Tips from a CPA on Buying or Selling a Business

Russel T. Glazer

CPA/ABV, MCBA, ABAR, ASA, CVA, MBA

In this interview exclusive, Russell Glazer, CPA, discusses buy-sell agreements, buying out an owner, working with a CPA and hiring an attorney. Mr. Glazer is a Partner with Gettry Marcus CPA, P.C. and is a member of the firm’s Business Valuation & Litigation Services Group. Mr. Glazer is a Certified Public Accountant, Certified Valuation Analyst, Master Certified Business Appraiser, is accredited in Business Valuation and is an Accredited Senior Appraiser.

Key Points from our Conversation

  • While the company’s CPA is a knowledgable financial professional, only people with the appropriate training, education and experience in valuing a closely held business should be valuing the company.
  • Selling a business is both a legal and financial transaction, and the process should involve the appropriate professionals.
  • The tax impact of certain aspects of the transaction may be signficant, and will likely have an impact on how the legal documents are drafted.
  • Even in circumstances where the accountant is hired directly by the attorney, confidentiality cannot be assured.
  • Anytime there is more than one owner, a business should have a buy-sell agreement that clearly spells out the “trigger events” that will require one party to buy out another.

Interview

Tina: How involved should my CPA be in the process of having my business appraised? Is it necessary to let them know I am appraising my business?

Russell: While the company’s CPA is a knowledgable financial professional, only people with the appropriate training, education and experience in valuing a closely held business should be valuing the company.  The CPA can be very helpful to the appraiser in gathering and interpreting the required information. 

 

Tina: Do I need an attorney and an accountant to sell my business? If so, what role should they play?

Russell: Selling a business is both a legal and financial transaction, and the process should involve the appropriate professionals.  The accountant can be very helpful during the due dilignece stage, interfacing with the buyer’s professionals in answering questions and facilitating the process.  Also, the final purchase price will often be determined after certain adjustments for working capital and other items.  The accountant can be instrumental in making sure this process is done properly.  The attorney will be critical in making sure the documents signed by the parties say what the parties intend, and protecting her client’s interest.

Selling a business is both a legal and financial transaction, and the process should involve the appropriate professionals.

Tina: How can my attorney and accountant work together to sell my business?

Russell:  The tax impact of certain aspects of the transaction may be signficant, and will likely have an impact on how the legal documents are drafted.  These two professionals should be working together for the client.

 

Tina: Can accountants offer the same level of confidentiality in an attorney-client relationship?

Russell:  No.  Even in circumstances where the accountant is hired direclty by the attorney, confidentiality cannot be assured.  Moreover, before disclosing any confidential information, for any reason, the accountant must be sure not be violating any relevant professional standards.

 

Tina: What's the best way to value a company when an owner is being bought out?

Russell: The shareholders’ agreement, if properly drafted at the outset, should specify many apects of the potential buyout, including the standard of value, the necessary qualifications of the business appraiser, payment terms, etc.

 

Tina: When does a business need a buy-sell agreement?

Russell:  Anytime there is more than one owner, a business should have a buy-sell agreement that clearly spells out the “trigger events” that will require one party to buy out another.  The agreement should be written at the beginning of the business relationship, when neither party knows if he will be the buyer or the seller, and it should be reviewed periodically to make sure that changing circumstances haven’t created a need to modify some of the provisions.

Anytime there is more than one owner, a business should have a buy-sell agreement that clearly spells out the “trigger events” that will require one party to buy out another.

Tina: Should I be thinking about selling stock or selling assets?

Russell:  There are many financial, tax and legal considerations in determining whether the transaction should be a stock sale or an asset sale.  This is another area where the accountant and the  attorney can work together in advising the business owner.

 
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