Thursday, August 19th, 2010
Thinking of buying a restaurant? Keep in mind that most of the full service restaurants have a liquor license which needs to be transferred. The steps to follow are many and it will take some time to get it accomplished. Therefore taking the appropriate steps could avoid lengthy delays in closing escrow or worse…loosing the deal.
It used to be that liquor licenses were sold as a commodity. If you owned a full liquor license (a license that allowed the sale of hard alcohol, beer and wine) then that had a lot of value to the buyer as licenses were not easy to get a hold of. However nowadays licenses of various kinds are easier to obtain, as long as the applicant (a.k.a. business owner) has no criminal record or previous violations on file, and the license is only valid at the current place of business. If the business moves location then the owner has to contact the California Alcoholic Beverage Control (ABC) to obtain an approval for the new location.
The license application process is lengthy and depending on the circumstances the process can take from 45 to 60 days, and sometimes 90 days or even longer. The key is to be informed and work with a knowledgeable professional so that the approval process will not drag on unnecessarily.
All kinds of steps have to take place such as notification to the local authorities such as the sheriffs department or chief of police, district attorney, city council, and then there is the public notice (a large sign in public view at the business). In some cases depending on the location of the business the business owner has to mail notices to the surrounding residents to give them an opportunity to file a protest against the issuance of a license in their neighborhood. There is a lot of scrutiny when it comes to alcohol licenses, but yet there are many successful businesses that have these licenses.
When we sell a restaurant or a convenience store we help the seller and the buyer prepare for the transfer of the alcohol license and guide them through the entire process.
Cheers!
Lucien Pillai
Thursday, August 19th, 2010
As an added incentive to hire new employees, employers can claim an exemption on the employer’s 6.2% Social Security tax for eligible new hires. An eligible new hire is required to sign a W-11 or company equivalent form stating that he/she was not employed for more than 40 hours in the previous 60 days before starting work at the firm. The 60 days unemployment must have been continuous and the period may span over 2009-2010.
Furthermore, for each qualified worker that has worked for the firm for at least one year without a significant reduction in wages, the company may receive an additional $1000 retention credit to be claimed on the company’s federal income tax return.
The Social Security tax credit is for wages actually paid, not simply earned, from March 19, 2010 to December 31, 2010. This exemption is claimed on the business’s quarterly 941 form. In order to not elect to take the exemption, just do not claim the credit on the Form 941.
Electronic signatures are acceptable. Scanned images of paper W-11s or company form may be kept instead of hard copies and these do not need to be notarized. However, they must be completed and signed and in the employer’s hands before the credit can be claimed on the Form 941.
If the employer has claimed exemptions for ineligible employees, a Form 941-X must be filed for each quarter that the exemption was incorrectly claimed. Failure to do so results in penalties and interest being charged to the firm.
Temp agencies are eligible to take the credit but if they claim the credit, then the client employer cannot.
Jackie Pillai
Thursday, August 19th, 2010
The collapse of the real estate market and the lack of financing created an economic crisis from which we have not yet recovered. Although there are some positive indications, there are also many grim factors which affect us and create an uncertainty as to how long it will take for a full recovery. We are also affected with factors which are outside of the control of our market. Such as the meltdown in Greece which could impact the capital position of U.S. banks if Germany and other EU members refuse to provide additional bailout funds. Other European countries like Spain and Portugal are also at risk. Our office in Spain has several great investment opportunities however money is so tight that financing is a problem. Another factor here in the U.S., is the oil spill in the Gulf of Mexico and its full impact on our economy is still unclear. For sure we can expect that domestic oil prices will rise. Another big challenge will be creating new employment opportunities. Tax increases will not be the answer, since it will only slow down the road to recovery.
There is no question that the current economic situation has impacted the business brokerage market which caused changes in the way businesses are sold. It takes a longer time to sell a business. From the time the business is placed on the market and until an offer is presented takes about 2 to 3 times longer compared to 3 years ago. Once an offer is accepted, it becomes more complex and takes a longer time to complete a transaction. It’s also much harder to find financing, particularly to get an SBA loan. Application processes take longer and credit is tighter. Seller financing becomes essential and 9 out of 10 sales do include some type of carry back. With the sale of smaller businesses, a lot of consideration is given to some type of seller’s financing and without it; the business becomes very difficult to sell. Seller financing is also a big confidence builder. Buyers feel that if the seller is willing to finance part of the acquisition, he or she must be confident that the business can not only afford the payments, but also provide a good cash flow for the buyer. We have assisted clients with other creative ways of having access to capital such as pulling funds from 401K and IRA’s. It is an alternative way of making those funds working for you without triggering withdrawal penalties. Due to the layoffs and downsizing being done by Corporate America, we have noticed that the current economic situation is creating a lot of first-time “corporate” buyers who are now investing in smaller businesses.
