How to Value a Family Business

Valuing a Family Business

Valuing a family business can be one of the most important financial steps an owner will ever take. No matter whether you are planning for retirement, preparing to pass the business to the next generation, or considering a sale, knowing what the business is truly worth gives you clarity and confidence. When you’ve spent the time making the business what it is, it’s imperative to make sure you have the clearest picture you can get.

At Cooper Norman, professional business valuation services help family-owned businesses make informed decisions based on accurate, objective information. This is especially important for agricultural businesses, which are often family-owned and closely tied to long-term legacy.

Why Valuing a Family Business Is Unique

Family businesses are built on years of hard work and shared history. Because of that, it is easy for emotion to influence how owners view the value of their business. Some owners may overestimate value based on sentimental attachment, while others underestimate it by focusing only on day-to-day income and forgetting to look at the big picture.

Common challenges include mixing personal and business expenses, informal pay structures for family members, and assets like land or equipment being held within the business. Without a clear valuation, these factors can create confusion and disagreements when it is time to make major decisions.

A professional business valuation helps separate emotion from financial reality and provides a clear picture of the business’s actual value.

The Importance of a Third-Party Business Valuation

Using a qualified third-party professional is one of the most important parts of valuing a family business. An independent valuation provides objectivity and credibility that internal estimates cannot offer, making sure that what someone sees as the value of their business is actually accurate.

Third-party valuations are often required for selling a business, transferring ownership to family members, estate planning, divorce proceedings, or tax reporting. Lenders, courts, and tax authorities rely on valuations performed by experienced professionals who follow recognized standards.

Working with a trusted firm like Cooper Norman ensures your business valuation is accurate, defensible, and useful for real-world decision-making.

Example: Valuing a Family-Owned Farm

Imagine a family farm that has been operating for several generations. The land has increased in value over time, equipment has been upgraded, and multiple family members are involved in daily operations. The owners are ready to retire and want to sell the farm to one child while treating the other children fairly.

Without a professional agriculture valuation, it can be difficult to determine a fair price. Land values may be outdated, equipment is often incorrectly depreciated, and income may vary from year to year based on weather and commodity prices. Family labor is often unpaid or underpaid, which distorts financial statements.

A formal valuation considers all of these factors, including land, equipment, livestock, operating income, and market conditions. This creates a clear and objective value that helps guide fair decisions and protect family relationships.

Why Agriculture Valuation Requires Specialized Expertise

Agricultural businesses have unique characteristics that require specialized valuation knowledge. Farm and ranch valuations must account for land productivity, seasonal cash flow, market volatility, and long-term asset value.

Because many farms and ranches are family-owned, agricultural valuation often plays a key role in succession planning, estate planning, and ownership transfers. An experienced valuation professional understands how to balance operational performance with asset-based value to provide a complete and accurate assessment.

Cooper Norman offers agriculture valuation services designed specifically for farms, ranches, and agribusiness operations.

When Should You Value a Family Business?

Many owners assume valuation is only necessary when selling a business, but that is not the case. A current valuation can be valuable during many stages of ownership, including retirement planning, adding or removing partners, estate planning, or preparing for financing. Having an accurate valuation not only gives you a better grasp on the current state of your business but also helps you plan for the future.

Having an up-to-date business valuation allows you to plan ahead instead of reacting during a stressful transition.

Protecting Your Business and Your Legacy

A family business represents more than income. It represents stability, opportunity, and legacy. A professional business valuation provides the clarity needed to make informed decisions and protect both the business and family relationships.

Contractors: How’s your succession plan coming along?

A 2024 survey conducted by consultancy FMI in partnership with the Construction Financial Management Association found that 58% of contractors who responded didn’t have an “ownership transition plan” in place. What’s worse, half of the construction business owners surveyed who planned to retire in three to five years had no plan at all. The data also showed that fewer contractors were developing formal succession plans than when the survey was last conducted in 2020.

With so much on your plate, it’s understandable that you might put off succession planning. (Kudos to you if you haven’t.) But dragging your feet reduces the odds that you’ll be able to hand off the business you’ve spent years building in a manner entirely of your own choosing. Here’s some food for thought, even if your anticipated departure is far down the road.

