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Accounting

Getting your PPP Loan Forgiven: Key Things Borrowers Should Consider

Paycheck Protection Program (PPP) loans have allowed small businesses across the United States to maintain their workforces during the economic downturn caused by the COVID-19 pandemic. PPP loans are forgivable if borrowers meet certain conditions, like spending a certain proportion of loan proceeds on payroll costs and retaining employees.

Choosing Between an Asset Sale or Stock Sale for your Business? Consider a 338 (h) (10) Election.

When negotiating the sale of a corporation, buyers and sellers can choose to structure the transaction as a stock sale or as an asset sale. Sellers and buyers have conflicting interests because these transactions are taxed differently. Stock sales are better for sellers because they get preferential capital gain tax treatment. However, buyers prefer asset purchases since they can reduce the amount buyers owe on taxes by claiming accelerated depreciation/amortization expense. Luckily, a 338 (h) (10) election is beneficial to both parties and can serve as a compromise.

Franchisors to Adopt New Accounting Standards for Recognizing Revenue

Under recent guidance from the Financial Accounting Standards Board (FASB), franchisors can only recognize revenue from initial franchise fees in their financial statements after they perform services that are distinct from the franchise agreement. Otherwise, they must recognize the revenue over the term of the agreement. This change can have a significant effect on franchisors’ financial statements, particularly those that are in the start-up or growth phases.

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