Planning, that is the most important word. I have had so many clients buy and sell businesses within the last year and every time, those who plan ahead, enjoy success.
Buyers usually want the majority of the purchase price allocated to inventory or assets so that it can be expensed right away. Buyer’s want to minimize goodwill and other intangibles that are deducted over a period of time.
Sellers will likely prefer the majority of value to be allocated to stock so that they can receive capital gains tax treatment. Selling stock in your business is the most simple sales solution. For the buyer, they get no immediate tax benefit AND they are taking on any laibilities, known or unknown that are attached to the entity. That is scary stuff!
So you can see where negotiations between buyers and sellers can get stuck and where having advisors who understand the ramifications of value classifications, can be critical to the TAX IMPACT of a purchase or sale. If you are even thinking about selling your business or buying a business within this year or next, please consult with your tax advisors to see how you can best benefit from tax law in this area.
You can always reach out to me.
And if I cannot help you, I will find someone who can.