The Case for Planning

We get it. You’re busy generating bids, managing multiple projects, engaging in strategic planning and doing everything else that’s part and parcel of running a construction company. Retirement may seem far off. And addressing other things that might force you out of your leadership role, such as disability or death, isn’t easy.

However, succession planning is essential for contractors who want their businesses to carry on after they retire or otherwise leave the company. Beyond preserving the business, it helps secure your family’s financial future and ensures operations continue in line with your mission, vision and values. But for that to happen, you need a succession plan that accomplishes your goals, whether those are to keep the company in the family, contribute to your retirement funds, provide opportunities to valued employees or some combination thereof.

Moreover, failure to plan can lead to confusion and uncertainty after your departure, which could, in turn, impair your company’s value. This is particularly true for owners who are well known and liked by employees, customers and the community. If you aren’t replaced by someone whom you clearly endorse, workers may jump ship and customers might take their business elsewhere. Lack of a succession plan in a family-owned business can also trigger acrimonious disputes between family members that have a ripple effect on employees, customers, vendors, lenders and sureties.

Transfer Methods

Your decisions on some key issues will drive your succession plan. Perhaps the most important is how you’ll transfer ownership.

For family-owned companies, an intrafamily transfer is a viable option, whether through a gift or a sale. The former offers flexibility. For instance, you can transfer the entire business at once or gift shares over time while retaining some degree of control and income. Alternatively, you can gift or sell shares to an irrevocable trust with family members as beneficiaries.

If you sell your construction company to family members outright, you have several options for structuring the sale. For example, you might set up an installment sale so you can rely on regular payments in retirement and defer (and possibly reduce) taxes. The sale price for family members is usually less than that for a third party, but you may minimize risks such as layoffs or a drastic change in company culture.

You’ll need to consider the estate tax implications as well. For instance, gifting would reduce your taxable estate but eat away at your estate tax exemption. The good news is this may be less of a concern with the current federal estate and gift tax exemption set at $13.99 million for individuals ($27.98 million for married couples). Starting in 2026, the exemption will increase to $15 million ($30 million for married couples), with annual inflation adjustments going forward. All that said, gifting can create family drama over “fairness”, especially if you have children who aren’t involved in the business.

If your company isn’t family owned or you don’t intend to pass ownership to family members, you could sell it to a third party or private equity group. However, attracting an outside buyer may require you to first strengthen your financials to make the business more appealing. This can take time, potentially delaying your departure.

Construction companies with strong leadership teams and workforces should at least consider an employee stock ownership plan (ESOP). With an ESOP, you can sell your ownership interest over time to a trust that holds shares for employee-owners. Or the ESOP can use financing to buy shares, with the business contributing cash annually to cover the principal and interest payments. Bear in mind, though, that ESOPs are legally prohibited from paying more than fair market value for shares.

Many Paths to Take

We’ve only scratched the surface of succession planning for contractors. The point is, there are many paths to protecting your financial future and preserving your construction company’s legacy. We can help you choose the right direction for your succession plan and assist you in making any necessary course corrections.

How to Value a Construction Company

Valuing a construction company

Valuing a construction company requires a careful look at its financial strength, business operations, and long-term potential. Because construction businesses often deal with fluctuating project loads, changing material costs, and shifting labor demands, determining their true value takes more than simply reviewing the books. Whether you are preparing to sell a company, buy one, or evaluate its performance, understanding what goes into a proper valuation is essential. Below are the key factors commonly used to determine the worth of a construction business.

Review Financial Performance

A major part of valuing any company is understanding its financial health. For construction businesses, buyers and investors typically look at revenue trends, profit margins, debt, cash flow, and overall stability. Examining several years of financial statements helps reveal how consistent the company has been with winning projects and managing expenses. Strong cash flow is especially important because construction work often requires paying for materials and labor before receiving client payments. A business with steady revenue and predictable cash flow will generally be valued higher.

Analyze Assets and Equipment

Construction companies often own valuable equipment such as trucks, loaders, excavators, and other heavy machinery. These assets play a significant role in the company’s value. Well maintained equipment raises the valuation, while older or poorly cared for equipment can reduce it. In addition to physical assets, companies may also have intangible assets like established vendor relationships, long term contracts, and strong local reputation. All of these factors should be included when determining value.

