Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, April 13, 1995 TAG: 9504200008
SECTION: NEIGHBORS PAGE: E-13 EDITION: METRO
SOURCE: BREEA WILLINGHAM STAFF WRITER
DATELINE: LENGTH: Medium
However, when it comes to selling and buying a business, the deal isn't as simple. There are more issues to consider, including taxes, valuation and environmental and legal issues.
To help clarify these issues, the law firm of Woods, Rogers & Hazlegrove held a Small Business Seminar in February to help potential sellers and buyers make the right decisions.
Attorneys Talfourd Kemper, Thomas Hall and Paul Thomson presented sessions on valuation, tax considerations and environmental concerns to more than 100 people who wanted to either buy or sell a business.
In the first presentation, Kemper explained the various methods of valuing a business so both the seller and buyer will get their money's worth.
There are two primary valuation methods: asset value approach and earnings approach. The asset value approach involves determining the value of the underlying assets of the business that are adjusted for existing and contingent liabilities.
The earnings approach, which is the most commonly used, involves the buyer projecting future profits he or she can make from the business.
While there are several tips for buyers and sellers to keep in mind, Kemper highlighted these:
Don't rely too heavily on the rules of thumb.
Consult your banker.
Don't set high or unrealistic prices, but don't sell yourself short.
If you're a seller, spruce up the business.
Don't want something so bad you can't walk away from it - you're dead before you buy.
To be successful, you have to have the most accurate projection and, lastly, a good lawyer.
Hall explained the intricacies of tax considerations when buying or selling a business. The first and most important aspect Hall stressed is for the seller or buyer to make immediate contact with his or her attorney before a deal is made.
"Your attorney should be the first person you talk to when buying or selling. He or she should give you guidance in tax results," Hall said.
Tax considerations are the most difficult part of the buyer/seller transaction because there are so many factors to consider.
For instance, Hall points out that the seller and buyer frequently believe the negotiation is complete once a price and payment terms have been set. However, what they don't realize is there are several alternative structures and contractual clauses with different tax and legal results that have an impact on the economics of the transaction.
If the tax and legal components are not carefully considered, a conflict could arise between the seller and buyer.
Besides valuation and tax considerations, environmental issues should be carefully considered.
Thomson explained that an environmental assessment, a process in which an environmental specialist inspects the site for any contamination and reviews and evaluates official records dealing with land ownership, usages, environmental permits and compliances, is the best way to prevent environmental risks.
"Money spent on an environmental assessment is the best money you will spend," he said.
by CNB