|Charles S. Wilson, CPA/CFF, CGMA, CBEC | CERTIFIED BUSINESS EXIT CONSULTANT | 281-993-4530 | firstname.lastname@example.org|
Exiting Your Business vs. Selling Your Home
[fname], many business owners believe that exiting their business is a
process that they can handle themselves, or 'deal with' when the time comes.
All too often, those business owners lose a lot of their hard-earned wealth
when they do not understand the issues involved with a Business Exit and,
consequently, do not do enough advanced planning.
Different buyers bring different attributes to the business sale – some will
pay more than others, and some will have to pay you out over time. This is
not the case in the sale of a home. But, in the sale of a business, value
and the stream of payments varies from buyer to buyer (for example, a
competitor will pay more for your business than an employee who needs to pay
you from cash flow from the business). This leads us to issue #2.
Included in the Deal Structuring are Deferred Payments, Contingent Payments,
Non-Compete Payments, Consulting Agreements, Escrow Payments, and continued
lease and property rental payments. Complicating Deal Structuring even
further is the fact that each of these payments is subject to its own tax
rate. Also, as a general rule, Buyers prefer to purchase Assets (of a
Company), while Sellers prefer to sell stock. Again, this varies
significantly from the sale of a home.
Payments to an exiting business owner can be characterized as Goodwill,
Personal Goodwill, Income, or, alternatively, fall into an Internal Revenue
Code section deferring the taxation until a future date, such as IRC
sec.1042 for (certain) sales of shares of a C Corporation to an Employee
Stock Ownership Plan – ESOP. The sale of a residential Home does not afford
the Buyer and the Seller options for reaching such characterizations, or
deferments, of the taxes.
Once this concept is grasped, an owner's primary motives for the exit may be
more easily achieved. In other words, different types of transactions are
available to allow flexibility to the process of business owner exit
Alternatively, exiting a business includes the services of a professional
who can draft documents reflecting the agreement for the transfer of shares
(or assets) of the privately-held company (an attorney), document any
arrangements for future payments and security that is taken in lieu of
payment at the closing (again, an attorney), assess the taxes that must be
paid as a result of the transaction (normally done in advance of a closing
by an accountant), and understand the unique nature of your privately-held
business (transactional intermediary).
> collect, maintain, and enforce (if necessary) confidentiality agreements - you don't 'open house' the Sale of a Privately-held business,
As always if you need some advice, you're welcome to email me of call me here at the office at 281-993-4530.
Charles Wilson, CPA/CFF, CGMA, CBEC
Charles Wilson, LLC
307 S. Friendswood Dr, Ste B-2
Charles Wilson, CPA/CFF, CGMA, CBEC is a Certified Business Exit Consultant and is affiliated with Pinnacle Equity Solutions, Inc., an Exit Strategies Training and Solutions company. Parts of the content in this email are taken from previous Pinnacle Equity Solutions, Inc's. newsletter library and website in accordance with Charles Wilson's certification in Pinnacle's Certification and Membership Program. All Copyrights are the properties of Pinnacle Equity Solutions, Inc. and Charles Wilson, LLC and their respective owners.