dbbmckennon to sponsor The Elite OC seminar

On Wednesday, March 28, 2012, dbbmckennon will be sponsoring The Elite OC's Seminar - Building and Growing a Business - The Tie Between Entrepreneur & Leader. The event will kick-off with a light breakfast and schmoozing (7:00-7:30am), followed by an interactive session with three of Orange County's most respected Entrepreneurs + Leaders (7:30-9:00am). These 'Entre-Leaders' will share their wisdom with us and answer questions on how to successfully build and grow a business:

ANDY FATHOLLAHI - Chief Executive Officer, Incipio

ERIK HALE - Founder, Locale Magazine

BRYAN ELLIOT - Founder, Linked Orange County

This is an amazing opportunity to engage with three key OC-leaders, while also giving back to the local Make-A-Wish Foundation through the optional donation of a backpack or toy for children 3-18 years old.

**Attendance is free and seating is limited so please RSVP and arrive early enough to check-in and grab a seat!

Fletcher Jones Motor Cars at 3300 Jamboree Rd, Newport Beach will be hosting the event. For additional information please contact dbbmckennon or visit The Elite OC.

IRS Releases the Dirty Dozen Tax Scams for 2012

The IRS released their annual "Dirty Dozen" ranking of tax scams to remind taxpayers to use caution during tax season to protect themselves against a wide range of schemes.

The three most common schemes to watch out for are:

Identity Theft – The IRS is increasingly seeing identity thieves looking for ways to use a legitimate taxpayer's identity and personal information to file a tax return and claim a fraudulent refund.  If you believe your personal information has been stolen and used for tax purposes should immediately contact the IRS Identity Protection Specialized Unit.

Phishing – This scam is typically involves unsolicited emails or fake websites that poses as a legitimate site and attempt to get the victim to enter valuable personal and financial information.  These emails can appear to be legitimate, but it is important to keep in mind the IRS does not initiate contact with taxpayers by email or request personal or financial information.

Return Preparer Fraud – It is important you hire a trusted tax professional to prepare and file your tax returns. Questionable return preparers have been known to skim off their clients' refunds, charge inflated fees for return preparation services and attract new clients by promising guaranteed or inflated refunds.

You can find the complete IRS Release of the Dirty Dozen Tax Scams for 2012 here along with additional information on how to contact the IRS if you feel you have been a victim of a tax scam.

For additional complimentary information regarding this item or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

SOX 404(b) Exemption Could Extend to Larger Companies

What is SOX 404(b)?  Section 404(b) of the Sarbanes-Oxley Act ("SOX") requires public companies to have an independent external auditor attest to internal controls over financial reporting, also known as an integrated audit.

What companies are exempt?

Currently, issuers (entities reporting before the SEC) with a public float of less than $75 million or annual revenues of less than $50 million if the public float of the issuer is zero  are exempt from SOX 404(b). However, economic conditions and businesses have contributed to applying pressure to extend the exemption to companies with public floats of less than $1 billion.  It has been also proposed to raise the threshold to $350 million from $75 million.

When might a change in exemption occur?

On February 16, 2012, the House Financial Services Committee opened discussions related to the "Reopening American Capital Markets to Emerging Growth Companies Act." During the markup period for this bill, an amendment to a separate bill was offered to exempt all companies with public floats of less than $1 billion from SOX 404(b).  Although the amendment was withdrawn, the committee chair stated the issue would be considered later this year.

The partners and staff of dbbmckennon, support an amendment to SOX 404(b) to lessen the burden on public companies by increasing the public-float levels from $75 million to in the range $350 million and $1 billion.

We encourage our clients and readers to write to their respective congressional leaders in support of raising the 404(b) public float requirements to $1 billion.  Our firm wrote our congressional leaders during the fight to exempt public companies from 404(b) in support of the $75 million public float, while our competitors and the AICPA did not support the exemption.

Auditor Explained!

