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As we move into 2020, there are signs that the M&A market may be slowing down.  Global trade issues, rising prices for target companies, and political uncertainty in the US all may contribute to reduced deal activity in the coming year.  In this type of market, acquirers will take a harder look at potential acquisitions in order to minimize risk. Both strategic and financial buyers will be focused on buying “quality” companies, where potential risks are minimized through good practices of the sellers.
Continue Reading 2020 Resolutions to Make Your Deal Go Smoothly

Very often, tax consequences determine how successful the sale of a business ultimately is.  Owners often focus only on top line price, while structure and tax treatment can make a significant impact on how much of the purchase price the owner ultimately retains.  Asset sales, while attractive to buyers because they allow for a “step up” in the basis of the assets up to the amount of the purchase price (enabling the buyer to take increased depreciation and amortization deductions), often create problems for owners.  Because the seller in an asset sale is typically an entity, the sale proceeds have to pass into the entity and then out to the owners.  This makes the sale proceeds subject to a double tax where the seller is a C corporation, an S corporation with earnings and profits, or an S corporation subject to the built in gains tax.  In addition, certain state taxes, such as the Massachusetts “Sting Tax” may apply, further decreasing the net sale proceeds to the owners.
Continue Reading Personal Goodwill: A Tax Saving Opportunity

Many family businesses run smoothly for years, until the business is sold or passed on to the next generation(s).  There are, however, those circumstances where the family or closely-held business runs into a deadlock among management where the parties are unable to agree on a course of action to move the business forward.  In these circumstances, one party can petition the appropriate court for a judicial dissolution of the business.  The other party may be opposed to this prospect, but can do little other than defend the claim or try to work out a solution with the party filing suit.  Owners of family or closely-held businesses should be familiar with the applicable judicial dissolution standards  and should try to include language in a shareholder agreement or operating agreement to avoid this problem, especially where management and stockholdings are divided 50/50.  An ongoing deadlock can be severely damaging to a business, taking time, attention and funding away from other matters.
Continue Reading Family Business Owners Should Be Aware Of Statutory “Deadlock” Provisions