EP 69: Tax Issues to be Aware of When Selling Your Business, with Roman Basi, The Center for Financial, Legal, and Tax Planning, Inc.

Ed Mysogland  0:36  
On today's podcast, I got a chance to interview Roman Basie and Roman is the president of the Center for Financial legal and tax planning. And I've I've heard him speak Oh, it's got to be at least five times over my career at different m&a conferences, and he is one of the most sought after sessions. Anytime you go to visit or anytime you go to see him the the room is filled and he doesn't disappoint on this episode either. It will be hard for you it will be hard pressed for any business owner not to have received some value from this. So, Roman is like I said they they are that their practice is you know ICMS dealmaking you know, they they help all of all the deal makers and make better deals for their clients. And he like I said he is a he is a sought after speaker he goes across the country back and forth talking about how to maximize value

you know his core competencies are business valuation succession planning, tax planning, and buying and selling a business and and like I said, he is just he was so generous with with his time as well as all the rapid fire

answers to my questions and I am not a tax guy but boy, he sure educated me so I hope you enjoy my conversation with Roman Basie.

On today's show, I'm excited to welcome Brian bass, sea bass, sea bass and Associates. I should point out today that this is not legal or tax or accounting advice. Romans been kind enough to come on on the on the show he is not your he's not your accountant or attorney yet. So seek your own counsel regarding any kind of advice we may give. So Roman, welcome to the show. 

Roman Basi  2:50  
Thanks, Ed. Thanks for having me. 

Ed Mysogland  2:51  
Well, like I was saying before we started out I'm a I'm a superfan I never, whenever I go to these conventions, I don't get the opportunity to, to,

you know, ask the questions that, that I that I've been meaning to, you know, I take my notes, but everybody seems to lunge forward. And I don't want to say rock star status. But in the, in the dealmaking world, you have one heck of a reputation on helping sellers really maximize the value or the proceeds of their sales. So, so I guess where I'd like to start is how did how did you it? See, it seems as though you do have a little bit of a niche with the sell side advisors. He talked a little bit about how you got into that? We do and that's an interesting question. I don't get that question very often. But you know, my father started our company back in the late 80s, early 90s. And he was a professor at Southern Illinois University and Penn State University, and I joined him in 1997. And he started doing a lot of research and writing about small businesses in the United States. And companies started to call him help wanting advice and information on what to do when they sold or when they created a succession plan, or when they just didn't know what to do. And we have a niche because like my father, I'm an attorney and a CPA. Now he also has a PhD in economics. However, I am also a real estate broker, and a title insurance agent. So our niche comes in because when we represent a small businesses in the United States, and I say small business, but that's defined as anything less than $50 million in assets or less. So the majority of privately held companies or small privately held companies. And when we get involved in these they see us as Oh, you are our legal counsel or accounting counsel or financial Council, our real estate Council, and that's what makes up a company besides human resources and employees and insurance and things like that. So we've kind of are a one stop

Unknown Speaker  5:00  
shot with the exception of the brokering or the m&a guidance piece where we look to gentleman like you, where that is where most of our referral base comes from, is brokers and advisors like yourself, but outside of that it's a one stop shop. And that's what created our niche over all these years. Well, and it's funny, and it truly is a niche, because you're a fixture at you. It's funny that the the the conferences that I attend, you always have either the houses fall for your session,

