lucas CPAs Kicks Off 2019 with the Acquisition of Flask, Kusak and Company

CLEVELAND, OH – February 9, 2019

Hobe & Lucas CPAs, a full-service certified public accounting and business consulting firm located in Independence, Ohio has acquired Flask, Kusak and Company, located in Parma, Ohio. The acquisition strengthens Hobe & Lucas’ overall service offerings and provides additional resources to increase its current levels of customer and client service.  This acquisition takes their total employee count to 43.

“Throughout the process of the acquisition it was apparent that the Flask team not only offered great technical expertise, but they also shared Hobe & Lucas’ number one core value, People First”,  said Louis Loparo, Shareholder, “We felt that Flask, Kusak and Company was a perfect addition to our firm given their commitment to exceptional customer service and dedication to truly being a partner to their clients.”

This transaction marks the first major growth move of Hobe & Lucas’ new leadership team. Flask, Kusak and Company team members will relocate their offices to the Hobe & Lucas CPAs office in Independence.

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About Hobe & Lucas CPAs

Hobe & Lucas Certified Public Accountants, Inc. is a full-service public accounting and business consulting firm dedicated to providing clients with exceptional value. Hobe & Lucas CPAs has been serving clients since their founding in 1978. As one of the largest independent accounting firms in Northeast Ohio, they offer a broad portfolio of services and possess extensive expertise in a wide range of industries and specialty practices. Hobe & Lucas CPAs pride themselves on delivering the personal attention, responsive communication and collaborative relationships their customers need to succeed.

For Media Inquiries:

Patty Austin

pattya@hobe.com

216-524-8900

3 keys to a successful accounting system upgrade

Technology is tricky. Much of today’s software is engineered so well that it will perform adequately for years. But new and better features are being created all the time. And if you’re not getting as much out of your financial data as your competitors are, you could be at a disadvantage.

For these reasons, it can be hard to decide when to upgrade your company’s accounting software. Here are three keys to consider:

Your users are ready.

When making a major change to your accounting software, the sophistication of the system needs to align with the technological savvy of its primary users. Sometimes companies buy expensive software only to have many of its features gather virtual dust because the employees who use it are resistant to change. But if your users are well trained and adaptable, they may be able to extract added value from a more sophisticated accounting system. For instance, they could track key performance indicators to generate more meaningful financial reports.

The price is right.

You’ll of course need to consider the costs involved. As holds true for any technology purchase, project leaders must set a budget and focus the search on products and vendors offering only the functions your company needs. But don’t stop there. Explore add-on services such as free trials, initial training and ongoing support. You want to get the most value from the software, which goes beyond the new and improved features themselves.

You need to integrate.

This is the concept of networking your accounting system with your other mission-critical systems such as sales, inventory and production. For most companies today, integration is essential to maximizing the return on investment in accounting software. So, if you haven’t yet implemented this functionality, an upgrade may be highly advisable. Just be aware that a successful company wide integration will call for buy-in from every nook and cranny of your business.

Sometimes a complete overhaul of your accounting system is not necessary.  We have created partnerships over the years with vendors of various applications that compliment accounting systems.  

For instance, a client with a small accounting office was looking to implement controls and efficiencies in there payables process.  We assisted them with implementing bill.com, a payables automation system.  We had another client that was looking for an easy way to gather credit card receipts that would sync with QuickBooks Online. We helped put receipt-bank in place to track and automatically sync with their QuickBooks.  In addition, we have also used other tools like Mile IQ and expensify to assist clients in organizing their spending.

If a company doesn’t need any major accounting process changes, it probably doesn’t need a major accounting software change either. But if upgrading both will help grow your business, it’s absolutely a step worth considering. It’s time to see how we can help.

Five key business areas to review before 2018

These final two weeks of the year are usually filled with a hope that a few of those outstanding proposals will turn into sales commitments.

This is also a great time to reflect on the past year and prepare for the upcoming year. We’ve compiled five areas you should be spending extra time with during the holidays to ensure you are ready when the calendar turns.

