Should You Hire an Accountant to Sell Your Business?

People sell off their businesses for a wide variety of reasons. As you probably already know, life has a mind of its own, and it can often take some unpredictable twists and turns despite our most well-thought-out plans. Some of the reasons businesses are sold are completely out of the business owner’s control. Thankfully, retirement is the most common reason profitable businesses are sold by their owners, but do you know the other reasons why businesses are sold?

If you are a business owner, surviving family member, or business partner, we have put this article together just for you. In it, we will provide you with the top things you need to consider before hiring a CPA to help facilitate the sale of your business. We also cover some of the finer points of the selling process, what the buyer will be looking for, why CPAs are a critical part of your sales team, how to pay less tax, and how to make the most profit. But before we get into all of that, let’s take a quick look at why people sell businesses in the first place.

Top 10 Reasons Business Owners Decide to Sell Their Business

1. Retirement – It’s time to take life a little easier and enjoy some of the finer things you enjoy. You have earned it!
2. Other Business Opportunities Arise – Many Business owners love running businesses, and the thought of getting in on another potential business opportunity just might be too irresistible.
3. Health Problems – Whether it’s the health of a loved one or the health of the business owner, health issues can dictate the need to sell the business and turn the reins over to someone else.
4. The Business has Peaked – As they say, buy low and sell high. There’s no better time to sell than when things are looking up. It will be hard to beat the profits of the upswing.
5. Partner Problems – Sometimes the business sale could be motivated by issues with spouses, or sometimes it can be motivated by issues with corporate partners. In either case, it may be the right time to sell and cash out.
6. Burnout – It can happen to all of us. The intense passion we once had for the business has long since diminished and we are more than ready for a fresh start.
7. Relocation – For a wide variety of reasons, it might be time for another location. Whether it’s because of health reasons, relationship changes, finances or it’s simply the big opportunity to live where you want to. Relocating has prompted many business sales.
8. No Profit – Far too often, business owners try to get out of their company because they see the writing on the wall. The company is not profitable enough for them to justify the investment of their time, energy, or money. These are not normally the best businesses to sell or buy. However, they often come with a very tempting price tag to buyers, and getting something is better than getting nothing. Sometimes, the new owner can make the company profitable with some adjustments and dedication.
9. Looking for Greener Pastures – You might not have another business opportunity, and you are not experiencing burnout. Perhaps you just want to do something different with your life. Maybe you are even ready to rejoin the corporate world or pursue something you are more passionate about.
10. Death of Business Owner – It’s normally best to sell a business before a business owner dies. However, life can take some funny turns, and sometimes that’s just not possible. This can leave former business partners and families in a tough spot when determining how to move forward.

Are you considering selling your business while achieving maximum profits?  If so, a good accountant (along with a good broker or investment banker and business attorney) will prove to be a critical part of your “sales team.” Not only will the accountant make sure you net the most money from the sale of your business, but they will also provide invaluable peace of mind throughout the entire sales process. 

Here are some ways we help our business owners sell their businesses for the biggest returns when it’s time to cash out:

1. ESTABLISHING BUSINESS VALUE

It might be hard to believe, but not all accountants are qualified valuation experts when it comes to selling your business. If you hire an accountant that is not properly qualified, you can very easily find yourself underselling your business while leaving money on the table. And if you list the price of the business too high, it will simply never sell.

Deciding how much a business is actually worth selling for can involve navigating some tricky waters. With over 20 years of serving businesses as a licensed CPA, we have seen just about it all. We know every metric and every rock to look under or consider when determining the true value of your business.

2. ALLOCATING ASSETS

Knowing how and where to allocate the purchase price of your business will have tax implications. So, it’s critical to know what portions to allocate of the purchase price towards categories like hard assets, real estate, goodwill of the company,  etc… 

3. BUSINESS SALE STRUCTURE

Before you ever decide to sell, we will explain to you the pros and cons of selling your business as either a stock sale or an asset sale. The taxes on each can vary widely. Normally, the tax advantages of selling the business as an asset sale will outweigh those of a stock sale. But it’s always best to know the advantages and disadvantages of them both before selling.

4. RECASTING AND OBTAINING BUSINESS FINANCIAL STATEMENTS

As a normal part of selling your business, potential buyers will want to view the financial documents from throughout the history of your business. We will provide these reports to prospective buyers for you. In addition, these financial documents may need to be “recast” to show the actual value of the business.

5. RECONSIDERING BUSINESS STRUCTURE (PRE-SALE)

In some cases (before the sale), it may make sense to transfer certain business assets to different entities or people. It may even make sense to form a brand new business entity or dissolve the existing entity before the sale of the business is completed. Again, this is all done while keeping in mind your goals, tax liabilities, and maximizing your profit in both the short and long term.

6. DISSOLUTION

We touched on dissolution a bit in the previous step, but we are not quite done dissolving the business yet. Based on how your business sale is structured and completed, a final tax return will need to be filed before the dissolving of the business is considered finished. If you provide financing to the purchaser and continue to receive money from the sale of the business, you will need to file returns for that income also.

As you can see, having the right accountant working for you during the sale of your business will have a definite impact on your bottom line. You have worked so hard to build your business and make it profitable, and now is the time for you to get the most for it.