Roman Basi  5:36  
or it's full, and there's some folks standing around. And, and it really is it's a I've learned an awful lot about about things that even though I've been in the business for 30 years, I you, you've shared a number of things that have helped a lot of our clients. So let me let me let me start off with everybody, every business owner knows that there's a there's you can sell business with the assets, or you can sell the stock. Every seller wants to sell the stock. And we know that so I guess from a high level, can you can you kind of give the the lead lamp or stock and asset sales? Yeah, I mean, from a very high level speaking, right, a seller is generally going to say to me, to you, Well, I heard it's best to sell our stock, because we're going to get capital gain treatment on the sale of our stock, which capital gains rates are traditionally lower than your ordinary income tax rates and asset sale, they're going to tell us well, I heard that's going to be mostly ordinary income tax to me, if I sell the assets of my business, and those are the two, those are generally speaking, the two ways to sell a business, are we selling the assets on the balance sheet and nothing else? Or are we selling the stock of the company, which is selling everything, everything that's on the balance sheet, and everything that's not on the balance sheet is a stock sale. And those are the two high level ways to look at those. There are hybrid methods that are becoming more used now, considerably more used now over the last couple of years, where you combine the elements of an asset sale and a stock sale, believe it or not, and for a lot of sellers listening today, they may be saying what, there's a way to do both. And there is a way to do both. And there's reasons sometimes to do both. Well, let's just dive in. I know I had it on my list to talk about let's let's just go and talk the hybrids. I mean, you got the momentum. Yeah, so one of the hybrids that we see a lot of is with an S corporation with a flow through entity. And it's the section that we have is three 338 transaction 330 Day extended transaction. And what that is, in general, is selling the stock of a company for legal purposes, and selling the assets of the company for tax purposes. Now, why do we need that to happen in some cases, because the buyer is going to essentially get the stock in the business. So they may be getting certain licenses, or certain contracts, or certain royalty agreements that are very, very difficult to transfer. I'm gonna give you a prime example of one that I did, and it was a white water rafting company in Colorado. Now imagine a whitewater rafting company, they've got these large rafts, hundreds of them, each one of them has a federal license on them that they can be on that federal waterway. Do you know that difficult it chain, a federal license like that, so a buyer wanting to buy that company is not going to be able to buy the asset by the raft and then apply for a license with the federal government, it was three years. So we use it 338 h 10, which what that does is the buyer gets the stock of the business. So they own the raft, and they own the license. But a buyer also wants a stepped up basis in the raft, like they were buying it as an asset only. And so in this particular transaction, they get a stepped up basis in the asset yet they bought the stock of the company and now the buyer can read depreciate the raft, right? That's why you see a 330 8x 10 a lot of the times with medical practices, I'm even involved right now potentially in the sale of a very, very large designer company that has a royalty agreements associated with it. And we are looking at a 338 H 10 for that transaction. So now from a seller side as we know we as you said my niche is sellers even though we do represent buyers, my real niche 75% of our deals, if not a little bit more are for sale.

ellers what happens with a seller? Well, a seller has some potential negative tech taxation, two or 338 H 10. And in the typical transaction, the seller, we will do an analysis, we will do what we call our tax minimization analysis. And we will show the seller what the negative tax treatment or if there isn't negative two or 338 is, and traditionally, the purchase price should be grossed up by the buyer to account for that negative taxation to the seller, because the buyer is getting the benefit of the stepped up basis of that raft. So that's a 338. Extend again, high level for you. Yeah, but

so the, the biggest reason to deploy a 338 is is predominantly to assign contracts right now contracts, licensure. Okay. Okay. So the Think about also think about this, I don't mean to cut you off a company that has a lot of vehicles, or a lot of equipment, and the buyer doesn't want to have to transfer title to all of those and pay sales tax and pay US taxes and transfer taxes and re licensing fees. So this is more useful in more companies than what we even think about. And we see 338 done with companies with lots of equipment, because they avoid all of that relicensing. Well, and we're seeing,

