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Personal Finances / Fools and Their Money
|Subject: Re: Buying a business as an investment||Date: 6/2/2012 3:41 PM|
|Author: jumpie||Number: 15270 of 15328|
> You need at least an attorney and a CPA to help you evaluate the
> business in their different areas of expertise. If you want a
> financial planner to help with investment questions, those
> questions aren't going to be answered by the attorney or the CPA.
Fair enough. My research seems to be telling me the same thing. Thanks.
> First question I'd have - if the business really is expected to
> continue to throw off the kind of income that it is currently
> generating, why does he want to sell?
As I first started researching businesses for sale (online), I shared your concern, but this appears to be standard pricing for small business sales - the asking price is usually 2 to 4 times the net profit.
In this case, as I said, it's a friend I'd be buying out, so there's less risk in that I know why he's selling (when it's a stranger, you have to take a leap of faith that they are really selling for the stated reasons).
> Have you seen the tax returns to confirm it's actually producing
> that much income?
Yes, of course. As to whether or not it will continue, well, that's the risk part, akin to the risk of investing...
> If the business income flows through to your individual return,
> are you counting the self-employment tax as part of your taxation?
It's a LLC so it's all about my own taxes. I was using 33% based on having owned my own business in the past and seeing that overall, the IRS was taking approximately 33% of my income. So I wasn't breaking it down and instead using an approximate overall percentage of my income. Maybe I should run through an actual scenario on a 1040 or ask a CPA to run the exact numbers.
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