Tax Tips on a C Corp Asset Sale
First, unless you are planning on going public or have hundreds of stockholders do not form a C Corp to begin with. Use an S Corp or an LLC. If you currently are a C Corp ask your attorney or tax advisor about converting to an S Corp. If you sell your company within a 10 year period of converting to an S Corp the sale can be taxed as if you were still a C Corp.
Here is what happens when there is an asset sale of a C Corp. The assets that are sold are compared to their depreciated basis and the difference is treated as ordinary income to the C Corp. Any good will is a 100% gain and again is treated as ordinary income. This new found income drives up your corporate tax rate, often to the maximum rate of around 34%. You are not done yet. The corporation pays this tax bill and then there is a distribution of the remaining funds to the shareholders. They are taxed a second time at their long term capital gains rate.
Compare this to a C Corp stock sale. The stock is sold and there is no tax to the corporation. The distribution is made to the shareholders and they pay only their long term capital gain on the change in value over their basis. The difference can be hundreds of thousands of dollars.
Secondly, keep all assets that may appreciate in value outside the C Corp and in an LLC. Your real estate, patents, intellectual property, etc. should be held in a pass through entity so you avoid the potential high C Corp corporate tax rate and the double taxation if you do an asset sale.
Let’s say that you are a C Corp and the buyer refuses to do a stock sale. If you can get the buyer to move as much of the transaction value to a covenant not to compete, you will be much better off. That will be taxed to you personally at the long term capital gains rate and not the corporate tax rate and the gain can be spread out over the non-compete period.
Another approach you can use is “Personal Good Will”. This is where the seller’s reputation, expertise, and relationships are in effect separated from the assets of the company and account for as much of the good will value as possible from the business. So let’s say that the company sells for $8 million dollars and the amount allocated to the hard assets is $6 million. That leaves $2 million that can be classified as good will. If that good will is assigned to the C Corp, it will be taxed at the 34% rate and then taxed again when it is distributed to the shareholders at 15%.
If you can move that amount to personal goodwill for the owner, it is paid directly to him and he gets taxed at the 15% rate only. The calculation looks like this: If the good will is $2 million and is allocated to the C Corp. They pay $680,000 in corporate income taxes. The $1,320,000 remaining gets distributed to the shareholders and an additional 15% tax is paid or $198,000 for a total tax on that $2 million of $878,000. Moving it all to personal goodwill results in a total tax on that $2 million of $300,000, a savings of $578,000. This approach was pioneered in a classic IRS case called the Martin Ice Cream Case.
There is a built in bias on the part of buyers with the advice of their attorneys to avoid doing stock sales because you buy everything including any hidden liabilities. You as the seller want to convince the buyer to do a stock sale by demonstrating that there are no hidden liabilities. Another argument you can use is that most contracts are not assignable without the consent of the other party. In an asset sale it could be problematic to get assignments of a large quantity of contracts. An example is if your company is in a favorable long-term property lease the landlord will never agree to an assignment of that lease. If you have a long-term contract with a government entity, a change in ownership can trigger a contract end. In a stock sale these are not issues.
There are many variables in a business sale negotiation. Price, Cash at close, Stock versus Asset Sale, and allocation of purchase price. The IRS does not allow the buyer’s allocation of purchase price to be different than the seller’s. It also must be noted that from a tax standpoint, something favorable for the seller is correspondingly less favorable for the buyer. An experienced buyer will structure the deal in the most favorable way for himself. Sellers must get good advisors to help them negotiate to achieve the maximum after tax proceeds.
Dave Kauppi is president of Mid Market Capital, Inc. MMC is an M&A advisory firm focused on middle market strategic business sellers. Dave a licensed business broker and a member of IBBA and the MBBI. Contact (630)325-0123 davekauppi@midmarkcap.com or http://www.midmarkcap.com
In Shaky Economic Times, Bestselling Author Provides Chiropractors “Freedom from Fear”
Why do bad things happen to good people? Why do good things happen to bad people? Why does life often seem so unfair? And what does all that have to do with your chiropractic practice?
Those, and more, are questions “street scholar” Mark Matteson seeks to answer. In a time when chiropractic income is going down, expenses are rising, and chiropractors are facing a multitude of other issues, Mattesson gives chiropractors techniques they can use to reduce worry in their lives. That’s because, according to Matteson, author of the bestselling Freedom from Fear, worry isn’t only stressful. It’s a waste of time.
“Worry is a misuse of the imagination; it’s negative goal-setting,” says Matteson. “The analogy I like to use is fog. One square mile of fog is simply 12 ounces of water. But when we hit that fog when we’re driving, we either slow down or stop. And that’s what fear does. It shifts our focus onto the wrong side of the ledger. We just need to understand that worry is an illusion.”
Matteson says fear is a roadblock to success. Fortunately, though not easy, it is possible to get rid of worry.
