Business Sale or Acquisition
We're going to share the most important piece of advice when considering buying or selling a business: get your accountant involved early! From the start your negotiations should be structured to save you taxes. It often takes just one meeting to assess the situation, and provide guidance on how to structure the sale or acquisition to mitigate your tax burden.
Types of Sales
Generally sales fall into two distinct types: stock or assets. In the former, the sale is of the company stock, or partnership interest from the seller to the buyer. In the latter, the sale is of the assets of the company, by the company to the buyer - who then structures their "Newco" (or new company) according to their needs. There are also hybrids that combine both of these techniques together - primarily for license transfers.
Sellers vs. Buyers
Generally, sellers prefer to sell stock to assure that all the gain will be at a lower capital gains tax rate; whereas, buyers prefer to acquire assets to avoid potential liabilities of the old company and to depreciate those assets. Knowing up front which one is your goal is critical to your negotiations. It can be challenging to restructure a sale after initial agreements can be worked out.
Whether you're buying or selling, we can assist you in understanding these differences and choosing the method that best fits your needs.