Akron CPA

According to this article at Cleveland.com, “The cases involve major violations at eight properties and less significant ones at five others. The earliest complaints date to January 2008. The judge calculated the fines from the number of violations, the number of days they continued, and the maximum daily fine amount, $1,000 to $5,000.”

Contact the Real Estate and Construction Group at Skoda Minotti, a CPA, business and financial advisory firm with offices in Cleveland and Akron, at 440-449-6800. 

The First Time Homebuyer credit has been extended, but not everyone is eligible to continue to take advantage of this credit. Only buyers who were under contract prior to the previous deadline of April 30 can take advantage of this extension to close by September 30 and receive the $8,000 credit.

One of the main reasons for the extension is that there are a high volume of short sales under contract but not scheduled to close by June 30^th. This is mainly due to short sales requiring seller side bank approval. As many banks are inundated with these requests, this backup could have caused buyers to miss out on the credit without the extension to September 30th.

For more information, see this article on examiner.com.  

Have questions about the First Time Homebuyer credit? Contact the Real Estate and Construction Group at Skoda Minotti, a CPA, business and financial advisory firm with offices in Cleveland and Akron, at 440-449-6800.

Click here to view Part 1 of our series and learn more about the stock option landscape or Part 2 to learn more about the accounting and tax ramifications of issuing stock options.

What To Do?

As discussed above, there are significant risks that a company brings upon itself if it decides to issue stock options without properly valuing the options and the equity of the company. Rather than issuing stock options, if a company wants to offer an employee the opportunity to obtain an ownership interest, the most efficient and “clean” method may be to allow the employee to purchase shares from the company or from existing owners. There is no valuation requirement in this case (unless a party wants to hire an expert to ensure that they the transaction price is fair and reasonable) which also eliminates the out-of-pocket cost for the employer. In fact, a business actually recognizes a cash inflow when an employee purchases shares directly from the company. 

I am a valuation expert and I directly benefit from work associated with the valuation of stock options, so why am I telling you to consider alternative routes of compensation? Too often, the companies that issue stock options without having them professionally valued are the same companies that will fight against having their options valued at all due to the cost associated with the valuation. I simply want to spread awareness that there are other avenues of compensating employees and giving them opportunities for equity ownership that may be more cost efficient for companies that are under the illusion that issuing stock options does not require a cash outlay.

If you take anything away from this article, remember that issuing stock options is not a “cashless” expense. Consider that there are other alternatives for compensating employees other than using stock options. Remember that there are transaction costs associated with issuing stock options, specifically, hiring a valuation expert, that will create real out-of-pocket cost for any company. Unless you are ready to comply with the valuation requirements associated with issuing stock options, you may be better off simply not using them and compensating employees in another manner. Finally, just like selling a home, if you are going to issue stock options make sure that you bring in an expert to ensure that the value of the company and options are determined and documented appropriately – and be prepared to pay the “commission” for these services.

The information in this article is not meant to represent legal or tax advice. Please consult with a Skoda Minotti business valuation professional or your tax/legal advisor regarding the applicability of these issues to your particular situation.

Visit our web site for more information on our business valuation services. Skoda Minotti is a CPA, business and financial advisory firm with offices in Cleveland and Akron.

Accounting and Tax Ramifications of Issuing Stock Options

 Click here to view Part 1 of our series and learn more about the stock option landscape.

To give you more perspective, first let us review the accounting treatment for the issuance of stock options (rest easy - this will not be too painful). When stock options are issued, an expense must be recorded based on the value of the option. A stock option’s value is derived from a variety of factors, two of which are the value of the stock as of the date of the option grant and the exercise price of the option (the price at which the option holder can purchase a share of stock). Determining the value of a company’s stock is not difficult when it is publicly traded, but privately-held companies do not have readily available market prices, which necessitates the services of a valuation expert. Unless the option is properly valued, a company cannot correctly record the associated compensation expense. If a company is unable to correctly record the results of its operations, it may find obtaining a clean audit opinion to be a difficult, if not impossible, task.

