Taxation

One of the most important aspects in any transaction is the taxation consideration. A Neumann & Associates is not a tax advisor and can not provide tax advice. However, we have been working many years with very qualified professionals who can minimize the tax impact for seller and buyer.

On the buying side, a company is typically purchased with after-tax dollars, i.e. a $10 million acquisition costs in essence 33% more, or $16.7 million in pre-tax generated profits. By utilizing a sophisticated tax planning approach as approved by the IRS, the required additional $6 million in pre-tax profit can be vastly reduced or eliminated.

On the selling side, capital gains are typically due for the seller, i.e. a 25% tax on the $10 million transaction price. By utilizing certain tax planning approaches, the capital gains tax can be reduced or eliminated. These are established and proven approaches as approved by the IRS. Continued cash flow and / or income with reduced tax burdens are available within this context.

In sum, what appears as a $10 million transaction, in essence typically costs the buyer $16.7 million whereas the seller only receives $7.5 million (with $9.2 million due to taxation). With the proper tax planning, this gap can be substantially narrowed or entirely eliminated, making it a win-win situation for buyer and seller. We strongly advise clients to consult with their respective tax planning experts to evaluate a transaction prior to committing to it. We can provide the proper introduction to make the tax planning process most beneficial to buyer and seller.

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