The term CPA is a riddlewrapped in a mystery, inside an enigma.

The term has always troubled me.


I took my first CPA exam while still an undergraduate at my professor’s insistence, but I never got my score so apparently undergraduate scores didn’t count. I passed the exam soon after I graduated with half an hour in the AA&Co library to learn governmental accounting. I got my certificate nine months later when I satisfied the experience requirement.


The CPA exam was a popular topic of discussion among AA&Co staff, half or more of whom had not passed the exam. Other than that, it wasn’t discussed at all. It was just the price of entry to the accounting profession. Without it you could not very well practice accounting. For those who hadn’t passed it, it was like Damocles sword hanging over their heads.


My career progressed into Fortune 500’s, where they didn’t care whether you were a CPA or not. In fact, I never heard it mentioned. Two of my accounting bosses at two different Fortune 500’s did not have their certificate. As my career progressed into the C suite, the subject never came up. And to be perfectly honest, I began to see it as a bit of an impediment, that somehow it pulled me down to their level & degraded me.


Later after attempting to buy my Fortune 500 employer, attempting an LBO and running for Congress, the CPA designation came back into focus when I decided to open an accounting practice of my own. I suddenly found myself in an environment where the CPA designation was talked about a lot. In fact it separated the top echelon from the wannabes. If you had a CPA certificate the other CPA thought you walked on water.


I had a staff person one time who passed the exam while working for me. He immediately walked into my office and quit to open his own firm. I told him he probably didn’t have enough experience to go out on his own, but that just mad because he had always heard just the opposite. He joined an office sharing arrangement and then just disappeared. That experience had a big influence on my attitude about the CPA designation and on the general intelligence of CPA’s.


Over time I dropped the CPA & began calling my company simply ‘Ellis’, rather than the legal title ECPA PC or Ellis CPA Firm PC.


But the deciding factor hit yesterday while watching a Youtube video by Dan Pena about creating deal flow. Pena’s tagline is “the Fifty Trillion Dollar man” so he does have some influence and is worth listening to. Pena ridiculed the CPA designation. “People who call themselves CPA’s are doing business out of their bedrooms.” and “Deloitte doesn’t call itself CPA. Ernst & Young doesn’t call itself CPA. PWC doesn’t call itself CPA. Peat Marwick doesn’t call itself CPA.” In fact, out of 2019’s top 100 accounting firms, only four included the term CPA in the name.


That brought back memories of a magazine I subscribed to when I first started my practice. The Practical Accountant ran a monthly article of demeaning published comments about CPA’s, who were apparently widely ridiculed across society. The magazine ceased publication years ago, but apparently the attitude they wrote about is still prevalent.


So … This morning, I texted the person working on a new logo for Ellis to brand around and told her to nix the CPA. Not that I include it in our online name, but I was going to include it on my updated landing page, but I decided other wise.

It’s very likely that the CPA designation is a net negative in the real world.

Spending CPA Marketing Dollars

I read something in the book ‘Corporate Cancer’ that opened my eyes. After years of trying to advertise my way to fame & fortune, I recently wrote a post on LinkedIn saying advertising for new clients simply doesn’t work. You get a few new clients, just enough to keep you pouring money into advertising, but at the best, fees on new clients barely pay the marketing costs. I still believe that. But now, I know what does work.

Corporate Cancer is well written and easily held my interest, but it has nothing to do with marketing.  I didn’t expect to find any marketing revelations in the book, but I did. I got definitive proof in my mind that the best way to spend your marketing dollars is to establish your brand.

The author,  Vox Day, spent a couple chapters building the case that converged companies overrun by social justice warriors push positions that are deeply rejected by most of their customers. But SJW warriors hold positions that are low enough in the organization that most SJW activities escape the attention of Senior Management. The remarkable thing that caught my eye is this. Although many (most?) of their customers aggressively dislike or even hate the company’s public positions, most of them hang around because of the Brand. They are more attracted to a well established brand than they dislike how the company actively pushes an agenda they basically hate. While these companies are losing customers, they aren’t bleeding them as you would normally expect, for that reason alone.

