Published in the Journal of the Louisiana Dental Association Vol. 78, No. 1 – Spring 2019
Building a successful professional services business takes years of hard work and dedication. In addition to running the day-to-day operations of the business, owners must maintain a strong reputation in the community, preserve a loyal client base and train a dependable staff. Selling a business that took such time and effort to build can be a difficult decision, both emotionally and financially.
Potentially, the most important aspects of selling such a business take place before the actual sale. Preparation is crucial to the successful sale of a professional services business. Accordingly, please see the following pre-sale preparation list that can be used to help effectuate the sale of a business in an efficient and effective manner.
In addition, the due diligence process can be arduous and expensive. Sellers can save significant time and money by having material documents and financials organized in advance. The following list previews customary requests made in connection with the sale of a business.
Basic Document/Information Requests:
Finally, there are several mechanisms in place that may allow for business owners to reduce, defer and potentially exclude taxes resulting from the sale of their business. For example, La. R.S. § 47:293(9)(a)(xvii) provides an individual income tax deduction for net capital gains (the “Net Gains Deduction”), resulting from the sale or exchange of an equity interest in or substantially all of the assets of a non-publicly traded corporation, partnership, limited liability company or other business organization commercially domiciled in Louisiana for at least 5 years prior to the sale or exchange. The amount of the Net Gains Deduction will vary depending on the length of time the business is commercially domiciled in Louisiana.
Alternatively, the Opportunity Zone program, created by the Tax Cuts and Jobs Act of 2017, offers capital gains tax relief to investors for new investments in qualified opportunity zones. Investment benefits include deferral of tax on previously realized capital gains as late as 2026, if the amount of the gain is invested in a Qualified Opportunity Fund (“QOF”). Specifically, a taxpayer that recognizes capital gain from sales to unrelated persons, and within 180 days invests an amount that is less than or equal to the capital gain into a QOF, may elect to defer the reinvested portion of the original capital gain. For instance, the amount of capital gain invested in a QOF may be discounted by up to 10% if the investment is held 5 years and up to 15% if the investment is held for 7 years or more. Further, if the investment is held for 10 years or more, any appreciation associated with the QOF investment will be shielded from capital gains tax.
About Jack Casanova, Jr.: Jack is an attorney at the New Orleans based law firm of Baldwin Haspel Burke & Mayer. His practice consists primarily of transactional matters, with an emphasis on federal and state taxation, and estate planning. Baldwin Haspel Burke & Mayer is a New Orleans based law firm that has been providing advice and guidance to companies and individuals regarding the acquisition and sale of companies, corporate and tax planning, estate planning and complex litigation since 1914. Visit us online at www.bhbmlaw.com to learn more.