Equity vs. Debt Financing: What to Consider

Equity vs. Debt Financing: What to Consider

Whether you’re crafting an initial business plan, expanding into new markets, or focused on meeting this week’s payroll, solid funding decisions can keep your company on the right trajectory.

In addition to cash generated by operations, small businesses often get infusions of cash from two primary sources: equity and debt. Which type of financing makes the most sense for your business? Take a look at the possible pros and cons of each:

Equity Financing
  • No interest. Unlike a loan, the company isn’t paying for the use of money.
  • No immediate repayment. You’re not required to pay investors until the business generates a profit.
  • Expertise and connections. With investors who possess experience and contacts in your industry, you can gain assistance with operational decisions, strategic planning and networking.
  • Lost independence. If your uncle contributes hard cash, he may want a significant role in decision-making —whether or not he understands the business.
  • Longer funding cycle. Pitching your venture to friends and family or sharing the business plan on crowdfunding sites may not generate cash quickly enough to meet your needs.
  • Complicated relationships. No matter how specific your explanations, contributors may be dismayed if they fail to get expected rewards.
Debt Financing
  • Many available sources. Your business can borrow funds from banks, suppliers, friends and from strangers through crowdfunding sites.
  • Many debt structures. You can borrow a lump sum or create a line of credit. You can vary the repayment terms and structure the interest rate as fixed or variable. If you are willing to do the math, you can determine the best structure for your needs.
  • No dilution of ownership. Unlike equity, you are not giving up your ownership to bring in funds for your business.
  • Interest charged. You pay for the privilege of getting the money. And it is not just interest, there are often fees involved. This is especially true when using programs like SBA (Small Business Association) loans.
  • Sometimes hard to qualify. Lending officers will scrutinize your credit score and financials before agreeing to loan money, especially for a startup business. Even worse, qualifications don’t end after you receive the money. You must often meet ongoing loan covenants or the lender may call the note or require collateral.
  • Security required. Banks will want personal guarantees and security when they lend money. This can make it more difficult for you to make other business decisions.
Questions to ask when considering finance options

When determining which available financing options are the most suitable for your business, consider asking yourself these questions:

  • How much money does the company really need? Cash flow must support loan payments. Run detailed projections to determine whether you’ll really need that funding for additional equipment.
  • Can the business qualify for a loan or line of credit with reasonable terms? Some lenders may gladly offer funding, but if the interest rate is exorbitant or the terms are otherwise onerous, beware.
  • Am I willing to relinquish a measure of control? Some investors make great business partners. Others may want or expect certain levels of control. Figure out how much control you’re willing to share.

While your financing choice will ultimately depend on what’s available to your business, understanding the nuisances of both debt and equity financing will help guide you in making a more informed decision.


Equity vs. Debt Financing to keep your company on the right trajectory


As always, we hope you find our tips and news for businesses valuable, and look forward to receiving your feedback. Companies focused on growth have sought the help of Insero & Co. for more than 40 years. During that time they have consistently experienced the peace of mind that comes from knowing their CPA firm takes the concept of integrity seriously. Should you have any questions, please contact us directly.

Questions to Ask BEFORE an Economic Downturn

Questions to Ask BEFORE an Economic Downturn

America is either on the verge of a recession or intense growth. Will the stock market tank or skyrocket? Trade agreements, the Federal Reserve, election results, oil prices — these factors (and many others) will be blamed or praised depending on tomorrow’s headlines.

One thing’s for sure: even if the worst-case scenario plays out, most small businesses will adapt to survive and thrive. Others will become statistics.

Before a downturn strikes, prepare your business with a well-thought-out strategy for weathering hard times. Focus on these crucial questions when determining how your business will fare:

