A new administration is in Washington D.C., and corporate tax reforms are likely to come.

While that’s good news for businesses hoping to reinvest revenue in growth and expansion, there is another benefit for owners of small and medium-sized companies who are looking for an exit strategy: tax reductions are likely to spark a steady rise in mergers and acquisitions.

Potential corporate tax reforms are good news for your business — and they may influence your personal financial long-term plans as well. To make the most of the opportunity, get started early.
Enlarge

Potential corporate tax reforms are good news for your business — and they may… more

GETTY IMAGES (ERHUI1979)

Then-President-elect Donald Trump proposed a dramatic reduction in the corporate income tax rate, from 35 percent to 15 percent, along with an initiative to allow corporations to repatriate profits held offshore at a one-time tax rate of 10 percent. These plans will certainly evolve through the legislative process, but there is widespread belief that the coming tax reductions will likely be substantial.

In this future tax environment, companies will have more cash on hand, and more incentive to pursue rapid income-building tactics. So, if you are a small and mid-sized business owner who has been considering a sale or merger, now is the time to take the initiative, map your strategy, and prepare for new, favorable opportunities. By working with key advisors to complete the tax planning and business valuation steps necessary for a successful transaction, you will be at a significant advantage in the coming year.

Here are several key steps you should consider:

Business valuation
The first step in preparing for a sale or merger is to obtain an up-to-date business valuation. A business valuation expert — usually a CPA who is a certified valuation analyst (CVA) — will analyze all of the elements of the value equation, including your company’s sales, earnings, performance, personnel, net book value, and fair market replacement value, as well as overall industry and market outlooks.

Also included in the examination will be a review of intangible assets such as the relative worth of your organization’s brand and reputation. In the end, a minimum to maximum value range will be determined.

Getting a valuation now will streamline future negotiations, and will ensure maximum tax advantages and compliance in the event that assets are transferred to family members.