Now that I have warned you about the headaches that you may encounter on the “accounting” side of issuing stock options, let me further alarm you with the tax ramifications. If a company sets the stock option exercise price lower than the fair market value of its stock on the grant date, the stock option could be deemed to be deferred compensation according to Internal Revenue Code 409A. Under 409A, such deferred compensation would be immediately taxable to the employees receiving the grant and subject to regular income tax rates plus 1%. Perhaps even more distressing, a 20% penalty plus interest would also be triggered. In addition, employers would be responsible for withholding income taxes for employees on these types of option grants, which if not done, could result in additional tax penalties. The immediate taxability, penalty and withholding requirements do not apply when the stock option exercise price is equal to or greater than the fair market value of the company’s stock on the grant date. It is impossible to compare the exercise price of a stock option to the fair market value of a company’s stock unless a valuation of the company’s stock has been performed. In addition, when a valuation has been performed to establish the fair market value of a company’s stock, the burden of proof shifts to the IRS to disprove the appraised value. Therefore, unless there is documentation to support the fair market value of a company’s stock near the option grant date, there could be significant tax issues in addition to the accounting issues alluded to earlier.

The information in this article is not meant to represent legal or tax advice. Please consult with a Skoda Minotti business valuation professional or your tax/legal advisor regarding the applicability of these issues to your particular situation.

Visit us tomorrow for Part 3: What to Do?

In the meantime, visit our web site for more information on our business valuation services. Skoda Minotti is a CPA, business and financial advisory firm with offices in Cleveland and Akron.
 

When selling your home, it is common to use an agent to list, promote and show the property. In exchange, you pay a portion of the sales price as a commission to the agent. The benefits of using an agent include: 1) the listing of your home in a database so that homebuyers can access information about it; 2) the agent acting as your middleman during the negotiation process; and 3) the incentive it gives the agent to sell your home quickly (so that her or she can earn their commission). 

Some people choose to sell their home by owner and forego using an agent. These are typically the homes that have “For Sale” signs in their yards for many months, sometimes even years (you know the ones), before they are actually sold. These people often believe that the benefit of not having to pay an agent commission on the sale of their home is worth the prolonged period it will likely take to sell the property. 

What does the choice of hiring a real estate agent or selling your home by owner have in common with private companies issuing stock options? The strange answer is: Much more than many of us realize. 

The Stock Option Landscape

More and more private companies are issuing stock options as part of their key employees’ compensation plans. This may be driven by the ideas that: 1) stock options don’t “cost” anything to the company; 2) stock options will positively influence employees’ performance; or 3) since public companies issue stock options, it must be a good idea and private companies should follow suit. Regardless of the motivation, what most private company owners and executives do not realize is that accounting for stock options, for both tax and financial reporting purposes, may actually have an out-of pocket cost that is greater than the value of the options themselves.

In order to value stock options issued by private companies, there are two major steps that must be undertaken:

1. Determining the value of the company’s equity (which is a key input to valuing a stock option)

2. Determining the value of the stock option

There are not many privately-held companies with the in-house resources or expertise necessary to perform either of the requirements above, both of which are essential in accounting for the issuance of stock options. This often puts accountants in the awkward position of trying to explain to business owners the “unseen” costs and accounting ramifications associated with issuing stock options.

Back to our analogy, hiring a valuation expert to determine the value of stock options is much like hiring a real estate agent to sell your home. A valuation expert is able to perform both of the tasks identified above that are necessary to value the stock options issued by a private company, much like a real estate agent takes care of the necessary steps to sell your home. This work is not free, however, and depending on the complexity of the company and the options issued, the cost to value a private company’s stock options can range in cost from thousands to tens of thousands of dollars. When private companies issue stock options, they often do not consider the “commission” that they will have to pay to a valuation expert to ensure that the options are properly valued. Unlike real estate agent commissions, however, which are based on the sale price of the home, valuation fees are relatively fixed. 

Just like selling a home “by owner,” some companies will issue stock options and try to determine the value themselves (or even worse, not value them at all). By not using a real estate agent, homeowners often find themselves making no headway in the sale of their home. Similarly, by not hiring a valuation expert to value the stock options that they have issued, private companies create the risk that their auditors will not sign off on their financial statements. Maybe even more importantly for business owners and employees, unsubstantiated option values leave both companies and their employees in danger of stiff tax consequences.

The information in this article is not meant to represent legal or tax advice. Please consult with a Skoda Minotti business valuation professional or your tax/legal advisor regarding the applicability of these issues to your particular situation.

Visit us tomorrow for Part 2: The Accounting and Tax Ramification of Issuing Stock Options

In the meantime, visit our web site for more information on our business valuation services. Skoda Minotti is a CPA, business and financial advisory firm with offices in Cleveland and Akron.

