All Posts By

Paul Gilbert

Matchmaker, matchmaker: Choosing the right lender

It’s easy to think of lenders as doing your company a favor. But business financing relationships are just that: relationships. Yes, a lender has the working capital you need to grow. But a stable, successful business represents an enormously beneficial opportunity for the lender as well. So you should be just as picky with your lender as it is with your financials.

Where to start

If you indeed have a long-standing relationship with a local bank, make that your first call. There’s no understating the importance of familiarity, good communication and an amicable rapport when negotiating terms, making payments and dealing with whatever business complications may come up.

But should your local bank not offer the size or scope of financing needed, or if you’d just like to get an idea of what else is out there, don’t hesitate to shop around. Look for a lender with multiple loan products, so you have a better chance at structuring one to your liking. And get some referrals regarding the strength of service and support.

Other alternatives

If yours is a small business, check into the availability of Small Business Administration or other government-backed loan programs. These are often designed to boost local economies, so you may be able to get favorable terms and rates.

Last, but not least, don’t limit yourself to traditional lenders. Today’s lending environment is competitive and technology driven. So businesses have a wide variety of alternatives, many of which are just a few clicks away. These include angel investors, online peer-to-peer lending networks and crowdsourcing.

Best results

Many, if not most, companies can’t grow without taking on some debt. But precisely how you go about using debt to your advantage depends largely on the lenders with which you choose to do business. Let us play matchmaker and help you find the ideal partner. We can also offer assistance in structuring and presenting your financial statements for best results.

© 2017

Envision your advisory board before you form it

Many companies reach a point in their development where they could benefit from an advisory board. It’s all too easy in today’s complex business world to get caught up in an “echo chamber” of ideas and perspectives that only originate internally.

For many business owners, an understandable first question about the concept is: What should my advisory board look like? To find an answer, start by envisioning the ideal size and composition of your company’s board in terms of skill sets and personalities.

The guest list

First and foremost, participants in your advisory board should have skills, experience and expertise that complement your company’s in-house staff. Second, they should support your established long-term strategic goals.

Ideal board candidates can think creatively and provide constructive advice while maintaining discretion with sensitive business issues. This allows the board to honestly discuss every aspect of your operations, including:

• Current challenges,
• Emerging opportunities, and
• Managerial dynamics.

Selecting advisory members is similar to selecting friends and colleagues to invite to an intimate dinner party. You want a diverse mix of backgrounds, expertise and skills. For example, try to balance impulsive, assertive personalities with more thoughtful, cautious ones.

An evolving entity

Bear in mind that, as your business needs change, you may need to rotate some board members out and bring in new blood. For instance, if the company needs to upgrade to a new technology platform to minimize data breaches, board members who were invaluable when the company began — and technology perhaps played a less prominent role — may lack the experience needed to get the business through the next phase.

In addition, the size of your board may change over time. Generally, business owners should limit the number of members to three to seven people. This will help keep the board affordable and manageable, particularly in terms of effective deliberation and decision making. But it may need to grow beyond that in number if your company itself gets larger.

Innovation and competition

Sage advice and diversity of opinion can be invaluable when looking to innovate and gain a competitive edge. Please contact our firm for help assessing whether now is the time for your business to form an advisory board.

© 2017

Make sure the IRS won’t consider your business to be a “hobby”


If you run a business “on the side” and derive most of your income from another source (whether from another business you own, employment or investments), you may face a peculiar risk: Under certain circumstances, this on-the-side business might not be a business at all in the eyes of the IRS. It may be a hobby.

The hobby loss rules

Generally, a taxpayer can deduct losses from profit-motivated activities, either from other income in the same tax year or by carrying the loss back to a previous tax year or forward to a future tax year. But, to ensure these pursuits are really businesses — and not mere hobbies intended primarily to offset other income — the IRS enforces what are commonly referred to as the “hobby loss” rules.

If you haven’t earned a profit from your business in three out of five consecutive years, including the current year, you’ll bear the burden of proof to show that the enterprise isn’t merely a hobby. But if this profit test can be met, the burden falls on the IRS. In either case, the agency looks at factors such as the following to determine whether the activity is a business or a hobby:

  • Do you carry on the activity in a business-like manner?
  • Does the time and effort put into the activity indicate an intention to make a profit?
  • Do you depend on income from the activity?
  • If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
  • Have you changed methods of operation to improve profitability?
  • Do you (or your advisors) have the knowledge needed to carry on the activity as a successful business?
  • Have you made a profit in similar activities in the past?
  • Does the activity make a profit in some years?
  • Do you expect to make a profit in the future from the appreciation of assets used in the activity?

Dangers of reclassification
If your enterprise is reclassified as a hobby, you can’t use a loss from the activity to offset other income. You may still write off certain expenses related to the hobby, but only to the extent of income the hobby generates. If you’re concerned about the hobby loss rules, we can help you evaluate your situation.

© 2017

EMV Chips and Retail Clients

Effective October 1, 2015, new credit card additions will change the way we pay for goods and services. An article by Gene Marks in Accounting Today states that new credit cards with EMV chips are currently being distributed to card owners. These EMV chips are designed to fight fraud and provide a more secure purchasing experience for the consumer. In order to utilize these EMV chips, some retailers must purchase new point of sale equipment. If the merchant does not do so, and they accept a fraudulent transaction, the merchant will now be liable for the costs.

These costs were previously covered by the credit card company, so failure to upgrade equipment could be very costly for some companies. Already being utilized in parts of Europe, Asia, and South America, these chips are proven to reduce credit card fraud. Unfortunately, many small merchants are not aware of EMV or what they need to do to take advantage of it. Failing to make a change could cost merchants thousands through customer loss and huge liabilities.

For more information on EMV chips and how they could affect your business, please visit the referenced article by Gene Marks in Accounting Today, or contact Paul Gilbert at or (231) 726-5860.

 Accounting Services , Closely-held Businesses

UIA Audits in West Michigan

Recently, one of my clients was faced with an Unemployment Insurance Audit (UIA). The target of this audit was the company’s contracted services; in agriculture this is often called “Custom Hire”. The auditor inspected payroll tax returns and unemployment returns for the audit period. Questions raised were:

  • Was form1099-MISC issued to the persons held as non-employees?
  • Did the non-employees provide their own tools?
  • Did the non-employees hold themselves out as a business?
  • Did the non-employees have any other customers?
  • Did the non-employees have a website or issue invoices?
  • Did the company supervise their work?
  • Did the company set the hours for their work performed?

It appears the UIA has not looked at the agriculture industry in a while and are making a concerted effort to audit more agriculture entities.

In agriculture, employers that file a Federal form 943, in place of a traditional form 941, do not need to file a Form UIA 1028 until they pay wages of $20,000. This must be in a calendar quarter for the current or preceding year.

If a business has at least ten agricultural workers for twenty different weeks (current or preceding calendar year) they are subject to the UIA tax. The weeks do not have to be consecutive. And, the twenty workers can be different people. If you are close to the wage threshold, this can be especially important as the tax, penalties and interest come into play. If the auditor finds issues, they can open up the prior two years as well.  Therefore, it is recommended to acquire social security numbers from non-workers up front if a 1099 or W-2 is necessary. Penalties increase when social security numbers are not available.

The State of Michigan Department of Licensing and Regulatory Affairs Unemployment Insurance Agency (UIA) office has a form UIA 1015 available for use to help with this determination.

For more information on UIA audits, please contact Paul Gilbert at or (231) 726-5860.