Embracing Retirement and Selling: 4 Tips for a Smooth Transition
No one works forever. Regardless of how much you love your business, sooner or later you will have to step away. Owning a business can be very demanding, especially for owner-operators of businesses. And unless you’re a zombie, you won’t live forever. So, you’ll have to embrace retirement at some point, and you may not know how to prepare to sell a business.
Most business owners have never sold a business before and may not know what to expect. The good news is that prospective buyers usually like the idea of buying an established business directly from a business owner. It is key, however, to do everything possible to make selling your business, as well as the transition period, as easy for a buyer as possible.
Prepping your business for sale has many diverse parts that need to be taken into consideration. Prospective buyers want to feel as though they will have a seamless transition, so it’s in your best interest to evaluate what steps you need to take to make the transition smooth.
You are the world’s greatest expert on your business. As a result, you are perfectly positioned to evaluate your business so as to ensure that it is both appealing to a prospective buyer and ready to sell. Let’s take a look at the steps you can take to ensure a smooth transition.
The Top 4 Transition Tips
1. Automate as many processes as possible.
In this way, prospective buyers are less likely to be intimidated by the level of work involved in owning a small business. The odds are good that many of your prospective buyers have never owned a business before. One of the best ways to not scare prospects away is to make owning and operating your business as streamlined as possible.
2. Work with your employees, key customers and vendors to ensure a smooth transition.
Anything that can cause a potential disruption may scare off prospective buyers. Put yourself in the shoes of prospective buyers and think about what may cause you concern if you were evaluating a business. Once you locate those areas of potential concern, do what you can start to remedy them well before placing your business on the market.
3. Pick out your “second-in-command” before you sell your business.
Having a competent and proven “right hand man or woman” that can step in and essentially operate your business is a very attractive asset to have in place when it comes time to sell your business. Often, prospective buyers want to retain key employees, so they will be valuable assets when you prepare to sell a business.
4. Work with a business broker.
Brokers know how to negotiate the complicated maze of buying and selling businesses. They will be able to help you evaluate your business and address areas that need improvement so as to ensure a smooth transition. Working with a broker will also save you hours of time and ensure confidentiality during the process.
Taking these steps will not just make your business easier to sell, but it will also shorten the amount of time it takes to sell and maximize the sale price. The last thing you want when you are prepare to sell a business and retire is for the selling process to drag on forever.
Copyright: Business Brokerage Press
Read MoreTax Credits Can Lower the Tax Bill From Selling a Business
By Ben Zachariah, Director of Tax Credit Investments, Monarch Private Capital
The sale of a business can generate substantial tax liability. But by investing or purchasing transferable tax credits at a discount, the tax burden can be reduced.
Tax credits are created by governments to incentivize certain business activities that are deemed socially beneficial to communities. Historic preservation, low income housing and renewable energy are all activities that the Federal Government has promoted through the issuance of Federal Tax Credits. To further incentive these activities, many states have created tax credits that offset state taxes in a particular state (state income tax, insurance premium tax, franchise and excise tax). State tax credits are created by individual state’s legislature and vary state-to-state. Tax credits are a direct reduction of tax liability, not a deduction and are not a “loop hole” put together by creative accountants.
Georgia Tax Credits
In Georgia, there are film and entertainment tax credits, low income housing tax credits (LIHTC), and historic rehabilitation tax credits. Georgia’s film industry is estimated to have had a $6 billion impact on the economy in 2015, based on a multiplier.
FILM:
For the Georgia Film, Television and Digital Entertainment tax credits, production companies may be awarded a tax credit up to 30 percent of dollars spent on production in Georgia. If a production company has little or no Georgia tax liability, it can directly transfer or sell its tax credits to another entity or individual. These credits are purchased through a transfer agreement between buyer and seller where price and other matters are stipulated. A transfer tax form, IT TRANS, is filed with the Georgia Department of Revenue to record the transfer. Monarch Private Capital (MPC) acts as a broker between the film company and the buyer. MPC vets all film credit projects to make sure the studio or production company’s paperwork is in order and all certifications have been met and received from the state (DOR). For Georgia film credits, the buyer can purchase credits in the current year, but use them in prior years, as far back at the year the credit was generated.
LIHTC:
The Georgia Low Income Housing Tax Credit Program was established in 2000 and allocates state tax credits to investors and developers of qualified low-income housing developments who reserve all or a portion of their units for low-income tenants. MPC invests in partnerships with project developers to receive the tax credits generated by the low-income housing developments. Thereafter, MPC creates a fund that contains the tax credits. Investors invest in the fund to receive an allocation of GA low income housing tax credits. The credits are reported through a K-1 (partnership tax form). The state tracks all developments earning LIHTCs and which are tracked from developer, through the fund, up to the end user/investor. For LIHTC, the investor must invest in the current tax year to receive the credit. If the taxpayer has excess credits, they may carry them forward for three additional tax years.
