Maximize what you get and minimize what the IRS takes.

We talked about setting your “end game” objectives as an important step in mapping your business Exit Plan. Remember, if you don’t know where you’re going, any map will do. Equally important is the starting point. If you don’t know where you are…a map won’t help. Valuing your business is a vital step that serves as a starting point on your Exit Planning journey. 

Let’s take a look at a few reasons why valuing your business is a vital step in Exit Planning:

• Two of your most important objectives - departure date and financial security - are dependent on the amount money you receive for your business. To determine the amount of cash you will receive we must know the value of your business.
• If you intend to transfer your business to a family member or co-owner, the business must be valued and that value must be used for gift tax purposes. 
• Determining the value now, allows you the opportunity to design an Exit Plan with the goal of maximizing what you get and minimizing what the IRS takes.
• Establishing valuation methods well before your business is transferred or sold, allows you to pinpoint the factors that are crucial to measuring and increasing (or decreasing) the worth of your business.  

 

We’ll talk more about determining a value for your business and specific techniques of business valuations. Its important to understand the methods of business valuation and the need to place a high or low valuation on your business depending on what type of buyer you have targeted as the new owner.

Tags: business exit plan, departure objectives, exit planning minimize taxes, financial security, minimize taxes, transfer your business, value of your business