Kevin Bouma Earns Certified Nonprofit Accounting Professional Designation

Yeo & Yeo is pleased to announce that Nonprofit Consulting Manager Kevin Bouma, CPA, has earned the Certified Nonprofit Accounting Professional (CNAP) designation. The CNAP certification recognizes Bouma’s specialized knowledge in nonprofit financial management and his commitment to helping mission-driven organizations strengthen their operations and achieve long-term success.

The CNAP certification is awarded to nonprofit financial managers and accounting professionals who complete a comprehensive training program and pass a rigorous examination. The program covers key areas including governance, budget development, financial reporting, and internal controls, equipping professionals with the skills needed to ensure financial transparency and accountability in the nonprofit industry.

Bouma has more than 25 years of experience in public and private accounting and has held leadership roles in several nonprofit organizations, including serving as Chief Financial Officer and Director of Finance and Operations. His experience includes conducting internal control studies, developing and analyzing budgets, reviewing policies and procedures, providing strategic financial consulting, and reporting to boards and stakeholders. With a passion for helping nonprofits thrive, he is dedicated to equipping leaders with the insights and strategies they need to strengthen their organizations.

“Although an organization may be a nonprofit, there are clear benefits to running it like a business—ensuring efficiency and strategic growth,” Bouma said. “Earning the CNAP certificate has strengthened my ability to provide nonprofits with the financial insights and best practices they need to make informed decisions and maximize their impact.”

Kevin’s CNAP designation reflects the depth of expertise that Yeo & Yeo’s Nonprofit Services Group applies to every engagement. The team supports hundreds of nonprofit organizations across Michigan, providing independent audits, internal control assessments, outsourced accounting, HR solutions, and financial management consulting. Whether serving as trusted advisors or interim staff, Yeo & Yeo professionals empower nonprofit leaders to focus on what matters most: advancing their mission.

When it comes to estate planning, one of the more nuanced tools available is a quiet trust (also known as a “silent” trust). Unlike a traditional trust, a quiet trust keeps beneficiaries — often children or young adults — in the dark about its existence or details until they reach a certain age or milestone.

Many states permit quiet trusts, but these trusts have both positives and negatives. Depending on the situation, an incentive trust may be a better way to achieve your goals.

The pros

One of the biggest benefits of using a quiet trust is that it helps preserve ambition and independence. If your heirs know too early about a significant inheritance, they may lose motivation to pursue educational goals or build a career. By keeping the details private, you give them the chance to grow independently.

Quiet trusts can also reduce family conflict during your lifetime, especially if distributions are unequal or come with specific conditions. In addition, secrecy offers protection from outside pressures — such as creditors, estranged spouses or opportunistic friends — and allows time for heirs to develop the maturity needed to manage wealth responsibly.

The cons

Quiet trusts aren’t without drawbacks. Some beneficiaries may feel resentful when they eventually discover that assets were withheld from them. This secrecy can also increase the risk of legal challenges once the trust is revealed.

By keeping heirs uninformed, you also may unintentionally deprive them of valuable opportunities. For example, they might forego graduate school because they don’t want to take on student loan debt that could take decades to pay back when, in fact, the trust would eventually allow them to pay off the loan more quickly. (Or current access to the money could allow them to avoid student loan debt altogether.) And because trustees must administer the trust without beneficiary input, their decisions could later be questioned, adding tension at an already difficult time.

Another option

The idea behind a quiet trust is to avoid disincentives to responsible behavior. But it’s not clear that such a trust will actually accomplish that goal. A different approach is to design a trust that provides incentives for responsible behavior.

For example, an incentive trust might condition distributions on behavior you wish to encourage, such as obtaining a college or graduate degree, maintaining gainful employment, or pursuing worthy volunteer activities. Or it could require getting treatment for alcohol or substance abuse and maintaining a sober lifestyle.

One drawback to setting specific goals is that it may penalize a beneficiary who chooses a different, but responsible, life choice — a stay-at-home parent, for example. To build some flexibility into the trust, you might establish general principles for distributing trust funds to beneficiaries who behave responsibly but give the trustee broad discretion to apply these principles on a case-by-case basis.

Finding the right balance

A quiet trust can be a powerful way to encourage independence and protect your heirs, but it requires careful planning. Many families find success in combining secrecy with a gradual disclosure strategy — sharing information at key milestones or leaving behind a written explanation to reduce confusion and conflict.

Every family is different, and the decision to use a quiet trust or an incentive trust should be based on your goals, values and relationships. We can help you weigh the pros and cons and structure your plan in a way that best protects your family and your legacy.

Your company’s supply chain is one of the many business functions vulnerable to fraud, particularly as foreign tariffs take effect. Dishonest employees and vendors are known to have taken advantage of the COVID-19 pandemic’s supply shortages and abrupt switch to remote working. Now, tariff disruptions provide a similar opportunity for fraud perpetrators.

Many businesses are currently assessing their supply chains. Some are switching to domestic vendors while others are implementing policies to address the increased costs, customs delays and logistical challenges of importing goods. If your company is in this process, add fraud risk to the list of urgent issues you must address.

Change equals risk

Any change in how your business operates can create risk, especially if it occurs quickly and there’s some uncertainty about the timing and effects of the changes. For example, you may be struggling to ascertain what tariffs apply and where all your goods or production components originated. It’s important to get these details right because the U.S. Department of Justice has indicated it will vigorously prosecute customs evasion under the U.S. False Claims Act.

According to the Association of Certified Fraud Examiners, businesses should look out for several common tariff evasion schemes, including:

Routing shipments through a third country to hide their origin,
Lying about shipments’ declared values,
Falsely classifying the contents of shipments, and
“Structuring” or splitting orders into multiple shipments to lower the overall assessed tariff.

A newer scam, “delivered duty paid,” has emerged recently and is gaining popularity. In such schemes, suppliers charge slightly higher prices and deliver products duty-free. They tell their U.S. customers they’ve already paid the tariffs, but they haven’t — and don’t intend to. Customers often recognize that cheating may be involved, but the vendors provide them with plausible deniability.

Protecting your company

You can help protect your business from tariff evasion risk by carefully documenting all purchases, payments and shipments, and requiring copies of documents from vendors. If you don’t have adequate in-house expertise, consider outsourcing work to international trade professionals. These specialists can provide a framework and policies that will enable you to import goods cost-effectively and legally.

And if you’ve decided to replace cross-border suppliers with domestic alternatives, be sure to follow your usual screening methods. These should include reviewing references from legitimate organizations and performing background checks of vendors’ principals. Don’t rush the due diligence process. Some stateside criminals may be lying in wait to take advantage of the situation.

Additional resources

Finally, don’t overlook your workers. When it comes to supply chain fraud, rank-and-file employees often are the first to spot or hear about suspicious activities. Consider establishing an anonymous whistleblower hotline or online reporting mechanism, if you don’t already have one. Contact us for additional fraud prevention suggestions or help assessing your supply chain risk.

Do you and your spouse together operate a profitable unincorporated small business? If so, you face some challenging tax issues.

The partnership issue

An unincorporated business with your spouse is classified as a partnership for federal income tax purposes, unless you can avoid that treatment. Otherwise, you must file an annual partnership return using Form 1065. In addition, you and your spouse must be issued separate Schedules K-1, which allocate the partnership’s taxable income, deductions and credits between the two of you. This is only the beginning of the unwelcome tax compliance tasks.