  • Will cash keep flowing into the business? Cash outflows won’t be a problem. You’ll always have expenses, but the company may need to shore up collection efforts, sell unused equipment, or renegotiate loan agreements in advance of a market downturn. The tougher the economic environment, the more crucial cash flow becomes. Start now by gaining a clear understanding of your monthly burn rate and cash position.
  • Will inventory be sufficient to meet demand? Consider how to reduce inventory costs without damaging your company’s reputation or customer focus. You might implement more detailed inventory tracking systems, reduce storage costs and obsolescence by using just-in-time methods, or develop a plan to offer discounts on slow-moving items. Don’t wait until a call from your suppliers forces the issue.
  • Will existing customers remain loyal? It may be far more expensive to acquire new customers than to retain clients already patronizing your business. If the economy spirals downward, your client base may be slammed. Loyal customers may face layoffs and foreclosures. Plan for that contingency. Get ready to pamper them. Offer discounts, gift cards, loyalty rewards — whatever is needed to keep them coming back.
  • Will you cut costs? Many small businesses, when faced with declining market demand, slash expenses indiscriminately. Big mistake. Although prudent cost-cutting may be warranted, your actions should fit into a well-designed plan. If management panics and lays off workers, cuts inventory and scraps marketing efforts without due consideration, unintended consequences may result. Customers may turn to competitors if they can’t get adequate service or products to meet their needs. In a downturn, plan to stay visible. Create a customer newsletter, maintain an active website, attend chamber of commerce meetings, and continue to network on social media. Redouble efforts to promote your company and its products.
  • Will the company have sufficient reserves to exploit new opportunities? Tough economic times don’t affect businesses uniformly. In fact, at such times skilled workers may be searching for employment. When competitors close their doors, new markets may materialize. When your company is growing and doing well, that’s the time to set aside cash reserves. You’ll be ready to take advantage of favorable conditions as they emerge.

No matter when an economic downturn hits, it’s crucial to think about how your business will handle hard times. Create or update your plan now to protect your company in the future.


Questions to Ask BEFORE an Economic Downturn


As always, we hope you find our tips and news for businesses valuable, and look forward to receiving your feedback. Companies focused on growth have sought the help of Insero & Co. for more than 40 years. During that time they have consistently experienced the peace of mind that comes from knowing their CPA firm takes the concept of integrity seriously. Should you have any questions, please contact us directly.

Tax Update: December 2019


Top 5 reporting and withholding actions to take before year-end
There are five key actions to take now to prepare to file information returns in January to ensure compliance with FATCA. From reviewing your structure to evaluating your 1099 and 1042 processes, conducting a self-assessment to identify and remediate gaps in your processes for complying with reporting and withholding requirements before year-end ensures that you file accurate and complete returns and do not under or over withhold taxes next year.

Regulations on acquired corporate life insurance policies
Favorable rule for corporate stock acquisitions where life insurance contracts are less than 50 percent of the target corporation’s assets. This exception applies upon the acquisition of any interest in a C corporation. It thus applies to an interest acquired via a tax-free reorganization structured as a stock acquisition. It does not, however, apply to an acquisition made via a tax-free reorganization structured as an asset acquisition.


op 5 reporting and withholding actions to take before year-end


Source: RSM US LLP
Used with permission as a member of the RSM US Alliance


At Insero, we make it our business to stay abreast of the latest trends and technical updates in accounting, tax, and audit; and we understand how important timely updates are to our clients. As a member of the RSM US Alliance, we also have the benefit of access to the resources and subject matter experts of RSM US LLP (formerly known as McGladrey LLP). This includes regular updates on the latest federal, state, and international tax news as well as updates pertaining to the Tax Cuts and Jobs Act. We hope that you find these informative and useful, and invite you to reach out to us if you have any questions.

Insero is separated from other CPA firms by our client service model which offers you year-round interaction and proactive advice from your client service partner. Yes, we’re sticklers about deadlines and compliance, but among our larger objectives is to help clients with tax management. So we keep an eye on federal, state, local, and international tax laws, including those which are pending and alert you to changes and help you respond in a timely way.

Streamline Your Expense Reporting

Solve the Top Challenges of Expense Reporting

Expense reporting is a vital process to ensure that you’re maximizing revenue and accurately tracking expenses on every project. It’s also a process that employees tend to dread—which means there’s a real opportunity to make improvements that will benefit your organization for years to come.


Challenges of clunky processes

Many businesses and nonprofits rely on outdated, inefficient, and overly complicated expense reporting processes, which leads to frustration for employees. These are among the signs that your process is behind the times:

  • Your travel and expense policy is complicated, requires a lot of employee time, and has resulted in multiple errors and inaccurate reports over the years.
  • Employees express confusion about expense reporting, asking a lot of questions that, over the course of the year, take hours of time to answer.
  • Reimbursements take a long time and are not provided on a regular schedule that employees can rely on.
  • Employees can’t submit expense information using their smartphones or other mobile devices.


