You need to take care of a lot of things before buying or selling any business. Taking the advice of an expert accountant or business broker is always beneficial at each step of your business’s buying or selling procedure. They can help you throughout the procedure by applying their financial knowledge and communication skills.
If you are planning to buy or sell your business, then have a look at the below blog.
Preliminary Valuation of the Business
If you want to sale or buy the business, then the first thing you need to know is the actual worth of the business.
An accountant can help you in this by providing an objective valuation.
Your accountant will help you ascertain the assets and liabilities like what you should include in the selling or buying, what you will own and what you will owe.
More importantly, an accountant can suggest a perfect valuation of the business by generating a picture of the business’s income over time, cash flow, past earnings, equity statements, balance sheets etc. and the market and economic performance of the business.
The negotiation stage is difficult during buying and selling a business, especially for the seller.
For example, if the business has been in the family for quite a long time, then the judgment of a price can be difficult.
But an accountant can advise you in such situations. The seller is there to sell; the buyer wants to get the business as cheaply as possible; so the accountant will help to ensure that a fair and reasonable price is agreed and that both parties are completely happy.
During the Heads of Terms period, the accountant will sit down with the buyer/seller and draw up a prospectus of the deal for buyer and seller, outlining the terms of the agreement and how the client sees the agreement going.
Both sides need to be completely transparent; detailing, openly and honestly, what they want to achieve and how; and agree with timescales: the accountant can help negotiate this.
Organizing a Structure of the Deal
Your accountant will help you know the advantages and disadvantages of selling or buying a business.
He will help you decide whether you should sale or buy the business as an asset or make the stock sale because the implications of tax between these two methods can be substantial.
Before the sale takes place, your accountant can advise you to transfer a portion of an asset of your business to a different entity in certain situations.
Obtaining Financial Statements
When you are selling your business, you need to provide financial statements from your business’ history and an updated set of financials during the current period.
Your accountant will be the one to help obtain these reports and provide you with relevant advice.
Besides, you also may have to “recast” financials of your business in order to provide the actual value of your business.
Allocation of Asset
An accountant can help you determine which portion of the asset you are buying or selling will go towards the betterment of your business and which towards real estate, and hard asset etc.
An accountant can also guide you in tax implications of allocating a portion of the purchase price.
There are many tax issues and implications you will crop up through all processes of the deal.
Whilst tax should never be the driving force behind the deal, the way in which an agreement can pan out and is structured moving forward can depend on it.
An accountant will advise you the most tax-efficient way to conduct the deal, addressing any implication at every stage.
As an objective advisor, your accountant will help you coordinate due diligence efforts and assign measurable values and information to each of the accompanying risks.
A financial point of view eliminates the need to make decisions principally.
Your accountant will look to file a final return for your entity.
You will still be getting income from the sale of your business in cases you provide seller financing. For that income, you will have to file separate returns.
After completion of the entire procedure if you are a seller, then your accountant can help you analyze the fallout from the deal and advice you to reinvest the money in other business.
And the buyer’s accountant will help you ensure that everything the client has just acquired tallies up.
About The Author:
Nidhi is a Full-time Content crafter at 123Financials. She is a Financials writer, blogger for the last 2 years – she loves travelling, photography, reading and hanging out with friends and family.