Start with a baseline

In order to start your new year on the right foot, it’s imperative that you know exactly where you will end 2017.  This involves working with your accountant and thoroughly going through income statements, management accounts and cash flow analysis and level set your actual levels versus your original projections.  Doing this exercise not only helps to build a trend analysis, but also allows you to accurately finalize your 2018 budget.

Confirm your revenue projections

Once you have a firm grasp on where you are financially, it’s time to make sure your sales targets are achievable based on how you will end this year. If you’re like most businesses, sales planning started in early Fall, so tweaks will need to be made. Did you end the year as you projected? Will it affect next year’s business goals? Where are your sales numbers trending? How do these numbers compare to previous years?

Get a pulse of your customer base

In all reality, a customer survey should be done often. It’s the best way you can get direct feedback on your company, your product (or service), and receive ideas for how to get more customers just like them! It’s also a nice way to check in with your entire customer base and show them you value their input, especially if you don’t reach out to them on a regular basis.  Questions can focus on why they purchased, why they didn’t, and would they recommend your company.

Plan for new technology

It’s no secret that technology moves fast. Investing in the right technology, whether or not you are getting ready for a growth period, can help streamline your business processes, lower administrative costs, and most importantly, keep you competitive in the marketplace. Take a look at your business software packages, CRM, mobile devices, phone system, laptops and any subscription services that could help you better manage your business. Making updates to your technology platforms early will help ensure you get the most out of your investments.

Align your sales and marketing efforts

Even though you have defined your sales targets, it’s imperative that you know WHO your target audience is and how you can best reach them. The first step is to build a thorough customer profile that identifies the type of person (or company), their major pain points, and where they buy. From there, build out a thorough marketing plan that includes your top strategies, marketing channels you will be using, and your marketing budget. The size of your marketing budget should be a combination of how much your company can invest and how quickly you can acquire customers to build an accurate ROI analysis.  

We’re not saying these are silver bullets to your company’s success in 2018, but taking the time to review each area will help put the pieces together for a complete understanding of your business needs, immediate challenges and financial requirements.

If you need a resource to help you plan for next year, or have questions on how to succeed, reach out to us either by email, info@hobe.com, or phone, 216-524-8900.

Why business owners should regularly upgrade their accounting software

Many business owners buy accounting software and, even if the installation goes well, eventually grow frustrated when they don’t get the return on investment they’d expected.

There’s a simple reason for this: Technology is constantly changing.

Technological improvements are occurring at a breakneck speed. So yesterday’s cutting-edge system can quickly become today’s sluggishly performing albatross. And this isn’t the only reason to regularly upgrade your accounting software.

Here are two more to consider.

  1. Cleaning up

You’ve probably heard that old tech adage, “garbage in, garbage out.” The “garbage” referred to is bad data. If inaccurate or garbled information goes into your system, the reports coming out of it will be flawed. And this is a particular danger as software ages. For example, you may be working off of inaccurate inventory counts or struggling with duplicate vendor entries.

On a more serious level, your database may store information that reflects improperly closed quarters or unbalanced accounts because of data entry errors. A regular implementation of upgraded software should uncover some or, one hopes, all of such problems. You can then clean up the bad data and adjust entries to tighten the accuracy of your accounting records and, thereby, improve your financial reporting.

  1. Getting better

Neglecting to regularly upgrade or even replace your accounting software can also put you at risk of missing a major business-improvement opportunity. When implementing a new system, you’ll have the chance to enhance your accounting procedures. You may be able to, for instance, add new code groups that allow you to manage expenses much more efficiently and closely. Other opportunities for improvement include optimizing your chart of accounts and strengthening your internal controls.

Again, to obtain these benefits, you’ll need to take a slow, patient approach to the software implementation and do it often enough to prevent outdated ways of doing things from getting the better of your company.

Here at Hobe, we see more and more clients ask about new technology for their businesses, especially for accounting software. With so many different accounting software platforms on the market, many need our help deciding which one would work best for them. To help decide, our first questions are geared around their business goals and where they see themselves in two to three years. With how quickly technology updates, we make sure to stay tuned in to a business as much as possible.

