Accountant's Business Manual (with CD-ROM Toolkit)

• Volume 1
• SOLE PROPRIETORSHIPS
• Introduction 5
  • Legal Nature of Proprietorship
  • Characteristics of a Proprietorship
  • Advantages of Proprietorship
  • Disadvantages of Proprietorship
  • Filing and Compliance Requirements
  • Proprietorship Name
  • Accounting for Proprietorships
  • Husband and Wife as Co-proprietors
  • Employment of Spouse and Children
  • Real Estate in Proprietorship
  • Contractual Relationships of the Sole Proprietor
  • The Proprietor and Obligations
  • Business Liability and Personal Assets
  • Protection of Proprietary Portions of Business
  • Change to Partnership
  • Change to Corporate Form
  • Change to Single-Member Limited Liability Company
  • Effect of Proprietor Death
  • Dissolution of Proprietorship
  • Home-Based Businesses
  • Suggested References
    • Appendix 1: Proprietorship Creation Checklist (also see Toolkit CD-ROM)
    • Appendix 2: Incorporation Checklists and Examples (also see Toolkit CD-ROM)
    • Appendix 3: Sample Notification of Change of Ownership (see Toolkit CD-ROM)
    • Appendix 4: Checklist for Sale of a Business (see Toolkit CD-ROM)
    • Appendix 5: Sample Noncompete Agreement (see Toolkit CD-ROM)
    • Appendix 6: Factors for Determining Whether an Activity Is a Business or a Hobby (see Toolkit CD-ROM)
• PARTNERSHIPS
  • Introduction 5
  • Partnership Forms
  • Legal Status and Characteristics of a Partnership
  • Laws Governing the Partnership
  • Delegation of Authority for Management Duties Among Partners
  • Duties of Partners to Each Other
  • Duties and Liabilities to Third Parties
  • Advantages and Disadvantages of a Partnership
  • Creating the Partnership
  • Funding the Partnership
  • Accounting Systems and Accounts
  • Distribution of Profits and Losses
  • Taxation of Partnerships
  • Terminating a Partnership
  • Suggested References
    • Appendix 1: Partnership Agreement Checklist (also see Toolkit CD-ROM)
    • Appendix 2: Partnership Creation Checklist (also see Toolkit CD-ROM)
    • Appendix 3: Comparison of Entity Attributes — Proprietorships, Partnerships, C Corporations, S Corporations, and LLCs (also see Toolkit CD-ROM)
    • Appendix 4: Sample Buy-Sell Agreement (see Toolkit CD-ROM)
    • Appendix 5: Sample Notification to Creditor of New Business Form (see Toolkit CD-ROM)
    • Appendix 6: Partnership Termination Checklist (see Toolkit CD-ROM)
    • Appendix 7: Eligibility for Using the Cash Method of Accounting (see Toolkit CD-ROM)
    • Appendix 8: Sample Election Under IRC Section 754 to Adjust Basis of Partnership Property (see Toolkit CD-ROM)
• CORPORATIONS
  • Introduction
  • Incorporation Procedures
  • Corporate Directors and Officers
  • Minutes, Meetings, and Seal
  • Shares
  • Shareholder Agreements
  • Shareholder Remedies
  • Corporate Distributions
  • Amendments, Mergers, and Dissolutions
  • Planning Hints for Closely Held Corporations
  • The Sarbanes-Oxley Act of 2002
  • Securities Regulation
  • Suggested References
    • Appendix 1: Incorporation Checklist (also see Toolkit CD-ROM) 64
    • Appendix 2: Tax Interview Checklist (also see Toolkit CD-ROM) 66
    • Appendix 3: Sample Articles of Incorporation (see Toolkit CD-ROM)