If brands are powerful enough to work that kind of magic & keep customers who genuinely dislike a company’s SJW policies from switching to another supplier, then they are very powerful indeed. Imagine what could happen if the company actively pursued their customers’ business instead of ignoring them.

I had already decided to devote my marketing dollars to developing my brand. But now I am doubly convinced, because all of this makes sense.



Here is a summary of the entities most commonly used in business. There are actually something like 30 entities people can operate businesses in. These are five are commonly used.


1-Schedule C self-employed with no credit protection. Owners can be sued individually.


2-Partnership with no credit protection. Owners can be sued individually. Those have been around since the time of Christ.


3-Corporation with limited liability. Widely known as a C corp because it‘s taxed according to Chapter C of the Internal Revenue code. Owners cannot be sued for unpaid business costs. This came on the scene in 1700 when investors had a need for liability limits to raise large amounts of money. The initial purpose was to create the East India Company that governed India & half of China for two centuries. This was by far the biggest & most profitable economic enterprise ever. The corporation is the only entity that pays income tax directly to the government.


3-S Corporation with limited Liability. A C corporation which elects to be taxed as a flow though organization that pushes out profits & losses to be reported on the owner’s tax returns. Commonly known as an S corp. Taxed under subchapter S of the Internal Revenue Code. Profits & losses flow through to the owners and are reported on their tax personal tax returns. That’s why you will sometimes hear the terminology “flow through companies” for entities that don’t pay tax directly to the government. Corporations & LLC’s commonly elect to be taxed as an S corp. This does not affect their legal protection. S corps are limited to 100 owners. That’s why all the big companies such as General Motors and Amazon are C corps. After 300 years all states have come to agreement on how to tax corporations & S corporations.


4-LLC with limited liability. This came on the scene in 1971. Owners cannot be sued individually as long as there are two or more owners. There is still disagreement on how LLC’s should be taxed by states. Wyoming created the LLC in 1977 to satisfy a demand for a partnership with limited liability. It has the same structure as a partnership and files taxes on the same tax return, but it has limited liability as long as there are two or more members. Owners are referred to as partners in a partnership, & as members in an LLC. LLC’s commonly elect to be taxed as an S corporation. It is a toss-up whether S corp’s or an LLC’s are the most popular business form in the U.S.


5-C Corporations with limited liability. Corporations have been around since 1700 and the law is basically settled. In every state corporations are treated essentially identically. LLC’s are relatively new (50 years) and the states have not yet come to agreement how they will be treated. In some states they are treated well, and in other states they are not a good alternative. We create most new LLC’s under WY law, South Dakota or Nevada because those state have charging orders that make an LLC almost bullet proof against lawsuit or collection activity of any kind.  Nevada also has charging orders for corporations.


For most small businesses an S corp or an LLC with an election to be taxed as an S corp are the best entities. Each of these four entities are subject to different tax treatment and can deduct different expenses on their tax returns.


The state you organize is also extremely important. Wyoming, Nevada & South Dakota are probably the three best states to organize in, but the type of entity also plays a determining role in the selection. Also, there is kind of a civil war among states competing for being the Delaware for pirvately owned businesses. Every year someone drops a delightful goodie in our lap. But, remember this … you should never just organize in the state where you are located. But, as you can tell, that’s a post for another time.


A significant part of our practice is determining the proper combination to use to incur the least amount of tax.

CFO Services

A virtual CFO (Chief Financial Officer) is an investment in the growth of your company. As every business grows, something happens. The more they grow, the more background, bureaucratic chores consume your time. If you don’t get control of this trend, it will eventually swamp your business & your dreams along with it. Outsourcing frees your time to focus on achieving key core business goals and planning. We pull the busy work off your plate.

