Two Franchise Owners Form a New Company Case Study

Creating a winning tax strategy for both buyers and sellers.

Smith Schafer Approach

When two Worldwide Express franchise owners decided to join forces and form a new company, Fusion Logistics, they had BPK&Z, now known as Smith Schafer, in place to help. As the CPA firm for one of the owners already, they felt Smith Schafer knew the industry and was the firm to take the company to the next level. The goal was to create a strategy allowing them to position their domestic and international shipping and freight company for numerous acquisitions and rapid growth.

John Edson, working with the owners in 2007, structured the new organization and any new acquisitions they would be making to minimize their tax impact and the tax impact of the sellers. Once the strategy was in place, their next goal was to acquire six more franchises and expand their business. The deals had to be structured in a way that was attractive to the seller by minimizing their tax liability when they sold their franchise. By structuring the deals so the sellers had an ownership interest in Fusion, they were able to defer the taxes on the ownership interest they received until they sold their interest in the future. Since each of the existing franchisees now had an ownership interest in the new company, no assets had to be sold, and they could transfer their franchise agreement into Fusion on a tax free basis. This sort of structure made it much more appealing to the sellers, and all six acquisitions took place in rapid succession.

Results

The company continues to grow and since the initial acquisitions they have gone on to acquire four more franchises – and they expect the acquisitions to continue. In 2010 they experienced a 50 percent growth in revenue and in 2011 were on track to see a 35 to 40 percent growth.

Steve Baklund, CFO of Fusion Logistics, said of their work with John Edson, “Early on, he helped with the company’s formation. Now we rely heavily on them for tax advice. We have multiple-state issues and federal issues because we’re an LLC.”

Since the acquisitions, Smith Schafer has worked with Fusion to determine how cash distributions to the ownership group will be made. Balancing cash distributions with taxable income is discussed often. Steve commented, “John understands the resale model well. More important, he understands taxes around LLCs and how it impacts the shareholders.”

The future looks bright for Fusion Logistics and with growth rates nearly unheard of in the current economy, it is clear the strategy set forth by the owners and Smith Schafer is working to support that strategy.

Why Clients Choose Us

Have enjoyed good service for over 30 years.

 - R & W Fleming Corporation

Our service is always exceptional and never have to second guess the answers.

 - EnergyPrint, Inc.

Smith Schafer has provided second to none service and value to my business and personal accounts for over 30 years. Their expertise and knowledge are unmatched by any other accounting firm I have encountered over all these years.

The relationship we have built over the years with the staff at Smith Schafer & Associates is one that can never be replaced. They are quick with helping us figure anything out, always willing to pick up the phone and walk us through any problem we are having. Also they are just all so friendly and kind!

I have worked with Jason Boynton for several years. He has consistently provided exceptional service and advice always delivered in a timely, pleasant manner.

Smith Schafer always makes everything go smoothly. They were recommended to us by our community bank. We have been using their services for many years for our small business and personal taxes. We always feel well taken care of and that we are receiving the best advice, direction, information and tax preparation."

- The Dog Perk Corporation

Smith Schafer always provides great information for our business. They are thorough with our accounting and financial planning. We have leaned heavily on them with interpretation of the PPP Loan and COVID-19 planning. They have been instrumental in our success and are always very knowledgeable and quick to respond to any of our questions."

Smith Schafer has provided second to none service and value to my business and personal accounts for over 30 years. Their expertise and knowledge are unmatched by any other accounting firm I have encountered over all these years."

The relationship we have built over the years with the staff at Smith Schafer is one that can never be replaced. They are quick with helping us figure anything out, always willing to pick up the phone and walk us through any problem we are having. Also they are just all so friendly and kind!"

We love our CPA team at Smith Schafer. They have helped us navigate many personal and business decisions."

Smith Schafer is very dedicated to their clients and always has their best interests in mind. They are very knowledgeable and thinking ahead to what the clients may be needing in the future. We would highly recommend Smith Schafer to our family and friends."

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