Each year I learn about the disasters that occur when my clients or others either buy or start a business. Why do the disasters happen? Many times the problems start because of consulting the attorney and the banker, but not consulting their tax professional. Why is it necessary to consult their tax professional? Many tax issues can be properly planned and dealt with by working with a tax professional even before buying or starting a business. If you wait until tax season to inform your tax professional, you could then be facing a large tax bill that could have been avoided with some advance planning. For now I am going to focus on buying a business.
When you consider buying a business, there are many tax and accounting questions that have to be asked. You need to consult tax professional not working for the current business owner, even if you are have been doing the books for the company. Some points about buying a business you need to consider are:
- What type of entity is the business you are looking to buy?
- If the business is a corporation, will I be buying the stock of the corporation or the assets of the corporation?
- What type of business entity is best for my situation?
These are only a few of the questions a prospective business owner must get answered before signing any papers to purchase a business. The answer to these and many other questions will determine how the buying and operating of the business will affect your tax situation.Wehighly recommend consulting a tax professional such as an Enrolled Agent when you consider either starting a business or buying a business. By consulting an Enrolled Agent now, you will save on tax payments and tax headaches later.