What Tax Time Means to Your CPA
Jeff Cremers, CEO of Cremers CPA
Business owners should always have their business’s accounting and business records current and in good condition but this is much more important if the business owner is even considering selling his/her business. Whether you are retiring or not your business is most often your most valuable asset and unlike most of your other investments you can control what the business is worth. There is a very large pool of buyers out there so once you decide to sell your business the requests for information from interested buyers will come very quickly. Many times the buyers will be guided by their CPAs with which questions to ask and which financial reports to request so as the business owner it is very important to speak with your CPA well ahead of time as they will be able to prepare you and your business for looking its best at the time you put it on the market. If possible inform your CPA of the potential of selling your business a year or two beforehand as having growth trend in profits and revenues will dramatically increase the value of your business so advance planning with your trusted business advisor is very valuable.
"If possible, inform your CPA of the potential of selling your business a year or two beforehand, as having growth trend in profits and revenues will dramatically increase the value of your business."
Tax time is here so business owners will working with their CPA soon anyway so now is a great time to have that discussion. Included in that discussion is the dreaded “How much will I pay in tax when selling my business?” question. Most business sales are structured as asset sales where the business owner is selling the equipment, customer files, business name, website and the overall business operations which means that taxation could be a significant factor in determining how much the business owner walks away with in the end. The allocation of the sales price between the tangible assets and goodwill is very important when it comes to taxes so as the selling business owner you need to discuss this ahead of time with your CPA. Because of the tax treatment available for installment sales the seller “carryback” portion can be advantageous as it can shift the taxable income to future years which may result in lower tax rates and therefore lower overall taxes paid. You have worked very hard to build your business to what it is worth today so utilize your trusted business advisors to help you maximize the value of your business and the amount you will end up with after the sale of your business.