Share This Info:  

Disclosing Unreported Income When Selling A Business


When selling a business some owners think it is to their benefit to disclose to potential buyers that they are hiding additional income from the taxing authorities. However, experts disagree and say that disclosing this information may actual hurt your chances of selling your business.


Comments Regarding This Video Or Podcast

3/8/2017
Contributor: Timothy Cunha JD: Business Broker, SF Bay Area   Post ID: 1222

Although cash income is less common with the trend toward payment by credit and debit card, cash income can still be a significant factor. Needless to say, all cash income should, by law, be reported, even though often enough it is not.

Sellers should not be disclosing unreported income to buyers. Period. As a business broker, I will not make any representations to any prospective buyer about any unreported cash income.

A business valuation cannot be based on unreported cash income. Generally it is unverifiable. It would need to be discounted by the taxes that would be paid by an honest business owner. It may not be sustainable by a new owner who does report the income because often the customer paying cash doesn't want their possession of cash potentially known to tax authorities. And, in order to take over a business and continue to operate it with unreported cash income, the buyer is effectively saying, "On the day of closing I agree to become a felon."

And, lastly, but very importantly, when a business owner says, "Look I've lied, I've cheated, I've stolen from the government, because I don't report my cash income or pay my fair taxes on that income," why should anyone believe anything else he tells them? He's already established that he's dishonest.

1/24/2017

This is where planning for the sale is so important. If you have income that is not reported but wish to use this income towards bettering your valuation you need to be able to prove it. The practice of not reporting income is not recommended and will likely reduce the Buyers Pool for Marketing your business; at the desired price. However, if well documented and verifiable you may be OK.

Specializing in the laundry business, this is an area we deal with frequently. Although, this is somewhat expected by Buyers looking at laundries. Back to planning, it is advisable to have a 2 year plan to sell your business, if possible. The more time for preparation the better. During this period you should carefully track all income and all appropriate operating expenses. Keep all supporting documents available; especially if you intend on still not reporting. (preferably start reporting it). Sometimes, depending on communication limitations, it is good to have Buyer and Seller sit down and explain the clouded areas between themselves.


  Helpful Resources To Assist In Selling And Buying California Businesses
Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

Helen Yoo: Escrow & Bulk Sale Services - Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.

Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses

Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.

Diane Boudreau-Tschetter: Escrow And Bulk Sale Services

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Elizabeth McGovern: Escrow Services - SF Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.


  Related Articles, Events, Blog Posts, Discussions, Videos, Interviews
Should I Buy A Business That is Losing Money? Feedback From Top Advisors

Are businesses worth taking a look at when they are losing money? Multiple Advisors & Business Brokers weigh in on this topic and say yes! (but be careful) on a BizBen Discussion. Some great feedback on this topic will make potential business buyers (and money losing sellers) want to read this info!

Top 100 List: This Week's Top Motivated Business Buyers & Their Requests!

If you're trying to sell a business - check out this week's top 100 business buyers - one of these buyers may be looking to buy your type and location of business! This list is updated weekly - make sure you check it frequently! Are you searching to buy - get on this list and reach seller direct!

Live Podcast: Broker Series - An Interview With Ken Oppeltz, Broker - 11/7

Ken Oppeltz, CBI, CBB, M&AMI will join Peter Siegel, MBA (BizBen Founder) in an hour long informative online session on another BizBen Podcast - Broker Series interview. Ken is with Vanguard Resource Group - a San Diego County premier business broker & merger and acquisition company.

8 Tough Questions You Most Likely Will Be Asked When Selling Your Business

When selling your small business, you'll be bombarded with questions - from the brilliant to the ridiculous. You need to be prepared. Here are some of the key questions you can expect to be asked. Tim Cunha (SF Bay Area Business Broker at 650-600-3751) reviews many of these possible questions.

Financing A Business Purchase With Limited Or No Real Estate Collateral

In my experience working with the "right banks and financial institutions" repayment ability sometimes overrules collateral pledged by someone needing financing for a business purchase or a down payment. Peter Siegel, MBA (Business Purchase Financing Expert) at 866-270-6278 shares his experience.

What Steps Do I Take When Closing A Business That Doesn't Sell And I Close?

Every business broker knows that a listing taken is not a listing sold, in fact the ratio of listed vs. sold could be discouraging if you really thought about it. Joe Ranieri (Orange County Business Broker) discusses what you should do if you finally have to close the doors and call it quits.

Tips When Using Escrow Bulk Sale Services When Buying Or Selling A Business

The final part of the business for sale transaction is the escrow and bulk sale process by Peter Siegel, MBA (Business Purchase Financing Expert, ProBuy & ProSell Program Advisor) answers questions and describes the escrow and bulk sale process. Peter can be reached direct at 866-270-6278.

Business Purchase Financing Help - Expert Tips For Faster SBA Loan Approvals

Business purchase financing advisor Peter Siegel, MBA shares his views on SBA loan financing. He explains the nuances of the SBA loan process when considering business purchase financing or getting pre-qualified. Reach Peter Siegel, MBA direct at 866-270-6278 regarding SBA & Non SBA Loan Financing.

See All News, Tips And Events

Business Purchase Financing SBA Loans
Southern California Legal Services For Buyers And Sellers
Redwood Escrow Bulk Sale Services
Willard Michlin Due Diligence Services
Facebook
Twitter
Linkedin
Google Plus You Tube
Vlogs and Podcasts
BizBen Blogs And Articles
New Postings Reports On BizBen Sign Up
BizBen ProSell Program
California Educational Events Buying And Selling Businesses
Business For Sale California Stats

BizBen - Where California Deals Get Done! 888-212-4747
7172 Regional Street #364 · Dublin, CA. 94568
BizBen · Copyright © 1994 - 2019, All Rights Reserved

               Vlogs and Podcasts  
Join Us On Social Media - Content Updated Daily
Sign Up Today - For Our FREE BizBen Weekly Email Newsletter
Includes The Best Info On Buying, Selling, Valuing, Financing California Businesses:
Articles, Blog Posts, Podcasts, Videos/Vlogs, Discussions, Q&A, Workshops, Webinars,
Resources. Watch For An Email Confirmation After Signing Up Above. Thank you.
Clost Login


Please confirm your registration by clicking the link we've sent to .

If you can't see it, please check your junk mail folder.

If you have any problems registering, or need assistance with your new BizBen User Account please phone BizBen Customer Support at 888-212-4747.



First Name:*
Last Name:*
Email Address:*
Confirm Email:*
Create Password:*
Confirm Password:*
Phone:
(   
 


You Are A:
Individual
 
Intermediary
 

Email Address:
Password:
 
Search BizBen.com

500 New & Refreshed Detailed Postings Daily
Over 2500 Resources Available On BizBen
Since 1994. Where California Deals Get Done!
Podcast: E-2 Visas: Buying & Selling CA Businesses: Attorney Explains Al...
Read More News
Is Crowd Funding A Viable Way To Raise Money To Purchase A Small Busines...
Read More News