• Expanding through contract manufacturing opens opportunities for your cannabis or hemp brand — but also brings complex financial and regulatory challenges.

• Stay ahead of tax risks by aligning your operations with both federal and state compliance rules.

• Strengthen your contracts and tracking systems to keep royalty payments accurate and transparent.

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Contract manufacturing arrangements can accelerate brand growth for cannabis and hemp companies, but they present complex tax, accounting, and compliance challenges. To protect financial integrity and valuation, companies must:

• Recognize and present revenue in a manner consistent with accounting standards and investor expectations. 

• Structure operations to preserve favorable tax status — especially for cannabis intellectual property (IP) entities avoiding Internal Revenue Code (IRC) §280E. 

• Monitor multi-jurisdictional tax nexus triggered by licensing activity. 

• Implement clear, enforceable, and regularly reconciled royalty calculation methods.

1. Revenue Recognition and Financial Presentation

Accounting Considerations

In contract manufacturing models, brand owners typically license IP to local manufacturers, who produce and distribute products under the brand name in exchange for royalty payments. Under U.S. generally accepted accounting principles (GAAP), this licensing arrangement should be accounted for as royalty income — distinct from product sales revenue recorded by manufacturers.

• Licensed operators: Recognize product sales with corresponding inventory and cost of goods sold (COGS).

• IP companies: Recognize only royalty income, without inventory or COGS.

For both cannabis and hemp operators, proper classification ensures financial statements reflect contractual entitlements — not hypothetical retail values — which can withstand both audit and investor due diligence.

Investor and Valuation Impact

Royalty-based models often report lower top-line revenue than direct sales, potentially influencing valuation multiples in capital raises. Your company can mitigate this perception by:

• Presenting retail market performance data as supplemental (non-GAAP) information.

• Demonstrating brand market share, pricing strength, and geographic expansion.

• Maintaining accounting integrity by ensuring GAAP statements reconcile with contractual royalty terms.

Sophisticated investors prioritize accuracy and contractual consistency over inflated revenue optics.

2. Tax Positioning and Regulatory Compliance

Cannabis: Preserving Non-280E Status

Cannabis IP holding companies that do not sell THC products directly and operate as an independent trade or business are generally not subject to IRC §280E and enjoy a significantly lower federal tax burden than state-licensed cannabis operators. However, maintaining this advantage depends on operational alignment between a company’s tax position and accounting presentation.

• Revenue must be recorded as royalty income, not product sales.

• General ledger (GL) accounts and financial statement categories must reflect licensing activity, not manufacturing operations.

Misalignment — such as recording product sales revenue while claiming 280E exemption — can trigger IRS scrutiny.

Hemp: Avoiding Misclassification

While hemp companies are generally outside §280E due to the 2018 Farm Bill, misclassification of revenue streams can still lead to incorrect tax filings, higher tax liabilities, or state compliance issues.

Proactive Compliance Measures

• Regular review of GL account descriptions and revenue categories.

• Documentation that ties reported revenue directly to licensing contracts.

• Periodic confirmation that financial presentation supports intended tax treatment.

For cannabis brands, this is critical to preserving 280E protection; for hemp, it safeguards proper business classification and tax outcomes.

3. State Tax Nexus and Multi-Jurisdictional Compliance

Income Tax Nexus

Licensing IP can create state income tax nexus without physical presence. States differ in sourcing rules — some focus on where products are consumed, others on where IP is exploited. Cannabis companies must navigate cannabis-specific rules layered over general sourcing provisions, while hemp companies contend with varied CBD/hemp regulations.

Sales Tax Considerations

Licensing arrangements may create sales tax obligations or require exemption certificate documentation. Hemp brands selling directly to consumers are typically subject to standard sales tax rules in each state.

Risk Mitigation

• Conduct nexus analysis regularly across all jurisdictions where products are sold.

• File returns in nexus states even if no tax is due.

• Document exemptions and monitor legislative changes.

Factor in marketing, contractor activity, and promotional events in nexus determinations.

4. Royalty Calculation and Documentation

Common Dispute Areas

Royalty disagreements often arise over:

• Gross versus net sales bases.

• Treatment of COGS, taxes, and regulatory fees.

• Allocation of shared costs (utilities, equipment, marketing).

• Returns, discounts, and promotional allowances.

Industry-Specific Nuances

• Cannabis: Must incorporate jurisdiction-specific excise taxes and licensing fees into formulas.

• Hemp: May face cost allocation issues related to compliance testing and certification.

Best Practices

• Include pro forma royalty calculations in contracts, tested with realistic production and pricing scenarios.

• Obtain written acknowledgment of the agreed methodology.

• Specify all potential chargebacks, shared costs, and allocation rules.

• Maintain separate royalty tracking systems.

• Perform periodic reconciliations between contractual formulas and actual payments to identify discrepancies early — an emerging industry best practice.

• Consider independent accounting reviews to validate partner-reported figures.

• If the manufacturer and the IP company are related parties, contracts should be reviewed in relation to tax transfer pricing rules that require arm’s length and market rate terms.

Position Your Brand for Contract Manufacturing Success

Contract manufacturing can offer compelling growth opportunities for your cannabis or hemp brand. The key to sustainable success lies in disciplined revenue presentation, strong tax positioning, proactive compliance, and robust royalty oversight.

By aligning accounting standards with tax objectives, maintaining transparent investor communications, and reconciling royalties regularly, your company can position itself to expand with confidence while minimizing regulatory and financial risk.

How MGO Can Help

We help cannabis companies across the U.S. to navigate complex accounting and tax challenges — including contract manufacturing arrangements. Whether you’re structuring royalty agreements, managing state tax compliance, or preparing for a potential audit, our dedicated Cannabis practice can help you grow smarter. Reach out to our team today to learn how we can support your goals.

The post 4 Critical Tax and Accounting Considerations for Cannabis and Hemp Contract Manufacturing Arrangements appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Accurate accounting helps startups attract investors, access credit, and make informed business decisions. 

• Implementing a scalable accounting system early supports growth and compliance. 

• Outsourcing accounting can save time, reduce risk, and provide strategic financial advice as your startup grows. 

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Starting a business is exciting, but it’s easy for accounting to fall to the bottom of the to-do list in the rush to develop products and build a customer base. 

Laying a strong financial foundation early on is crucial for long-term viability and growth. Whether your startup is bootstrapped or venture-backed, sound accounting practices help you track performance, attract investors, access credit, and comply with tax rules. 

Why Accounting for a Startup Company Is Necessary

Startups face a unique set of financial pressures. Many operate with limited resources while attempting to scale quickly. In these circumstances, accurate and timely financial reports are critical for making informed decisions, managing cash flow, and demonstrating fiscal responsibility to potential lenders or investors. 

Investors may require financial statements if you’re looking for venture capital or preparing for Series A and beyond. Investors want to see a clear picture of burn rate, runway, margins, and revenue growth. Banks and other lenders typically require financial statements to underwrite loans or lines of credit. 

Beyond external stakeholders, accounting helps internal teams understand what is working and what isn’t. It shows your true customer acquisition cost (CAC), identifies where you can improve margins, and helps uncover early signs of inefficiency and waste. 

How to Set Up Accounting for Your Startup

Follow these steps to establish a solid accounting foundation for your startup’s financial health:

Step 1: Choose an Accounting Method 

One of the first decisions you need to make is whether to use cash basis or accrual basis accounting. 

• Cash accounting records income when you receive cash and expenses when you pay them. This method is simple and often suitable for early-stage startups with minimal inventory or accounts receivable. However, it can give a misleading picture of profitability — especially if there are large timing differences between revenue and expenses. 