“Worry is imagining what you don’t want to have happen, and it’s a habit,” he says. “The good news is, I can unlearn a habit. The question I like to ask is, where’s your focus? Is it on the things you want, or is it off the things you want?”
Because of his proven and practical techniques, Matteson is in great demand as a keynote speaker, seminar leader and management consultant. He says he attempts to take the best parts of his books, Freedom from Fear and Freedom from Fear Forever, and integrate them into each presentation–much as he’s planning to do at the International Chiropractic Appreciation Mega Event (ICAME) in Las Vegas in January.
Mark says he wants to inspire every audience to “raise the bar” and achieve higher levels of personal and professional performance. And, when it comes to Matteson’s advice, you can be sure it comes from experience. One example is self-confidence. Matteson recommends a kind of journaling to boost self-worth.
“When good things happen, write them down. I’ve been doing that for 15 years, and it’s dramatically changed my self-concept. At the risk of sounding arrogant, what’s it’s done is bolstered my self-worth,” says Matteson. “It’s built my confidence, and people buy that confidence. That’s no less true for speakers than it is for chiropractors.”
In fact, Matteson says self-confidence and self-esteem have a great deal to do with getting rid of worry and experiencing success in chiropractic offices.
“I believe personally that people buy you. In the chiropractic industry, you’re developing a relationship,” Matteson explains.
“It’s a relationship business, and you can’t give away something you don’t have.”
You can hear Dr. Patrick Porter’s interviews with Mark Matteson and other great speakers by going to iTunes. In-depth information on the ICAME event mentioned in this article can be found at http://www.parkervegas.com. Dr. Porter’s chiropractic support program can be viewed at www.newreality.com.
Does the Road to Success Lie Through Failure? It Can, According to Billionaire Bill Bartmann
Most people don’t value their failures…but Bill Bartmann does. In fact, when it comes to failure and success, no one knows the ropes better than he does. If that seems a little exaggerated, it’s not. Among other life changes, Bartmann pulled himself from abject poverty to become the 25th wealthiest man in America.
“I’ve had a very interesting life,” Bartmann says. “I’ve gone from being unemployed and almost unemployable, to employing more than 10,000 people. I’ve gone from being a million dollars in the hole and bankrupt to being over a billion dollars to the good.”
And that’s just the beginning. Bartmann, who has earned recognition from numerous institutions, as well as a permanent place in the Smithsonian Institute’s Museum of American History, says his mission is to share his success strategies with as many people as possible.
“I’ve seen both sides of success and failure, and I’ve seen both of them up close and personal,” says Bartmann. “It’s because I’ve seen them, and have learned some things during my journey, that I want to share the things I’ve learned with the hope that it will provide some value for the people in the audience.”
Because he’s known more than his share of hard times, Bartmann says he teaches people how to react to adversity in a way that makes their lives better.
“Most of us don’t know how to react to the things that happen to us. We go into shock,” he says. “We want to grab a bottle or grab a gun or grab a razor blade, because we fall into despair or despondency. I show people none of that stuff is necessary.”
Bartmann also says the way to dealing with adversity is deceptively simple.
“The simplest way to deal with adversity is to raise your self-confidence. If you can do that, then when things happen around you, you have the strength and the resolve to be able to deal with them honestly and straight-up,” Bartmann says.
While, Bartmann admits, he can’t fix everyone’s problems, he does want to help make their lives easier.
“I’m not a psychologist,” he stresses. “I’m not trying to cure all the ills of the world, but I do want to be able to talk to people one-on-one, to let them understand there is somebody out there who’s been through the stuff they’re going through, and there are some very simple things you can do that will make your life so much easier.”
“I’ve had more failures than anyone else I’ve met in my whole life, but I’ve also had more successes than most people, because I’ve learned how to deal with my failures,” Bartmann concludes. “That’s what I want to show people.”
You can hear Dr. Patrick Porter’s interviews with Bill Bartmann and other great speakers by going to iTunes or http://www.parkervegas.com. Dr. Porter’s chiropractic support program can be viewed at www.newreality.com.
Finding the Right Marketing Services Provider for Your Business
If you’re a small business owner, medium-sized business, or marketing professional who realizes that you can’t be an expert in everything, then finding a Marketing Services Provider to meet your growing needs is essential. However, not all marketing service providers are the same. In fact, there are thousands of providers who promise everything from Advertising to Tradeshow Management. But how can you tell who will deliver for your business and who will not? There are a few things to look for before choosing the right Marketing Services provider who cares as much about your business as you do.
1. Screening Questions. Depending on what type of marketing service provider you’re looking for, take time to organize some basic questions that will help you evaluate whether or note the marketing service provider can meet your needs. You should customize these questions based on your specific marketing needs. Here are a few to get your started: a. How long have you been in business? b. What happens if I am not satisfied with the result of the project? c. Please explain the process your will follow for this project? d. Can you provide me with a list of client references for which you’ve done similar projects? e. What is your fee structure? f. On average, how long do these types of projects take to complete?
