What is the value of integrated consulting, legal, tax, and accounting services? Just before the millennium, a group of prominent professional service companies was known as “The Big Eight.” The Big Eight included Arthur Anderson, Arthur Young (now known as simply AY), Coopers & Lybrand, Deloitte Haskins and Sells (now simply Deloitte), Ernst & Whinney, Peat Marwick Mitchell (now KPMG), Price Waterhouse and Touche Ross. Price Waterhouse and Coppers & Lybrand merged in the late 80s to become PwC.
The remaining “Big Four” provide integrated services to large public and private companies. Most American businesses and international companies with U.S. interests simply can’t afford the overhead of the Big Four. However, the Big Four’s intrinsic value is based on their ability to get the right answer to complex business questions.
Where There’s Smoke, There’s Fire
Generally speaking, many business challenges actually disguise a larger problem underneath. The old saying “Where there’s smoke, there’s fire” definitely applies. After several decades of service, we can tell you business managers and professionals are very competent at recognizing the “smoke” – the obvious and immediate relatively surface-level issue. Business executives and managers often approach our firm with one problem, without realizing it is actually the tip of a much larger issue – the fire.
The second challenge is that these genuine business challenges often span multiple professional disciplines. Consider the example of a U.S. company that plans to expand into the European Union. “We simply need a new EU corporate entity to attack that market.” Business entity formation – on the surface, you need a business lawyer.
However, an international business will also face multiple challenges with accounting and taxation. If there are operations and sales in a foreign country, there will be substantial additional tax issues to consider. How will transactions be conducted between and through the associated entities? How will capital flow throughout the corporate structures? Even if one were to recognize the potential tax issues of multiple jurisdictions, very few professionals would understand the accounting strategies necessary to properly structure the transactions and capture the types of information required to maximize retained earnings while reducing U.S. and international tax exposures.
In this example, a business attorney, a tax attorney, a CPA and a business consultant (or teams of them) would sit down to hash out the best solution. The attorney must focus on simply the legal aspects. However, the choices one makes in entity selection and the structure of the “constellation of entities” will substantially impact taxation, both at home in the U.S. and abroad. The tax attorney and CPA are focused on their pieces of the puzzle, and you wind up with three completely separate (and often conflicting) perspectives and recommendations. The client is left to try to discern how to move forward.
The real solution is a unique, customized blend of disciplines that solves the immediate and underlying challenges while positioning the company to pursue its goals and objectives. One must give consideration to complex implementation issues across multiple business units, internal accounting and management systems.
The Benefit of Integrated Consulting, Legal, Tax and Accounting
This is the benefit of integrated consulting, legal, tax, and accounting services. Today’s business environment is constantly changing and increasingly competitive, and margins are often much tighter. You need the right answer(s) to the challenges you will face. You need a proven integrated approach that can help discern ” smoke ” issues from actual “fires” and develop a strategy that accomplishes your business objectives as well as a comprehensive plan that ensures it can be implemented and ultimately measured.
The solution is often a blend of legal, tax, accounting, and business advisory services to resolve existing challenges or prepare to engage new opportunities. The structure of your entity or entities must support the types of business you are conducting or intend to pursue. Accounting systems are, in our experience, undervalued and misused. Accounting isn’t just the capture of financial information for financial statements and taxes. Your accounting systems should provide insight into performance at every level of the organization and the data to make the immediate business decisions necessary to compete and succeed. Accounting systems and processes should also feed internal and external financial reports and tax returns.
Finally, an integrated approach is central to the discipline of transactional planning. Transactional planning is the discipline of structuring how you organize and conduct your business to maximize retained earnings and reduce associated taxation. Transactional planning should balance how, when, and where gains (and losses) are realized in order to accomplish these important goals.
Where in the EU (in our example) should gains be realized to minimize the impact of taxation? Will earnings remain offshore, or will they need to be repatriated? How will the structure of your entities allow you to shift the timing of income and expenses from one tax year to another as needed? How can your accounting system provide up-to-date, on-demand crucial business information to help you measure progress toward your business goals while informing day-to-day business decisions?
This is an essential business challenge in today’s fast-paced and competitive environment. Your ability to find a partner with extensive experience and expertise and integrated consulting, legal, tax, and accounting services issues to meet your goals and objectives, maximize retained earnings, and reduce taxation will determine the level of success you achieve.
We invite you to learn more about the integrated tax, legal, accounting and business consulting services of Allen Barron and contact us or call today to schedule a free consultation at 866-631-3470.