Is Your Tax Strategy Devaluing Your Business?

As business owners, we all know owning a business is not about how much money we make; it’s about how much money we take home. Realize it or not, there is an unwanted, silent partner in our business taking a large percentage of the profits…. taxes.

Most business owners do not want to pay any more in taxes than is absolutely necessary. As business brokers and business owners, we understand this very well. However, the issue is some business owners choose to hide profits. As such, these are a few common examples:

  • Not reporting revenue
  • Running personal owner or family expenses through the business
  • Having non-working family members on the payroll

What is the real cost of these strategies?

Hand holding a large stack of $100 dollar bills, tax strategy


Let’s look at a company making $300,000 in profit per year. In the owner’s uppermost tax bracket, the owner is paying 24% in income taxes (Married Filing Jointly $172,750 to $329,850 in 2021). A business owner in this tax bracket would save $2,400 in income taxes for every $10,000 that were not shown on the tax return. That sounds good – but what is the true cost of doing this?


The Result:

Reporting and paying the taxes on $10,000 in profit would have likely increased the selling price of the business by $30,000 to $40,000. This increase in selling price would take a person 12 to 16 years to recoup this money when you compare the tax savings to the future value of the business! This is just a simple example; there are companies that have not reported hundreds of thousands of profits to minimize taxes. While these companies are making a really good business, they are not sellable.

These are some tax strategies you CAN implement that will not decrease the value of the business:

  • Contribute larger amounts to your retirement accounts
  • If you own the real estate and it will be sold with the business, own it under a real estate holding company and you can either:
    • Pay a higher than market rent rate
    • Run your non-business expenses through the real estate holding company and when we sell your business, buyers and lenders only look at the operating company


Person moves the king piece in a game of chess, tax strategy


It is important to have a good CPA that is willing to think outside the box on how to structure your company, your expenses, and your profits. A CPA is critical to minimizing your taxes and protecting the value of the business.


Want to know the value of your business? Call us now for a free no-obligation consultation at (972) 219-6961 or contact us.