This is why you went into business in the first place instead of just getting a job. We pull the hated, boring, tedious but necessary functions off your hands and give them to people on our staff that love doing it. Believe it or not, there are people who love doing it. You don’t love doing it. You should fire yourself and hire us. That will make us both happy.

In addition, our qualified CFO talent is available for advice & CFO consultation. He or she is a crucial member of your strategy team. 

We have significant experience as CFO with Fortune 500 companies. 

Virtual Chief Financial Officer

CFO is an outsourced service provider offering high skill assistance in financial & administrative requirements of an organization, just like a chief financial officer & his staff do for large organizations.

Ellis experienced CFOs, executives, accountants & tax professionals perform administrative, accounting & payroll functions can help owners, management, and board members solve financial management & operational issues by providing unique guidance and advice. See business services.

You can depend on experienced, high-level professionals to provide the financial insights you need to meet the challenges you face. We provide all the back room services you need; as well as advice, explanations & recommendations.

    • Financial strategy
    • Short & long term forecasting
    • Financial systems strategy & design
    • Budgeting
    • Projections
    • Facilitating & supporting financial reporting
    • Raising capital
    • Interim CFO services
    • Cash flow analysis & restructuring
    • Renegotiating vendor contracts
    • Restructuring client contracts
    • Ensuring pricing is aligned with company & industry trends
    • Analyzing commission structures
    • Supply chain management
    • Attributing costs to revenues
    • Accounting & bookkeeping
    • Payroll
    • Financial Statement
    • Bill pay
    • Collections
    • Data driven management
    • Capture & interpret critical operating data
    • CFO service
    • Streamline & simplify
    • Cash management
    • Remote office
    • Management financial statements
    • Compiled financial statements

Corporate Reorganization

Business reorganizing or restructuring is an action taken by businesses to significantly modify the structure or the operations of the company. This usually happens when a company is facing significant problems and is in financial jeopardy. But it often happens to enhance it’s competitive position, to protect its assets or to get out in front of a problem. It’s another tool in their tool box. Some examples of Global 500 companies:

Global 500 Re-orgs

  1. Forbes announced, Jeff Bezos is unloading a billion dollars of Amazon stock.
  2. In 2015 Caterpillar announced restructuring and cost cutting plans right before they were hit with a $2 billion penalty for tax fraud.
  3. In 2018 John Deere announced realignment of leadership responsibilities.
  4. Humana’s CEO-founder had twice before had shifted the company’s course to a brand-new industry.
  5. Chase Manhattan Bank and Chemical Bank used their merger as an opportunity to both reduce operating costs and achieve an important strategic objective.
  6. Scott Paper‘s chief executive officer (CEO) decided to implement the layoffs quickly—in less than a year—to minimize workplace disruptions and gain credibility with the capital market.

We’ll probably never know why they reorganized. What matters is they reorganized for some reason. Despite the massive size of Global 500 companies, and despite the difficulties presented by re-organizing a massive company, they are not afraid of re-orgs.

Privately owned business re-orgs

Privately owned businesses seldom re-organize.  It’s just not one of the clubs in their bag. They’ll ride their present structure right into the ground even when the company is collapsing around them.

Never fall in love with your company. You can fall in love with your business. A business has value because that’s how you make money. A company is a legal creation for operating a business. Nothing more & nothing less. Most people don’t think this through well enough and get the two confused. A few years of operating your company like it was your business can put you in vulnerable position.

If most companies lose a lawsuit, they could lose everything they’ve been building all their lives. If they win, the litigant can strip your company bare. We plug that hole through business re-org by removing everything of value from their operating company and putting it in an LLC that does no business what-so-ever. It never does anything to get itself sued. If everything of value is in the LLC, and the mothership loses a lawsuit, you can just shutter the doors and start over again with a new company the very next day with everything of value behind an impenetrable LLC barrier. The LLC just needs to license it to your new company, and you’re good to go. Since you own both of them, there are no barriers.

