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May 2014
Global Expertise, Local Knowledge
By Ramona Patterson

     John Norman thought he was in college studying to become an engineer, when he realized he had a proclivity for accounting. He completed his bachelor’s degree in business administration and a master’s in taxation from the University of South Carolina, and joined up with Charlotte’s PricewaterhouseCoopers as a tax consultant. That was the early ’90s and already he was developing a passion for small to mid-sized companies doing business internationally.

     Unraveling the complex tax laws governing foreign-owned businesses became his niche. He enjoyed solving problems while developing business relationships. When Norman learned of GreerWalker LLP and its focus on middle-market companies and international affiliations, he realized its business model closely aligned with his interests and joined as a senior associate in 1993.

     Today, he has overall responsibility for the firm’s global services and manufacturing and distribution practice, and is managing director of its exit planning and investment bank affiliate, GreerWalker Corporate Finance, LLC. In short, he specializes in resolving international tax issues for foreign firms doing business in the U.S., as well as U.S. firms doing business in foreign countries. He is considered an expert in mergers and acquisitions, transfer pricing, entity selection, entity structure and ownership changes.

 

Growing Global

     With just a receptionist, Charlie Greer and Kevin Walker started the firm in 1984 primarily to serve manufacturers and distributors. The practice has changed drastically in 35 years. Today, GreerWalker has 12 partners and over 100 associates, and is one of the 10 largest CPA firms in the Charlotte region and considered among the top 200 CPA firms in the nation. It is also the exclusive Charlotte member firm of PKF International, one of the world’s largest networks of independent accountant associations.

     “It’s been all organic growth,” says Greer. “We’ve never had a merger.” About 25 percent of the firm’s clients are international.

     When Norman joined GreerWalker 20 years ago, he says, “Everybody was doing total quality management, which is looking at your processes to determine how to become viable and independent.”

     That’s when it became evident to Greer and Walker that they needed to delve into international markets, to offer global services, to avoid losing business. “Now we’re on the offense with it,” he asserts.

     “Nowadays,” Norman emphasizes, “there’s no such thing as international business. If you’re in business, you’re going to have to deal globally. But,” he insists, “being effective in a global arena requires team effort.”

     Klaus Becker, honorary consul of Germany, has worked with Greer and Walker for over 30 years. “They go out on a limb to be good corporate citizens and to interact with people,” says Becker.

     Becker, president of Nirosteel LLC, considers the firm’s close ties with the community instrumental in developing strong business relationships. The three met when both companies operated out of 112 S. Tryon Street.

     “They really do an excellent job of supporting the German community,” offers Becker. GreerWalker also supports the consul and the German American Chamber of Commerce. The firm’s generous investments include organizing seminars and supporting German-related speaking events.

     “I really admire Kevin and Charlie,” admits Becker. “They’ve worked very hard to become the largest privately-held CPA firm founded in Charlotte.”

     Under Norman’s leadership, the firm’s global services have steadily grown. About 80 percent of Norman’s time is dedicated to tax planning, compliance and consulting services for a wide range of international businesses.

     While global business is essential to the firm’s continued growth, the company also specializes in real estate, construction and motor sports. Greer says, “It’s a rarity for a firm our size to have such a strong international tax practice.”

     Greer credits the firm’s team model with setting it apart from other CPA practices. “Every client is a client of the firm and not the individual partner, so there’s a sharing of clients that you don’t see at other firms,” explains Greer. “Whenever a client gets into an international situation or is going to Germany and Italy,” comments Greer, “we automatically get John involved.”

     “John’s always focused on what’s best for the client in everything he does,” says David Jones, a fellow partner who specializes in manufacturing, distribution and international business. “He creates relationships with clients that are more than just professional and client. They’re friendships,” he says.

     “John’s very practical and has dealt with a lot of different businesses over time and not only helps people make tax decisions, but also helps with general business planning,” adds Jones. “There are many professionals that approach taxes and assurance as if they were a product, but have very little interaction with their clients. We as a firm, but John in particular, strive to be a lot more than that—we constantly talk what else we can do to help our clients.”

     For example, it’s not unusual for GreerWalker advisors to discuss buy-sell agreements with clients, life insurance for owners and other non-tax or assurance-related business transactions. According to Jones, companies must take into consideration several aspects to succeed in global business, and Norman is extremely thorough in covering all the bases.

     Client loyalty has been a key factor in the firm’s steady growth. Repeat business long-term from middle-market companies has been essential. “One Chinese company was about $2 million when they started with us,” says Norman. “Now they’re about $200 million.”

 

Transformational Change

     Over the last decade, changing economic circumstances necessitating doing business outside the country have contributed to growth. A decade ago, East Coast residents viewed California as a foreign country, jokes Norman, a native of Akron, Ohio. Today, his practice has dozens of U.S. privately held middle-market companies that have survived by globalizing.

     In the mid-1990s, U.S. textile and apparel companies made up the first big wave of outbound work. “To remain competitive, they had to go south,” Norman says. “To get around intensive labor costs, they produced in Mexico, Honduras and Guatemala. Those that didn’t, closed.”

     Before setting up shop in another country, small privately-owned firms need someone who understands the impact structures can have on company profits and navigate through complex U.S. international tax laws. That’s Norman’s specialty.