Tips to improve expense reporting

If your expense reporting processes are out of date, the good news is that you can make significant improvements with a relatively small investment of resources. To begin with, audit your overall process to evaluate its accuracy, timeliness, and efficiency. Find out how many hours employees are spending on the processes—the answer might surprise you.


As part of your audit, be sure to talk you’re your employees about what they like and don’t like about current policies and practices. By involving them in the review process, you can get more buy-in on the changes you eventually make.


If you find real problems with your current processes, consider investing in automated expense reporting software. For instance, if you use Sage Intacct, a cloud-based accounting software solution, you can easily integrate third-party add-ons like Expensify, which provides real-time expense reporting—you set the policy, and Expensify automates the process, including syncing all data to provide next-day ACH reimbursement.


By taking a close look at your current processes and then streamlining them with new software or other solutions, you can maximize revenue and make sure your employees stay focused on business goals instead of spending hours on expenses, accounting, and reporting.


Make the right decision for your organization

Insero & Co. is a public accounting firm with decades of experience working with both nonprofits and businesses. Our experts are available to help you streamline your processes, including providing audit assistance and business consulting.



Streamline Your Expense Reporting

Insero Promotes Five to Principal

Insero is pleased to announce the recent promotion of Jennifer Allen, Marcus Cortellini, Lindsay D’Agostino, Anthony Mangiameli, and Lisa Marou to Principal of the firm.

Please join us in congratulating them on their accomplishment, and scroll to learn more about each of these rising leaders:


Jennifer Allen, CPA is a Principal in the Audit Department and has been with Insero & Co. since 2005. She leads the planning and execution of financial statement and compliance audits. Jennifer has experience in a wide range of industries including real estate, manufacturing, and service as well as governmental entities and higher education institutions. In addition, she consults with clients concerning budgets, operations, compliance, and other management issues.

Jennifer has extensive experience auditing employee benefit plans with an in-depth understanding of benefit plan issues and ERISA. She is an integral member of the firm’s benefit plan practice which is in the top 1% based on plan assets audited in the United States.

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Marcus Cortellini, CPA is a Principal in the Tax Department and has been helping Insero & Co.’s clients attain their business goals since 2006. He is responsible for planning, performing, and supervising reviews and compilations along with completing the filing for recurring compliance for federal and state tax requirements. He also assists clients with banking and financing issues. He has built on his experiences working with companies of varying sizes and industries throughout his career to offer insight and management advice on a variety of issues and situations.

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Lindsay D’Agostino, CPA is a Principal in the Tax Department and has been with Insero & Co. since 2002. Her primary focus is on the real estate industry. Lindsay is responsible for planning, performing, and supervising reviews and compilations along with completing the filing for all recurring compliance for federal and state tax requirements for a number of real estate management companies. She has built her experience working on companies of varying sizes and industries to offer insight and management advice on a variety of issues and situations.

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Anthony Mangiameli, CPA is a Principal in the Audit and Business Advisory Services Group and has been with Insero & Co. since 2006. He leads the planning and execution of financial statement and compliance audits (commercial and employee benefit plans), reviews, compilations and agreed upon procedures. In addition, he consults and advises with clients concerning budgets, operations, compliance, and other various management issues.

Anthony has experience in a wide range of industries including real estate, employee benefit plans, manufacturing, and service.

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Lisa Marou, CPA is a Principal in Insero & Co.’s Tax Department and has been in public accounting since 2006. She specializes in preparing and reviewing returns for privately-held businesses of all sizes. Her expertise includes domestic, international, and state and local taxes. Her industry experience covers retail, manufacturing, distribution, construction, the service industry, and nonprofit entities. Lisa also prepares tax provisions and analyzes the tax consequences of sale transactions.

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The 1,099 Hassles of 1099s

The 1,099 Hassles of 1099s

Preparing and filing 1099s is one of those IRS requirements that can really annoy accounting teams, requiring far more hours and effort than they can afford to give to such a mundane task. While there probably aren’t quite 1,099 hassles to 1099 preparation, it certainly can feel like it when you’re scrambling to get them all prepared and filed on time.


