MLR

Category: Due Diligence / Mergers & Acquisitions

Are you thinking about buying a business? How you structure the deal will affect the taxes owed by the buyer (you) and the seller (the other party). The Tax Cuts and Jobs Act (TCJA) brought sweeping changes to the federal income tax rules for businesses, including some changes that affect the taxation of mergers and acquisitions. Here’s why many buyers are choosing to buy the assets of the target business, rather than its ownership interests, under current law — and why you may need to act fast to take advantage of breaks offered by the TCJA.

Frequently, investors engage in securities transactions at year-end to improve their tax situation. This requires a basic understanding of the current tax rules for capital gains and losses. We want to review some of the important tax changes in the Tax Cuts and Jobs Act (TCJA) and how it affects investors and estate/gift planning with you.

The franchisor/franchisee business relationship is a common one, and it offers plenty of growth potential. Whether you’re considering owning a franchise or thinking about taking on franchisees, understanding the process before making a major decision is crucial. Then, it’s essential that you draft a franchise agreement that covers both the immediate terms, as well as any changes that may occur in the future. Maxwell Locke & Ritter can help you complete this when you’re ready, but here is what to know and understand before buying a franchise:

It’s common for companies to hit a point during growth where it is difficult without outside assistance. Private equity investment can be a wonderful option for business owners who want to retain some control of their business while also reaping the benefits of an outside investment.

The right private investor can be an incredibly valuable addition to your team — beyond just providing much-needed capital. As long as you consider the details beforehand so you can protect your own best interests, you may find that an investor is the key to your company’s long-term expansion and overall success.

In the context of mergers and acquisitions, potential investors get a level of assurance when the investment target is audited.  However, relying solely on the target’s audited financial statements when making an investment decision could be shortsighted.

If you are selling your business, you may be eligible for an earnout provision. Read about earnout purchases and the related due diligence assessment.

Just because a merger or acquisition is completed on paper doesn’t mean the transactions will be a success. The implications can generally be seen 18 to 24 months after the deals close and officials can assess how the combinations contributed to improvements or disappointments on profit and loss statements.

The standard financial due diligence process focuses on providing potential investors with an understanding of a company’s sustainable EBITDA, historical operating trends, working capital needs, and accounting policies and procedures.

However, access to the C-suite during fieldwork allows a financial diligence provider to gain valuable insight into other aspects of a company’s operations that may be just as important when evaluating a deal. In particular, financial diligence teams may uncover significant issues affecting post-acquisition integration and the investor’s ability to effectively monitor and effect change post-transaction.

Comprehensive due diligence is essential if your business plans to acquire or merge with another organization. Without one, complicated implications could arise with the potential to significantly affect the profits or viability of the transaction.

The IRS has an Employee Plans Team Audit (EPTA) program to enforce the tax rules for employee benefit programs in large companies. According to the tax agency, one of the top ten concerns of this group of auditors is how mergers and acquisitions affect compliance with employee benefit rules. Recurring or uncorrected compliance failures can lead to tax penalties or worse — such as outright disqualification of tax-favored employee retirement and benefit programs.