In today’s economy, it is crucial to keep good tenants. The following nine points will help you maintain maximum occupancy in an uncertain environment:

1. Understand the tenant’s business. Research their industry so you can credibly talk about their business, and make them feel that you understand their concerns in today's economic conditions. 
2. Respond reasonably to rent relief or downsizing. This entails a two-step process consisting of listening to the request, and then formulating a personal response within three days. Establish limits to these requests and button down your parameters. If the tenant is downsizing, request their financials or tax returns to understand that their current financial position warrants this action. Make sure not to open the floodgates to requests every month, however.
3. Happy tenant employees means happy tenants. This is as easy as keeping the common areas clean and neat.
4. Go green, well. Reducing the amount of water or soap could get employees irritated. Also, automatic motion lighting in conference rooms or offices could be more of a hassle than a money saver, whereas they may work well in a hallway or a closet. Find other ways to go green that will help the environment and not hinder employees. Also, watch individual tenant leases when attempting to pass-through Green costs.
5. Follow up with tenants. Make sure to follow up with your tenants on a timely basis. There is a difference between "quick response" and "at their beck-and-call."
6. Be consistent with responses to tenants. Tenants talk to each other. Tenants get angry when your message is not consistent, whether it be costs, timing of an event (like cleaning), rent relief, management deferred maintenance plan, etc.
7. Tightly manage your broker’s promises. The easiest way to do this is to make sure that the broker and the property manager are on the same page - enforce constant and effective communication. Understand what the broker wants or needs so you can deliver. Also, promising occupancy before the tenant has signed the contract can get you into trouble - never anticipate a tenant's intentions until it is in writing. 
8. Keep current with billing. Tenants need predictability for cash flow purposes. Keep them updated and give them an estimated time frame when to expect the invoice if it will be late. Consider personally communicating changes in pass-through estimates each year - tenants appreciate the personal touch and the advanced notification.
9. Be strong, be fair, be smart. Remember that retaining the tenant may not be in the best interest for both parties involved. Also, don’t give up too easily, but if it is clear the tenant will not make it financially, come to an agreement. If the lease is more than 10 years old, update the lease to the way the property is operated today. Items specific to the lease that could have changed are holidays, weekend hours of operation, pass-through costs, timing and collection of rents; prohibited activities, sub-leasing, etc.

***This summary was based on a webinar from the members-only section of the NAIOP website. Most of the points have been modified pursuant to the blogger's experience.

Looking for a Cleveland or Akron accounting firm that provides services to the real estate industry? Contact the Real Estate and Construction Group at Skoda Minotti at 440-449-6800.

What did Picasso’s paintings look like when he was only halfway finished? How did Michelangelo’s “David” look like after the first few chisels? How livable is a house after the frame has been erected, but no interior work has been done?

A valid answer to all of the preceding questions is, “Something different than the final product.” However, for financial experts who provide opinions on economic damages and other litigated matters involving calculated figures, current rules sometimes allow for previous non-submitted, and non-final, drafts of an expert’s report to be considered discoverable evidence. 

The review of draft iterations of an expert report is often considered to be a waste of time (and dollars) as such drafts often do not correctly capture all of the relevant information that was synthesized in the final submitted report. Oftentimes, the tactic of reviewing an expert’s draft reports is an attempt by an opposing attorney to discredit the expert or make the expert’s conduct appear improper in some way. Therefore, some attorneys will request that non-final draft iterations of reports be admitted as evidence and scrutinized, distracting the court from the analysis offered in the financial expert’s final, submitted opinion. 

This is akin to asking Phil Collins to stop all work on a song that he is still feeling his way through, releasing that song, and then asking him to defend its quality to the public and his fans. Not only is this unfair to Phil, but it is unfair to the music-listening public, who expect a polished, quality product that Phil would be willing to stand by. 

In a recent article by Thomas Hilton, MS, CPA/ABV/CFF, ASA, CVA in Financial Valuation and Litigation Expert, a highly-regarded publication in the business valuation and litigation support field, Mr. Hilton discussed that relief for this problem may be on the way. The Committee on Rules of Practice of the Judicial Conference of the United States (Committee) recently proposed amendments to the Federal Rules of Civil Procedure that would shield draft expert reports from discovery. If the proposal makes its way through the necessary channels without any holdups, this relief could come as soon as December 1, 2010. 

As part of the community of financial experts, we hope that relief from the proposals highlighted above (which have been backed by the AICPA) comes swiftly. Primarily, we believe that these proposals will force courts to focus on the merits of an expert’s submitted opinions rather than the potentially unfinished and in-process analysis that is present in draft reports.

Need assistance with a litigation matter? Contact our Litigation Advisory Services Group at 440-449-6800.

Topics: Litigation Advisory Services, Cleveland Business Advisors, Akron Business Advisors, Akron Business Consultants

Unfortunately, the downturn in the economy has effected many not-for-profit organizations that provide invaluable services to numerous communities and individuals.  For some of these organizations, management has thrown its hands in the air, determined that they just cannot provide these services anymore, and closed their doors.

