One of the more onerous tax issues facing CrossFit Affiliate owners is determining what type of employee compensation is taxable. This may be especially true for small business owners who often wear many administrative hats and may not have the luxury of an in-house accountant to answer complex tax reporting questions.

Generally, an employee’s wages are considered taxable compensation. However, the term “wages” can be somewhat misleading. In addition to actual earned compensation, federal and many state payroll tax laws generally define “wages” as any type of payment received for services rendered. Here’s a quick look at some of the other “wages” typically paid to employees that must generally be reported for payroll tax purposes.

Advances

Payments to any employee for future work or services are considered taxable wages. An advance is not considered a taxable wage if: 1) it’s used for expenses involved in performing a service for the employer; or 2) it is a loan to the employee that is properly documented and must be repaid.

Awards

Many employers have contests or give out awards for outstanding performance. In general, all awards and prizes are taxable wages with one exception. An employee award or prize is not included in taxable wages if it meets the following conditions: 1) the prize or award is not cash; 2) its value is less than $600; and 3) it is given as a reward for length of service or as a safety achievement award.

Benefits

There are many types of benefits in the workplace. Generally speaking, any fringe benefit not specifically excluded by law is considered taxable compensation for payroll tax purposes. However, the list of benefits excluded from payroll taxation is fairly extensive. These include, but are not limited to, payments attributable to a health insurance plan, employer contributions to a qualified plan, workers compensation, and a wide array of other “perks.”

Business Expenses

Generally, expenses cannot be reimbursed unless they are made via an advance or are specifically highlighted in an accountable plan. Under an accountable plan, an employee: 1) must be properly reimbursed for deductible expenses incurred while rendering services for the employer; 2) must keep accurate records that validate the reimbursement; and 3) must return any payment by the employer that exceeds the actual amount of reimbursement.

Jury duty

Compensation paid to an employee serving jury duty is generally a taxable wage. However, actual taxation will vary based on how jury duty pay is actually paid. If you deduct jury duty pay from regular wages, payroll taxes apply to regular wages less jury duty pay. Likewise, if you pay an employee his or her regular wages but ask the employee to give you the jury duty pay, payroll taxes also apply to regular wages less jury duty pay. Finally, if you pay regular wages and allow employees to retain their jury duty pay, only regular wages are subject to payroll taxes.

Vacation

If you offer your employees paid vacation, the compensation they receive while they’re on vacation are taxable wages. In addition, if you allow employees to “buy back” unused vacation time, that is also considered wages.

Payroll taxation is just one of the many tax issues facing CrossFit Affiliate owners. This article is meant to serve as a general overview. A qualified tax professional can help you ensure your business is on proper payroll tax footing.

Neither the firm nor its agents or representatives may give tax advice. Be sure to speak with a qualified professional about your unique situation.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Caught up in the day-to-day operations of your business, you may not be thinking about how much your box could be worth when the time comes for a transition. But the choices you make now, both large and small, can add to or detract from the future value of the business.

There are many ways for a gym to grow, including opening new locations, developing new products, acquiring complementary businesses (pt practice, recovery, etc.), hiring more employees, and increasing sales and marketing expenditures. You can grow the business faster by tapping into outside financing or more slowly by using the company’s own revenue. With so many strategies to consider, you may want to develop a long-term plan to guide the growth of your business.

Your decision regarding the ultimate disposition of the company may influence many aspects of your current business strategies, including your form of business ownership. You may want to consider a C corporation structure for a business that may go public or an S corporation structure if a private sale is planned. We help guide clients in regard to the implications of various forms of business ownership and how it can impact their overall goals.

Transferable Assets

To begin, work on building and maintaining your company’s transferable assets. These may include tangibles like property and equipment, as well as intangibles, including a customer database, website, brand recognition, and business processes. You may also develop intangible assets, such as copyrights or trademarks, proprietary lists of customers or prospects, and long-term contracts. An attractive location can also add value beyond an owner’s equity.

A CrossFit Box can also derive intangible benefits from a strong management team with the knowledge and connections required to maintain the business without the owner’s oversight. In many cases, having a skilled and loyal workforce may also be considered a transferable asset in a sale.

Financial Performance

When growing your business, strive to establish a self-sustaining enterprise with steady revenue growth. The financial performance of a box is often measured by its free cash flow or the cash that it generates before interest, taxes, depreciation, and amortization, less capital expenditures. In assessing the value of a business, a buyer may, for example, project a company’s earnings over the next five years based on the current cash flow. This projection will take into account any outstanding debt, as well as whether revenue growth and margins demonstrate a history of consistent growth.

