Category: Business Valuation

Business Valuation Sandy UT

Business Valuation Sandy UT

Selling Your Business to Pay for Retirement

Business Valuation Sandy UTMany small business owners get so immersed in day-to-day operations that they don’t take the time to consider long-range plans, such as retirement. But even for those who are able to work a good, long time – avoiding the misfortunes of health issues, financial emergencies and business setbacks – retirement tends to sneak up on you. Business Valuation Sandy UT 

However, the day will come when you realize that you can’t work forever, and at some point the business you’ve labored to build will need to work for you. Don’t let that moment come so late that you haven’t prepared your enterprise to procure the highest price possible.

You might think you have retirement covered. Once you’re ready, you’ll just sell the business and retire on the proceeds. But that plan can have flaws. For example, what if when you want to retire, the economy is in a downturn and there are few prospective buyers?

What if you have to sell before you previously intended due to a health concern or family emergency? If we have learned anything during the past decade, it’s to plan for contingencies.

Do you have a plan to aggressively pay off your mortgage and other obligations so you can retire debt free? Do you have insurance to protect both your business and family should something happen to you? It’s important to start strategizing ahead of time so that, regardless of whether all goes to plan or not, you have options when the time comes to retire. A big part of this equation is to understand the value of your business as it relates to retirement planning.

Because a small business is often built on blood, sweat, experience and long hours, it can be difficult to step away and view it as an asset. To create a retirement plan, it’s important that you recognize this and consider how much that asset is worth. To get started, hire a third party appraiser or broker to value your business from an objective market perspective. Bear in mind that there are three methods typically used to assess the value of a business:

  1. Asset approach – Add up all of the assets and subtract their depreciation to determine value.
  2. Income approach – Calculate the net present value of the income generated by your business by discounting future cash flows and applying multipliers to EBIDA (Earnings Before Interest, Depreciation and Amortization).
  3. Market approach – Compare your business to others in your industry, paying careful attention to similar size and location, and factor in intangible variables such cash flow, market opportunity, economic conditions, customer loyalty, team experience, etc.

You might wish to value your business using all three approaches and then establish a price based on the one with the most favorable valuation. Recognize, too, that the value of a small business is frequently influenced by less tangible assets – such as the expertise of a key employee – so it’s not always effective to use a simple mathematic formula.

It’s also a good idea to plan two exit strategies. For example, Plan A might be to sell for a generous profit, while Plan B is to retain equity in the business but hand it over to someone else to run if you don’t get an offer for the price you want. Consider your future market and the ideal buyer, and manage your business so that it will be an attractive turnkey for that target when you’re ready to sell. Or, think about grooming a younger employee or one of your children to take over the business when you retire. Perhaps selling isn’t your best option – if you remain invested in the business it could generate passive income to supplement your nest egg.

There’s your business plan, and your retirement plan … now is the time to think about how to integrate the two.

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Areas of Service: Business Valuation Sandy UT,  Valuation Expert Sandy UT

Business Sale Salt Lake City

Business Sale Salt Lake City

Getting Value from Your CPA

Business Sale Salt Lake CityHow did you fare on April 15? Business Sale Salt Lake City Did you file on time or extend? How was your tax bill? Did you owe money or receive a refund? We won’t talk about whether you paid too much tax because no matter the amount, all Americans feel they pay too much tax. So how did April 15 treat you? Regardless of your answer, if you didn’t consult your CPA during the year, you may have missed out on his or her real value.

You see, most people think the value of a CPA comes only in that short period of time between January 1 and April 15, but the true value comes throughout the year when you consult your CPA on financial matters. The matters can be simple, such as how much to withhold for federal and state taxes or complex like when you are negotiating the purchase or sale of a business.

For example, let’s take a look at a typical business purchase. Say you get the chance to buy an established business. The current owner tells you the average annual income is $100,000, he wants $350,000 and you can pay it over 10 years at no interest. Let’s see, you get net cash income of $65,000 ($100,000 – $35,000) and build your own business asset in the process. Considering you only make $35,000 right now, that sounds great, doesn’t it?

Well, let’s ask some questions a CPA might ask. First of all, what does the balance sheet look like? What assets will you get with the purchase? Are there any receivables or inventory? Are there any real assets like equipment or buildings? Is the $100,000 really consistent and does it come from the good name of the business or a few contacts the owner has that will disappear when you purchase the company? Is the net income before or after taxes and does it represent real cash available for your living expenses or will cash flow be significantly less?