even without the licensure issue, it's just, it seems as though the whole motivation is a tax treatment, it doesn't matter. It's me, are you seeing that do or am I imagine things the whole motivation is the buyer gets that tax treatment, they get that step up in basis, they get to re depreciate the assets. And yet they don't have to recreate an entire corporation structure. It's there for them. So why don't why don't more people do it? Why isn't that just totally the main the main way of transferring businesses, it's a complicated tax analysis. And that's why most accountants are not familiar with it. They don't want to analyze it, they just think it's too complicated to kind of deal with a seller is dealing with so many other things in their mind, going to market. complicating it with a 338 can be very difficult if the seller is not educated. I'll give you this one too. I represented a behavioral health clinic. And I told them from the very beginning this the smells like it's going to be a 338 It smells like it's going to be a 338 we get the 60 page asset agreement two weeks prior to closing. And sure enough, what's in there for 338 there. That's why these things don't have traction, because sellers are not educated buyers throw them in at the last minute from their legal or tax counsel. And it blows things up. Yeah. Well, like so it just seems as though,

Unknown Speaker  12:57  
you know, Google has has educated a lot of sellers, wrong or otherwise. And the and again, they they show up wearing the t shirt that says I want to 338 and and it just it just doesn't always go that way. You know, you're absolutely right. We had a seller contact us about a year ago. And the sellers email or reference said, Well, I've been hearing that I want a 338 and in my mind, why do you why do you want the seller want a 338? It blew my mind. I'm like that's for buyers. It's not sellers.

Ed Mysogland  13:37  
It's funny you say that because it because we're seeing it a lot and and again.

Now it's it's Google's a blessing and a curse. You know it? We do a lot of I'm certain you do a lot more of it but straightened and people's

assumptions out on what they want.

One of the things I wanted to ask you about is, is the different levels of

deals like what is it seems as though you're you're micro businesses, look, this is going to be a traditional asset or traditional assets. Let's just leave it at that. But where are the thresholds that you're seeing complexity layered on?

Roman Basi  14:28  
Okay, so you got your main street transactions, which are generally $1 million or less all that number is getting getting stretched these days because of inflation. And we don't see too much complexity in the Main Street to Main Street deals or generally, asset deals straight up or stock deal. Although you get to the higher end of that main street deal. You will see some complexity now. You get anywhere above a million dollar deal. You see complexity you see issues. Give me another example. I got a call the other day from an attorney from a broker broker

We're in Arizona, he has a business he's selling without an attorney owns however, she happens to be in labor. This just happened last week. And she's physically in labor on the day, they want to analyze the purchase agreement, it's about a $3 million deal. So I'm looking at this purchase agreement. And if you meet and when you say complexity, I look immediately at the tax issues when I look at a purchase agreement. And the first thing I saw on this deal, on a $3 million deal was a $500,000 allocation to a non compete, folks, that's ordinary income to a seller. I've never in my 25 year career, seen a $500,000 allocation to a non compete, and I do deals 20 million, 50 million, 60 million 100 million, I've never seen that number. So you start to see those issues, those complex concepts and non competes not complex, but the tax allocation can be and the negotiation for it can be. And that was a $3 million deal. By reducing that down to $100,000, which is still unrealistic, that saved the client $80,000 in taxes, well worth my couple of hours and looking at that purchase agreement for her while she's sitting delivering her baby. So you see that complexity kind of kick in once you get above that million dollar range, or when there's potentially real estate involved, because then we have some issues we can flex with from a tax perspective. So well, from an allocation of purchase price will go down there. And the funny thing is,

Ed Mysogland  16:42  
too, one thing that you you said, well, a long time ago, you know, you you take that that allocation, that furniture, fixtures and equipment, take it to book. I mean, you've saved a massive amount of taxes. And I've used that, that that's in the letter. But when we counter, you know, what if we're at a stalemate, no it because you Yeah, I guess, can you talk a little bit about the allocation of purchase price? And and if I'm, if I'm, if I just heard that that allocation of the non compete are sitting there say, Well, why is that a problem that? I mean, we just negotiated this out?