     “The U.S. international tax law is really written for the old multinationals in the ’60s, and it hasn’t really been upgraded,” comments Norman. “For privately-held businesses, there are some really unfortunate hoops and quirks that can result in seriously negative effects.”

     In terms of global markets, the international arena is broken into two categories: Inbound is when companies originating outside the U.S. come here; outbound is when U.S. companies do business in other countries.

     When engaged globally, it is important to realize it is not a level playing field. For example, one major mistake businesses make is assuming they’re eligible for indirect foreign tax credits. “If you pay taxes in another country on your income there, that credit does not naturally flow back to you as a U.S. owner,” explains Norman. “So you end up paying twice on that same income unless you do some tax planning.”

     That is the type of situation where clients need skilled tax advisors who understand international tax laws, effectively tax planning to ensure clients receive all the credits to which they are entitled. Through market analyses, advisors also help clients avoid setting up facilities in jurisdictions that are heavily taxed.

     By staying abreast of international market trends in distribution and manufacturing, the firm helps clients operate more profitably. For example, in the global apparel manufacturing business, the high fashion industry has 13 seasons, rather than four. Fashion industry colors rotate every month to keep apparel trends fresh. If it takes designers six weeks to finalize color schemes, manufacturers aren’t able to produce apparel in China and get it to U.S. stores in time.

     As a result, over the last several years, much of the high fashion production has shifted back to the western hemisphere. Some has returned to the U.S. while some has gone to nearby Honduras, where there’s only a three-week turnaround. But more of the higher-end products are being made in North and South America.

 

Strategic Advantages

     While relocations of giant manufacturers like BMW, Siemens and Boeing make headlines, small family-owned foreign businesses bring their share of jobs to the region. They may create 20 to 30 jobs at a time, but it’s not insignificant.

     Norman and his colleagues get a lot of new clients from working with the Charlotte Chamber of Commerce and the Charlotte Regional Partnership as they bring companies to the area. They also get business referrals from local law firms, bankers and PKF International. When companies express interest in Mecklenburg County, GreerWalker advisors sit down with them to review tax structure, business structure and incentives to come.

     Norman points out that Charlotte’s central geographic location makes it extremely marketable. The accessibility to Charleston ports, a major airport and the trucking industry make the Charlotte region a prime location. The area’s well-educated, well-trained workforce and openness to diverse groups is another plus, he says.

     “When I came to Charlotte, basically what I was told was it didn’t matter where you came from or what you did,” recalls Norman. “Just get involved in some community organization and give back to the community, and you’ll be accepted.” He finds that attitude equally applicable to the community’s broad acceptance of foreign firms.

     “It doesn’t matter if you’re from Germany, Japan or China; the expectation is that if you give back to the community, you’re going to be accepted,” says Norman.

     International business inevitably depends on relationships at the local level. For example, a foreign manufacturer inbound has to ensure a continuous production cycle for dependable distribution of its product. That means it has to have local resources readily available—repair parts and service technicians—for its production processes, otherwise production stops.

     “So the only way to increase sales and be accepted in the U.S. market is if you have spare parts and technicians that are available right away, not days away,” says Norman.

     Norman points to a German machine tool maker for textiles that actually set up sales and service companies in the U.S. The same thing is happening now with Chinese companies. Being local also lowers shipping costs. One client that makes machines used in nonwoven textiles noted its customer moved all of its production from the U.S. to China five years ago to save on labor cost, but recently brought it back because the savings in the cost of electricity to run the machines far outweighed the labor savings overseas.

     According to Norman, location says it all. Two thirds of the U.S. population is one trucking day away, and Charlotte is half way between New York and Miami. Quick access to U.S. Interstates 85 and 77 running north and south and 26 and 40 running east and west are major sellers.

     “We are at the center of the hub to reach U.S. markets from a distribution standpoint,” says Norman. “From the airport, service technicians can get anywhere in the world within 24 hours.

     “In the ’60s and ’70s, mostly German and other European companies were drawn to the area. Chinese companies mostly settled on the West Coast. But the West Coast is only a third of the U.S. population,” continues Norman, “and going west to east with transportation doesn’t make sense.

     “There’s just so much that’s right about Charlotte. I always question when they don’t choose this region. I think we will continue to see more direct investment from Asia.”

     Typically, it’s not cost effective for U.S. companies to invest directly in China, but in Hong Kong through Wholly Owned Foreign Entities, known as WOFE’s. Norman says, “It’s a weird thing between China and Hong Kong—same country, but different rules.”

     Since Hong Kong has no currency restrictions, U.S. companies can send currency back to the U.S. or anywhere at any time. China has restrictions on getting money out of the country. But there are no restrictions going between China and Hong Kong. Hong Kong has no tax treaty with the U.S., but China does. Because Hong Kong has a 17 percent tax, U.S. companies have to decide if they want to pay the tax and not get a credit, or set up the business to get a flow-through credit and do the surplus.

     That’s the type of tax challenge Norman thrives on helping clients understand the implications. “I love problem-solving and thinking outside the box,” he admits. He likens the necessary acuity to math word problems. “If you’re a word problem person, you belong in tax,” says Norman. “That describes tax people.”

Ramona Patterson is a Greater Charlotte Biz freelance writer.
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