• Accrual accounting records income when you earn it and expenses when you incur them, regardless of when cash changes hands. This approach provides a more accurate view of financial performance, and investors generally prefer it. 

Many startups begin using cash basis accounting but switch to accrual accounting as they mature. Whichever method you choose, consistency supports comparability and compliance. 

Step 2: Open Business Bank Accounts 

One important yet often overlooked step in setting up an accounting system is opening separate business bank accounts and credit cards.  

Mixing business and personal transactions in the same account makes it tough to track income and expenses. Using a separate bank account simplifies bookkeeping and streamlines monthly reconciliations. 

Using a business bank account to pay vendors, receive payments, and manage cash flow conveys professionalism to clients, suppliers, and financial institutions. It also provides a clearer audit trail when getting audited financial statements for investors, lenders, and regulators. 

Similarly, a dedicated business credit card can help establish a credit history for your company, help you track expenses by category, and potentially earn rewards while keeping personal spending separate. 

Taking this step early lays the groundwork for organized and transparent financial management. 

Step 3: Use an Accounting System 

Implementing reliable accounting software early on helps you avoid costly errors and inefficiencies down the road. Your accounting software should support basic accounting tasks such as: 

• Recording financial transactions — including sales, purchases, payroll, etc. 

• Reconciling bank accounts 

• Paying bills 

• Managing accounts payable and receivable 

• Expense tracking by category or project 

• Generating financial reports — including a balance sheet, profit and loss (P&L) statement, and cash flow statement 

For most startups, cloud-based accounting software is the logical choice. Platforms such as QuickBooks Online, Xero, or Sage Intacct offer scalability, automation, and access for remote teams. They also integrate with other tools —, including payroll, customer relationship management (CRM) systems, inventory management, and e-commerce platforms. 

Also, consider who will be responsible for entering data, approving payments, and reviewing reconciliation and other financial reports. Even with automation, you need oversight to maintain accuracy and prevent fraud. 

Step 4: Plan for Tax Preparation 

Taxes are often an afterthought for startups, but early planning prevents surprises and supports smoother compliance. 

Here are a few areas to address early on: 

• Business structure: The choice between sole proprietorship, LLC, partnership, S corporation, or C corporation impacts how you pay taxes. It also affects eligibility for certain deductions and credits. 

• Sales tax nexus: Startups selling goods or services across state lines may have sales tax obligations in multiple jurisdictions. It’s crucial to understand where and when to collect and remit sales taxes. 

• Payroll taxes: Hiring employees triggers payroll tax filing and remittance requirements. Misclassifying employees as independent workers or missing deadlines can result in penalties. 

• Estimated taxes: You need to start making quarterly estimated tax payments as soon as the business starts generating profits. 

• Tax deductions and credits: Startups involved in product development may be eligible for incentives, such as the research and development (R&D) tax credit. This credit can offset federal and state income taxes and, in some cases, payroll tax liabilities. However, it’s important to document qualifying activities and costs to claim these benefits. 

Should Your Startups Outsource Accounting? 

While many business owners attempt to handle bookkeeping themselves in the early stages, outsourcing is a strategic decision that saves time and reduces risk. 

Outsourced accounting services range from recording transactions and preparing monthly reconciliations to controller or CFO-level oversight. For startups with limited staff, this approach provides access to financial guidance without the cost of building an in-house team. 

Outsourcing is especially valuable when: 

• Founders are unfamiliar with generally accepted accounting principles (GAAP) or financial reporting 

• The business has multiple revenue streams or international transactions 

• Investors or lenders require formal financial statements 

• Compliance and tax filing deadlines are approaching 

Before engaging an external accounting services provider, evaluate their process, technology stack, and service model. Look for a professional who is experienced with early-stage companies in your industry and one who can scale services as your needs evolve. 

How MGO Can Help 

Accounting is the foundation for making strategic decisions and building financial credibility. Startups that invest early in solid accounting practices are better equipped to manage growth, appeal to investors, and handle their tax obligations. 

MGO helps founders build a strong accounting foundation — from selecting an accounting method and accounting software to managing outsourced accounting functions and preparing for tax obligations. Our team understands the unique challenges startups face and provides practical, reliable support to help you reach your business goals. 

Reach out today to learn how we can support your business’s financial health from day one. 

The post Accounting Tips for Startups: Setting Up Financial Systems for Success  appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• OBBBA tax changes signed July 2025 affect Q2 ASC 740 tax provision and valuation allowance disclosures for calendar-year companies. 

• GILTI and FDII rule changes may increase tax rates and impact deferred tax assets and international tax strategies in 2025. 

• New bonus depreciation rules and state nonconformity create challenges in 2025 tax modeling and ASC 740 reporting. 

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President Donald Trump signed the reconciliation tax bill, commonly known as the “One Big Beautiful Bill Act” (OBBBA) into law July 4, 2025, which is considered the enactment date under U.S. Generally Accepted Accounting Principles (GAAP). The legislative changes will affect income tax accounting in accordance with Accounting Standards Codification (ASC) 740, Income Taxes. Notable corporate provisions include the restoration of 100% bonus depreciation; the creation of Section 174A, which reinstates expensing for domestic research and experimental (R&E) expenditures; modifications to Section 163(j) interest limitations; updates to the rules for global intangible low-taxed income (GILTI) and foreign-derived intangible income (FDII); amendments to the rules for energy credits; and the expansion of Section 162(m) aggregation requirements. Refer to BDO’s tax legislative alert for additional analysis. 

Those provisions could have important implications for the calculation of current and deferred taxes, including the assessment of valuation allowances. However, because the bill was signed after the June 30 period-end and its provisions have varying effective dates, only some changes – such as those affecting valuation allowance assessments – might affect the current year’s financial statements. For calendar-year filers, there are specific disclosure considerations for their Q2 10-Q filings, as discussed below. 

Changes in Tax Laws 

Under ASC 740, the impact of tax law changes on taxes payable or receivable for the current year is reflected in the estimated annual effective tax rate (AETR) in the period that includes the enactment date. Adjustments to prior years’ income taxes resulting from new legislation are recognized as discrete items in income tax expense from continuing operations in the period of enactment. 

For deferred taxes, the effects of tax law changes on temporary differences and related deferred taxes existing as of the enactment date are recognized as discrete items in the period of enactment as a component of income tax expense from continuing operations. Companies must make a reasonable effort to estimate temporary differences and related deferred tax amounts, including related valuation allowances, as of the enactment date. For temporary differences arising after the enactment date within the current year, the impact of the tax law change is incorporated into the AETR beginning in the first period that includes the enactment date.  

Insights: Accounting for Tax Law Changes in an Interim Period 

We are aware of an alternative policy that allows companies to use beginning-of-year temporary differences and related deferred tax balances when evaluating the impact of tax law changes during an interim period. Companies should discuss the approach with their auditors and tax advisors. 

For companies that have elected to recognize deferred taxes on GILTI, any changes in the tax law that affect GILTI deferred tax accounting must be reflected in the interim period that includes the enactment date, as discussed below. Also, companies may need to assess the impact of the expanded Section 162(m) aggregation rules on the recognition of deferred tax assets (DTAs) related to share-based compensation for covered employees. 

Insights: Accounting for Retroactive Changes in Tax Laws 

If a tax law change is retroactive, the accounting treatment depends on whether the impact relates to prior periods or the current year. For prior-period deferred taxes and taxes payable or receivable, the effect is recognized discretely in the period of enactment. However, if the retroactive change affects current-year taxes payable or receivable – when the effective date is before the enactment date but still within the current year – the impact is recognized through an adjustment to the AETR. The updated AETR is then applied to year-to-date ordinary income, resulting in a catch-up adjustment for taxes payable or receivable in earlier interim periods.  