Evaluate Backlog and Contract Stability

A company’s backlog refers to the projects it has secured but has not yet completed. This is an important indicator of future revenue. A healthy backlog shows that the company has ongoing work and stable demand. In contrast, a thin or inconsistent backlog may suggest instability. Evaluating the types of contracts the company holds is also important. Long-term, fixed price, or recurring contracts often increase a company’s value because they provide dependable revenue and lower the risk for future buyers.

Consider Workforce Strength

Skilled labor is one of the most valuable assets a construction company can have. A stable and experienced workforce adds significant value because it indicates reliability, higher quality work, and easier project management. If a company has low employee turnover, strong leadership, and workers with specialized skills, it will be valued more favorably. A company that struggles with staffing shortages or frequent turnover may require additional investment, which can lower its value.

Review Market Position and Reputation

A construction company’s reputation in its community and industry heavily influences its worth. Positive customer feedback, longstanding relationships with suppliers, and a strong presence in the market all contribute to a higher valuation. Companies known for quality work, reliability, and on time project delivery typically attract more clients and opportunities, which enhances their long-term value.

Choose the Right Valuation Method

Several common methods are used to value a construction company. These include the income approach, which looks at future earnings, the asset based approach, which evaluates physical and intangible assets, and the market approach, which compares the company to similar businesses that have recently sold. Often, a combination of these methods provides the most accurate picture.

Understanding how to value a construction company requires looking beyond surface level numbers. By taking financial performance, assets, workforce quality, contracts, and market reputation into account, you can determine a fair and realistic valuation that reflects the company’s true strength and future potential.

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How to Value a Business for Divorce

Valuing a business

Divorce can be a complex and emotional process, especially when a business is involved. Determining the value of a business is essential for fairly dividing marital assets and ensuring both parties reach an equitable settlement. Business valuation during divorce requires careful analysis, professional guidance, and clear documentation. Whether the business is small or large, understanding how its value is calculated can help both spouses navigate the process with confidence and clarity.

Determine Whether the Business Is a Marital Asset

The first step in valuing a business during divorce is identifying whether the business is considered marital property, separate property, or a combination of both. In many cases, a business started or significantly grown during the marriage is treated as a marital asset. Even if one spouse owns the business, the other spouse may still have a claim to part of its value if marital time, money, or labor contributed to its growth. Understanding how your state classifies property is essential, as it influences how the business will be valued and divided.

Gather Complete Financial Documents

Accurate business valuation depends on thorough financial documentation. This typically includes tax returns, balance sheets, profit and loss statements, bank records, payroll reports, and accounts receivable or payable. The more complete and transparent the financial information, the easier it is to determine a fair value. Providing full documentation also helps prevent disputes and reduces the likelihood of delays during the divorce process.

Use Professional Business Valuation Experts

Because valuing a business can be complicated, most couples choose to hire a professional business appraiser or valuation expert. These professionals specialize in analyzing financial records, market trends, and operational data to determine an objective value. They also help eliminate bias and ensure the valuation meets legal standards. In some cases, each spouse hires their own expert, while in others, the couple agrees to use a neutral appraiser. The complexity of the business often determines which approach is best.

Understand the Common Valuation Methods

Business appraisers typically use one or more standard methods to determine value. The income approach looks at the business’s expected future earnings. The market approach compares the business to similar companies that have recently been sold. The asset approach evaluates the company’s tangible and intangible assets, such as equipment, inventory, and goodwill. Each method provides unique insight, and the final valuation may use a combination to paint a complete picture of the business’s worth.

Consider Personal Goodwill Versus Business Goodwill

Goodwill refers to the intangible value of a business, such as reputation, customer relationships, and brand strength. In some cases, goodwill is tied to the business itself, while in others it is tied to the personal reputation or skills of one spouse. Personal goodwill is often excluded from marital property, while business goodwill is included. Distinguishing between the two can significantly influence the business’s valuation and how much each spouse receives.

Plan for Buyout or Division Options

Once the business value is determined, the couple must decide how to divide that value. Common solutions include one spouse buying out the other, selling the business and dividing the proceeds, or allowing both spouses to retain ownership. In most cases, business buyouts are preferred because they allow the business to continue operating without disruption. A structured payment plan may also be used when a lump sum is not possible.

Valuing a business for divorce requires patience, transparency, and professional support. By understanding the key steps and methods involved, couples can make informed decisions that lead to a fair and balanced outcome while protecting the future of the business.

