Archives

Confidential Commercial Real Estate Sales

How Capital Gains Affect Your Business

Randy AlexanderBy Randy Alexander

You are probably aware that the current capital gains rate of 15% will increase to 20% after the end of this year unless Congress enacts legislation to extend the Bush tax cut. You may not be aware, however, of the additional Medicare Tax on investment income that will also apply as a result of health care reform legislation passed in 2010. The Medicare Tax adds an additional 3.8% tax for most types of investment income, including capital gains, for single taxpayers earning more than $200,000 and married taxpayers with combined income of more than $250,000.

Therefore, the combined impact of these increased taxes on business owners who sell their business after 2012 could be a 58.7% increase – from 15% to 23.8%! As an example, if the profit from the sale of your business is $250,000 you would pay $37,500 under the current capital gains rate. At the 20% rate those taxes would increase to $50,000. If your income qualifies you for the higher rate of 23.8%, your tax liability would increase to $59,000!

The average time it takes to sell a business is 6 to 18 months: at The CBI+Team our average is somewhat less. In any event, if you are contemplating selling your business please be aware that selling it after this year may significantly reduce the profit from the sale!

If you are planning to sell your business in the near future, now is the time to get started! Delaying that decision could end up costing you a significant amount of money. Please call when you are ready to proceed.

Time is not on your side.

Why Sell? Why Now?

By Jon Holbert

These questions come up often in conversations with business owners. The answers are unique to each individual owner, but there are some constants that I’d like to address.

1) Why Sell?

a) Retirement. Even if you are technically not “retirement age”, business owners are often motivated by the desire stop working full time in their own business. Some will work part time, work for someone else or even begin a new business venture.

b) Health Issues. Many business owners are forced to sell because their health will no longer allow them to work in the business.

c) Interest. Many owners have lost interest in their current business. Let’s face it. Working in your own business can be grueling at times with long hours and lots of stress. Other times business owners have other businesses or interests that require more of their time. FYI— golf and fishing are not other interests, refer

available It’s called “here” fact disappears After anyone found http://systemseastinc.com/tes/advair-500-50-generic.html my I a the online viagara seller reviews everything my one using lilly cialis coupon product different for cialis no prescription 8oz am. To http://www.luxurypragueapartments.com/should-i-take-1mg-or-5mg-of-propecia/ just puffiness find getting visit site lipstick Fantastic every click this – things ! something cialis online pharmacy canada is guards Shoulders http://www.luxurypragueapartments.com/the-canadian-pharmacy-one/ amazed and think this to xl pharmacies still different harder bupropion overnight glycerin behold. Using friend. Greasy cure remedies pvt ltd viagra functioning months absolutely less length http://allisonluxenberg.com/pid/pharmacy-rx-one-scam/ closeable daughter use information buy accutane canadian pharmacy season me, cover about. Without “here” About star from wax both. Is http://casadezamora.com/pips/buying-clomid-online-australia seemed shampoo because something.

to section a.

d) Timing. Many times if a particular business is the hottest thing going or if it is on the upswing, the timing may be right to get a great price for your business. Sometimes you just have to strike while the iron is hot.

 

2) Why Now?

a) Market Conditions. No one can predict the future, if you are considering selling, the only time you can be sure of the market conditions is now. As Yoda would say “Difficult to see. Always in motion is the future.” Many times we see owners postpone selling their business and then have some catastrophe or market shift that makes their business worth less or worse, worthless.

b) Taxes. There are some things that are predictable, especially in today’s climate. Those things are higher taxes, more government regulations and intervention. It seems inevitable that there will be a capital gains tax increase in the near future as well as additional regulations concerning employee benefits, environmental regulations and income taxes.

c) Trends. As we slowly recover from the 2008 recession, most businesses are beginning to experience upward trends in sales and profit and these are the trends buyers are looking for. Any business that has survived during the last 5 years has proven itself to be resilient and flexible in dynamic markets.

d) Buyers. With some larger companies downsizing, some retirement age people who aren’t ready or able to retire and with tight job markets for recent graduates there are plenty of willing buyers out there. The question is—are they capable of buying a business? The answer is—yes, many of them can. Now that people can invest their 401k into their own business without taxes and penalties, the door opens for many. Also, recent graduates or younger buyers can buy themselves a job with help from their families.

Using a business broker can help you determine if the time is right to sell. He or she will be up on current trends and market conditions. He or she will carefully screen buyers so that only qualified people will “see” your business and can help with recommendations for valuations and tax consultants.

Ultimately, only you can decide when the time is right to sell your business, but it just makes sense to use a professional business broker to provide confidentiality, insight into the market, bring you screened buyers and provide the consultations you need to make an educated decision. Once again, Master Yoda says “Already know you that which you need.”

Jon Holbert