The good news is that businesses are still being sold and during troublesome times, other opportunities are created. Savvy entrepreneurs are recognizing those opportunities and are buying.
CW Wilson
Thursday, August 19th, 2010
Is the federal first time buyer credit over?
For most people the answer is yes, originally you had to be in escrow before April 30th 2010, and close within two months or June 30th. The only thing that has been extended is the closing date, which is now September 30th, but you still had to be in escrow before April 30th.
The other exception is for certain military personnel who were stationed away from home who have an extra year (May 1, 2011) to claim the credit. To qualify you had to have been on qualified extended duty for at least 90 days during the period beginning after December 31st 2008 and ending before May 1st 2010. Also the qualified extended duty had to be at least 50 miles from applicant’s main home.
What about California’s Homebuyer Tax Credits?
California has two tax credits, one for first time buyers, and the other for people buying brand new homes. The credit amount is 10,000 to be used evenly against your tax liability for three years starting the year you’ve purchased the home. Unlike the federal tax credit, the states credit can only reduce your tax liability, it is not a credit if your tax liability is 0, and any unused portion of the credit will not rollover into the next year. Also unlike the Federal credit, California has placed a cap on the amount of funds that can be used at one hundred million for both first timers and new home purchasers. Unfortunately, as of 7/23/10 the state has received over 20,000 applications for the first time credit so it’s safe to say there are no more available funds for that credit. As of 7/20/10 only two thirds of the funds for new home buyers have been secured so it is not too late to apply for this credit. Once you close escrow on your new home the buyer and seller must complete Form 3549-A and it must be faxed to the Franchise Tax Board at 966.855.5577 along with the final settlement statement (generally the buyers HUD-1).
Residential Energy Credits
There are two types of credits for improving the energy efficiency of your home. One is the non-business energy property credit which allows you to claim a credit of 30% of the cost of certain energy efficient property or improvements you placed in service. This property can include high efficiency heat pumps, air conditioners, and water heaters. It may also include energy efficient doors, windows, insulation materials, and certain roofs. Make sure to ask your contractor if the item you’re purchasing qualifies for the tax credit, as some “energy star“ labeled items do not. This credit caps at 1,500 for the tax years of 2009 and 2010, meaning if in 2009 you already spent 5,000 on qualified property and claimed the 1,500 credit on your 2009 return you can not claim any further amount on your 2010 return, however if you only spent 2,500 on qualified property and claimed a credit of 750 on your 2009 return than you still have an additional 750 left that you can claim on your 2010 should you spend at least 2500 in 2010.
The second credit is for qualified solar electric property costs, qualified solar water heater property costs, qualified small wind energy property costs and qualified geothermal heat pump property costs. The credit is also 30% of your costs, but there is no cap on how much of a credit you can claim on your tax return.
For both credit’s the improvements must be done on your principle residence in order to qualify.
Also of note, both credits only reduce your tax liability and will not contribute to a refund if your tax liability is zero.
Frank Edwards
Tuesday, June 29th, 2010
My business is the best it has ever been and you want to know whether or not I would consider selling my business? Give me one good reason why I’d even be contemplating it!
This is an all too frequent response that I have received over the years when talking to a prospective client whose business is doing extremely well. For most this is a normal reply but then you need to consider what your goals for the future are. Are you going to continue working until your dying days or do you plan to enjoy the fruits of all your years of hard work? A lot of you have already made plans to eventually retire, but selling your business in the height of its existence, especially when you still have many more years to go, is for many unthinkable.
So why consider selling when times are good? The answer is simple; maximum profitability!
What would be more valuable to a buyer seeking to acquire a business? A business that is able to make ends meet, or a business that has strong sales and healthy profit margins? This is not a hard one! Obviously a business that is doing very well holds a higher value in the eyes of an investor than one that is not. It’s a numbers game, as we like to say. If the profit and loss statements can clearly show that the profits are indeed there and that there are no onetime events like a short lived fad, then the potential buyer will not hesitate to offer a very fair price for your business. Another important factor is the confidence that the seller projects about their business by showing the buyer that he or she is more than willing to consider carrying a note on the business. Not only will this convince the buyer that he has a good opportunity here, but the seller can use the note as a tool to negotiate the best possible deal for him or herself, which could consequently provide for a higher price and tax benefits.
Many times the seller is so focused on the success of their business that they do not to see beyond their current short-term goals, and thus run the risk of missing the opportunity to maximize the profitability of their business. If your business is doing well and you have plans to retire sometime in the future, then let us help you figure out what your business might be worth, and at the same time, we can discuss what you could do to prepare your business for an eventual sale.
Lucien Pillai