Companies should consider that rule when assessing the financial reporting implications of some provisions enacted in July 2025 that are retroactive to the beginning of 2025. That includes provisions such as R&E expensing, Section 163(j) limitation on interest deductions, and 100% bonus depreciation (for property acquired and placed in service after January 19, 2025). 

Valuation Allowance Considerations 

Adjustments to valuation allowances for DTAs existing as of the enactment date are recorded as discrete items and allocated to income tax expense from continuing operations. Conversely, the expected adjustment to the valuation allowance at year-end for deductible temporary differences originating after the enactment date and related to current-year ordinary income must be incorporated into the estimated AETR.  

The corporate provisions – such as the permanent restoration of 100% bonus depreciation, R&E expensing, changes to the GILTI and FDII rules, and the more favorable calculation of the interest limit under Section 163(j) – could have important effects on the determination of valuation allowances for many companies. Specifically, the updates could affect projections of future taxable income, including adjusted taxable income under Section 163(j), potentially triggering a change in judgment about the realizability of DTAs. 

If tax law changes are enacted after the period ends but before financial statements are issued, changes to the valuation allowance are not recognized until the period that includes the enactment date. However, disclosure may be required, as discussed below. 

Insights: Reassess the Realizability of Deferred Tax Assets 

Before, companies might have recorded a full valuation allowance on their Section 163(j) DTA as a result of the interest deduction limitation being based on 30% of adjusted taxable income, which included amortization, depreciation, and depletion (that is, the earnings before income and taxes limitation). The reinstatement of the earnings before income, taxes, depreciation, and amortization limitation under Section 163(j) for tax years beginning after December 31, 2024, might require a reassessment of the realizability of the current-year disallowed interest deduction and Section 163(j) carryforward DTAs from prior years that were previously subject to a full valuation allowance. 

International Provisions 

The OBBBA includes several major changes to international tax provisions. Further, it renames the FDII and GILTI provisions to “foreign-derived deduction-eligible income” (FDDEI) and net controlled foreign corporation tested income (NCTI), respectively. In this Alert, we use the terms “FDII” and “GILTI.”  

The OBBBA introduces major changes to the FDII regime by increasing the effective tax rate from 13.125% to 14% through a permanent reduction of the Section 250 deduction from 37.5% to 33.34% – a rate still higher than what would have applied without the legislation. It also makes the FDII calculation more favorable by eliminating the reduction for qualified business asset investment (QBAI) and specifying that interest and R&E costs are not allocated to eligible income. Most FDII changes in the OBBBA are effective for tax years beginning after 2025. 

The act raises the effective tax rate on GILTI by reducing the Section 250 deduction from 50% to 40%, resulting in a pre-foreign tax credit (FTC) effective rate increase from 10.5% to 12.6%. That is still lower than the rate that would apply without the act. The FTC haircut under GILTI is reduced from 20% to 10%. The OBBBA also repeals the QBAI deemed return, increasing the amount of income subject to GILTI, and narrows expense allocations for FTC purposes. Those changes are effective for tax years beginning after 2025. 

The OBBBA raises the base erosion and anti-abuse tax (BEAT) rate from 10% to 10.5% for tax years beginning after 2025, which is lower than the 12.5% rate that would have applied absent the legislation. It also repeals a scheduled 2026 change that would have increased BEAT liability by the sum of all income tax credits. 

For tax accounting purposes, FDII and BEAT are treated as period costs, and most companies also account for GILTI as a period cost. Because most of the OBBBA international provisions do not take effect until tax years beginning after December 31, 2025, companies will likely see an immediate accounting impact at enactment only if the law change affects their valuation allowance assessments – for example, if the changes affect future income projections used in the valuation allowance analysis.  

However, companies that recognize deferred taxes for GILTI-related basis differences must remeasure those deferred tax balances at enactment if they are expected to reverse after the new law becomes effective. Further, if a company factors BEAT into its assessment of deferred tax asset realizability, it must evaluate how changes to the BEAT calculation affect its valuation allowance and recognize any impacts in the period of enactment. 

Energy Credit Provisions 

The OBBBA significantly curtails and modifies a broad range of Inflation Reduction Act (IRA) energy tax incentives, imposes new domestic content and foreign entity restrictions, and phases out or repeals many credits in the coming years. The changes effective in 2025 could affect financial statements if companies had anticipated the impact of IRA credits in their 2025 AETR calculations for interim periods.  

Accounting Considerations for Uncertainty in Income Taxes 

Companies must assess the act’s impact, particularly in areas where the interpretation of new rules is uncertain. If a tax position expected to be taken on a tax return is not more likely than not to be sustained upon examination based on its technical merits, it must be evaluated under the recognition and measurement requirements of ASC 740 to determine the appropriate amount of tax benefit to recognize. 

State Income Tax Considerations 

Companies must assess the state and local tax effects of the OBBBA; the impact will depend on whether and how states conform to the federal tax code. State tax implications may be significant for bonus depreciation, R&E expensing, FDII, GILTI, and interest deductibility. Companies must review state conformity rules to determine the appropriate state tax effect and related tax accounting and may need to adjust state current and deferred tax balances in addition to federal balances. 

Financial Statement Disclosures 

Companies need to consider disclosing the expected effects of new tax laws in the notes to the financial statements, management’s discussion and analysis, and risk factors. 

If a law is enacted after the interim balance sheet date but before financial statements are issued, the tax law change would be considered a Type II nonrecognized subsequent event under ASC 855, Subsequent Events. In that case, companies must disclose the nature of the event and either estimate its effect (if material) or state that an estimate cannot be made. If a law is enacted during an interim period, major variations in the relationship between income tax expense and pretax income must be explained.  

For annual financial statement reporting, ASC 740-10-50-9(g) requires companies to disclose the tax effects of adjustments to deferred tax liabilities or assets resulting from enacted changes in tax laws or rates in their annual financial statements. Public business entities in the U.S. need to separately disclose the effect of tax law changes in the annual effective tax rate reconciliation.  

Next Steps 

Companies must assess the impact of the tax legislation on their income tax provision calculations, including current and deferred tax balances, the AETR, valuation allowances, and related financial statement disclosures. The analysis will likely require extensive modeling and planning because the provisions are highly interconnected. While this Alert highlights selected areas of income tax accounting that might be affected by the OBBBA, it is important to consider how the changes apply to specific facts and circumstances.  

Written by Daniel Newton and Bella Verdiyan. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com 

How MGO Helps You Navigate the New Tax Landscape 

The OBBBA brings a wave of corporate tax changes that present both risk and opportunity, especially around deferred tax assets, valuation allowances, and interim reporting under ASC 740. MGO’s Tax team works with tax and finance leaders to adapt provision models to reflect the latest federal and international updates. We support companies in life sciences, manufacturing, and technology by turning legislative changes into practical, forward-looking strategies. From addressing Q2 financial statement impacts to modeling future effects of GILTI, interest limits, and bonus depreciation, we serve as a resource for navigating complex tax reporting with accuracy and speed. Contact us to learn more.  

The post One Big Beautiful Bill Act: Implications for Accounting for Income Taxes  appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Professional athletes need a comprehensive financial team — including business managers, accountants, tax specialists, and consultants — to manage their complex financial lives.

• Your financial front office provides critical visibility into your finances, prevents potential problems before they arise, and creates a coordinated strategy across all aspects of your wealth management.

• While you may only interact with one or two people on your financial team, there should be an entire network of professionals working behind the scenes to protect your wealth and secure your future.

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Behind every winning team in pro-sports is a strong front office. From the general manager to the scouts, trainers, and analysts, each person plays a critical role in a team’s success. But what about your personal financial team? As a professional athlete, you need an equally robust front office of your own to manage your finances and secure your future.

