Succession PlanningGary N Cooper CPA PC and Forward Results, LLC

www.garycoopercpa.com

Succession Planning

•Business point guard.

•Understanding of processes and procedures within 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 or lack of.

•Overall market, industry and economic issues.

Analysis 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 Planning

Succession PlanningOrganization of Financial Data:

Balance sheet cleanupUnderstanding of inventory levels Accounts receivable - collectableFixed assets - detail/market valueDo all of the above compare and agree with the underlying supporting documentation?

Succession Planning

CapitalizationIs 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 PlanningIncome Statement

Need for business segments?Classes if QuickBooks.Potential need for multiple entity structures

or separation strategies.Common size analysis

Year-to-year comparativesIndustry comparatives

Revenue recognition defined and corrected for future growth.

Percentage of completionAccrual / cash.

Succession PlanningEntity Structure

Double taxationC- Corporation

Minority shareholdersTake out before transaction

Built in gate analysisConversion to S-Corporation

Separation of hot assets.BuildingEquipment

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&AForecast to actualOperating 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 allocation's number of years of depreciation versus good will. PV analysis on savings.

Succession PlanningConclusion Would you consider using a team of professionals to assist you with your clients succession needs?Succession planning could last up to 10 years so the team of professionals could assist with increasing client cash flow by implementing processes and procedures in all aspects of the clients business.Questions or comments?

Succession PlanningConclusion Have you ever discussed succession planning with your client?How close are you to your clients financial records.Do you have regular meetings with your client to discuss their financial position and results of operations?Do you have a clear picture of their goals and objectives?Do they understand the value of their business with our without their involvement?

Gary N. Cooper CPA PC1703 W. 12st StreetHouston, TX 77008713-243-8590www.garycoopercpa.comwww.forwardresults.com