Summer 2021
The insights and opinions expressed herein are those of the authors and do not represent professional counsel nor an endorsement by the IBBA.
Halfway There
by Lisa Riley, 2021 IBBA Chair
A Q u a r t e r l y D i g i t a l P u b l i c a t i o n o f t h e I n t e r n a t i o n a l B u s i n e s s B r o k e r s A s s o c i a t i o n
T H E B E S T I N S I G H T S O N B U Y I N G A N D S E L L I N G S M A L L B U S I N E S S E S
Plus Insights on:
+ Proposed Tax Laws
+ Deferred Sales Trusts
+ Capital Gains Tax
+ Legislative Updates
The best insights on buying
and selling small businesses
In this Issue
LETTER FROM THE CHAIR
PROPOSED TAX LAWS
WHAT THEY MEAN TO BUSINESS BROKERS!
MORE THAN JUST TAX MITIGATION: EVERYTHING YOU NEED
TO KNOW ABOUT DEFERRED SALES TRUSTS
AN ALTERNATIVE APPROACH TO CAPITAL GAINS TAXES
DEAL EXPERIENCE:
A BROKER’S EXPERIENCE WITH A LEGAL DISPUTE
Q&A WITH IBBA MEMBER STEVE BOYLAN
LEGISLATIVE UPDATES
BLUE SKY: HOW TO HANDLE THE BLUE SKY VALUE DEBATE
WITH YOUR SELLER - A MODERN-DAY TALE
12
17
19
26
28
29
Dear Friends,
It’s hard to believe we’re approaching the halfway mark for 2021. Hopefully this year
has brought you health, happiness and prosperity so far. For some, I’m sure the time
can’t go by quickly enough as we all still yearn for the time when things are ‘normal.’
Yet, all the time we have is precious, even when it’s imperfect. In fact, decisions on how we invest our
time are perhaps our most critical and ultimately define what kind of outcomes we achieve in life and
business. Now that we’re halfway through the year, it’s time to reflect on how we’ll spend our time for
the next 6 months.
You might need to invest time with family, on personal well-being, or on a long overdue vacation.
As Business Brokers we o�en overlook or postpone these valuable activities that make us be�er
in all aspects of our life. Maybe you’re good on the personal front, but really need to put time into
working on your business instead of just in your business. This would include things like operational
systemization and standardization or vowing to build your listing pipeline, so your business doesn’t
feel like a roller coaster. Perhaps building your skill in a key area would be time well spent. Deciding
what things to NOT do is equally important to optimizing our time.
The IBBA exists to help you, a Business Broker, succeed and, in turn, help you support the critical small
business communities across the world. The association must also then endeavor to spend its time
wisely, maximizing the output for each of our 1,566 members. Sometimes, deciding what 1,566 people
want and delivering on it is a challenge, yet we do our best to align our initiatives with your feedback.
SUMMER 2021
Halfway There
Lisa Riley, CBI, CM&AP, CBB | Delta Business Advisors
For example:
You asked for professional sales training. We’re delivering a Summer Sales Symposium June 9-10
featuring Sandler Sales training techniques for Business Brokers, followed by a 4 hour, live Sandler Sales
training course at the October Conference. I’m looking forward to both… and hope I see you there!
You wanted virtual Summits. Not le�ing COVID stand in your way, you still wanted access to critical
recasting and pricing instruction, so we switched to virtual Summits, hosting 4 sell-out sessions and
training more than 100 people. Our next one is being held in September - check it out here.
You asked for CBI Exam prep. Normally the CBI Refresh course is held in conjunction with the
Conference. With so many people wanting to take their CBI Exam now, we offered a sold-out virtual
option in May, and already have requests to schedule another session. Look out for updates!
You asked for new virtual learning opportunities. For the first time, we’re bringing you Course #219:
Effective Systems and Processes (ESP) for Consistent Professional Results (CPR), virtually on July
15th. As always, register early since we do limit class sizes for optimum student interaction and keep
checking the schedule year-round for new virtual learning opportunities.
You asked to get together safely. With the Conference now moved to October, we’re back on planning
The Business Broker Event of the Year! Get ready for an exciting and energizing line up of speakers,
workshops, mastermind sessions and networking – we can’t wait! Look for registration to open end of
July. Want a heard start? Check out Agenda At A Glance or Book Your Hotel Room.
