Buying & Selling a Business

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Buying & Selling a Business

In a merger , what is the Pooling of interests accounting method ?

Asked Friday, January 12, 2001 by an anonymous user
Pooling of interests is an accounting method for reporting acquisitions accomplished through the use of equity. The combined assets of the merged entity are consolidated using "book value", as opposed to the Purchase method, which uses "market value". The merging entities financial results are combined as though the 2 entities have always been a single entity.
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Buying & Selling a Business

Is there a website to contact an appraiser ?

Asked Monday, January 08, 2001 by an anonymous user
Yes. www.appraisers.org. The American Society of Appraisers (the “Society”) is a multi-discipline non-profit international organization of professional appraisers (valuers). The mission of the Society is to foster the public trust of our members and the appraisal profession through compliance with the highest levels of ethical and professional standards. The American Society of Appraisers:
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Buying & Selling a Business

What is the bulk sales tax?

Asked Saturday, December 09, 2000 by an anonymous user
Bulk sales tax is a tax paid by the buyer on certain tangible assets including furniture and fixtures.
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Buying & Selling a Business

How do you allocate the purchase price of a business to various assets?

Asked Saturday, December 09, 2000 by an anonymous user
The CPA usually is involved with the allocation of the assets to the purchase price. When a business is acquired, the business being purchased can include various assets including machinery, inventory, fixtures and intangible assets. The allocation of these assets is important because certain assets can be depreciated or written off faster than others.
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Buying & Selling a Business

What does it mean when a seller

Asked Saturday, December 09, 2000 by an anonymous user
Quite often, a seller of a business is willing to hold a note for a portion of the business purchase. When the seller holds paper or this note, the purchase of the business is facilitated since the buyer does not have to go to traditional lending sources.
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Buying & Selling a Business

What is a secured creditor?

Asked Saturday, December 09, 2000 by an anonymous user
A secured creditor is a creditor that has filed a UCC form against certain assets which says in the case of your default, he has first rights to those assets. In real estate a mortgage is filed to secure the creditor. Banks always want as much security as possible. Try never to secure a purchase of a business with your home.
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Buying & Selling a Business

Should I purchase the seller's corporation ?

Asked Saturday, December 09, 2000 by an anonymous user
Generally speaking, when we are dealing with privately held businesses, it is not recommended to acquire the corporation of a seller. When you acquire the seller's corp, you are inheriting the seller's hidden liabilities that could exist including sales tax, payroll taxes etc. Also when you purchase the sellers corporation, you have nothing to write off because you are buying "stock". For this reason, most privately held businesses are structured as asset acquisitions.
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Buying & Selling a Business

When I buy a business , how is Goodwill determined ?

Asked Wednesday, December 06, 2000 by an anonymous user
Goodwill is the difference between the selling price and the estimated assigned values assigned to all the assets not including the goodwill. The seller's asking price will be broken down into its various components such as equipment, inventory, furniture, accounts receivable, miscellaneous assets, assumed liabilities and the difference will equal the goodwill.
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Buying & Selling a Business

Within the many business valuation methods , what is the Income Approach ?

Asked Wednesday, December 06, 2000 by an anonymous user
Valuing a business is a tricky process with the end result being to ascertain the fair market value of the business. Fair market value is the amount at which the property would change hands between the buyer and seller when neither are under compulsion to buy and when both have reasonable knowledge of relevant facts concerning the business. The income approach is generally used when valuing small closely held businesses. When using this approach, you can determine the value of a business using one or more methods where you convert the anticipated benefits of owning the business. To find the fair market value under the income approach, divide the after tax value by the capitalization rate,(capitalization rate is the Net operating Income divided by the purchase price expressed as a percentage). Speak to your local CPA or business broker for more information about valuing a business and on your pending purchase or sale.
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