Professional Documents
Culture Documents
MBA 7295
Business Structure
Assessment Presentation
Michael
Hutchinson
C-Corporation
Happy Feet
By:
Holly Hartman & Angela
Whitaker
2
A tax preparer (our CFO) will be required sign off to complete the filing of
Happy Feets 2014 tax return.
6
12/31/2012
12/31/2013
2012-2013
Change
12/31/2014
2013- 2014
Change
10,049.00
10,341.00
9,088.00
-961.00
1,253.00
Short-Term Investments
1,167.00
3,161.00
6,124.00
4,957.00
-2,963.00
11,216.00
13,502.00
15,212.00
3,996.00
-1,710.00
5,409.00
5,314.00
6,170.00
761.00
-856.00
384.00
294.00
376.00
-8.00
-82.00
5,793.00
5,608.00
6,546.00
753.00
-938.00
32,240.00
37,751.00
42,912.00
10,672.00
-5,161.00
476.00
364.00
344.00
-132.00
20.00
29.00
28.00
14.00
-15.00
14.00
56.00
56.00
46.00
-10.00
10.00
49,810.00
57,309.00
65,074.00
15,264.00
-7,765.00
23,306.00
24,305.00
25,294.00
1,988.00
-989.00
Accumulated Depreciation
-13,993.00
7
-14,645.00
-15,070.00
-1,077.00
425.00
Accounts Receivable
Other Receivables
Total Receivables
Inventory
Finance Division Loans
and Leases, Current
Deferred Tax Assets,
Current
Other Current Assets
9,313.00
9,660.00
10,224.00
911.00
-564.00
Goodwill
4,945.00
5,035.00
5,043.00
98.00
-8.00
Long-Term Investments
1,043.00
1,180.00
1,204.00
161.00
-24.00
4,296.00
4,056.00
3,627.00
-669.00
429.00
209.00
209.00
209.00
0.00
0.00
5,892.00
6,753.00
2,939.00
-2,953.00
3,814.00
Other Intangibles
3,044.00
3,111.00
3,052.00
8.00
59.00
1,434.00
1,583.00
1,291.00
-143.00
292.00
79,986.00
88,896.00
92,663.00
12,677.00
-3,767.00
Total Assets
12/31/2012
12/31/2013
12/31/2014
2012-2013
Change
2013- 2014
Change
Revenues
68,735.00
81,698.00
86,623.00
12,963.00
4,925.00
Total Sales/Revenue
68,735.00
81,698.00
86,623.00
12,963.00
4,925.00
55,739.00
68,556.00
73,193.00
12,817.00
4,637.00
Gross Profit
12,847.00
13,033.00
13,355.00
186
322
3,408.00
3,717.00
3,956.00
309
239
R&D Expenses
3,918.00
3,298.00
3,071.00
-620
-227
Other Operating
Expenses
7,326.00
7,015.00
7,027.00
-311
12
Operating Income
5,521.00
6,018.00
6,328.00
497
310
-386
35
56
Interest Expense
-477
-4429
12/31/2012
12/31/2013
12/31/2014
2012-2013
Change
2013- 2014
Change
278
268
214
-10
-54
-199
-174
-172
25
Other Non-Operating
Income (Expenses)
166
140
101
-26
-39
-119
-84
-96
35
-12
24
20
-20
16
EBIT
5,393.00
5,910.00
6,232.00
517
322
1,382.00
2,007.00
1,646.00
625
-361
Earnings from
Continuing Operations
4,011.00
3,903.00
4,586.00
-108
683
4,018.00
3,900.00
10
4,585.00
-118
685
Loss on Sale of
Investments
Gain on Sale of Assets
Net Income
Family Dynamic
Father
Holly
Angela
Son Married
Daughter Divorced
No children
1- adopted child
No grandchildren
2 - Children under
18
Example
Angela will receive a charitable income tax deduction
in the amount of $100,000 in year one.
All income earned by the trust, including capital
gains and amounts paid to charity, will be considered
earned by and, therefore, included in Angelas gross
income just as if the trust does not exist.
However, because Angela transferred tax-exempt
securities to the trust, she will not be required to
include the interest from the bonds in her gross
income.
However, any gains from the sale or redemption of
the bonds is produced will18 be taxable to Angela.
Dynasty Example:
Assume you transfer $1 million to a Dynasty Trust.
The trust will benefit your child, grandchild, and
great-grandchild for their lives after which time the
remaining assets will pass outright to your great
great-grandchildren.
Assuming the trust balance grows by a net of 6% - 8%
annually.
In this case, when the trust ends, your great greatgrandchild would receive about $84 million.
If instead, you gave this $1 million outright to your
child, who in turn passed it down through each
succeeding generation, your great great-grandchild
would receive only about $8
million.
