The Fork CPAs

Pre-opening expenses for a new restaurant can be a trap for the unwary. These expenses are generally required to be capitalized as intangible assets for tax purposes and amortized over 15 years starting the month the restaurant opens, instead of fully deductible in the year incurred. However, if you add a location, your pre-opening expenses could be deductible for tax purposes in the year incurred if they are considered costs in expanding an existing business. Check out our complete article on how to deduct pre-opening and expansion costs below: https://bit.ly/4iPrELM #RestaurantTax #RestaurantAccounting #TaxSavings #RestaurantManagement

With the S-corporation and Partnership tax return deadline approaching on March 15, we want to share a tax court case from 2024 that could significantly impact positions you take on your 2024 tax return. Whether a shareholder or partner can use losses from their business to offset other sources of income on their personal tax returns depends on whether they have sufficient basis in the business. Having "basis" essentially means you must have funded the losses by contributing capital or loaning money to the business. You can't take advantage of tax losses that you didn't fund. In an S corporation, intercompany loans do not create a basis. Partnerships differ because they give the partner basis even if the loan comes from a related entity. This has been the case for decades. However, in the case of Estate of Thomas H. Fry et al. v. Commissioner (T.C. Memo. 2024-8, filed January 23, 2024), the Tax Court ruled that the owner of an S corporation was entitled to deduct losses from his waste processing business because amounts transferred from his other business created basis. The court determined that cash transfers from the owner's profitable business to the struggling one should be classified as equity rather than debt. Since these transfers were treated as equity, they increased the owner's basis in the business, allowing him to claim the losses on his tax return despite the lack of formal documentation for the transactions. This significant ruling impacts both S-corporations and partnerships because it shows that taxpayers can argue substance over form when classifying debt versus equity. For example, a relative that has lent the partnership money could argue that the loan is [in substance] equity because it will never get paid back, and therefore, they should be able to claim losses from the partnership. Before you freely start transferring funds between your companies, you should know that the court used many factors to determine that the intercompany loan was an equity contribution. This also doesn't change the requirement that loans to an S-corporation must come directly from the shareholder to create basis. Therefore, we must proceed cautiously. However, if you do [mistakenly] transfer amounts from a profitable restaurant to an S-corporation, you should know that you can argue substance over form if you're not given basis for the amounts transferred. Here are some of the ramifications of this remarkable case and the ability for taxpayers and the IRS to rely on substance over form: - Intercompany loans between a partnership and an S corp could also be treated similarly if they're deemed to be a distirbution from one entity and a contribution to the S-corp instead of being a true loan. - “Loans” to shareholders might in substance be distributions. Thus, not requiring imputed interest income to the S-corp. - Loans to a partnership may create an equity interest, even if the partner is not truly a partner. #taxplanning #cpatips

Check out the tax preparation and planning guide that every restaurateur needs to see before filing their 2024 taxes. This is not your typical cookie-cutter guide that shows you how to organize your tax documents and understand how to file taxes for a restaurant. Instead, this article will provide a comprehensive roadmap for taking advantage of proven tax strategies and restaurant tax deductions to mitigate taxes and increase cash flow in your restaurant. The seasoned accountants at The Fork CPAs use these strategies to reduce taxes for hundreds of restaurants, both big and small. #restaurants #taxes #restaurantaccounting #restaurantfinance #restaurant #accounting

Your restaurant group is expanding. Here’s how to fund it. Whether you’re opening one new location or three to five, the process starts with determining how much funding you’ll need. But how do you figure that out? ?? 1: Build your case. Investors and lenders care about more than just the amount you need—they want to see the project’s viability. This is the first calculation you’ll make: - How much funding is required? - What makes this expansion a smart move? ??Step 2: Decide on debt vs. equity. Striking the right debt-to-equity ratio is critical. Higher returns often come when 70–80% of your financing is from debt, but there’s a tradeoff: higher risk for the operator. ??Step 3: Structure your equity. There are two types of equity structures to consider: - Short-term equity: Investors focused on individual restaurants with quick returns. These investors usually take ownership at the restaurant level because they see it as a high-risk, short-lived opportunity. - Long-term equity: Investors who buy in at the brand level. They’re in it for steady growth, reinvesting profits into opening more locations and scaling the multi-unit group. ??Step 4: Assess your debt capacity. Once your equity structure is clear, it’s time to approach lenders to figure out how much debt your business can sustainably take on. We’ve broken this entire process down in a detailed article—ratios, deal structures, and all. Read it here: https://bit.ly/3Es1T5r restaurant-expansion/ Want to chat about how this applies to your expansion plans? Send Raffi Yousefian a message! #RestaurantExpansion #RestaurantFinance #MultiUnitRestaurants #FundingStrategies #EquityStructures