Most people are shocked to find out that Certified Public Accountants do more than just tax compliance. dbbmckennon is a full service CPA firm in which provides other services including audits of private and public companies. Individuals within our firm in which perform these services are referred to as "auditors". Most people when they hear that you are an "auditor" automatically associate you with bad things, such as an IRS auditor. What most people don't realize, is that we are the type of auditor in which is there to protect them and their investments. Most auditors have a difficult time explaining to the friends and family what they actually do. If you find yourself not quite grasping what an auditor does, the Center for Audit Quality has created a short video explaining such. You can find the video here. For additional complimentary information regarding our services or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact here.

What’s that new number on your W-2?

You may see a something new on your W-2 this year; employer health plan costs. The Patient Protection and Affordable Act  requires many employers to report the cost of qualifying employer-sponsored health coverage. The new requirement is optional for the 2011 W-2’s (physically issued in January 2012) as employers make modifications to their payroll systems to accomodate the addition information. Starting with 2012 W-2's (physically issued in January 2013) most employeers in which issue in excess of 250 W-2's annually will be required to provide such information.

The costs on the W-2 encompass the costs to the employer for coverage under any group health plan that the employer makes available to the employee. The reporting by the employer provides the US Government to ensure the minimum health care costs are being expended by the employer in accordance with the Act. The amounts are not included in employees' gross income. These costs disclosed exclude long-term care, coverage under separate dental and vision plans, disability insurance, HSA plans, etc. The costs disclosed will include both the employee and employer portion paid.

For additional complimentary information regarding this item or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact here.

Five Accounting Resolutions for 2013

Improving your company should be a constant effort.  Here are fie resolutions to make for 2013 to improve your company's accounting and business.

1. Outsource the work that doesn't benefit your top or bottom line – Business owners should not spend one, two, three or four or more hours a day doing administrative work that doesn't directly impact the company’s growth and future.  Business owners are the face of the company and shouldn't spend all their time behind a computer and a stack of paper.  Outsource the accounting work to a qualified accountant that can take over receivables, payables, and general oversight of the company’s accounting needs.  Use a payroll company that can also help you with HR related issues.  Don’t try to wear all the hats in the organization.
2. Review – Create a monthly or quarterly review process.  Review margins, receivables, payables, and cash forecasts.  Sometimes business owners aren't as profitable as they think they are.  You may get a great margin on a sale, but are you thinking about your overhead costs, how long the product sat on the shelf, etc?  Are your prices to low/high?  Your product/service may need price adjustments.  Reviewing these items regularly will ensure your company doesn't fall behind needlessly.
3. Automate – As your business expands, make sure that efficiencies are found where available.  Credit card processing, storing bank information for clients, or automating payments can assist in becoming more efficient.  Upgrading your accounting software or billing practices can also help.
4. Plan – Speak with your CPA a few times throughout the year not just at year end.   Planning with your CPA can help minimize taxes.  Planning expenditures, creating retirement plans, and taking advantage of certain deductions can all help minimize taxes.
5. Take action – Most resolutions never get off the ground.  Make a concerted effort to do at least one thing that will help your accounting in 2013.  The first step is usually the hardest!

dbbmckennon is a full service CPA firm with offices in Orange County and San Diego focused on providing quality accounting and consulting services at reasonable rates. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.

Tax Prepares Required to be Registered with the IRS

Anyone who prepares tax returns and charges a fee will be required to register with the Internal Revenue Service (IRS). Tax attorneys, certified public accountants, and enrolled agents are exempt because they are already registered with the IRS.

What will be required for a tax preparer to sign a federal tax return:

• Register and obtain a preparer tax identification number (PTIN)
• Required competency tests except for certified public accountants, enrolled agents, and attorneys.
• Continuing education except for certified public accountants, enrolled agents, and attorneys
• Extending the ethical rules in the Treasury Department Circular 230 to apply to tax preparers.

These rules are meant to help tax preparers become more competent in preparing tax returns and reduce the amounts of errors on tax returns. The IRS will start implementing this plan sometime in 2011. Make sure your tax preparer is registered with the IRS.

For additional complimentary information regarding this item or other questions you may have please call one of dbbmckennon's offices located in Southern California or email us here.