The self-employment tax issue
Self-employment (SE) tax is how the government collects Social Security and Medicare taxes from self-employed individuals. For 2025, the SE tax consists of 12.4% Social Security tax on the first $176,100 of net SE income plus 2.9% Medicare tax. Once your 2025 net SE income surpasses the $176,100 ceiling, the Social Security tax component of the SE tax ends. But the 2.9% Medicare tax component continues before increasing to 3.8% — because of the 0.9% additional Medicare tax — if the combined net SE income of a married joint-filing couple exceeds $250,000. (This doesn’t include investment income.)

With your joint Form 1040, you must include a Schedule SE to calculate SE tax on your share of the net SE income passed through to you by your spousal partnership. The return must also include a Schedule SE for your spouse to calculate the tax on your spouse’s share of net SE income passed through to him or her. This can significantly increase your SE tax liability.

For example, let’s say you and your spouse each have net 2025 SE income of $150,000 ($300,000 total) from your profitable 50/50 partnership business. The SE tax on your joint tax return is a whopping $45,900 ($150,000 × 15.3% × 2). That’s on top of regular federal income tax. (However, you do get an income deduction for half of the SE tax.)

Here are three possible tax-saving solutions.

1. Use an IRS-approved method to minimize SE tax in a community property state

Under IRS guidance (Revenue Procedure 2002-69), there’s an exception to the general rule that spouse-run businesses are treated as partnerships. For federal tax purposes, you can treat an unincorporated spousal business in a community property state as a sole proprietorship operated by one of the spouses. By effectively allocating all the net SE income to the proprietor spouse, only the first $176,100 of net SE income is hit with the 12.4% Social Security tax. That can cut your SE tax bill.

2. Convert a spousal partnership into an S corporation and pay modest salaries

If you and your unincorporated spousal business aren’t in a community property state, consider converting the business to S corp status to reduce Social Security and Medicare taxes. That way, only the salaries paid to you and your spouse get hit with the Social Security and Medicare tax, collectively called FICA tax. You can then pay reasonable, but not excessive, salaries to you and your spouse as shareholder-employees while paying out most or all remaining corporate cash flow to yourselves as FICA-tax-free cash distributions. Keep in mind that S corps come with their own compliance obligations.

3. Disband your partnership and hire your spouse as an employee

You can disband the existing spousal partnership and start running the operation as a sole proprietorship operated by one spouse. Then hire the other spouse as an employee of the proprietorship. Pay that spouse a modest cash salary. You must withhold 7.65% from the salary to cover the employee-spouse’s share of the Social Security and Medicare taxes. The proprietorship must also pay 7.65% as the employer’s half of the taxes. However, because the employee-spouse’s salary is modest, the FICA tax will also be modest.

With this strategy, you file only one Schedule SE — for the spouse treated as the proprietor — with your joint tax return. That minimizes the SE tax because no more than $176,100 (for 2025) is exposed to the 12.4% Social Security portion of the SE tax.
Additional bonus: You may be able to provide certain employee benefits to your spouse, such as retirement contributions, which may provide more tax savings.

We can help

Having a profitable unincorporated business with your spouse that’s classified as a partnership for federal income tax purposes can lead to compliance headaches and high SE tax bills. Work with us to identify appropriate tax-saving strategies.

Unpredictable reimbursements, rising costs, and staffing pressures make forecasting more important than ever. That’s why we’re breaking down a clear, four-step process to help you build a smarter financial plan for your practice.

In this quick, 15-minute on-demand session, Carrie Lapka, CPA, CPPM, shares how to build a forecast that helps you prepare for uncertainty, set achievable goals, and make better-informed decisions for your practice.

What You’ll Learn:

How to create a budget narrative that aligns with your goals
The steps to projecting revenue using your CPT codes and reimbursement rates
How to calculate and plan for operating expenses
Why a conservative, flexible forecast is key to financial control

Why Watch:
Forecasting isn’t just for the finance team. It’s a smart, strategic tool to keep your entire practice on track. Learn how to create a roadmap for success, whether you’re preparing for growth, managing rising costs, or simply planning for the year ahead.

Watch the Webinar

Get Practical Resources for Your Practice

Yeo & Yeo’s Smart Medical Practice Toolkit is your go-to resource for navigating the financial, operational, and regulatory complexities of practice management. This collection includes brief, high-impact webinars, downloadable tools, and practical guidance—all built around the real challenges physicians and practice managers face.

Access the Toolkit

Once an organization reaches a certain size, it’s difficult to compete for talent and retain employees without sponsoring a qualified retirement plan. However, the costs of doing so can be intimidating, and plan administration might seem overwhelming. Let’s explore four ways to run a more cost-effective plan.

1. Use automatic features

Among the most effective and inexpensive steps any organization can take is adding automatic features to its plan to simplify the experience for both employer and participant. For example, automatic enrollment adds employees to the plan by default, usually after they reach a certain amount of service time. This tends to dramatically boost participation, which is to your advantage from a cost and compliance perspective.

Also consider automatic contribution escalation. This feature gradually increases participants’ contribution rates over time, helping them save more without seeing a big hit to their paychecks.

2. Match prudently

Agreeing to match each participant’s salary-deferred contribution can serve as a major enticement in hiring and plan enrollment. But your organization doesn’t need to make huge contributions to make a difference. Even a 2% or 3% match can encourage employees to participate in your plan. Plus, it signals that you’re willing to invest in your staff’s future financial security.

What’s more, employers may set up their plans so that participants must contribute more of their own money to receive the full match. For instance, rather than matching 100% of the first 3% an employee contributes, you might match 50% of the first 6%. This approach would cost your organization the same amount but encourage higher savings rates among participants.

3. Right-size investment options

“The more, the better” may seem like a good philosophy when offering plan participants various investment options. However, particularly for small to midsize employers, this approach can backfire when employees feel overwhelmed and dissatisfied with the plan.

You may be better off providing a smaller, carefully curated set of investment choices. Target-date funds are an especially popular choice. This will likely help participants feel more confident in their investment decisions and more engaged with the plan.

Another benefit of a right-sized approach is that you’ll likely reduce your fiduciary risk as plan sponsor. With fewer funds to deal with, and well-chosen ones at that, you should be able to better monitor performance, fees and suitability for your workforce. In turn, this will make it easier to fulfill your plan administration responsibilities.

4. Offer financial education

Sponsoring a qualified plan alone may not be enough. Many employers find they also need to educate employees about financial wellness so they know how to manage their retirement funds. Consider approaches such as:

Hosting educational seminars (live or virtual) on various topics,
Providing access to online tools or apps, and
Holding Q&A sessions with a rep from your plan provider.

In addition, be sure to recap your plan’s positive features during open enrollment and issue regular reminders about the importance of participants actively managing their accounts. It can all add up to stronger plan participation and satisfaction.

Why it matters

There are valid reasons why qualified retirement plans have become such a common employer-sponsored fringe benefit. Employees who feel financially secure are generally more focused and less stressed about the future.

Meanwhile, your organization can enjoy competitive advantages in hiring and retention. It may also benefit from tax deductions for contributions and even potentially qualify for tax credits that help offset administrative costs. Contact us for assistance exploring ways to strengthen your plan’s effectiveness without overspending.