    • Appendix 4: Sample Bylaws (see Toolkit CD-ROM)
    • Appendix 5: Sample Minutes of First Meeting of Board of Directors (see Toolkit CD-ROM)
    • Appendix 6: Sample Minutes of First Meeting of Shareholders (see Toolkit CD-ROM)
    • Appendix 7: Sample Shareholder’s Agreement (see Toolkit CD-ROM)
    • Appendix 8: Sample Voting Trust Agreement (see Toolkit CD-ROM)
    • Appendix 9: Policy on Conflicts of Interest and Disclosure of Certain Interests (see Toolkit CD-ROM)
    • Appendix 10: Worksheet for Preparing Annual Minutes (see Toolkit CD-ROM)
    • Appendix 11: How to Calculate the Deduction for Qualified Production Activities Income (see Toolkit CD-ROM)
• S CORPORATIONS
  • Background
  • Eligibility Requirements
  • Making an S Corporation Election
  • Terminating and Revoking an Election
  • Preventing Unwanted Termination of Elections
  • Passive Income Problems
  • Taxation at the Corporate Level
  • Taxation at the Shareholder Level
  • Distributions
  • Suggested References
    • Appendix 1: S Corporation Checklist (see Toolkit CD-ROM)
    • Appendix 2: Sample QSub Election (see Toolkit CD-ROM)
    • Appendix 3: Sample Subchapter S Election (see Toolkit CD-ROM)
    • Appendix 4: Sample Attachment to S Election for Additional Shareholders (see Toolkit CD-ROM)
    • Appendix 5: Sample QSST Election (see Toolkit CD-ROM)
    • Appendix 6: Sample ESBT Election (see Toolkit CD-ROM)
    • Appendix 7: Sample Election to Close the Books of an S Corporation (see Toolkit CD-ROM)
    • Appendix 8: Chart — Subchapter S Elections By Trusts (see Toolkit CD-ROM)
    • Appendix 9: Flowchart — Operation of Rev. Proc. 2003-43 (see Toolkit CD-ROM)
    • Appendix 10: Sample Election to Distribute Earnings and Profits First (see Toolkit CD-ROM)
    • Appendix 11: Sample Election to Forego Previously Taxed Income (see Toolkit CD-ROM)
• LIMITED LIABILITY COMPANIES
  • Introduction
  • Defining an LLC
  • LLC Operations and Management
  • Classification of LLCs for Tax Purposes
  • Taxation of Multi-Member LLCs
  • Tax Aspects of Converting Existing Entities into LLCs
  • Tax Aspects of Converting From or to a Single-Member LLC
  • Suggested References
    • Appendix 1: Sample Operating Agreement — Manager Managed (see Toolkit CD-ROM)
    • Appendix 2: Sample Operating Agreement — Member Managed (see Toolkit CD-ROM)
    • Appendix 3: Operating Agreement Checklist (see Toolkit CD-ROM)
    • Appendix 4: LLC Creation Checklist (see Toolkit CD-ROM)
    • Appendix 5: LLC Termination Checklist (see Toolkit CD-ROM)
    • Appendix 6: Application for EIN by Single-Member LLC (see Toolkit CD-ROM)
    • Appendix 7: S Election by an LLC Electing to be Taxed as a Corporation (see Toolkit CD-ROM)
    • Appendix 8: Sample Check-the-Box Election (see Toolkit CD-ROM)
• OBTAINING FINANCING
  • Introduction
  • The Decision to Borrow
  • Short-Term Financing
  • Intermediate-Term Financing
  • Long-Term Debt Financing
  • Employee Stock Ownership Plans (ESOPs)
  • Venture Capitalists
  • The Economics of Refinancing
  • The Importance of Financial Statements
  • The Financing Proposal Package
  • Interest Rate Swaps
  • College Financial Aid
  • Suggested References
