Tag Archives: retirement

7 ways to prepare your business for sale – Succession Planning

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succession planning

For some business owners, succession planning is a complex and delicate matter involving family members and a long, gradual transition out of the company. Others simply sell the business and move on. There are many variations in between, of course, but if you’re leaning toward a business sale, here are seven ways to prepare:

1. Develop or renew your business plan.

Identify the challenges and opportunities of your company and explain how and why it’s ready for a sale. Address what distinguishes your business from the competition, and include a viable strategy that speaks to sustainable growth.

2. Ensure you have a solid management team.

You should have a management team in place that’s, essentially, a redundancy of you. Your leaders should have the vision and know-how to keep the company moving forward without disruption during and after a sale.

3. Upgrade your technology.

Buyers will look much more favorably on a business with up-to-date, reliable and cost-effective IT systems. This may mean investing in upgrades that make your company a “plug and play” proposition for a new owner.

4. Estimate the true value of your business.

Obtaining a realistic, carefully calculated business appraisal will lessen the likelihood that you’ll leave money on the table. A professional valuator can calculate a defensible, marketable value estimate.

5. Optimize balance sheet structure.

Value can be added by removing nonoperating assets that aren’t part of normal operations, minimizing inventory levels, and evaluating the condition of capital equipment and debt-financing levels.

6. Minimize tax liability.

Seek tax advice early in the sale process — before you make any major changes or investments. Recent tax law changes may significantly affect a business owner’s tax position.

7. Assemble all applicable paperwork.

Gather and update all account statements and agreements such as contracts, leases, insurance policies, customer/supplier lists and tax filings. Prospective buyers will request these documents as part of their due diligence.

Succession planning should play a role in every business owner’s long-term goals. Selling the business may be the simplest option, though there are many other ways to transition ownership. Please contact our firm for further ideas and information.

About the author

Brady is the owner of Ramsay & Associates. He specializes in financial statement preparation and personal, fiduciary and corporate tax and accounting.

His professional experience includes seven years' experience for local and national CPA firms before joining Ramsay & Associates in 2006.

He has a Bachelor of Accounting degree from the University of Minnesota Duluth. He is a Certified Public Accountant, a member of the Minnesota Society of CPA's, an Eagle Scout, as well as an active volunteer in the community.

2014 IRS Amounts and Great Change to Flexible Spending Accounts

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The IRS released its list of updated 2014 deductions and limitations, which are adjusted annually for inflation.

  • Standard deductions
    • Married Filing Joint: $12,400
    • Single and Married Filing Separately: $6,200
    • Head of Household: $9,100
  • Personal exemption: $3,950
  • Maximum 401(K) deferral: $17,500 or $23,000 if over age 50 (same as 2013)
  • Maximum combined employer and employee contribution to a 401(K) plan: $52,000
  • The maximum wages subject to Social Security Taxes is $117,000.

In addition, the IRS relaxed it’s “use it or lose it” rules for Flexible Spending Accounts.  If employers make the change to their plan, employees will be able to carry over up to $500 to cover expenses in the next year.  This is a great change that can allow some flexibility for employees who won’t need to scramble to use their funds by year’s end.

2013 Deduction and Income Limits

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This is the second in a two part series on the 2013 inflation adjusted limits released by the IRS last week.

  • The annual amount allowed to be given as a gift without requiring a gift tax return increased to $14,000 for 2013, up from $13,000 for 2012.
  • A high deductible health plan for HSA purposes must have
    • A minimum annual deductible of $1,250 for self-only coverage, and $2,500 for family coverage.
    • A maximum annual deductible and out of pocket expense limit of $6,250 for self-0nly coverage and $12,500 for family coverage
  • The maximum HSA contribution allowed in 2013 is
    • $3,250 for self-only coverage ($4,250 for those age 55 or over)
    • $6,450 for family coverage ($7,450 for those age 55 or over)
  • The adjusted gross income at which eligibility for Roth IRA contributions begin to phase out is $112,000 for single filers, $178,000 for those married filing joint.
  • Roth IRA contributions are not allowed for those with AGI of $127,000 and above for single filers, and $188,000 and above for those married filing joint.

We expect more updates to be released in the coming months, and we’ll bring them to you as they are available.

2013 Retirement and Social Security Limits

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The IRS recently released the limits to be used for retirement contributions and the amount of wages subject to Social Security taxes in 2013.

  • The maximum amount of wages subject to Social Security tax is $113,700, up from $110,100 in 2012.
  • The maximum 401(k) deferral by an employee will be $17,500, up from $17,000 this year.  Those age 50 or older can contribute up to $23,000 next year.
  • Up to $5,500 can be contributed to both traditional and Roth IRA accounts next year, with those age 50 or older able to contribute up to $6,500.
  • Those using SIMPLE IRA accounts will be allowed to defer up to $12,000, with those age 50 or older able to defer up to $14,500.

This is the first in a two part update on the 2013 limits.  We’ll bring the rest to you next week.