Succession Planning

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.

Often, a CPA firm will start very comfortable conversations with another firm about doing a merger deal or an acquisition. Then, despite early good vibes, pushback is often encountered. Pushback is not rare, but if you don’t handle the issues of concern promptly and comprehensively, getting the deal done will become much harder.

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.