The Game Changes When the Checks Get Bigger

When you sign that first contract, everything changes. Suddenly, you may be dealing with more money than you’ve ever seen before. You’re getting big paychecks coming in, but also big expenses going out — including taxes, which nobody likes to think about.

It’s a common misconception to think: “I make a million dollars, so I can spend a million dollars.” In reality, that million might actually be $600,000 or less after taxes. Without proper financial management, you can quickly find yourself in trouble.

Your Financial Front Office Lineup

Just as you wouldn’t play without a complete team on the field, you shouldn’t manage your finances without a complete financial team. Here’s who should be in your financial front office:

Business Manager

Think of your business manager as the quarterback or point guard of your financial team. They coordinate everything and serve as your primary point of contact. They handle:

• Bill payments and expense management

• Budgeting and financial projections

• Cash flow analysis

• Personal CFO services

• Coordination with other financial professionals

Your business manager is the person you go to for everything financial. They provide a “seamless experience” by coordinating with all the other specialists working on your behalf.

Accounting Team

Behind the scenes, you need strong accountants who specialize in providing visibility into your financial world. These professionals handle:

• Consolidated financial statements for both personal and business accounts

• Monthly cash flow reporting

• Real-time financial visibility

• Tracking all financial activity across your accounts

The accounting team picks up all the activity in your financial universe — the salaries coming in, all the expenses going out on your credit cards, bank accounts, brokerage accounts, etc. — making sure that it’s all captured in one place.

This financial visibility is crucial. You receive comprehensive reports showing exactly where your money is coming from and where it’s going. This real-time tracking allows you to make adjustments before problems arise.

Tax Team

Tax planning is critical for professional athletes. Your tax team handles:

• Income tax preparation and estimated tax payments

• Multi-state tax compliance (crucial for athletes who play in multiple states)

• Entity structuring (including “loan-out” companies)

• Tax strategies for salaries, bonuses, and endorsement deals

• International tax planning

For athletes, tax planning is complex. You’re often earning income in multiple states and through different channels. Without proper tax planning, you could face significant penalties and unexpected tax bills.

Specialty Consulting Services

Depending on your needs, your financial front office might include professionals who can assist you in areas like:

• Brand licensing, publishing, and royalty consulting

• Name, image, and likeness (NIL) planning

• Insurance and risk management

• Film, TV, streaming, and media production

Much like position coaches who focus on specific aspects of your game, these professionals provide knowledge and experience when and where you need it.

The Benefits of a Complete Financial Front Office

Here’s what you gain from having a full team working behind the scenes for you:

1. Financial Visibility and Control

Perhaps the most important benefit is having complete visibility into your financial situation. Until you see it on paper, it’s hard to really understand how much is entering and leaving your bank account on a regular basis.

With monthly reporting, you can see exactly where your money is going — allowing you to make informed decisions about your spending and saving.

2. Proactive Problem Prevention

Your financial team can identify potential issues before they become problems. If your spending starts to exceed your income, your business manager can have a conversation with you about adjusting your habits.

In some cases, they might recommend specific monthly spending caps to help you maintain positive cash flow.

3. Coordinated Financial Strategy

With everyone working together, you get a coordinated approach to your finances. Your business manager ensures your accounting team has all the information they need, which then provides your tax team with accurate data for tax planning.

This coordination is seamless to you — you have one point of contact who manages everything behind the scenes (your business manager), but you benefit from the specialized expertise of each team member.

4. Relief from the Burden of Financial Management

Perhaps most importantly, a financial front office frees you to focus on what you do best: play your game. You don’t have to worry about paying bills, tracking expenses, or preparing for tax season. Your team handles it all, giving you the mental space to excel in your career.

The Invisible Gears of Your Financial Watch

Your financial front office works like a precision watch. You might only see the time (the final reports and recommendations), but behind the face is a complex system of gears working together. While you may only touch base with one or two people, there are several different teams of people — business management, accounting, tax, consulting — working on your behalf.

This behind-the-scenes work keeps everything running smoothly, even if you don’t see all the moving parts.

Build Your Winning Team with MGO

Our dedicated Entertainment, Sports, and Media team understands the unique financial challenges professional athletes face — multi-state income, endorsement deals, loan-out companies, and a career span that requires careful planning. From business management to tax, accounting, and consulting, our experienced professionals work together seamlessly to provide the support you need at every stage of your career.

With our team as your financial front office, you can focus on winning on the field while we take care of the rest. Contact us today to learn how we can customize our services to your needs and goals.

The post Why Every Pro Athlete Needs a Financial Front Office appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Strengthen your cannabis business by implementing solid financial controls, accurate reporting, and professional oversight to support long-term growth and investor confidence. 

• Develop proactive tax strategies to navigate 280E and state tax burdens while maintaining full compliance and protecting cash flow. 

• Approach financing and diversification strategically to reduce risk, preserve flexibility, and stay competitive in a fast-changing industry. 

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Financial resilience, simply defined, is the ability to withstand and recover from unexpected events and financial shocks. Financial resilience applies to individuals, governments and municipalities, not-for-profit organizations, churches, and many other organizations.  

Overall, cannabis businesses build financial resiliency much like any other business — by identifying risks and implementing strategies to manage financial uncertainty. These strategies include:  

• Strong governance 

• Focus on cash flow and capital structuring management  

• Diversification and performance reporting and monitoring  

However, operating in the cannabis industry means operating in an environment that requires focusing these strategies on challenges that are unique from most industries. A few of the many challenges cannabis businesses experience include: 

• Unique tax burdens: Federal disallowance of certain business deductions (i.e., IRC 280E) and state and local tax (SALT) 

• Fragmented and dynamic regulatory environment: Rules, compliance requirements, and regulations that vary from state-to-state 

• Regularly shifting marketplace: Competition from new operators, impact of non-regulated hemp-derived products, etc. 

With these challenges in mind, here are some practical insights on building a financially resilient cannabis operation: 

Implement Strong Financial Controls and Management 

Perhaps the most critical factor observed in resilient cannabis businesses is financial control and management. The companies that weather industry storms typically share these characteristics: 

• Well-developed business and marketing plans 

• Strong internal controls throughout the organization 

• Sound accounting practices and reliable financial statements  

• Professional financial management and oversight 

When you implement proper controls and focus on reliable financial statements, it improves company value and operational efficiency and provides clearer decision-making insights. This becomes especially important if you’re considering bringing on investors or planning an eventual exit. Buyers and investors will pay a premium for operations with transparent, reliable financial controls and reporting relative to businesses without them.  

The focus on financial controls and management also facilitates internal operational predictability, which improves the ability of management to effectively pivot resources when confronted with unexpected events. 

Navigate Tax Burdens Effectively 

Tax compliance in the cannabis industry crosses into state and local tax (SALT) — such as sales and use tax, manufacturers’ equipment tax, special property tax, and others. But the most prominent tax burden of cannabis operators is federal tax on income.  

Under federal law, businesses operating in the cannabis industry are considered illegal. In 1982, the federal government implemented Internal Revenue Code Section 280E, which, in basic terms, disallowed cannabis operators from taking certain business deductions when reporting taxable income. 

Unless federal tax laws change, IRC 280E will continue to impose an added burden on cannabis businesses resulting from the disallowance of certain business deductions.  

It is common for operators in the cannabis industry to strategically model their projections in anticipation of cannabis businesses being removed from the rules of IRC 280E. But, so far, the short history of the industry has shown us that a rush by the federal government to remove the impacts of IRC 280E is not a priority. Therefore, building a business model around the hope of repeal may be better redirected to focus on proactive strategies that help mitigate its impact while maintaining compliance. 

