Harnessing the Advantages of the ROBS / BORSA Structure.
PART I: C-CORP
By: Bryan Uecker, QPA, QPFC, AIF, AIFA
ROBS (Rollover as Business Start-up) or BORSA™ (Business Owners Retirement Savings Account) structures are exclusively compatible with C-Corps. This is because only C-Corps permit a 401(k) profit-sharing plan to serve as a shareholder. Upon discovering this exception, some prospective clients may feel disappointed, as the C-Corp often carries a stigma of “double taxation”. Historically viewed as “the entity choice of last resort” due to potential for double taxation resulting from corporate-level taxes and subsequent taxation upon distribution or liquidation. The good news is that C corporations present unique tax advantages that S corporations and partnerships cannot replicate.
To debunk the stigma of “double taxation” right up front, a helpful chart compares the corporate tax and dividend tax to profits through a pass-through entity at a personal tax rate of 37%:
So the issue is not how many times you are taxed……but rather how much tax you pay.
Now that we have cleared up the myth, here are ten benefits of a C-Corp:
1. Lowering Overall Tax Burden: C Corps can achieve significant tax savings thanks to a single flat corporate tax rate of 21%. By proactively managing dividends and salaries, business owners can optimize their tax burden, generally resulting in lower overall taxes than pass-through entities.
2. Flexible Fiscal Year: C Corps can choose their fiscal year, unlike LLCs and S Corps. This allows for better timing of income recognition and expense deductions, enabling shareholders to further minimize their tax burden.
3. Retaining Earnings for Growth: C Corps can reinvest profits within the company at a lower tax cost. Unlike S Corps, where profits are passed through to shareholders and taxed regardless of distribution, C Corps can retain earnings to fuel future expansion without immediate tax consequences.
4. Deducting Salaries and Bonuses: Shareholders of C Corps can receive salaries and bonuses, which are deductible expenses for the corporation. Businesses can optimize tax efficiency and mitigate double taxation concerns by structuring compensation packages appropriately.
5. Tax Write-offs for Fringe Benefits: C Corps can deduct 100% of medical premiums and other fringe benefits provided to employees. This includes health, long-term care, and retirement plan contributions, offering substantial tax savings opportunities for the corporation and its employees.
6. Charitable Contributions Deduction: C Corps can deduct charitable donations as business expenses, subject to certain limitations. This benefits worthy causes and provides tax advantages for the corporation, with the option to carry over excess contributions to future tax years.
7. Capital Gaines and Losses: C Corps are taxed at a flat 21% on short-term and long-term gains so you no long have to carry economic risk to get to a lower tax bracket. You sell you capital asset when it is best for you. C Corps can carry forward capital and operating losses indefinitely to offset future profits. This flexibility allows businesses to smooth out tax liabilities over time, particularly during growth or economic downturns.
8. Fewer Ownership Restrictions: Unlike S Corps, which have strict ownership rules, C Corps can have unlimited shareholders, issue multiple classes of stock and be owned by anyone or anything. This flexibility facilitates equity financing and business expansion without the constraints imposed by S Corp regulations.
9. Favorable Treatment for Passive Investors: Passive investors in C Corps benefit from the inability to pass losses through to individual tax returns. Unlike S Corps, where active participation is required to claim losses, passive investors can still enjoy tax advantages without direct involvement in management.
10. Unique Financing Opportunities: Registering as a C Corp opens doors to diverse financing options, including public offerings and innovative strategies like 401(k) business financing, such as ROBS or BORSA™ plans. These financing avenues give businesses access to capital while minimizing debt obligations, offering a valuable alternative to traditional lending sources.
With over four decades of experience, DRDA, LLC has focused on supporting entrepreneurs in initiating, expanding, and selling their businesses. Leveraging our proficiency in accounting, business consulting, and retirement plan design, we harness the advantages of the ROBS/BORSA™ structure to benefit our clients throughout the operation of their business and at their succession transition or exit of their business, not just at formation.
By: Bryan Uecker, QPA, QPFC, AIF, AIFA
- Published in Business Lending, ROBS 401(k), ROBS 401k Provider, Small Business, Starting a Business
Delving into Required Minimum Distributions (RMDs) for 401(k) Plans: Understand the New Rules
By Bryan Uecker, QPA, QPFC, AIF, AIFA
A Required Minimum Distribution (RMD) is the mandated withdrawal amount from certain retirement accounts on an annual basis after reaching a specific age. These rules were established by the government to prevent retirement accounts from being used solely for estate planning purposes to transfer wealth to beneficiaries upon the account holder’s death. It’s crucial for participants in 401(k) plans to grasp these regulations as failure to comply with RMD requirements can lead to tax penalties imposed by the IRS.
