In just three years since its founding, Sponsel CPA Group has grown to become one of the largest accounting firms in Indianapolis.

“I am so honored the partners have entrusted me to head up this new office, and start writing the next chapter in the Sponsel CPA Group story,” Hemmelgarn said. “We look forward to bringing our client-focused accounting services to the Bloomington business community.”

By Jason Thompson, Partner and Director of Valuation and Litigation Services

Like any successful entrepreneur, most business owners look upon their company as not just their livelihood, but as part of their identity. As they approach retirement, it’s a natural instinct to want to protect that legacy and pass it on to worthy successors. This desire can be complicated when the business in question is family-owned.

The thought of relinquishing control to the next generation of the family may seem reasonable when you’re looking far down the road. But when the day actually arrives, control is often the last “asset” owners are willing to part with.

Sponsel CPA Group has extensive experience with assisting the successful transition of family-owned businesses. Many of these clients are first-generation owners, but we also have some that are in the fourth generation of ownership succession.

The statistics can be alarming: most family businesses do not survive through the third generation of owners.

The initial generation of owners are often the most “transition” challenged, as they have no experience “passing the baton.” Subsequent generations tend to better understand the challenge of ownership transition because they have personally lived through that experience. They know what a successful transition looks like, and what pitfalls to avoid.

The challenge of successful family business ownership compounds when there are multiple generations and multiple lines of family descendants.

A succession strategy must address numerous areas, including management transition, financial transactions related to ownership transfers, and the ultimate question: when will control actually transfer?

In some cases, companies are transferred via “gifting” of shares of ownership from one generation to another. Right now is an excellent time to take advantage of the historically high limit of the Lifetime Gift Tax Exemption, currently at $5,120,000. Given the political turmoil in Washington, the future of this exemption amount is highly uncertain.

In addition to gifting, there are other strategies that can be utilized to transfer wealth while retaining control of the business. These options can be beneficial because value is transferred out of the owner’s estate, but he/she maintains control of the asset transferred – in this case, the family business.

If you are family-owned company and desire to perpetuate the enterprise, Sponsel CPA Group recommends the following steps:

1. Communicate your exact desires directly with the future generation of owners, often and openly.
2. Seek their feedback and reaction to your family succession plan for the business.
3. Start the process early – at least 10 years before the elder generation wants to retire.
4. Be open-minded about the direction the company may take after transition. The next generation could have more energy and inclination for implementing major changes to the business model.
5. Provide the future business operators the benefit of your experience, but allow them to make their own mistakes – so long as they’re not fatal!
6. Use professional advisors to assist in counseling sessions designed to discuss difficult issues and the financial aspects of the business, both in good times and economically challenging ones.
7. Develop a plan to address family members who are not involved in the business.
8. Actively engage in the process – before, during and after transition.

Often we encounter older business owners who do not have a succession plan in place because of a misguided desire to avoid family conflict. In fact, the opposite is true: dealing with the issue of transition while you are still among the living is more beneficial to familial harmony than leaving yours heirs to speculate what you wanted after you are gone.

Unfortunately, we have seen many families permanently and tragically divided over the settlement of estate and business ownership issues.

Become proactive in working with your trusted advisor (CPA, attorney, etc.) to develop a succession plan. Conduct family meetings to explain and implement a plan that is best for your family-owned company’s situation. And take the necessary steps to ensure your business becomes your lasting legacy.

If we can be of any assistance in helping your business with succession issues, please call Jason Thompson in our Valuation and Litigation Services department at (317) 608-6694 or email jthompson@sponselcpagroup.com.

Lisa Blankman has joined Sponsel CPA Group as a staff accountant. She will work in both the Tax and Audit & Assurance Services departments.

A Greensburg native, Blankman received a bachelor’s degree in accounting from Marian University in 2011. At Sponsel CPA Group, she will work on federal and state taxation issues, individual taxes, audits, compilations and reviews.

“Exceptional young accountants like Lisa Blankman represent the future of our proud profession,” said Managing Partner Tom Sponsel. “I am extremely pleased to add such high-caliber talent to what is already one of the finest accounting teams in Indiana.”

Mike Bedel, a veteran CPA and MBA, has been named a Trustee with Indiana CPA-PAC. Bedel is a Manager with Sponsel CPA Group in the Audit & Assurance Services department.

Indiana CPA-PAC is the sole political action committee in the state on behalf of CPAs, and supports the campaigns of state legislature candidates who represent the best interests of the profession.

A native of Louisville, Ky., Bedel received bachelor’s and MBA degrees from the University of Dayton. He has also served on the Indiana CPA Society Leadership Cabinet for the past two years.

“I am humbled and honored to be given this trust by my fellow Hoosier CPAs,” said Bedel. “I pledge to work with the Indiana CPA-PAC to uphold the high standards of our profession.”

As January comes and goes, so do New Year’s Resolutions. Such resolutions are often made to be broken, if procrastination hasn’t already postponed making a commitment. A 2007 study by the University of Bristol found that 88 percent of all resolutions end in failure.

