From the buyer`s point of view, they would prefer higher values for depreciable assets rather than overvalued assets. In fact, the depreciable assets will provide the purchaser with tax deductions on depreciation expenses over the next few years. On the other hand, there is no amortization for goodwill, since it is an investment value. If the sales contract does not distribute the total purchase price among the acquired assets, the purchaser can make this allocation himself (subject to the values assigned to the various assets that are economically realistic). Conversely, if you sell your practice, you want to spread the sale price as much as possible on goodwill and not on equipment. Much of your equipment was probably fully depreciated at the time of sale for tax reasons. As a result, any amount allocated to equipment greater than the book value of this equipment is taxed at a regular income rate, perhaps up to 39.6%. On the other hand, the value is taxed at a much lower rate of return of 15 to 20%. This is not a tax advice for a given situation. It is recommended that you obtain competent professional tax advice when dealing with a transaction to buy or sell a business. Non-share sales may exclude certain operating assets: as in so many aspects of tax legislation, the rules are complex and require close collaboration between the tax advisors of buyers and sellers to establish a purchase price allocation that optimizes the tax results for each of them.
With careful planning, both the buyer and seller can be “tax winners.” In addition, many buyers want sellers to allocate a portion of the purchase price into the non-compete agreement to ensure that non-competition obligations are mandatory and enforceable. However, if you sell your practice, you want to distribute as little as possible on the non-compete agreement, as it is taxable as normal income. In addition, purchased devices can often be deducted in accordance with Section 179 of the internal income code (up to a certain amount in dollars), resulting in immediate tax savings. To the extent that the equipment is not eligible under Section 179, it can still be depreciated for a period of only five to seven years, while the value must be depreciated over a period of fifteen years. This allows the buyer to see more immediate tax savings. A commercial contract for the purchase of a business is a legally binding agreement between the buyer and the seller. Although the contract may be oral, a written contract is recommended because it provides proof of the agreement, prevents misunderstandings, prevents parties from later amending the terms and brings the parties to a final agreement. Business contracts should always be developed by lawyers.
The awarding of an asset purchase price can be extremely complex, even for the most experienced business owners. If you. B assign the purchase price, you have to take into account the rules introduced by the IRS. The value of a company`s intangible assets is also an important factor to consider. In the example above, the seller could accept a total price of $480,000, but allocate US$350,000 to the value, $100,000 for equipment and $30,000 for non-competition.