Preparing to Sell Your Business, Keep Calm Stay Invested, and What if You Get Audited
by Rita Wilczek on May 30, 2019
Thought you might find these articles of interest.
Rita
Preparing to Sell Your Business
What is your exit strategy?
Provided by Rita Wilczek
Your company is ripe for sale. Now what? These days, your children or employees may not necessarily want to take over your business, but you still want to sell your business. So, what’s a successful entrepreneur to do? Find a buyer, of course. Many savvy business owners know that nothing as monumental as selling a business should be done quickly. Read on to learn some helpful pointers for formulating your exit strategy.
Plan for the long term. To truly get the most out of your business and ensure you have found the best buyer, formulate a sales strategy at least 5 years in advance.1,2
Prepare yourself. Have you thought about what life will be like after selling your business? Can you arrange new income streams to replace your business income? A needs analysis may help you estimate how much money you will need to maintain your current standard of living.
Readying your business. Look at your company and its immediate rivals. How attractive is it by comparison? What do you think it is worth? Have you developed a unique selling proposition (USP)?2
Often times, the service and performance of your employees may have strengthened or weakened your USP over time. Being aware and honest about your USP may be the key to maximizing your sale. Another key strategy may revolve around your online presence. Is it current? Does it need a facelift? Make a to-do list of some potential business upgrades and schedule their implementation. Finally, don’t forget to analyze the strategic value of your business with respect to a particular buyer, not simply the standalone value.1,2
Marketing your company to potential buyers. Who are you going to market to – a strategic buyer or a financial buyer? Do you think it would be better to sell your company to a major player in your industry? An up-and-comer? Would a private equity firm be intrigued? Your marketing strategy should be strong enough to attract multiple offers whether pursuant to an asset sale or a share sale.
Dealing with taxes. What will the tax impact of the sale be? Can you manage it? Keep in mind, this information is intended for educational purposes only and is not a replacement for real-life advice. Always make sure to consult your trusted tax, legal, and accounting professionals before modifying your tax strategy.1,2
Negotiating the sale. Make sure to use a properly licensed business broker and certify that they are dedicated to you getting the most for your business as opposed to focusing on closing the deal. With all your research completed, make sure to set a sensible floor price, and be prepared to walk away if an offer comes in beneath it. Pausing after the receipt of a lowball offer may send the wrong message.
How competitive are you? If you want to sell a company and start up another in the same industry, the buyer may demand that you hammer out a noncompete agreement. This will prohibit you from starting a competing business for a given period of time. Contact your local Small Business Association for more information regarding noncompete agreements.1
Handling change. You may need to put someone else in charge of things during the ownership transition. In addition to being a good manager, you may also want to be sure they care about your clients or customers as much as you do. Making sure they uphold the values with which you started the company can help ensure its value during the transfer of ownership.1
Selling a business is a big effort, and a financial or tax professional should be consulted in order to help you outline the sale of your business as well as the transition of its ownership.
Rita Wilczek may be reached at 952-542-8911 or rwilczek@hirep.net.
www.ritawilczek.com
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 - sba.gov/business-guide/manage-your-business/close-or-sell-your-business#section-header-2 [5/20/19]
2 - inc.com/bob-house/selling-a-business-in-2019-three-important-things-to-keep-in-mind.html [1/9/19]
Keep Calm, Stay Invested
Expect volatility, but avoid letting the headlines alter your plans.
Provided by Rita Wilczek
Recent headlines have added volatility to the markets. There will always be new headlines, and any of them could mean turbulence for Wall Street.
As an investor and retirement saver, how much will this turmoil matter to you in the long run? Not as much as you may expect. There are many good reasons to remain in the market rather than attempting to intuit or guess when and where big shifts in fortune may arrive.
What is market timing? Michael Tanney, one of the directors at Magnus Financial Group, puts it plainly: “Market timing doesn't work […] Every bear market has historically given way to a bull market […] No one can predict the timing of these moments.” Market timing is the use of predictive tools and techniques to predict how the market may move and make investments accordingly.1,2
When you work with your trusted financial professional and cultivate a financial strategy, your need to factor in market timing diminishes. You also don’t need to sit still if you have concerns. Instead, you have a strategy that is based on your goals, risk aversion, and time horizon. This balanced approach means that you won’t need to make hurried decisions when volatility arises.
There may well be a situation in which you may need to adjust your strategy, but it’s also possible that snap judgements might cause you to undercut yourself. The market reacts to headlines, but it’s just as common that quick dips might see fast relief.
Remember that many investors come to regret emotional decisions. The average recovery time for bear markets (meaning a downward swing of 20% or more), where equities return to bull market levels? About 3.2 years (measuring each recovery since 1900). For that reason, investing with the longer term in mind, with periodic and carefully considered rebalancing (alongside your trusted financial professional), may allow you to better weather headline-induced peaks and valleys.3
Breaking news should not dissuade you from pursuing your long-term objectives. The stock market is always dynamic. Episodes of upward and downward volatility come and go. A wise investor acknowledges that downturns are expected and has patience when they do. Decisions made during market turbulence can backfire. While some of these ups and downs may be significant enough to signal a change in your asset allocation, they need not change the fundamentals of your investment policy.
Rita Wilczek may be reached at 952-542-8911 or rwilczek@hirep.net.
www.ritawilczek.com
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 - money.usnews.com/investing/stock-market-news/articles/2019-05-10/how-investors-can-mark-the-markets-seasons [5/10/18]
2 - investopedia.com/terms/m/markettiming.asp [4/10/19]
3 - marketwatch.com/story/why-retirees-shouldnt-fear-a-bear-market-2019-01-16 [1/29/19]
What if You Get Audited?
What the I.R.S. looks for and why.
Provided by Rita Wilczek
“Audit” is a word that can strike fear into the hearts of taxpayers.
However, the chances of an Internal Revenue Service audit aren’t that high. In 2017, the I.R.S. audited 0.5% of all individual tax returns.1
Being audited does not necessarily imply that the I.R.S. suspects wrongdoing. The I.R.S. says that an audit is just a formal review of a tax return to ensure information is being reported according to current tax law and to verify that the information itself is accurate.
The I.R.S. selects returns for audit using three main methods.
Random Selection. Some returns are chosen at random based on the results of a statistical formula.
Information Matching. The I.R.S. compares reports from payers – W-2 forms from employers, 1099 forms from banks and brokerages, and others – to the returns filed by taxpayers. Those that don’t match may be examined further.
Related Examinations. Some returns are selected for an audit because they involve issues or transactions with other taxpayers whose returns have been selected for examination.
There are a number of sound tax practices that may reduce the chances of an audit.
Provide Complete Information. Among the most commonly overlooked information is missing Social Security numbers – including those for any dependent children and ex-spouses.
Avoid Math Errors. When the I.R.S. receives a return that contains math errors, it assesses the error and sends a notice without following its normal deficiency procedures.
Match Your Statements. The numbers on any W-2 and 1099 forms must match the returns to which they are tied. Those that don’t match may be flagged for an audit.
Don’t Repeat Mistakes. The I.R.S. remembers those returns it has audited. It may check to make sure past errors aren’t repeated.
Keep Complete Records. This won’t reduce the chance of an audit, but it potentially may make it much easier to comply with I.R.S. requests for documentation.
Remember, the information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.
Rita Wilczek may be reached at 952-542-8911 or rwilczek@hirep.net.
www.ritawilczek.com
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations.
1 - irs.gov/statistics/enforcement-examinations [1/30/19]