Ten Questions to ask a Tax Preparer

There are approximately 100,000 paid tax preparers in the US, but not all are equal. With so many individuals and firms providing these services, it’s not necessarily hard to find a preparer, but it is to find a good preparer who is appropriate for your business and/or personal return. Because everyone’s situation is different, here are the top 10 questions to assess the quality of a prospective tax preparer.

1. Do you specialize in the type of tax returns I require?  Why – Don’t hire a preparer with no experience in the tax returns you require. For example not many preparers specialize in non-profit returns. Find someone who specializes in what you need.
2. How many years of experience do you have preparing returns?  Why – Make sure the person signing off on your return has at least five years experience.
3. Are you a CPA or Enrolled Agent (EA) and are you registered to practice with the IRS under their new regulations? Why – CPA’s and EA’s are completely different. EA’s are licensed to practice in front of the IRS which can be valuable. CPA’s generally have a greater understanding of accounting and business as a whole. Make sure anyone you chose is registered with the IRS to be a paid tax preparer which is required starting in 2012. If a preparer brushes this issue off, keep looking.
4. Do you have experience in IRS audit representation should one of my tax returns get audited? Why – If your return gets chosen for audit, you want to make sure the same person that prepares your taxes can handle your audit. This allows for efficiencies.
5. What are the benefits of using your services rather than a self-preparer service such as TurboTax or a low-end service such as H&R Block. Why – TurboTax and H&R Block are great when you are lower income levels and have an otherwise easy return. But if you own your own business, have income from multiple sources, or have life changing financial events, the expertise of a CPA is advantageous. Most CPA’s can be a value added individual rather than just a simple service provider. CPA’s can also offer planning which will help to minimize your tax burden over the long-term. Lastly, remember that most big-name tax preparation services use seasonal employees. Thus year-to-year, you never see the same preparer which creates a lack of continuity.
6. How will you make sure I get every tax benefit available for me?  Why – Make sure they have a system to catch as many benefits as possible.
7. Does your company offer tax planning and will that be a benefit to me?  Why – Tax planning is a great way to minimize your tax burden through structured and planned actions. However, tax planning is not always necessary. Most companies and individuals don’t need quarterly tax planning but would benefit from tax planning once or twice a year. Unless you are a relatively large company or high-net worth individual, avoid firms that recommend tax planning quarterly as often times they just want to collect more fees than are necessary.
8. Does your firm offer e-filing and how do you ensure the security and retention of my information?  Why – You want to ensure that you use a firm that is up to date with technological advances, which includes the latest in security protection. Firms that take this seriously are serious about keeping your business for the long-term. Investing in technology generally means they are investing in both your future and theirs.
9. How responsive can I expect you to be if I have questions or require tax documents during the year?  Why – Look for preparers that will respond within 24 hours. However, be realistic; good preparers are usually flush with work during tax filing deadlines and often require a little extra time to respond. Be careful about a preparer that overpromises their responsiveness.
10. Will my taxes be filed on time if I am able to provide you with my information in a timely manner before the applicable deadline?  Why – Make sure the preparer is committed to getting your taxes filed on time. However, remember that in order for the preparer to do their job, you need to get you information to them in a timely manner.

For additional complimentary information regarding this item or other questions you may have please call one of dbbmckennon's offices located in Southern California or email us here.

dbbmckennon Takes to the Air

On Tuesday October 18^th, David Gosselin, a director with dbbmckennon, was interviewed on Critical Mass: The Radio Show hosted by Ric Franzi. Topics included future financial concerns of CEO’s, fraud, mitigation of risk through internal controls, and dbbmckennon’s market advantages compared to other CPA firms. dbbmckennon was thrilled to provide our time to contribute to the Orange County business community and get our message to the airwaves. If you didn’t get to listen live, the podcast can be accessed through iTunes podcast. Tune into Ric’s radio show each Tuesday from 4-5pm on www.octalkradio.net.

For additional complimentary information regarding this item or other questions you may have please call one of dbbmckennon's offices located in Southern California or email us here.