Getting answers to these very basic questions will give you’re a firm expectation of time, expense, and proposed outcomes. If they are not what you’re looking for, you can always negotiate, but keep in mind that the first answers given are usually closest to what you can expect. Don’t settle. Keep asking these questions as many times as you need to. Eventually you will find the right vendor who answers these questions to your satisfaction.
2. References. The only legitimate way to know whether or not a service provider has a solid reputation is to call references provided. Often times, individuals ask a vendor for references and never receive them. Even worse is the buyer who receives a list of references and never calls or speaks to them. Don’t feel awkward calling a vendor’s references. These individuals have agreed to be contacted by future clients. If a vendor is unable to give you a list of references, then you must question why no one is willing to vouch for the vendor’s previous work. Finding satisfied clients is one of the most important cues to selecting a vendor that you’ll be satisfied with.
3. Shop Around. Be sure to acquire at least three quotes (one each from 3 separate vendors) before making a final selection. You’ll be surprised how much money you can save by getting multiple quotes for the same project. Even if you prefer a certain vendor over another, multiple quotes allow you to negotiate and make sure that each vendor is offering the same type of service. If prices vary greatly, ask your vendors why their pricing is so much higher – what are they including that the others aren’t?
4. Ask for a Detailed Project Outline. It’s very easy for projects to get started and quickly become sidetracked. Before beginning any project, make sure that your vendor provides you with a detailed outline of project dates and deliverables. This will not only set your expectations correctly, it will also detail what’s included in the proposed work. Ask your vendor, what happens if he/she misses a deliverable? How often do they complete their projects on time? The point here is to communicate with your marketing services vendor that you have expectations that must be met. This will allow for better project management throughout your marketing services engagement and ensure that all deliverables are achieved on or close to target.
5. Provide Partial Payment. Most marketing service vendors ask for part of the project payment up front. They realize that the fees you pay are partially based on satisfaction and completion of the work. If your marketing service vendor asks for the whole fee up front, tell the vendor that you will only agree to structured payments. This ensures project completion and gives you ability to manage deliverables throughout the project timeline.
If you’re going to be selecting a marketing services provider for your business, be sure to follow the steps outlined above. By shopping around and asking the right question, you can find a marketing services provider that is affordable, meets your needs, and does excellent work. If you don’t take the time to find the right vendor, don’t expect the outcome you’re looking for.
Michael Fleischner is the founder and President of MarketingScoop.com. He has appeared on major media including the TODAY Show, Bloomberg Radio, and more. To learn more, visit http://www.MarketingScoop.com.
What’s the Secret to Getting Paid for Your Chiropractic Services? Look at the Evidence
As a chiropractor, you may have heard the term, “evidence based practice,” but what does it mean? According to Dwight Whynot, DC, it means the difference between getting paid and losing money…and maybe even the difference between keeping and losing your practice.
That’s because, in today’s tough economic environment, chiropractors everywhere are finding it more difficult to squeeze payments from reluctant insurance companies. If you want them to show you the money, you have to show them the proof. That’s where evidence based practice comes in.
“The health care system as it is, it’s getting harder and harder to get reimbursed for everything you do in your office,” says Whynot. “When I practice an evidence-based style of practice, I give the insurance companies the evidence they need to gather to show them the patient needs the care I’m giving.”
Whynot, who has a private practice in Johnson City, Tennessee, learned the hard way how difficult it is for chiropractors to make ends meet. Then, an invitation to a group called Center for Integrative Medicine opened his eyes.
“One of the things the medical doctors asked me was, ‘How do you know the patient’s getting better?’ I said, ‘Well, the patient tells me.’ There was no objective way I was doing at that time, to tell me whether or not the patient was getting better,” Dr. Whynot says. “There wasn’t any evidence I could give the medical doctor who referred the patient to me, to show them the patient was getting better.”
That realization started Whynot on a path of discovery that led him to develop his own evidence-based practice.
“I started looking, and I found range of motion studies, computerized muscle testing, pain pressure threshold testing, tests that prove whether people have a subluxation,” Dr. Whynot explains. “Then I can show them how well they’re doing. I can send reports to the medical doctor and say, ‘Yes, the patients you referred are getting better.’ I can show the insurance company whether or not the patient’s getting better. That’s why I like evidence-based chiropractic.”
Whynot says he wants to use the knowledge he’s gained to help other chiropractors.
“I want to change our profession,” concludes Dr. Whynot. “The biggest way to change our profession is by trying to reach as many people as possible. You need a lot of documentation to prove what you did helped the patient, and providing that documentation has really helped me out. I give people that information.”
You can hear Dr. Patrick Porter’s interviews with Dr. Whynot and other industry greats by going to iTunes or visiting http://www.parkervegas.com. Dr. Porter’s chiropractic support program can be viewed at www.newreality.com.