Top 5 Mistakes to Avoid with Your Tax Return When Selling Your Business – Insights from Murphy Business Sales Tampa

by l.zavala@murphybusiness.com | Aug 15, 2023 | Business, For Sellers, Selling a business

Are you considering selling your business? It’s a significant step that requires careful planning and attention to detail. One critical aspect that business owners often overlook is their tax return. Properly managing your tax return and financial statements can greatly impact the value of your business when it comes time to sell. In this blog post, we’ll dive into the top five things you should avoid doing with your tax return when trying to sell your business, with insights from the experts at Murphy Business Sales Tampa.

1. Properly Reporting Expenses on Tax Returns and P&Ls

Accurate financial reporting is the foundation of a successful business sale. When preparing your tax return and profit and loss statements (P&Ls), make sure to accurately categorize and report your expenses. Misclassifying expenses or failing to report them can lead to discrepancies that might raise red flags for potential buyers. Work with your accountant to ensure that all expenses are correctly recorded, giving potential buyers confidence in the accuracy of your financial statements.

2. Avoid Reporting Personal Expenses as Business Operating Expenses

One common mistake some business owners make is reporting personal expenses as business operating expenses. While this might seem like a way to reduce your tax liability, it can have severe consequences when selling your business. For instance, if you write off personal expenses to save on taxes, the potential sale value of your business could decrease substantially. The example is simple: imagine you save $1,500 on taxes by writing off $10,000 in personal expenses, but this action could potentially cost you $20,000 to $30,000 in the final sale price. It’s crucial to keep personal and business expenses separate to ensure an accurate valuation and maximize your business’s worth.

3. Differentiating Between Capitalized and Expensed Items

Understanding the difference between capitalized and expensed items is vital when preparing your tax return and financial statements. Items that can be capitalized are recorded as assets on your balance sheet and can affect the depreciation of your business. When selling your business, this depreciation is added back to the expenses, which can impact the valuation positively. Collaborate with your financial advisor to determine which items should be capitalized and which should be expensed, optimizing your business’s financial presentation for potential buyers.

4. Factoring in Interest Expenses During Valuation

Interest expenses, if present, can be added back when valuing your business. These expenses are often necessary costs for running a business, but they might not accurately reflect the business’s operational performance. By adding back interest expenses, potential buyers can better assess the true earnings potential of the business. Highlighting this adjustment in your financial statements can enhance the appeal of your business and provide a more accurate representation of its value.

5. Rent Charges and Property Ownership

If you own the property through a separate entity and charge rent to your business, it’s essential to align the rent charges with the market value. Charging significantly more or less than the market rate can impact the perceived value of your business. Overcharging on rent could make your business seem less profitable, while undercharging might raise questions about your business’s potential earnings. Striking the right balance and accurately reflecting property-related expenses and income is crucial for a transparent valuation process.

In conclusion, when selling your business, your tax return and financial statements play a pivotal role in determining its value. Avoiding common pitfalls such as misclassifying expenses, reporting personal expenses as business costs, understanding capitalized vs. expensed items, factoring in interest expenses, and properly valuing property-related charges can significantly enhance the perception of your business’s financial health and ultimately lead to a successful sale.

At Murphy Business Sales Tampa, our team of experienced professionals can guide you through the intricacies of selling your business, including optimizing your financial statements for a successful transaction. Reach out to us today to ensure that your business sale journey is both smooth and rewarding. Contact Murphy Business Sales today – your financial future deserves nothing less than expert guidance and strategic insights.

Value of Your Business Sale with Murphy Business Sales Tampa

by l.zavala@murphybusiness.com | Jun 20, 2023 | Business, For Sellers

If you’re a business owner considering retirement and looking to sell your business, it’s essential to plan your exit strategy well in advance. By starting the preparation process 1-2 years prior to selling, you can strategically analyze your financial situation and maximize the value of your business. In this blog post, we will explore how Murphy Business Sales Tampa can assist you in preparing a comprehensive exit strategy, ensuring a successful and profitable business sale.