A recent survey of about 100 not-for-profit organizations indicated that about 90% of those organizations have been directly affected by the downturn in the economy, some even severely.  Another survey indicated that, of approximately 1,000 not-for-profit organizations, only 16% expect to cover operating costs in 2009 and 2010.

Public funding is down, endowments are down and earned income is likely down.  There are a few steps that organizations can take to try and stop the bleeding, or at least slow it down:
 

• Take a closer look at how you are operating internally and how you are administering your programs.  Do the programs align with your mission?  Can you change the way you administer programs, achieving the same results but in a less costly manner?
• Make your mission known.  Let others know how important your services are, and how you are providing benefit to the community and individuals.  Be vocal.
• Take advantage of the situation to eliminate inefficient programs and expenses.  
• Work with existing funders to try and overcome the roadblocks.
• Take the time to analyze the situation, and develop a realistic plan to deal with the situation at hand.

We have seen first-hand how the downturn in the economy has effected not-for-profit organizations.  These are just a few steps you can implement to help your organization survive, and continue to provide the invaluable services that it does.  

For more information on the issues facing the not-for-profit industry, contact Skoda Minotti at 440-449-6800 or visit us online.

Topics covered: Cleveland Accounting Services, Akron Accounting Services, nonprofit organizations

This week is our final update in our series on the changing rules and regulations and their impact on employee benefit plan audits.

This week’s topic:

2009 Cost of Living Adjustments for Qualified Retirement Plans

The Internal Revenue Service announced cost-of-living adjustments applicable to dollar limitations for pension plans and other items for tax year 2009.

Click here for more of this article.

Looking for assistance with your benefit plan audit? Contact the CPA’s business and financial advisors at Skoda Minotti at 440-449-6800.

According to an article in Retail Traffic, major big-box retailers have informed about 700 shopping center owners that they will be reducing their rent 25%, no questions asked. Included in the letter was their first rent check, at the reduced rate. Owners and retailers have both been hurting in this poor US economy and each are trying to keep their head above water by reaching a common ground. With vacancy rates rising and retail sales decreasing, roles have switched from the past ten years and retailers are now setting the precedent.

Owners, however are giving pushback and evaluating who actually needs and deserves the rent relief. This issue has caused a dilemma for owners; either decrease their income or have a chance at losing the retailer entirely.   

How does the owner know that the retailer relies on rent relief for the longevity of their business, not just because their next door neighbor received it? According to the article "you can always tell which retailers really need help because they're willing to give up some of the options they have in their lease.” 

Read the whole article here.

Skoda Minotti asks: Is it time to restructure using percentage rents or lowering the break point for overage rents? Whatever the answer, communication between landlord and tenant is imperative.

Has your rent changed over the past year? Have you and your landlord adjusted your rent to meet at a common ground? Leave us a comment and let us know.

Looking for a Cleveland or Akron accounting firm that provide services to the real estate industry? Contact the Real Estate and Construction Group at Skoda Minotti at 440-449-6800.

Topics: Cleveland Real Estate Accounting

The Magis Advisory Group of John Carroll University is offering a seminar providing continuing legal education credits for attorneys, continuing education credits for certified financial planners, and continuing professional education credits for certified public accountants in estate planning, advanced planning for the family owned business and business and asset valuation.

Our own Robert A Ranallo, CPA/ABV, JD, CVA, CFF, will be presenting the "Business and Asset Valuation" session on Friday, June 19th, 2009.

Click here for more seminar imformation or to signup for the seminar.

Looking for business valuation assistance in Cleveland or Akron? Contact our Business Valuation Group at 440-449-6800 for more information.

Topics: Cleveland Business Valuation, Akron Business Valuation

Looking for a low-cost construction financing option? The American Recovery and Reinvestment Act of 2009 created a new category of bonds - Recovery Zone Bonds (RZB). These bonds are intended to stimulate economic recovery in designated “recovery zones”. There are two categories of RZBs – Recovery Economic Development Bonds ($10 billion allocated) and Recovery Zone Facility Bonds ($15 billion allocated).

Recovery Zone Economic Development Bonds – These are governmental bonds to be used for governmental purposes that will allow the county/large municipality to borrow on a lower cost than traditional tax-exempt financing.

Recovery Zone Facility Bonds – These are private activity bonds that permit counties/large municipalities to provide tax-exempt financing for private projects which historically would not qualify (e.g. large manufacturing plants, distribution centers, hotels, research parks, etc).

