Seth is a seasoned executive with an impressive track record of success, having held Vice President and Director positions across diverse industries. He has a wealth of experience in sales and understands the importance of building strong relationships and working collaboratively to achieve outstanding results. Seth is a skilled consultant, having helped companies of all sizes boost sales, streamline processes, and improve their bottom line. Notably, he played a crucial role in the mergers and acquisitions strategies for one of the nation's largest medical retailers.
Graduating from the University of Georgia with a Bachelor of Business Administration in Management, Seth has gone on to become a Certified Exit Planning Advisor (CEPA®) and holds a real estate license in Texas. Throughout his 20-year career, he has consistently been recognized for his achievements, receiving the highest rankings for his exceptional work.
Seth is a devoted family man and lives with his wife and two daughters in the Dallas/Fort Worth area. When he's not at work, he's active in his local church, where he volunteers his time and serves as the executive committee chair for finance.
John is a successful cross-functional executive with experience in leading and strengthening finance, accounting, and operations organizations. He has held various executive roles, including CFO, VP of Supply Chain and Planning, and EVP of Finance and Operations, during his 17-year career. In these roles, John was an integral part of the leadership team that scaled a medical device company and sold it to a private equity firm for $161 million. He led integration efforts and participated in due diligence for all the company's acquisitions.
John began his career with the accounting firm Ernst and Young in Atlanta, GA, and has worked with both startups and a large, private equity-owned medical device manufacturer. He leverages his extensive mergers and acquisitions experience to help entrepreneurs successfully transition business ownership.
John graduated from the University of Georgia with a Bachelor of Business Administration in Accounting and holds a Master of Business Administration from Kennesaw State University. He currently lives in Marietta with his wife and two daughters.
Carl is an entrepreneur at heart. He was the third-generation owner of a wedding services provider with 14 locations and 200 employees. Carl led the effort to sell the 50 year-old business in a private equity roll-up of the industry, and his first-hand experience gives him an unparalleled understanding of what it’s like for a business owner to bring their company to market and negotiate a successful exit.
Carl is also an Adjunct Professor in the Executive MBA program at the University of Georgia and serves on the Board of the Shore Entrepreneurship Center at Kennesaw State University. He is the Founder of Brio Business Academy, dedicated to guiding business owners as they launch and grow their business. He is passionate about education because he believes that business owners make better decisions when they know how and why things work (or don’t!).
Carl graduated from the University of Notre Dame, and holds an MA from the University of Chicago, an MBA from the University of Georgia, and an M.Ed from the University of Loyola. He and his wife live in Dunwoody and have two sons that attend the Georgia Institute of Technology.
KEY POINTS TO CONSIDER
- You are only taxed if there is a gain on the sale or if income is earned
- Capital Gains tax rate is almost always lower than Ordinary Income tax rate
- Both the Seller and the Buyer are required to file form 8594 with the IRS disclosing how the assets of the business were transferred
- Buyers prefer asset sales, Sellers desire stock sales
- Buyers want to allocate as much of the purchase price to consulting agreements and highly depreciable assets such as equipment and vehicles
- Sellers want to allocate as much of the purchase price to goodwill and inventory
Corporate Stock
Most small business transactions are asset sales rather than stock sales. But on the rare occasion when stock is purchased it is treated as a capital gain for the Seller. The gain is calculated by figuring how much the original owners stock is worth (also called the basis) and subtracting that number from the price the Buyer is paying for the stock. You will need the help of your accountant to determine the basis and the gain.
Accounts Receivable
This asset may or may not be included in the sale of the business. Many times it is just as easy for the seller to retain the receivables and collect the accounts after closing. Other times the buyers may want the receivables to satisfy their working capital needs. AR is sometimes transferred for a loss if the buyer negotiates a discount arguing that some of the receivables will be uncollectable.
Inventory
This asset is normally sold to a buyer “at the Sellers Cost.” Therefore, no gain is realized by the seller for transferring this asset to a buyer. If the Seller decides to sell the inventory for more than they paid to acquire the inventory, then there will be a gain and the ordinary income tax rate will apply.
Furniture, Fixtures, & Equipment (FF&E)
This asset class is called personal property and includes everything tangible that is used by the business. FF&E is treated in one of three ways; (1) Ordinary Income, (2) Depreciation Recapture, or (3) Ordinary Loss. You will need the help of your accountant to calculate the Depreciation Recapture amount if applicable.
Goodwill
This asset class is commonly referred to as blue sky. It is the amount of money that is not necessary assignable to a tangible asset. It is treated as a capital gain for the seller. Obviously the seller wants to allocate as much as possible to goodwill for tax purposes. The buyer wants more allocated to assets that can be depreciated sooner than 15 years. Also keep in mind that it is difficult to find a bank that will lend against goodwill. This will limit the number of potential buyers that are able to purchase the business.
Non-Compete Agreements
This asset class can be the worst-case scenario for both the buyer and the seller. The seller is taxed at the ordinary income rate and the buyer has to amortize the value of the agreement over 15 years. Not to mention that non-compete agreements have inherent flaws to their enforceability.
Summary
The purchase price allocation dictates the tax consequences for both the buyer and seller. The goal is to strike a balance that has positive consequences sufficient for both parties to move forward and close the deal. Business owners should involve their accountant early on in the process to avoid unexpected tax consequences resulting from the sale of their business.
For more information about this topic and many others, contact Bristol Group to speak with one of our advisors.
