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Case Study

Underlying Data

  • Jane and Jack own a construction business
  • The business is structured as an LLC\Form 1065
  • Annual revenue: $18,000,000
  • Employee count: 26 (Including Jane and Jack)
  • Personal taxable income: $450,000
  • Estimated income tax: $180,000 (450,000*0.40 (combined marginal income tax rate)
  • Current balance of debt: $3,700,000 (3-loans)
  • Years left to pay: 25-years (average)

Victory Goals

  1. More cash flow for growth and stability + retirement fund
  2. Eliminate debt payments ($230,000 annually)
  3. Reduce taxes\stop overpayment
  4. Reduce risks from lawsuits, etc.
  5. Structure for sale in 5-7 years

CPA Approach

  • Cash basis tax return
  • Modified GAAP + tax basis for accounting records
  • Increase ERISA contribution by $65,000 (55% went to Jane and Jack)
  • Purchase equipment and use Section 179 to lower tax
  • Get checks in December and deposit in January (deferral of income)
    • Kick-the-can approach
  • Pay children (those over 12 for construction clean-up\$10,000 per child)
  • Office-in-home deduction
  • Said make additional payments on debt to reduce interest costs…hurt cash flow
  • Advice but little implementation or monitoring services
  • CPA’s practice was a tax preparation firm\82% of total revenue

Cash Flow Mastered Additions

1) Victory

Define goals, timeline, and resources

Victory Goals

  1. More cash flow for growth and stability + retirement fund
  2. Eliminate debt payments ($230,000 annually)
  3. Reduce taxes\stop overpayment
  4. Reduce risk from lawsuits, etc.
  5. Structure for sale in 5-7 years

2) Design

Find paths built within the tax code

Design

  1. Success Projection Model (SPM) to provide future look and management targets. No more driving in the dark.
  2. 50/50 Flexible and Free to accelerate the retirement of debt using tax deductions and not additional payments.
  3. Entrepreneurial Risk Management (ERM) for increased cash flow for asset protection, cash for growth and stability, and cash for Jane & Jack only funding for retirement.
  4. Made structural changes to reduce liability exposure, reduce taxes, increase cash flow, and provide a more favorable exit upon sale.
  5. Other tax strategies that were now available once the first 4 were in-place.

3) Execute

Build-out the tax code design to best practices

Execute

  1. Built-out needed strategies.
  2. Worked with CFM internal team, client CPA, and strategic alliance members recommended by CFM.
  3. Client did not have an attorney.
  4. Every team member check and re-checked design and implement to ensure all was at best practices.

4) Monitor

Interactive response to changes to keep focus on ultimate victory

Monitor

  1. Typical entrepreneur have very little support in implementing good ideas and even less in on-going monitoring of those good ideas.
  2. CFM believes in standing shoulder-to-shoulder until victory is achieved.
  3. We meet with the client monthly (their choice) and review the Sales Projection Model and developing tax liability model to ensure:
    1. Client is optimizing opportunities.
    2. Staying focused.
    3. Achieving desired victories.
    4. Optimizing impact.

CFM Additions\benefits

KEY RESULTS gained from using the interconnected structure of the tax code

1) Success Projection Model (SPM)

  • Knows where they are going, how to get there, and when they will get there… needed to optimize victories.
  • Key to victories.

2) 50/50 Flexible and Free

  • Saved $2.573,000 in debt payments compared to status quo.
  • $3,819,000 in ERISA plan fully for Jane and Jack.
  • Made available $2,573,000 in cash flow available for growth and stability due to accelerated payment of debt.

3) Entrepreneur Risk Management (ERM)

  • Heightened protection against risk.
  • Build long-term retirement plan with deferred tax rates.
  • Funded 50/50 Flexible and Free 100% tax deductible after 1st year.
  • Saved $120,000 ($300,000 * .4) in taxes.

4) Entity structuring

  • Heightened protection against risk.
  • Reduced taxes by material amount at sale.

Would you like to see these types of results for you?

Would you like such a battlefield warrior Standing By You in your entrepreneurial battles delivering these types of results? You will with Cash Flow Mastered on your team.

Would you like to be the warrior delivering these results to your clients? You will with Cash Flow Mastered on your team.

Would you like to be the HERO CPA that stands shoulder-to-shoulder in their entrepreneurial battles?

Let me tell you how all of that is possible.

As you stand shoulder-to-shoulder with your clients, we stand with you.

Let Me Tell You How