Liddell bullish on Xero's US growth prospects

Hamish Fletcher for the New Zealand Herald writes: Xero has a decade of expansion ahead and the problem won't be finding areas for the accounting software maker to grow but choosing which of these to take, says chairman Chris Liddell.

In the United States - where Liddell lives - he says there are 30 million small-to-medium sized business which Xero can vie for.

"Just having those people come online and use cloud-based services, I can see five to 10 years' growth just in that and then you talk about all the add-ons to [Xero's] core product and we have a whole other growth phase," Liddell said after the company's annual meeting in Wellington this week.

Liddell, an expatriate New Zealander who has previously held top positions at Microsoft and General Motors, joined Xero's board in February and said he brings a "US perspective" to the company.

According to New York-based Liddell, "being there" helps strategise how the company will tackle the United States market.

Part of this US playbook could be a stock exchange listing there, which was flagged by both Liddell and Xero chief executive Rod Drury at the meeting on Wednesday afternoon.

Liddell, in his address to investors at the annual meeting, said a US listing was a "logical step" and a "significant milestone in becoming a truly global company".

While Xero is active in four main markets - New Zealand, Australia, the United Kingdom and the United States - its North American prospects are what are laboured over and scrutinised.

Drury says the company is "really focused on" that part of the world, which made up only 6 per cent of its customer base as at March 31 this year.

He would not give numbers updating the company's US progress in this financial year, nor its predictions for growth in that market.

Investors, however, should "not expect too much over the next few years", he said.

"It's a long game ... we've got a plan for the US, we've got more product to build and we're building a team and it will get interesting over the next few years," he said. "We are the leader outside the US which is an incredibly powerful position to be in as we enter the US market."

Is there a "plan B" if the US doesn't go how the company wants?

"We don't need a plan B because we've got a solid business across all other geographies but we don't see any scenario where we don't grab significant market share in the US," he said.

Drury, as usual, was dismissive this week of Xero's massive US rival Intuit.

That company - which recorded revenue of US$4.2 billion last year - was adding more online customers each month than Xero, based on a graph Drury tabled as part of Wednesday's meeting.

Drury said this wasn't Intuit getting new business but flipping its desktop software customers online.

Xero, on the other hand, was growing as a "new entrant with no brand", he said.

The potential US listing, according to Drury, would help with building that brand.

And while the listing is not in line for this financial year, during the current reporting period Xero will break through US$100 million in annualised committed monthly revenue, positioning it for a US listing when and if it chooses to.

Although capital raising won't be the primary focus in Xero's US listing, Liddell said the company will raise more money as it needs to.

The company, as at March 31, had $210 million cash on hand to fund its present growth - its stockpile bolstered by a $180 million raising from mainly US investors last October.

"We've got people we're turning away, it's all about making sure we raise capital in the right way and build a shareholder base that wants to stick with us," Liddell said.

Xero shares advanced 5.7 per cent yesterday to $25.90. The stock has gained 9.8 per cent since its annual general meeting on Wednesday.

Check ( mobile bill pay that serves 10 million registered users) Closes The Loop On SMB Invoice Payments

Ben Kepes for Forbes writes: Anytime I hear about a new service or new piece of functionality that allows me (not to mention other small business owners) to automate what was formerly a manual process, I get excited. It’s a little known fact that SMBs have nearly as complex processes within their organizations as do larger businesses, but without the corresponding resources to throw at wrangling said processes. Automation therefore is arguably more important for SMBs than it is for enterprises.

Check is an interesting company that Intuit acquired a few months ago, the company is rolling out a trial version of new functionality that is pretty interesting. The idea of Photo Bill Pay is, as the name suggests, that small business owners and employees can simply take a photo of a bill (currently it’s only supported on Android devices). On the following screen the scanned bill, and digitized information from that bill are shown. The user can then simply click a box to confirm payment from their nominated bank account or credit card – no more wrangling unfriendly internet banking user interfaces, no more writing and posting checks and no more getting payment amounts wrong when moving from one system to the other – the whole idea of the app is to zap bill payments processes and make it easy to pay bills quickly and with as little paper as possible. [snip]  The article continues @ Forbes, to continue reading click here.

Offshore Business Tax Reporting Summary

Premier Offshore Investor writes: If you’re operating a business outside of the United States, your offshore business tax reporting obligations can be daunting.  Failure to comply can result in significant interest and penalties, the loss of your business, and even the loss of your freedom.  Here is a brief description of themost common offshore business tax reporting obligations.

The first and most important offshore business tax reporting obligation is not about paying taxes, but reporting where your assets are located.  FinCEN Form 114, commonly referred to as the FBAR, requires you to disclose your foreign bank accounts if you have more than $10,000 offshore.  This form requires the name of the bank, account number, account size, address of the bank, and whether you own the account.  Failure to file FinCEN Form 114 can result in a penalty of up to $100,000 per year and 5 years in prison.

The next non-tax offshore business tax reporting obligation is IRS From 8939, “Statement of Specified Foreign Financial Assets.”  This one expects you to disclose all assets and investments you hold outside of the United States.  It is only required if you have “significant” assets abroad, so check the instructions for the filing requirements.  They vary depending on where you live (in the U.S. and abroad) and whether you are married or single.

There are several exceptions to Form 8939.  For example, you do not need to report gold you hold in a vault nor real estate that you hold in your name.  For more information, please see my articles on gold and offshore real estate.

The balance of your offshore business tax reporting obligations are in concert with your personal income tax return (Form 1040) and the forms are attached there, too.  For example, you should be drawing a salary from your offshore company of up to the Foreign Earned Income Exclusion and retaining earnings in excess of this amount ($99,200 for 2014).  To accomplish this, you will attach Form 2555, “Foreign Earned Income,” to your personal return.  This form requires information on your employer (the offshore company you own), your salary, foreign residency if any, and your travel days to and from the United States.

The largest (in terms of number of pages) offshore business tax reporting item is IRS Form 5471, “Information Return of U.S. Persons with Respect to Certain Foreign Corporations.”  This is a full blown corporate tax return, akin to IRS Forms 1120 and 1120-S.  It will require information on the owners and shareholders of the offshore business, as well as Profit and Loss and Balance Sheet data.  It includes a variety of forms and schedules and is attached to your personal income tax return.

Because Form 5471 goes in with your personal return, it is due whenever your 1040 is due.  If you’re living in the U.S. on tax day, you need to mail it by April 15.  If not, you can get an automatic extension to October 15.  If you are living outside of the U.S., you get an extra two months to file.

If you will use an offshore Limited Liability Company to hold intellectual property, or to manage personal investments, you will file IRS Form 8858, “Information Return of U.S. Persons with Respect to Foreign Disregarded Entities.”  This form allows you to create subsidiaries of your parent corporation and eliminates corporate level tax on passive investments that you wish to flow through to your personal 1040 or Form 5471.

Finally, if you will hold your business inside an offshore trust for estate planning, privacy and asset protection purposes, you may need to file IRS Forms 3520 and 3520-A.  These will allow you to hold your offshore business in an offshore asset protection trust and may provide significant tax benefits if your estate is over $5 million.

The bottom line of IRS Forms 3520-A and 3520 is that income from the trust will flow through to the settlor’s personal income tax return (your 1040).  Only at your passing will your heirs need to begin reporting and paying tax, albeit at a stepped up basis.

I hope you’ve found this post on offshore business tax reporting interesting.  See our tax section (top right of the website) for more detailed information.  If you are interested in receiving these posts by email, please sign up for our free email newsletter.