Partner with cannabis industry-specific tax professionals to: 

• Determine an appropriate allocation of costs between deductible and non-deductible activities 

• Optimize your entity structure to enhance allowable deductions 

• Confirm ongoing compliance while managing overall tax liability 

• Monitor and adapt to evolving state tax laws that may impact profitability and cash flow 

Effective tax planning is a core component of financial resilience in cannabis. If taking uncertain tax positions to mitigate 280E, consider a fund for potential IRS changes coming from a tax audit. 

Be Strategic About Debt and Financing 

Access to capital remains one of the bigger challenges in cannabis. Traditional bank financing is largely unavailable due to the federal status of cannabis, so operators often turn to private lenders, sale-leaseback arrangements, or equity financing. However, each of these options carries trade-offs. 

The cost of capital in the cannabis industry remains high compared to most industries. Whether you’re looking at debt or equity financing, the terms you accept today will shape your business for years to come. 

When considering financing: 

• Be conservative in your projections 

• Carefully evaluate the cost of capital and structure to preserve cash flow 

• Avoid over-leveraging — excessive debt can compromise operational flexibility 

• Align financing terms with the company’s short, medium, and long-term strategic goals 

• Understand how different forms of capital affect valuation and control 

• Don’t base your financial models on regulatory changes that may never come 

Operators who approach financing with discipline and foresight are better equipped to weather market shifts and capitalize on growth opportunities. 

Diversify to Weather Market Shifts 

One of the clearest paths to financial resilience in cannabis is diversification. Relying too heavily on a single revenue stream, product type, or market leaves you vulnerable to changes in regulation, market saturation, or consumer demand. 

Consider diversifying across: 

• Revenue streams: Add branded merchandise, infused products, or service offerings 

• Product mix: Expand into different formats or categories (e.g., beverages, edibles, concentrates) 

• Supply chains: Avoid bottlenecks or disruptions by developing alternate vendors and partners 

• Customer base: Target medical, adult-use, and niche demographics to balance demand 

• Geography: Explore brand licensing in emerging states to expand your footprint without stretching operations 

• Distribution partners: Broaden your network to increase visibility and reduce reliance on any one channel 

Just as important: prepare for frequent regulatory changes and market shifts. States around you may legalize faster than expected. Your region may flood with new competitors. Build flexibility into your model so you can pivot when the environment shifts. 

Operators in mature markets have learned this firsthand. Diversifying into newer markets or adding new product lines can help offset declining margins and regulatory fatigue at home. 

Gain Stability in the Face of Uncertainty 

Financial resilience isn’t just about surviving the next regulatory change or market dip — it’s about building a business that can thrive in a constantly shifting environment. The cannabis industry is marked by rapid change: state-by-state legalization, volatile pricing, and restricted access to capital. Resilient businesses are the ones that anticipate these shifts, diversify thoughtfully, and build strong financial systems that can adapt. 

Whether you’re optimizing tax strategies, strengthening cash flow, or expanding into new markets, each step you take now builds a stronger foundation for whatever comes next. And while cannabis businesses often face added complexities — such as real estate decisions or partnership structures — those risks can be managed with careful planning and professional guidance. 

With the right strategies, you can gain stability in the face of uncertainty. That’s the core of financial resilience. 

How MGO Can Help 

Our dedicated Cannabis practice is here to help your business become more resilient — from getting your financial statements audit-ready and strengthening internal controls to implementing 280E mitigation strategies and managing complex sales and excise tax obligations. Whether you’re expanding into new markets or tightening operations at home, we’ll work with you to build a solid financial foundation. 

Reach out to our team today to start building a stronger, more resilient future for your cannabis business. 

The post How to Make Your Cannabis Business Financially Resilient  appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• New FASB guidance now affects how your company identifies the accounting acquirer in SPAC and VIE-related transactions.  

• There are fewer transactions that may qualify as business combinations now under ASU 2025-03.  

• You must still evaluate VIE status for disclosure, even if it doesn’t impact acquirer identification.  

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Summary 

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2025-03, Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity, to address stakeholder concerns about unintuitive accounting outcomes in transactions involving variable interest entities (VIEs). For example, many operating companies have entered the U.S. public markets by merging with a special-purpose acquisition company (SPAC). While a SPAC merger might be economically similar to conducting an IPO, under the old guidance, it often resulted in a new basis of accounting for the operating company instead of carryover basis. Stakeholders expressed concerns to the FASB about this inconsistency, which will be less likely to occur under the new ASU. 

After adopting the ASU, an entity must assess the factors in ASC 805, Business Combinations, to determine the accounting acquirer in an acquisition transaction primarily effected by exchanging equity interests when the legal acquiree is a VIE that meets the definition of a business.  

Background 

Identifying the accounting acquirer is important because it affects the carrying amounts of the combined entities’ assets and liabilities and post-combination net income. The accounting acquirer records the assets acquired and liabilities assumed in a business combination generally at their acquisition date fair values, with limited exceptions. Additionally, the accounting acquirer reflects the accounting acquiree’s income beginning on the acquisition date.  

Under prior U.S. generally accepted accounting principles (U.S. GAAP), if the legal acquiree was a VIE, the primary beneficiary of the VIE was always the accounting acquirer. Conversely, when the legal acquiree is not a VIE, if a business combination is effected primarily by exchanging equity interests, and the determination of the accounting acquirer is not clear after applying the guidance in ASC 810, Consolidation, an entity must consider the following factors from ASC 805 to identify the accounting acquirer:  

• Relative voting rights in the combined entity 

• Existence of large minority voting interest in the combined entity 

• Composition of the governing body of the combined entity 

• Composition of senior management of the combined entity 

• Terms of the exchange of equity interests 

• Relative size of the combining entities 

Applying these factors can result in a determination that the legal acquiree is the accounting acquirer and, therefore, the transaction is a reverse acquisition. See our Blueprint, Business Combinations Under ASC 805, for more guidance on evaluating these factors and the accounting for a reverse acquisition. 

Main Provisions 

To address stakeholders’ concerns about the inconsistency in the accounting for the acquisition of a VIE that is a business as compared to the accounting for a voting interest entity that is a business, the FASB issued ASU 2025-03. The new guidance requires that an entity evaluate the factors in ASC 805-10-55-12 through 55-15 to determine the accounting acquirer when all the following conditions are met: 

• The acquisition transaction is effected primarily by exchanging equity interests. 

• The legal acquiree is a VIE. 

• The legal acquiree meets the definition of a business. 

The ASU cannot be applied to other transactions. As such, for acquisitions of VIEs that are effected primarily by exchanging cash or other assets or incurring liabilities, and for acquisitions of VIEs that do not meet the definition of a business, the primary beneficiary is always the accounting acquirer. See our Blueprint, Control and Consolidation Under ASC 810, for more guidance on identifying a VIE and its primary beneficiary. 

ASU 2025-03 Has a Limited Scope 

ASU 2025-03 does not change the guidance for identifying the acquirer of a VIE for a transaction that is not effected primarily by exchanging equity interests or for the acquisition of a VIE that does not meet the definition of a business. An entity cannot analogize to the guidance in ASU 2025-03 if the acquired VIE is not a business.  

Consider the following example:  

• Company A (the legal acquirer) issues some of its equity in exchange for all the equity of a life sciences entity (the legal acquiree).  

• The legal acquiree is a VIE but does not meet the definition of a business because substantially all the fair value of the gross assets acquired is concentrated in a single asset.  

• Company A determines that it is the primary beneficiary of the VIE and, therefore, is the accounting acquirer. 

Conversely, had the legal acquiree in met the definition of a business, the accounting acquirer might be different, depending on the facts and circumstances and based on the analysis of the factors in ASC 805. 

