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info@kbl.com

KBL Business Bytes

KBL BUSINESS BYTES

 
 

 

Question:
What are the rules for providing unpaid internships?

Answer:
There are limited circumstances in which individuals who participate in for-profit private sector internships or training programs may do so without compensation. Even where the intern needs to complete an internship for their own educational benefit, the determination of whether an internship or training program can have unpaid participants depends upon all of the facts and circumstances of each such program. The following six criteria are looked at by the Courts to determine if the intern must be paid:

1 The internship, even though it includes the actual operations of the facilities of the employer, is similar to training which would be given in an educational environment;
2 The internship experience is for the benefit of the intern;
3 The intern does not displace regular employees, but works under close supervision of existing staff;
4 The employer that provides the training derives no immediate advantage from the activities of the intern and on occasion its operations may actually be impeded;
5 The intern is not necessarily entitled to a job at the conclusion of the internship; and
6 The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If all of the factors listed above are met, the federal minimum wage and overtime provisions do not apply to the intern. This exclusion from the general obligation to pay an individual working for a company has been construed quite narrowly.

There are some general principles you may wish to consider. The more the internship program is structured around a classroom or academic experience as opposed to the employer s actual operations, the more likely the internship will be viewed as an extension of the individual s educational experience (this often occurs where a college or university exercises oversight over the internship program and provides educational credit). The more the internship provides the individual with skills that can be used in multiple employment settings, as opposed to skills particular to one employer s operation, the more likely the intern would be viewed as receiving training. On the other hand, if the intern is performing productive work for the company, then the fact that they may be receiving some benefits in the form of a new skill or improved work habits will not exclude them from the law s minimum wage and overtime requirements.

Additionally, if an intern substitutes for regular workers or augments a company s existing workforce, the intern should be paid. Similarly, if you would have hired additional employees or required existing staff to work additional hours had the intern not performed the work, the interns should be paid. Conversely, if the employer is providing job shadowing opportunities that allows an intern to learn certain functions under the close and constant supervision of regular employees, but the intern performs no or minimal work, the activity is more likely to be viewed as an educational experience.

Also, the internship should be of a fixed duration, established prior to the outset of the internship. It should not be used as a trial period to see if the intern will work out as an employee. seeking employment at the conclusion of the internship period.

KBL Business Bytes represents short answers to common questions that we receive from the owners of emerging businesses. The information contained in KBL Business Bytes should not be used in any actual transaction without the advice and guidance of a professional adviser who is familiar with all the relevant facts.

 
 
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Website   www.kbl.com     Contact us at info@kbl.com
         
 
Our Areas of Practice
     
  Audit and Assurance
Tax Advisory and Compliance
Business Advisory Services
  Finance & Accounting Outsourcing
Mergers & Acquisitions Advisory
Litigation Consulting & Forensic Accounting
 
Services Provided To
       
  Emerging Businesses
Publicly Held Companies
Fortune 500 Companies
Closely Held Businesses
Global Enterprises
Government & Municipalities
  Not-For-Profit
Sports, Media, & Entertainment
High Net Worth Individuals
Retirement Plans
Family Owned Enterprises
Investment Community
 
 

Question:

Is there a general range of how many multiples of earnings a service company is worth?  I'm hearing between 1.5 and 2 times revenue is very basic and fair usually.

Answer:

It depends first on the industry.   And then the company's subset in the industry. 

So, in the services industry, valuation of an accounting firm is different from a law firm, is different from a technology firm, is different from a medical practice.  If you are a technology firm, then it depends on what type of technology firm.  Are you a software developer?  A service company?  A combination of both? 

Then you should look at quality of earnings.  What percentage of revenue is written off to bad debts?  What percentage is 30, 60, 90, 120 days’ collectible?  What percentage of billings are one time engagements vs ongoing legacy engagements?  What percentage of ongoing legacy engagements are 2 year, 3 year, 5 year, indefinite contract periods?

Then there is the company's debt.  How much debt exists?  What are the debt covenants?  What is current vs non-current?  Then there are the lease terms for the operating lease.  When does the lease expire?  What will future rent be? 

These are just some of the factors that are looked at when coming to a final number.

So, a company may fall into the 1.5 to 3 times revenue bucket based on the industry it is in.  But upon due diligence, when all of the above items are factored in, it may end up settling at 2 times revenue. 

Point being that the industry standard for a company may be, say 1.5 to 3 times revenue.  But that is just a starting point for the conversation.  Once you get through due diligence and factor in the specifics of the company that gets drilled down to a more specific number.  And that factor amount is the basis for valuing that specific company.

KBL Business Bytes represents short answers to common questions that we receive from the owners of emerging businesses. The information contained in KBL Business Bytes should not be used in any actual transaction without the advice and guidance of a professional adviser who is familiar with all the relevant facts.

 
 
 

Question:

I have a home office. What types of expenses are deductible when one has a home office?

Answer :

With more and more people expected to be self-employed and working from home, here are a number of tips to help home-business-owners be sure they were properly calculating home office deductions:

Business Only

TOne of the most important things to be sure of before you try to claim the deduction is that some part of the home has to be exclusively and regularly used as the principal place of business. A mixed-use area, like a kitchen, wii not qualify.

The Simplified Option

Self-employed folks with an office in their home do not need to do a lot of calculations and add up all their home-office-related expenses. The IRS now offers a simplified option based on the size of the office. Under this simplified option you take a standard deduction of $5 per square foot of workspace, up to 300 square feet.

