partner

how to juggle tax considerations for partner retirement benefits

by

senior executive in home office with two monitors and keyboard on leather desk and looking at paperwork on deskminimizing self-employment taxes is desirable but tricky.

by marc rosenberg
retirements & buyouts

the income tax aspect of practice management issues is an area of my consulting practice in which i have knowledge, but i wouldn’t call it “expertise.” so i sought the counsel of an expert – jeff arnol, cpa, managing partner of kessler, orlean, silver & company in chicago. the information presented here is based on my 20+ years of experience of working with cpa firms on partner retirement plans, liberally supplemented by arnol’s input.

more on partner retirements: two ways to retire, and one’s not pretty | mandatory retirement varies by firm size | mandatory retirement? 4 reasons the firm comes first | how to transition clients from retiring partners | you want goodwill payments? give proper retirement notice | retirement vesting: the devil’s in the details | compromise is in order for some goodwill payouts | three ways to calculate goodwill payable in partner buyouts, none of them great | 5 points to consider when paying out goodwill | how to set terms and limits for goodwill payouts | partners may balk at guaranteeing retirement obligations

read more →

two ways to retire, and one’s not pretty

by

older businessman taking a coffee breakthe graceful way to slow down and phase out.

by marc rosenberg
retirements & buyouts

there are two ways that partners slow down as they approach traditional retirement age:

announced – the “cooperative” way to slow down. the partner openly and willingly informs the partners that she wishes to slow down. this change in status is usually related to the retirement process, but some partners who are not retirement-minded may wish to work less than full time in order to pursue other life goals.

more on retirement: mandatory retirement varies by firm size | how to transition clients from retiring partners | retirement plan funding? what funding? | retirement vesting: the devil’s in the details | when retiring partners take a specialty with them | three ways to calculate goodwill payable in partner buyouts, none of them great | the multiple of compensation method, fully explained | clients leaving? time to reduce retirement benefits | partners may balk at guaranteeing retirement obligations

goprocpa.comexclusively for pro members. log in here or 2022世界杯足球排名 today.

unannounced – the “uncooperative” way to slow down. in these instances, the partner is either unwilling to cooperate with his partners in working out a sensible, fair phase-down period or is unaware that he needs to phase out of the firm.

read more →

mandatory retirement varies by firm size

by

senior businesswoman holding portfoliopractices between “large” firms and smaller firms diverge.

by marc rosenberg
retirements & buyouts

as is the case with many aspects of practice management, mandatory retirement is addressed quite differently depending on the size of the firm. here is data from a recent rosenberg map survey:

percent of firms having mandatory retirement policies for partners:

  • 83 percent for firms with annual fees greater than $20 million.
  • 77 percent for firms in the $10 million-20 million range.
  • 56 percent for firms in the $2 million-10 million range.
  • 21 percent for firms with fees less than $2 million.

more on retirement: mandatory retirement? 4 reasons the firm comes first | how to transition clients from retiring partners | you want goodwill payments? give proper retirement notice | retirement plan funding? what funding? | vesting can cover part-timers, too | retirement vesting: the devil’s in the details | compromise is in order for some goodwill payouts | when retiring partners take a specialty with them | if clients leave, do you reduce retirement benefits?

read more →

mandatory retirement? 4 reasons the firm comes first

by

elderly businessman with hand on door frameand 6 reasons that firms struggle.

by marc rosenberg
retirements & buyouts

at cpa firms, the concept of requiring partners to retire at a certain age has been around for decades. the mandatory requirement policy has its roots in the “one-firm” concept of managing a firm: the interests of the firm should always be more important than the interests of any individual partner.

more on retirement: you want goodwill payments? give proper retirement notice | retirement plan funding? what funding? | compromise is in order for some goodwill payouts | when retiring partners take a specialty with them | if clients leave, do you reduce retirement benefits? | the multiple of compensation method, fully explained | the ins and outs of aav for goodwill | 5 points to consider when paying out goodwill | how to set terms and limits for goodwill payouts | 4 ways to decide how to pay out capital | partners may balk at guaranteeing retirement obligations

why a mandatory retirement policy is good for the firm: read more →

you want goodwill payments? give proper retirement notice

by

older man and younger man having meeting at deskno transition – no goodwill.

by marc rosenberg
retirements & buyouts

if there is one takeaway in retirement planning, it would be this: “no transition – no goodwill.” here’s what i mean.

more on retirement: retirement plan funding? what funding? | vesting can cover part-timers, too | compromise is in order for some goodwill payouts | when retiring partners take a specialty with them | if clients leave, do you reduce retirement benefits? | three ways to calculate goodwill payable in partner buyouts, none of them great | eat what you kill? then maybe ‘book of business’ is for you | the ins and outs of aav for goodwill | 5 points to consider when paying out goodwill | clients leaving? time to reduce retirement benefits | 4 ways to decide how to pay out capital | partners may balk at guaranteeing retirement obligations

the best of times and the worst of times…

with apologies to charles dickens, who famously opened his classic “a tale of two cities” with the above, here are two real experiences i had regarding transition, one of which was the best example of retiring partner transition i’ve ever seen and one the worst.

