Archive for category: General

With the last of our deals getting done on December 28th, it’s time to look past the fiscal cliff craziness to the deals that are in the works for 2013. There has been a recent surge of business owners that are now prepared to sell – for various reasons:

Some were sellers who had focused on uncertainty over potential tax changes and delayed their deals. Some were waiting for the election to determine what administration was going to be leading our country, and then decided to sell. And for others it is just the right time.

So, some business owners acted quickly to get their businesses sold in 2012, some moved more slowly and will potentially pay a higher tax in 2013, some are not concerned about the tax issue and just want/need to sell as soon as possible, and the other 98% of the businesses are not ready to sell.

The point to this is that as we look out our windows, the cars are still moving, people are going to work, we are buying goods and services, the world did not end, and the fiscal cliff will not determine our future.

2013 is looking like another great year! We wish you all a fantastic 2013 in your business and personal lives.  You deserve it!

There are a few options for a business owner who wants to retire. Selling the business to an employee or group of employees is one of those options. This may seem like the easiest way to transition, but the seller should still have professional assistance to make sure the sale is successful and the future of the business is secure. (Most business sellers care about the future success of their business).

Make sure the employees are experienced, trained, and mentally prepared to own and operate the business. Employees can make terrific managers, yet fail when it comes to the rigors of ownership. Handing over a substantial business to an employee who has only limited resources and experience is dangerous.

Being charitable is commendable, but the seller may be putting their buyer and the business at extreme risk. Will the buyer have a substantial investment or will they be relying on the seller to finance? Will the buyer have the fortitude to resist taking all the cash out of the business when they have personal debts to pay? Can they skip their salary if business is down? Will they be able to secure a line of credit if the need arises? If it is a group of employees that will manage together, do they have a realistic and detailed partnership agreement? These are just a few of the questions that need to be addressed.

Another consideration for a business owner when contemplating a sale to employees: is the seller getting solid market value for the business? Does the price include a premium for seller financing risk? It will be critical to get a market valuation completed to ensure the seller is not leaving anything on the table. Personal and emotional decisions should be limited.

If you are a business owner considering a sale to your employees, call an Apex Business Advisor for a review of your plans.

Most accountants advise their clients to take the S-Corp election rather that remaining a C-Corp. There are going to be a few specific situations that will require keeping the C-Corp, but the majority of small to mid-sized businesses meet the S-Corp criteria. The principle advantage to choosing the S-Corp vs. the C-Corp is the tax liability. The owners of the S-Corp are taxed (once) at their personal tax rate on the year-end profit, whereas the C-Corp is taxed on a higher corporate tax schedule on the same profit and then shareholder dividends are taxed again at their personal tax rate.

When selling a business, this can become a complicating factor. C-Corps are going to pay a much higher rate than the S-Corp upon the sale; so many C-Corp owners want to sell the stock to reduce the tax liability. However, buyers do not want to buy a company’s stock because of some large ongoing liability issues, the ongoing double taxation mentioned above, and they would not get other tax benefits they would receive in an asset sale. Typically, if a buyer has to acquire the corporation to make a deal work, the price they will be willing to pay for the business will be cut to balance the risk and increased tax.

Seek advice from a trusted tax or estate attorney or CPA. It is never too late to change to the S-Corp designation. Even if you plan to sell your business within the next year, there will be advantages to change now. For more information, contact your Apex Business Advisor.

Quite frequently, we are asked by various professional and networking groups to give our impression of the state of the overall business environment. Also, potential buyers and sellers want our viewpoint because of our unique ability to have confidential access to many businesses and their financial histories.

We feel that although there is always a market for buyers and sellers of businesses, there have been some challenges over the last couple of years. Good businesses were hurt by the overall economy, and banks paused in funding acquisitions and working capital. The good news is that these businesses seem to have hit bottom, stabilized, and begun growing again, resulting in an increased value of the business.
Activity in our business is up. More business owners are ready to sell and retire after having recovered from the recession. In light of stable and upward trending revenues, buyers are more comfortable proceeding with a business purchase. They also appreciate and recognize that the business is one that can withstand one of the worst recessions in history. Additionally, banks are making a real effort to compete for loans and are more anxious to fund the acquisitions of these improved businesses.

Some media-reported statistics are now revealing an improved confidence and optimism in our economic future. The press can focus on the negatives too often (understatement), so we need to share the positives! Contact your Apex Business Advisor for assistance when looking at buying or selling a business.