Understanding the “Required” Aspect of RMDs:
An RMD must be distributed from your 401(k) account each year once you reach a designated age. However, if you’re still employed when you reach this age, your plan might allow you to postpone RMDs until retirement.
RMD Age or Retirement:
The age for commencing RMDs is determined by your birth year:
– Born before July 1, 1949: RMD age is 70 ½
– Born after June 30, 1949, and before January 1, 1951: RMD age is 72
– Born in 1951 through 1959: RMD age is 73
– Born after 1959: RMD age is 75
However, you might be able to defer your initial RMD beyond this age if you’re still employed by the plan sponsor and don’t own more than 5% of the business. Owners with more than 5% ownership must start RMDs at the designated age.
RMD Deadline:
Typically, you must receive the RMD by December 31 of the relevant year. However, the first RMD can be delayed until April 1 of the following year if it’s the later of reaching RMD age or retiring (if allowed by the plan and you’re not a 5% owner).
RMDs Upon Death:
Regardless of whether you’ve reached RMD age, distributions must be made from your 401(k) account upon your death. Beneficiaries usually have ten years to withdraw the full amount, though some, like spouses or minor children, might be eligible for extended payment periods.
RMDs with BORSA®:
For many BORSA® clients, employer securities make up the bulk of their 401(k) balance. The corporation can repurchase shares to cover the RMD, or the participant can opt for an “in-kind” distribution in employer securities equivalent to the RMD’s fair market value. The participant is subject to ordinary income tax on the in-kind distribution and holds the stock personally.
RMDs and Roth 401(k) Accounts:
Starting with the 2024 RMDs, Roth 401(k) accounts are not subjected to the same RMD rules. Prior to 2024, Roth 401(k) accounts followed the same rules but were non-taxable.
By Bryan Uecker, QPA, QPFC, AIF, AIFA
- Published in ROBS 401(k), ROBS 401k Provider, Small Business
Forging a Bright Career Ahead: Empowering Students Through DRDA
By: Eva Jiang, M.B.A., M.S.
Success Starts Here
Bauer Connect: Bridging Futures – An event Recap
Last week, UH Bauer students had the opportunity of engaging with DRDA leaders from diverse backgrounds at the Bauer Connect event. The attendees experienced a dynamic lineup of presentations, participated in a lively quiz session, and engaged in a thought-provoking panel discussion, providing invaluable insights for their professional journeys.
Connecting with University and Campus:
Connecting with universities and campuses is crucial for companies like DRDA and the accounting industry. It not only allows us to share our knowledge and experience with the next generation of professionals but also provides an opportunity for students to gain real-world insights and build connections within the industry. Through events like Bauer Connect, we aim to foster a mutually beneficial relationship between academia and industry, empowering students to thrive in their future careers.
Opportunities for Growth:
For students considering their career paths, joining DRDA offers more than just a job—it’s an opportunity for growth and advancement. Unlike experienced staff who may have already established their careers, students have the advantage of a blank canvas, ready to be painted with diverse experiences and opportunities.
At DRDA, we recognize and value the fresh perspectives and innovative ideas that students bring to the table, offering them a platform to shine and make meaningful contributions from day one. Take, for example, our tax department career path: starting as Staff I, graduates progress to Staff II and then to Senior positions. With dedication and skill development, they can advance to roles such as Tax Manager/Department Manager and ultimately become Partners at twice the industry norm. This advancement is made possible because of the resources DRDA has developed to help our people succeed. The picture below lists some of those resources. If you want to know more about these resources and the opportunity for you, just give us a call or email.
A Bright Future Awaits:
As students embark on their journey with DRDA, they can look forward to a promising future filled with opportunities for personal and professional development and growth. Unlike many CPA firms, where partnership is often restricted to a select few, DRDA offers a rare opportunity for every member of our team to become a partner if they desire. We believe in treating everyone fairly and giving opportunities based on talent and hard work, ensuring that the brightest and most dedicated individuals have the chance to shape the future of our firm.
In conclusion, DRDA is dedicated to empowering students and shaping their bright futures. Join us as we bridge the gap between academia and industry, together forging a path to success.
By: Eva Jiang, M.B.A., M.S.
- Published in Culture, Team Achievement, Team Achievment
Discovering Financial Excellence: Why DRDA’s Tailored Solutions Stand Out
By: Eva Jiang, M.B.A., M.S.
Looking for financial services that exceed expectations? Look no further than DRDA. Our comprehensive range of services encompasses tax planning and compliance, audit, accounting, bookkeeping, QuickBooks, 401(k) plan, Third Party Administration, BORSA® implementation, Operation and Exit, Profit and Cash Flow Optimization (P+CFO®), and Business Value Acceleration.