Yeo & Yeo HR Advisory Solutions expands its leadership development offerings with AMPLIFY, a people-centered training program designed to prepare leaders to navigate complexity, motivate teams, and drive meaningful impact. Registration is now open for the first cohort, which will convene October 23-24 at Yeo & Yeo’s Troy office location (Troy Corporate Center II, 880 W. Long Lake Road, Troy, MI).

AMPLIFY goes beyond traditional leadership training—it’s an immersive six-month, hands-on experience built on the principle that great leadership demands both empathy and execution. With personalized coaching, guided self-assessment, and in-person development, participants will gain deeper insight into their leadership style, enhance their communication skills, and build practical strategies for managing teams and leading through change.

The program begins with individual planning and leadership assessments, laying the foundation for a two-day, in-person workshop on October 23 and 24. The workshop fosters personal reflection, peer connection, and real-world application, equipping participants with a personalized leadership roadmap and a comprehensive toolkit of resources. The program continues well beyond the workshop with individualized coaching sessions, ensuring that learning is reinforced and leadership strategies are refined in alignment with each participant’s unique goals and growth plans.

Through a blend of strategic planning, hands-on training, and sustained support over the course of six months, AMPLIFY empowers leaders to transform their leadership philosophy, drive meaningful change, and make a lasting impact within their organizations.

“Leadership is personal. It shapes culture, influences retention, and drives results,” said Amy Cell, President of Yeo & Yeo HR Advisory Solutions. “With AMPLIFY, we’ve created an experience that’s deeply reflective, highly actionable, and grounded in what leaders need most today—clarity, trust, and the ability to inspire others.”

Built by a team of organizational development professionals, AMPLIFY brings together decades of consulting experience and insights from clients across industries. The program’s focus on practical leadership tools, paired with a supportive peer community, makes it ideal for professionals stepping into leadership roles, new managers seeking confidence, or experienced leaders ready to elevate their impact.

AMPLIFY builds on Yeo & Yeo HR Advisory Solutions’ deep expertise in leadership development and talent strategy. Formerly known as Amy Cell Talent, the team recently marked a decade of supporting businesses, nonprofits, municipalities, and startups across Michigan. Since joining Yeo & Yeo in early 2025, the group has continued to expand its reach while maintaining a strong reputation for effective, personalized HR services. Now with more than 20 professionals, the team brings its proven approach to leadership development through AMPLIFY—combining experience, insight, and a commitment to helping leaders thrive.

Amplify

Learn more and register here

The going concern assumption underlies financial reporting under U.S. Generally Accepted Accounting Principles (GAAP) unless management has plans to liquidate. If a going concern issue is identified but not adequately disclosed, the omission might be considered “pervasive” because it can affect users’ understanding of the financial statements as a whole. So it’s critical to get it right. Here are answers to common questions about this assumption to help evaluate your company’s ability to continue operating in the future.

Who’s responsible for the going concern assessment?

Management is responsible for making the going concern assessment and providing related footnote disclosures. Essentially, your management team must determine whether there are conditions or events — either from within the company or external factors — that raise substantial doubt about your company’s ability to continue as a going concern within 12 months after the date that the financial statements:

Will be issued, or
Will be available to be issued (to prevent auditors from holding financial statements for several months after year end to see if the company survives).

Then you must provide appropriate documentation to prove to external auditors that management’s assessment is reasonable and complete.

What are the signs of “substantial” doubt?

Substantial doubt exists when relevant conditions and events, considered in the aggregate, indicate that it’s probable that the company won’t be able to meet its current obligations as they become due. Examples of adverse conditions or events that might cause management to doubt the going concern assumption include:

Recurring operating losses,
Working capital deficiencies,
Loan defaults,
Asset disposals, and
Loss of a key person, franchise, customer or supplier.

If management identifies a going concern issue, they should consider whether any mitigating plans will alleviate the substantial doubt. Examples include plans to raise equity, borrow money, restructure debt, cut costs, or dispose of an asset or business line.

What role does your auditor play?

The Auditing Standards Board’s Statement on Auditing Standards (SAS) No. 132, The Auditor’s Consideration of an Entity’s Ability to Continue as a Going Concern, is intended to promote consistency between the auditing standards and accounting guidance under U.S. GAAP. The current auditing standard requires auditors to obtain sufficient audit evidence regarding management’s use of the going concern basis of accounting in the preparation of the financial statements. The standard also calls for auditors to conclude, based on their professional judgment, on the appropriateness of management’s assessment.

Audit procedure must evaluate whether management’s assessment:

Covers a period of at least 12 months after the financial statements are issued or available to be issued,
Is consistent with other information obtained during audit procedures, and
Considers relevant subsequent events that happen after the end of the accounting period.

During fieldwork, auditors assess management’s forecasts, assumptions and mitigation plans and arrive at an independent going concern assessment.

The evaluation of whether there’s substantial doubt about a company’s ability to continue as a going concern can be performed only on a complete set of financial statements at an enterprise level. So, the going concern auditing standard doesn’t apply to audits of single financial statements, such as balance sheets and specific elements, accounts or items of a financial statement.

How are going concern issues reported in audited financial statements?

The audit team also reviews the reasonableness of management’s disclosures. When a going concern issue exists and the disclosure is adequate, the auditor can issue an unmodified opinion. However, it will typically include an emphasis-of-matter paragraph that explains the nature of the going concern issue.

Conversely, if management fails to provide a going concern disclosure or the disclosure is inadequate or incomplete, the financial statements won’t conform with GAAP. As a result, the auditor will either issue 1) a qualified opinion if the issue is material but not pervasive, or 2) an adverse opinion if it’s both material and pervasive.

Sometimes, the scope of an audit may be limited if management won’t provide sufficient support for its going concern conclusion or the auditor can’t gather enough evidence independently. This situation, if pervasive, can lead to a disclaimer of opinion — a major red flag to lenders and investors.

Auditors as gatekeepers

By independently evaluating management’s assessment, testing assumptions and insisting on clear disclosures, auditors safeguard stakeholders from being misled when substantial doubt exists. As you prepare for your next audit, be sure to carefully document your going concern assessment, anticipate auditor scrutiny, and be ready to communicate candidly about risks and mitigation strategies. Contact us for guidance on navigating these complex requirements in today’s uncertain economic environment. Our team of experienced CPAs is here to help.

A major tax change is here for businesses with research and experimental (R&E) expenses. On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) reinstated the immediate deduction for U.S.-based R&E expenses, reversing rules under the Tax Cuts and Jobs Act (TCJA) that required businesses to capitalize and amortize these costs over five years (15 years for research performed outside the United States).

Making the most of R&E tax-saving opportunities

The immediate domestic R&E expense deduction generally is available beginning with eligible 2025 expenses. It can substantially reduce your taxable income, but there are strategies you can employ to make the most of R&E tax-saving opportunities:

Apply the changes retroactively. If you qualify as a small business (average annual gross receipts of $31 million or less for the last three years), you can file amended returns for 2022, 2023 and/or 2024 to claim the immediate R&E expense deduction and potentially receive a tax refund for those years. The amended returns must be filed by July 4, 2026.

Accelerate remaining deductions. Whatever the size of your business, if you began to amortize and capitalize R&E expenses in 2022, 2023 and/or 2024, you can deduct the remaining amount either on your 2025 return or split between your 2025 and 2026 returns, rather than continuing to amortize and capitalize over what remains of the five-year period.

