If you see an acquisition or sale on the horizon, make sure you identify and quantify all areas of exposure so you can address them on the front-end and ensure you get an accurate valuation.
If you are planning to sell your company or are looking for new investors, it is wise to engage someone knowledgeable in tax diligence matters to perform sale-side tax diligence so that you know your exposure on the front-end and have an opportunity to remedy previously unknown tax liabilities. Such diligence also increases your credibility with prospective buyers because of your foresight and transparency.
On the flip side, if you are acquiring an entity make sure you don’t overlook sales and payroll taxes—they definitely need to be added to your due-diligence checklist. Even if you do not want full-blown tax diligence, make sure you are looking at these two areas.
Whether buying or selling, the key to successful tax due diligence in any acquisition is to make sure you are working with a qualified transaction specialist who knows what to look for and how to work through previously undiscovered tax problems. Such specialists not only can save time, money and headaches, but also bring credibility and objectivity to the process.
Jayme Parmakian, CPA, LBMC Shareholder, and tax services leader in LBMC’s transaction advisory services division.
LBMC tax tips are provided as an informational and educational service for clients and friends of the firm. The communication is high-level and should not be considered as legal or tax advice to take any specific action. Individuals should consult with their personal tax or legal advisors before making any tax or legal-related decisions. In addition, the information and data presented are based on sources believed to be reliable, but we do not guarantee their accuracy or completeness. The information is current as of the date indicated and is subject to change without notice.