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Change Your Tax Strategy if You Plan to Sell Your Business Within Two Years

Tuesday, February 19 2008

Tax season is here.  If you plan to sell your business in the next year or two, NOW is the time to change your tax strategy to maximize your purchase price, not reduce your taxes.

Let’s do some quick math.  For the purpose of this example, let’s say that you have a business that has been valued at 3.0 times earnings.   Every additional dollar to the bottom line is worth $3 at the sale of the business.  How much is the dollar that does not make it to the bottom line worth in tax savings?  About 30 cents.   Which is worth more: 30 cents of savings or $2.xx in additional cash (after taxes)?

It’s a big difference, but many business owners (and their CPAs) are automatically programmed to reduce taxes.  Some to such a degree that not only are they reducing taxes, they are breaking the law and exposing themselves to no small degree of risk when they go through the business sales process.

It also helps your business broker / M&A advisor.  I can’t tell you how frustrating it is to get turned down by banks on business acquisitions, when I KNOW the cash flow (and value) is there.  But either I can’t divulge it to the bank, or I can divulge it but the bank will not accept the adjustments to the tax returns.

The year or two before you sell is the time to come clean and show all your profits.  It is well worth it!

 

In addition, make sure to read these articles:

  • Selas Corporation of America Reports...
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  • Business Editors MONTREAL--(BUSINESS WIRE)--Jan. 28, 2004 BCE Emergis Inc. (TSX:IFM): -- Q4 revenue from continuing operations at $76.5 M, year at $315.7 M -- Q4 ......
  • The St. Joe Company Reports First Quarter 2006...
  • JACKSONVILLE, Fla. -- The St. Joe Company (NYSE:JOE) today announced that its Net Income for the first quarter of 2006 was $3.7 million, or ......
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  • The Whole World Is Buying.
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  • Serena to Unveil IT Change Governance Strategy...
  • SAN MATEO, Calif. -- Serena Software, Inc. (Nasdaq:SRNA), the largest company solely focused on managing change in the IT environment, today announced details for ......
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  • HEADNOTE EXECUTIVE SUMMARY A project can't be deemed complete - let alone successful - until the sustainability of the change is ensured. To guarantee change ......
  • Determining Your Bottom-Line Profit Margin
  • Most decorators know the frustration of losing orders to low-ballers ? screen printers willing to tack $0.50 on to the cost of a shirt to ......
  • CI Sell Cars, Inc. Announces Name Change to...
  • TORONTO -- Trading Symbol Also Changes to "SGYI" CI SELL CARS, INC. (OTCBB: CISL), a provider of specialty lines of insurance, reinsurance and structured risk ......
  • Vons fights new Procter & Gamble pricing strategy.
  • P&G: Supermarkets profit unfairly on 'trade allowances' The Vons Cos., Southern California's largest retail grocer, has taken a lead role in a supermarket soap opera ......
  • Results-Based Leadership: How Leaders Build...
  • by David Ulrich, Jack Zenger, and Norm Smallwood. Publisher: Harvard Business School Press (1999), ISBN 0875848710. As we enter the new century, corporate leaders are ......
  • Landing large accounts differs from selling small...
  • MANY things have changed since my first insurance sale 22 years ago. One is the average size of the accounts I choose to work on....
  • Stop misguided strategies
  • IMAGE FORMULA 1 In case you missed it, the game of banking during the last several years has become infinitely more challenging. While many bankers ......

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