BUSINESS NEWSLETTER FOR NOVEMBER, 2009

Selling a Small Business

 Approximately 40 percent of small business owners expect to sell their business in the next decade, but only about one-third have a known successor.

When selling your small business, you may wish to remain involved in the operations of the business.  Two major options exist: 1) Selling only a portion of your business; this allows you to reduce your risk and see a return on your investment.  2) Sell the business entirely on the condition that you remain employed.  This option allows for you to maintain a stream of income, while eliminating your risk.

Timing the sale of your business can help in realizing the highest return.  High management turnover can decrease the value of your business.  Also, bad economic times will usually equal a lower return.  Begin preparing to sell your business well in advance of putting it on the market.  The additional time should be sufficient for you to correct any management issues and survey market conditions.

Price the business right.  Owners tend to over-value their business. Speak to a professional in determining the true value.

What is an SBA Loan?

SBA loans are loans funded by various lending institutions that carry a federal guarantee from the Small Business Administration.

These loans are a good source of funding considering the current credit crunch and unwillingness to lend by many institutions.  The loans allow borrowers to fall outside normal credit terms.  This can include such things as a longer repayment period and a higher loan-to-equity ratio.

The SBA will back up to 85 percent of the loan value, up to $150,000.  However, it must be remembered that the decision to enter into a relationship with the SBA is one that rests with the lending institution and not the borrower.

All borrowers must develop a good business plan.  The borrower must first "sell" the business plan to the lending institution before the SBA will be considered.

Always shop around with different lending institutions; they all have different lending standards.

Federal Tax Incentives for Small Businesses

Five-year Carryback of Net Operating Loss – businesses can pick to which of the past five years they would like to apply the current year's losses, and therefore create a tax refund for the selected year.  However, the company's gross-receipts can not exceed $15 million.

Extension of Expensing Allowance – was originally set to expire in 2008, but has been extended for another year.  IRS allows businesses to expense up to $250,000 for certain business expenses such as office furniture, fixtures, and certain machinery.

Extension of Bonus Depreciation – was also set to expire in 2008.  Allows companies to take 50 percent depreciation on certain purchases.  For example, a piece of equipment with a 20-year operating life can be depreciated 50 percent in year one.

Health Care Reform – What does it mean for my small business?

Health care reform is projected to impact one-third of all small businesses (operating as sole proprietorships, S-corps, or other entities where the income from the business flows through the individual owner for tax purposes) that employ 20 to 250 workers.

The surcharge will range from 1 percent to 5.4 percent for households with income in excess of $350,000.

Although the impact on small businesses is disputed, there is a consensus among most that there will be some type of surcharge on small businesses.

The final health care reform bill is still in negotiations and therefore the true impact will be unknown until it is enacted.

Prepared by:       Manik J. Saini