From the category archives: Certified Business Brokers News

Tips, tricks and long term strategies you should consider when buying a business in a Texas town near you.

The 1031 Exchange -- Sell Business Property Now, Pay Tax Later

A growing number of investors are selling properties and paying taxes later through a deal structure called a 1031 exchange. Section 1031 of the U.S. Tax Code permits a seller of commercial properties to defer the capital gains obligation if it identifies a replacement property within 45 days of closing the sale. The seller must then close on its new purchase within 180 days of the first closing. In a typical transaction, the property owner is taxed on any gain realized from the sale. However, through a Section 1031 Exchange, the tax on the gain is deferred until some future date. Section 1031 of the Internal Revenue Code provides that no gain or loss shall be recognized on the exchange of property held for productive use in a trade or business, or for investment. A tax-deferred exchange is a method by which a business owner who has outgrown a company-owned building, for example, can defer the tax liability as long as the proceeds are used to buy another building of equal or greater value within a spe ...

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Buying a Business - Questions to Ask the Seller

The following serves as an excellent checklist for a Buyer in compiling questions to ask the Seller about his business during the Due Diligence period. Potential Problem Areas to be Addressed Changes in law, New competition, Change in technology Foreign imports, Drop in demand, Equipment obsolescence Facility obsolescence, Market shifts, Down trends Employee theft, Interest rate flux, Labor problems Tax liens, Increased repair costs, Low margins Capital improvements needed, Single supplier position, Single customer position Bad receivables, Low backlog, Shipping problems Political instability, Restricted credit, Lavish facilities Closed business, Customer problems, Supplier problems Regulatory violations, Utility rate changes, Insurance cost changes Obsolete inventory, Slow moving inventory, Obsolete advertising Key talent leaving, Lease about to expire, Employee promised equity High lease escalation, Product liability claims, Patent ex ...

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Houston -- #3 Business-Friendly City in the Nation

Business is thriving in Houston........and No Wonder! Houston is the fourth-largest city in the United States, located in a culturally diverse metropolitan region of 4.8 million residents – and growing at more than twice the national pace. It has a low cost of living, a well trained and educated workforce, has one of the largest ports in the nation for the expansion into the international marketplace, has no state income tax, and is one of the top business-friendly states in the nation. Houston is booming and is ranked #3 best Metro Area for doing business by Texas has the #6 best Business Tax Climate in the nation according to the Tax Foundation's 2007 State Business Tax Climate Index. The Tax Foundation, established in 1937 in Washington, D.C., provides unbiased tax information and presents facts and figures to educate the public about America's tax burdens and its impact on our economy. As reported by the Texas Workforce Commission (3/8/07), Houston's job growth rate was double t ...

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The Buyer Remorse Stage of Buying a Business

Getting Cold Feet? Closing the deal can be the most challenging part of buying or selling an operating business. Valuations, investigations, and negotiations are complete and now it's a matter of getting everything into writing in a form that satisfies everyone so that the transfer of ownership of the business can take place. However, you can definitely count on someone getting cold feet just before the closing. Be prepared for this! Anticipate it happening and then work through it logically, reasonably and unemotionally. Many Buyers, particularly first-time Buyers, experience a pre-closing nervousness known as “Buyer’s Remorse.” It generally occurs during the Due Diligence phase. During this period the Buyer may begin to have second thoughts about the wisdom of buying the business. The train of thought may go something like, “Am I doing the right thing?” “Do I really want to get into this venture?” “Is this the right time?” “What if the curren ...

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Buying A Business - The Sequence of Events

6 Steps in the Buying Process Step 1: Self Assessment When you meet with a Business Broker, be prepared to discuss your background, work experience and financial ability to purchase a business. A Business Broker cannot adequately help you find a company that meets your needs without this knowledge. A personal resume and financial statement will also be required by lenders, landlords and others who will be a party to your business acquisition. The following are examples of the questions you may be asked by a Business Broker: Why do you want to buy a business? What are your special skills and educational background? What is your work and/or business ownership experience? What are your hobbies and areas of special interests? Assuming suitable sources of financing are available, what is the maximum amount of your personal funds you can invest as a down payment to purchase a business? If you plan on including an equity partner/investor, how much do you expect them t ...

