Volume 2 | Issue 7

July 2010

Dear Mark,

I hope the summer has started on the right foot for you. It is time to navigate through the economic hogwash and prepare your business to finish the year strong! As some economist predict a strong rebound, others forecast we have only begun to de-lever our banking system. We were all slapped in the face to find out GDP (Gross Domestic Product) was revised down from 3.2% to 2.7%. This is a significant 15.6% reduction in GDP. The reduction was primarily due to consumer spending which provides the largest portion to our GDP. The 1st quarter 2010 GDP downward revision followed the 4th quarter 2009 GDP being revised downward as well. Is the information being manipulated to try to make you feel good and spend only to later find out that the economy isn't as rosy as previously reported? Would you have spent the money if the data was more accurate the first time?

Our warnings since February have been correct: close business immediately before others realize the economy is not as good as they believe it is. Additionally, a year ago (June 2009) we issued an update sharing our concern of a double-dip recession for small business and how to prepare for it. We believe a double-dip for small businesses is still likely and our motto throughout the summer will continue to be to close business as soon as possible.

Sincerely,

Mark Wyssbrod, CPA

Metro-Atlanta Real Estate Update
Has Real Estate Finally Stabilized in Metro-Atlanta?

The Georgia Society of CPAs has its annual Real Estate Conference on June 17th. Several economists and professionals including Rodger Tutterow (Professor of Economics at Mercer University), John Hunt (SmartNumbers), Christoper Marinac (Research Analyst at FIG Partners) and Tad Leithead (Chairman of the Atlanta Regional Commission) shared information and opinions regarding Metro-Atlanta's real estate climate.

Has real estate finally stabilized in Metro-Atlanta? We will discuss this in further detail below:

Supply meets Demand in 2012?

The number of home sales dropped 80% nationally and 94% in Metro-Atlanta
88% drop in single family home starts in Georgia
Population continues to growth in Metro-Atlanta
Price still above historic levels, but gap is narrowing
Conclusion: Inventory collapsed and demand is increasing
Potential Outcome: Housing shortage in 2012 is possible
Opportunity: Purchase real estate to hold for the long-term, now could be a good time to lock in a short-sale or foreclosure
Caution: Most good deals have a lot of "sweat equity" and major repairs which require time and\or capital

Lot Prices

Lot prices raised so fast over 2004-2006 that it priced out first time home buyers
The larger the lot, the larger the house
Lot prices have adjusted so you have lower lot prices with a smaller house
Smaller houses to be built with basics. No more granite counters and tile floors, welcome back vinyl!

Future of Real Estate

Atlanta exploded to out lying areas over the past 10 years which has lead to urban sprawl, infastucture expansion and commuting from surrounding counties.
Populations to move to "city centers" over the next 10 years causing population moving toward city and the infastucture to include more mass transit than road improvement and expansion.
Opportunities: In town (population center) lots and properties
Caution: Real estate is not expected to outpace inflation over the next 20 years
Caution: Stay away from commercial property and raw land outside of core population centers

Reality in real estate is not to rush in. Have patience and be financially conservative. Don't be afraid to look for a great opportunity! Interest in reading more? Read the entire article "Metro Atlanta Economic Update & What You Can Do About it!"

S-corporation Issues

Good Reminders to Keep You Safe

The Internal Revenue Service (IRS) had a Tax Forum in Atlanta from June 22nd to the 24th. The IRS is focusing on S-corporation and stated their intention is to begin tough enforcement of s-corporations including their legal documents.

Here are some major highlights:

S-corporations should not be paying personal expenses of the shareholder(s)
Fixed Assets which are being depreciated, including vehicles, must be titled in the s-corporation's name
Document all shareholder loans including loan amount, interest rate and payment schedule
Keep up with Basis Schedules
Governance: Keep annual corporate minutes. Not behaving like a corporation may void the s-election

Shareholder Distribution: The distributions must be approved by the Board of Directors

Officer Compensation
Be certain to pay a reasonable salary based on:

What role is the owner performing?
How is the corporation performing?
What are wages of other key employees?
What is the fair market value of the owners services (i.e. if you had to hire an outsider how much would you have to pay them

The IRS is promising future audits. Please contact us if you would like to learn more.

IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein

In This Issue

Different Forecasts For Different Small Business Climates

Reminder - 2nd Quarter Tax Payments Due

Financial Ratio of the Month - Quick Ratio

Financial Ratio of the Month - Quick Ratio

Gross Profit Margin indicates the percent of revenues which is paid out for direct costs. It is a measure of operational efficiency. It can be used in business planning because it indicates home many cents can be generated from each dollar of revenue.

Gross Profit Margin = (Revenues Less Direct Costs) / Revenues

A small improvement in the Gross Profit Margin can have dramatic improvement in the Net Profit. The higher the ratio the better!

Contact Information

11770 Haynes Bridge Road

Suite 205

PMB 362