Roman Basi  17:22  
What, you know that they think it's a I don't say a game, but you know, this is a negotiation, and we're kind of moving our pieces around. Can you talk about the ramifications of making really poor judgments on that 8594. And that's the problem. You know, in early on in a transaction, the seller is negotiating with a buyer, they don't necessarily don't often necessarily think about the tax ramification. They're just seeing that hide that they're going to get for the company. And that's where the mistake comes in. Because how is the allocation being crafted? Who's in charge of it? And like you just said, what's the framework, you're going to utilize? Maybe in your letter of intent, is it booked value to the assets that are on my book sellers, if we're using book value, and that's what's on your balance sheet, you are not paying taxes on book value, that is your tax free basis that you can return to yourself, everything above that up to the original cost of the item is going to be depreciation recapture, which is traditionally ordinary income. But there are some categories around depreciation recapture everything above its original cost, which is rare, and an asset sale is going to be capital gain. Now, he had mentioned 8594, you mentioned 8594. That's the IRS Form that should be completed at a closing. Keep in mind, that form is not signed by either party. Either party can if it's not discussed, and it's not part of the deal. And I'm gonna give you an example. It just happened a week ago and I've I blew my lid. But that 8594 A buyers 9085 94 doesn't have to match the sellers. And that's how we report the allocation to the Internal Revenue Service. You are telling the Internal Revenue Service, what seven categories of assets you allocated to in the deal, and how much you allocated, and how much the fair market value is. The IRS wants to see, are you allocating more or less than its fair market value, folks, you got to be really, really careful. Here's my example. We sold a janitorial cleaning company. This was like an under $2 million deal. We had the allocation set in the asset purchase agreement, and we used a personal goodwill agreement. The document said each party will file an 8594 After closing in accordance with this allocation. Two months go by law

Last week happens, we get an email from the buyer, I don't have any dock and I didn't represent the buyer, I don't have any documents, I don't know what our allocation is, I need all this information, the sellers trying to cut their costs did not want to have us respond very much. We were unaware there was this communication going back and forth, the seller sends the buyer, the fair market value of all the assets the buyer bought, that was not our agreed allocation, I immediately jumped in, sent them all proof of the documents, mostly showing book value. I hope to God, they don't have a dispute now because now the buyer can say, Well, why is the fair market value so much higher than what we allocated? And I want this? I don't I hope to God and other sellers, you got to be so careful with the information that is given to the parties, loi during due diligence during purchase agreements, and after closing. So what one of the things that has always struck me is why why doesn't the 8594 get signed? Why you would think of all the documents? Yeah, that that the the taxable structure, you would think that, that the the service would would demand that, you know, interesting because it's a form. So a lot of IRS forms don't get signed, they just get attached to our returns. And the history behind the form says that the parties don't have to agree that the parties technically don't have to agree. And they can file whatever they want. And if they file differently, the IRS has the right to audit them and determine what fair market value is. So that's why maybe they tried to avoid the fact that if they required signatures back in the day, parties may never have agreed and no one would have signed? I don't know, that's a great question. Because I don't know the answer to it. That's the history of it. And that's what people don't know is that you actually don't have to agree. But I don't recommend that. And of course you don't. We recommend everybody agreed. Well, the funny thing is I in all my years, I've never heard of the service coming back on on that. Have you ever bumped into that? Yeah, the only way we never ran into it, you know, again, because look, when sellers use people like you people like us, they're generally they're protecting themselves from those questions of audit. But what the IRS would do is they would read characterize the allocation and say, Well, you can't put this on goodwill, you got to put this on the assets. And if they audited a transaction, that's what they would be looking for is a REIT characterization of the allegation. And then your client would get a tax bill, you may not ever hear about it, I may not ever hear about it, but it may be happening out there to our clients. I got. So you had talked about C corpse. And