    • Appendix 1: Small Business Administration (SBA) Personal Financial Statement Form (see Toolkit CD-ROM)
    • Appendix 2: Small Business Administration (SBA) Statement of Personal History Form (see Toolkit CD-ROM)
• BUSINESS VALUATION
  • Introduction
  • Definitions
  • Valuation Purposes
  • Important Valuation Concepts
  • Common Methods of Valuation
  • Applying Discounts
  • Reaching Conclusions
  • The Internal Revenue Service Approach
  • Valuation of Selected Items
  • Special Valuation Considerations
  • AICPA Guidance
  • Other Professional Guidance
  • Research Sources
  • Report Writing
  • Considerations in Mergers and Acquisitions
  • Suggested References
    • Appendix 1: Illustrative Letters (also see Toolkit CD-ROM)
    • Appendix 2: Valuation Checklist (also see Toolkit CD-ROM)
    • Appendix 3: Research Checklist and Sources
    • Appendix 4: Sample Company Business Valuation (also see CD-ROM)
    • Appendix 5: Sample Informal Valuation Report (Excerpt) (see Toolkit CD-ROM)
    • Appendix 6: Sample Calculation of Value Report (Excerpt) (see Toolkit CD-ROM)
    • Appendix 7: Business Valuations Rules of Thumb (see Toolkit CD-ROM)
    • Appendix 8: Summary of IRS Revenue Rulings and Procedures Cited in Chapter (see Toolkit CD-ROM)
• INVESTMENT VEHICLES
  • Introduction
  • Definitions
  • Bank Investments
  • Bonds
  • Common Stock
  • Options and Warrants
  • Preferred Stock
  • Mutual Funds
  • Commodities
  • Life Insurance
  • Tax-Sheltered Retirement Plans
  • Tax-Deferred Income Plans
  • Investment Administration and Strategies
  • Suggested References
    • Appendix: Retirement Plan Annual Contribution Limits
• BANKRUPTCY/INSOLVENCY
  • Introduction
  • Bankruptcy Overview
  • Alternatives to Bankruptcy
  • Typical Accountants’ Roles in Bankruptcy
  • The Ins and Outs of Working in Bankruptcy
  • Organization of the Bankruptcy System
  • Terminology and Definitions
  • Chapter 7: Liquidation
  • Chapter 13: Adjustment of Debts of an Individual with Regular Income
  • Chapter 11: Reorganization
  • Chapter 12: Adjustment of Debts of a Family Farmer or Fisherman with Regular Annual Income
  • Exemptions
  • Conversion of Cases
  • Dismissal of Cases
  • Transfers of Property
  • Creditors’ Rights and Protections
  • Income Tax Implications
  • Suggested References
    • Appendix 1: Bankruptcy/Insolvency — Comparison of Old and New Law (see Toolkit CD-ROM)
    • Appendix 2: Bankruptcy/Insolvency — Federal Bankruptcy Exemptions (see Toolkit CD-ROM)
• EMPLOYEE RETIREMENT AND DEFERRED COMPENSATION PLANS
  • Overview of Retirement Planning
  • Choosing a Plan: Kinds of Qualified Plans
  • Statutory Requirements for Qualified Plans
  • Deduction Limits
  • Taxation of Distributions
  • Fiduciary Responsibilities
  • Plan Adoption and Reporting
  • Simplified Employee Pension Plans and SIMPLE Plans
  • Other Kinds of Plans 100
  • Accounting for Pension Plans
  • Nonqualified Plans
  • Suggested References
    • Appendix 1: Selected ERISA Pension Plan Reporting and Disclosure Requirements
    • Appendix 2: Limitations Affected by Cost-of-Living Adjustments
• EMPLOYMENT REGULATIONS
  • Introduction
  • Sources
  • Definitions
  • Federal Wage and Hour Requirements
  • Discrimination
  • National Labor Relations Board
