Selling my Business

[Possi]

I will be selling my business at the end of tax season. 

I would like to un-incorporate (S-Corp) and stop payroll by the end of June. Is that wise? I mean, is there any reason I should NOT do that? 

(I'll continue as a Sole Prop until I find a buyer, then I'll be employed by that business until I retire. That's the plan in my head.)

 

 

[Elrod]

Sounds like a good plan, Possi.   God luck with all your future endeavors.

[TAXMAN]

I am thinking same. Can you say how you come up with a price. Do not want to know # just some kinda idea.

[Catherine]

22 minutes ago, TAXMAN said:

I am thinking same. Can you say how you come up with a price. Do not want to know # just some kinda idea.

Most places sell for 90-110% of one year's gross receipts, frequently paid as 1/3 of receipts from transferred clients per year for three years (plus additional if you work for the new firm, hourly or whatever).  The idea being that clients are more likely to stay with the new firm if you are seen to still be involved, and you get paid more for clients that stay.

[Possi]

59 minutes ago, Catherine said:

Most places sell for 90-110% of one year's gross receipts, frequently paid as 1/3 of receipts from transferred clients per year for three years (plus additional if you work for the new firm, hourly or whatever).  The idea being that clients are more likely to stay with the new firm if you are seen to still be involved, and you get paid more for clients that stay.

So, will it be considered an installment sale? I'm walking into this blind. 

[jasdlm]

I am doing this right now (on the buyer side) in much the manner Catherine states.  Are you selling anything other than your client list?  (Building, equipment, software, etc.?)

[Patrick Michael]

I purchased another practice this year, paying 35% of returning clients fees each year for three years.  I estimate I got about 75% of their clients come over but expect that number to drop next year. The old preparer agreed to let clients drop off and pick up their paperwork at her home (they are about 30 minutes away from my office) but will not being so next year.  I'm also planning on "firing" some of their PIA clients next year, not worth the time and stress.

[Randall]

I'm probably a few years away.  How are you looking for a buyer?  I receive the mailings about this.  But I'm not looking for a bundle.  And I know my fees have been much lower than most people.  I was thinking of someone close, not big.  Maybe someone going out on their own.

[Lee B]

If you are a few years away and you want to get a decent price for your practice then you should consider raising your fees over the next few years.

[Catherine]

3 hours ago, Possi said:

So, will it be considered an installment sale? I'm walking into this blind. 

Yes, it's an installment sale.

[Possi]

4 hours ago, jasdlm said:

I am doing this right now (on the buyer side) in much the manner Catherine states.  Are you selling anything other than your client list?  (Building, equipment, software, etc.?)

No equipment or building involved. Just the client list.

 

3 hours ago, Randall said:

I'm probably a few years away.  How are you looking for a buyer?  I receive the mailings about this.  But I'm not looking for a bundle.  And I know my fees have been much lower than most people.  I was thinking of someone close, not big.  Maybe someone going out on their own.

I put it on my local EA group and had several calls. I'll address other groups after tax season is over. I want to be picky and try to find a good match so my clients will be happy about it. I've been working out of my home for over 20 years and have TOO MANY returns to be doing this anymore. I did talk to a woman who has a family run business, full office and family staff, and it might be a good fit. We will have a meeting after the season. 

[michaelmars]

I would not cancel payroll so fast.  1st if the buyer doesn't have payroll then he will pay you as a 1099 and you might want that to go to your S corp for liability and pension purposes.  [among others]  Also after the purchase, if he renegs on payments then you get the practice back and are back in business till you find a new buyer.