Relocate research activities. Consider relocating foreign research activities to the United States. Before the OBBBA, the five-year vs. 15-year amortization period made domestic R&E activities more attractive from a tax perspective. Now the difference between a current deduction and 15-year amortization makes domestic R&E activities even more advantageous tax-wise.

Take advantage of the research credit. A tax deduction reduces the amount of income that’s taxed, while a tax credit reduces the actual tax you owe dollar-for-dollar, providing much more tax savings than a deduction of an equal amount. So consider whether you may be eligible for the tax credit for “increasing research activities.” But keep in mind that the types of expenses that qualify for the credit are narrower than those that qualify for the deduction. And you can’t claim both the credit and the deduction for the same expense.

We’re here to help

With the recent changes to the R&E expense rules, understanding your options is more important than ever. Our team can walk you through the updates, evaluate potential strategies, and help you determine the best approach to maximize your savings and support your business goals.

Yeo & Yeo is pleased to announce that Bradley DeVries, CPA, CAE, will lead the firm’s Nonprofit Services Group, which provides accounting, audit, and consulting solutions for nonprofit organizations across Michigan.

DeVries has nearly two decades of experience in public accounting, with an emphasis on serving nonprofit and association clients as well as multifamily businesses. He specializes in single audits and internal control design, and serves as the managing principal of the Lansing office.

“I understand the pressures nonprofit leaders face, from board expectations to compliance and sustainability,” DeVries said. “My goal is that our nonprofit team members can continue to be trusted partners who help clients solve problems with confidence and serve their communities effectively.”

DeVries began his career as an internal auditor for the State of Michigan before joining Yeo & Yeo in 2005. Since then, he has developed a strong reputation for guiding nonprofit leaders through financial and governance complexities. In addition to the Certified Public Accountant (CPA) designation, he holds the Certified Association Executive (CAE) designation, demonstrating his dedication to professional development in nonprofit and association management.

DeVries is passionate about education and mentorship. He has led finance and budgeting training sessions for the Michigan Society of Association Executives’ Academy of Association Management and in-house seminars on nonprofit and real estate auditing. In the community, he is a frequent volunteer and serves as a board member for the Michigan Rural Development Council.

“Brad’s deep commitment to the nonprofit sector, combined with his extensive experience and ability to build strong relationships with clients and colleagues, equips him to successfully lead our Nonprofit Services Group,” said Jamie Rivette, CPA, CGFM, Assurance Service Line Leader. “His leadership will undoubtedly help drive meaningful impact and continued growth.”

Yeo & Yeo’s Nonprofit Services Group supports hundreds of nonprofit organizations across Michigan, providing services from independent audits and internal control assessments to outsourced accounting, HR solutions, and financial management consulting. Yeo & Yeo’s professionals leverage the award-winning YeoLean audit process—rooted in Lean Six Sigma principles—to deliver audits that are more efficient and less disruptive. Whether serving as trusted advisors or interim staff, the team’s goal is to empower nonprofit leaders to focus on what matters most: advancing their mission.

Divorce is stressful under any circumstances, but for business owners, the process can be even more complicated. Your business ownership interest is often one of your largest personal assets, and in many cases, part or all of it will be considered marital property. Understanding the tax rules that apply to asset division can help you avoid costly surprises.

Tax-free transfers

Most assets — including cash and business ownership interests — can be divided between spouses without triggering federal income or gift taxes. Under this tax-free transfer rule, the spouse receiving the asset assumes its existing tax basis (used to determine gain or loss) and holding period (short-term or long-term).

Example: If you give your spouse the marital home in exchange for keeping 100% of your company stock, the transfer is tax-free. Both the home and the stock retain their original tax basis and holding period for the new owner.

Tax-free treatment applies to transfers made:

Before the divorce is finalized,
At the time of divorce, and
After divorce, if they occur within one year of the marriage ending or within six years if required under the divorce agreement.

Future tax consequences

While transfers may be tax-free at the time, the recipient will owe taxes if he or she later sells an appreciated asset (where fair market value exceeds the tax basis).

For instance, if your ex-spouse receives 48% of your highly appreciated company stock, no tax is due at transfer. However, when he or she sells the stock, your ex will pay any capital gains tax based on your original basis and holding period.

Important: Appreciated assets come with built-in tax liabilities, which generally makes them less valuable than an equal amount of cash or non-appreciated property. Always account for taxes when negotiating a divorce settlement.

This rule also applies to ordinary-income assets — such as business receivables, inventory or nonqualified stock options. These can be transferred tax-free, but the recipient will report the income and pay taxes when the asset is sold, collected or exercised.

Valuation and adjustments for tax liabilities

A critical step in a divorce involving a business is determining its value. When valuing a business interest for this purpose, the valuator must understand what’s appropriate under applicable state law and legal precedent because the rules and guidance may vary across jurisdictions. The valuation process may be contentious, especially if one spouse is actively involved in the business and the other isn’t (or will no longer be involved after the divorce is settled). A professional valuation considers tangible assets (including equipment, inventory and property), intangible assets (including intellectual property) and other factors.

Potential tax liabilities are also considered during the valuation process. Examples include deferred taxes on appreciated assets, liabilities from unreported income or cash distributions, and implications from goodwill. These adjustments can significantly affect the business interest’s value and the fairness of the settlement agreement.

Nontax issues

There are a number of issues unrelated to taxes that a divorcing business owner should be prepared to address, including:

Cash flow and liquidity. Divorce settlements may require significant cash outlays — for example, to buy out a spouse’s share of the business or to meet alimony and child support obligations. This can strain the business’s liquidity, especially if the owner must take out loans or sell assets to meet these obligations. We can help assess the impact of these financial demands and develop strategies to maintain healthy cash flow, such as restructuring debt or revisiting budgets.
Privacy and confidentiality. Divorce proceedings may expose sensitive business information. Financial statements, client lists and proprietary data may become part of the public record. Business owners should work with legal and financial advisors to protect confidentiality, possibly through protective orders or sealed filings.

Plan ahead to minimize risk

Divorce can create unexpected tax and financial consequences, especially when dividing business interests and retirement accounts (such as 401(k) accounts and IRAs). The financial stakes are often higher for business owners, making careful planning essential.

We can help you navigate these rules and structure your settlement to minimize tax liabilities while complying with state community property laws. The earlier you address potential tax issues, the better your financial outcome after divorce.

Is your organization looking to expand its workforce and having trouble finding workers to fill its needs? If so, you may need to broaden the hiring pool into which you usually cast a line for job candidates.

Since the mid-1990s, the federal government has incentivized employers to consider applicants they might not usually look at through the Work Opportunity Tax Credit (WOTC). However, as of this writing, the tax break’s time is running out. Unless Congress takes action in the next few months, the WOTC will expire on December 31, 2025.

Targeted groups

Generally, an employer may qualify for this credit by paying eligible wages to members of what the IRS describes as “certain targeted groups who have faced significant barriers to employment.” These groups are:

Qualified members of families receiving assistance under the Temporary Assistance for Needy Families program,
Qualified veterans,
Qualified ex-felons,
Designated community residents,
Vocational rehabilitation referrals,
Qualified summer youth employees,
Qualified members of families in the Supplemental Nutritional Assistance Program,
Qualified Supplemental Security Income recipients,
Long-term family assistance recipients, and
Long-term unemployed individuals.

