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Blue Sky

TODAY'S BUSINESS OWNER®
Volume 11: Issue 7
July 2010
Knowledge is Power
The Advantages of Self-Educating whether Buying or Selling 
Business OwnersAs any VR business intermediary will tell you, buying a business gives you a greater chance of success than starting one from scratch. 80% of new businesses fail in the first three years due to factors such as poor location, low product quality, under-capitalization and lack of management skills. Buying an established business will provide you with a stable location and an existing customer base and product.
Financing the Business Sale
Understanding the Engagement from the Buyer and Seller 
Financing BusinessWhether you're looking to buy or sell a business, the biggest challenge comes from how the financing is going to take place. Many factors influence the selection of the right avenue for both the buyer and seller. Regardless of the side you're on, you must be aware of the options available and methods employed when financing a business. Both sides have to know how this part will be accomplished in order to have a successful transaction.
Franchisor of the Month
The Franchise Showcase is designed to support individual franchises and existing small business owners by making franchise ownership more affordable.
 
Maid to Sparkle
Maid to SparkleA complete turn-key residential cleaning service system, Maid To Sparkle trains the franchisee owner to grow their business, while hiring employees to clean their customers home. This is a unique and lucrative ground-floor opportunity, where you have the ability to open up a Maid to Sparkle location with minimal costs but a high return on investment. While a ground-floor opportunity is the initial phase of a new business opportunity; unlike other established franchises, Maid to Sparkle offers more potential for expansion and success.  
 
Obtaining Venture Capital
Using a Different Route to Finance Your Business 
Venture CapitalVenture capital is an alternative to financing a business you want to buy. Not many aspiring entrepreneurs go down this route, opting to apply for SBA loans or other types of financing. The process of selecting, pitching and negotiating with a venture capitalist can be an intimidating one.
 
Most aspiring business owners are not accustomed to the world of high-finance, regardless of whether they have already owned a business or not at some point in their career. However, there are simple steps to help you achieve obtaining your financial backing if you do it correctly.
THE VR BLOGGER 
Following the Strategy when Building Your Business' Value
It's funny how the strategic plans for most direct competitors of businesses are identical in most cases. Everyone determines correctly which client sectors are growing, services rising in demand and which dimensions of competition clients and customers demand - client service or innovation.
Highlighted Transactions
And New Engagements 
 Blue Sky

SUCCESSFUL TRANSACTIONS 

Industrial Supply Company
VR Mergers & Acquisitions of Wilmington, NC, a leader in the sale of privately-held companies, recently facilitated the strategic sale of an industrial supply company.
 
The transaction, which closed this month was handled by Don Adkins, a business intermediary specialist.  
 
VR is celebrating over 30 years as the world's only network of full-time professional business intermediaries.
 
VR has sold more business in the world than anyone®.
 
 

Blue Sky

 SUCCESSFUL TRANSACTIONS 
 
Vietemese Restaurant
VR Mergers & Acquisitions, located in Artesia, CA, the leading business intermediary firm in the area, has recently facilitated the strategic sale of a Vietemese restaurant.
 
Tonny Key, a VR Intermediary, represented the seller throughout the transaction that was completed in June 2010.
 
VR is celebrating over 30 years as the world's only network of full-time professional business intermediaries that addresses the needs of small and mid-sized businesses.
 
VR has sold more business in the world than anyone®.
 
 

Blue Sky

NEW ENGAGEMENTS 
 
Manufacturing and Installation Company
VR Mergers & Acquisitions located in Indianapolis, Indiana, announced today it has been engaged by a manfacturing and installation company to assist in facilitating the sale of their business.
 
The company offers a start to finish approach to its industry including the design, manufacturing and installation processes. Go to VR Web Site for further details.
 
VR is celebrating over 30 years as the world's only network of full-time professional business intermediaries that addresses the needs of small and mid-sized businesses.
 