The government will allocate each category of RZBs to states based on each state’s decrease in employment compared to the national decrease in employment. The state then allocates the bonds to counties and large municipalities based on their decrease in employment compared to the state’s decrease in employment. We will provide an update once these bonds have been allocated.

To learn more about how Recovery Zone Bonds may benefit your business, click here to view a more detailed summary from Benesch Attorneys at Law.

Looking for a Cleveland or Akron accounting firm that provide services to the construction industry? Contact the Real Estate and Construction Group at Skoda at 440-449-6800.

The CPAs, business and financial advisors in Skoda Minotti's Real Estate and Construction Group recently authored an article for Builders Exchange Magazine.

The article summarizes some important accounting and tax provisions that construction professionals need to keep in mind. The article highlights the American Recovery and Reinvestment Act, the Energy Policy Act of 2005, qualified rehabilitation and low income housing tax credits.

To view this helpful article, click here.

Looking for a Cleveland or Akron accounting firm that provides services to the construction industry? Contact the Real Estate and Construction Group at Skoda Minotti at 440-449-6800.

Selling a business can be one of the most challenging tasks that business owners face. Click here to read “Avoiding Seller’s Remorse,” featuring our own Robert A. Ranallo, CPA/ABV, JD, CVA, CFF.

Need assistance valuing your business? You can contact our team of Certified Valuation Analysts at 440-449-6800.

Skoda Minotti is a CPA, business and financial advisory firm with offices in Cleveland and Akron.

You’ve probably heard the phrase that Facebook “isn’t just for kids anymore.” That’s true. In fact, according to this cnn.com article, the most popular social networking site in the world is more about tracking grandkids. That’s right, the world’s most popular social networking site is currently growing most quickly among women older than 55.

So what does this mean to a business looking at online marketing tactics? It means that no matter which demographic you target, you can find them on Facebook. And, via Facebook’s advertising tool, you can find them much easier than you think.

When placing an ad on Facebook, you can target by gender, age, location, education level, and a host of other valuable demographics. Let’s say you only want to target single males, between the ages of 25-35 (about 5,000 in case you’re interested) in Cleveland, Ohio. You can easily create a custom ad that will appear only to your selected demographic and you will only be charged when a member of your demographic clicks on your ad (about $.60 per click for this demographic). It’s an easy, yet powerful way to know exactly where and to whom your marketing message is being delivered.

With over 200 million users worldwide, your demographic is out there somewhere on Facebook, you just need to find it.

Need help developing an effective online marketing strategy? Contact Skoda Minotti at 440-449-6800 for more information on how we can help.

Skoda Minotti is a CPA, business and financial advisory firm with offices located in Cleveland and Akron.   

Hello, and welcome to the first blog entry from the Skoda Minotti Real Estate and Construction Group!  We are excited to roll-out our new website, and will periodically bring you up-to-date on recent events, changes in market conditions, educational opportunities, tax-savings tips… anything that can help you in your real estate or construction business.  We strive to connect you and your business contacts to our real estate and construction world.

We encourage you to browse through our Real Estate and Construction Group website.  Here are a few highlights of our group: 

• While many of our clients originate from Northeast Ohio, we service clients from Florida to Pennsylvania to California;
• Each member of our Real Estate and Construction Group team averages 25 hours of education in this industry sector each year;
• We are very active in numerous professional and trade organizations, including BOMA, ABC, SAO, CREW, AHACPA, CFMA, OCA, OLTA and NAIOP;
• Our tax and accounting CPA’s often contribute articles to various publications that support real estate and construction professionals;
• We deliver value-added services everyday by connecting our clients to our vast networking directory - this includes bankers, attorneys, sureties, architects, appraisers, sub-contractors, grant writers, and marketing specialists - anyone that can help you succeed in business
   

We are very pleased to announce that on December 1st, we will be opening the doors to our new Akron office. The office will be located at 3875 Embassy Parkway, Suite 200, in Fairlawn.

With an increasing portion of our clients and employees based in the Akron area, we realize the significant potential for growth that the area holds. An Akron office will allow us to serve our Akron client base more efficiently and effectively. Additionally, this office will further our goal of continuing to attract the best and most talented staff in order to continue delivering on the promise of outstanding client service.

Our new Akron office will be fully integrated with our current Mayfield Village office and our professionals will be able to fully serve clients from either location. If you are in the Akron area this December, we invite you to stop by and check out our new office space. Click here for directions. 

Looking for a Cleveland or Akron accountant? Contact us at 440-449-6800 (Cleveland) or 330-668-1100 (Akron).