Business owners considering the sale of their enterprise in Washington State generally need to resolve any outstanding tax issues. For example, if your business has past-due tax liabilities, a potential buyer may not want to take on those debts.
The Internal Revenue Service makes available various strategies that may allow you to reconcile complex tax matters before deciding on the future of your business. Before contacting the IRS, however, you may wish to gain an understanding of the legal issues related to your particular case.
How does a federal tax lien look to a potential business buyer?
As noted on the IRS website, if the agency filed a federal tax lien against your business, it has the right to its assets, which includes any accounts receivables. A potential buyer interested in your company, however, may view your receivables as the most valuable asset listed on your balance sheet.
To purchase your business, a prospective owner may need to pay the lien. If he or she does not wish to do so, it may affect your asking price or lower the buyer’s offer. A buyer may also require the seller to resolve a lien or other possible collection efforts that the IRS may attempt to employ in the future.
When do I need to disclose tax issues to an interested party?
Interested buyers and lenders who supply them with acquisition loans may conduct a public record search to see if your entity has any existing liens or judgments. You may need to prepare for a lengthy and detailed due diligence process before listing your business as available for a sale. A buyer has the right to inspect your business’s books and records before making a decision or an offer.