20
The Dynasty Trust has $76 million more in assets
Gifting Breakdown
Exhibit A
Dynasty Trust
Outright Gift
Grantors gift of $1 MM
$ 1,000,000
$ 1,000,000
$ 4,549,383
$ 4,549,383
$ 0.00
$ (2,502,161)
Total
$ 4,549,383
$ 2,047,222
$ 19,525,364
$ 8,786,414
$ 0.00
$ (4,832,527)
Total
$ 19,525,364
$ 3,953,886
Value at great-grandchilds
death
$ 83,800,336
$ 16,969,568
$ 0.00
$ (9,333,262)
21
Line 1 Report the estates or trust share of all taxable interest that was
received during the tax year Ex: Cash accounts, Notes Loans, US Treasury
bills, US savings bonds and additional income received.
Line 4 Capital Gain or (Loss) and include Sch. D
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Line 12 Fiduciary fees for administering the estate or trust during the
year.
Line 14 Attorney, accounting and tax return preparer fees
Line 18 Income Distribution Deduction to any beneficiaries during the
tax year and complete Schedule B. to determine the distribution. For
each beneficiary a K-1 will be created.
23
Analysis
The Dynasty Trust has $76 million more in assets
because of the magic of transfer tax-free
compounding which will be a nice nest egg for
Hollys children and grandchildren.
Highlights for Happy Feet in 2014 - achieved a
rapid growth on stock price; lowered cost in
expenses in comparison to competitors.
By Partnering with a Shark Tank Exec-Happy Feet
enhanced our ability to reach new markets for
our C-Corp and increase profitability by 30% in
2014, while mitigating our tax liabilities both
personally and from a corporate perspective.
Analysis Cont.
Happy Feet, Inc. was pleased with
nearly a full in 2014 5 EPS, ROE, &
Stock Price as our closest competitor
Dr. Scholl's.
Happy Feet gained traction in the market in 2013
becoming a formidable competitor.
Lesson learned- Was continuing domestic
manufacturing and not selling all capacity sooner,
and/or offering discounted pairs, lead to extremely
high inventory turnover. In the end we turned out a
25
nice profit and successfully
maneuvered Happy Feet
Sole
Proprietorship
Coffee Shop
By:
Lauren Rogers
28
Sole Proprietorship
The self-employment tax rate for 2015 is
15.3% of the first $118,500 of income and
2.9% of everything above that amount.
To incorporate a sole proprietorship in the
State of Delaware, I will need to obtain a
Delaware business license from the
Delaware Division of Revenue.
I must register an EIN with the IRS.
A sole proprietorship can be established
without filing any legal documents with the
DE Secretary of State.
33
34
Estate Planning
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Estate Planning
Credit Shelter Trust
Estate Planning
Charitable Trust
Estate Planning
Life Insurance Trust
I will create an irrevocable trust, naming my
husband as the beneficiary. Then I will transfer my
life insurance policies into the trust and the
beneficiary becomes owner of the policy.
I will no longer have any control over the insurance
policies, but through the terms of the trust I can
determine who will have control, how premiums will
be paid, who will benefit from the trust, and how
payments should be made.
Three important requirements:
* The trust must be irrevocable
* I cannot be the trustee of the trust
* The trust must exist for at least three years before
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death
Analysis
The payout from my charitable trust can be used as a tax
deduction on my income and estate after death.
Using a Credit Shelter Trust for my properties will
significantly reduce taxes. Once my surviving spouse
passes away, the properties will be passed on to our
children without penalties.
My investments (stocks, bonds) will be passed on to my
spouse using a Transfer on Death form. At which point he
may make investment decisions and/or place in a trust for
our children after his own death.
The goal of the Life Insurance Trust is to avoid federal
taxation. If a life insurance policy is owned by a grantor,
the death benefits are included in the grantor's estate for
federal estate taxes- because the grantor has the power
to designate beneficiaries to receive the death benefits.
This is why this must be an irrevocable living trust.
39
$25 Million
Inheritance
Contact a wealth planner & obtain a
lawyer
Invest $6 Million in new Company
The Fitness Equipment Store, LLC
45
46
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New Partner?
Paul Short, owner of Gym Source headquartered
in New Jersey expressed interest in partnering with
The Fitness Equipment, LLC
Details of Partnership
Gym Source is an accredited company
Mr. Short is respected in the industry and
previously worked with my husband Steven
Reasons for partnership
Expansions Potential
Competition
48
Basis
FMV
8
8
Million Million
2
Estate Planning
Shawn & Lakeya
2 Children Shawn Jr. & Lisa
10 years after Business start-up
Business appraised
Turn appraised amount into shares/units
Each year the children will receive 25,000
units valued at $200 share
Unit distribution will save us 50% on gift taxes
50
Conclusion
Contact wealth advisor after I receive my
inheritance
All companies set up as a LLC
Units distributed to children will give them
ownership in the family business
My husband, Shawn will receive
everything at the time of my death
Establish trust and make sure my entire
family is educated on estate planning
54
References
IRC 701 Partners, not partnership,
subject to tax
IRC 721 Nonrecognition of gain or loss
on contribution
IRC 751 Unrealized receivables and
inventory items
IRC 704 Partners distributive share
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