years ago, I saw more and more of them not so much these days. So But nevertheless, I think it would be remiss not to talk about the Q SBS. Yeah, that's a great topic for sellers out there. And for buyers out there. When I represent a buyer, or I represent someone going into business, we help them incorporate their companies, we're going to talk to them about section 1202 of the code. This is this is for potentially buyers of stock also for sellers of stock 1202 is called qualified Small Business stock, it is stock of a C Corporation, which is a non flow through entity. If you have stock of a C corporation, under code section 1202, depending upon when you created the company, when you were issued the stock, how long you held the stock for you can possibly sell the stock of your company and not pay tax on the gain whatsoever. It is a gain exclusion under Section 1202. Now you're right we didn't see a lot of C corporations after the tax code was passed in the 80s with the creation of Subchapter S, which is where S corporations come from, however, in 2017, with the tax cuts and Jobs Act, when the C corporation rate was dropped down to 21%. All of a sudden, we saw some conversions to C corporations, and some incorporation of C corporations. And now what I see because of the knowledge of 1202 is we convert some companies that were never a C, we convert them from an S to a C and then if that company holds on to that stock for five years, now we can sell that stock tax free. This is one

under full for internal transactions, succession plans, sales to a key employee, sometimes sales to a competitor, or someone knowledgeable in the market that is okay buying the stock in the business. So bravo twos are extremely advantageous. So, so the look back period for the for the conversion is five years for holding, we call it a holding period, you've got to hold that stock for five years to be eligible for the conclusion of the game. I got so for planning purposes.

Ed Mysogland  25:33  
And I mean, what's the likelihood that's going to change the tax codes? I mean, granted crystal ball, but what's the likely that's going to change? And what would you have changed over the years? In fact, let me let me explain that

Roman Basi  25:46  
I don't have in front of me a minute ago, let me find my, oh, here's, here's my, here's my cue SBS chart, it's changed a little bit. So I don't think 1202 will ever go away. But it does change. So if the shares were acquired, after September 27 2010, it's 100%. Exclusion. If the shares were acquired, between February of oh nine and September of 2010, it's a 75% exclusion. If the shares were acquired before Oh, nine, it's a 50% exclusion. So my answer to that question is 1202 is here to stay. But the exclusion rates can change with legislation.

So what I'm in my notes here, I wanted to talk about the 1202 G, which, which has something and I don't, I have no idea with this. I've never even heard of this that, that there is something that the Q SBS works for pasture entities it does. So a pass through entity like an S corporation, or 1202 G can work for S corp, which is otherwise known as a pass through, you've got to be careful, though, you cannot transfer during the holding period, that stock cannot be transferred to a partnership, or another type of vehicle. So 1202 G got to be very careful with we're just now starting to see some potential transactions and some legislation around 1202 G. So it'll be interesting to see how that kind of fans out now that we're seeing more of those. Yeah, cuz, because

we're talking to a lot of sellers that are sitting here saying, alright, you know, the next couple of years are probably going to be a little bit bumpy, it might be time to retrench. And kind of get our plans back in order. And you know, there's still time to to have a great exit, you know, does it make more sense to do the restructure and the five year hold? Or do the 1202? G, if you're a an S corp, it's one of the things that we will look at, because, you know, one thing we say about C corporations, and a lot of people don't understand this, that a C Corp, you know, you have this 21% tax rate, but are you really paying company taxes ever in your C corporation? Or are you withdrawing the profits via salary bonuses, however, you're withdrawing them, you're not paying those taxes anyway. So sometimes it's more advantageous for us to make the conversion because their tax rate is less if they do leave profits in the company, as opposed to an S corp, subjecting yourself to the scrutiny below to G and then paying a higher tax rate while you're operating the S Corp. So those are some of the things we look at when we say is it better to do a 1202 G hold onto my S corp stock and face a little bit additional scrutiny? Or should I go a 1202 route straight up C Corp run the company if I have profits in there, I'm only paying tax at 21% Flat Rate anyway. So those are the analyses that we look at. I got it.

