The owner of a real estate business came to Lagerquist Accounting & Advisory with books that were almost a year behind and with no ability to track or evaluate profits. In response to the client’s situation, Sylvia Lagerquist, CPA focused on addressing three immediate priorities: accounting systems and tracking; tax consulting; and employee benefits and legal consulting.
Accounting Systems and Tracking
The accounting and bookkeeping for the business as a whole needed immediate attention. In addition, there were two entities involved. The first was a brokerage that managed foreclosed properties by paying the expenses and seeking reimbursement. For this entity, Lagerquist Accounting & Advisory created a simple system in QuickBooks to determine how much was owed to the client for each property.
The second entity handled “flips” and rentals, renovating approximately six properties per month and managing over a dozen rental properties. For this entity, Lagerquist Accounting & Advisory worked quickly and diligently to update the accounting records and develop reports which could:
- Track sales and the cost of sales for the flips
- Track revenue and expenses by rental property
- Track all debt on all properties
- Track earnest money deposits for each property
Then, looking at the overall profitability and tax situation, Sylvia Lagerquist, CPA recommended an “S” election for one of the Single Member LLCs. This resulted in a potential savings of over $10,000 per year in the self-employment tax for that entity. In addition, the firm suggested that the S Corporation own all of the LLCs, enabling all activity in all entities to be included on one tax return. This saved the owner from having to file multiple Schedule Cs and Es on his personal return.
Lastly, Lagerquist Accounting & Advisory advised that the S Corporation serves as the management company for all activities for all entities. This minimized the number of checkbooks that needed to be maintained, resulting in a centralized and streamlined accounting function.
Employee Benefits & Legal Consulting
Recognizing that the company needed some additional expertise, Sylvia Lagerquist, CPA recommended payroll and employee benefits companies to handle payroll for employees, who were previously treated as independent contractors, and for the owner, who was previously treated as self-employed. This also enabled the company to offer health insurance and a 401(k) plan to the employees and owner. Lagerquist Accounting & Advisory also suggested an attorney to handle the legal aspects of asset protection in relation to the current LLCs and those to be created in the future and recommended that the attorney draft a management agreement between the LLCs and the S Corporation.
The client was extremely pleased with the value of having an experienced Outsourced CFO, who focused on the bigger picture financial strategy to save money and time while improving reporting and overall profitability.