Selling Your Small Business in A Post COVID Environment

Selling Your Small Business in A Post COVID Environment

 

COVID rocked the small business community, resulting in some businesses thriving and some struggling.  Regardless of whether you grew or declined during the pandemic, as a business owner you likely considered a PPP Loan.  If you more than considered applying and got a check, that was just the start of the journey.

Even though Nevada does not have a Corporate Income Tax, there are tax implications for PPP loans.  In Nevada, Forgiven PPP loans are treated as taxable gross revenue. Because the PPP loan is new, tax preparers have been waiting for guidance, so your tax preparation will likely be delayed.

If you are doing business in multiple states, especially in California, you will be dealing with different rules in different jurisdictions. It is vital to rely on your tax professional to ensure you remain in compliance depending on the state.

Many business owners are ready to sell after experiencing this period of unprecedented uncertainty in our history. If you are wanting to sell your business in this post  COVID environment, you need to be prepared for the following:

Finances

Ensure your books and financial records are clean for 2020. You may experience better success if your business can show a rebound in comparison to 2019 or better revenue for Q1 of 2021

Buyer Inquiries

Be prepared to answer questions from buyers regarding your PPP loan.

  • What did you use the funds for?
  • Have the loans been forgiven?
  • If they have not been forgiven, have you filed?
  • Were you acting on the advice of a CPA or did you complete the process yourself?

Possible Delays

Due to COVID, many buyers are feeling a higher level of risk and uncertainty in purchasing a business, which could lead to:

  • Lower offers
  • Longer escrows
  • Taxes are likely to be delayed in filing, therefore payment and tax clearance may take longer than traditionally

 

As a seller, there are steps that we recommend to assist in mitigating the risks and make your business more valuable/saleable.

Get Clean

If you are not working with a  tax professional, preferably a CPA, you need one now more than ever.  This is not a time to rely on your bookkeeper or do it yourself (unless you are a CPA of course).

Seek Forgiveness

As soon as you are able to seek forgiveness for your PPP loan(s), the sooner it will be off your books and the sooner that you can move on.  If your loan is not forgiven, it will affect your relationship with your lenders, as well as your taxes.  Even in an asset sale, where the buyer is not taking on your legal entity, this can greatly affect your success if you are trying to sell.

Make Amends

Can’t get forgiveness on the loan?  This can happen if the government does not agree with how you allocated the PPP funds.  If you are unable to get forgiveness, establish a payment plan in order to make amends with the government.  Lawsuits and tax liens are deal killers when you are trying to sell your business.

The Liberty Group of Nevada is knowledgeable, experienced and understands the challenging process of selling a business. We are equipped to assist owners in navigating each step of the transaction, resulting in successful transactions.  We provide high-quality service and guidance through the process to make the selling of your business as simple, profitable, and painless as possible.  http://thelibertygroupofnevada.com/contact-us/.







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