Most of us do not achieve what we desire for the following reasons:

Lack of a Commitment to a Plan of ACTION
Lack of Support in collaborating with others
Poor Execution
Poor Attitude
Lack of Willingness to make short-term sacrifice
for Long Term Benefit

Resolve to make 2012 the year you become an activist for your company. This includes making your personal role in the company more fulfilling, making your company better with suggestions for improvement in both planning and execution, and finding a sense of satisfaction and fulfillment in your personal life.

This may sound like a utopia, but most of us become frustrated because we do not commit to an active role in making all this happen.

You can enhance your value to your company and improve job satisfaction through the following steps:

Together with your supervisor, identify three to five areas you should improve on in 2012.
Seek your supervisor’s support in helping you achieve your goals; solicit feedback and request any necessary resources.
Clearly understand how your role interrelates with other team members in delivering products and services.
Understand your company’s corporate goals for 2012 and the action steps management has laid out to achieve them.
Offer suggestions for making your company better.
Be committed to life-long learning and continuous improvement.
Celebrate your successes and evaluate your failures; use both to establish your next challenges.
Execute your assigned role, and hold others accountable to their roles.
Read voraciously on a variety of topics to expand your knowledge and challenge the status quo.

Many of us get dragged down because we approach our responsibilities as if we were bystanders in our own lives – our jobs, our families and personal relationships. There will be many challenges in life, and how we react to those adverse experiences will determine what we are able to accomplish and how other people regard us.

Take English poet William Ernest Henley. After progressive tuberculosis of the bone claimed one of his legs, and threatened to take the other, he wrote “Invictus,” which ends with these immortal words:

I am the master of my fate:
I am the captain of my soul.

Even if you are usually a follower or a doer rather than a leader, you must become a leader in your own realm – because no one else is going to do it for you!

Within each of our companies, we are part of a team of individuals with a diverse array of talents. When combined together correctly, the whole is much more effective than the sum of its parts.

The stronger we become individually, and the better we interact with co-workers, the stronger we make the company. A stronger company will deliver better customer service and higher quality products, have a satisfied workforce and become more successful. And we all want to be a part of success!

The key to this success starts with that person you see in the mirror every morning. If you commit to becoming an activist and not a bystander, you will be much happier – and your co-workers, spouse and family will thank you for your efforts.

Resolve to make 2012 a better year than the past, and start today to make it happen!
 

The Facts About Retirement Plan Fee Disclosures
As we approach year’s end, now is a good time for all those in charge of overseeing retirement plans to review their disclosure responsibilities. As we prepare to greet 2012, it’s important to remember that overlooked deadlines or missed disclosure requirements can become a costly mistake.

To help keep you up to date, we’ve developed this handy overview of the new retirement plan fee disclosure rules.

The U.S. Department of Labor has gone to great lengths to help retirement plan sponsors gain better understanding of fees associated with their plans. Fiduciaries require complete fee disclosure by service providers in order to fulfill their responsibilities. Greater fee transparency allows plan sponsors to make more informed decisions, and helps participants become better investors.

Fee Disclosure Regulations for Service Providers
The retirement plan’s service providers must provide fee disclosures to the plan sponsor by April 1, 2012. It must be made in writing and include: services, status and compensation. The disclosure should include a description of services the arrangement provides to the plan. It also must include a statement that it will provide fiduciary services to the plan.

In addition, the disclosure needs to describe all direct and indirect compensation the service provider reasonably expects to receive in connection with services. The description should contain sufficient information to permit evaluation of the reasonableness of the compensation.

A service provider must disclose any change in this information as soon as practicable, but no later than 60 days from the date on which the service provider is informed of changes.

Fee Disclosures to Participants
The plan administrator is responsible for providing fee disclosures to participants effective May 31, 2012. Most investment platforms will provide these to the participants.

Initial notice is required on or before the date the participant can direct his or her first investments. It must include general information on the plan, administrative expenses that may be charged against the account, and designated investment alternatives. This same information must be provided to all eligible employees at least once a year, whether or not they are enrolled in the plan.

A quarterly accounting of all fees and expenses assessed against participants’ plans is required. Notice of any changes to information provided in the initial and annual disclosures must be communicated to participants no later than 30 days, but no sooner than 90 days, prior to the effective date of the change.

If Sponsel CPA Group can be of assistance in helping you with an employee benefit issue, please feel free to contact Pat Metallic at (317) 613-7841 or pmetallic@sponselcpagroup.com.

Sponsel CPA Group is proud to announce the addition of Maulik Khatadia to its Audit & Assurance Services department.

Khatadia has public accounting experience working with financial institution, real estate and health care clients at a major firm. He received his B.S. in accounting with a minor in forensic accounting from Indiana State University, where he also earned his Masters in Business Administration. He is a Certified Fraud Examiner (CFE).

Khatadia is a member of the American Institute of the Certified Public Accountants (AICPA) and Alpha Kappa Psi, a professional business fraternity.

As part of the Audit & Assurance Services team, Khatadia will help businesses and organizations implement financial controls to mitigate risk, increase profitability and ensure compliance.