In one of the sessions, I sat, I went back to my notes and I saw a tax free reorganization. But I for the life of me I can't remember what in the world that was. What is that for tax free, reorganizations are so in a nutshell and a high level overview of that, because they're they work in certain industries. And it's when a seller is going to retain equity in the new essentially, in the new company. That's when a tax free reorg of an S corp, can

we form a new company to hold the stock of the target company buying the new company stock? So the old company, you gotta be careful because, in general, majority of the sellers that I deal with in the industry is ideal with about 80 to 90% of the time, they're selling out in a hole and they're not taking an equity piece, so the rewards are not a possibility for them. However, if you're a seller and you're listening to the podcast today, and you're thinking of yam

gotta sell out, but I'm gonna keep a 20% interest in my business. Okay, if you're an S corp, you are a potential candidate for an F reorganization, we see a ton of this in the insurance industry. And we saw more than I've ever seen in my life in 2021. In the insurance industry, we call them roll ups, where we're rolling the company up into a new company, but you the seller are taking an equity piece in the company. So that's when the reorders are a possibility. If you've got to sell it, it's going to sell out in full. That's not an option. Yeah, I got it.

Ed Mysogland  30:39  
So I'm looking at

I guess, like, rapid fire questions I'm trying. There's different scenarios that we're seeing a lot of, you know, selling to a kid,

Roman Basi  30:53  
selling to a key employee we're seeing more and more Aesop's, Aesop's are coming are getting more prevalent, and then selling to a competitor in a strategic, I'm just kind of curious to know, like, here, if I'm selling to my kid, here's the top three things you need to keep in mind. If I'm telling you in my employ this top three things you need to keep in mind. So how can you can you kind of run through those scenarios? Yeah, you know, we start with when we look at that for a client is we again, we like to do what we call our tax minimization analysis, we are showing them the effects of three different, you know, yeah. Are you selling to a family member? Are you selling to an employee? Are you selling to an outside competitor? And what are the ways that we do that, and how's that look for you, and what's your taxation there, and we show our clients down to the penny, what they're going to receive on these, and let's just break them down. If you're going to sell to a family member or a child, typically, we're going to structure that as a stock redemption, where typically 99% of the time, I'm going to structure it as a stock redemption, which is where you are using the profits of the business, to pay yourself the seller over time for your stock. So what we will do with the child is we will give them one share, or they will buy a share with a bonus that we give them, and then we redeem all of the owners share. So you as the owner, get capital gain treatment on anything above your bases, you have a little bit of interest income on that, because there's a note given to you for a certain period of time, 10 years, 15 years, 20 years, whatever it may be. The child, on the other hand, is running the company, they're paying your note, they don't get a deduction for the note, but they get a deduction for the interest expense. It's a very clean, easy transaction with a child with an employee. It's about 5050. Because here's the difference. If we do a redemption, the person within the company who's helping who's paying the note for you, they're not getting any basis in their stock. So if they're going to sell their stock down the road, they have no basis, it's all going to be capital gain. So sometimes an employee would rather say, No, I want to buy the stock under a stock purchase agreement, and I'm gonna go get a loan, or I'm just gonna bonus myself out money. And then what's that employee doing? They're building their tax free basis for down the road if they ever sell the stock. But again, remember, we might sell assets down the road. So all that stock talk goes out the window. So we liked him. Those are the those are two of the primary ways to deal with an employee or a child. And then of course, you got got some other mechanisms as well. And you're talking about Aesop's I think Aesop's are extremely beneficial when and I represent some companies that have Aesop's. The benefits Aesop's is, maybe you don't have a successor in place, and you've got just a core group of employees been there forever, and you want them to own a piece of the company, if not all of it in the future. That's when an ESOP is the best way to go. The negative to an ESOP is the company has to be valued every year, there's costs associated with an ESA. So now you're dealing with a valuation of the company every year, and all of a sudden, you also should not be you should be cleaning up your books and records to avoid all of the seller discretionary expenses, so that they're not part of that valuation each year, or you just muddy the water. They're good in certain circumstances. Right.