  • Payroll Requirements
  • Postemployment Issues
  • Suggested References
    • Appendix 1: State Labor Agencies
    • Appendix 2: State Civil Rights Agencies
    • Appendix 3: State Equal Employment Opportunity Agencies
    • Appendix 4: Sample Productive Work Environment Policy (see Toolkit CD-ROM)
    • Appendix 5: Types of Reasonable Accommodations Related to Job Performance (see Toolkit CD-ROM)
• WORKERS’ COMPENSATION
  • Introduction
  • Definitions
  • Federal Regulations
  • Occupational Safety and Health
  • State Information and Offices
  • Suggested References
    • Appendix: Occupational Safety — State Agencies and Addresses
• UNEMPLOYMENT INSURANCE
  • Introduction
  • Definitions
  • Federal Unemployment Tax Act (FUTA)
  • Reporting Requirements Under FUTA
  • FUTA and State Unemployment Insurance
  • State Unemployment Insurance
  • Factors Affecting Employer’s Experience Rating
  • Suggested References
    • Appendix: State Unemployment Tax Agencies
• HIRING FOREIGN NATIONALS
  • Basic Premises
  • Nonimmigrant Visas
  • Lawful Permanent Residence
  • Labor Certification
  • Ineligibility for Visas — Inadmissibility
  • Applying for U.S. Citizenship
  • Employer Responsibilities
  • Penalties
  • Suggested Resources
    • Appendix: Visa Classification Symbols
• INSURANCE
  • Background
  • Types of Insurers
  • Agents and Brokers
  • Health Insurance
  • Life Insurance
  • Property Insurance
  • Liability Insurance
  • Employee Bonding
  • Social Security
• TRUSTS
  • Trust Formation
  • Types of Personal Trusts
  • Specific Uses of Trusts
  • Trust Administration
  • Income Taxation
  • Gift Taxation
  • Estate Taxation
  • Suggested References
    • Appendix 1: Assignment of Assets (see Toolkit CD-ROM)
    • Appendix 2: Client Letter on Funding (see Toolkit CD-ROM)
• ESTATE PLANNING
  • Fundamental Estate Planning Concepts
  • The Conventional Will
  • Will Components
  • Federal Estate Tax
  • Gift Tax
  • Tax on Generation-Skipping Transfers (GST)
  • Income Tax
  • Special Estate Planning Situations
  • Postmortem Estate Planning
  • Sunset Provisions of the Tax Act of 2001
  • Suggested References
    • Appendix: Estate Planning Practice Aids (see Toolkit CD-ROM)
• Volume 2
• E-BUSINESS
  • Definition and Scope of E-Business
  • Internal Issues When Implementing E-Business
  • Marketplace Issues When Implementing E-Business
  • Web Presence Implementation Issues
  • Benefits of an E-Business Initiative and a Web Presence
  • Suggested References
    • Appendix 1: Web Site Features, Tips, and Tricks Checklist
    • Appendix 2: Terminology You Are Likely to Encounter
    • Appendix 3: Five Steps in the Web Site Development Process
    • Appendix 4: Web Site Costs
    • Appendix 5: Tips for Selecting Web Hosts and Web Designers
• SOCIAL SECURITY AND OTHER ISSUES FACING ELDERLY OR DISABLED CLIENTS
  • Introduction
  • Social Security
  • Supplemental Security Income
  • Medicare
  • Medicaid
  • Planning for Substitute Decision Making
  • Suggested References
    • Appendix 1: Sample Advance Directive/Health Care Power Appointment of Surrogate (see Toolkit CD-ROM)
• HUMAN RESOURCES
  • Recruitment
  • Recruitment Sources
  • Interviewing
  • Reference Checking and Testing