“I’m very excited to add such an immensely talented young professional to the Sponsel CPA Group staff,” said Managing Partner Tom Sponsel. “Maulik will further bolster what is already one of the strongest accounting teams in all of Indiana.”

In 2011, Indiana’s lawmakers made several changes that affect income, sales and use taxes. Do any of these changes benefit or burden you? Here’s a quick summary of some of the key changes.

Several of the deductions that had been allowed on federal income tax returns in recent years will need to be added back on your Indiana return for 2011. Some of these include:

• Deduction for distribution from an individual retirement plan paid directly to a charity.

• Deduction for qualified tuition and fees.

• Expenses of elementary and secondary school teachers.

• Excess depreciation deduction for qualified leasehold improvement property classified as 15-year property (Indiana returns to treating as 39-year property).

• Previously tax-exempt interest income from state and local obligations from outside Indiana (acquired after 12-31-11).

On the upside, there are some new deductions/credits available. These include:

• A deduction of $1,000 per dependent who was enrolled in a private school or home-schooled (K-12) for tuition, fees, computer software, textbooks and school supplies.

• A credit of 50% (limited to the current year tax liability) of the contribution to a Scholarship Granting Organization, such as the Educational CHOICE Charitable Trust or other approved SGOs.

Some other changes to note include:

• Eliminated the net operating loss carryback after 12-31-11 for corporations and individuals.

• Extended the time to protest an assessment from 45 days to 60 days.

• Now allow voluntary withholding of state and local taxes from payments for unemployment compensation.

• Eliminated the health benefit plan tax credit for employers providing health insurance to certain employees.

• Eliminated the small employer qualified wellness program credit for employers offering a qualified wellness program to employees.

If you would like additional information on any of these changes, please contact Jennifer McNett at 317.613.7857 or jmcnett@sponselcpagroup.com.

Sponsel CPA Group is pleased to announce the addition of Jeremy DeWinter as a Senior in its Audit & Assurance Services department.

DeWinter has a great deal of experience in public accounting, with extensive work compiling and reviewing financial information as well as providing federal and multi-state tax compliance and consulting services to corporations and individuals. His breadth of experience includes work in professional services, real estate, retail, manufacturing and other industries.

As part of the Audit & Assurance Services team, DeWinter will help businesses and organizations implement financial controls to mitigate risk, increase profitability and ensure compliance.

Born in Mishawaka, Ind., DeWinter earned B.S. and M.A. degrees in accounting from Ball State University. He is a member of the American Institute of Certified Public Accountants, the Indiana CPA Society and the Emerging Leaders Alliance of the ICPAS.

“Jeremy is a top recruit, and we’re very lucky to have attracted such a fine candidate to join our firm,” said Managing Partner Tom Sponsel. “He will be a terrific asset on the Sponsel CPA Group auditing team.”

We just recently ended estate planning awareness week. Which begs the question: when was the last time you thought about your personal estate plan? For most of us this tends to be one of those items on our lengthy to-do list that we keep pushing off.

There are a few opportunities currently available that may be worth considering. Most of us are aware of the annual gift tax exclusion which allows individuals to give up to $13,000 to each person of their choosing tax-free on an annual basis. However, were you also aware that through the end of 2012 the federal estate and gift tax laws allow for a $5 million life-time exemption – meaning it could be possible to transfer up to $5 million without paying tax? Barring any future action by Congress, this exemption will revert back to the 2001 level of $1 million beginning January 1, 2013.

Removing assets from your estate does not mean you have to give up $5 million today to an underage or irresponsible beneficiary. Many estate planning vehicles exist that can legally remove these assets from your estate while allowing you to retain some control.

Gifting assets to an irrevocable trust for the benefit of your spouse, children, grandchildren, etc. will remove the assets from your estate and also allow for the growth of those assets to be free of estate taxes.

Similarly, a credit shelter trust can be set up to maximize both spouses’ exemptions by shifting an amount equal to the exemption to the spouse upon the taxpayer’s death. Dynasty trusts are available to remove the assets from the estate while preserving them for future generations. If set up correctly, gifts can qualify for the gift tax exclusion.

Life insurance is a common estate planning tool; establishing a life insurance trust can remove the principal assets from the grantor’s estate. If you don’t want to lose cash flow from transferring assets out of your estate, another option might be grantor retained trusts (GRAT or GRUT), which provide for cash flow to the grantor. Today’s low interest rates also make a grantor retained annuity trust (GRAT) especially advantageous. These are just a few of the options available.

A drawback could exist if Congress decides to allow the reversion back to 2001 levels of $1 million and the 55 percent tax rate. There is always the possibility Congress could decide to enact a “clawback” provision subjecting any prior gifts in excess of the lifetime exemption to be subject to tax. This pitfall is not certain and would seem unlikely, but it will not be known until future legislation is passed.

The question of whether or not to take advantage of any of these estate planning opportunities depends on each taxpayer’s situation. Factors such as net worth, willingness to act without knowing future laws, the amount of discretionary assets and desire to retain control should all be considered. We would be happy to have a conversation to determine what makes the most sense to you.

For additional information, please contact Stacey Jarrett at 317-613-7848 or sjarrett@sponselcpagroup.com.