Surety Bonds & End of the Year Considerations – Part 1

Goldleaf Surety End of Year ConsiderationsHow a company deals with year-end planning issues can have a significant effect on what kind of surety support Goldleaf Suretycan achieve for them in the upcoming year. Over the next several blog posts, we will look at some of these year-end planning issues.

Owners/managers whose businesses are profitable and growing sometimes fail to prioritize year-end issues with their future surety support in mind. They may consult other professionals – for example, their attorneys, bankers and tax accounts. However, good advice from these perspectives may not further, and actually can compromise and destroy, a company’s surety capacity. So, if continued or expanded surety support is critical to a company’s growth next year, they need to weigh surety-oriented considerations against the other considerations that guide their year-end planning.

Consider upgrading the company’s year-end financial statements.

Increased surety capacity depends greatly on the “reliability” of the financial information provided to the surety company. Generally, surety companies prefer to see financial statements prepared by a respected certified public account (CPA) that is familiar with the company’s industry. In all cases, you should have your year-end statements prepared on the “accrual basis.” Statements prepared on the “income tax basis” or “cash basis” will present the weakest picture of the company’s financial position.

Build equity.

If a company is a “S-Corp,” accumulating equity may seem counter-intuitive. After all, owners are paying personal income tax on the company’s earnings, and it may seem right to take out what you have been taxed on. However, a company’s bonding capacity depends, in large part, on company equity.

Do not over-emphasizes tax planning.

No one wants to make money and send it all to Washington, D.C. However, if a company has had a profitable year and wants to continue growing with contracts that require bonds, they need to balance their tax planning against the other goals of the company. Reducing taxable income means reducing the net income that otherwise can be used to show profitability and equity growth on the company’s financial statements.

Goldleaf Surety can provide counsel to agents and their insureds – both with year-end considerations as well as other surety considerations – needed to grow and improve the company’s surety support.