By Jonathan Schmidt / Guest Column
Whether or not you’re considering buying a zoo or another business to fulfill your bucket list, 2017 will see the buying and selling of multitudes of new businesses. Will you be one to invest in a privately-owned business? Or, is now the right time to divest yourself of a business?
Word to the wise, unprepared or unprotected – the process of buying or selling a business can indeed be a zoo. Here is a list of things that might help the transaction go smoothly:
This is rather straightforward. The only true value assessment that matters is the lowest amount that a seller is willing to accept for the business, or the highest amount that a buyer is willing to pay for it at that moment.
Along with business valuation, a deal structure proposed for an acquisition or a sale should be carefully considered. The following are some of the elements that must be carefully explored, sorted through and agreed upon:
- Purchase price and what is included or excluded
- Form and timing of payment(s)
- Whether the purchase or sale consists of assets or shares
- Potential intellectual property rights issues
- Non-compete stipulations
- Existing contracts or agreements related to the business
- Existing employee matters
Starting a business in Iowa
To start a new business in Iowa, first you must find out if the goods or services you will be selling are subject to the state’s sales tax. You can find an Iowa Sales and Use Tax Information booklet at http://bit.ly/2iBT9hj.
You must register for a permit if the sale of goods or services is taxable. Seek legal assistance to register your business with a combined business application form, which will allow you to register for one or more of the following:
- Sales tax
- Use tax
- Automobile rental tax
- Withholding tax
Also, learn about Iowa’s local option tax which is in addition to the state rate. Iowa’s state sales tax rate is 6 percent as of July 1, 2008.
Not every business needs a Federal Employer Identification Number (FEIN). The following are some of the circumstances in which you will need a FEIN:
- You are a sole proprietorship and have employees
- Your business is a corporation
- Your business is a partnership
- You sell alcohol, firearms or tobacco
- You need to pay federal excise taxes
If you will have employees, you must also register to be an Iowa withholding agent through the Iowa Department of Revenue, and have each employee fill out both a federal and Iowa W-4. You can find information necessary to determine how much federal and state income tax to withhold from your employees’ paychecks on the irs.gov and taxiowa.gov websites.
If you are a sole proprietor or in a partnership, you must also be sure to pay estimated income taxes for yourself by making estimated payments for both federal and Iowa tax.
In addition, you will need to contact Iowa Workforce Development to establish your Iowa unemployment insurance tax account and file your registration form and unemployment insurance quarterly reports.
Every deal is unique with distinctive opportunities and potential pitfalls. It may seem overwhelming, but remember businesses are bought and sold thousands of times every day. Leave the zoo to the animals and arm yourself with a legal professional on your side to navigate your success.
Jonathan Schmidt is an attorney and partner with Nazette, Marner, Nathanson & Shea LLP. He practices in areas of business and litigation. He can be contacted at firstname.lastname@example.org or www.jschmidtlaw.com.