Business restructuring and reorganization is one of our strengths. I personally have been involved in two Fortune 500 re-orgs & countless re-orgs of private companies.  Not all of them have followed the approach we describe in this post. There are many ways to re-org and many things a business wants to accomplish. Every private re-org I was involved with succeeded without repercussion. We re-org our clients frequently for tax purposes. We have significant expertise in this area.

An actual example.

A few months ago I got a call from a client who was being sued by a marketing company. They had entered into a contract and the marketing business failed to perform, so my client quit paying the marketer. But there was a contract, and the contractor sued the company, but not the individuals. There was no way to sue the individuals. Their lawyer was vigorously defending the suit. He warned them it could cost several thousand dollars to defend suit. He also warned them, they could lose the suit.

For some reason they called me.

  1. I questioned them and discovered they hadn’t recorded any business assets. Their company was basically a vacant shell. There were assets, but no assets had been recorded in the company. They were still owned by the owners.
  2. I advised them to abandon the company.
  3. I also advised them to simultaneously form two new companies, an LLC to hold company assets, and a corporation to operate the business.
  4. I then advised them to legally transfer all the business assets into the first new company (an LLC), including web sites, trade names, trade secrets, and everything essential to carrying on businesses. Since they had never trademarked their name, I suggested the do that in the name of the LLC.
  5. Simultaneously again. I advised them to open new bank accounts in the name of the new corporation and begin conducting business in the new corporation.
  6. I also advised them to run this past their lawyer. He said it would work. The only thing he suggested is to file bankruptcy on the old company that had failed. That was a good final touch.
  7. It did work. The marketing company, rightly or wrongly, was got nothing but legal fees.

Tax savings

This methodology is one of my favorite re-orgs. It is used to protect vital assets and to change the character of earnings. It can also be used to eliminate C corp taxation by removing earnings from a C corporation and turning it into royalty income on the personal returns.

That eliminates an entire level of taxation.


Tax as a Competitive Advantage

I have decided to go back on the speaking circuit. I will go anywhere and do anything to get on the agenda at events or conventions of mid-caps or privately owned businesses and/or their owners.

If you know of anything, please pass my name along or email me contact info.

I am a pretty good speaker and my take on tax gets a good reception. I start with a surprise about how the 16th amendment created two tax systems in America and worked my way through the secrets of tax strategy and through significant tax savings available in interstate & international taxation. I also talk about saving tax (& companies) by restructuring and with intellectual property rights & royalties. There’s a lot of take-aways and attendees find it illuminating. My talks are different than anything they have ever heard. And I end every talk with an answer & answer session, which is generally lively and will continue until someone shuts it down. I earned my speaking spurs as a politician running for Congress. In politics you speak so often at the drop of a hat, it’s a good way to develop skill. I developed the reputation of being the best speaker in the state, speaking to audiences as large as 10,000. I also learned how to work a room, any room. My background is a Big 5 auditing firm, 2 Fortune 500 C suites and private practice working for such varied clients as the Saudi royal family. My IQ is quite high and I have been developing my tax strategies for decades. None of them have ever been challenged by the IRS. I have never “lost”an  IRS  audit.  I have  two  businesses, both of which are being  re-branded right now.

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If you are putting together an event, keep me in mind. BTW, that is not a bad way to pick up leads for yourself. Maybe we could work together by putting together a tour of events. Let me know if you are interested. Or if you know of anyone that might be interested.

Any leads appreciated. Thank you.

Robert Ellis, (888) 241-5040, Email, Ellis CPA Firm PC 

Selecting a Top Tier CPA Firm is Counter Intuitive

A prospective client asked me how many CPAs we had. I didn’t think much of it at the time. Later I realized he was probably evaluating us on that number.

This is a common error, assuming quantity is identical to quality. Big mistake.

I started my public accounting career with the biggest & best public accounting firm in the world, Arthur Andersen. They were the only firm that was a true international firm. Today’s Big 4 are all associations of firms. When Enron killed them, they were the largest auditing firm in the world, Accenture (formerly Andersen Consulting) was the largest consulting firm in the world and Arthur Andersen Consulting was the 2no largest consulting firm in the world.