Ed Mysogland  34:39  
So

Roman Basi  34:41  
I mean, how far in advance do you plan this kind of stuff? Man, you know, the ideal answer is between three to five years out. Ideally, if someone talks to me and they're three to five years out, it is just beautiful. It gives us time to first of all,

You know, and as you see on my credentials, I'm a CPA, we are a full service accounting firm. Number one, clean up the financials, get your books and records, right. And I know there's probably going to be people listen to the podcasts that are like Good God, Romans, right, clean up your books, it's gonna take a while and we do it for a lot of companies, we get in there, make sure your books and records are right, because how many companies have a set of books on their computer they're running, and their accountant is doing all the backend cleanup at the end of the year on their set of books, yet, the company said the books are still not right. And how many times we sell a business, and they don't want us talking to their accountant, they don't want their accountant to know. So now all of a sudden, we're dealing with a messy set of books, three to five years out, start cleaning them up, seller discretionary expenses that you can really start to cut down over that time period is extremely beneficial. You don't want to get into these arguments with potential buyers of where's this income coming from? Or where's these expenses coming from? And you don't want to have to explain all that. So that's ideally what it what's a map. In reality, most sellers are cleaning up the books within a couple of months of listing the company, or after listing the company to be realistic.

We don't love it. But hey, you guys are all giving me more work when I got to clean up books for three years. Okay.

Ed Mysogland  36:29  
So

so what

one of the things I really enjoyed was when you kind of did your little crystal ball. This is what this is where the puck is heading in the next and the next few years.

Roman Basi  36:43  
I mean, what what's your thoughts on that? Well, we're in desperate need of new tax legislation. You know, our we had some major tax legislation during COVID, which was completely separate from the 2017 tax cuts and Jobs Act, which was probably one of the largest ones. And every year in the history of my career, I'm assuming my father's as well, we always get tax legislation at the end of the year. And now it's just been non existent for the past year or two. So, you know, where do we know we're due for a rewrite of the code? I don't see, of course, when we you know, of course, we follow the elections, we follow what's happening in Congress, you know, we don't see much changing now over the next year or two because of the division in Congress. So the next election cycle in two years will be extremely, extremely crucial. Now, crystal ball speaking, as inflation hits us, it continues to add a little bit, as interest rates go up, valuations of companies go down, and it is in an inverse relationship. So we still have at least one maybe two interest rate increases. So valuations of companies on an interest rate perspective are going to come down. If I'm an investor, and I want to make a certain dollar for my company, and interest rates go up, I have to pay less for my company. It's a very simple concept. So that's something we have to look for for the next six months cycle is we're going to have some pressure, downward pressure on the valuation of companies set all this real estate stuff aside, some states are having steel, good times, some states are not having good times. That's what's going to come for us in the next six months. From a tax legislation perspective, you know, there's some work to do because we know the flex incorporates them with us a while I don't think that's going to stick much longer, I think we'll see a graduated rate come back into play. And then of course, we'll have a rework of the individual tax rates. And when normally look back in history, when we start to have depression type times, we will get some tax incentives. So we're going to start to see some of those things come back and getting maybe some bonus depreciation or tax legislation, things on that nature. We will see that maybe by the end of 2023 2024 Let's see where this recession may take us. So as far as working with especially Yeah, everybody's talking about baby boomers and I mean, that's nothing new.

Ed Mysogland  39:16  
I think everybody they try to time the market and I'm not certain

I'm not certain right now is the best time to time the market. I know that's a silly thing for a deal guy to say.

But I just I'm trying to figure out

if I'm a buyer, I'm trying to look out but five year payback of of my investment, you know,

if I'm a buyer in my aggressively looking to buy for especially if I have access to cheaper capital, but I'm just trying to I'm trying to reconcile the two together on when is the optimal

Time to sell like if I'm if, if I'm 70 years old and poor health, you know, I may not want to wait this thing out.

