Donna Genie provides practical guidance for someone purchasing a family-owned business. Key points: buyers commonly acquire business assets and should form a new entity, re-establish payroll/sales/tax accounts and local registrations, and consider separate entities for the operating business versus real property to limit liability and simplify tracking. The speaker emphasizes due diligence, timing (about a month before transition in the example), and getting professional advice to avoid long-term tax and legal problems.
Chapters
Hi there. I'm working with a business owner who is purchasing an existing business from a family member. There are some exciting things I want you to know in that transition that you need to be prepared for. I'm Donna Bordeaux with calculatedmoves.com and we are assisting this business owner in purchasing from their family. Now they've already agreed on a sales price, which is a big enough issue there that many people struggle with, that we can help with. But as we approach that transition time, there are a lot of things to check off the list. As a new owner of that family business, you are most likely purchasing the assets of the business and you're going to start up your own entity for that process. In starting your own entity, you'll need to re establish all of the accounts, things like payroll withholding and unemployment taxes, sales taxes, registration with your local area if there's a business license, personal property taxes, annual reports with your secretary of state, and the new beneficial ownership interest rules as well. So there are a lot of boxes to check off with there. And the owner that I'm working with today, we are looking at some due diligence. They're still about a month out from their transition date, so. So we want to make sure that we have all of that information set up. A really important piece there is discussing the entity strategy and how they will operate that business. In this case, they are actually purchasing the building that the business is in as well as the assets of the business. They'll operate both of those in separate entities so that they can track the business property separately. It's a good idea to do that for legal protection for one reason in that legally, if someone were to sue the business based on a faulty product or something like that, or an employee sues the business based on some human resources effort, we don't want to lose the building and make that be at risk as well. So it's important to have good advice on how you structure your entity up front when buying or taking over any business. It's crucial and has very long term effects. In a lot of cases. It's very difficult to to change those things that you make in those initial elections if they're not correct, not impossible, but difficult. And there may be tax consequences too. So we want to avoid that at all costs. Start off on the right foot. Let us help you turn decades of learning into days and months of learning. Instead, we can help you eliminate the mistakes that many new business owners make by having advice and guidance from somebody who's been there and done that many times before and has a lot of experience. If you're in that situation, I'd be happy to help you and see what we can do to make that a smooth transition and a successful business purchase for you.
