27 Nov Around the Web: A Week in Summary
A recent article from The Enterprise entitled “Steps to take before buying a business” explains the five things that every buyer needs to do before completing the purchase of a business.
Buying a business versus starting one from scratch has its benefits. However, it also has some major financial implications that are imperative to consider. While either choice is a major commitment to make, here are five steps to take before signing on the dotted line on a purchase agreement:
- Determine the type of business you are interested in.
- Take the time to complete your due diligence.
- Enlist the help of an experienced attorney.
- Develop a plan to finance the purchase.
- Review your personal financial position in detail.
If you are indeed going to opt for purchasing an already existing business over the choice to start a new one from scratch, then it’s important to have your ducks in a row. You want to make sure that you’re choosing a business you’ll be passionate about running, or at least knowledgeable about, and that your financial and legal protections are in place. A wonderful place to start when you’re beginning to look at businesses is with a business broker who can help you to find the right fit for you.
A recent article from Albuquerque Journal entitled “On reporting the deal ‘consistently’ on returns” provides a business brokers’ detailed answer to a business owner’s question regarding how to report their business sale on their taxes.
When a small business is sold to a larger company, there is always the matter of taxes for the buyer and the seller at the end of the year. The way that the purchase price is reported to the IRS holds implications, that are often conflicting, for each party. However, to avoid the tax returns being challenged by the IRS it is best that both party’s returns report the allocations the same way. To resolve this issue, a clause is commonly added to the purchase agreement that states that neither party will file their tax return until both agree upon the allocation of the value and assets of the business. According to Jim Hamill, this clause is a good thing to have added to the agreement, but how things will be allocated should be agreed upon before the agreement is signed.
A recent article from Journal Enterprise entitled “A Brief Guide to Selling a Business” explains the best practices for selling a business for an inexperienced seller.
There are many reasons to sell a business. While some individuals may sell what’s left of a failing business, others may have only started the business to sell it for a profit or may sell a perfectly thriving company in order to retire. Whatever the reason for the business sale, there are many potential problems that remain consistent across the board. For a smooth business sale, follow these pieces of advice:
- Seek professional help – Working with a business broker can help you to navigate the more time consuming and complicated aspects of selling a business such as negotiations, finding interested buyers, preparing your business for sale, and otherwise guiding you through the process.
- Organize the paperwork – Without easy-to-read, complete and properly prepared financial, tax and other documents, your business will not be easy to sell. A diligent buyer will want to see all of these papers while they are performing their due diligence so having them prepared and organized before they are requested will make for smoother sailing.
- Plan your offer and recheck business details – In other words be clear on what you are looking for in the sale of your business and make sure you are up-to-date on the goings on within your company. It would be very problematic to have an interested buyer bring problems within your business to your attention that you are not already aware of or are in the process of handling.
Many factors go into the sale of a business and the process can be time consuming and lengthy. For these reasons, a seller should step into the process with preparation and professional assistance.