Tax Planning for the Sale of Your Business

By Tom Cobery
In March 23, 2016

During recent negotiations for the purchase of a company, it was asked of the Seller if they had consulted outside tax advisors to point out any tax considerations they should consider. The answer from the Seller was an unequivocal yes. My client (the Buyer) and I reiterated that there were many items that the Seller should discuss with their tax advisor, such as depreciation recapture, ordinary tax rates versus capital gains rates, asset purchase versus a stock purchase, allocation of the purchase price to Non-Competes, and Goodwill, etc. He again assured us that these discussions had been discussed with his tax advisor.

We continued our negotiations with the Seller and came to a mutual agreement on the terms and amount of the purchase price. However, it turned out that his tax advisor was not the person he would be using to advise him on this transaction. He had been relying on his current tax preparer, who had no experience in the sale of a business. In the end, he discovered that the tax that would be due on the sale of his business would be significantly greater than he had been advised by his tax preparer.

The moral of the story is that both a Seller and a Buyer should seek outside professional tax advice from people who have experience in the area of Mergers & Acquisitions. A clear understanding of what the tax considerations are in entering into a transaction of this magnitude are needed by both the Seller and Buyer.

If you want to chat, give me a call at 201-523-6326 or Email me at tcobery@epicomm.org.

Tom Cobery

Dealing with the day-to-day needs of running a busy printing operation often leaves company leaders little time to plan for the future of their enterprises on their own. Tom works with chief executive officers and senior management executives in the Tag and Label Industry to develop growth opportunities through strategic transactions, new markets, or new service opportunities. Available for consulting on individual projects, he can also be engaged to serve as an Advisory Partner, helping executives guide their company into the future, serving as an impartial sounding board for ideas, and working with them to set the right course for continued growth and greater profitability. Tom’s personal experience as a Tag and Label Industry company president and chief executive officer, plus his extensive networking with other industry executives through his volunteer leadership activities with the Tag and Label Manufacturers Institute (TLMI) give him a unique perspective on the tough issues today’s company leaders face in this specialized segment. Companies engaging Tom will find his insight and independent advice an invaluable asset in helping them achieve their growth and profitability goals. More than a consultant, Tom Cobery wants to be your trusted Advisory Partner.

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