Shell Companies

Shell companies in the past have been abused by promoters as a method to pump and dump penny stocks and reap illicit profits. As a result, the Securities and Exchange Commission (the “SEC”) has issued various regulations under the Securities Act of 1934. These provisions prohibit the use of short form registration of securities on Form S-8 generally used for registering securities for officers, directors, employees and consultants until after 60 days from the date the company ceases to be a shell company. In addition, expanded reporting on Form 8-K, commonly referred to a “Super 8-K”, for reverse mergers (or “back-door registrations”) involving a private operating company and a shell company in the US. The term shell company means a registrant, other than an asset-backed issuer as defined in Item 1101(b) of Regulation AB, that has:

  1. No or nominal operations; and

  2. Either:

    i. No or nominal assets;

    ii. Assets consisting solely of cash and cash equivalents; or

    iii. Assets consisting of any amount of cash and cash equivalents and nominal other assets.

How is nominal measured? The SEC purposely did not define nominal since they wish to retain some level of judgment to managements and the SEC staff. Often times, it is not easy to determine whether a company with assets is a shell company or deemed an operating company.

A company with a business plan and qualified management team, which has not commenced operations, may be deemed to be a shell company until operations and assets become significant. Additionally, a company which has exited a business, and temporarily has no significant operations or revenue generating assets, would likely fall into classification as a shell company until operating assets are acquired. A company with a royalty stream from licensing may be considered a shell company if revenues and operating activities are nominal, even though investing activities in new products may be significant.

The facts and circumstances need to be addressed with each company that gives the appearance of a shell company, and the related impact on use of Form S-8 and reporting requirements of Form 8-K for US domiciled companies.

dbbmckennon is a registered firm of the Public Company Accounting Oversight Board, performing financial statement audits for public companies, and providing consultations to management teams involving complex accounting and reporting matters before the SEC.

1099 Requirements Repealed and Explained

It’s no surprise that so many people were confused about the proposed changes to 1099 reporting requirements.   Prior to the Healthcare Reform bill being passed in 2010, businesses had to issue 1099’s to any non-corporations for services provided over $600.  Upon the Healthcare Reform bill being passed, new regulations required that businesses issue 1099’s to ANY person OR corporation that provided ANY good or service individually or in aggregate over $600.  As you can imagine, the new regulations created quite a stir with the additional work that would be required.  These changes were to go into effect at the start of 2012. In April 2011, the new requirements were repealed; much to the pleasure of many small businesses that were deterred by the now former increased reporting measures.   So as we stride ahead in 2011 and march toward 2012, fear not, as the infamous 1099 requirement will not be looming and the old requirements are new again.

The 1099 drama to continue?

As previously discussed there are some big changes scheduled to take effect in January 2012 related to Form 1099 reporting. However, based on the Presidents State of the Union address on January 25, 2010, it appears the President has indicated the willingness to potentially repeal the additional Form 1099 reporting requirements. “Now, I've heard rumors that a few of you have some concerns about the new health care law,” stated the President. “So let me be the first to say that anything can be improved. If you have ideas about how to improve this law by making care better or more affordable, I am eager to work with you. We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses.”

Based on recent legislation introduced by the Senate Finance Committee Chairmand Max Baucus and the Senate Majority Leader Harry Reid, the new legislation would repeal the requirement for all goods and services to be reported by small businesses on Form 1099 beginning in January 2012. As of right now, the reporting requirement still stands so stay tuned.

New IRS Reporting Requirements for Brokers and Transfer Agents

Effective January 1, 2011, brokers and transfer agents will be required to report the costs basis of a security in which was sold during the reporting year on Form 1099-B. Previously, only the sales proceeds received in connection with the sale of a security was included on Form 1099-B. The new requirement is intended to ease the burden on the investor and result in more accurate reporting to the IRS. However, the potential for confusion exists. For instance, assume an individual receives a compensatory grant of stock from an employer. On the date of issuance, the fair market value of the stock is $100 resulting in taxable income to the employee of the same amount. Assuming the individual sells the stock for $200, the broker or transfer agent would most likely report the transaction at a sales price of $200 and a $0 basis. The broker or transfer agent did not take into account the taxable income of $100 already recognized by the individual. Thus, individuals will have to critically review their copy of the 1099-B to ensure completeness.

