Tips for placing a value on your business

There are several reasons why you should know the value of your business. if you are planning to sell your business, the general rule is that you should sell it for fair market value. In many instances the term "fair market value" is somewhat ambiguous. In the simplest sense, fair market value is what a willing buyer would pay a willing seller, with each party knowing all the pertinent facts.

There are several acceptable methods for determining the fair market value of a company. The most common three methods use (1) the value of the company's assets, (2) the earning power of the company, or (3) the stock value, assuming the company is a corporation. When determining the value of the corporation's stock, you must research the sale of stock for a substantially similar business. If you have been operating the company for many years, you have built up a reputation for providing good service. This goodwill is a valuable asset and should play an important role in determining a fair asking price for your business.

The fair market value of the business is also relevant if you plan to transfer the company to a family member. If the transfer is for less than fair market value, the IRS considers the transaction as part sale and part gift. Inter-family transfers are more closely scrutinized, making an accurate valuation even more important.

Tax Tips Small Business

  • Thinking of Selling Your Corporation?

    Carefully review your options before making a decision

    When it come time to sell your corporation, you have two options. You can either sell the corporation stock or have the corporation sell the assets and distribute the proceeds. The tax implications of the two sales are very different. If you choose to sell the stock, you are the seller. The corporation is not affected by the transaction. The new owner steps into your shoes as the shareholder and takes over the existing corporation. If your share of the proceeds exceeds your basis in the stock, you'll have a capital gain to report on Schedule D.

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Small Business Quick Tip

  • SS Wage Base

    The Social Security wage base increases to $118,500 in 2016. This means that you are no longer required to withhold social security tax for employees after meeting this threshold. However, you are required to withhold Medicare taxes regardless of the amount of wages paid.
Wednesday, 17th July 2019
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Tax Tips Personal

  • Saving for Your Retirement

    Certain taxpayers are eligible for a tax credit

    If your adjusted gross income is less than $50,000, you may be eligible for a nonrefundable credit against your income tax for elective contributions you make to §401 (k) plans,

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Personal Quick Tip

  • Organized Appointment

    Go to your tax appointment well organized. Have all your income statements such as W-2s and 1099s separate from your expenses. Make sure you have all the proper social security numbers for dependents, as well as their names as they appear on their social security card. Careful organization will save you time come tax season.