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Cost Reporting in Construction

Cost Reporting

In the construction industry, keeping projects on budget is just as important as completing them on time. With multiple stakeholders, changing site conditions, and unexpected expenses, construction projects are often at risk of exceeding their budgets. Cost reporting is a critical tool that helps project managers, contractors, and owners monitor financial performance, make informed decisions, and ensure projects remain profitable.

What is Cost Reporting in Construction?

Cost reporting in construction is the process of tracking, analyzing, and communicating the costs associated with a project. This includes everything from labor, materials, and equipment to subcontractor expenses and overhead. The goal is to provide stakeholders with accurate, up-to-date information about project spending, allowing them to identify potential overruns early and take corrective action. Construction accounting is a great way to do all that is mentioned above to create smooth cost reporting.

Why Cost Reporting is Important

Accurate cost reporting offers several benefits for construction projects:

Financial Control: Regular reports help project managers understand where money is being spent and where savings can be made. This reduces the risk of unexpected overruns.

Transparency: Detailed cost reports provide transparency for owners, investors, and contractors, building trust and accountability.

Decision-Making: Timely financial data enables managers to make informed decisions about resource allocation, scheduling, and procurement.

Forecasting: Cost reports allow project teams to predict future expenses and adjust plans proactively, minimizing risk.

Compliance: Many projects require adherence to regulatory or contractual reporting standards. Cost reporting ensures that documentation is accurate and compliant.

Key Components of Cost Reporting

A comprehensive cost report typically includes:

Budget vs. Actual Costs: Comparing planned expenses against actual spending highlights variances and potential issues.

Labor Costs: Tracking wages, overtime, and productivity helps manage one of the largest portions of any construction budget.

Material and Equipment Costs: Monitoring purchase orders, invoices, and usage ensures materials and equipment stay within budget.

Subcontractor Costs: Keeping tabs on subcontractor payments and work progress prevents delays and unexpected costs.

Overhead and Indirect Costs: These include project management, permits, insurance, and other administrative expenses that must be accounted for.

Best Practices for Effective Cost Reporting

Use an Accountant: Using a construction accountant is a a great way to create consistency and have the aid of a professional to look at data over time.

Update Regularly: Frequent reporting ensures that issues are identified early, reducing the likelihood of costly surprises.

Leverage Technology: Construction management software can automate tracking, improve accuracy, and generate real-time reports.

Analyze Trends: Look beyond single-period numbers. Trend analysis helps identify recurring issues and areas for improvement.

Communicate Clearly: Reports should be concise, clear, and tailored to the audience, whether it is an owner, project manager, or accounting team.

Cost reporting in construction is more than just bookkeeping. It is a strategic tool that provides financial insight, enhances transparency, and supports better decision-making.That is why a construction accountant could be very beneficial for any construction business. By implementing consistent, accurate, and timely reporting practices, construction teams can maintain control over their projects, prevent budget overruns, and improve overall project outcomes. For construction firms aiming for efficiency and profitability, effective cost reporting is essential.

What Are Fractional CFO Services?

For many growing businesses, managing finances can become complex and time-consuming. Companies often need strategic financial guidance to make informed decisions, improve profitability, and plan for sustainable growth. However, not every business can justify hiring a full-time Chief Financial Officer (CFO). This is where fractional CFO services come in. They provide businesses with access to experienced financial leadership on a part-time or flexible basis, offering expert guidance without the cost of a full-time executive.

Understanding Fractional CFO Services

A fractional CFO is a seasoned finance professional who works with a company on a part-time, contract, or project basis. Unlike a traditional CFO, a fractional CFO does not work exclusively for one company full-time. Instead, they provide strategic financial support tailored to a business’s needs, often for small to mid-sized companies, startups, or businesses experiencing rapid growth.

