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Lastly, let’s take a look at a few examples of legitimate “one-time expense” add-backs: These types of expenses obviously would not transfer over to the buyer.
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He or she may also have a very high end and/or expensive health insurance plan for his or herself. Often, the owner of a small business will have a life insurance policy on himself that is paid for through the business, sometimes referred to as a “key-man policy”.If the company has a loan that you are not taking on as the buyer (meaning the seller is responsible for that loan, and it is not transferring over to the buyer), this interest would be a legitimate add-back.Next, let’s cover some examples of add-back expenses that’s related to the current owner and will not be transferring to the buyer: You or your CPA will have to look at each of those expenses to verify that they truly are not company related expenses. Note: This can make the due diligence process much more difficult if there are a lot of these items because you can’t just take the seller’s word for it.The owner simply buys things for his or her personal use and runs them through the company as an expense, which makes it an “expense” that you as the new owner would not incur. This is extremely common when looking at small business opportunities.Personal expenses being run through the company.
What is another word for add ons free#
Meanwhile, feel free to contact me via our free business buying support forum if you need advice on this topic on a specific deal. I will write an entire article about just this part of the topic in the future because it varies deal to deal and is often a heated topic in negotiation. in other words, the new owner isn’t going to be expected to work for free. I personally disagree with this, because there is some cost of replacing the owner’s work, even if the new owner is going to be doing that job….