Roman Basi  40:08  
But if I'm if I'm in good health and I'm rocking along, well, this might, I might, it might be a time to do some planning and and I guess I want your your thoughts on that before we go good point because in the last year or two years, we've seen some of the most activity we've ever seen in our careers, we know that we know that selling was off the chart. And I'll tell this to from what I see. And I see deals every day, I get two to three calls a day for new transactions. And that is no lie. This morning, actually, last night, at about 10 o'clock at night, I had a $14 million offer come in on a company from overseas buying a US based company, folks, it's every day. So the market is still as hot as it was, however, and I tell my wife that Solana my closings are being stretched out, we're not seeing the fire closings that we were seeing at the end of the year. Last year, everybody wanted to get done before the election, before there's potential new tax changes, we didn't have that rush this year, it's still a good time to be thinking about selling your company, it's still a very good time, fine interest rates have increased a little bit, it really hasn't put them out of anybody's financing capabilities. To be honest. Now, we get a year down the road. And we're into a which we've been in a recession technically for a while over a year, actually. But we get another year down the road in this economy. And we might see, it may not be the best time to be honest. And it also is industry dependent. They're doing a lot of transactions in the automobile industry. Right now, there's a lot of activity going on. Because honestly, this concept is the same from the comment is the same from all of them. In the auto industry. The older owner dealers are very scared of the new models that were created during COVID for auto sales across the country, and they are selling out. So if you are in an auto industry segment, your industry is extremely active. And now is the time you will miss your window. If you don't do something now on buyers that wanted to get in the industry, slow down their deals because of where interest rates are and the and the worry about what's happening with that industry. So if you're a seller of a business, you've got to really know the pulse of your industry is changing. If it's changing, does that influence your decision to market your company now rather than later?

Ed Mysogland  42:45  
No, those are great points. Well, my friend, I want to be sensitive to our time. My last questions the same for everybody. And I think I have an idea of what it's going to be. But nevertheless, I'll ask it, what's the one piece of advice that you would give our listeners that would have the most immediate impact on their business? Prepare, I am an Eagle Scout, that's not on my, that's not on my designations there. But the motto of an Eagle Scout is to be prepared, and I can't tell you that enough, be prepared. And, you know, we, there's a lot that goes into that, that those two words, the more you prepare, the better that whole process will be. You know, and I'm with you, I wish, you know, being in the Exit Planning space and, and all the associations that I belong to, I assumed at some point someone would commission some empirical data that, you know, by being prepared, this is this is what this is the premium I got for my business or this is how I increased the likelihood of selling it by this. But, you know, you would think that that would be I don't wanna say common sense. But to me, that's probably the most valuable information for a business owner on why you should prepare. But anyway, well, we'll get there. So my friend

Roman Basi  44:10  
what's the best way we can keep in touch or get in touch with you? Oh, that's great. Yeah, to get in touch with us. Our website is tax planning.com Our phone number is 618-997-3436 or they can always anyone can shoot me an email. It gets immediately seen by me and whether I respond or one of my staff responds and it's our Basie at tax planning.com We're on Facebook. We blog twice a week on Facebook on our Facebook page. So pretty easy to find and our website really drives you to everywhere you need to go and we'll make sure that we have every place that you are featured on the in the show notes. So my friend you know I've been I've always enjoyed listening to it the association's and you certainly knocked it out of the park on this one. I appreciate your time.

Thanks, Ed. Thanks for having me. I'm very much appreciated as well see you at the next conference. Thanks, Robin. Thank you.

Ed Mysogland  45:08  
Thank you for joining us today on the how to sell your business podcast. If you want more episodes packed with strategies to help sell your business for the maximum value visit how to sell a business podcast.com For tips and best practices to make your exit life changing. Better yet subscribe now so you never miss future episodes. This program is copyrighted by miso Inc. All Rights Reserved