Key Components of Real Estate Fund Accounting

Investor Contributions and Capital Calls
Fund accounting starts with tracking each investor’s capital contributions. Accurate records are essential for calculating ownership percentages, managing capital calls, and ensuring that funds are allocated properly across investments.
Property Acquisition and Financing
When a fund acquires real estate, accounting must reflect the purchase price, financing arrangements, and associated transaction costs. This includes loan interest, closing costs, and any capital improvements made to the property.
Revenue Tracking
Real estate funds generate revenue through rent, lease agreements, and other property-related income. Fund accounting tracks this revenue, allocates it to the correct investors, and records it in compliance with fund agreements.
Expense Management
Expenses such as property management fees, maintenance costs, insurance, and property taxes must be tracked carefully. Proper expense allocation ensures that investors receive accurate performance reports and avoids disputes over fund management.
Distribution Calculations
One of the most critical aspects of real estate fund accounting is calculating distributions to investors. This may include preferred returns, profit-sharing arrangements, or waterfall structures as outlined in the fund agreement. Accurate accounting ensures that all investors are paid fairly and on schedule.
Performance Reporting
Regular reporting to investors is essential for transparency and trust. Fund accountants prepare detailed financial statements, including balance sheets, income statements, cash flow reports, and capital account statements. These reports allow investors to monitor fund performance and make informed decisions.

Benefits of Hiring a Fractional CFO

Businesses can gain significant advantages from fractional CFO services:

Cost Efficiency: Companies access expert financial leadership without the expense of a full-time salary, benefits, and overhead.

Flexibility: Fractional CFOs can work on a monthly retainer, project basis, or as needed, giving businesses the flexibility to scale services up or down.

Expertise: Businesses benefit from seasoned financial professionals who have experience across industries and business cycles.

Improved Decision-Making: With clear financial insights and strategic guidance, business owners can make informed decisions that support growth and profitability.

Short-Term or Long-Term Support: Fractional CFOs can step in for temporary needs, such as a transition period or specific project, or provide ongoing strategic oversight.

Who Can Benefit From Fractional CFO Services?

Fractional CFO services are particularly valuable for a variety of businesses. Startups can benefit from guidance on budgeting, fundraising, and financial strategy, while small and mid-sized businesses experiencing rapid growth or significant changes gain support in managing their finances effectively. Companies undergoing mergers, acquisitions, or restructuring can rely on fractional CFOs for strategic oversight and risk management. Additionally, businesses looking to improve cash flow, enhance profitability, or increase operational efficiency can leverage these services to achieve their financial goals with expert guidance.

Fractional CFO services offer businesses a cost-effective, flexible way to gain the expertise of a seasoned financial leader. By providing strategic guidance, financial planning, and operational insight, fractional CFOs help companies navigate complex financial challenges and achieve sustainable growth. For business owners who need executive-level financial support without the commitment of a full-time hire, fractional CFO services are an ideal solution.

A Guide to Real Estate Fund Accounting

Real Estate Fund Accounting

Real estate investing can be a lucrative opportunity for individuals and institutional investors alike. Whether it’s a private equity real estate fund, a real estate investment trust, or a joint venture, managing the finances of a real estate fund requires specialized knowledge and precision. Real estate fund accounting is a critical component of ensuring that investments are tracked accurately, reporting is compliant, and stakeholders have the financial clarity they need to make informed decisions.

What is Real Estate Fund Accounting?

Real estate fund accounting is the process of recording, tracking, and reporting all financial transactions related to a real estate investment fund. Unlike standard business accounting, fund accounting focuses on managing multiple investors, tracking fund performance, and ensuring transparency in distributions, fees, and valuations. The goal is to provide clear financial information to investors while ensuring compliance with regulatory and tax requirements.

Key Components of Real Estate Fund Accounting

Investor Contributions and Capital Calls
Fund accounting starts with tracking each investor’s capital contributions. Accurate records are essential for calculating ownership percentages, managing capital calls, and ensuring that funds are allocated properly across investments.
Property Acquisition and Financing
When a fund acquires real estate, accounting must reflect the purchase price, financing arrangements, and associated transaction costs. This includes loan interest, closing costs, and any capital improvements made to the property.
Revenue Tracking
Real estate funds generate revenue through rent, lease agreements, and other property-related income. Fund accounting tracks this revenue, allocates it to the correct investors, and records it in compliance with fund agreements.
Expense Management
Expenses such as property management fees, maintenance costs, insurance, and property taxes must be tracked carefully. Proper expense allocation ensures that investors receive accurate performance reports and avoids disputes over fund management.
Distribution Calculations
One of the most critical aspects of real estate fund accounting is calculating distributions to investors. This may include preferred returns, profit-sharing arrangements, or waterfall structures as outlined in the fund agreement. Accurate accounting ensures that all investors are paid fairly and on schedule.
Performance Reporting
Regular reporting to investors is essential for transparency and trust. Fund accountants prepare detailed financial statements, including balance sheets, income statements, cash flow reports, and capital account statements. These reports allow investors to monitor fund performance and make informed decisions.