Are you in the process of evaluating new accounting software for next year?  Read our Technology Consulting offering and let us know.  We can help you set a budget and choose the product that best fits your current needs.

Ensuring a peaceful succession with a buy-sell agreement

Ensuring a peaceful succession with a buy-sell agreement

A buy-sell agreement is a critical component of succession planning for many businesses. It sets the terms and conditions under which an owner’s business interest can be sold to another owner (or owners) should an unexpected tragedy or turn of events occurs. It also establishes the method for determining the price of the interest.

This may sound cut and dried. And a properly conceived, well-written buy-sell agreement should be — it is, after all, a legal document. But there’s a human side to these arrangements as well. And it’s one that you shouldn’t underestimate.

Turmoil and conflicts

A business owner’s unexpected death or disability can lead to turmoil and potential conflicts between the surviving owners and the deceased or disabled owner’s family members. Such disorder has the potential of disrupting normal business operations and can result in instability for employees, customers, creditors, investors and other stakeholders.

A buy-sell agreement ensures that an owner’s heirs are fairly compensated for the deceased owner’s business ownership interest based on a predetermined method. The other owners, meanwhile, don’t have to worry about the deceased’s spouse (or other family members) becoming unwilling (and unknowledgeable) co-owners. And employees will benefit from less workplace stress and disruption than would otherwise be caused if an owner dies or becomes disabled.

Spousal matters

Indeed, among the worst potential succession-planning scenarios is when a deceased or disabled owner’s spouse becomes an unwilling participant in the business. Without a properly structured buy-sell agreement in place, the spouse could be thrown into this situation — even if he or she knows little about the business and doesn’t want to actively participate in running it.

There’s also the less tragic, though still difficult, possibility of divorce. When a business owner and his or her spouse decide to end their marriage, the ramifications on the business can be enormous. A buy-sell helps clarify everyone’s rights and holdings.


Great benefits

Ownership successions are rarely easy — even under the best of circumstances. These transitions can go much more peacefully with a sound buy-sell agreement in place. Please contact us at 216.524.8900 with the tax and financial aspects of drawing one up.

© 2017

Estate Planning: Will, Trust, or Both?

by: Melissa Love, CPA

Most people dread even thinking about estate planning.  Although not the happiest of topics, taking the time to explore options and make the appropriate decisions now, can help give you peace of mind later – and could save you money.  A properly planned estate is less about death and more about having control of your assets.

Everyone’s estate plan should include a Last Will and Testament  

A will is a document that directs your wishes after death.  It can designate both financial requests, like how your assets will be distributed, as well as your non-financial wishes, such as funeral arrangements or who will be granted guardianship of your children.  Without a will, your assets will be distributed according to state law.  Wills are both easy and inexpensive to create and can be amended throughout your life as your situation changes.

Utilize a trust to achieve your estate planning goals

A common misconception is that only the rich need trusts.  Depending on an individual’s situation, a trust can benefit more than just wealthy individuals.  There are many types of trusts available to suit specific needs and can provide benefits such as avoiding estate tax, disability planning, flexibility to access assets prior to death, and income tax savings.

A primary reason people choose set up a trust is to avoid probate.  Probate is a process that occurs after death, when a state court oversees the administration of the will.  It ensures debts are paid and the individual’s assets are distributed according to the wishes of the deceased.  This process can be very lengthy – lasting months to even years to complete, during which time the assets are not accessible by the beneficiaries.

Another benefit of a trust is that it takes effect when it is formed – unlike a will, which isn’t enforceable until death.  This is especially important if an individual becomes physically or mentally incapacitated prior to death.  Without any other directions, the court can take control of your assets prior to death.  A trust can specify your directives in the event of disability.

Trusts allow an individual to give detail on the timing and terms of the distribution of their assets, which can be useful to avoid possible creditors or lawsuits of designated beneficiaries.  Trusts can also be helpful if you plan to direct your assets to provide ongoing care for a beneficiary, such as a child with special needs.