The IRS has the opinion that the institutions tracking this information are more sophisticated than most investors and thus, the reporting should be more accurate. The IRS has noted in the past, since the investor was responsible for the reporting, there was room for error and interpretation. Accordingly, the IRS believes that they lose out on billions in tax revenue annually due to misreporting.

How the 2010 tax law affects your taxes

With all the uncertainty in Washington, you may have wondering and/or worrying what is going on with taxes in the next few years. Now that the 2010 tax relief act has been passed the picture is a bit clearer. Here are a few highlights of the extension:

1. The current income tax rates in which start at 10 percent and top out at 35 percent will be in place for two more years. The rates were previously schedule to rise in 2011.

2. The rate for which an employee pays into social security has been reduced from 6.2% to 4.2%. This basically means for ever $1,000 of earnings; an individual will take home an additional $20. This is only for 2011 and the employer still pays the full 6.2% employer portion.

3. Patches for Alternative Minimum Tax (“AMT”) were included for 2010 and 2011. In 2010 AMT exemptions will be $47,450 for unmarried individuals and $72,450 for married individuals filing jointly. In 2011, these amounts are set to be $48,450 and $74,450, respectively.

4. Extension of 100% bonus depreciation for business property acquired between September 8, 2010 and January 1, 2012, subject with certain limitations.

5. Important to the elderly, temporary reinstatement of the estate tax of 35% with $5 million exemption.

6. Certain credits and deduction extensions including but not limited to: increased standard deductions for those married and filing jointly, child tax credits, earned income credits, and child dependency credits.

Although there is approximately only one week until the end of the year, there is still plenty of time to make some tax saving moves prior to then. To determine how the new tax law affects your particular situation, contact dbbmckennon today.

Five Tips for Year-End Close

Many small businesses lack formal procedures to properly close their books. Here are five tips that can help streamline the process this year. 1. Make a list and check it twice – The most effective way to close a period correctly and accurately is to make sure everything is complete. Before the year-end, make a checklist of accounts to close, schedules to prepare, tasks to complete, and timeline for each. Keep track of what has been done, and what needs to be done. Identify who needs to prepare the work and who will review it. Then have each of those individuals sign-off on the checklist along the way. Preparing ahead of time and using a checklist will ensure completeness and timeliness.

2. Know your entries – Along with the checklist you make above, create a list of standard journal entries that are required to be made monthly, quarterly, and annually. Compare the list to your current close to make sure everything is properly booked.

3. Use Technology – Along with a listing of standard journal entries, try to use the power of your accounting system (i.e. QuickBooks, PeachTree, etc). Whatever entries can be automated should be set up to do so (i.e. monthly fixed asset depreciation, etc). Also try to use Excel to create dynamic workpapers that create journal entries for you each period to better automate the process. A little work ahead of time will save you time down the road.

4. Analyze variances – Compare each account in your current trial balance against the prior year(s). Set expectations of what you should see based on known activities, economic factors, and recent transactions. Look for accounts that vary outside of those expectations. This simple task will help you determine if something is misstated.

5. Have a tax plan – Develop a plan with your CPA regarding taxes and tax payments. Pro-active planning will help minimize tax burdens, increase cash management effectiveness, and ease your worries about the unknown.

Don’t hesitate to give dbbmckennon a call or email today, to ask us about how these tips can be integrated to your specific situation. We would be happy to help answer your questions or assist you in compliance in order to put your company on a path to success.

Professor Michael McKennon (at least for a day)

On November 4, 2010, Michael McKennon was honored to be able to give back to his Alma Mater, California State University at Fullerton (CSUF), through the "Professor for a Day" program. This was the third consecutive year Michael participated in the program. Michael was allowed to speak with a “Critical Thinking” honors’ class filled with the exceptional freshman students at CSUF. “This was a very insightful and creative group of students I was able to share my time with. I asked each student what they are doing to make a difference in their respective fields to ensure they have opportunities upon graduation. Their answers were surprising; most students were actively involved in some regard, but they admitted that they could do more", said Michael. In addition, Michael communicated the need to make a difference in their respective fields by donating their time in academia and associations which enhance positions in their respective careers. At the end of the instruction, Michael had various individuals thank him for his time and the information provided. Once such individual added the following:

"Dear Mr. Michael McKennon:

Thank you for sharing your experiences today with my Critical Thinking Honors class. I truly appreciate your advise to start networking with teachers, peers, and possibly start looking into internships to get our names out there. You did not simply state that we have to or should network but you also explained why it is important to network. We, students, often hear from other people that we need to start networking since our first year of college to build strong relationships throughout our college years. Some students ignore this because they believe they have time to start in the next few years. Thank you again for taking time out of your busy day to give a truly motivational speech.