LETTER FROM THE CHAIR
SUMMER 2021
We have some other exciting projects in the works, but by far most of the IBBA’s time this year has
been spent on fulfilling the demand for education and interaction across a variety of subjects and
disciplines, delivered in a remote environment. Kudos to so many of you for investing in your skills
and success!
Thanks for taking the time to read this article and our wonderful new IBBAInsights Magazine.
And remember, the bad news is time always flies…but the good news is, you’re the pilot.
Looking forward to seeing all my familiar friends, and making new ones, in October!
Best regards,
LISA RILEY
2021 IBBA Chair, CBI, CM&AP, CBB | Delta Business Advisors | lisa@deltabusinessadvisors.com
LETTER FROM THE CHAIR
IBBA is pleased to welcome
174 New Members this year!
The information expressed is on behalf of the IBBA
Members and/or Tax Experts as contributors to this
section and does not represent an endorsement
by or legal advice from the IBBA.
Proposed Tax Laws
What They Mean to Business Brokers!
By Lou Vescio, CBI, M&AMI
Coastal Business Intermediaries, Inc.
Anyone reading or watching the news in the past few months has heard about the new tax laws
proposed to make the rich pay their fair share. O�en called the billionaire’s tax, it sounds like it will
not reach us average Americans. But, unfortunately, this tax on capital gains will impact many of our
not-so-wealthy business owners when they sell.
A good synopsis of the capital gains tax proposal is discussed in this recent article from the Tax
Foundation, the nation’s leading independent tax non-profit since 1937. This is a must-read article
for every business broker and M&A advisor.
WHAT BUSINESS BROKERS SHOULD KNOW!
If you sell a business that will yield capital gains of $1 million or less, the proposed tax law will not
apply, but once the capital gains exceed $1,000,000, the tax increases from 23.8% to 43.4%, an 83%
increase. When you combine the proposed federal tax rate with the various state tax rates, the total
tax is over 50% in thirteen states and the District of Columbia. California topped the list with a
current total tax rate of 56.7%.
Unless the business you are selling has a great deal of inventory or capital equipment that is not
significantly depreciated in an asset sale, goodwill is probably the largest asset class and goodwill is
taxed as a capital gain. In a stock sale, it is likely to all be taxed as a capital gain.
Here is a chart of how the tax increase will impact business Sellers with $2,000,000 to $11,000,000 in
capital gains. This range was selected as many of the 2020 IBBA award winners sold businesses in
this range. The analysis assumes a 17% tax on the first $1,000,000 in capital gains, but this could vary
from client to client.
Capital Gain
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000
$11,000,000
Tax on first $1M
$170,000
$170,000
$170,000
$170,000
$170,000
$170,000
$170,000
$170,000
$170,000
$170,000
Tax on Balance
$238,000
$476,000
$714,000
$952,000
$1,190,000
$1,428,000
$1,666,000
$1,904,000
$2,142,000
$2,380,000
Total Tax
$408,000
$646,000
$884,000
$1,122,000
$1,360,000
$1,598,000
$1,836,000
$2,074,000
$2,312,000
$2,550,000
Total Tax Rate
20.4%
21.5%
22.1%
22.4%
22.7%
22.8%
23.0%
23.0%
23.1%
23.2%
Capital Gain
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000
$11,000,000
Tax on first $1M
$170,000
$170,000
$170,000
$170,000
$170,000
$170,000
$170,000
$170,000
$170,000
$170,000
Tax on Balance
$434,000
$868,000
$1,302,000
$1,736,000
$2,170,000
$2,604,000
$3,038,000
$3,472,000
$3,906,000
$4,340,000
Total Tax
$604,000
$1,038,000
$1,472,000
$1,906,000
$2,340,000
$2,774,000
$3,208,000
$3,642,000
$4,076,000
$4,510,000
Total Tax Rate
30.2%
34.6%
36.8%
38.1%
39.0%
39.6%
40.1%
40.5%
40.8%
41.0%
CURRENT TAX RATE
PROPOSED TAX RATE
SUMMER 2021