Business successions are generally accomplished in one of three ways: transition to next-generation family members, sale to key management or employees, or sale to an outside party. There are many considerations, both financial and nonfinancial, when deciding on a transfer of ownership. But when maximizing the net proceeds from the sale is a priority and ensuring that the majority of the proceeds are up-front cash, a sale to an outside party is the most viable option.

Entrepreneurs work hard to make their businesses succeed, and they often have a large percentage of their personal wealth embedded in those businesses. When they begin to contemplate retirement, it is important to maximize the net proceeds from the sale of their business to provide sufficient resources to support their retirement.

The Tax Cuts and Jobs Act became law in December 2017, and now private companies and their investors must consider how the changes in tax law impact business valuations. Specifically, stakeholders should consider how the Tax Act impacts their projected cash flows and the inputs and assumptions that drive the estimation of enterprise value.

This feature does not look at business interruption claims as a result of COVID, but rather how business interruption claims were analyzed and evaluated in the past and what impact COVID-19 has had on this process to date and going forward. The world is adjusting to a new normal, and how business interruption claims are evaluated is evolving as well.

Valuation is critical when preparing for a business transition, whether it’s an acquisition by an outside party or a transfer of ownership to a family member or key employee. Valuation is a broad and subjective concept, and critical factors can be interpreted differently. This can lead to a disparity in valuation opinions. As such, it is important to start the valuation process with a solid understanding of the fundamental concepts.

One disadvantage of forming a Subchapter C corporation is the unfortunate reality of “double taxation.” The first level of taxation occurs when the business pays corporate income taxes on its profits. The second level occurs when the previously taxed profits are distributed to shareholders as dividends. Even if the corporation does not have sufficient cash flow and decides to distribute property that has appreciated in value to its shareholders, the tax is typically unavoidable.

At many middle-market companies, mergers and acquisitions (M&A) are few and far between. But if your company’s strategy includes growth by acquisition, M&A needs to be a core competency. Fortunately, this does not require staffing a large internal transaction group.

When the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law, taxpayer-friendly opportunities were aimed at quickly getting cash into the hands of businesses who needed it most. One method of accomplishing this included the temporary reintroduction of net operating loss (NOL) carrybacks. While this was certainly a welcomed benefit, some taxpayers who were involved in a merger or acquisition in 2018, 2019, or 2020 may need to review their old agreements to make sure the benefits of their NOLs are preserved.

CPAs are well aware of the typical federal vs. state issues when it comes to taxes and related matters. However, CPAs choosing to work on behalf of those in the cannabis industry need to understand federal vs. state issues on a very different level.

Ever since the economic crash of 2008, foreign and domestic corporations have fought hard to get back to the days of steady growth. A lot of corporations have grown organically, but many essentially expanded through acquisition. Without the luxury of having excess cash reserves, these corporations typically opt to leverage their acquisitions by taking on some form of debt.

No two merger and acquisition deals are alike. Each is unique, opening the door to new challenges and uncharted territory for those tasked with determining the tax treatment of the transaction. One challenge that often gives practitioners headaches is how to handle assumed liabilities in an asset acquisition.

There is one part of the M&A equation that is important to note: succession is not unique to one side of the table. Buyers, too, have succession issues that impact their approach to M&A. Here are four general succession concerns that often guide buyer-side decisions.

While reviewing a possible re-organization involving a traditional merger, savvy consultants consider whether the restructuring could be accomplished more efficiently through one or more corporation-to-limited liability company conversions.

You may be familiar with Internal Revenue Code Section 382 of the tax code, which limits an acquiring corporation’s ability to use certain preexisting tax attributes once the target corporation experiences an “ownership change.” The triggering of Section 382 can raise some rather complex issues, and may even serve as a potential roadblock to profitable, tax-paying corporations who are eager to reduce their tax burden by attempting to purchase the tax attributes of “loss corporations.”

On Sept. 9, 2019, the U.S. Treasury and IRS issued proposed regulations under IRC Section 382(h) pertaining to the interaction between built-in gains or losses with Section 382 limitations. Treasury believes the proposed regulations will simplify the application of Section 382, provide needed clarification to taxpayers in determining built-in gains and losses, and address other issues relating to Section 382 that were created as a result of tax reform (the Tax Cuts and Jobs Act of 2017). Taxpayers are not as optimistic about these recent developments, and for good reason.

For too many business owners or operators, succession planning takes a back seat to day-to-day operations and short-term goals. For family businesses, succession planning involves additional stresses, such as deciding which relatives will actively participate in the business, what their roles and responsibilities will be, and how much the owner will be compensated.

Negotiating the terms for a CPA practice transfer or merger is the most important step in setting the stage for a successful transaction. Nearly as important, but often overlooked, is having a well-designed integration plan.

A buyer of a business quite often will pay a purchase price that represents a premium that exceeds the tax basis of the assets held by the target entity. Often the buyer’s desire for a tax basis step-up is in conflict with the seller’s desire to mitigate double taxation and to optimize the portion of the gain that is taxed at a lower capital gains tax rate.