When I started at Arthur Andersen, every recruit at my office had graduated at the top of their college class. The major daily newspaper published a story about us saying, “The firm had to widen its halls so we could walk by each other, such a collection of egos we were.”

So Andersen hired the best people and were the best firm in the world. But we didn’t have a lot of CPA’s on staff. Out of a hundred professional staff, no more than 15 were CPAs. Most of our professional staff were still aspiring to become CPAs. But we cycled them through pretty fast. It didn’t take more than two or three years to figure how bright they were. You move out those who will never be what you want them to be. And you bring in a bunch of new people looking for that one. For those who were nearly the best but not not good enough for the firm, they generally got executive placements at our clients. This is the way good CPA firms  work. “Move up or move out”. The only people we kept at Andersen were best of the best; the kind of person who could move the needle.

Here’s where I’m going with this diatribe.

If you see a “CPA Firm” with a lot of CPAs, that’s a bunch of individual CPAs sharing an office and overhead trying to give the impression of a real firm. These are the people who get moved out by the Big 4 but weren’t good enough for an executive placement, or never got to the Big 4 in the first place. In other words these are the drones taking up office space and clogging everything up so that if a really good person would actually come along, he could never advance through the seniority system. All his drive would be killed long before he ever got there.

The more CPAs per capita, the greater the risk of getting an incompetent firm. The fewer CPAs the greater chance of excellence. This is because at every firm, the strategies & complex ideas come from the very top. That is not happening at every person in the firm. They are either developing or on the way out.  The worst thing you want to do is select a firm with 17 CPAs and two other employees. The better firms go through accountants like they were water. And most of their staff haven’t yet become CPAs. But they’re better accountants. They’re actually doing something other than just cluttering up an office and collecting a check.

You’ve been warned.

Everything Is Changing

The digital revolution means that everything can be improved. So in a few short years, everything will be improved.

Most services and products are as good as they could be. There were limits to what any company could do, so they did the best they could and grew into giant multinationals on that formula. But the digital revolution pushes the possibilities to the end of the rainbow. The walls limiting what was possible have been breached. Already the improvements are massive. Just decades ago, banks were drowning in a sea of paper. Every bank had to process every piece of paper and stuff every check into an envelope and mail it back. No more. In a few short years, everything will be improved. Not just a little. But in big massive ways like paper disappearing from the banking industry. In the same way China skipped by the infrastructure phase of development and went straight to cell phones, new businesses that today are just in their infancy (like Bitcoin), or just starting up or a just a glimmer in someone’s eye will drive giant incumbents in every industry to their knees. Entire industries will be wiped out. By the second or third decade of this century, the landscape will be vastly different.

How will you cope?

I can see my industry, accounting and tax being entirely wiped out. What about yours? How will you pivot? Or will you wait it out?

You best study guide is science fiction. The singularity? Who knows? Whatever.

This will be a topsy turvey two or three decades. The entire 21st century will reverberate with possibility.

But keep in mind. Ellis can help you do whatever you need to do. At the very least you need to maximize profits by improving infrastructure, cutting taxes, cutting costs, protecting your business and making it more valuable. This is an urgent issue you need to address now. Then at least you will have more options.  This is what we do. Call us.

99% won’t see it coming until it hits them in the eye.

Oregon immigration vote is a warning for Obama

PORTLAND, Ore. (AP) — The fate of a little-noticed ballot measure in strongly Democratic Oregon serves as a warning to President Barack Obama and his party about the political perils of immigration policy.

Even as Oregon voters were legalizing recreational marijuana and expanding Democratic majorities in state government, they decided by a margin of 66-34 to cancel a new state law that would have provided driver’s licenses to people who are in the United States illegally.