read more →

when compromise is in order for some goodwill payouts

by

businessmen standing on dollar billtwo ways to deal with the loss of a major client.

by marc rosenberg
retirements & buyouts

sometimes you need a creative compromise for dealing with the issue of linking client retention with goodwill benefits.

situations that could cause a firm to factor in lost clients in calculating goodwill benefits include:

  1. client loss, regardless of who is at fault.
  2. non-traditional services that were not institutionalized and hence, left the firm with the lead partner.
  3. loss of a significant client.

read more →

when retiring partners take a specialty with them

by

businessman sitting on scales with stack of coins in other traynon-traditional services must be ‘institutionalized’ to be valuable.

by marc rosenberg
retirements & buyouts

the only reason firms pay goodwill-based retirement benefits is to retain the clients managed by the retiring partner.

more on partner buyouts: if clients leave, do you reduce retirement benefits? | why you’ll get less from your partners in a buyout than you might by selling the whole firm | eat what you kill? then maybe ‘book of business’ is for you | the multiple of compensation method, fully explained | 5 points to consider when paying out goodwill | clients leaving? time to reduce retirement benefits | partners may balk at guaranteeing retirement obligations

if a firm were 100 percent certain that all of a retiring partner’s clients would leave the day after the partner settled in at the retirement community, i doubt the remaining partners would be terribly motivated to sign any retirement checks. read more →

if clients leave, do you reduce retirement benefits?

by

burning money dollarphotoclub_69980042.jpgwhy today 1 in 5 firms links client loss with payout reductions.

by marc rosenberg

many things have changed during the history of the cpa profession. twenty or more years ago, the majority of firms valued their goodwill at one times fees and at the same time, had a provision in their retirement plan to reduce the goodwill benefits of a retiring partner if her clients left when she exited the firm.

by contrast, today the average goodwill valuation is roughly 80 percent of fees, and only 20 percent of firms have a provision that links client loss with benefits.

let’s analyze each of these two changes. read more →

is your firm in trouble? 7 signs

by

businessman with face in handsbusinessman with head in hands at laptop broken laptopa culture change may be in order.

by august j. aquila
creating the effective partnership

accountability, according to the merriam-webster online dictionary, is “the obligation or responsibility to accept responsibility or to account for one’s actions.” let’s explore what this definition means.

first, there is an obligation. an obligation is a promise to do something. if a company has a financial obligation and fails to meet it, it may go into bankruptcy. if individuals fail to meet their obligations they also fall into a state of bankruptcy – i.e., failure.

read more →

why you’ll get less from your partners in a buyout than you might by selling the whole firm

by

toy soldiers battle on and for dollar billshow to determine partner retirement payout terms and annual limits.

by marc rosenberg

the vast majority of firms pay retirement benefits over a 10-year period, according to our research.

more on retirement: three ways to calculate goodwill payable in partner buyouts, none of them great | eat what you kill? then maybe ‘book of business’ is for you | the multiple of compensation method, fully explained | the ins and outs of aav for goodwill | 5 points to consider when paying out goodwill | clients leaving? time to reduce retirement benefits | how to set terms and limits for goodwill payouts | 4 ways to decide how to pay out capital | partners may balk at guaranteeing retirement obligations

we occasionally see five to seven years at lower payout levels. and some firms under $10 million adopt five-year payouts for goodwill, reasoning that because five-year payouts are common for the purchase of a cpa firm, the same term should apply to their own buyouts.

but external purchases of firms are quite different than internal buyouts. read more →

three ways to calculate goodwill payable in partner buyouts, none of them great

by

pen, eyeglasses, calculator and magnifying glass on financial reportssome methods can damage the firm.

by marc rosenberg
retirements & buyouts

cpa firms use a number of methods to calculate the goodwill payable to a retiring partner.

here are three less commonly used.

1. ownership percentage

this method has clear detriments. firms should look at goodwill benefits as deferred compensation. both current and deferred compensation should be performance-based; ownership percentage is not performance-based and is often highly illogical.

read more →

eat what you kill? then maybe ‘book of business’ is for you

by

a big golden tiger looking out for any disturbance during his mealthree common and painful scenarios.

by marc rosenberg
retirements & buyouts

the book of business method of allocating goodwill benefits is most often used by “eat what you kill” firms. essentially, retiring partners “sell” their client bases back to the firm.

more on retirement: the multiple of compensation method, fully explained | the ins and outs of aav for goodwill | 5 points to consider when paying out goodwill | clients leaving? time to reduce retirement benefits | how to set terms and limits for goodwill payouts | 4 ways to decide how to pay out capital | partners may balk at guaranteeing retirement obligations

in almost all cases, the retired partner gets paid only to the extent that the firm retains her clients throughout her payout term.

the major flaw with this method is that a partner will never, ever delegate or transfer clients, for the good of the firm, to other firm members because this would lead directly to reduced retirement benefits. read more →