Robert A. Bonavito, CPA PC

RABCPA PC Blog

Archive: 2018

Part 5 NJ 2014 Alimony changes

NJ 2014 Alimony changes, law N.J.S.A. 28 get: 34, Rehabilitation alimony, open duration, limited duration, reimbursement alimony Many attorneys still refer to this as the new law. In New Jersey in 2014 divorce law change substantially, when Gov. Christie signed into law N.J.S.A. 28 get: 34, the law basically did away with permanent alimony. There was a lot of uproar in the state because when permanent alimony was awarded in the past, that meant that if the money spouse retired, they still had to pay the alimony. This would result in them going back to court and trying to get a change of circumstances. Which was so troublesome. The new law seems to be restrictive, it actually made it more flexible. Now they could award more than one type of alimony in divorce settlements. Alimony is assumed to end once the obligors reaches retirement age as defined by the Social Security administration. bed and board, allows you to keep survivor benefits with Social Security and some insurance policies, also may not change the will and estate planning. open duration, only if parties are married for at least 20 years, ends when you remarry or live with someone else or spouse reaches retirement age limited duration, generally will not last longer than the marriage did, usually based on how long it will take you to improve your earning capacity. Courts may change the amount of the award but rarely the length of time it’s paid. Rehabilitation alimony, usually awarded based on receiving more education or training must follow specific steps for rehabilitation reimbursement alimony based on you supporting your spouse through school or additional training and expected to benefit from your spouse’s increase in income. “court of equity”

Posted December 6, 2019 by Robert A Bonavito in Matrimonial & Divorce

Part 4 Pendente Lite

Pendente Lite Dissipation, Counter intuitive, awaiting the litigation If there’s one thing you need to know or at least talk about with people getting divorced or divorce attorneys in matrimonial engagements is Pendente Lite, which is Latin for awaiting the litigation. Remember this could go on for a year or more so if Pendente Lite is not appropriate it could have a dramatic effect on either party either the money spouse is not can have enough money to live on what the non-monied spouse. This is a complex area, remember New Jersey is an equitable division state, remember that the assets and income is divided equitably. Also, you have dissipation issues where sometimes a spouse may be taking money from the marriage and utilizing it to buy a townhouse for his girlfriend in Hoboken “Dissipation”. That money had to be considered in establishing the Pendente Lite. Counter intuitive, money used in marriage increases maintenance Pendente Lite sets the stage for how the judge will rule on alimony and child support.

Posted November 22, 2019 by Robert A Bonavito in Firm News, Matrimonial & Divorce

Theory of The Firm

The one question that is often asked of me is what makes a firm successful, why do some firms flourish, and others go out of business. Obviously, that is a very difficult question to answer. There are many reasons why some firms fail, and some succeed, some has to do with luck, but many has to do with strategies and the abilities of the entrepreneur that runs the company. But I want to start off at a more basic question, before we delve into why some firms survive and others don’t, that is why firms exist in the first place. And to understand that we have to go back to Adam Smith and his book The Wealth of Nations that was written in 1776. Most people don’t realize that Adam Smith was not only an economist but also a moral philosopher. In fact, one of his most famous books was The Theory of Moral Sentiments. The Wealth of Nations created the field of economics and provided the four basic cornerstones. They are: The beneficial power of self-interest The division of labor, or specialization The importance of freedom The ability of markets to self-organize, to have spontaneous order To understand this just have to look at the manufacturing involved in making a pin, Adam Smith pointed out that in order to make a pin it takes 18 distinctive operations. One person who is not properly trained could make maybe 20 pins a day. But if the various operations were divided among 10 highly trained employees, they could make 4,800 per man. This is the power of self-interest, specialization, freedom and self-organizing markets.   That still does not answer the question of why there are firms. For example, in a market couldn’t each of the 10 men by their services. Why would you form a firm to employ all 10? This is something that was addressed by Coase in his 1934 article that appeared in the Economics Journal. Coase basically stated that firms exist because they can reduce cost. The firm’s created internal hierarchies that allows the firm to operate at lower cost than the market. For example, in the market you have to negotiate with each person separately. If they were employed by the same employer, the need for negotiation would be mitigated reducing time and money spent on contracts whether they were formal or informal contracts. Adam Smith discussed and implied that markets have many similar traits as those in biological evolution. Nelson and Winters put forth the assertion that just like evolution selects those traits most appropriate to the environment, the market selects business traits that can thrive and grow. Companies that have appropriate competencies, learning ability and routines that are in line with current market conditions will produce excess profits. Companies that produce these profits will grow and thrive in those that do not, will end up in bankruptcy. The big question is, what actually makes some company successful? Stephen Klepper an economist did an extensive study and published a paper in 2002 that addressed this issue. This study analyzed successful companies in the automobile, television and pharmaceutical industries. The conclusion shows that companies that entered the market early were able to grow rapidly. This growth produced excess cash flow and if it was reinvested into the company through R&D those companies survived. The research and development activities enabled the company to develop efficient methods and lower cost which made it better able to compete and drive rivals out of business. Some examples used were General Motors that was started in the 1930s yet still survives pharmaceutical companies like Pfizer and Bristol which of survive since the early 50s. It needs to be pointed out that R&D includes not only research and development in the traditional sense, but also methods that can be applied to a business-like Google. Research and development enable them to build better algorithms, understand their customers better and improve some products like U-Tube. Alchian, another famous economist pointed out that imitation being a primary source of innovation, without the necessary money a time required by extensive R&D. In conclusion companies that apply Adam Smith’s lessons and focus on their self-interest and specialize in high value core competencies will produce excess profits. Firms that are more efficient than the markets and have lower cost will be able to reinvest in research and development (use imitation when helpful) to improve their products and reduce cost. By having products that are needed and wanted by consumers and delivering them efficiently and at lower cost this will drive out and keep competition limited. The cycle will perpetuate itself and the company will grow until it exceeds a specific scale where the law of diminishing returns will stop its growth.

Posted November 15, 2019 by Robert A Bonavito in Business Valuations