VR has sold more business in the world than anyone®.
 
 
Blue Sky 

NEW ENGAGEMENTS 

Medispa 
VR Business Sales in Milwaukee, Wisconsin, specializing in the sales and acquisitions of small and mid-sized businesses, has announced that the company has been retained to facilitate the sale of a medispa.
 
This beautiful medispa specializes in a wide range of skin and laser treatments and is ideally located in the metro Milwaukee area. Click here for further details and contact information. 
 
Celebrating over 30 years as the world's only network of full-time professional intermediaries, VR addresses the needs of small and mid-sized businesses.
 
VR has sold more business in the world than anyone®.

 
Blue Sky 

ADDITIONAL ENGAGEMENTS 
 
 

CLICK HERE TO ACCESS ALL VR BUSINESSES-FOR-SALE
Now is a Great Time to Become Part of VR!
Blue SkyWith baby boomers selling their businesses to retire and frustrated corporate executives and managers looking to buy a business to replace their corporate job, NOW is a great time to become part of VR!
 
 
 
VR Office
Panama City, Panama
VR Global Headquarters
One East Broward Boulevard
Suite 1500
Fort Lauderdale, FL 33301
Phone (954) 565-1555; Fax (954) 565-6855 
http://www.vrbb.com
 
Copyright © VR 2009-2010
In This Issue
Knowledge is Power
Financing the Business Sale
Franchisor of the Month
Obtaining Venture Capital
THE VR BLOGGER
Ask a VR Intermediary?
Quick Links
Ask a VR Intermediary?
How Do You Negotiate the Price of a Business?
 
Noah Foster,
Columbus, OH
Dear Noah,
 
Coming to terms on a price is usually the pinnacle of negotiation in any asset purchase. It is important for both the buyer and seller to be aware the price must be allocated between classes.
 
Reporting the Price of the Assets
The purchase price of assets must be reported on the Internal Revenue Service Form number 8594. The form is required "if goodwill or going concern value attaches, or could attach to such assets, and if the buyer's basis in the assets is determined only by the amount paid for the assets."
This form is prepared and attached to the appropriate income tax return (1040, 1041, 1065, 1120 or 1120S) in the year of the sale.
 
The true purpose of the form is to allow the Internal Revenue Service the ability to determine if both the buyer and seller treated the sale consistently. This form forces both parties to agree on the allocation of price between various classes.
 
Defining the Business Asset Classes
These are easily defined in the instructions. The area for negotiation is typically between Class III, IV and V assets. Class IV and V assets are basically the same. These assets include Section 197 Intangibles such as goodwill, going concern value, patents, copyrights, licenses, trademarks, franchises and covenants not to compete.
 
Class III assets are defined as tangible assets that are not Class I, II, IV or V assets. These assets typically include furniture, fixtures, land, buildings, equipment and inventory. These assets should be allocated according to their fair market value as of the purchase date. The remaining purchase price amount, if any, in excess of the fair market value of Class III assets will typically be allocated to Class IV or V.
 
The area for negotiation is important to understand because the tax treatment of these assets will vary from buyer to seller, including tax rates for the buyer and the ability for the seller to depreciate or amortize the assets over different lives.
 
Allocating the Dollar Amount
It is easiest to allocate a dollar amount to Class III assets first. The allocation should be made part of the sales contract so there will be no disputes when the actual form is filed. The form specifically asks if both parties agreed to the allocation of the sales price. The form also asks for both buyer's and seller's tax identification number. The form also goes as far as to request details of the sale such as covenants not to compete, employment contracts and lease arrangements.
 
It is important for the buyer and seller to be aware of this form, its requirements and the various ramifications to the tax treatment of the sale. The buyer and seller should consult the appropriate professional before finalizing the contract or they could end up with a tax problem that could have been avoided. This part of the negotiation should not be a deal breaker, but a well-informed buyer and seller will result in satisfied parties
.

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