FEDERAL:
Federal investment tax credits are offered by the United States government to promote specific types of developments in various fields. Federal tax credits are generally suited for corporations that carry an annual income tax liability of $500,000 or more. Corporations investing in federal tax credits will typically see a substantial internal rate of return on their investment. Additionally, individuals with substantial passive income may also benefit from federal tax credits.
Our team at MPC works with historic rehabilitation, Federal Solar Investment Tax Credit (ITC) and affordable housing federal tax credits. In some cases, the provisions may mirror state regulations, in some cases, not.
In addition to the tax benefits of tax credits, many such investments offer opportunities for positive public relations. When investing in solar tax credits, you help reduce the negative impacts on the environment through the creation of clean power. When you invest in historic tax credits, you restore a lifelong part of the community to vitality and create a new future for historically significant buildings. When you invest in affordable housing credits, you prove to your community that you care about their well-being by creating affordable quality homes. When you invest in film credits you are supporting the arts and entertainment industry which creates thousands of new jobs and boost, the local economy.
Contact us to learn more about how to benefit and make an impact today.
Ben Zachariah is a GABB affiliate and serves as Director of Tax Credit Investments for Monarch Private Capital. Zachariah helps businesses and individuals identify, underwrite, and invest in federal and state tax credit investment opportunities, which afford them the ability to effectively reach and optimize their tax and wealth planning goals. Zachariah works with wealth managers, RIAs, CPAs, attorneys, and advisors to assist them in driving value to their client’s overall financial plans and strategy. Zachariah is a licensed CPA in the state of GA.
Zachariah specifically focuses on individuals with liquidity events, real estate investors, hedge fund managers, private equity managers, high-income earners in general ($1M plus of net taxable income), banks, profitable portfolio companies with cash flow, financial institutions and trust companies, insurance companies, and corporations with federal and multistate federal tax liabilities.
Zachariah has facilitated the placement of over $70M federal and state credits since joining the firm in 2016.
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Don’t Let the Dust Settle on Your Commercial Lease: Eleven Factors to Consider
Owners often don’t understand their leases, and this can be an expensive oversight. If your business is location-sensitive, then the status of your lease is likely a major factor in the value of your business. The location of restaurants and retail businesses is usually critical to the operational success of the business. But every business should understand in detail the terms of its leases.
Key factors involving leases should not be ignored or overlooked. If you adhere to these guidelines, you’ll be much more likely to control your outcomes.
- Lease length. Usually, the longer your lease the better.
- Buying the property. If the property goes on the market, it is often in an owner’s best interest to buy the property or he or she may be forced to move.
- Exit clause. When negotiating a lease, it is best to negotiate a way out of the lease if possible; this is particularly important for new businesses where the fate of your business is still an unknown. Experts recommend opting for a one-year lease with a long option period.
- Transfer provisions. You may want to sell your business at some point, and this is why it is important to see if your landlord will allow for the transfer of the lease and what his or her requirements are for the transfer.
- Non-compete clause. If your business is located in a shopping center, have it written into your lease that you’re the only tenant that can engage in your type of business.
- Anchor store closing. If you’re located in a shopping center, then try to outline in your agreement a reduction of your rent if an anchor store closes.
- Tenant/Landlord responsibilities. Your lease should describe what your responsibilities are and what responsibilities your landlords hold. Keep in mind that if you are a new business, it is quite possible that your landlord will likely require a personal guarantee from you, the owner.
- Insurance/Disaster Provisions. What happens in the event of a natural disaster or fire? Who will pay to rebuild?
- Percentage clause. Are you obligated to pay a percentage of your gross sales in rent, or a percentage clause? If so, is that percentage clause reasonable?
- Taxes and Fees. How are real estate taxes, grounds-keeping fees and maintenance fees handled?
- The bottom line: show me the money. The dollar amount is necessarily the most important factor in determining the quality of your lease. It is important to carefully assess every aspect of the lease and understand all of its terms.
Investing the time to understand every aspect of your lease will not only save you headaches in the long run, but it will also help to preserve the integrity of your business.
Copyright: Business Brokerage Press, Inc.
Read MoreGearing Up for the U.S. Economic Census
Every five years, the U.S. Census Bureau collects extensive statistics about businesses that are essential to understanding the American economy. This official count, better known as the Economic Census, serves as the foundation for the measurement of U.S. businesses and their economic impact.
This is free data you can use for your business.