The many challenges associated with 1099s include:

  • Identifying contractors

    If your business or nonprofit hires independent contractors, freelancers, or vendors, and you pay them more than $600 in business-related payments, then you need to prepare and file IRS Form 1099-MISCs for them. That may sound simple enough, but there are lots of caveats, including that 1099s are only needed for provision of services, not goods, and are only for business services, not personal ones. Then, too, if the contractor provides materials as well as services, you have to separate the two.


  • Collecting W-9s

    You need to collect Form W-9, Request for Taxpayer Identification Number (TIN) and Certification, from all of your qualifying providers. It makes a lot of sense to get this upfront, but for various reasons that’s not always possible. Even if you have a good process in place to request the W-9 in a timely manner, some contractors are slow to provide it or don’t fill it out correctly, leading to last-minute requests and corrections.


  • Avoiding errors

    Contractors need to update their W-9s every year; if you rely on last year’s, the information may be out of date. As mentioned, even when you receive an up-to-date W-9, the contractor might make mistakes, so you have to ensure that the official name and the taxpayer information number (TIN) listed on the W-9 are correct. If you have to make corrections after filing, the IRS imposes penalties that get more painful the longer it takes for you to recognize the error.


  • Meeting deadlines

    The end of the calendar year is an especially busy time, and unfortunately it happens to be the exact time when 1099 demands hit. Organizations have to send 1099s to recipients by January 31 of the year following provision of services, and a copy also has to go to the IRS by February 28. Just to make things a little harder, individual states may have additional requirements and different deadlines for reporting and filing 1099s.


Reduce your 1099 struggles

Because preparing and filing 1099s is such a tedious process, many organizations are choosing to outsource the function. If you want to discuss 1099 filing requirements or explore the possibility of outsourcing the function, contact Insero & Co., a public accounting firm with decades of experience working with both nonprofits and businesses. Together, we can explore ways to streamline your accounting functions, so your employees can spend more time on business-critical tasks.



The 1,099 Hassles of 1099s

Employee Benefits Update Year End 2019

This issue’s topics include:

RMDs and “lost” participants

Steps to comply with your fiduciary duty

Losing contact with former participants who have vested benefits remaining in your plan can be problematic for both the former participants and the plan sponsor. The issue becomes more urgent when it’s time for them to begin receiving their required minimum distributions (RMDs) the year after they hit 70½. This article takes a look at why it’s a problem and what plan sponsors can do about it.

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How plan eligibility can help achieve recruitment goals

In a tight labor market, employees may feel more confident about finding another job if they’re unhappy with the one they have. For plan sponsors, 401(k) plan participation eligibility requirements take on greater significance in this market. In general, employers can require a new hire to wait a year before being eligible to participate in a qualified retirement plan, in addition to requiring that the employee be 21 years old. This article discusses the pros and cons of giving new employees the opportunity to enroll in the plan immediately.

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Plan advisor fiduciary category status: It’s more than numbers

Like so many other facets of retirement plan management, the role of plan advisors who help you with plan investments is governed by ERISA. And it may seem that many plan sponsors speak in ERISA code sections. For plan sponsors, the question is: Do you need a 3(38) fiduciary, or is a 3(21)ii fiduciary more fitting? This article reviews the duties of each and why a plan sponsor may choose one or the other.

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Should your 401(k) vest now or later?

Survey data from the Plan Sponsor Council of America (PSCA) indicates that roughly 40% of 401(k) plan sponsors provide immediate vesting on their matching contributions. In theory, employers that offer immediate vesting on matching 401(k) contributions might have a leg up on other companies when recruiting workers in a tight labor market. This article discusses why immediate vesting is an important aspect of your recruiting strategy.

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Compliance alert

This feature lists a few key year-end tax reporting deadlines for December and January.

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notebook reading employee benefits to discuss plan eligibility and recruitment goals

As always, we hope you enjoy this edition of our newsletter and we look forward to receiving your feedback. Should you have any questions regarding the information contained in the attached materials or our Employee Benefit Plan Services, please feel free to contact me directly.

Want to learn more?

Join our Employee Benefit Plan Resources group on LinkedIn for more frequent updates on recent developments and best practices and discuss related topics with your peers.

