June 2023 What happens when an owner pays him or herself a non-market rate of compensation? This month’s legal update presents, Mekhaya v. Eastland Food Corp., 287 A.3d 395; 2022 Md. App. LEXIS 938 (Md. Ct. App. December 22, 2022). In that case, an appellate court discusses what can happen when owners use their control prerogatives to pay owner employees more than a market rate for the services they provide ...

Rising Levels of High Mental Readiness for an Exit Business owners often-times see exit planning as a complicated, overwhelming, and emotional process. Accordingly, few owners adequately prepare for this significant event. However, an exit plan is essential to help business owners manage the illiquid wealth in their businesses, particularly in turbulent times such as these marked by strife that is present i ...

Distribution policy addresses both how much cash flow should be distributed to shareholders and the ideal form of such distributions.  The purpose of this whitepaper is to help directors formulate and communicate a distribution policy that contributes to shareholder wealth and satisfaction. To read the full article in Mercer Capital's Financial Reporting Blog, click: Distribution Policy in 30 Minutes. This ...

The issue of dividends and dividend policy is of great significance to owners of closely held and family businesses and deserves considered attention.  This highly informative blog is excerpted from Z. Christopher Mercer’s (founder and chief executive officer of Mercer Capital) newest book: Unlocking Private Company Wealth. To read the full article in Mercer Capital's Financial Reporting Blog, click: An Int ...

Important factors to consider in making tax adjustments to pass-through income Damodaran recently wrote about the potential devaluation of dividend-paying stocks if the preferred dividend tax rate were to climb back up to the ordinary rate.  This could inspire valuation experts to make a tax adjustment reducing untaxed Pass-Through Entity (PTE) income to equate it with corporately taxed income that qualifie ...

A Dozen Categories.  Some Categories Alone Encompassing Up to 20 New Taxes.  Here's the Detail.  The American Taxpayer Relief Act, passed by Congress on Jan. 1, permanently extends a large number of tax items from the 2001 and 2003 tax acts and extends many expired tax provisions. Here is a comprehensive look at the many changes contained in the bill, as well as other new taxes that took effect Jan. 1. Paul ...

Payments an accounting firm characterized as consulting fees were really disguised dividends and should have been taxed as corporate income, the Seventh Circuit held on Thursday. The payments reduced the firm's income to zero, and the court applied the "independent investor" test to recharacterize them as dividends paid to the firm's owners.   Alistair M. Nevius at the Journal of Accountancy, in the article ...