Today’s episode of #PoisedforExit featured Lance Madson, CPA and Tax Partner with Boulay. Lance got his start in tax and stayed there. Imagine his level of expertise when working with business owners!
We started out talking about one of the basic quandary’s owners face when selling their companies; should it be a stock sale or asset sale? Well, sellers like stock sales and buyers like asset sales. “Frankly, most small businesses are asset sales”, Lance said. Buyers like to get the step up in basis on the tax side, so they will prefer an asset sale. Sellers would prefer a stock sale, because they’d get taxed at the capital gains rate, which is lower than ordinary income, and their whole company goes with a stock sale, not just the assets….
Most of the value in a business lies in the goodwill of the business, which is an intangible asset. What consists of goodwill? Customer/client lists, reputation, brand, vendor relationships and employees! When a valuation leans heavily on goodwill (which lenders don’t like) it’s an advantage for the sellers because there’s less tax to pay on intangible assets.
Lance also gave advice on how to defer tax in a sale as well as how to even eliminate it! He cited a tax code that allows for the sale of qualified small business stock (you have to be a C-corp) and provides for an exclusion of the gain up to $10M! Structure your next venture on this premise, but only after you’ve consulted with Lance on the details. Listen to the show and learn more!
Upcoming events and programs:
Owner’s Forum Registration | October 6
Business Transition Readiness Workshop | October 19
For more tips, stories and advice listen to episode here
Poised for Exit Podcast Sponsors:
Sunbelt Business Advisors
Sunbelt Business Advisors is a proud sponsor of the Poised for Exit Podcast. The Poised for Exit podcast seeks to help entrepreneurs improve, grow – and successfully exit – their businesses.
Julie Keyes, a life-time entrepreneur and founder of KeyeStrategies, understands what keeps an owner up at night and the balancing act required to work both ‘in’ and ‘on’ the business. The firm’s mission is to help business owners increase enterprise value and prepare for a future exit.
Julie believes in providing outside perspective and mentoring, which made all the difference for her while spending years growing and improving her companies before selling and becoming a business adviser in 2011.