6
What Do You Mean, Taxes?
Are you selling assets or are you selling stock? Is the business a subchapter S corporation, a subchapter C corporation or an LLC? Are you taking some of the purchase price as a consulting agreement or in stock of the buyer? Does any of this matter so long the buyer gives you that pile of money that you wanted for your business? You bet it does! The consideration of the tax implications of the structure of the business sale is often considered by first time sellers very late in the process. The reality is that seemingly small decisions can have large tax consequences. The after-tax dollars can differ dramatically due to deal structure. Don’t miss your opportunity to engage in tax planning (including estate planning).
7
The Phoenix Phenomenon.
It is inevitable. Your deal will be stone-cold dead at some point. Some insurmountable issue will smack you between the eyes and you will sink into the depths of despair. In a sick way, the good news is that this seems to happen somewhere along the line in just about every transaction, including those that eventually close! Generally speaking, the sale of your business will emerge from the ruins of the calamity like a phoenix rising from the flames. Sometimes it will resurrect itself more than once. Sure, deals die, but many close after going through a near death experience (or several). Don’t lose faith.
8
Its Not Over When Its Over.
When you close the sale of your business, you’ll never have to worry about it again, right? Wrong. Even if you don’t have to face the possibility of an “earn-out ebb,” your worries are not over when it closes. Your agreement will include representations and warranties which you will have to honor for some period of time following the closing. Some of the purchase price may even be escrowed for a period of time. In other words, the buyer will normally have at least some ability to reach through the closing - you will be at risk for giving back some of the money. Like paying taxes, an occasional sleepless night over a “tail liability” of some sort is nearly guaranteed. However, instead of being shocked and fighting the concept, you need to try to control the issue. Simply stated, you do your best to minimize your exposure by disclosing everything imaginable about your business during due diligence and trying to place as many limits as you can on your “tail liability.”
9
The Lawyers All Envy You.
Maybe you didn’t sell the business for as much money as you had hoped. Perhaps your ears are still ringing from the criticism of your baby. But, shock of all shocks, all of the lawyers at the closing table are jealous. Good business lawyers are like penguins – they know what it is to be a bird, but are denied the ability to fly. Experienced and valuable legal advisers know what makes a business successful and what makes it fail.
They are trained to sniff out risk where the most conservative business person could never find it and are then able to guide you through the minefield of which risks are acceptable and which are not. However, ask any good corporate lawyer to actually take a chance, assume a risk and act like a successful entrepreneur and you will discover that they are genetically unable to take that step. So every single lawyer at the closing table fully understands what you do, but will never be able to "fly" with you. They are all envious and jealous.
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