Insights 

Fewer Transactions May Be Business Combinations After Adopting ASU 2025-03 

After adopting ASU 2025-03, an entity that effects an acquisition transaction by primarily exchanging equity interests to acquire a VIE that is a business must consider the factors in ASC 805 to identify the acquirer. As a result, fewer transactions will be accounted for as business combinations. However, while the FASB’s intention when issuing this guidance was to align the accounting for economically similar transactions involving businesses, there will still be inconsistencies in the accounting for transactions involving VIEs that are not businesses, as discussed in the alert above.  

Legal Acquiree’s Vie Status Affects Required Disclosures 

While the legal acquiree’s VIE status will be less relevant in determining the accounting acquirer in a business combination primarily effected by exchanging equity interests when the VIE meets the definition of a business, ASC 810 requires that the primary beneficiary of a VIE disclose information about the VIE’s assets and liabilities unless an exemption from the disclosure requirements apply. The new ASU does not change these requirements. Therefore, the primary beneficiary may still need to determine whether the legal acquiree is a VIE for disclosure purposes.    

Effective Dates and Transition 

The following table summarizes effective dates and transition for ASU 2025-03: 

Accounting Standards Update No. 2025-03 Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity 

Written by Adam Brown and Jon Linville. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com 

How MGO Can Help 

Navigating the evolving landscape of U.S. GAAP and variable interest entity (VIE) accounting can certainly be complex, especially with the adoption of ASU 2025-03. At MGO, our experienced assurance and consulting professionals are well-versed in the nuances of ASC 805 and ASC 810 and are equipped to help our clients interpret and apply this new guidance. Whether you’re planning a SPAC transaction, assessing business combinations, or re-evaluating your existing VIE structures, we can provide you with the tailored strategic insights and practical solutions your organization needs. Contact us to learn how we can help you maintain compliance and stay confident in your financial reporting.  

The post FASB Changes Guidance on Determining the Accounting Acquirer of a Variable Interest Entity  appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Bookkeepers and accountants each play distinct but complementary roles in managing a wealthy family’s financial ecosystem, with the bookkeeper handling recordkeeping and the accountant providing insight and analysis for decision making.  

• Without accounting insight, key opportunities may be missed, including tax savings and estate planning to compliance with IRS regulations and wealth transfer strategies. 

• The complexity of wealth is often underestimated and often requires more than surface-level financial tracking.  

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Many affluent families believe that their financial affairs are straightforward, leading to frustration over the lack of immediate access to comprehensive financial information for liquidity, budgeting, tax planning, and investment management purposes.  

In reality, however, many wealthy individuals have more complex financial affairs than they realize, including multiple trusts, extensive private equity investments, private foundations, multiple residences, family limited partnerships, intrafamily loans, and much more. Given this complexity, one might question whether their financial affairs are truly as simple as they initially appear. 

To keep track of it all, many wealthy individuals and families hire professionals to manage their finances. However, some families find that the inputs tracked through extensive bookkeeping are not the same as the insights provided through in-depth accounting and comprehensive financial reporting. This article will detail the tasks performed by each discipline and why both bookkeeping and accounting services are essential for providing structure and clarity to a family’s or an individual’s financial affairs.  

The Essential Partnership: Bookkeepers and Accountants 

Understanding the distinction between bookkeeping and accounting is crucial for holistic financial management. Bookkeeping involves the meticulous recording of financial transactions and documenting every financial move accurately. Accounting, on the other hand, encompasses a broader range of services, including the interpretation, analysis, and reporting of financial data to inform strategic decisions. Both functions are indispensable; bookkeeping provides the foundational data, while accounting transforms this data into actionable insights, enabling families to preserve and grow their wealth across generations. 

Consider the example of a wealth holder with a diverse portfolio of personal property, marketable securities, and alternative assets. The bookkeeper enters all transactional data for a given month into a general ledger system and runs a few reports – perhaps total expenses, an income statement, and a balance sheet. But a monthly summary of debits, credits, liabilities, and assets doesn’t provide truly insightful information.  

An accountant, however, will review the reports and: 

1. Determine the underlying reasons for significant changes – For example, was additional cash contributed to this investment account or was a distribution received?  

2. Make adjustments to help increase the potential for tax-deductible expenses – Are all costs associated with an operating entity/for-profit trade or business being allocated to the right entity?  

3. Notify the tax team of any relevant information – Has the tax team incorporated the gain from the sale of securities in their quarterly estimated tax payment calculations? 

As you can see, the bookkeeping data serves as the foundation for various analytical and strategic activities, but it requires a higher level of analysis to bring meaningful insights to the forefront.  

How Accountants Support a Comprehensive Financial Strategy 

Enhancing Tax Benefits 

For high-net-worth individuals with multiple family members, investment advisors, operating entities, residential properties, and staff it is often difficult to ensure that the appropriate tax deductions are being taken and reported correctly.  

For example, many wealthy families have employees that support their personal needs from a lifestyle management perspective, but those same individuals may also provide support for the family’s business and investment-related activities. A bookkeeper might book a personal assistant’s payroll and benefits costs, for example, under a single entity in the general ledger. An accountant, on the other hand, might allocate a pro-rata share of those costs to the operating business or investment entities the assistant supports, thereby facilitating additional tax deductions for the family. 

Additionally, while individuals may intend to keep all business-related expenses on one credit card and personal expenses on another, business and personal expenses are often intermingled. Most bookkeepers won’t know how to analyze the expenses and reclassify them as necessary to the tax-deductible business accounts, but a knowledgeable accountant will.  

Transfer Wealth Efficiently  

Ultra-high-net-worth individuals and their families face unique challenges in estate and wealth transfer planning. Accountants leverage financial records to develop comprehensive estate and wealth transfer plans that align with the wealth holder’s long-term goals. These plans might include charitable contributions, funding trusts, and direct gifting strategies. Bookkeepers record past actions, but accountants can help the wealth holder make more informed decisions about the future.  

For example, while many bookkeepers will record an asset at cost upon its acquisition, they often won’t know the importance of tracking each asset under the appropriate entity’s general ledger account and continuing to record the fair market value of the asset on the balance sheet. As a result, the wealth owner may not be able to easily see where their personal net worth stands, especially regarding the value of assets still titled in their name. Without this information, it’s very difficult to answer questions such as “What is my estate tax liability if I were to pass away today, and what can I do to lower that in the future?” 

Similarly, accountants will bring the wealth holder ideas that make current wealth transfer plans more efficient. For example, an accountant may know that an irrevocable grantor trust has a clause allowing for the exchange of an asset in the trust for an asset of equal value on the wealth holder’s personal financial statement. With such knowledge, they might recommend a swap for significantly appreciated marketable securities being held in trust with other non-appreciated assets of the same value. This way, beneficiaries get a step-up in basis upon the wealth holder’s death, which would not be the case if they were titled to a trust upon death. Learn more here.  

Compliance with Commitments and IRS Regulations 

Accountants can see trends in the financials and know that there are deeper questions to ask. For example, if the family owns a property that they usually rent out, but suddenly rental income stops coming in, the accountant is likely to raise questions to stay in compliance with tax regulations. Sometimes, a family member or friend is allowed to stay at the property for free, which the IRS classifies as a gift. If the rent isn’t reported on a gift tax return, then the statute of limitations doesn’t start running, and the IRS can go back and audit records indefinitely.  

The same issue can apply to an intra-family loan. A bookkeeper may just book the payment as a distribution, but an accountant will know that additional documentation is required to ensure that the IRS doesn’t deem the loan a gift, potentially creating a 40% gift tax liability on the value of what was intended to be a loan.  

Finally, an accountant will know to document not just the initial investment in a private placement investment, but the full amount of the uncommitted capital. Aggregating the uncommitted capital across the entire portfolio will enable better liquidity planning in the future as capital calls come in over time.  

