In this episode, Scott offers his expertise on important tax matters to consider when it comes to succession and exit planning for businesses.
Scott discusses M&A transactions, including what types of businesses meet the qualifications (HINT: You have to be a C-corp), and the tax implications that come with these transactions.
He talks about purchase price allocation on a sale and how the buyer and seller must come together to agree on a purchase price. He dives into what the goals of the seller should be during this process, including allocating more consideration to capital gain items.
Scott goes over some tax-deferral techniques that can be used during the exit planning process, including the use of the installment sale treatment and rollover equity.
He talks about ways to handle the transfer of real estate and leases during a succession plan. If you already own the property, leasing to the new buyer might provide you with a steady income for the foreseeable future. On the other hand, if you are currently leasing the property, make sure that these leases and contracts will carry over to your buyer before going through with the sale.
Lastly, he shares two action items for business owners:
1. Prepare ahead of time to save yourself money. Get professionals on your team early. A year or more would be great, but at least 3 to 6 months will give your team enough time to optimize your outcome.
2. A change of ownership might be difficult for some of your employees, so before you go through with a sale, talk to your employees to help you pick the right buyer. Find out what the most important things are to them about the business and their work within it. For your business to continue to be successful after a sale, those key employees will need to stick around and be happy under new ownership.
Watch the video episode by clicking the thumbnail below or visit Morton's YouTube Channel.
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Disclosure: Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your attorney, finance professional or accountant before implementing any transactions and/or strategies concerning your finances.