  • Communication With Applicants
  • New Employee Orientation
  • Employee Development and Promotion
  • Compensation
  • Benefit Programs
  • Flexible Work Arrangements
  • Termination
  • Suggested References
    • Appendix 1: Sample Firm Hiring Policy (see Toolkit CD-ROM)
    • Appendix 2: Sample Staffing Needs Request Form (see Toolkit CD-ROM)
    • Appendix 3: Sample Management Questionnaire to Clarify Job Requirements (see Toolkit CD-ROM)
    • Appendix 4: Sample Job Descriptions (see Toolkit CD-ROM)
    • Appendix 5: Sample Application for Employment (see Toolkit CD-ROM)
    • Appendix 6: Standard Interview Questions Form (see Toolkit CD-ROM)
    • Appendix 7: Sample Interview Questions (see Toolkit CD-ROM)
    • Appendix 8: Sample Inappropriate Interview Questions (see Toolkit CD-ROM)
    • Appendix 9: Sample Interview Rating Report, and Interviewer’s and Interview Evaluation Forms (see Toolkit CD-ROM)
    • Appendix 10: Reference Check (see Toolkit CD-ROM)
    • Appendix 11: Job Offers and Rejections (see Toolkit CD-ROM)
    • Appendix 12: Sample Employee Personal Information Update (see Toolkit CD-ROM)
    • Appendix 13: Orientation Checklist (see Toolkit CD-ROM)
    • Appendix 14: Job Description Outline (see Toolkit CD-ROM)
    • Appendix 15: HR Dependency Chart (see Toolkit CD-ROM)
    • Appendix 16: Sample Annual Work Plan (see Toolkit CD-ROM)
    • Appendix 17: Continuing Education Course Evaluation (see Toolkit CD-ROM)
    • Appendix 18: Sample Professional Development Appraisal (see Toolkit CD-ROM)
    • Appendix 19: Sample Performance Evaluation Process Chart (see Toolkit CD-ROM)
    • Appendix 20: Checklist for an Office at Home (see Toolkit CD-ROM)
    • Appendix 21: Exit Interview Form (see Toolkit CD-ROM)
    • Appendix 22: Separation Interview Checklist (see Toolkit CD-ROM)
    • Appendix 23: Termination Checklist (see Toolkit CD-ROM)
    • Appendix 24: Sample Employee Handbook (see Toolkit CD-ROM)
    • Appendix 25: Sample Employee Code of Conduct (see Toolkit CD-ROM)
    • Appendix 26: Interview Contact Control (see Toolkit CD-ROM)
    • Appendix 27: New Employee Prospect Referral Form (see Toolkit CD-ROM)
    • Appendix 28: Sample Employment Agreement (see Toolkit CD-ROM)
    • Appendix 29: Sample Severance Agreement (see Toolkit CD-ROM)
    • Appendix 30: Request for Travel Arrangement (see Toolkit CD-ROM)
• FEDERAL INDIVIDUAL TAX NOTES
  • Tax Relief Related to Hurricane Katrina
  • Individual Income Developments
  • Individual Deduction Developments
  • Retirement Plan Issues
  • Fringe Benefits
  • Tax Calculations and Tax Credits
  • Filing and Compliance Matters
• FEDERAL CORPORATE TAX NOTES
  • Tax Relief Related to Hurricane Katrina
  • S Corporation Developments
  • Depreciation and Amortization
  • Accounting Method Changes
  • Compensation, Retirement Plan, and Fringe Benefit Issues
  • Other Major Developments
• CASH MANAGEMENT
  • Introduction
  • Definition and Objectives
  • Accelerating Cash Inflows
  • Decelerating Cash Outflows
  • Use of Banks
  • Cash Management Reports
  • Cash Planning Techniques
  • Interest Rate Risk
  • Fraud and Risk Management
• BUSINESS AND SUCCESSION PLANNING
  • Introduction
  • What Is a Business Plan?