To claim the WOTC, you must first get certification that a new hire is a member of one of the targeted groups. To do so, you need to submit IRS Form 8850, “Pre-Screening Notice and Certification Request for the Work Opportunity Credit,” to your state agency within 28 days of the eligible worker’s first day on the job.

Various requirements

Beyond submitting the form, you must meet various other requirements to qualify for the credit. For example, each eligible employee must complete a specific number of service hours. Also, the credit isn’t available for employees who are related to or previously worked for an employer.

The rules and credit amounts vary depending on the targeted group an employee originates from. For most eligible employees, the maximum credit available for first-year wages is $2,400. However, the credit amount is $4,000 for long-term family assistance recipients, and $4,800, $5,600 or $9,600 for certain veterans. Additionally, for long-term family assistance recipients, there’s a 50% credit for up to $10,000 of second-year wages, resulting in a total maximum credit, over two years, of $9,000.

For summer youth employees, the wages must be paid for services performed during any 90-day period between May 1 and September 15. The maximum WOTC credit available for summer youth employees is $1,200 per employee.

If your organization qualifies for the WOTC, you’ll naturally need to claim it on your federal income tax return. And the credit’s value is limited to your income tax liability. Generally, a current year’s unused WOTC can be carried back one year and then forward 20 years.

Watchful eye

The One Big Beautiful Bill Act, which was signed into law in July, made permanent several tax breaks of interest to many employers. These include the qualified business income deduction and 100% bonus depreciation. Perhaps curiously, it didn’t address the WOTC.

The tax credit’s demise isn’t a sure thing, however. The WOTC has been extended three times since 2015, and Congress might save it again before year end. We can keep you updated on any developments and identify many other tax strategies that may benefit your organization.

The One Big Beautiful Bill Act (OBBBA) shifts the landscape for federal income tax deductions for state and local taxes (SALT), albeit temporarily. If you have high SALT expenses, the changes could significantly reduce your federal income tax liability. But it requires careful planning to maximize the benefits — and avoid potential traps that could increase your effective tax rate.

A little background

Less than a decade ago, eligible SALT expenses were generally 100% deductible on federal income tax returns if an individual itemized deductions. This provided substantial tax savings to many taxpayers in locations with higher income or property tax rates (or higher home values).

Beginning in 2018, the Tax Cuts and Jobs Act (TCJA) put a $10,000 limit on the deduction ($5,000 for married couples filing separately). This SALT cap was scheduled to expire after 2025.

What’s new?

Rather than letting the $10,000 cap expire or immediately making it permanent, Congress included a provision in the OBBBA that temporarily quadruples the limit. Beginning in 2025, taxpayers can deduct up to $40,000 ($20,000 for separate filers), with 1% increases each subsequent year. Then in 2030, the OBBBA reinstates the $10,000 cap.

While the higher limit is in place, it’s reduced for taxpayers with incomes above a certain level. The allowable deduction drops by 30% of the amount by which modified adjusted gross income (MAGI) exceeds a threshold amount. For 2025, the threshold is $500,000; when MAGI reaches $600,000, the previous $10,000 cap applies. (These amounts are halved for separate filers.) The MAGI threshold will also increase 1% each year through 2029.

Deductible SALT expenses include property taxes (for homes, vehicles and boats) and either income tax or sales tax, but not both. If you live in a state without income taxes or opt for the sales tax route for another reason, you don’t have to save all your receipts for the year and manually calculate your sales tax; you can use the IRS Sales Tax Deduction Calculator to determine the amount of sales tax you can claim. (It includes the ability to add actual sales tax paid on certain big-ticket items, such as a vehicle.) The increased SALT cap could lead to major tax savings compared with the $10,000 cap. For example, a single taxpayer in the 35% tax bracket with $40,000 in SALT expenses and MAGI below the threshold amount would save an additional $10,500 [35% × ($40,000 − $10,000)].

The calculation would be different if the taxpayer’s MAGI exceeded the threshold. Let’s say MAGI is $560,000, which is $60,000 over the 2025 threshold. The cap would be reduced by $18,000 (30% × $60,000), leaving a maximum SALT deduction of $22,000 ($40,000 − $18,000). Even reduced, that’s more than twice what would be permitted under the $10,000 cap.

The itemization decision

The SALT deduction is available only to taxpayers who itemize their deductions. The TCJA nearly doubled the standard deduction. As a result of that change and the $10,000 SALT cap, the number of taxpayers who itemize dropped substantially. And, under the OBBBA, the standard deduction is even higher — for 2025, it’s $15,750 for single and separate filers, $23,625 for heads of household filers, and $31,500 for joint filers.

But the higher SALT cap might make it worthwhile for some taxpayers who’ve been claiming the standard deduction post-TCJA to start itemizing again. Consider, for example, a taxpayer who pays high state income tax. If that amount combined with other itemized deductions (generally, certain medical and dental expenses, home mortgage interest, qualified casualty and theft losses, and charitable contributions) exceeds the applicable standard deduction, the taxpayer will save more tax by itemizing.

Beware the “SALT torpedo”

Taxpayers whose MAGI falls between $500,000 and $600,000 and who have large SALT expenses should be aware of what some are calling the “SALT torpedo.” As your income climbs into this range, you don’t just add income. You also lose part of the SALT deduction, increasing your taxable income further.

Let’s say your MAGI is $600,000, you have $40,000 in SALT expenses and you have $35,000 in other itemized deductions. The $100,000 increase in income from $500,000 actually raises your taxable income by $130,000:

At a marginal tax rate of 35%, you’ll pay $45,500 (35% × $130,000) in additional taxes, for an effective tax rate of 45.5%.

In this scenario, even with your SALT deduction reduced to $10,000, you’d benefit from itemizing. But if your $10,000 SALT deduction plus your other itemized deductions didn’t exceed your standard deduction, the standard deduction would save you more tax.

Tax planning tips

Your MAGI plays a large role in the amount of your SALT deduction. If it’s nearing the threshold that would reduce your deduction or already over it, you can take steps to stay out of the danger zone. For example, you could make or increase (up to applicable limits) pre-tax 401(k) plan and Health Savings Account contributions to reduce your MAGI. If you’re self-employed, you may be able to set up or increase contributions to a retirement plan that allows you to make even larger contributions than you could as an employee, which also would reduce your MAGI.

Likewise, you want to avoid moves that increase your MAGI, like Roth IRA conversions, nonrequired traditional retirement plan distributions and asset sales that result in large capital gains. Bonuses, deferred compensation and equity compensation could push you over the MAGI threshold, too. Exchange-traded funds may be preferable to mutual funds because they don’t make annual distributions.

At the same time, because the higher cap is temporary, you may want to try to maximize the SALT deduction every year it’s available. If your SALT expenses are less than $40,000 and your MAGI is below the reduction threshold for 2025, for example, you might pre-pay your 2026 property tax bill this year. (This assumes the amount has been assessed — you can’t pre-pay based only on your estimate.)

Uncertainty over PTETs

In response to the TCJA’s $10,000 SALT cap, 36 states enacted pass-through entity tax (PTET) laws to help the owners of pass-through entities, who tend to pay greater amounts of state income tax. The laws vary but typically allow these businesses to pay state income tax at the entity level, where an unlimited amount can be deducted as a business expense, rather than at the owner level, where a deduction would be limited by the SALT cap.

