The decision to work with a business broker Valley Center is a wise one. The broker will ensure that you never make mistakes that cost your peace of mind or money during or after the sale. In addition, the broker will be an experienced adviser that will ensure everything is done the right way from start to finish. Even so, before you hire a business broker in San Diego, it is good to educate yourself on their commission.
As you may already know, a business broker Valley Center is mainly paid a commission. This is a percentage of the final selling price of your business. The typical rate is between 10% and 15%. If your business has a value of less than $1,00,000, the broker may charge a flat fee of between $10,000 and $15,000. This is, however, not all there is to know about a business broker’s commission. Here are some important points you must keep in mind.
It is negotiable
The broker’s commission is not set by law. What this means is that it is negotiable. What you end up paying the broker will be whatever you and the broker agree on. For example, if your business is valued at $700,000, you can negotiate 10% on the first $500,000 and 8% for anything above $500,000. Most brokers are quite accommodating. If you argue your case well, you can end up paying far less.
It is tax-deductible
If they were voluntary, we would all avoid paying taxes. When selling your business, you want to keep as much money as possible. For starters, you will want your business broker in San Diego to work out a plan that keeps you from falling into a higher tax bracket. The next thing you want to do is get as many deductions as possible.
The good news is the commission paid to business brokers is tax-deductible. After paying the commission to your business broker, you should ask your accountant to help you get a tax deduction. It is good to ask your accountant to help allocate the ultimate sales price between depreciable and amortizable assets. Consulting your accountant before closing will help you understand the tax implication of selling your company.
The buyer pays their broker
Last but not least, unless the buyer hires the broker and your broker agrees to co-brokering, the buyer will pay their broker’s fee. This is usually a flat fee. The buyer pays half at the time of hiring the business broker and the other half at closing.
These are the key points you need to understand about the commission paid to a business broker Valley Center. Last but not least, you must understand that the commission charged will depend on what is customary in the region your business is based in and what the brokerage firm has established.