Questions about your wealth that bookkeepers and accountants can address: 

Elevate Your Wealth Management Strategy 

Bookkeepers provide an essential service for affluent individuals and their advisors by maintaining accurate and detailed financial records. However, accountants take this data to the next level, transforming it into strategic financial planning, enhanced tax strategies, and a smoother generational wealth transfer. By leveraging the combined strengths of bookkeepers and accountants, affluent individuals and their advisors can enhance their financial management strategies and explore potential new opportunities for wealth growth and preservation. 

Understanding the distinct roles and value of each professional is important for fully leveraging financial data. Whether focusing on accurate bookkeeping or benefiting from comprehensive accounting services, engaging the right professionals can provide the insights needed to grow and protect a family wealth enterprise for years to come. 

How MGO Can Help  

At MGO, we are well-versed in the financial landscapes that affluent individuals and families must navigate. Our Private Client Services team offers both meticulous bookkeeping services and high-level accounting services to make sure that every aspect of your financial world is not only documented but strategically handled. We collaborate closely with you and your advisors to uncover meaningful insights, enhance tax efficiency, support intergenerational planning, and make sure you’re compliant with ever-changing regulations. Whether you’re looking to create structure around your current finances or plan for future growth and legacy, MGO offers you clarity and confidence needed to manage your wealth with ease. Contact us to learn more.  

Written by Nickie Dupuis. Copyright © 2025 BDO USA, P.C. All rights reserved. www.bdo.com 

The post Bookkeeping Is Only Half the Equation for Effectively Managing Wealth  appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Succession planning is a multifaceted process that benefits from early conversations and guidance from a trusted tax advisor.

• A tax accountant can help you structure ownership transitions to minimize tax liabilities and preserve your wealth.

• A well-designed succession plan should carefully balance financial, operational, and family dynamics to protect your business’s future.

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The journey from founding a company to successfully handing over the reins involves navigating a complex maze of financial, legal, and even emotional challenges. Robust succession planning can prepare the family-owned enterprise for new leadership or new owners while enhancing the financial stability of the business and its shareholders. This article explores six ways that a tax accountant can assist in developing a comprehensive plan that helps business owners achieve their transition goals while avoiding costly missteps. 

1. Help Start the Initial Discussions 

The first step, which is often the most important part of succession planning, is starting the conversation. Business owners, especially founders, often hesitate to begin a formal succession planning process because they are still heavily involved in the business’s operations and perhaps find it difficult to part ways with something they created or have led for decades. They may know that honest discussions about succession or exit plans are important to the future of the company, but finding the time, and perhaps mustering the courage, to formally engage in a succession planning process can be challenging. 

For many business owners, their tax accountant has been with them for years, and therefore understands the business, along with some aspects of the industry, key employee roles, and family dynamics at play. They can help think through some of the initial considerations, gather and review key documents, prioritize objectives, and map out a potential timeline.  

In addition, a tax accountant can help family business owners think through some of the most pertinent questions, including: 

• Should I transfer ownership of the business to family members, to employees, or should I consider an outside buyer? 

• Do I need a certain level of proceeds from the business to fund my retirement? 

• What is my business worth?  

• What options are available to reduce the tax liability associated with gifting or selling my ownership in the business?

2. Promote Tax Planning and Optimization 

When working on a plan for a family-owned business, an accountant may start by evaluating the business structure to see how the owners could reduce the income, gift, and estate tax impact of any future succession or exit plan. They can help evaluate options such as gifting shares to maximize the lifetime estate tax exemption, the applicability of qualified small business stock (QSBS) tax exemptions, the benefits of an employee stock ownership plan (ESOP) transaction, and many more tax strategies. Each of these strategies takes time to evaluate and deploy, so it is best to start such discussions early to develop the most beneficial tax treatment. 

3. Provide Strategic Financial Analysis 

An accountant can gain a deep understanding of the family enterprise by reviewing the operating company financial statements, company and individual tax returns, current estate plans, personal balance sheets, life insurance policies, and more to gather a full picture of an individual’s personal financial affairs. With that knowledge in hand, the accounting professional can make recommendations that affect the succession plan, including ways to: 

• Maximize current cash flow 

• Assess and mitigate risk 

• Prepare financial models that assist with scenario planning 

• Recognize the tax implications of the plan 

Family business owners can depend on their accountants to propose ideas that contribute to a strong succession plan based on their in-depth understanding of the business in its current form and its potential tax liabilities.  

4. Help Establish the Company’s Value  

An accountant can assist with obtaining a qualified, independent appraisal of the family enterprise. The clear, defensible value for the business impacts every aspect of the succession plan, including equal distribution of the business and estate assets, obtaining insurance and financing, and supporting tax strategies. The appraisal can also provide data needed to maximize the company’s current value and further solidify the family’s financial security.  

5. Navigate Family Dynamics and Issues 

Every family is unique, and melding a succession plan with individual family dynamics requires careful thought, engaged listening, and the ability to view the family business globally. Common issues include: 

• Preserving the family’s values and legacy 

• Assessing family members’ ability to manage the business 

• Deciding who will control the business 

• Maintaining privacy 

• Addressing the needs of blended families 

A tax accountant can recommend strategies that connect sensitive family dynamics with current and future goals. For example, some owners wish to retain control while they prepare to transfer the company or the proceeds of its sale to other family members. A trusted tax accountant can potentially recommend strategies that allow the owner to maintain some control while proceeding with their plans. 

6. Assist With Post-Implementation Administration 

After all the legal and financial documents have been signed setting the succession plan in motion, a tax accountant can assist the family business owner with administration of the plan. As the business continues to change — due to both internal and external factors — accounting professionals can provide ongoing review to help ensure the succession plan continues to meet the family’s current and future needs. With a plan in place early and reviewed often, the family enterprise can be better prepared to withstand unexpected events. 

Written by Brian Schad. Copyright © 2024 BDO USA, P.C. All rights reserved. www.bdo.com 

How MGO Can Help 

Our team of experienced tax professionals understand the complexities of succession planning for family-owned businesses and provide you with end-to-end guidance, from initiating sensitive conversations and evaluating tax strategies to assisting with business valuations, estate planning, and post-transition administration. Whether you’re looking to explore an ownership transfer within your family, to an employee, or to an outside buyer, we can help you tailor a solution to your personal and business goals simultaneously, all while minimizing your tax burdens and making sure you have a smooth transition in place for future generations. Contact us to learn more.  

The post Succession Planning for Your Business? Consider These Six Ways to Lean on Your Tax Accountant as a Trusted Advisor appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Check your payroll and industry compliance tax rates regularly for updates to avoid penalties and interest from underpayment during quarterly filings.

• Properly classify employees versus contractors and align your business practices with your tax strategy to prevent costly adjustments and fines.

• Manage executive and owner compensation effectively, including proper documentation of draws and retirement contributions; meet requirements with compliance filings and diligence.

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As a professional services provider — whether you run a law firm, marketing agency, public relations company, architecture firm, or engineering consultancy — managing tax compliance can feel like a never-ending challenge. From industry-specific regulations to keeping up with rate changes to properly classifying employees and contractors, it’s crucial to stay proactive. Mistakes can cost you in penalties and interest, so let’s break down some key areas you should focus on.

Update Your Payroll and Industry Compliance Tax Rates Regularly

When the new year rolls around, published payroll tax rates, thresholds, and compliance items often change. These include federal, state, and local taxes, unemployment insurance rates, and compliance items like sales tax or permitting fees — which can vary significantly based on your business location and setup. While large payroll providers like Gusto and ADP often handle some of these updates automatically, smaller systems might leave this responsibility on your shoulders. Proper set up in point-of-sale (POS) or enterprise resource planning (ERP) systems can be daunting but is essential.

