Exit Strategy – Preparing Your Business For Sale
When we sell our automobile, we get it detailed, make it look great so we can get the most out of the sale. We need to do the same for our businesses, and it’s a two year process.
Can your business run without you? If not, find a way to replace yourself. If I die, and my business dies with me, it has limited value.
If we employ family and/or friends that will not stay on after the sale, replace them with staff that will stay on.
Business Tax Return is the evidence for the earnings / profit of a business. Show ALL of your Income! If we’re hiding $50,000 from the IRS, and we’re in a 28% tax bracket, we’re saving $14,000 in tax liability. However if your business is valued at 2x cash flow, that’s a loss of $100,000. We just lost $100,000 to save $14,000.
Any cash not reported cannot be considered as income unless it is proven by sales receipts or register till. Please keep copies of your sales receipts and make it organized and easy to review. Again, please report all of your income.
Take a “Reasonable Salary” and have it reflected on your tax return. This will be added-back into your income stream. Make sure you are taking advantages of Depreciation of equipment, buildings, etc.
Don’t have just any account prepare your tax returns. Hire a CPA! I can always tell if the tax preparer is an expert. Hiring a CPA will go a long way. If a standard account prepared taxes in the past, hire a CPA to review prior years and possibly file an amended tax return.