The Fund Funds Rate went from 5.33% in January 2024 to 4.33% in January 2025. While the Fed Funds Rate doesn’t directly indicate specific business loan rates, many small business loans—including SBA loans and lines of credit—adjust when the Fed Funds Rate drops. We connected with our lending partner, Michael Spitalney, at?Everfund?to explore whether it's a good time to refinance or consolidate restaurant debt. We were provided with an in-depth article explaining: - how refinancing and debt consolidation work for restaurants - what types of debt can be refinanced - when it makes sense to refinance - the challenges of refinancing restaurant debt and - practical steps for refinancing and consolidating debt Check out the article below! #financing #accounting #restaurants #lending #debtconsolidation #restaurantcfo #restaurantaccounting https://lnkd.in/e2JQgAry

Big news for the DMV restaurant scene! We’re very excited for Call Your Mother ‘s next stage of growth! #restaurants #finance #growth #bagels #privateequity #restaurantaccounting

Where do you go for money if you have reached store-level profitability at your existing restaurants and want to expand? Expansion should only be considered once you have ideal unit economics and a profitable business model. If you’re producing 15%+ store-level pre-tax profit margins, you can probably bootstrap the expansion, but that will only get you so far. Depending on your growth rate and ambitions, taking on debt and raising capital from investors could be inevitable. See below for our latest article outlining the detailed steps and implications of funding your restaurant group’s expansion. This article also covers the different types of equity structures (long-term vs. short-term), how debt amounts are determined, the ideal debt vs. equity structures, and more. #restaurantcfo #cpatips #restaurantfinance #restaurantgrowth #accounting #raisingmoney #raisingcapital https://lnkd.in/eEEksXNC

No matter what mythological statistic you've heard about the number of restaurants that fail or stagnate, the reason is always the same... The inability to identify financial problems before it’s too late. We've written a value-packed guide for restaurant owners providing the exact blueprint successful restaurateurs use to build thriving, profitable businesses. This 5-step process is the accumulation of years of experience helping restaurant businesses grow. The same tactics and clear, actionable items we’ve used to change the lives of hundreds of restaurateurs. Whether you're a single location, a restaurant group or a franchise, this will work for you. 1. Gain crystal-clear visibility into your restaurant's financial health 2. Make informed decisions with real-time financial insights 3. Maximize profits at each location to fuel growth 4. Boost your bottom line by optimizing critical performance metrics 5. Secure your restaurant's future with strategic capital management Download your guide FOR FREE today to make your way confidently through each step https://bit.ly/3Zga1hr Don't let your restaurant become another statistic. #RestaurantSuccess #RestaurantGroup #RestaurantOwner #HospitalityBusiness

Do you know about the tax credits available for offering a 401(k)? For a detailed breakdown and real-world examples, we've summarized the options in one of our recent articles, check it out here! https://bit.ly/4i1Mkks #RestaurantFinance #TaxCredits #401k #MultiUnitRestaurants #RestaurantGroups

Restaurant growth stalling? Your capitalization might be the culprit. Before expanding, ensure you've hit these milestones: 1. Paying market-based wages to owner-operators 2. Reaching 10-15% profitability 3. Paying taxes 4. Paying down debt 5. Achieving working capital requirements Only then should you accumulate growth capital for expansion. Master the art of restaurant capitalization. Our Ultimate Guide to Financial Success in Restaurants shows you how. Download it here https://bit.ly/3Zga1hr #RestaurantGrowth #Capitalization #FinancialStrategy