Buying & Selling a Business
Since buying and selling a business involves many legal, accounting and tax issues, it is highly recommended that both the buyer and the seller, each employ his/her own CPA and legal counsel. In any business sale, the selling price must be allocated between the various categories of assets involved and must be reported to the IRS by both the buyer and the seller. For example, the selling price needs to be allocated between fixed assets, inventory, goodwill, cash & cash equivalents and supplies. These items should be allocated prior to closing because what is a good allocation for the seller is not necessarily a good allocation for the buyer. Many taxpayers have been burned when filing their taxes because they did not truly understand the implications of a proper allocation. In addition, these amounts should never be arbitrarily determined.
A buyer, should obtain a lot of financial and tax information from the buyer before rendering a contract to purchase the business. This may include copies of tax returns, payroll returns, W-2's, sales tax returns, bank statements, depreciation schedules and financial statements. A trained CPA may be able to spot discrepancies and inconsistencies within the data, which even the business savy person may overlook. In the excitement of purchasing a new business, it is often easy to overlook areas that should be addressed. For the seller we can help determine a selling price and find discrepancies before the buyer does.
Choosing the Right Business Entity
Before you start a business or purchase an existing business, you must choose the correct tax entity based on your individual situation. Should you become a sole proprietor, a C Corporation, an S Corporation, a partnership, an LLC or any of the many hybrids of the above? Many lawyers will incorporate you no matter what or will choose the entity type they are most familiar with. Unfortunately most lawyers are not tax lawyers and are unfamiliar with the many tax implications of the various entities. If you need to incorporate, we will advise as such. If you don't need to incorporate, we will tell you that as well. What entity you choose today will affect you for years to come. Although you may be able to change your business entity down the road, it is often more costly and time consuming than choosing the right entity in the beginning. If you have already chosen your tax entity but have not consulted a CPA or other tax professional, please consult one, as soon as possible. It is imperative that you obtain competent advice in the early stages to avoid major complications down the road.
We can help to review your investment portfolio and look for ways to improve it. If you have an investment advisor or broker, we most certainly will work with them. Together with them, or alone, if you do not currently have an investment advisor, we will help you to determine if you are taking advantage of tax deferred or tax free investments. We will examine your tax situation and your debt and tailor a plan that incorporates these in with your investing and retirement planning. How old are you? Are you married or single? Do you have any dependents? Any of these or hundreds of other questions, if addressed could have an impact on your overall strategy. Since we are not a licensed insurance agent or broker, we can point you in the right direction and give you advice but we will need to work with your broker and insurance agent to select the specific products right for you.
You are never too young to start planning for retirement. One would be shocked to know how much wealth could be accumulated by starting early in life. Putting a little money aside early in life, will substantially surpass the growth of a lot of money, later in life. The time value of money has been called by Albert Einstein as one of the greatest, if not the greatest wonder in the world. Some of the more common reasons for not planning for retirement include the following. I can't afford to save. I am young. I have plenty of time. Social Security will be there for me. Financial experts have indicated that the average person today will need between one and two million dollars to retire at their current life style. Although this sounds out of line, when you consider the projected annual inflation rate of 3-4% per year ( and it likely will go up in the future), the increased life expectancies of most individuals, and the likelihood of up and down investment returns, this amount is realistic. Most people have not started to save for retirement and for those that have, its only a few thousands. Even those who have pension plans at work, most will not accumulate any where near the first million but probably more like several hundred thousand. Only 4% of the population will ever reach this number based on past statistics. Why do you think so many people are still working past the normal retirement age?