You can go with individual expenses or the simplified option, whichever is larger, and you can change from year to year.

Common Deductions

Some of the business owners heating, electric and utility bills can be deducted, and phone, internet and other information services may also qualify. Separate Internet connections and phone numbers can help keep track of expenses.

An office isnot an office without office supplies -- which is why computers, printers, toner, paper, paper clips, staplers, staples, staple removers and other critical equipment may also qualify. Furniture and upgrades to the home itself, if related to the office, may also be deductible.

Leaving Home

Many of those with home offices will find themselves travelling for business purposes even if its just driving across town to a client. Parking, tolls and mileage (at 54 cents a mile for business-related travel) may all be deductible, to say nothing of airfare and hotel rooms.

Recordkeeping

We recommend keeping expense records for at least three years after filing, or two years after paying taxes, whichever is later. Among the records home-business-owners should be holding onto are cancelled checks, bank statements, vendor invoices, bills, receipts and mileage logs.

More information on having a home office is available in IRS Publication 587.

KBL Business Bytes represents short answers to common questions that we receive from the owners emerging businesses. The information contained in KBL Business Bytes should not be used in any actual transaction without the advice and guidance of a professional adviser who is familiar with all the relevant facts.

 
 
Logo
Website www.kbl.com Contact us at info@kbl.com
         
 
Our Areas of Practice
     
  Audit and Assurance
Tax Advisory and Compliance
Business Advisory Services
  Finance & Accounting Outsourcing
Mergers & Acquisitions Advisory
Litigation Consulting & Forensic Accounting
 
Services Provided To
       
  Emerging Businesses
Publicly Held Companies
Fortune 500 Companies
Closely Held Businesses
Global Enterprises
Government & Municipalities
  Not-For-Profit
Sports, Media, & Entertainment
High Net Worth Individuals
Retirement Plans
Family Owned Enterprises
Investment Community
 
 
 

Question:
We process our sales tax within QuickBooks using their sales tax platform. However, the sales tax payable liability reflected in QuickBooks does not zero out after payment and the sales tax payable liability in QuickBooks keeps increasing.

What are we doing wrong?

Answer:

We have a client that pays sales tax to several states and we set up a system where the QuickBooks sales tax payable balances are reconciled to the sales tax paid and filed monthly. Prior to that it never matched up.

Turns out the reason was that after the sales tax returns were processed there were instances where invoices were entered afterwards into the system for dates prior to the sales tax reporting date.

So for example, let's say that the sales tax due for the period ended June 30 was processed and paid. There were instances that after processing, invoices were then entered into the system that had a date of June 30 and before. Which resulted in an increase in the sales tax payable liability. But because the invoices were reflected June 30 and prior and after the sales tax for that month had been processed they ended up not being reported and not paid to the government subsequently. And the sales tax liability would keep growing for these types of amounts.

Our fix for it was that immediately after the sales tax returns were processed QuickBooks was password closed. This stopped additional processing of invoices prior to the date of closing. Then when the client checked the sales tax payable balance at the end of each period the sales tax payable liability in QuickBooks would zero out.

KBL Business Bytes represents short answers to common questions that we receive from the owners emerging businesses. The information contained in KBL Business Bytes should not be used in any actual transaction without the advice and guidance of a professional adviser who is familiar with all the relevant facts.

 
 
Logo
Website   www.kbl.com Contact us at info@kbl.com
         
 
Our Areas of Practice
     
  Audit and Assurance
Tax Advisory and Compliance
Business Advisory Services
  Finance & Accounting Outsourcing
Mergers & Acquisitions Advisory
Litigation Consulting & Forensic Accounting
 
Services Provided To
       
  Emerging Businesses
Publicly Held Companies
Fortune 500 Companies
Closely Held Businesses
Global Enterprises
Government & Municipalities
  Not-For-Profit
Sports, Media, & Entertainment
High Net Worth Individuals
Retirement Plans
Family Owned Enterprises
Investment Community
 
 
 
 

Question:
I have been invited to invest on a friends and family level with a start-up, and was wondering if anyone could share experience on how to evaluate such an "opportunity".

Answer:
The majority of these financing opportunities result in no return. Unless the company is mature and possibly going public I wouldn't do it. Unless you need a future tax write off and have passive income to offset any losses generated from the investment . My experience in these types of situations is summarized with three words from the movie Forest Gump: "Run Forest, Run".

KBL Business Bytes represents short answers to common questions that we receive from the owners of emerging businesses. The information contained in KBL Business Bytes should not be used in any actual transaction without the advice and guidance of a professional adviser who is familiar with all the relevant facts.

 
 
Logo
Website   www.kbl.com Contact us at info@kbl.com
         
 
Our Areas of Practice
     
  Audit and Assurance
Tax Advisory and Compliance
Business Advisory Services
  Finance & Accounting Outsourcing
Mergers & Acquisitions Advisory
Litigation Consulting & Forensic Accounting
 
Services Provided To
       
  Emerging Businesses
Publicly Held Companies
Fortune 500 Companies
Closely Held Businesses
Global Enterprises
Government & Municipalities
  Not-For-Profit
Sports, Media, & Entertainment
High Net Worth Individuals
Retirement Plans
Family Owned Enterprises
Investment Community