The OBBBA preserves these PTET workarounds, and PTET elections may remain worthwhile for some pass-through entities. An election could reduce an owner’s share of self-employment income or allow an owner to take the standard deduction.

Bear in mind, though, that some states’ PTET laws are scheduled to expire after 2025, when the TCJA’s $10,000 cap was set to expire absent congressional action. There’s no guarantee these states will renew their PTETs in their current form, or at all.

SALT deduction and the AMT

It’s worth noting that SALT expenses aren’t deductible for purposes of the alternative minimum tax (AMT). A hefty SALT deduction could have the unintended effect of triggering the AMT, particularly after 2025.

Individual taxpayers are required to calculate their tax liability under both the regular federal income tax and the AMT and pay the higher amount. Your AMT liability generally is calculated by adding back about two dozen “preference and adjustment items” to your regular taxable income, including the SALT deduction.

The TCJA increased the AMT exemption amounts, as well as the income levels for the phaseout of the exemptions. For 2025, the exemption amount for singles and heads of households is $88,100; it begins to phase out when AMT income reaches $626,350. For joint filers for 2025, the exemption amount is $137,000 and begins to phase out at $1,252,700 of AMT income.

The OBBBA makes these higher exemptions permanent, but for joint filers it sets the phaseout threshold back to its lower 2018 level beginning in 2026 — $1 million, adjusted annually for inflation going forward. (It doesn’t call for this change for other filers, which might be a drafting error. A technical correction could be released that would also return the phaseout thresholds to 2018 levels for other filers.)

The OBBBA also doubles the rate at which the exemptions phase out. These changes could make high-income taxpayers more vulnerable to the AMT, especially if they have large SALT deductions.

Navigating new ground

The OBBBA’s changes to the SALT deduction cap, and other individual tax provisions, may require you to revise your tax planning. We can help you chart the best course to minimize your tax liability.

Businesses with more than one owner benefit from having multiple viewpoints and varying skill sets. However, they also face serious risks of uncertainty and conflict if one of the owners suddenly departs or undergoes a major life change. A carefully crafted buy-sell agreement can guard against these risks — if it’s securely funded.

Transfer guidelines

A “buy-sell” (as it’s often called) is a legally enforceable contract among a company’s owners that sets guidelines for transferring ownership interests. It gives the remaining owners or the business itself the right — or, in some cases, the responsibility — to buy an exiting owner’s interest if a “triggering event” occurs. Such events may include an owner’s death, disability, divorce, retirement, voluntary departure, and loss of professional license or certification.

Essentially, the buy-sell creates a market for a withdrawing owner’s interest. It also defines how the price of an ownership interest will be determined, including identifying a valuation method and standard of value. By outlining when and to whom interests can be sold — and for how much — the agreement ultimately helps prevent conflicts among remaining owners or with the withdrawing owner’s family.

Popular choice

When a triggering event occurs, a substantial amount of money is typically needed to buy the departing owner’s interests. So, it’s critical to properly fund a buy-sell.

One popular choice is life insurance. Although such coverage might seem useful only to provide liquidity in the event of an owner’s death, it’s not limited to such situations.

The right policy, sometimes combined with riders or other types of coverage, can help ensure that departing owners or their beneficiaries efficiently receive the agreed-upon price for ownership interests following eligible triggering events. Meanwhile, it can ease the strain on the company’s cash flow and reduce the likelihood that the business will have to sell assets to fund an ownership interest buyout.

Various structures

Buy-sells can be structured to use life insurance in various ways. One option is a cross-purchase agreement, where each owner takes out a policy on each of the other owners.

For example, let’s say you buy coverage for your business partner. If that individual dies, triggering the buy-sell, you’ll collect the death benefit and use it to buy the ownership interest from your partner’s estate.

Assuming it’s large enough, the policy should guarantee you’ll have the funding to fulfill your obligations under the agreement. Other benefits include:

The insurance proceeds won’t be taxable as long as you plan properly, and
Your tax basis in the newly acquired interests will equal the purchase price.

On the downside, a cross-purchase agreement can be cumbersome if there are more than a few owners because of the number of policies required. It can also be unfair if there’s a significant disparity in owners’ ages or health, causing the policy premiums to vary substantially.

One alternative is establishing a trust or separate partnership to buy a policy on each owner. If an owner dies, the trust or partnership collects the death benefits on behalf of the remaining owners and pays each one’s share of the ownership interest buyout.

Another option is a redemption agreement. Under this approach, the business — not the individual owners — buys a policy on each owner’s life. The company holds the insurance and receives the proceeds following a qualifying triggering event, which it then uses to buy a departing owner’s interest.

A disadvantage of a redemption agreement is that the remaining owners won’t receive a step-up in basis when the company buys the departing owner’s interest. This can result in higher capital gains taxes.

Additionally, in the 2024 case of Connelly v. United States, the U.S. Supreme Court held that the value of corporate-owned life insurance used to meet a redemption agreement should be included in the value of a deceased owner’s business interest for federal estate tax purposes. And that doesn’t include any offsetting reduction for the company’s obligation to redeem the deceased owner’s interest.

The ruling may have adverse consequences for estates subject to the federal estate tax. Under current law, the unified federal estate and gift tax exemption is $13.99 million for 2025 and $15 million for 2026.

Bottom line

The bottom line is, if not properly funded, a buy-sell agreement won’t likely benefit anyone. Work with your attorney to create and occasionally review yours. Meanwhile, we can help you choose an optimal funding strategy and advise you on the tax implications.

As year end approaches, many businesses will soon be preparing for their annual audits. One key consideration is ensuring there are no potential conflicts of interest that could compromise the integrity of your company’s financial statements. A conflict of interest can cloud an auditor’s judgment and undermine their objectivity. Vigilance in spotting these conflicts is essential to maintain the transparency and reliability of your financial reports.

Understanding conflicts of interest

According to the American Institute of Certified Public Accountants (AICPA), “A conflict of interest may occur if a member performs a professional service for a client and the member or his or her firm has a relationship with another person, entity, product or service that could, in the member’s professional judgment, be viewed by the client or other appropriate parties as impairing the member’s objectivity.” Companies should be on the lookout for potential conflicts when:

Hiring an external auditor,
Upgrading the level of assurance from a compilation or review to an audit, and
Using the auditor for non-audit purposes, such as investment advisory services and human resource consulting.

Determining whether a conflict of interest exists requires an analysis of facts. Some conflicts may be obvious, while others may require in-depth scrutiny.

For example, if an auditor recommends an external payroll provider’s software to an audit client and receives a commission from the provider, a conflict of interest likely exists. Why? While the third-party provider may suit the company’s needs, the payment of a commission raises concerns about the auditor’s motivation in making the recommendation. That’s why the AICPA prohibits an audit firm from accepting commissions from a third party when it involves a company the firm audits.

Now consider a situation in which a company approaches an audit firm to assist in a legal dispute with another company that’s an existing audit client. Here, given the inside knowledge the audit firm possesses of the company it audits, a conflict of interest likely exists. The audit firm can’t serve both parties to the lawsuit and comply with the AICPA’s ethical and professional standards.