Sincerely,

Natassja Romero"

Based on the feedback and appreciation received, Michael is looking forward to next year's opportunity. Upon returning to work that day, Michael expressed the following to the firm personnel: "Sometimes we lose sight of our responsibilities as professionals to make a difference in our communities. I feel great reward in impacting these fine young honor students."

You can view Michael's Certificate here.

What You Need to Know About IRS Communications

Over the last several months, our firm has been receiving a substantial number of calls from clients in a panic because they had received an email notification from the Internal Revenue Service “IRS” stating that their filed tax return will be subject to an audit. The words “IRS” and “audit” are enough to ruin anybody’s day. The IRS will never initiate taxpayer contact via an unsolicited e-mail. All initial contacts are made via US Mail. In addition, the IRS does not use e-mail to discuss cases or to solicit sensitive personal financial information from taxpayers. If this happens to you, the official IRS website (www.irs.gov) has specific instructions on reporting suspicious e-mails or other unsolicited contacts for personal information. The above applies to most government entities including but not limited to the California State Board of Equalization, California Franchise Tax Board, etc.

The IRS website also has some helpful hints on how to spot an e-mail scam. Many e-mail scams are fairly sophisticated and hard to detect. Here are signs from the IRS to watch for if you receive a suspicious e-mail: • Requests detailed or an unusual amount of personal and/or financial information, such as name, SSN, bank or credit card account numbers or security-related information, such as mother’s maiden name, either in the e-mail itself or on another site to which a link in the e-mail sends the recipient. • Dangles bait to get the recipient to respond to the e-mail, such as mentioning a tax refund or offering to pay the recipient to participate in an IRS survey. • Threatens a consequence for not responding to the e-mail, such as additional taxes or blocking access to the recipient’s funds. • Gets the Internal Revenue Service or other federal agency names wrong. • Uses incorrect grammar or odd phrasing (many of the e-mail scams originate overseas and are written by non-native English speakers). • Uses a really long address in any link contained in the e-mail message or one that does not start with the actual IRS Web site address (http://www.irs.gov). The actual link’s address, or url, is revealed by moving the mouse over the link included in the text of the e-mail.

For those who have received a questionable e-mail claiming to come from the IRS you may forward directly to IRS. The information will assist the IRS track the suspicious e-mail to its origins and ultimately help shut down the scam. Please don’t hesitate to give dbbmckennon a call or email, to discuss any of your concerns or if you are actually subject to an IRS, California State Board of Equalization, California Franchise Tax Board, etc. audit.

What is the difference between a Certified Public Accountant (CPA) and Enrolled Agent (EA)?

For you or your business, the difference could be significant or inconsequential depending on the services you require and the experience of the professional. If you look at statistics alone, you will find there are more CPA’s in the United States than EA’s. This may lead you to believe that an EA is the more desired and difficult designation to attain; and therefore, the more valuable designation. In reality, the reason there are more CPA’s is because CPA’s can specialize in different areas (audit, income taxes, consulting, etc.), whereas EA’s only prepare basic income tax returns, primarily for individuals as opposed to corporations, trusts and estates. A CPA has general accounting and business knowledge along with a specific specialization. A CPA that specializes in income taxes will often have expertise in taxation of mergers and acquisitions, complex income tax matters, as well as multi-state tax compliance. To become an EA, you must either take a written exam based on the tax matters or have the required past experience with the IRS. A CPA on the other hand is required to have a minimum of 120-150 credit hours (differs by state) of higher education (university level), work experience in the field, and pass four rigorous exams within 18 months, which cover various subjects including: financial and cost accounting, taxes, regulation, general business, economics, IT in business, and others. Both are required take continuing education to maintain their status, which should keep them up to date on the latest trends and regulations.

