Every four years, business owners who have considered selling a business will pause to consider how a change in presidential administration might affect that sale. Regardless of the anticipated details, the uncertainty itself can cause anxiety for any business owner. This is why, even in the most certain and predictable times, utilizing the expertise of a professional advisor can bring a sense of calm and assurance. As seasoned professionals, we have been here before, and we can help guide you through the process of selling your business.
Here are six of the new administration’s key points on taxes:
- The top individual federal income tax rate would rise from 37% to the pre-Trump rate of 39.6%.
- The corporate rate would rise from 21% to 28%; a 15% alternative minimum tax would apply to corporate book income of $100 million and higher.
- Individuals earning $400,000 or more would pay additional payroll taxes.
- The maximum Child and Dependent Tax Credit would rise from $3,000 to $8,000 ($16,000 for more than one dependent).
- Tax relief would be offered for student debt forgiveness and the first-time homebuyer’s credit would be restored.
- The estate tax exemption would drop by about 50%.
How do these proposed changes affect selling your business?
Depending on the details of your business, there are a number of ways to answer this question. However, there are some recommendations we can offer, regardless of your business size, location, or industry.
Viking Mergers & Acquisitions has advised and represented business owners since 1996, spanning five presidential administrations. We have consistently found that early preparation is critical, even if selling a business is not on your immediate horizon. This preparation includes obtaining a business valuation. A business valuation puts a stake in the ground, so to speak, of how buyers and lenders look at your business. It can also often open the eyes of a business owner to see his or her business from a different perspective. This fresh view is beneficial.
From there, start operating your business like a public company, with the aim of maximizing shareholder wealth. We have found that this change in perspective tends to kick-start the process of getting the business organized, from evaluating employees and staff structure, scrutinizing vendors and suppliers, tracking sales by customer to ensure there is no concentration concern, and many other components critical to increasing the value of the business.
Bottom line: administrations will come and go, along with their policies. Therefore, begin preparations early, and work with a professional firm to help you exit on your terms and for the highest price. If you are considering selling a business in 2021, contact us today for a no-cost consultation. We would love to help.