Challenges in Real Estate Fund Accounting

Real estate fund accounting is complex due to multiple factors:

Multi-property Management: Each property may have unique revenue streams, expenses, and financing arrangements.
Regulatory Compliance: Funds must adhere to local, state, and federal regulations, including tax compliance for multiple investors.
Investor Transparency: Accurate and timely reporting is essential to maintain investor trust and meet fiduciary responsibilities.
Complex Fund Structures: Real estate funds often include preferred returns, tiered profits, and waterfall distributions, which require precise calculations.

How Professional Accounting Services Can Help

Given the complexities, many real estate funds rely on professional accounting firms to manage their fund accounting. These services provide:

Expertise in fund structures and investor reporting
Accurate bookkeeping and expense allocation
Timely and compliant financial reporting
Support during audits and regulatory reviews
Strategic insights to optimize fund performance

Real estate fund accounting is more than just managing numbers,it is a critical process that ensures transparency, accuracy, and compliance for investors and fund managers. Whether you are managing a small private fund or a large institutional portfolio, having a robust accounting system in place is essential for maintaining investor confidence and maximizing returns. By understanding the key components and challenges of real estate fund accounting, fund managers can make informed decisions and build long-term success in the competitive world of real estate investing.

Construction businesses shouldn’t overlook the R+D credit

Contractors: Don’t blame yourself if you’ve been running on the assumption that your company is ineligible for the federal research and development (R&D) tax credit. Many people believe the potentially lucrative tax break is available only to organizations in industries commonly associated with experimentation and innovation, such as technology and life sciences. But construction businesses may indeed qualify for the credit, sometimes without knowing it, and even if they don’t report profits in a given tax year.

Construction businesses shouldn’t overlook the R&D credit

How does it reduce taxes?

Under Section 41 of the tax code, the R&D credit generally equals 20% of the excess of a company’s domestic qualified research expenses (QREs) for the tax year over a base amount. The base amount is usually calculated in part based on the taxpayer’s average gross receipts for the four most recent years. QREs include:

Wages for employees involved with the research,
Supplies to conduct the research,
Amounts paid to rent or lease computers for research purposes (including many cloud-computing arrangements), and
65% of amounts paid or incurred for contractors involved with the research.

Notably, for some taxpayers, the credit isn’t applicable only to offset income taxes. Qualified small businesses (QSBs) can also apply up to $500,000 annually for five years against payroll taxes. That means you can benefit even if you have a loss for the year.

QSBs are corporations (including S corporations) or partnerships with 1) gross receipts of less than $5 million for the tax year, and 2) no gross receipts for any tax year in the preceding five-year period ending with the tax year. Note that the payroll credit first reduces an employer’s Social Security tax for the quarter, then it reduces the employer’s Medicare tax for the quarter. Any remaining excess carries over to the next quarter.

Corporations without publicly traded stock, partnerships and sole proprietorships whose average annual gross receipts for the preceding three-year period don’t exceed $50 million also have the option to offset the alternative minimum tax. Members of controlled groups, businesses under common control and affiliated groups are treated as employed by a single employer for purposes of this gross receipts test.

Which activities qualify?

To claim the R&D credit, your construction business must generally satisfy the following four factors:

It must perform research to eliminate technical uncertainty about the development or improvement of a “business component.” This is generally defined as a product, process, technique, formula, invention or type of software.
It needs to undertake the research to discover information that’s technological in nature. In other words, your efforts must be based on physical, biological, engineering or computer science principles.
It must intend to apply the research to develop a new or improved business product or process.
Its research activities must substantially be elements of an experimentation process related to a new or improved function, performance, reliability or quality.

While these requirements may seem daunting, you’d be surprised how many of your company’s activities might satisfy them, especially in today’s innovative construction environment. Qualified research activities could include:

Exploring alternative project delivery means and methods (before work begins),
Testing constructed systems throughout a job,
Improving building components (for example, to withstand natural disasters or improve sustainability), and
Developing construction models.

If your business engages in such activities, or has in the recent past, you could qualify for the credit or a refund that trims your tax bill and reduces your effective tax rate and estimated tax payments.

