Before becoming engaged in a disposal or investment of a major asset, businesses will need to structure their taxes strategically. Strategic structuring of taxes allows for businesses to achieve the objectives and goals that they have decided on while decreasing their risk of liability. When structuring their taxes before a disposal or investment in an asset, businesses can use the help of an experienced accountant to ensure that conditions are ideal for them to conduct operations and set their sights on a profitable future.
The Sacramento tax structuring of disposal and investment accountants from Cook CPA Group are available to assist businesses with tax structuring as they go through a disposal or investment. The accountants from Cook CPA Group are proud to offer services that allow businesses to focus on their long-term financial goals.
Why Your Business Needs to Structure Taxes Strategically
Taking time to properly structure taxes while going through a disposal or investment is important for the long-term financial health of a business. Tax structuring during a disposal or investment entails an array of services: tax-efficient group reorganization, value chain transformation, analyses of the internal implications of tax planning initiatives, and more.
When an accountant is helping a business with strategic planning during a disposal or investment, they will also perform strategic tax planning that assesses the long-term trajectory of the company. Strategic tax planning during a disposal or investment entails lowering tax rates following the disposal or investment, choosing when exactly taxes will be paid, deciding on the credits and deductions that the business can plan on claiming, and addressing the Alternative Minimum Tax.
If businesses want to maximize their chances of experiencing long-term financial health, it is important for them to take an interest in the structuring of their taxes while they are gaining or losing assets. With the help on an experienced accountant, businesses can implement comprehensive tax structures that can allow them to fulfill their objectives and avoid the risk of liabilities.
How Disposal and Investment Transactions Work
When a business disposes of an investment, it is known as a disposal. Disposals occur when businesses sell stock investments, make a major merger or acquisition, make major donations to charities, or sell major assets such as property or art. Essentially, a disposal is any type of loss of an investment.
When a disposal occurs, accountants can help businesses structure their taxes around it by taking the needs of all parties into account, which will optimize tax outcomes following the disposal. Accountants can also defer net tax costs to be compliant with tax laws and perform a close review of the documents involved in the transaction. Accountants may also prepare tax elections and purchase allocations and advise businesses on the most profitable way to deal with the transaction’s cost.
The role of an accountant during a disposal of an asset or investment is to assess the buyer’s financial state and to make sure that the transaction complies with the tax laws of the jurisdiction in which the transaction is taking place. They will also alert the business to the steps that must happen in the aftermath of the sale and how to distribute equity and debt capital.
It is important for businesses to note that the tax structure of their business will have an impact on the price of their disposal transaction, as well as the amount that they can expect to receive post-taxes. The buyer and the seller will have to agree on the value of the individual assets involved in a disposal transaction, which can be done with the help of an accountant.
The Two Types of Purchases: Asset Purchases and Stock Purchases
When disposal and investment transactions take place, they are usually structured in one of two ways. There are both advantages and disadvantages to both asset purchases and stock purchases that businesses should be aware of as they consider their disposal and investment transactions. Businesses should choose the type of purchase that is most aligned with the financial goals of their business.
The first is known as an asset purchase. During this type of purchase, buyers purchase some or all of a seller’s assets. The individual assets are grouped to make the transaction. During an asset purchase, the buyer usually only purchases certain assets associated with the business. This type of purchase allows for buyers to reap more tax advantages. There is also less need for due diligence. However, asset purchases depend heavily on contracts and are more costly than stock sales.
The other type of purchase is known as a stock purchase. During this type of purchase, a buyer will purchase a seller’s ownership in a business. The ownership of the business is then transferred to the seller, but the seller will maintain the assets and liabilities of the asset. Stock sales are advantageous for buyers because they are easier to understand and navigate than asset sales. However, they carry less capacity for tax benefits.
Contact our Tax Structuring of Disposal and Investment Accountants
The Sacramento tax structuring of disposal and investment accountants that work with Cook CPA Group are available to assist businesses with tax structuring as they gain or lose major assets.