But what is the difference to you the individual or small business owner?

If you are starting, or already have, a business and require annual income tax returns, tax planning, and business guidance on matters, then a CPA is likely your best choice. In addition, you may want to consider a CPA that is part of a full-service CPA firm, where there are multiple CPA’s with varying specialties including: income taxes and IRS representation, technical accounting and assurance services and consulting. Choosing a full-service CPA firm, will ensure that all your business needs can be serviced continually one firm. EA’s cannot perform assurance services, such as a compilation, review or audit of your company’s financial statements.

When determining the services you require, consider interviewing the professionals to determine their knowledge and expertise.

Is a Reverse Acquisition right for you?

One of the more popular ways for a small business to go public is through a reverse acquisition. A reverse acquisition allows private companies to go public without a number of regulatory requirements present in a typical IPO. A typical IPO can take at least six months to complete and require hundreds of thousands of dollars in professional fees due to the comment and review process with the Securities and Exchange Commission. A typical reverse acquisition, involves 100% of the private company’s stock or equivalent being acquired for a large equity stake in the public company, generally over 90% but can be as low as 40%. Generally, the public company is known as a “shell corporation” in which has limited or no operations. The two businesses are then merged using the private company’s products with a public company’s structure.

One of the biggest factors in considering whether or not you have a reverse acquisition is who controls the public company after the transaction. In cases where the private company’s shareholders own less than 50% of the public company, analysis of operational control, board control or other factors impacting control must be conducted. We have experienced reverse acquisitions where private company shareholders control 40% of the public company stock, and the board is controlled or evenly controlled by the private company’s management. Thus, control is maintained by the private company.

A reverse acquisition, with a public company will cause a change in reporting entity which, in effect, causes the financial statements of the public company to be eliminated and replaced with those of the private company for all previously reported periods which are included in future filings with the SEC; no previously filed reports of the public company are required to be amended and re-filed. A change in reporting entity is generally a preferable reporting requirement because the readers of the financial statements can see comparable amounts in the interim and annual reporting by the public company. Alternatively, in a forward acquisition, the private company’s financial statements and results are included only from the date of the acquisition forward.

One of the key requirements to a reverse acquisition is that an 8-K, commonly known as a Super 8-K, needs to be filed within four (4) business days of the acquisition date. The 8-K will include information similar to that of a standard 10-K, including audited and reviewed financial statements of the private company. All future public filings will present the historical financial statements of the private company as if they acquired the public company.

If you are considering a reverse acquisition it is extremely important that you obtain proper guidance from a securities attorney and an experienced auditor. One of the major delays in closing a reverse acquisition is obtaining the required audits and the completed 8-K. At dbbmckennon we have conducted numerous audits in connection with reverse acquisitions. If you are contemplating a reverse acquisition to take your private company public, please contact us to discuss if this is the right method for you.

dbbmckennon moves its Orange County office to a new location within Newport Beach, CA

Newport Beach, CA –dbbmckennon moved its Orange County office to: 20321 SW Birch Street Suite 200 Newport Beach, California 92660

All other contact information including phones and email will remain the same.

Our new building provides for our future growth, and enables us to incorporate the latest technologies and space efficiency to achieve cost effectiveness. For more information, contact dbbmckennon at 949-203-3010 or info@dbbmckennon.com.

dbbmckennon is a full service public accounting firm in which was established to provide tax, attestation and consulting services to individuals and businesses through our two offices located in Southern California. Our partners have represented hundreds of small businesses and audited over a hundred smaller reporting public companies in the United States and abroad. We deliver high-quality professional services, in a timely manner, and focus on providing value to our clients. Our technical skills rival those offered by our strongest competitors, which enable our clients comply with the rules and regulations of our profession. We take every engagement seriously with the expectation that our clients will be completely satisfied with our performance. In addition, the firm has a highly competitive fee structure for the Southern California market. We take every engagement seriously with the expectation that our clients will be completely satisfied with our performance and fees. Our rate structure is intended to be the most competitive in light of the current economic conditions.