  • Contents of a Business Plan
  • Financing
  • The Accountant’s Role
  • Succession Planning
  • Suggested References
    • Appendix 1: Sample Business Plan Outline
    • Appendix 2: Sample Format for Financial Statement Projections (also see Toolkit CD-ROM)
    • Appendix 3: Business Planning Software
    • Appendix 4: Sample Cash Flow Statement Format (also see Toolkit CD-ROM)
    • Appendix 5: Sample Business Plan
    • Appendix 6: Small Business Administration (SBA) 8(a) Business Plan (see Toolkit CD-ROM)
    • Appendix 7: Succession Planning Checklist (see Toolkit CD-ROM)
• TRADE AND PROFESSIONAL ORGANIZATIONS (see Toolkit CD-ROM)
• IRS PRACTICE AND PROCEDURE
  • Mission and Organization of the Internal Revenue Service
  • Practice Before the IRS
  • IRS Procedure for Examining Returns
  • Types of Examinations
  • How to Prepare for an Examination
  • Criminal and Civil Tax Fraud
  • Results of the Examination
  • Assessment and Collection of Tax
  • Appeals Process
  • Obtaining a Refund
  • Rulings, Determinations, Technical Advice
  • Problem Resolution: National Taxpayer Advocate
  • Tax Shelter Disclosure Regulations
  • Alternative Dispute Resolution
  • Circular 230
  • Suggested References
    • Resource: Where to Obtain Out-of-State Tax Forms (see Toolkit CD-ROM)
    • Appendix 1: Recognition and Authorization Requirements for Persons Appearing Before the IRS (see Toolkit CD-ROM)
    • Appendix 2: Record Retention (see Toolkit CD-ROM)
    • Appendix 3: Sample Circular 230 Disclosure Statements (see Toolkit CD-ROM)
    • Appendix 4: Covered Opinions (see Toolkit CD-ROM)
• BUSINESS PERFORMANCE MEASURES
  • Performance Measurement Defined
  • Evaluating the Need for Performance Measures
  • Historical Assessment
  • Critical Success Factors
  • Key Performance Indicators
  • Financial Ratios
  • Performance Targets
  • Action Plans
  • Monitoring and Reporting Systems
  • Periodic Realignment Of Targets
  • References
    • Appendix 1: Client Readiness Questionnaire (also see Toolkit CD-ROM)
    • Appendix 2: Checklist for Planning Documents and Existing or Prior Consulting Relationships (also see Toolkit CD-ROM)
    • Appendix 3: Value Chain Illustration
    • Appendix 4: Key Performance Indicator Work Plan (also see Toolkit CD-ROM)
    • Appendix 5: Financial Ratios (also see Toolkit CD-ROM)
    • Appendix 6: Realignment Questionnaire (also see Toolkit CD-ROM)
• INDEX

Common Methods of Valuation

Several important valuation methods are discussed below; however, space does not permit a comprehensive list of all possible valuation methods.

In circumstances where a binding, contractual agreement specifying a particular valuation method exists, the agreement would dictate the valuation method to be used, for example, a buy-sell agreement may indicate a fixed price, a formula price, or a specific capitalization factor. In addition, a valuation method based on recent arm's-length sales may take precedence over other valuation methods if the sales were made under appropriate circumstances.

Otherwise, a combination of the methods discussed below may be the best way to reach evaluation conclusion. In the absence of a binding contractual agreement and/or recent prior sale, the guideline company valuation method may provide the most appropriate valuation. Other methods become appropriate, should the guideline company valuation method not be applicable. Appendix 4 contains a comprehensive case study of each of the following valuation methods (see also the Accountant's Business Manual Toolkit CD-ROM).

Guideline Company Valuation Method

In valuing the stock of closely held companies, the market values of stocks of comparable publicly held companies (and privately held companies if enough information is available) are relevant factors for providing guidance on the value of the subject company. Such comparable companies are called guideline companies. Conclusions about the financial condition of a company can also be drawn by comparing its operating results with those of guideline companies.

To be truly comparable to the subject company, a guideline company should be engaged in the same or a similar line of business. Its size, capital structure, and trend of sales and earnings should be similar.
To reflect the public market attitude, a guideline company's stock should be actively traded in a free and active market, whether on an exchange or over the counter.

The guideline company valuation method is perhaps most appropriate for larger companies that compete with publicly traded companies. The first step in this method is the selection of a group of publicly traded companies similar to the subject company. The accuracy of the results of this valuation method depends on finding truly comparable companies.