Discussion:Purchase a Practice

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

Discussion Forum Index --> Business Growth Community --> Purchase a Practice

Naomi3800 (talk|edits) said:

24 October 2013
Hi everyone,

I get an offer to purchase a practice. The owner wants me to buy the company stocks. I have several questions about how to handle the purchase. Would you please advise me?

1. The owner said I can purchase the company stocks and amortize the goodwill. I know the buyer can't amortize the goodwill as tax deduction in the stock purchase. Why did she say that? Did I miss any tax codes? Which tax codes can I use to purchase the stock and also get the goodwill amortization?

2. Should I use Sec 338(h)10? If yes, how to implement it on buyer side and seller side?

3. The owner is sick and I am afraid that she may did a lot of mistakes in the last year of her practice. Is there anything I can do to limit my liability if I purchase the company stocks?

Thank you for your help. Any comments and inputs are welcome and appreciated!

Kevinh5 (talk|edits) said:

24 October 2013
You can certainly limit your liability by doing an asset purchase rather than a stock purchase. With a stock purchase you will inherit ALL of the company's problems: late or missing 941 payments, customer claims, creditor claims, lease, etc. Do you even know her compliance history?

There is no need to do that. If you WANT to purchase this practice, make an offer for an asset purchase.

OR, make an offer based on a referral fee for the clients who come to you.

If the owner has been ill the past year and you worry about mistakes, then a bunch of the clients may have already left after this year's tax season. With a referral fee arrangement you only pay for clients who actually come to you.

Bobw12 (talk|edits) said:

25 October 2013
Kevin, by asset purchase I assume your talking about purchasing FF&E and not clients, is that right? I've thought about adding clients by a referral fee arrangement. Are they subject to the normal non-disclosure arrangements and other provisions normally found in a purchase agreement? What is a typical referral fee arrangement based on? Something like a percentage of collections over a certain time period?

Kevinh5 (talk|edits) said:

25 October 2013
no, you would purchase the clients in an asset purchase also. 'Customer list' and 'going concern value' intangibles.

A referral fee arrangement is whatever you two agree to.

For example: 25% of collection for the first four years for returning clients. You therefore pay full price only for the clients who come (and stay). If they stay only one year you still make money on the work you did.

Dusty2004 (talk|edits) said:

28 October 2013
Would anyone have a sample letter from both the buyer and the seller of a tax business they would be willing to share?



To join in on this discussion, you must first log in.
Personal tools