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Buying or Selling a Business -- Closing the Deal Checklist

A Simplified Checklist When Selling A Business & Closing A Deal - Adjust purchase price This would take care of prorated items such as rent, utilities and inventory up to the time of closing. - Review documents required to be provided by the seller This would be a corporate resolution approving the sale, evidence that a corporation is in good standing, any tax releases that may be been promised by the seller. Check with your local department of corporations or secretary of state. - Sign promissory Note In some cases the seller will financing part of the sale price, so have an attorney review any Note documentation. - Security Agreements These documents may be necessary if you are going to finance your purchase. A Security Agreement lists the assets that will be used for security as a promise for payment of the loan. - UCC Financing Statements These documents are recorded with the Secretary of State in the State in which you have purchased your business. Again, these documents are nece ...

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When Buying a Business -- Understand the Seller's Position

In the purchase of a business, the end result of negotiation is not winning an argument, but reaching a mutually beneficial agreement between buyer and seller. The most common mistake people make in negotiation is thinking that their goal is to win at the expense of the other party. Adopting this win-lose approach almost always results in a failed, or less than optimal, negotiation. A win-win approach, where each party gets its needs met, is the most successful way to negotiate. To better accomplish this end, the prudent business Buyer should understand the Seller’s position, establish a harmonious relationship with the Seller, and pave the way for negotiations which will lead to the successful purchase of a business. Understanding the Seller's Position The buyer should seek to understand the Seller’s position as well as those circumstances which lead to the decision to sell. This is the first step in developing a sincere respect for the Seller’s objectives, which builds a found ...

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Buying A Business -- A Due Diligence Checklist

Due Diligence is the last phase in the buying process. This is the time when you will have access to all of the company's books, records and files. You will have a pre-determined period of time to investigate the information that you have been given so far to verify its accuracy. The goal of an effective due diligence is to validate what the seller has represented and to allow you adequate time to review all of the other key issues of the business. The following is a checklist of information and documents that a buyer may wish to review during the due diligence period. Organization and Good Standing Accounting and Financial Information Physical Assets Real Estate Intellectual Property Employees and Benefits Licenses and Permits Environmental Issues Reports, Studies, Appraisals Taxes Contracts, Agreements, Leases Product or Service Lines Customer Information Litigation Insurance Coverage Vendors, Suppliers, & Profe ...

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Who Would Be the Buyer of Your Small Business? Part 2

Who are the Buyers for Privately-Held Companies and What is Their Acquisition Criteria? Understanding who the buyers are and their acquisition criteria will enable business owners to be better prepared when the time comes to sell. Unrealistic expectations of value and factors that drive value result in many business owners being unable to sell their business. When a business is on the market for a long period of time, pre-disclosure to employees, customers and suppliers can be detrimental to the business. Alternatively, proper valuation, packaging and presentation to the most likely buyers enhances the probability of a sale within a reasonable period of time. Already addressed in Part 1 of this subject was the Individual Buyer Category. Discussed here will be the Financial Buyer (sometimes called investment buyer) and Synergistic Buyer categories. Each have specific identifiable acquisition criteria. THE FINANCIAL BUYER There are approximately 200 well-known financial or investment buyers ...

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Who Would Be the Buyer of Your Small Business? Part 1

The Individual Buyer Category represents the largest number of prospective buyers for small to midsize privately-held businesses. Understanding who the buyers are and their acquisition criteria will enable business owners to be better prepared when the time comes to sell. The individual buyer category encompasses a variety of buyer types that include wealthy individuals, corporate executives, engineers and salespeople working for large firms, and immigrants entrepreneurs who have recently moved to the US. There are two other buyer categories that will be discussed in a future post: Financial Buyers (sometimes called investment buyers) and Synergistic buyers. Each buyer category differs in their purpose for making an acquisition and the types of businesses they target. Wealthy Individuals often are people who have taken early retirement from corporate America and after a brief period of being nonproductive decide to get into their own business. They tend to acquire midsize companies grossing in excess of ...

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