Role of a CPA in Buying or Selling your Business

Scott R. Miegel

CPA, CBA, CrFA

In this interview, we talk with Scott Miegel about the reasons why a business owner would hire a CPA, the role a CPA should play in buying or selling a business, and more. Mr. Miegel is a Certified Public Accountant licensed in the State of Florida, a Certified Business Appraiser with the Institute of Business Appraisers, and a Certified Forensic Accountant with the American College of Forensic Examiners.

Key Points from our Conversation

  • Your CPA can help you understand and highlight the value drivers of your business.
  • The biggest thing I find is clients believe a good CPA is trustworthy and logical.
  • Business valuation is a specialty that requires years of training to be able to identify what makes a business tick (or not).
  • Poor records or no records immediately cost you credibility and value.

Interview

Tina: Do I need a CPA to help with due diligence if I am buying a business?

Scott: Absolutely! A CPA is trained to look for the specific characteristics that give value to the business, the intangibles that are transferable to you as the buyer, and the red flags (the warts of the business the seller is likely trying to cover up).

 

Tina: What role does my CPA play if I buy a business? Should I hire a CPA right away or can I wait until after the closing?

Scott: Your CPA will provide guidance on how to build value in your business and realize the most from your efforts.

 

Tina: How would a business owner get the most out of working with a CPA?

Scott: Your CPA can help you understand and highlight the value drivers of your business. These are the specific attributes that are transferable to a buyer and are what make your business attractive. Further, a trained CPA can help you prepare the business by pointing out the negative characteristics of your business and how to minimize these in a sale.

A CPA is trained to look for the specific characteristics that give value to the business, the intangibles that are transferable to you as the buyer, and the red flags.

Tina: What role does a CPA provide business owners, besides financial advice?

Scott: The biggest thing I find is clients believe a good CPA is trustworthy and logical. Often, clients have nobody else to turn to when they wish to discuss subjects other than financial, so they turn to their CPA. 

 

Tina: Should an entrepreneur hire a CPA with any type of specialty or can any CPA help with the transaction?

Scott: Business valuation is a specialty that requires years of training to be able to identify what makes a business tick (or not). A CPA not trained in business valuations may often lack the knowledge and expertise to properly value your business, resulting in you selling for too little or buying for too much!

 

Tina: Is it more expensive to hire a CPA who is specialized? If so, are there parts of buying/selling a business that can be done by a non-specialized CPA, to save on costs?

Scott: Often yes, but the extra cost is minor compared to the benefit received. The most common analogy when thinking about whether to hire a CPA who is specialized is this: “Would you pay a penny for a dollar?” You are contemplating perhaps the largest single transaction of your life. The worst possible thing to do is be concerned about a few bucks up front!

The worst possible thing to do is be concerned about a few bucks up front!

Tina: The buyer is asking to see my tax returns and bank statements before making an offer. Should I release this information?

Scott: Absolutely (redacted for SSN info of course). This is the basic proof for your selling claims. If you are unwilling to show the buyer these, you immediately lose credibility. Be sure they tie out to financial statements. Poor records or no records immediately cost you credibility and value.

 

Tina: I am buying a business. Is there a tax benefit to structuring the sale as an asset sale?

Scott: If you can sell it as a stock sale, you likely will receive more favorable capital gains treatment.    

         

Tina: Does a buyer normally assume my liabilities if I sell my business?

Scott: Yes- if they purchased the stock they likely would. However, if they only purchase the businesses assets, then they do not assume the sellers liabilities.