–SINCE 1982–

Tis the Season: To Visit Your Tax Advisor

In my opinion, September and early October is the best time of year to be in Colorado. The weather is dry (although this year, too dry) and the evenings cool down to provide crisp, clear morning air, unless we are dealing with smoke from wildfires, like this year. The weather is also a reminder that we will be going into the holiday season in November with Thanksgiving, followed by Christmas, Chanukah, and a new year, 2021.

Assuming that December 31 is the end of your year for tax purposes, It is also the time, if you have not already done so, to visit with your accountant to firm up your tax planning for 2020 and 2021. As a result of the economic impact of COVID, either good or bad, tax planning may be more important this year and is probably critical if you are planning to sell your business in 2020 or 2021. You will note that I have not even raised the issue of the upcoming election and the significant differences in tax policies.

Poor financial records is one of the top three reasons that a business doesn’t sell when it is put on the market. Below are a few suggestions as you are closing out the year:

  • It is not too soon to visit with your accountant/tax advisor.
  • Consistency and accuracy are important in the Due Diligence process in the sale of a business. Don’t play games with your numbers.
  • You will probably not be reimbursed on a dollar-for-dollar basis if you buy new equipment. Don’t buy equipment to reduce your taxes. If you need new equipment, consider leasing instead of buying. In many cases the buyer will assume the lease.
  • In most sales, EBITDA or Seller’s Discretionary Earnings are the driver of value and your most recent year-end financials will have the most influence on the price and structure of a sale. Don’t defer income to the next year to save on taxes. And don’t accelerate expenses in late December that my adversely impact the value of your company.

If you have a question that you believe we can help address, feel free to contact us. Our initial consultations are confidential and without obligation.

(originally published in the October 2020 eNewsletter)