Assessing Your Financial Position: Maximizing Value through Strategic Tax Planning

When you partner with Murphy Business Sales Tampa, the first step is to evaluate your actual profit and loss (P&L) statements and tax returns. Our team of experts will meticulously review these documents, identifying any potential expenses that can be added back or reclassified to maximize the value of your business. We understand that small business owners aim to minimize taxes, and we approach it differently. Rather than focusing on immediate tax savings, we consider the long-term impact on your business’s value.

For example, let’s say your business owns vehicles and you recently had to replace an engine. Instead of expending the new engine, our approach involves adding it as an asset and depreciating its value by utilizing Section 179. This depreciation expense becomes an add back to expenses, significantly increasing the overall value of your business. By adopting this strategy, we have successfully increased business valuations by 2-3 times the original expense. We recognize that every expense represents an opportunity to enhance your business’s worth, ultimately benefiting you during the selling process.

Comprehensive Business Evaluation: Uncovering the True Worth of Your Business

After closely examining your financials, Murphy Business Sales Tampa will conduct a thorough evaluation of your business. Our experienced team specializes in business appraisals and has an in-depth understanding of various industries. We consider crucial factors such as revenue, profitability, growth potential, market trends, and comparable sales in your sector. This evaluation will provide you with an accurate and realistic understanding of your business’s fair market value, serving as a foundation for determining the asking price.

Determining Your Selling Timeline: Aligning Goals with a Strategic Exit Plan

Once you have received the evaluation, it’s time to make a decision regarding your desired selling timeline. Murphy Business Sales Tampa understands that personal goals, financial needs, and market conditions play a significant role in this choice. Whether you prefer to sell today or in the near future, our team will support you in listing your business or developing strategies to further enhance its value. We work closely with you to align your selling timeline with your objectives, ensuring a smooth transition.

Finding the Ideal Buyer and Closing the Deal: Navigating Due Diligence for a Successful Sale

With Murphy Business Sales Tampa by your side, we will actively seek out the ideal buyer for your business. We thoroughly assess potential buyers’ qualifications, financial capabilities, and their compatibility with your business’s values and culture. Additionally, we evaluate if your business has a capable management team in place to ensure its continuity after the sale. Our team performs due diligence, verifying the buyer’s intentions and capabilities, and works diligently to negotiate a favorable deal for you.

Once due diligence is complete, and all parties are satisfied, Murphy Business Sales Tampa assists in closing the deal. We guide you and the buyer through the legal aspects, provide valuable insights, and ensure all necessary paperwork is completed accurately and efficiently. Our goal is to facilitate a seamless transition and maximize the value you receive from the sale.

Get Expert Advice with Luis Zavala and Murphy Business Sales Tampa

Preparing an exit strategy is a critical step in ensuring a successful business sale. With Murphy Business Sales Tampa’s expertise and support, you can navigate the complexities of selling your business with confidence. By starting the process well in advance, assessing your finances, conducting a comprehensive evaluation, and finding the right buyer, you can unlock the true value of your business and achieve a smooth and profitable transition to the next phase of your life. Trust in Murphy Business Sales Tampa to guide you every step of the way, leveraging our industry knowledge and extensive network to connect you with qualified buyers who will recognize and appreciate the value you have built. Don’t leave the future of your legacy to chance; partner with Murphy Business Sales Tampa to secure the best possible outcome and embark on a new chapter with peace of mind.

WHY YOU NEED A VALUATION

by l.zavala@murphybusiness.com | Sep 9, 2022 | Business, Business Information, Buy a Business, Buying a business, For Buyers, For Sellers, General Business, Sell a Business, Selling, Selling a business, Valuation, Valuing

The buzz is that if you are a Baby Boomer and you want to sell your business in the next few years, then you are in the majority. You are not the only Baby Boomer and will possibly have your business compete against many more similar businesses in both model and industry. In order to be well-prepared, you will need a proper valuation. Establishing a baseline value of your business will help you overcome weak areas that keep you up at night. Why would a buyer want to buy your problems? Some savvy entrepreneurs will want your problems, but most will not.