Not only must you look at the basic business questions, but the manner in which you structure the purchase is critical. If the business in the preceding example is a corporation, you have two choices. You can either purchase the assets or you can purchase stock. Let’s say the only asset of the company is its good name, commonly called goodwill. If you buy the stock, your basis in the company is $350,000, but you won’t be able to deduct any of that cost until you sell the company. If you buy assets, you will have a $350,000 asset, the cost of which you can deduct over 15 years. If your effective tax rate is 30% that saves you $7,000 per year. Would you rather pay less tax now or later?

There are numerous tax and legal matters that come into play when buying a business and the fact is you shortchange yourself if you fail to involve the proper professionals before, during and after the acquisition.

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Areas of Service: Business Sale Salt Lake City, Business Sale Sandy UT, Business Sale South Jordan, Business Sale West Jordan

Bankruptcy Salt Lake City

Bankruptcy Salt Lake City

How to Use an IRA for Asset Protection

Bankruptcy Salt Lake CityMost people do not anticipate a situation in which a creditor will come after their assets, but these situations are more common than you might think. Bankruptcy Salt Lake City For example, say your teenager is involved in a car accident and the injured party files a civil suit – your assets could be vulnerable. Likewise, if you get divorced or must file for bankruptcy, your assets can be attached or garnished.

If you would like to protect your portfolio against the possibility of creditors getting access to your assets – now or after you pass assets on to your heirs – it’s a good idea to understand what accounts are the best vehicles to protect your assets.

Up to $1 million in aggregate of all Individual Retirement Accounts’ assets are protected from creditors if you file for bankruptcy. Moreover, a bankruptcy court has the discretion to increase this cap in the “interest of justice.” Outside of a bankruptcy situation, whether or not your IRA will be protected from creditors is largely dependent on state law. The majority of states shield all assets of a traditional IRA from creditors; slightly fewer (but still most) states offer the same protection for a Roth IRA.

Employer-sponsored plans, such as the 401(k), 403(b), 457(b), SEP IRA and SIMPLE IRA, enjoy unlimited protection under the Employee Retirement Income Security Act of 1974 (ERISA). If you roll over assets from an employer-sponsored plan, they will then be subject to the $1 million limited protection given an IRA in a bankruptcy proceeding, and be subject to state law outside of bankruptcy.

Limited Liability Protection

You can also structure your IRA to wholly own an LLC for the same reason individuals use LLCs in their personal investment and business activities – to limit personal liability. Using a Self-Directed IRA LLC to make investments offers you greater asset and creditor protection than making investments personally. For example, say you purchase rental property under your IRA/LLC and a renter then files a lawsuit as a result of being injured on the property. In this case, only the assets owned by the IRA/LLC are at risk; the lawsuit may not go after your other personal assets.

Inherited IRA

You might be able to protect IRA assets that you plan to leave to your family (other than your spouse) by naming a trust as your designated IRA beneficiary because a trust also enjoys creditor protection. If you do not do this while you’re alive, your heirs can preserve inherited retirement assets by transferring the IRA they inherit to a “see-through trust.” This type of trust enjoys the same tax-deferred treatment that the beneficiary would enjoy had he inherited the IRA directly, but with far better protection from creditors in the wake of a bankruptcy filing or creditor lawsuit.

Be aware that in July 2014, the Supreme Court unanimously upheld a Seventh Circuit decision (Clark v. Rameker) that an inherited IRA was not protected in a bankruptcy proceeding. This was a specific case in which the IRA beneficiary claimed her inherited assets should be protected against creditors, demonstrating that these protections may come under scrutiny going forward on a case by case basis.

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Areas of Service: Bankruptcy Salt Lake City, Bankruptcy Sandy UT, Bankruptcy South Jordan UT, Bankruptcy West Jordan UT

Business Valuation West Jordan UT

Business Valuation West Jordan UT

Business Valuation West Jordan UTThere are many reasons business valuations are performed. Below are the most common reasons to request our assistance. Business Valuation West Jordan UT

  • Business Sale or Acquisition: It is essential to know the value of the sale or acquisition. Realistic expectations need to be established before negotiations begin. Sellers need to have a realistic understanding what their business is worth before incurring the costs to list their business for sale. Buyers need to be able to support their offer. When both parties understand the underlying value of the business, sales occur much faster.
  • Legal Purposes: Often certain legal issues such as divorce, estate issues, and business partner disputes may require that a business valuation be performed to cure the issue.
  • Obtain Financing: A business valuation West Jordan UT performed by a valuation professional can also be instrumental in helping a buyer secure business acquisition financing for growth or expansion. Both investors and lenders will feel more confident about their decision to provide capital.
  • Other: Other reasons to request a business valuation include buy-sell agreements between business owners, gifting to children, estate planning, restricted stock valuation, wealth transfer and valuation of employee stock ownership plans. ( Business Valuation West Jordan UT )

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