DRDA Wheel of Services
Because of our commitment to professionalism and uniqueness, we offer several trademarked services, including RMaP, BORSA, STEP, P+CFO, ARM, POD and LMS. At DRDA, we pride ourselves on our ability to make a difference in our clients lives. These trademarked services represent our dedication to providing cutting-edge solutions that are tailored to the needs of each client.
When you choose DRDA, you’re not just getting cookie-cutter solutions. Our team understands that every business is unique, which is why we take the time to truly understand your individual needs. We believe in open communication and collaboration across departments, ensuring that your experience with us is seamless and efficient.
Our tax services cover everything from planning and compliance to resolution, helping you navigate complex tax laws to minimize liabilities and maximize savings.
Our accounting services are tailored to your specific needs, providing accurate and reliable financial reporting. From auditing, assurance and financial statement preparation to budgeting and forecasting, our team helps you understand and trust your business information systems.
Our bookkeeping services ensure that your financial records are organized and up-to-date, allowing you to focus on what you do best – running your business. And if you use QuickBooks, our consultants can optimize your software usage, from setup and customization to training and ongoing support.
In addition to traditional services, our business advisory team offers strategic guidance to drive growth and profitability. Whether you need help with TPAS (Third-Party Administrative Services), retirement plan, BORSA® implementation (ROBS), business planning, performance analysis, or risk management, we’ve got you covered.
At DRDA, we don’t believe in a one-size-fits-all approach. DRDA Business Solutions are tailor-made for your business, saving you time and money while ensuring maximum efficiency and effectiveness.
Of the more than 46,000 CPA firms in the United States, DRDA has been recognized as one of the Top 500 CPA Firms in the United states by Inside Public Accounting, DRDA is ready to serve you. Visit our website at www.drdacpa.com to learn more about how we can help you and your business succeed and thrive.
By: Eva Jiang, M.B.A., M.S.
- Published in P+CFO™, ROBS 401(k), ROBS 401k Provider, Small Business, Starting a Business, Tax
My Journey to Success: Becoming the Youngest CPA Candidate at DRDA
By: Eric Vasquez
Hey, everyone! It’s Eric Vasquez, and I’m excited to share my journey of conquering the CPA exams—the highs, the lows, and the lessons learned along the way.
After graduating in 2021, I spent two years gaining practical experience in DRDA, a leading CPA firm, while taking my CPA exam journey. The decision to pursue accounting was a natural one, influenced by both my family and my fascination with numbers.
The motivation behind pursuing the CPA designation was clear—to position myself at the forefront of financial expertise. However, the journey was no cakewalk. Time management was a constant challenge, balancing work, study, and personal life. Yet, self-motivation and patience were my companions throughout this marathon.
I earned my accounting bachelor’s and master’s degrees from UHCL, setting the stage for a promising career. Joining DRDA marked a significant step forward, offering exposure and opportunities that fueled my professional growth.
With accountants in the family, the choice was obvious. What attracted me to audit was the love for investigation, the allure of new projects, and the inherent challenge that each audit brings. There’s a unique sense of fulfillment when an audit is completed—the report finalized, the hard work paying off. It’s these moments of accomplishment that make the journey worthwhile.
Now that I’ve passed the exams, the immediate goal is to gain more practical experience. In five years, I envision myself as an audit manager, with aspirations to become a partner down the line. Working in a team is something I love, and DRDA has been an incredible support system. From study programs to time off on exam days, and the wealth of experience from CPAs within the company, the support has been invaluable. Meanwhile I believe my success aligns seamlessly with our company’s core values. DRDA prioritizes the growth and success of our employees, understanding that their achievements contribute to the overall success of our firm.
Outside of the professional realm, I find solace and joy in music. Playing the piano and guitar is my way of unwinding and expressing creativity.
For those on the CPA journey, I have a few pieces of advice:
- Leave time for yourself. The journey is intense, and self-care is crucial.
- If a subject is challenging, practice, practice, practice. It makes all the difference.
- Stay persistent. The real exam might just surprise you—it could be more manageable than the practice ones.
In wrapping up, the CPA journey is both a personal and professional expedition. It’s about embracing challenges, staying motivated, and finding fulfillment in every milestone achieved. As DRDA celebrates my success, we are reminded of the incredible capabilities and potential that reside within our team. My accomplishment is a testament to the culture of excellence and support that defines DRDA. Looking forward to my continuing career development and contributions to my firm’s growth.
By: Eric Vasquez
- Published in Team Achievment
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