Academic journal article Journal of Accountancy

Buying or Selling, CPAs Must Know the Details: Here's How to Make the Right Tax Choices in the Purchase or Sale of a Business

Academic journal article Journal of Accountancy

Buying or Selling, CPAs Must Know the Details: Here's How to Make the Right Tax Choices in the Purchase or Sale of a Business

Article excerpt

In making an acquisition or disposition of a corporate business, a thorough analysis is necessary to adequately advise clients and senior company management.

Taxpayers selling a business must ensure that all tax, accounting, and operational considerations have been addressed. The seller should attempt to foresee what items and business areas would be important to a potential buyer. For example, the buyer of a corporate business relies greatly on the seller's financial statements.

To a large extent the sale price is determined on the historical information found in these financial statements. If the seller's financial statements have never been audited, or have not been audited within the past six months, an audit should be considered to allow for an accurate presentation of current financial information.

Some other items that may be important:

* The payment record of federal taxes

* State income tax

* Sales tax

* Franchise tax

* Stamp and transfer taxes

* Contractual obligations

* Title restrictions on property

* Registration of patents; trademarks; trade names and copyrights

From the buyer's standpoint, appropriate "due diligence" procedures must be performed to ensure that the transaction is structured properly, the purchase price is not overstated, and all potential liabilities have been identified. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.