Taken from Drudge

Tricky Government

Income inequality is real and it isn’t being fueled by hard work and perseverance. In Vox Day’s opinion, it’s being fueled by “…neo-feudal largesse distributed by the federal government to the financial aristocracy through the central bank.”

Sounds reasonable to me.

If it’s true, one of the pillars of financial success is to avoid investments in the stock market, Wall Street, equity bankers & stock brokers; don’t finance anything and consider alternatives to the federal reserve backed banking system. Of course this is possible for some of us and impossible for others. If you own a business, you’re basically stuck with the banking system. But the stock market is a whole different issue.

I had some clients who took this to heart. Both business owners. One buried his money in his back yard. Apparently $100,000 in $100 bills fits nicely in a Folgers coffee can. No problems. Happy guy. Another client rat holed money in the basement of his restaurant. The day before the closing was scheduled on a new restaurant purchase, he learned a squirrel had discovered his cache and made off with most of his $100 bills. This guy died young. Somewhere in that mountain village, there’s a very expensive squirrel nest.

Even if you avoid Wall Street and do all the other things I listed, the government can still take your money and peel it off to the ‘financial aristocracy’, which, if you remember the ‘bail out’, they’re perfectly happy to do. And it really doesn’t matter whether you vote R or D. They’re just different sides of the same coin.

An uncomfortable conversation I often have with clients is when I tell them the government didn’t institute IRA’s to help you prepare for retirement. They instituted IRAs to drive investment in the stock markets in order to line the pockets of equity bankers. And it worked like a charm.  All but a few dollars of all the money in those IRAs and 401(k)s is invested in the stock market.

First of all, let’s cover the basics. You deduct it when you invest in a tax advantaged retirement account, and you pay tax on it when you take it out. For the purposes of this article we’ll assume this is a wash or very nearly a wash. (Time value of money be damned. See below.)

As far as I’m concerned, it’s a more efficient use of your money to avoid all tax advantaged retirement vehicles.  If your goal is for your investments to increase in value (and if it’s not, what the hell are you doing?), it’s far better, in my opinion, to invest in your personal name (or an LLC) instead of an IRA. You may leave the money in your IRA for more than 40 years, so it’s reasonable to expect a tidy gain on your investment. (After all, these are professionals investing your money.) But if they do a good job of investing and you do make a profit, you have to pay taxes on everything, profit and all, at ordinary rates. Which are twice what capital gains rates are.  If the profits were in your personal name, instead of the IRA or 401(k), you would pay tax only on the profits at capital gains rates, (less money at half the rate).

One more time to make sure you’ve got it. Every penny you take out of an IRA or 401(k) is taxed at ordinary rates. But if you sell a personal investment, only the profit is taxed, the original investment isn’t taxed, and the profit is taxed at capital gains rates. A phenomenal savings on the back end.

A word of warning. The people who howl the loudest about what I just wrote are the people who make money off the system. They will talk about a lot of things like the current value of money. (Here’s what the current value of money is today >> the interest rate on my recently opened money market account is .0001, one, one hundredth of one percent. Not much.) Plug them in with equity bankers. Although to be perfectly honest, my argument will probably catch your retirement planner by surprise. He probably thinks he’s helping you.

There is one caveat to this; that’s if your employer is matching all or part of your 401(k) investment. If that’s the case, jump in with both feet. You might still lose money, but with no gains or losses, you have a fighting chance that your employer will pay your taxes for you, leaving you even with where you started and getting today’s tax savings for free.

Two interesting facts.

Most people invest in tax advantaged retirement accounts not to prepare for retirement, but to save on taxes. Tax savings is the lure the government used to lure your money into the stock market.  If a client says he wants to save $100,000 on taxes, I tell him to send me a $200,000 check. So for, no takers, but a lot of people who are a little smarter. It costs you 100% to save 50% (or less). The only genuine tax shelter today is a cash flow business.

I once did a survey of my clients with stock market investments. They were all carrying losses forward. That means none of them had made enough profits to cover all their losses.

Just saying.