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Selling Your Business (405)
Author: Holmes F. Crouch
Pages: 224
List Price: $19.95
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  • Summary

    SELLING YOUR BUSINESS (T/G 405) covers the preparatory matters and asset description details needed before a sale offering, how to appraise intangibles (operating systems, customer lists, covenants, etc.), methods for gross pricing, the "residual method" for establishing goodwill, and items for inclusion in the sales contract. Also covered:

    • Form 4797: Sales of Business Property
    • Form 8594: Assest Acquisition Statement
    • Bulk notice & gross proceeds reporting
    • Landmark case: Newark Morning Ledger Co.
    • Examples of different business sales
    • Precautions against post-sale litigation

    Table of Contents
    Selling Your Business
    Book:  405
    
    Table of Content
    
    1.  PREPARATORY MATTERS                                 1-1
    
        What Is a “Business”?                               1-2
        Identify Your Asset Bundle                          1-3
        Clarify Ownership Interests                         1-5
        Prepare History of Business                         1-7
        Good Reasons for Selling                            1-8
        Clear Out Your Junk                                 1-10
        Get Tax Returns in Order                            1-11
        Update Your Balance Sheet                           1-12
    
    2.  GETTING DOWN TO DETAILS                             2-1
    
        Set a Target Date                                   2-2
        Land, Buildings, & Structures                       2-3
        Leases & Leasehold Improvements                     2-5
        Machinery, Equipment, & Vehicles                    2-6
        Furniture, Fixtures, & Furnishings                  2-7
        Inventory & Work in Process                         2-8
        Tangible Assets Summarized                          2-10
        Precautions With Franchises                         2-12
        Patents and Copyrights                              2-13
        Licenses and Permits                                2-14
        Contracts and Easements                             2-15
        Customer Lists                                      2-16
        Intangible Assets Summarized                        2-17
    
    3.  DETERMINING GOODWILL                                3-1
    
        Pertinent Generalizations                           3-2
        Early Tax Decisions                                 3-3
        No Natural Endowment                                3-5
        Covenant Not to Compete                             3-6
        Income Capitalization Approach                      3-7
        4-Step Formula Process                              3-9
        Those “Separable” Intangibles                       3-10
        Profit-Opportunity Method                           3-12
        The Residual (Hindsight) Method                     3-13
    
    4.  NEW RULES ON INTANGIBLES                            4-1
        
        The High Court Ruling                               4-2
        Thank the Newark Company                            4-4
        “Section 197 Intangible” Defined                    4-5
        “Amortizable” Intangible Defined                    4-6
        More Detailed Definitions                           4-7
        Licenses, Covenants, & Franchises                   4-9
        Overview of Special Rules                           4-11
        For “Partial” Dispositions                          4-12
        When Intangibles Are Exchanged                      4-13
        Exclusions from Section 197                         4-14
        Computer Software                                   4-16
        Separately Acquired Interests                       4-17
        New Class IV Assets                                 4-19
    
    5.  PRICING YOUR BUSINESS                               5-1
        
        Net Book Value “Plus”                               5-2
        Adjusted Book Value                                 5-3
        Professional Appraisals                             5-5
        Multiple of Earnings                                5-8
        Comparable Business Multipliers                     5-9
        Full Replacement Cost                               5-11
        Closely-Held Stock                                  5-12
        Liquidation Value:  Cash                            5-13
        Several Methods Needed                              5-14
    
    6.  CONSUMMATING THE SALE                               6-1
    
        Weigh the Buyer’s Needs                             6-2
        Use Advisors Selectively                            6-4
        The Full Disclosure Stage                           6-5
        Agreement on Price and Terms                        6-7
        Offers and Counter Offers                           6-8
        Avoid “Aiding and Abetting”                         6-9
        Typical Documents Involved                          6-10
        The “Memorandum” Document                           6-11
        Content of Sales Contract                           6-12
        Covenants and Warranties                            6-15
        Instructions to Escrow                              6-17
    
    7.  BULK NOTICE & ALLOCATION                            7-1
    
        Purpose of State Law                                7-2
        Contents of the Notice                              7-4
        Separate Notice to IRS                              7-5
        Reportable Real Estate?                             7-6
        Must Use Form 1099-S                                7-7
        Why “Gross Proceeds”?                               7-9
        The Allocation Process                              7-10
        Allocation of Intangibles                           7-11
        The “Whipsaw” Problem                               7-12
        Consistent Positions Required                       7-14
        Five Allocation Classes                             7-16
        Form 8594 Required                                  7-19
        Checkbox Questions Asked                            7-21
        Class IV Intangibles: Itemize                       7-21
        After-Sale Reallocations                            7-23
    
    8.  THE MASTER FORM: 4797                               8-1
    
        General Purpose:  Gross Proceeds                    8-2
        Format Overview:  Part I, II, & III                 8-4
        The 8 Columns Identified                            8-5
        Section 1231:  Very Special                         8-7
        Qualified Section 1231 Property                     8-8
        Part III: Must Recapture                            8-9
        Pars I and II Revisited                             8-11
        Transfers from From 4797                            8-13
        Focal Role Summarized                               8-15
    
    9.  SALE OF PROPRIETORSHIP                              9-1
    
        The Pre-Sale Scenario                               9-2
        The Schedule C Sale                                 9-3
        The Schedule F Sale                                 9-5
        Two Forms 8594 Required                             9-6
        Also, Two Forms 4797                                9-8
        Cost Recovery Worksheet                             9-10
        “Expense of Sale” Allocations                       9-12
        Now, Form 4797 (H)                                  9-13
        And Now, From 4797 (W)                              9-15
    
    10. SALE OF PARTNERSHIP                                 10-1
    
        Introduction to Form 1065                           10-2
        A “Pass-Through” Entity                             10-4
        Partners’ Capital Accounts                          10-5
        Ordinary Course of Events                           10-7
        Sale or Exchange Treatment                          10-8
        Exception to the Above                              10-10
        Section 741 Analyzed                                10-11
        Must Notify the Partnership                         10-12
        Inconsistent Treatment Rules                        10-13
        Section 751 Statement Required                      10-14
        Reporting on From 1040                              10-15
        Special Reporting:  Form 8308                       10-17
    
    11. SALE OF CORPORATION                                 11-1
    
        It’s the Balance Sheet                              11-2
        Your Stock’s Book Value                             11-3
        C-versus S-Type Corporations                        11-5
        Beware of Securities Laws                           11-7
        Sale-of-Assets Option                               11-8
        Direct Sale of Stock                                11-9
        Part Sale, Part Redemption                          11-10
        Deemed Sale:  80% of Stock                          11-11
        Reorganization Exchanges                            11-13
        Summary of the Basics                               11-14
        Reducing the Risks                                  11-14
    
    12. POST-SALE MATTERS                                   12-1
    
        Anticipate a Lawsuit                                12-2
        Review the Warranty Clauses                         12-3
        Be Open to Renegotiation                            12-4
        Expedite Your Tax Return                            12-5
        Winding Down a Corporation                          12-6
        Form 8594 Revisited                                 12-9
        Form 6252: Installment Sale                         12-10
        What the IRS Looks For                              12-12
        Form 8824 Exchanges                                 12-14
        Purpose (s) of Form 8824?                           12-15
        The Ideal Exchange: Sec. 354                        12-16

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