Risk:

If you fail to update your rates, any shortfall discovered during the quarterly filing will fall on you as the taxpayer. Payroll tax or sales deposits that fall short can trigger penalties and interest for underpayment, which are the responsibility of the company.

How to Manage the Risk:

• Schedule a compliance environment review with your accountant before quarterly payments are due.
• Confirm that all federal, state, and local rates are accurate and current.
• Audit your sales tax collection to verify POS and online sales platforms are correctly calculating and collecting taxes.
• Be sure about graduated receipts requirements and deadlines for permits and licenses, as these are not always “same as last year”.
• Double-check employee classifications to avoid misclassification penalties.

Align Your Business Spending with Your Tax Strategy

Year-end accounting may reveal gaps between your business practices and your tax strategy, especially around employee-versus-contractor classification. Misclassification carries significant financial risks — including penalties and the need for costly amended returns.

In recent years, states like California have tightened the definition of independent contractors. Considering the additional costs and obligations that come with employees, it is important to carefully weigh the costs and the benefits — as well as the risks — of using independent contractors.

If your workers have been treated as contractors rather than employees but meet the regulatory standards of employees, it’s not too late to make adjustments. Revisiting these arrangements with your contractors/employees and amending your payroll filings can help you avoid hefty penalties down the road. Many employers make such considerations at the preference of the contractors themselves, but it is important to keep in mind it is the business (not the contractor) who is opening themselves up to potential consequences.

Risk:

Improper classification of employees and contractors can expose your business to costly adjustments and fines. Additionally, handling bonuses outside of regular payroll can complicate reporting and create compliance issues.

How to Manage the Risk:

• Conduct a thorough review of employee and contractor classifications.
• File 1099s for all independent contractors — even if it’s late, it’s better than not filing.
• Carefully consider the additional costs of taking on employees (payroll taxes, increased workers’ compensation insurance) against the potential liabilities for non-compliance.
• Review year-end bonuses, especially if paid in cash, to confirm they were properly recorded in payroll filings.
• Correct errors promptly by amending filings as needed.

Manage Executive and Owner Compensation Effectively

Compensation planning for executives and business owners goes beyond standard wages. Compensation structures, distributions, and retirement contributions must align with your business and tax strategy.

Risk:

Failing to manage compensation properly can impact pass-through results, personal taxes, and compliance with financial covenants.

How to Manage the Risk:

• Regularly assess compensation structures to verify they align with current roles and business strategies.
• Document all draws and retirement contributions meticulously.
• Keep accurate filings and promptly address any discrepancies.

Be Prepared for IRS Shake-Ups

The IRS has undergone significant changes recently, with staffing shifts that have created uncertainty around audit frequency. While it might be tempting to assume that reduced IRS resources mean lower audit risk, this could be a dangerous assumption.

Despite the recent reorganization at the IRS, businesses should not let their guard down when it comes to business and regulatory tax compliance. The question isn’t whether you’ll face an audit, but whether your practices would stand up to one if it occurred. Implementing a strong, current tax strategy and strictly following it in practice is the best path to security.

Take Control of Your Regulatory and Compliance Strategy

Managing compliance requirements as a professional services provider can be daunting, but taking a proactive and strategic approach will help you stay ahead of potential risks. Consider meeting with your accounting professional to review your operational setup, align your compensation strategy, and catch any issues before they become costly problems.

How MGO Can Help

Our dedicated Professional Services team understands the unique needs of law firms, advertising agencies, architecture firms, marketing companies, PR firms, engineering firms, and more. We provide a full suite of tax, consulting, and assurance solutions to help you manage risks and seize new opportunities. Reach out to our team today to find out how we can help you streamline your strategy and maintain compliance.

The post 3 Smart Compliance Tax Strategies for Professional Services Firms appeared first on MGO CPA | Tax, Audit, and Consulting Services.

• Managing finances in the cannabis industry is complex — with strict regulations, evolving tax laws, and banking challenges.

• Outsourcing your accounting function can help you navigate compliance, manage cash flow, and streamline operations.

• Benefits include cost savings, access to advanced knowledge, and improved financial reporting.

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As a professional in the cannabis or hemp industry, you’re navigating an evolving landscape filled with regulatory hurdles, cash flow challenges, and tax complexities. Whether you’re managing a cultivator, manufacturer, distributor, or dispensary, staying on top of compliance while scaling your business can be overwhelming.

Outsourcing your accounting offers a powerful solution — giving you access to extensive experience, strengthening internal controls, and allowing you to focus on strategic growth. But how do you know if it’s the right move for your business?

What Is Outsourced Accounting?

Outsourced accounting can have several meanings including: 

• Fractional or temporary controller 

• Special project accounting manager 

• Fractional CFO 

• Bookkeeper 

5 Reasons to Outsource Your Cannabis Accounting

Here are key signs that outsourced accounting could be the best next step for your cannabis company:

1. You’re Struggling with Tax Compliance and Complexities

Cannabis taxation is complicated, especially with IRS Code Section 280E limiting deductions. State and local tax requirements vary widely, and tracking inventory properly for cost accounting is crucial. If you’re spending more time deciphering tax laws than managing your business, it may be time to bring in consulting professionals who are knowledgeable in cannabis financial regulations.

2. Cash Flow Is a Constant Challenge

Managing cash flow, accounts payable, and payroll efficiently is critical to keeping operations running smoothly. An outsourced accounting team can implement financial controls, improve cash management, and help you meet payroll and tax obligations without stress.

3. Your Financial Records Need to Be Organized and Audit-Ready

Accurate financial reporting is essential for regulatory compliance, securing funding, and long-term success. If your accounting team is overwhelmed with day-to-day tasks and struggling to produce clear financial statements, an outsourced team can bring structure, accuracy, and transparency to your records — helping you stay compliant and prepared for audits or sophisticated investors.

4. You Have to Scale Quickly

As the cannabis industry grows, so do the demands on your financial operations. Whether you’re expanding into new markets, acquiring licenses, or preparing for investment opportunities, your accounting needs may fluctuate. Outsourced accounting provides the flexibility to scale up or down without the costs of hiring and training an in-house team.

5. You’re Concerned About Security and Fraud Risks

If your accounting team is small or handling the majority of the accounting duties, the risk of financial mismanagement or fraud increases. Outsourcing adds an extra layer of oversight — implementing stronger internal controls and reducing the risk of errors or financial misconduct.

How Outsourcing Can Benefit Your Cannabis Business

Here are some key benefits of outsourcing to help your cannabis business grow smoothly and stay compliant:

• Industry-specific experience: Work with professionals who understand the nuances of cannabis taxation, banking restrictions, and regulatory compliance.

• Stronger financial controls: Improve security, reduce fraud risk, and implement better cash management systems.

• Improved reporting and compliance: Maintain audit-ready financials and meet tax and reporting requirements with confidence.

• Scalability: Expand or contract your accounting support as your business evolves.

• Cost and time savings: Avoid the high costs of hiring full-time staff while gaining access to skilled and knowledgeable financial support.

How MGO Can Help

At MGO, we offer tailored outsourced accounting  and advisory solutions for the cannabis industry — providing the right-size support for your organization’s unique needs. Whether you’re looking to support your team with specialized knowledge or skills, manage day-to-day tasks, get assistance with regulatory compliance, or navigate complex transactions like M&A and capital raising, we’ve got you covered.

Reach out to our team today to learn how we can help streamline your accounting operations.

The post Is Outsourced Accounting Right for Your Cannabis Business? appeared first on MGO CPA | Tax, Audit, and Consulting Services.