Managing potential conflicts

AICPA standards require audit firms to avoid conflicts of interest. If a potential conflict is unearthed, audit firms have the following options:

Seek guidance from legal counsel or a professional body on the best path forward,
Disclose the conflict and secure consent from all parties to proceed,
Segregate responsibilities within the firm to avoid the potential for conflict, and/or
Decline or withdraw from the engagement that’s the source of the conflict.

Ask your auditors about the mechanisms the firm has implemented to identify and manage potential conflicts of interest before and during an engagement. For example, partners and staff members are usually required to complete annual compliance-related questionnaires and participate in education programs that cover conflicts of interest. Firms should monitor for conflicts regularly because circumstances may change over time, for example, due to employee turnover or M&A activity.

Safeguarding financial reporting

If left unchecked, conflicts of interest can compromise the credibility of your financial statements and expose your company to unnecessary risks. Our firm takes this issue seriously and adheres to rigorous ethical guidelines. If you suspect a conflict exists, contact us to discuss the matter before audit season starts and determine the most appropriate way to handle it.

If your business sponsors health care benefits for its employees, you know the costs of doing so are hardly stable. And unfortunately, the numbers tend to rise much more often than they fall. According to global consultancy Mercer’s Survey on Health & Benefit Strategies for 2026, 51% of large organizations surveyed said they’re likely to make plan design changes to shift more costs to employees next year — presumably in response to price increases.

Small to midsize companies face much the same dilemma. With costs widely anticipated to rise, should you cut benefits, increase the cost-sharing burden on employees or hold steady? There’s no way to know for sure until you assess your current health benefit costs. Here are five ways to ascertain whether you’re spending wisely:

1. Choose and calculate metrics. Business owners can apply analytics to just about everything these days, including health care coverage. For example, you might use benefits utilization rate to identify the percentage of employees who actively use their benefits. Low usage may indicate your benefits aren’t aligned with the particular needs of your workforce.

Another metric is cost per participant, which is generally calculated by dividing total health care spend by number of covered employees. The result can help you judge the efficiency of your budget and potentially allow you to identify cost-saving opportunities.

2. Audit medical claims payments and pharmacy benefits management services. Mistakes happen — and fraud is always a possibility. By regularly re-evaluating claims and pharmacy services, you can identify whether you’re losing money to inaccuracies or even wrongdoing. Your business may need to engage a third-party consultant for this purpose, though some companies might be able to leverage training and specialized software to conduct internal reviews.

3. Scrutinize your pharmacy benefits contract. As the old saying goes, “Everything is negotiable.” Conduct a benchmarking study to see how your business’s pharmacy benefits costs stack up to similarly sized and situated companies. If you believe there’s room for negotiation, ask your vendor for a better deal. Meanwhile, look around the marketplace for other providers. One of them may be able to make a more economical offer.

4. Interact with employees to compare cost to value. The ideal size and shape of your plan depend on the wants and needs of your workforce. Rather than relying on vendor-provided materials, actively manage communications with employees regarding the design of your health care plan and its costs. Determine which benefits are truly valued and which ones aren’t.

Ultimately, your goal is to measure the financial impacts of gaps between benefits offered and those employees actually use. Then, explore feasible ways to adjust your plan design to close these costly gaps.

5. Get input from professional advisors. Particularly for smaller businesses, internal knowledge of health care benefits may be limited. Don’t get locked into the idea that you and your leadership team must go it alone.

Consider engaging a qualified consultant to help you better understand the full range of health care benefits available to your company. Ask your attorney to review your plan for potential compliance violations, as well as to check your contracts for negotiable items. Last, keep our firm in mind. We can perform financial analyses, audit claims, and offer strategic guidance to optimize spending and improve plan efficiency.

If you or your managers suspect fraud is occurring in your organization, you can’t afford to wait to act. According to the Association of Certified Fraud Examiners, the longer an occupational fraud scheme continues, the more it will cost the company a significant amount. So any suspicion should result in hiring a forensic accountant to investigate.

During an investigation, these professionals generally interview potential suspects and witnesses. But before they do, you should attempt to gather some basic facts by talking to employees who might know something.

Before you speak …

Before you interview anyone, consult your attorney to ensure you don’t create a legal liability. Then, decide what information you’re looking for. Knowing what you want helps you get to the truth of the matter quickly and avoid getting sidetracked by extraneous information. Then, identify who’s best able to supply that information.

Say, for example, you think an accounts receivable employee might be siphoning money. Talk to that person’s supervisor about typical work habits and any unusual behavior. Also, speak to the manager of your IT department about possible signs of file tampering or other misuse of your company’s tech resources. Keep in mind that people may be reluctant to share information if they think it reflects poorly on them or if it might get a colleague in trouble.

At the table

Set the tone with some introductory questions and ask the interviewee to agree to cooperate. In most cases, you’ll be looking for information that helps prove or disprove your suspicions, and the interview will be fact-finding in nature. It should last long enough for you to obtain all the information the subject has to offer. But don’t prolong sessions unnecessarily.

Aim for an informal, relaxed conversation and be sure to remain professional, calm and nonthreatening. Don’t interrupt unnecessarily, suggest that you have preconceived ideas about who did what, or assert your authority unnecessarily. If you suspect someone is withholding information, try asking more detailed questions. And if the employee says something you believe is untrue, ask for clarification. You might suggest that your question was misunderstood or that the person didn’t give it enough thought before answering.

Finally, never make threats or promises to encourage an employee to change a statement or confess. If the case ends up in court, such tactics could make the evidence you collect inadmissible. If someone persists in lying, ask them to put their statement in writing and sign it. Then turn the statement — and your suspicions — over to a forensic accountant.

Other information

You may be tempted to gather information by viewing a potential fraud perpetrator’s text, email and phone records. Make sure you talk to legal counsel first! Although employers generally can view employee messages on employer-issued devices, workers also enjoy an expectation of privacy in certain circumstances. You want to help ensure that any information you collect will be admissible in court (if the incident ends in a criminal or civil action). Contact us immediately if you suspect an employee is committing fraud.

One of the most critical decisions entrepreneurs make when starting or restructuring a business is choosing the right entity type. This choice directly impacts how the business is taxed, the level of administrative complexity and regulatory compliance obligations. While legal liability considerations also matter, we will focus on tax implications. For liability advice, consult a legal professional.

Whether launching a new venture or reassessing your current structure, understanding how each entity is taxed can help you make strategic and compliant decisions. Here’s a brief overview of five entities

1. Sole proprietorship: Simple with full responsibility

A sole proprietorship is the easiest structure to set up. It’s owned and operated by one person and requires minimal administrative effort. Here are the main features:

Taxation. Income and losses are reported on the owner’s personal tax return on Schedule C of Form 1040. Income is subject to 15.3% federal self-employment tax, and the business itself isn’t taxed separately. The owner may also qualify for a Qualified Business Income (QBI) deduction, potentially reducing the effective tax rate.
Compliance. Aside from obtaining necessary licenses or a business name registration, there’s little required paperwork. However, the owner is personally liable for all business debts and legal obligations.