For higher net worth individuals, those who own a lot of real estate, those with assets in multiple states, or those who have specific instructions how and when assets are to pass to beneficiaries, can benefit from utilizing trusts.

A will may be enough

Although they can be very beneficial, a trust is not always needed.  Trusts can cost thousands of dollars to set up, with additional charges to maintain or amend the terms in subsequent years.  In many cases, having a properly established will may be sufficient to suit an individual’s needs.  It is important to keep the details of the will current, and make it as detailed as possible, so there is no confusion when distributing the assets.

Avoiding or limiting your assets from probate is possible, even without a trust.  Assets with properly designated beneficiaries, such as life insurance policies and retirement accounts, are excluded from the probate process.  It is recommended if you are not utilizing a trust, that you take care to designate beneficiaries on as many of your assets as you can.  Ohio permits an individual to title investment and bank accounts as “payable on death” which designates a beneficiary, thus avoiding probate.

Taking the time to designate beneficiaries on your assets, making your wishes clear and detailed in your Last Will and Testament, and making the proper arrangements for how your affairs will be handled, both at death and in the event of disability, could be ways to achieve your estate planning goals without the need for a trust.

Each individual’s situation is different.  In each instance, we recommend you consult with a knowledgeable estate attorney to discuss which options will be most advantageous in achieving your estate planning goals.  Contact us for guidance and recommendations of attorneys in your area.

Do you have a plan for your paperwork?

by: Devin Cunningham

Every January we all make resolutions for the year ahead. A common goal, both professionally and personally, is to get better organized – and a great first step is to create and maintain an effective record retention policy.

The essence of an effective record retention policy is to keep what you need and get rid of the documents that no longer matter. This sounds so simple in theory, but can be difficult without some guidance. This is where we can help!

Some benefits of a well-implemented retention policy include:

  • Reduction in data storage costs by eliminating unnecessary items
  • Mitigating risk in the event of a data breach
  • Reduced litigation or regulatory costs
  • Improve speed/accuracy of record retrieval

Here is our suggested record retention policy for both businesses and individuals:

General Rules of Thumb 

Businesses and individuals should retain copies of filed tax returns indefinitely. These should be kept in a safe place. If you prefer to keep your records electronically we can provide you with a secured pdf copy. However, be sure to back up your computer records effectively if you choose to retain only electronic records. Once you have made the decision to dispose of paper documents, be sure to shred them thoroughly before throwing away. These documents contain a great deal of personal information that you don’t want falling into the wrong hands!

IRS Examinations 

The IRS generally will not audit returns after three years, though there are exceptions that can extend the IRS audit window. We included a link to the IRS webpage concerning record retention.

What about Ohio? Ohio’s statute of limitations is 4 years. this period begins on the date that the Ohio income tax return was due without extensions. The state of Ohio is permitted to examine your tax returns for one year longer than the IRS. We recommend that our Ohio business and individual clients retain all documentation for 4 years in the event of exam. Many states have statutes that differ from the IRS regulations. Be sure to check the rules in your specific state before disposing of any records.

What about Non-Tax Related Business Records?

Certain business documentation should be kept indefinitely. This includes:

  • Articles of Incorporation
  • Legal communications
  • Patents, copyrights, trademarks
  • Audited financial statements and CPA audit reports
  • General ledgers and year-end trial balances

Aside from supportive tax records, other documents such as accounts payable/receivable ledgers, inventory reports, bank statements and reconciliations, invoices and expense reports should be retained for a minimum of 7 years.

Final Thoughts

There IRS will expect you to be able to deliver documents promptly should they ever ask. It is extremely helpful to maintain an efficient record-keeping system, whether you prefer to keep hard copies or electronic records. Please consult your legal team or advisors for the record retention adoption policy that best suits your organization.

Remember, we’re here to be your financial and tax partner year-round, not just at tax time! If you would like to discuss your individual or business situation, please give us a call at 216.524.8900.

Click here to download your copy of our Record Retention sheet for Individuals and Businesses.