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Your Exit Plan, Your Employees and Your Tax Team

exit-plan“Everyone lives by selling something.” – Robert Louis Stevenson

Last week, we discussed sensible exit strategies when selling your business to key employees.

We established that it can be a safe, solid move, and that Brinen & Associates has deep experience in this scenario. While we focused on legal planning in the prior installment, let’s look at two other separate roles that I am qualified to assume: The tax advisor and the certified public accountant (CPA).  

A CPA works in tandem with the legal counsel in setting exit objectives and advising you on their practicality. It’s their job to collaborate with the tax advisor and the legal counsel and determine the value of the business. This analysis includes:

  • Providing periodic and ongoing valuation services
  • Providing cash flow projections
  • Discussing methods to maximize the company’s value

At the time of sale is also a fine time to review projections of the business in a post-ownership scenario. The CPA may have a completely different, yet insightful, opinion of the key employees you’ve groomed for ownership.

You typically should not second-guess yourself at this stage, but if your CPA is someone you completely trust and is screaming “red flag,” you should listen.

Wealth Preservation

Limiting tax exposure is just one way to align your business needs with your personal exit goals. Your tax advisor should provide a list of tax consequences for your sale, and it’s important to note that each type of company is subject to different types of taxes. Whether yours is a C-Corp or an S-Corp, the advisor should know your situation inside and out and address many of your “what ifs.”

Perhaps most importantly, the tax advisor should help you determine whether your financial needs and exit objectives can be satisfied by the net sale proceeds.

Someone approaching retirement will have different objectives than that of someone who has taken the business as far as possible and wants to move on. However, when it comes to the numbers, the sale price needs to be affordable enough for your employees to purchase the business but high enough for you to be able to continue living within your means.  

Transferring ownership to your key employees is a pragmatic way to ensure that your business will be in good hands while also maximizing your price point. Contact us to discuss the best options when considering a sale.



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