Check out our short video on the different types of Valuations.

Roger Murphy, our CEO, explains the different types of valuations we provide.

Why Hiring a Business Broker is Essential for Selling Your Business

by l.zavala@murphybusiness.com | Sep 9, 2022 | For Sellers, Sell a Business, Selling a business

Selling a business is a complicated and an intricate procedure. However, business brokers play a fundamental role in getting along the process to make it a successful deal. There are several factors and cautions involved that should to be considered before stepping out to sell your business.

Finding the exact potential buyer and to avoid scams you need to hire a business broker. Brokers are professionals at introducing the buyers and sellers and support in finding the middle ground. The business broker will confidentially work upon the marketing process to sell your business, the word is kept private as it affects adversely on your sales and stimulate staff problems.

Unsatisfactory preparation is a key error that business owners commit. Important matters such as financial documentation, the profit and loss sheet, insurance or lease issues and legal concerns have to be well prepared as it will have an impact on the market worth of your business.

You can be an expert in running your business but not at selling it and your reluctance to leverage the business brokers can be destructive. As countless matters can only be looked after by your business brokers such as selling it at the best possible value, projecting your establishment’s future, market it at its highest potential, finalizing the necessary paperwork and catching the eye of secure qualified buyers.

The productivity and successful running of your business can be affected if you neglect it and spent time on selling it. The efficiency and the performance of your business is what you really sell which makes it compulsory to concentrate on it.

Sellers mostly fix the value of the business at very high rates without determining its real market worth, you should take some time and get in touch with market rates, and after it you can easily tag realistic and a well approachable price to your establishment.

As due diligence is important, you should be able to manage the protection and authenticity of representations made during the sale. You can discuss and seek help in significant issues from business brokers at sflabusinesses4sale.com on the subject of selling your business. Generally you hunt for replies to the questions such as the worth of business, assurance of the status and qualification of potential buyers, correct way of homework for the sale and course of structuring the deal. These queries can be handled in a perfect manner by a broker.

Think Like a Buyer When Selling Your Business

by l.zavala@murphybusiness.com | Sep 9, 2022 | Buying a business, For Buyers, For Sellers, Selling a business

When you’re hoping to sell your business there are a number of things to be concerned about. There are a few ways you can get a step-up on your buyer and anticipate their moves before they have thought them up themselves. If you want to swim with the piranhas you’re going to have to nip a few toes; if you want to sell your business, you’re going to need to think like your buyer.

Understand what the buyer is after – One of human beings greatest faults and one of the things which every business seller can be at fault of is being too rooted in your own self-interest. If you would take yourself out of the equation for a moment, you’ll likely find that your deal is skewed towards your own interests; at least in your own mind. Think about what the buyer is after; what could make this deal impossible for them to say no to? If all business sellers would simply take a minute and put themselves in their buyer’s shoes they may find that the work is done for them. The schematics of the deal will fall into place effortlessly if you let them.

Be Upfront when selling your business – You would hate to be trying to hide something negative about your business; be it the structure of the building, last year’s receipts, inflated accounting or anything else; only for this to be revealed later on and to be bitten by it down the road. Rather than fight that fight, be upfront. Not only does this tactic save time on the vetting; then the buyer is a lot more likely to be straight with you. You can know sooner if this deal is a good fit or if the time has come to part ways.

If you’re able to be flexible with financing, be flexible! – Financing is another bugaboo. If you’re the outright owner and are able to be flexible with financing you may as well offer that up as an option. This may allow you to keep your hand in the kitty just a little longer and enjoy continued fruits of your labor. Be wary of the hostile takeover – Don’t be too nice. If you feel as though you’re being stepped on, best to revert to a defensive pose.

It’s also a good idea to have a trusted partner on your side to help broker the deal.