What documentation is needed?

The IRS has heightened the information requirements for refund claims. So, comprehensive documentation is essential. Claimants must identify all business components to which the refund claim relates for the relevant year. Also, for each component, you need to:

Identify all research activities performed,
Name the individuals who performed each activity (or provide their titles or positions),
Describe the information each individual sought to discover, and
Provide the total qualified employee wage expenses, total qualified supply expenses and total qualified contract research expenses for the tax year.

In addition, you’ll have to keep contemporaneous records to fulfill those requirements, including payroll and hours (divided between qualifying and nonqualifying activities), third-party contracts and invoices, and detailed documentation of the research process.

Who can help?

Although potentially beneficial, the R&D credit is far from simple. We can help you determine whether your construction company qualifies for the tax break. If it does, we’d be happy to assist you in documenting your research activities and claiming the credit come tax time.

9 Essential Types Of Insurance For Construction Companies

Comprehensive insurance coverage might seem like a luxury for many contractors. After all, you’re likely dealing with rising costs from supply chain uncertainties, tariff-impacted materials prices and a tight labor market. However, these conditions make financial protection more important than ever.

We can help you put together the optimal insurance mix tailored to your construction company’s circumstances. But in the meantime, here are nine essential policy types to consider if you don’t have them and to review carefully if you do:

General liability. Sometimes called comprehensive general liability, this coverage kicks in when your business is sued for bodily injury, property damage or personal injury allegedly caused by your operations. For example, it may cover claims of defamation or invasion of privacy. General liability policies are sometimes required by law or under some contracts.
Commercial property. This type of insurance provides coverage if you suffer qualifying losses to your owned or rented building, tools, furniture, inventory or equipment. Generally, such losses must arise from fire, burglary, theft, wind or lightning. A policy pays part or all of the costs to repair or replace business property damaged by a covered occurrence.
Business interruption. This policy will compensate you for income lost if you’re forced to suspend normal operations because of physical damage to your property or a civil order requiring your business to close. It also typically covers losses from specified natural disasters, theft and vandalism, but excludes those caused by events such as epidemics and viral or bacterial contamination.

Note: Many insurers allow you to bundle general liability, commercial property and business interruption insurance into a single policy known as a business owner’s policy.

Commercial auto. Does your construction company use vehicles as part of its operations? If so, you’re probably aware that personal auto coverage generally won’t cover accidents that occur while a vehicle is being driven to or from a jobsite, used to make equipment or materials deliveries, or operated for some other business purpose. Commercial auto, or commercial truck, for large vehicles such as dump trucks and cement mixers, usually covers accidents, as well as theft, damage from natural disasters and vandalism.
Cyberliability. Hackers don’t restrict their nefarious activities to large corporations, financial firms and health care systems. Any business that collects and stores sensitive data can be targeted, and that includes construction companies. Cyberliability insurance generally covers regulatory fines and penalties, litigation expenses, and response costs. For instance, it may cover investigating incidents and notifying customers affected by a data breach.
Builder’s risk. Also known as cost of construction coverage, these typically short-term policies apply to buildings and other structures undergoing development, construction or renovation. A policy may also cover equipment and machinery used in the process, as well as temporary structures (such as scaffolding), paving, fencing and new landscaping.

Coverage generally applies only to damage caused by fire, weather, theft or vandalism. Damage from earthquakes or flooding is usually excluded. Many project owners have builder’s risk insurance, so contractors may not always need to buy it.

Errors and omissions (E&O). Also known as professional liability insurance, this type of coverage may sound like it’s intended for doctors or lawyers. However, any business that might be confronted by an unsatisfied customer claiming the company made mistakes while providing services should consider it. E&O insurance is typically limited to financial damages, with claims for property damage or bodily injury falling under general liability insurance.
Inland marine. This type of coverage usually applies to equipment, tools and movable materials that are stolen or damaged in transit, on a jobsite or in storage. It may apply to mobile equipment (such as forklifts and cranes), leased equipment and computer equipment (for example, laptops and tablets). The insurance generally provides replacement cost or actual cash value and may also cover related costs, such as those resulting from project delays caused by a covered incident.
Wrap-up. These policies, whether owner-controlled or contractor-controlled, are typically applicable to large construction projects. Wrap-up insurance is designed to provide sweeping coverage that:

Shields the owner, general contractor and subcontractors, and
Bridges gaps that can arise when all these parties buy individual liability policies.

