Still thinking about selling your business? Do you have the proper techniques and structures in place?
Generally, one of the most powerful planning techniques to structure a tax efficient sales transaction of your business is the installment sale reporting method under IRC Section 453. However, there are some complexities and inherit limitations that requires an experienced M&A tax planning professional to work around in the context of an S corporation target.
This blog discusses in general broad terms the complexity of installment sale reporting in the context of an F reorganization involving the sale of an S corporation target. For background information on the benefits of an F reorganization involving an S corporation selling target, please visit my previous blog on M&A Shop Talk from Monday, March 28.
The “F reorganization” has become the tax planning structuring technique of choice in today’s middle market M&A world. So, what does it mean to you as a seller?
First, F reorganization is only applicable in the context of corporations not LLCs. Second, in the middle market M&A world, which is still controlled by S corporation’s seller target, it means legally converting your existing S corporation to an LLC before selling.
The two major tax benefits to the seller are as follows:
We in the tax business remember quite well the stressful last weeks leading up to the annual tax deadline on April 15th. We know it was tough for you too. Is there anything that you can do now to ensure that the next tax season is smooth and stress-free? Here are some simple steps that you can take now to ease the pain next year.
1. Set up and maintain a current file of all your tax-related information.
This can be as simple as keeping a file folder to catch all your tax related documents throughout the year. Keeping records together in one place avoids the need to scramble and hunt for these at the last minute. Some of the records you will be collecting during the year:
Did you know that you might be eligible to receive a big tax credit for expenditures to make your business ADA-compliant?
The Americans with Disability Act of 1990 (ADA) prohibits discrimination against individuals with disabilities in everyday activities. The law requires that businesses offering public goods or services (including doctors’ offices) be accessible to individuals with disabilities.
To comply with ADA and to encourage private business facilities to be more accessible to disabled individuals, a Disabled Access Credit is available to eligible small businesses. For any tax year, the amount of the Disabled Access Credit equals 50% of the amount of the eligible access expenditures for the tax year that exceed $250 but do not exceed $10,250. Thus, the maximum amount of the Disabled Access Credit is $5,000.
For purposes of the Disabled Access Credit, an eligible small business is any business that has gross receipts for the preceding tax year of $1 million or less; or employed 30 or fewer full-time employees during the preceding tax year.
Eligible expenditures include amounts incurred or paid for the following:
In order to qualify for the Disabled Access Credit, the expenditures must be reasonable and necessary to accomplish the above purposes (e.g., accessible medical equipment used in doctors’ office such as adjustable-height exam tables and chairs, wheelchair-accessible scales, adjustable-height radiologic equipment, portable floor and overhead track lifts, and gurneys and stretchers). However, in another example, X-ray machines purchased by a dentist were not eligible access expenditures and did not qualify for the Disabled Access Credit because the dentist did not purchase the machines to comply with ADA requirement, but rather to provide better dental care for the dentist’s patients.
If your Virginia business is required file income tax returns in multiple states, you may be paying too much in BPOL taxes. Virginia localities are authorized to impose a Business, Professional and Occupational License (BPOL) tax for the privilege of doing business in the locality. The tax is also known as a “business privilege tax” or “gross receipts tax.” It’s bad enough that the Virginia BPOL tax imposed by most localities in the Commonwealth is a tax on all business receipts regardless of expenses. To make matters worse, the most broadly applicable exclusion allowable to multistate businesses is often misrepresented by localities, leaving the unsuspecting taxpayer with a larger annual bill than may be necessary.
Generally, gross receipts subject to BPOL taxation include only those receipts attributed to a place of business within a jurisdiction. For a service provider, gross receipts are attributed to the place of business from where the services are performed or from which the services are directed or controlled.