FBB eNews
December 2015

 

In This Issue 


"Year-End Tax Planning With a Potential Sale Looming"
 
FEATURED 

CLIENTS 


Unique Logistics Business
#2015
 
This business specializes in services provided to municipalities, schools, institutions, and businesses. Services include the handling of furniture, storage, and relocation needs, to include new installations, configurations, tenant finish, comprehensive project management, shelving, warehousing, delivery, inventory, and design. Projects, although primarily in Colorado, take place throughout the Western United States. Sales continue to grow and are on track to meet or exceed $2.2 million in 2015, with even more growth anticipated in 2016.
 
Purchase Price.....$1,485,000
Down Payment (est.).....$371,250
Gross Sales....$1,836,331
SDE.......$351,447

 
For more information,
contact Lynn Lage
 
 
Specialty Printing Business
#2714

This business has been serving this Colorado community for over 30 years. A local industry leader in large format color and monochrome copy and print technology. Family owned and operated, this business serves a diversified customer base with a vast range of printing, copying, and scanning requirements. It is known and appreciated for its rapid turn-around, detailed production monitoring, problem solving, technological assistance, and quality final product. Sales for November are up over the same period in 2014; SDE was up 234.4%.
Purchase Price........$221,652
 Down Payment......$56,000
 Gross Sales...$224,540
SDE........$102,594
For more information,
contact Kim Hoyal

 
Specialty Service Provider
#215

This well-known and well-established business provides consulting, project management, and project design support services to assist private, municipal, state, and federal agencies to acquire property and easements for the expansion of public infrastructure, to include roads, bridges, rail, electricity, water, sewer, energy, water storage, and urban renewal. There is no licensing required in the State of Colorado to provide this service; however, other states may require related licensing. REAL ESTATE (valued at $550,000, subject to appraisal) AVAILABLE TO PURCHASE OR LEASE.
  
Purchase Price.............TBS
Down Payment.........TBS
Gross Sales...$2,776,176
SDE........$1,051,689
 
Business Summary

For more information,
contact Lynn Lage

 

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The end of the calendar is typically one of the busiest periods in the M&A industry. There are usually tax and other considerations, in completing a transaction at year end or the beginning of the new year. This year is no exception and, in fact, we are busier than usual as 2015 has just surpassed 2007 as the most active year for M&A activity, and we anticipate that this trend will carry over into 2016.                
Last month, I attended an industry conference which was attended by several dozen Private Equity Groups looking for acquisitions and, based on my conversations with them, they are very active in their in efforts to source quality businesses to acquire. If you are contemplating the sale of a business within the next several years, you should consult with your advisors to determine if it would be in your best interests to take advantage of the current Sellers' market.
Whether you are contemplating the sale of your business in the near future or not, it is typically advisable to visit with your tax advisor prior to the end of your tax year. This month's featured article comes from Patrick Stephens, CPA, a Tax Manager at Stockman, Kast, Ryan, LLC, a well-regarded CPA   firm that we have worked with in the transfer of many businesses over the last twenty plus years. Patrick shares with us several suggestions for year-end financial and tax planning. In addition to the relevancy of Patrick's comments at this time of year, I would like to add that most buyers and lenders go back at least three years in analyzing and performing due diligence on a transaction, so it is better to start sooner, rather than later in your planning process.
The majority of our business is derived from referrals. Please consider referring our services if you encounter a situation involving the potential purchase or sale of a business.
Best holiday wishes to you and yours,

RV Chernak Signature
Ronald V. Chernak
President 
     
Inspiring business relationships since 1982!


Year-End Tax Planning With a Potential Sale Looming
by Patrick Stephens, CPA, Tax Manager, Stockman Kast Ryan & Co.
When thinking of selling a business in the near future, business owners should be cognizant of year-end tax planning opportunities available in their final full year before the sale. While owners are likely to be more concerned with showing a strong balance sheet and earnings on their financial statements than taxable income, there are tax deductions and credits that will not weaken the income statement or balance sheet under generally accepted accounting principles (GAAP). These include the domestic production activities deduction, energy efficient building deduction, and the research and development tax credit.
From a financial statement perspective, some owners may find it more advantageous to not defer income or accelerate deductions in the form of prepaid expenses until their final short period tax return. For accrual basis taxpayers, this could mean sending out invoices to customers in December, as opposed to January of the following year. For cash basis taxpayers, this could mean paying expenses in January, that would normally be prepaid in December. Note, that if a cash basis taxpayer prepares accrual basis financial statements, they could still prepay expenses in December, take a tax deduction for that year, and not lower GAAP earnings that potential buyers will be scrutinizing. Since these methods would lead merely to timing differences on tax returns, the cumulative taxable income on the business' final two returns would not change, and the accounting could lead to increased purchase price proposals from potential buyers.
While buying equipment in December with a sale of the business expected in the coming months can lower taxable income in the current year with accelerated depreciation, buyers may not be willing to pay fair market value for the equipment. Therefore, sellers should be certain they're buying equipment that will be used in the immediate future of the business, and will not sit idly until the sale which could raise questions by potential buyers. Note, that leasing equipment in the year before sale may prove to be a better option, as the lease may be assumable by the buyer.
In the final full tax year before a sale, sellers should not forget about any favorable tax attributes currently available to their business, such as tax credit carryforwards or net operating loss carryforwards in the C Corporation context. Utilizing these attributes may allow businesses to increase the income and the strength of their financials without the owners or their entity paying additional tax.
Sellers should ensure that they are up to date with all tax filing in the months before a potential sale. Along with their income tax returns, final payroll tax returns (Form 941), sales tax returns, and any informational returns such as foreign bank account reporting (FinCEN Form 114) should be timely filed as potential buyers are completing their due diligence process. While outstanding filing issues with the IRS may not have an effect on the financial future of a business, they are an unwanted nuisance potential buyers could frown at.
As of December 7th Congress has yet to extend certain tax provisions that expired in 2014 such as bonus depreciation and Section 179 depreciation, however most CPAs are inclined to believe they will be extended once again for tax years ending 12/31/15. Regardless of whether business owners are considering a sale in the near term they should be consulting with their tax advisors this December after Congress has made final decisions on extenders.
 
Patrick Stephens has been in public accounting since 2009, with significant experience serving corporations and partnerships. Patrick is a member of the American Institute of Certified Public Accountants. He can be reached at Stockman Kast Ryan & Co., (719) 630-1186 [email protected] or visit http://www.skrco.com/