It can include general liability, builders’ risk, pollution liability, commercial vehicle and other types of coverage, all in a single policy. With such extensive protection, though, wrap-up insurance often comes with a hefty price tag.

How to Avoid IRS Auditing Penalties

IRS Auditing Penalties

When it comes to taxes, most people share one major fear: being audited by the IRS. While the chances of an audit are relatively low for most taxpayers, mistakes on your tax return can raise red flags,and those red flags can lead to penalties, interest charges, and plenty of stress. As a trusted Idaho Falls accounting firm, Cooper Norman wants to help you stay on the safe side. Here’s how to avoid IRS auditing penalties and keep your tax records clean

1. File Accurate and Honest Returns

The most important way to avoid IRS penalties is to make sure your return is accurate and honest. This means reporting all of your income, not exaggerating deductions, and double-checking for typos or incorrect numbers. Whether you’re self-employed or receive a W-2, every source of income must be reported.

An experienced accountant can help ensure nothing is overlooked. At Cooper Norman, we use professional-grade tax software and cross-check each return for errors, which greatly reduces the chance of costly mistakes.

2. Keep Organized Records

The IRS can request documentation to support the numbers on your tax return. If you’re unable to provide that documentation, you could be penalized,even if the numbers were correct. Keeping receipts, mileage logs, bank statements, and invoices can go a long way in supporting your claims.

We recommend storing your tax documents in digital and physical formats for at least seven years. If you’re working with an accounting firm, ask them about their record-keeping policies and digital organization tools.

3. Report All Income (Even Side Hustles)

Side income from freelance work, gig apps, or online sales can easily be forgotten,but that doesn’t mean the IRS won’t notice. Many platforms send 1099 forms directly to the IRS, so even if you don’t receive a copy, the IRS still might.

Reporting this income accurately,and deducting any legitimate business expenses,is a specialty for most professional accountants. Don’t try to hide it. Transparency is key to avoiding audits and penalties.

4. Be Cautious with Deductions and Credits

It’s tempting to take every deduction and credit possible, but overstating business expenses, charitable donations, or home office deductions can trigger audits. This doesn’t mean you can’t claim them,just be sure they’re legitimate and well-documented.

Commonly scrutinized deductions include:

Excessive business meals or travel
High charitable contributions (especially cash)
Large home office deductions without proof

A qualified accounting firm will ask the right questions to verify deductions and ensure they meet IRS guidelines.

5. Don’t File Late or Miss Payments

Missing the tax filing deadline can lead to automatic penalties, even if you don’t owe much or anything at all. The same applies to underpayment or late payment of taxes. Filing an extension is an option, but remember: an extension to file is not an extension to pay.

Hiring an accountant helps you stay on top of these deadlines. Many firms offer tax planning services that ensure you’re paying quarterly taxes correctly if you’re self-employed or have multiple income streams.

6. Understand Your Risk Profile

Certain behaviors are more likely to trigger audits, including:

Earning more than $200,000 annually
Claiming rental losses
Running a cash-intensive business
Having foreign accounts

If you fall into a higher-risk category, working with a seasoned accounting firm is even more important. Accountants can take proactive steps to reduce their audit risk, including reviewing their financials and advising on best practices before they file.

7. Respond Promptly to IRS Notices

If you do receive a letter from the IRS, don’t panic,but don’t ignore it either. The longer you wait, the more interest and penalties may accrue. Many IRS notices are simple requests for clarification or small adjustments. Others may require submitting supporting documents or paying a balance.

If you’re working with an accountant, forward the notice to them right away. A professional response can resolve the issue quickly and help you avoid further complications.

Partner With an Accounting Firm You Trust

Navigating tax season doesn’t have to be stressful. The best way to avoid IRS auditing penalties is by staying proactive, organized, and honest, and by working with a qualified accountant who understands the ins and outs of tax compliance.

Whether you’re a business owner, freelancer, or a salaried employee with multiple deductions, Cooper Norman is here to help you stay compliant, reduce your audit risk, and file with confidence.

Need help preparing your taxes or reviewing past returns? Contact our office today to schedule a consultation with one of our experienced Idaho Falls accountants.