2. S Corporation: Pass-through entity with payroll considerations

An S corp is a tax designation offering pass-through taxation benefits while imposing stricter rules. Here are the highlights:

Taxation. S corps don’t pay income tax at the entity level. Instead, profits or losses are passed through to shareholders via Schedule K-1 and reported on individual returns. A key tax benefit is that shareholders who are employees receive a salary (subject to payroll tax), while additional profit distributions aren’t subject to self-employment tax. However, the salary must be reasonable. The business is eligible for QBI deductions.
Compliance. To qualify, S corps must have 100 or fewer shareholders, all U.S. citizens or residents, and only one class of stock. They must file Form 2553, issue annual Schedule K-1s and follow corporate formalities like shareholder meetings and recordkeeping. An informational return (Form 1120-S) is also required.

3. Partnership: Collaborative ownership with pass-through taxation

A partnership involves two or more individuals jointly operating a business. Common types include general partnerships, limited partnerships, and limited liability partnerships (LLPs). Here’s what makes it unique:

Taxation. Partnerships are pass-through entities. The business files Form 1065 (an informational return), and income or loss is distributed to partners on Schedule K-1. Partners report this on their personal returns. General partners must pay self-employment tax, while limited partners usually don’t. The business is eligible for QBI deductions.
Compliance. Partnerships require a detailed partnership agreement, coordinated recordkeeping and clear profit-sharing arrangements. While more complex than a sole proprietorship, partnerships offer flexibility for growing businesses.

4. Limited liability company: Flexible and customizable

An LLC merges elements of corporations and partnerships, offering owners — called members — both operational flexibility and liability protection.

Tan. By default, a single-member LLC is taxed like a sole proprietorship, and a multimember LLC like a partnership. However, LLCs may elect to be taxed as a C or S corp by filing Form 8832 or Form 2553. This gives owners control over their tax strategies. LLCs that don’t elect C corp status are eligible for QBI deductions.
Compliance. LLCs require articles of organization and often must have an operating agreement. Though not as complex as corporations, they still generally face state-specific compliance requirements and annual filings.

5. C Corporation: Double taxation with scalability

A C corp is a distinct legal entity offering the most liability protection and growth potential through stock issuance. Here are its features:

Taxation. C corps face double taxation — the business pays taxes on earnings (currently at a 21% federal rate), and shareholders pay taxes again on dividends. However, C corps can offer deductible benefits (for example, health insurance, retirement plans) and retain earnings without immediately distributing profits. C corps aren’t eligible for QBI deductions.
Compliance: These entities require the most administrative upkeep, including bylaws, annual meetings, board minutes, and extensive state and federal reporting. C corps are ideal for companies seeking venture capital or IPOs.

After hiring employees

Regardless of entity type, adding employees increases compliance requirements. Businesses must obtain an Employer Identification Number (EIN) and withhold federal and state payroll taxes. Employers also take on added responsibilities related to benefits, tax deposits, and employment law compliance.

What’s right for you?

There’s no universal answer to which entity is best. The right choice depends on your growth goals, ownership structure and financial needs. Tax optimization is a critical factor. For example, an LLC electing S corp status may help minimize self-employment taxes if set up properly. Contact us. We can coordinate with your attorney to ensure your structure supports both your tax strategies and business goals.

Yeo & Yeo, a leading Michigan-based accounting and advisory firm, has been recognized by INSIDE Public Accounting (IPA) as a Top 200 Firm in the U.S. for the seventeenth consecutive year. In the 2025 IPA ranking of more than 600 participating firms based on net revenue, Yeo & Yeo ranked 114. The firm was also named among the 75 Best of the Best CPA firms.

This recognition comes at a time of growth and transformation for Yeo & Yeo. Over the past year, the firm has expanded its presence across Michigan, welcomed new team members through strategic acquisitions, and invested in emerging technologies.

“Our success is driven by our people and our focus on providing exceptional client service,” said Dave Youngstrom, President & CEO of Yeo & Yeo. “In the past year, we’ve embraced forward-thinking initiatives to strengthen our firm and provide long-term value for both our clients and our team. We’re honored to be recognized for the work we’re doing today and where we’re headed.”

As part of its growth strategy, Yeo & Yeo welcomed the professionals of Berger, Ghersi & LaDuke PLC and Amy Cell Talent, expanding the firm’s talent base to more than 275 professionals and enhancing its specialized service capabilities. Technology and innovation remain a core focus. The firm has introduced advanced tools such as robotic process automation (RPA) and Copilot AI to streamline workflows and create more efficient, seamless client experiences.

Internally, Yeo & Yeo remains committed to supporting its team through people-focused initiatives, including enhancements to the firm’s parental leave program and expanded learning and development opportunities. These efforts have helped cultivate a thriving workplace culture, supporting the firm’s ability to attract and retain top talent across its five entities: Yeo & Yeo CPAs & Advisors, Yeo & Yeo HR Advisory Solutions, Yeo & Yeo Technology, Yeo & Yeo Medical Billing & Consulting, and Yeo & Yeo Wealth Management.

“Our ability to evolve and anticipate the needs of our clients and communities is what sets us apart,” added Youngstrom. “Being named among the top firms in the country is a reflection of our team’s hard work, leadership, and vision for the future.”

View the list of top-ranked IPA firms.

If your Michigan business has 10 or fewer employees, you have until October 1, 2025, to fully comply with the Michigan Earned Sick Time Act (ESTA). There are many required updates to consider and prepare for – policy updates, payroll adjustments, and employee communication — starting now will make the transition far smoother.

What ESTA Requires for Small Businesses

Beginning October 1, 2025, eligible employees at small businesses will have the right to accrue and use paid sick time. This means you must have systems in place to:

Track accrual at a rate of 1 hour for every 30 hours worked (or frontload 40 hours at the start of the benefit year)
Allow up to 40 hours of paid sick time per year
Permit carryover of unused hours (if using accrual)
Pay sick leave at the greater of the employee’s regular rate or Michigan’s minimum wage
Maintain compliance with recordkeeping and notice requirements

Why You Should Prepare Now

Policy Updates – Your employee handbook and PTO policies must be updated to reflect ESTA’s requirements.
Payroll & Tracking Systems – Adjust accrual tracking in payroll or HR software to ensure compliance from day one.
Employee Communication – Prepare to post required notices and communicate changes to your team in a clear, consistent way.
Avoid Penalties – Non-compliance can result in costly fines and legal exposure.

Next Steps for Small Business Owners

Review Your Current PTO/Sick Leave Policy – Identify where it falls short of ESTA requirements.
Choose Accrual or Frontloading – Decide whether to track hours worked or grant sick leave up front each year.
Update Payroll & HR Systems – Ensure systems are ready to track and report correctly.
Post Required Notices – Use the state’s official poster and provide notices at hire and as required.
Train Managers & Supervisors – Make sure they understand how to approve and track sick leave requests under the new law.

Yeo & Yeo Can Help You Get Ready

Don’t wait until the deadline is looming — take advantage of our complimentary ESTA Readiness Assessment for Michigan businesses with 10 or fewer employees. In just a few quick questions, we’ll help you pinpoint your current compliance status and provide a tailored action plan so you’re fully prepared well before October 1, 2025.

Take the ESTA Readiness Assessment →

To support your preparation, we’ve also developed the Yeo & Yeo ESTA Toolkit — a comprehensive set of resources, guides, checklists, and templates created specifically for Michigan small businesses navigating the new requirements.

Your Yeo & Yeo advisor is here to walk you through the process, answer your questions, and help you implement changes that keep you compliant while supporting your employees.