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Possibilities Insights for Businesses & Individuals June 2016

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Possibilities Insights for Businesses & Individuals June 2016 POSSIBILITIES INSIGHTS FOR BUSINESSES & INDIVIDUALS JUNE 2016 Exit Strategy: Transitioning Your Business to a New Owner this issue While each business owner chases success “No,” Mr. Doe says. 2 in his or her own unique way, there are some Managing Tax Identity Theft “Do you have any key employees who have things nearly all owners have in common. the interest or skill set to buy and run the Hard work, determination, a vision of what business?” could be, and the will to make it happen— 4 these are the stock and trade of anyone who Mr. Doe shrugs. “I have had some over Comprehensive Financial Planning starts a business. There’s also another common the years, but they have moved on to other factor that binds together all business owners: opportunities.” The need to someday transition your business 5 “Do you have good management depth?” New Estate Law Affects Beneficiaries to its next owner. “Not really, everything runs through me,” For some, the decision will come early in the Mr. Doe says. “I call all the shots.” life of their business, and they will be on to 6 the next big thing. For others, it may be among The transaction advisor looks thoughtfully Generations & Technology the last decisions they make as an owner. at Mr. Doe and leans forward. “Do you think Regardless of how you reach this milestone— we can find a buyer to invest in this business whether it’s retirement or a buyer knocking at if you aren’t a part of it anymore? If you own 8 Eide Bailly Adds 14 to Partnership the door—an understanding of the transition all the customer relationships, know-how, process will go a long way to making this technical expertise, and the brand is you, how event smooth and amicable. do we sell this?” Who Will Buy My Business? Of course, Mr. Doe’s story doesn’t end there. One of the first questions you’ll ask when you It’s really just the beginning. While Mr. Doe transition your business is who your potential would like to go back in time and do some buyers are, and it may not be as easy as things differently, it may not be too late for you think. him to prepare his company for sale. He can start by grooming management, transferring It happens all the time. Mr. Doe starts a widget relationships and establishing processes. What business and pours his heart and soul into happens next is a discussion on how to find the it. After years of developing relationships, right buyer so Mr. Doe can achieve his goals— assembling a workforce, creating a brand and both for his retirement and his business. Most achieving success, he’s ready to transition buyers can be classified as either strategic or to retirement. In fact, he wants to move to financial buyers. Florida in the next six months. Mr. Doe consults a transaction advisor, who has a fairly Strategic buyers typically buy 100 percent standard list of questions to learn more about of your business and assume all responsibility Mr. Doe and his situation. for it. Examples include family members, employees, competitors, suppliers or “Do you have any family members interested in even customers. the business?” the transaction advisor asks. Exit Strategy — continues on page 3 2 | POSSIBILITIES Managing Tax Identity Theft: How to Recognize it and Protect Yourself The volume of federal tax-related identity theft is growing at an alarming rate. The IRS has confirmed that hundreds of thousands of taxpayer accounts were compromised in last year’s data breach of the “Get Transcript” application that allowed people to check their tax history, and more could be discovered. Tax-related identity theft occurs when an individual intentionally uses the personal identifying information of another individual, typically the Social Security number, to file a falsified tax return with the intention of obtaining an unauthorized refund. Thieves may also use a stolen EIN from a business to create false W-2 Forms to support refund fraud schemes. To try and limit the filing of fraudulent returns, the IRS developed The FTC website also explains: the Identity Protection PIN (IP PIN) program. Prior victims of • How to close new accounts opened in your name identity theft received a unique IP PIN from the IRS to use when • Remove bogus charges from your accounts filing their federal tax returns. However, the IRS confirmed earlier • Correct your credit report this year that identity thieves have been filing fraudulent returns • Place an extended freeze alert or credit freeze with the using these special taxpayers’ IP PINs during the 2015 filing season, credit bureaus meaning the IP PIN program, which was thought to have been a • Report a misused Social Security number safeguarded system, has been compromised as well. We expect there will be many instances of rejected e-filed returns due to identity • Stop debt collectors from trying to collect debts you don’t owe theft utilizing information obtained through the IP PIN program. • Replace government-issued IDs Warning Signs of Tax-Related Identity Theft • Resolve child identity theft You may be unaware you are a victim of identity theft until • Resolve medical identity theft you or your tax preparer attempt to e-file a tax return and it is • Clear your name of criminal charges rejected. Or, you may realize you have been victimized when you receive an IRS notice regarding: But, even with the assistance these resources can provide, the process of clearing up tax identity theft issues can be cumbersome • More than one tax return filed using your Social Security number and time-consuming, especially when dealing with the IRS. • A balance due, refund offset, or a collection action has been Protect yourself by becoming more vigilant and protective of taken for a year in which you did not file a tax return your digital identity by using passwords and changing them • IRS records indicate you received wages from an unknown often. Learn the security procedures of the online businesses employer you frequent. And, if you are using online banking, debit cards Additionally, a business entity may receive an IRS letter about or other financial services, don’t assume they are immune to an amended tax return, fictitious employees, or about a defunct, identity thief. Check financial accounts regularly for unknown closed or dormant business. activity. Being proactive in protecting your digital footprint and becoming familiar with the resources provided in this article Where to Seek Help may not prevent you from becoming a victim of tax identity Fortunately, particularly as the methods used to gain your tax theft because you can’t totally control it, but it will decrease identity for fraudulent tax purposes get more sophisticated, the opportunities of those who would steal your identity. n several excellent resources are available to help you combat identity theft issues. CONTACT The Federal Trade Commission’s (FTC) website, www.identitytheft.gov, has a comprehensive set of instructions on what to do right away if you are victimized, including placing a Mike Mondelli fraud alert with the credit reporting bureaus (Experian, Equifax, National Tax Senior Associate TransUnion), getting a free annual credit report, reporting identity 612.253.6754 theft to the FTC and filing a report with your local [email protected] police department. Businesses & Individuals | 3 Exit Strategy — continued from page 1 The benefits of a strategic buyer can include: • The potential to combine the business with another, creating a more powerful entity and gaining entry to new markets. • Capitalizing on the synergy that comes with a buyer who has intimate knowledge of your business. • Liquidation of 100 percent ownership. Concerns with a strategic buyer may include cultural differences that make integration difficult, or sharing information with competitors who may or may not buy your business. Financial buyers are groups such as a private equity firms, venture capital firms, hedge funds or family offices. Selling to Step Three – Letter of Intent one of these groups may actually mean you end up selling your Once the buyer has a cohesive picture of your business, they can business twice. Many of these buyers invest in businesses they hone in on a more precise value. This is laid out in the Letter of feel they can grow and increase marketability for a future sale. Intent, which covers the purchase price, the structure of the deal, They may buy 75-80 percent of your business’s equity now and whether it is an asset or stock sale, the escrow parameters, the sell the business five to seven years later. You will be paid out working capital allowance, and other details. While this is a very your remaining equity then, and in some cases this 15-20 percent intentional document, it is non-binding. will be the same or more than the original sale of 75-80 percent Final Step – Purchase Agreement of the company. After negotiation, review of legal terms and final due diligence, a Concerns with a financial buyer are the buyer will often require purchase agreement is created. This binding agreement is agreed majority ownership, so the management team and the buyer upon by both parties and will be a road map for how things play group should share the same goals and have good chemistry. out once the deal is closed. How Do I Sell My Business? It’s Your Call Selling your business is more than a tour of the office, a Remember, it’s your business—you’ve put a lot of hard work into handshake and exchanging a check. It can be complicated, it.
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