Gone are the days when you could freely generate a loss for a restaurant using bonus depreciation and then offset your other sources of income using those losses. The losses you can claim from your restaurant or bar against your other sources of taxable income, such as wages or investment income, are now limited. These
Looking for better tax-saving strategies for your restaurant? The 2024 Guide to Filing Restaurant Taxes: Tips and Tricks, hosted by TouchBistro, is here to help! Rather than simply explaining how to organize your tax documents and walking through the basics of how to file taxes for a restaurant, this guide provides a comprehensive roadmap of
When paying a DJ, musician, comedian, or other performer in your restaurant, bar, or nightclub, there are a variety of forms you need to request, prepare, and file with the IRS. Sometimes, you may also need to withhold taxes and remit to the IRS. The forms you request from and file on behalf of your
Most New York restaurant owners cannot deduct their NYC and NYS taxes paid because they don’t itemize deductions for federal tax purposes. Even when they do itemize, their state and city deduction is limited to $10k, which is tiny compared to the state taxes a profitable restaurant owner pays. This can have devastating tax consequences
What is the most beneficial tax structure for a restaurant or bar in Washington, DC? The tax law in DC is different from your typical state, and the Tax Cuts and Jobs Act (TCJA) of 2017 changed many rules of thumb that historically applied to small businesses. As a result, you have probably received convoluted
Since 2018, restaurants had the luxury of deducting 100% of their build-out expenses and other fixed asset purchases, such as equipment and furniture, by claiming bonus depreciation on their tax returns. Starting in 2023, restaurants will no longer have this luxury. Bonus depreciation will be phased out over the next four years to 80% in
From a tax perspective, is it more beneficial for restaurants and bars in New York City to set up their tax structure as a partnership or an S-corporation? Restaurateurs have received mixed messages from their CPAs over the years, especially after the Tax Cuts and Jobs Act (TCJA) introduced the Qualified Business Income (QBI) deduction,
Tenant improvement allowances (frequently referred to as “TI”), are an enticing and common incentive that many restaurateurs and landlords incorporate in their lease agreement because it’s a win-win for both parties. The landlord gets the benefit of someone building out their space and committing to rent it, which will in turn attract future tenants and
Restaurants may legally organize in several different forms. Most people are familiar with the Limited Liability Company (LLC) and Corporation, all legal classifications. It’s commonly misunderstood that the legal classification is automatically the tax classification, but that’s not quite true. This blog will NOT address the ideal legal entity type for restaurants; you should discuss
The 2023 tax season is here! It looks less complicated that the last two years, but there are still plenty of advantageous strategies and incentives to implement. In collaboration with TouchBistro, our very own Raffi Yousefian, CPA presents The 2023 Guide to Filing Restaurant Taxes: Tips and Advice to break it all down. You’ll also
You shouldn't run personal expenses through your restaurant for multiple reasons, but here are the top 5:
You cannot analyze and assess labor costs and profit without paying or accruing a market-based wage.
If owner-operators are not paid a market-based wage, then the net income/profit and labor costs lie to you; better yet, you're lying to yourself. Until the owner's compensation is reflected in the financials at a market rate, the financial data we're working with is nearly useless.
This is extremely important because net profit and labor cost as a % of sales drive many of our analyses and concepts in this guide.
Without reflecting a market rate owner's comp on the books, you will never know if you have a profitable restaurant.
You could easily claim zero owner's salary and 20% net profit (which is extremely high), but that will not mean anything because if someone were to buy your business and hire someone to do what you do (paying market wages) it could be a losing business.
That is important if you want to eventually transition out of your business either fully or partially, raise money for your business, or sell your business at a high valuation that doesn't require an earn-out payment. If all of the value of the business is tied to you, then you don't have a business, just a stressful job.
Refer to How Much Should Restaurant Owners Be Paid to determine how to set a market-based wage and why it's important.
You must ensure that revenue and expenses are reported in the period they relate to; otherwise, your financials will not tell you anything besides cash flow performance.
Refer to the Importance of Accrual Basis Accounting in a Restaurant to understand the importance of Accrual Basis accounting and how to implement it.
Non-finance people frequently overlook the balance sheet. The balance sheet is equally, if not more important, than the P&L. If the balance sheet is off, then the P&L will certainly be off.
The balance sheet shows a snapshot of a restaurant's health and financial position at a point in time. Imagine knowing all your annual expenses and income but not how much money you have in your bank account. That's what the balance sheet tells you: what you own and owe.
Many important ratios and formulas used to analyze financials and a restaurant's health require an accurate balance sheet.Besides the simple reference to cash balance above, another example of balance sheet accuracy is ensuring loans are represented accurately. You need to remove any loans from the balance sheet that are not truly loans.
This refers to amounts owed to/from affiliates and partners or shareholders that are not loans or have no intention of being paid back. This will be necessary for calculating your ROE (Return on Equity), one of the most important ratios investors use to assess the value and viability of a restaurant investment.
For example, assume investors contribute $500k to open a restaurant, then another $150k loan because the $500k is not enough, and the restaurant generates $150k in profit.
$150,000 Profit / $650k Total Net Equity =Return on Equity=23% ROE
$150,000 Profit / $500k Total Net Equity =Return on Equity=30% ROE
In restaurants, the cash and working capital you keep on hand are determined by liquidity ratios, such as the current ratio, which measures the ratio of your current assets to current liabilities.
If your balance sheet is inaccurate, one of the most important financial measures of your restaurant's viability and health will be thrown off.
For restaurants, the chart of accounts must match the restaurant uniform COA provided by the National Restaurant Association.
For example, the paper cost in a quick-service restaurant is coded to the Cost of Goods Sold account, but in a full-service restaurant, they are coded to Direct Operating Expenses. This can affect COGS as a % of sales by 2-4%. Another example is bar consumables/supplies, which should be bifurcated and coded to liquor cost, not food cost.
If transactions are not coded according to the restaurant uniform COA, you cannot assess your performance compared to industry standards.