As part of the Census Bureau’s mission to provide timely information on the health of the U.S. economy, this “business” census serves as the most extensive collection of data related to business activity. Nearly 4 million businesses, large, medium and small, covering most industries and all geographic areas of the United States will receive surveys tailored to their primary business activity.
The data produced from the Economic Census are important for your industry, your community and your business:
- Statistics from the Economic Census provide policymakers with the evidence based information used to make sound programmatic decisions.
- Federal agencies rely on the data as the basis for key measures of economic activity, such as the Gross Domestic Product (GDP), National Income and Product Accounts (NIPAs), and the Producer Price Index (PPI).
- Trade and Business associations, along with Chambers of Commerce, rely on Economic Census data to measure key business facts they can use to gauge organizational structure and product trends.
- Individual businesses use the data from the Economic Census to make decisions about operating sites, capital investments, and product development.
The extensive and comprehensive data products include over 950 detailed industries across 18 industrial sectors classified using the North American Industry Classification System (NAICS). Geographic Area Series reports containing general statistics will be produced for nearly 21,000 geographic areas including the U.S. Territories. Additionally, over 7900 goods and services products will be released for the first time on the new North American Product Classification System (NAPCS) basis.
The key statistics produced for the Economic Census include Total Number of Establishments; Value of Sales, Shipments, Receipts, Revenue; Primary Business Activity; Total Number of Employees; Total Annual Payroll; Total First Quarter Payroll; and industry specific statistics.
Starting with this Economic Census, respondents will use an online, secure portal to respond making filing easier while at the same time improving data quality and reducing costs. Small companies located in the U.S. territories will have a paper option available, including a Spanish version for Puerto Rico.
To find out more about the Economic Census and how you can use Census data for your business, visit the U.S. Census Bureau’s Economic Census page.
GABB CPA’s Discussed Tax Law Impact on Businesses
Wondering how the new tax laws will affect your business? Three certified public accountants discussed how tax law changes will affect businesses, individuals and business valuations during the March 27 meeting of the Georgia Association of Business Brokers.
The three accountants also answered questions from the GABB, the state’s only association of professionals who work to facilitate the purchase and sale of businesses and franchises. The GABB meets at 10:30 a.m. at the Atlanta Realtors Center at 5784 Lake Forrest Dr. NW, Atlanta, GA 30328. The meeting was preceded by a free breakfast and networking session sponsored by corporate attorney Germaine Curtin.
An audio recording of the discussion is linked here.
The panelists were: Gary Massey, CPA, MBA, MST, founder and managing director of Massey and Company; Andrew Moore CPA, tax senior manager of Frazier & Deeter; and Will Geer CPA/ABV/CFF, CVA, MAFF, CFE, ASA, CMAP, a founding partner of Geer & Associates, PC.
Gary Massey, CPA, MBA, MST has worked in public accounting formore than 25 years, including a 10-year period at Ernst & Young, Coopers & Lybrand and KPMG. He specializes in tax compliance, tax planning and representation of taxpayers before the IRS. He earned a BA in History, Summa Cum Laude, at Brandeis University. He also earned an MBA in Accounting and MS in Taxation from Fordham University.
Andrew Moore CPA is an active member of his firm’s pass-through team and participates in the overall delivery of tax compliance, consulting, and planning services offered. Prior to joining Frazier & Deeter, Andrew led major initiatives that include helping clients implement the IRS Tangible Property Regulations and filing related accounting method changes which resulted in his clients saving millions of dollars in taxes. Before joining Frazier & Deeter, Andrew spent just over nine years working with clients in the automotive, manufacturing & distribution, trucking, legal, technology, and service based industries at various other accounting firms in Atlanta.
Will Geer CPA/ABV/CFF, CVA, MAFF, CFE, ASA, CMAP is a founding partner of Geer & Associates, PC, a firm of CertifiedPublic Accountants and advisors in Atlanta, Georgia. Mr. Geer performs construction, governmental, franchisor, and not-for-profit audit and accounting functions, consults on tax matters and controversies, and provides forensic and valuation services for its clients. Mr. Geer is responsible for creating both the tax practice, audit practice and forensic accounting practice his firm. Prior to founding his firm, Mr. Geer worked for a large regional accounting firm and worked for a United States Bankruptcy Trustee in the Southern District of Georgia. He earned a Bachelor of Science in Accounting from Florida State University with and then a Masters of Business Administration from Georgia Southern University.
The GABB is the state’s only association of professionals who work to facilitate the purchase and sale of businesses and franchises. The group includes business brokers as well as lenders, attorneys, business appraisers, insurance agents, environmental specialists and other professionals. GABB’s member business brokers work with businesses of all sizes to help them through all steps of selling their company: valuation, marketing, financing, and closing. Aspiring business owners also work with business brokers to purchase existing businesses at a fair price.
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