Join the Group

LinkedIn button to join Insero's Employee Benefit Plan Resources Group on LinkedIn

Dissolving Your Business? 6 Steps That’ll Help

Dissolving Your Business? 6 Steps That’ll Help

Closing a business is often a difficult and complicated choice to make. Usually, the decision to close has little to do with the financial performance and more to do with a change in ownership or the death or injury of a key owner. Regardless of the reason, it’s helpful to follow a systematic dissolution strategy whenever possible. Here are some steps to include as you prepare your plan:

  • Get expert advice. Dissolving a business can be a stressful and fragile process. The best place to start is by creating a buy-sell agreement long before you get to the end. By agreeing beforehand, many future problems can be avoided. If your business does not have a written agreement, get help from competent professionals (including attorneys, bankers, and others) to iron out the details.
  • Vote to dissolve the business. A sole proprietor may only need to consult with a spouse or trusted advisor. With a partnership, corporation or limited liability company, more than one business associate must agree to the dissolution. Organizational documents or a state’s business statutes often mandate the level of agreement required (a simple majority or two-thirds majority, for example), so you’ll want to consult applicable rules.
  • Fill out dissolution paperwork. Let your state and local governments know that the company is ceasing operations. The forms you need should be posted on your secretary of state’s website. Especially when a partnership or corporation is dissolved, formal filings should prevent future confusion about ownership and liabilities.
  • Cancel licenses, permits, and insurance policies. Most businesses are required to obtain city, county and/or state licenses to operate. The appropriate agencies must be notified of the dissolution. Insurance brokers should also be told to cancel business liability, health care and other company policies.
  • File a final tax return. Even if the business only operates for a portion of the year, you’ll need to notify the IRS that the company’s annual tax return is its last one.
  • Notify interested parties. You’ll need to inform lenders, suppliers, service providers and customers. Lenders will be eager to find out how you plan to repay loans. Suppliers will want to know when to make final deliveries. Utility companies will need to know when to turn out the lights and shut off the water. Customers should also be given plenty of notice about final orders and ongoing projects.

These important steps will help effectively move along your shutdown process. If you have questions about preparing your business, contact us today.

As always, should you have any questions or concerns regarding your tax situation please feel free to contact us.


man with laptop frustrated over dissolving a business


As always, we hope you find our tips and news for businesses valuable, and look forward to receiving your feedback. Companies focused on growth have sought the help of Insero & Co. for more than 40 years. During that time they have consistently experienced the peace of mind that comes from knowing their CPA firm takes the concept of integrity seriously. Should you have any questions, please contact us directly.

Take the Pain Out of Year-End Closes

Take the Pain Out of Year-End Close

For many organizations, the only thing worse than the month-end close is the dreaded year-end close.


Especially if you rely on manual, paper-based processes, the year-end close can require weeks of tedious effort, with a long list of iterative steps, including:

  • Collecting financial results from multiple systems and divisions
  • Consolidating all the financial results according to IFRS or other guidelines
  • Reviewing results for completeness and accuracy
  • Making corrections and reclassifying revenue and expenses wherever needed
  • Reconciling hundreds of accounts (or more)
  • Producing clear, understandable financial statements


And that’s just for starters. If you uncover unwelcome surprises along the way, the last month of the year becomes even more stressful.


Less Agony, Better Results

There is a better—much better—way to manage your year-end close. Cloud-based ERP solutions like Sage Intacct, make it possible to streamline, automate, and accelerate closes with very little hassle.


One way Sage Intacct streamlines month-end and year-end closings is by offering a virtual close, which means you don’t have to move income and losses for a given period into retained earnings. Instead, those earnings are handled automatically, based on how your chart of accounts is configured. It’s features like that which make it possible for Sage Intacct to claim its customers can reduce time to close by as much as 79%!


Sage Intacct also provides real-time visibility into data from across your organization, which makes it much easier to spot errors when they happen—as opposed to months later. All the relevant data you need, including journals, books, and transactional data, is available at your fingertips, and accessible 24/7 from mobile devices.


The combination of automated processes, deep data analysis, real-time visibility with intuitive dashboards, and consolidated reporting—to name just a few key features—makes transitioning from manual ERP solutions to Sage Intacct worth considering, especially before your next year-end close.


Make the right decision for your organization

Insero & Co. is a public accounting firm with decades of experience working with both nonprofits and businesses. Our experts are available to assist you with your month-end and year-end closes, and with other ways you might be able to streamline your accounting processes.


Take the Pain Out of Year-End Closes