| When selling your own business, it is critical that you | | | | committed to a deal and then blow it up over a |
| understand the points in the deal process when your | | | | meaningful change due to tax concerns. |
| attorney and CPA should get involved. The first point | | | | TIP: All CPA's are not created equal. You need one |
| to make is that both of these parties must be involved | | | | with experience in business transactions. If your normal |
| in your selling process. You should think of them as a | | | | CPA does not frequently deal in business transactions, |
| part of your "Exit Strategy Team." | | | | then you need to find one who does. Ask CPA's |
| Your CPA | | | | pointed questions to see if they seem to have a grip |
| Your primary goal with your CPA is to minimize the | | | | on the implications for a business sale. |
| tax impact of your sale. Small changes in deal | | | | Your Attorney |
| structure can make large differences in your after-tax | | | | A good business attorney will help you review your |
| cash from the sale, or be the difference in whether or | | | | purchase agreement both for issues that protect your |
| not a deal gets done at all. A seller can save literally | | | | interests, and to ensure that it complies with legal |
| hundreds of thousands of dollars in taxes as a result | | | | requirements in your jurisdiction. |
| of deal structure and asset allocation decisions. If you | | | | You can find excellent purchase agreement templates |
| have a small business that won't sell for hundreds of | | | | online that are designed to be balanced and treat both |
| thousands of dollars, don't think there isn't a role for a | | | | parties fairly. While you can settle most of the issues in |
| quality CPA. There is. | | | | your deal with one of these templates, be sure to |
| A typical CPA is going to charge you somewhere | | | | have an attorney review the agreement before |
| between $100 and $200 for a one hour consultation. | | | | committing to it. Your deal or business may have |
| For a smaller business, a good CPA should take no | | | | unique attributes that need to be accounted for. In |
| more than thirty minutes to give you an intelligent | | | | addition, each state has its own laws and regulations, |
| assessment of your tax exposure based on likely deal | | | | and your attorney will ensure the standard required |
| structures. Spending $100 to save $1,000 on a small | | | | language in your state is included, either by changing |
| business sale, or to make sure you simply didn't miss | | | | the body of the form, or through an addendum. |
| an opportunity, is a good deal. | | | | When to Meet with Your Attorney |
| When to Meet with Your CPA | | | | There are multiple points in time when you may want |
| Meet with your CPA at two critical junctures: after you | | | | to consult with an attorney. There are two critical |
| first decide to sell, and when you are evaluating an | | | | points, however, when an attorney must be involved. |
| offer that includes any agreement on the structure of | | | | The first is prior to signing a binding purchase |
| the deal. | | | | agreement, as noted above. |
| The first meeting will allow you to develop an | | | | The second time an attorney must be involved is at |
| understanding of deal structure issues, particularly in | | | | closing. Do not, under any conditions, close the deal |
| terms of tax implications. This will make you a more | | | | yourself only to save a few hundred dollars in |
| informed decision-maker and a better negotiator. | | | | attorney's fees. It will come back to haunt you. Ideally, |
| There are numerous internet based resources that will | | | | you should use an escrow attorney who is not |
| help you gain a base of knowledge that will make your | | | | representing either party to close the deal. If it is a |
| time with a CPA more valuable. Simply type "how to | | | | larger deal where one party has an attorney on staff, |
| sell a business" in a search engine like Yahoo, MSN or | | | | you must use an independent attorney to handle the |
| Google, and you will be able to find several quality | | | | closing, or have both parties attorney's manage the |
| resources. | | | | process together. |
| A second meeting over a specific offer gives your | | | | TIP: |
| CPA concrete variables to calculate your tax liability, | | | | Attorneys have specialties. You want one who has |
| and possibly reveal solutions to minimize it. | | | | been involved in numerous business transactions. Also |
| You may meet with your CPA more often if you | | | | shop prices. For a typical small business transaction, |
| have multiple offers over time. After you get a little | | | | you don't need a $1,000 per hour attorney, just one |
| education from him or her, you will be able to make | | | | with experience processing business sales including |
| some decisions on your own, but call your CPA before | | | | business purchase agreements. |
| entering into a final and binding purchase agreement. If | | | | Use Your Exit Strategy Team |
| they are familiar with your situation, a shorter, cheaper | | | | Although some key points at which to involve both |
| phone call may suffice. | | | | your CPA and attorney in your deal have been |
| If you're trying to economize, you can meet with your | | | | outlined here, never hesitate to involve them at other |
| CPA only before committing to a deal that includes | | | | points in the process when you have doubts or |
| financial structure details that can affect your tax | | | | concerns of a tax, accounting or legal nature. It's a lot |
| situation. We do advise working out allocation issues | | | | cheaper to pay for an extra ten or fifteen minutes of |
| prior to a binding purchase agreement for the simple | | | | time than it is to deal with the aftermath of a failed or |
| reason that you don't want to get the parties | | | | flawed agreement! |