1. Implement a plan that yields a greater after-tax amount for the sale of your company. Since the cash flow of the company may increase, the key is to provide Uncle Sam with a smaller slice of the available cash flow.
2. Use an experienced advisory team, usually consisting of a business attorney, CPA and an insurance or financial professional (e.g., Synergetic Finance specializes in working with like-minded professionals to form such a team.) This team should understand the importance of tax sensitivity to both seller and buyer in order to make more money available to you.
3. In addition, you and your advisors should use a modest-but-defensible valuation for your company. Because a lower value is used for the purchase price, the size of the tax bite is correspondingly reduced. The difference between what you will receive from the sale of your business, at a lower price, and what you want to be paid to you after you leave the business is “made good” through a number of different techniques to extract cash from the company after you leave it.
Tax planning for the transfer of your company to an insider takes time, planning and knowledge. But it can possibly save a tremendous amount of money. Take time now to begin the planning process.
- Learn as much as you can about how to best accomplish the transfer of your business.
- Seek the advice of your advisory team. Taking action sooner rather than later may help your business transfer to be more successful.