DEC 26, 2014
    Your New Years’ Resolutions are great advice.  A little planning now saves a lot of heartache down the road.  I have three comments though:
    Regarding the form of entity… If you are any type entity other than an S Corporation ask your accountant why.  Ask him or her if they understand the value of your RMR.  If you get a blank stare run to someone who understands.  C Corporations with intangible assets (RMR) are taxed twice when they sell, and both tax rates are generally higher than the rates that the owners of a S Corporation pay one time.   The typical alarm company owner with 800 accounts would expect to pay around $160,000 to $200,000 in taxes on a sale of RMR in an S Corporation.  The total tax on the same sale from a C Corp would be $500,000 to $600,000.  Even if you are so well off that you don’t need the money, why not pay less tax and donate the difference to charity. 
    I have hung around lawyers for over 30 years and I have picked up some legal “knowledge,” but I know what I don’t know.  The best legal advice that I can give to someone is Ken's phone number.  When it comes to accrual vs. cash accounting, they should talk to me.  Accrual method may be a better option for taxes, it depends upon the individual circumstances.  It most certainly gives an owner a better feel for the performance of the company.  It is possible to use accrual accounting for internal purposes and still file and pay taxes using cash accounting.   While it is true that most small businesses are better off using cash accounting for taxes, many can actually pay less tax by the accrual basis for tax purposes.  Unfortunately accountants that do not understand the industry do not know the benefits for a security company.  Just as alarm company owners should not be using their brother in law that does traffic tickets for their legal work, they should be talking to us about their accounting and taxes.
    Ken's advice about not selling accounts is dead on.    For some companies, selling RMR is their only option, but others may be able to finance their new installs and don’t realize it.  There are some funding sources for the industry that loan against new and existing RMR.  They are listed in The Alarm Exchange.  In addition we have established relationships with several regional and national banks that understand RMR and are willing to loan against it.  The interest rates are very reasonable (think mid single digits), but they do require monthly or quarterly financial information.  We can help with this. 
    Ken, thank you for all that you do for our industry and for all of the great information that you put out.  Happy New Year to you and yours. 
Mitch Reitman
Reitman Consulting Group, Inc.
Fort Worth, TX 76133
    First let me thank everyone who takes the time to read and respond to the daily emails.  The daily emails have been around over 10 years, and that's a long time to be sending out a new email every day, 365 days a year.  I appreciate everyone's participation, and those of you who think others get too much "press or space", well it's because they email me their comments, something all of you are encouraged to do.  
    As most of you know, the emails' content covers, legal issues, accounting issues, business management issues, alarm industry questions and answers, recommendations, personal comments and sometimes just letting off some steam.  
    I'd like to especially thank Mitch for his contributions to the forum.  His accounting expertise is one of the better reasons for reading this forum daily.  You never know when really valuable information and advice will be offered.  For those of you who are wondering why you're still dealing with your present accountant, or actively looking for another one, or your first one if you're just getting started in business [or have decided to stop taking chances waiting for IRS to knock on your door]  I suggest you look no further then Mitch Reitman.  He's a highly skilled accountant who represents alarm companies all over the country.  He knows issues faced by alarm companies and how to handle those issues.  He's probably not working today, but I know he's not a drinker or I suspect a wild party guy, so he'll be hard at work tomorrow, Jan 2.  Pick up the phone and talk to him about your accounting needs.  I am confident that you can't be in better hands and I am sure you'll be surprised how reasonable his accounting fees are.  
    I wish everyone, your family and staff, a happy, healthy prosperous new year