Businesses are often more efficient when they focus on their core competencies, rather than diversifying too broadly. So, if your CrossFit box has product lines or offers services not closely aligned with the box’s core business, consider whether these areas are profitable or represent a drag on the business income.

You may also want to restructure agreements or contracts that may be objectionable to a potential buyer, such as a long-term lease, licensing contracts, employment contracts, and loan agreements. Long-term leases may be an asset provided the terms are favorable, the location is suitable, and the size is right. If, however, the current box is likely to outgrow it’s current space before the lease is up, a short-term lease may be more appropriate.

For a detailed analysis of your company’s value, we offer business valuation services specifically serving the CrossFit microgym community. Even if you have no immediate plans sell the box, an estimate can help you identify ways to maximize the value of your business in preparation for a future exit strategy.

Neither the firm nor its agents or representatives may give tax advice. Be sure to speak with a qualified professional about your unique situation.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom-suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference

Partnering with Outside The Box Financial Planning offers numerous benefits for individuals seeking retirement planning, small business support, wealth management, and beyond.  With their fiduciary duty, comprehensive approach, unbiased advice, transparent fee structure, and ongoing support, OTBFP act as a trusted advisor who prioritizes your best interests. Click here to schedule a complimentary “Fit” meeting to determine if we would make a good mutual fit.

Remember, financial decisions have long-lasting implications, and working with a professional can provide the expertise and guidance necessary to make informed choices that align with your financial aspirations. 

However, if you would like to take a shot at building a financial plan on your own, we offer our financial planning software, RightCapital, free of charge. Click here to get started.

In recent years, the markets, the economy and the global political scene have evolved considerably. We’ve witnessed both remarkable volatility and remarkable resilience in these areas. The reality is that less predictability in today’s economic landscape requires more vigilant risk diversification, coupled with the ability to adapt to a fast-changing environment.1

I work with my clients to set financial goals and make strategic and tactical recommendations to help them reach their individual financial objectives. Equally as important, I want to encourage clients to work with me to monitor their financial progress and let me know when their personal or financial situation changes. Investing mirrors life in many ways: You make plans, but they often get disrupted, waylaid or delayed. By closely monitoring your financial strategy, I can help you determine if and when it’s time to make changes.

To this end, it may be beneficial for you to understand the distinction between strategic asset allocation and tactical asset allocation. Strategic allocation establishes and maintains a deliberate mix of stocks, bonds and cash designed to help meet your long-term financial objectives.2

Tactical asset allocation, on the other hand, is more market focused. While an investor may set parameters for how much and how long he wants to invest in a certain asset class, he may want to then increase or decrease his allocations by 5 percent to 10 percent over a short time based on economic or market opportunities.3

It is important to be aware that tactical asset allocation strategies present higher risks but also the opportunity for higher returns. It’s a good idea to set percentage limits on asset allocations and time benchmarks for when you may want to exit certain positions.4 Tactical asset allocation is, in fact, a market timing strategy, but its risk lies more in asset categories rather than individual holdings, and a crucial key for this type of allocation is to actively manage that risk.5

To help diversify and manage risk, some financial advisors recommend exchange traded funds (ETFs). These are passively managed funds that can be bought and sold throughout the trading day. While ETFs are passively managed, they provide a means for an investor to tactically expand or shrink exposure to a specific asset class in her own actively managed portfolio. Proponents of ETFs favor them because of their low cost, tax efficiency and trading flexibility.6

Content prepared by Kara Stefan Communications.

1 Nasdaq. June 26, 2017. “Asset owners must be more innovative to fulfill investment missions.” http://www.nasdaq.com/press-release/asset-owners-must-be-more-innovative-to-fulfill-investment-missions-20170626-00612. Accessed July 8, 2017.

2 Chris Chen. Insight Financial Strategists. July 1, 2017. “Tactical asset allocation can enhance a long term strategy.” http://insightfinancialstrategists.com/asset-allocation/?utm_source=ReviveOldPost&utm_medium=social&utm_campaign=ReviveOldPost. Accessed July 8, 2017.

3 Ibid.

4 Ibid.

5 Girija Gadre, Arti Bhargava and Labdhi Mehta. The Economic Times. June 19, 2017. “5 smart things to know about tactical asset allocation.” http://economictimes.indiatimes.com/wealth/invest/5-smart-things-to-know-about-tactical-asset-allocation/articleshow/59189407.cms. Accessed July 8, 2017.

6 Robert Powell. MarketWatch. June 9, 2017. “Why financial advisers prefer ETFs over mutual funds.” http://www.marketwatch.com/story/why-financial-advisers-prefer-etfs-over-mutual-funds-2017-06-09. Accessed July 8, 2017.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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