When your funeral home has been in the family for years, it can be tough to think about anyone else taking it over. However, selling to another family member can be complicated and require special considerations. If you are planning on selling your funeral home to a family member, here is what you need to know before you do so.
Get a Professional Valuation
A valuation is the best way to get the professional objective opinion of an expert on what your funeral home is worth. This gives you an idea of what you could get for selling your funeral home, and it will set the fair value in the greater market. It’s a nice way to see that all of your hard work has paid off, and it will also give you an idea of what you should be taking from the business in order to move to your next phase of life.
Are You Selling to Retire?
Many families end up selling a funeral home to another family member so that the current owner can retire. The amount that you want to profit on the sale might depend on how much you currently have saved up for retirement. Work with your financial advisor to determine the amount that you need and the appropriate amount to sell the business for. Keep in mind that selling your funeral home to another family member can lead to interpersonal drama, so you should always work with an outside expert to make sure you are getting what you deserve and your loved one isn’t overpaying.
Explore Your Options
In other cases, when you are selling your funeral home the buyer would pay upfront or in set installments over a period of time. When family is involved, that is not always the case. Many families will set up less formal agreements that allow the buyer to pay a certain amount as cash flow changes. Family members can benefit from Applicable Federal Rates, or lower interest rates solely for family members who loan money to other family members, if you are interested in loaning money in this capacity. As long as you are negotiating the loan using the AFR at minimum, the IRS will consider the sale to be a legitimate business transaction.
Financial Planning for Every Death Care Services Industry Business from MKS&H
MKS&H provides tax and accounting services to businesses of every size and in every industry. Our team can help your business gain confidence in your important accounting reports and make better, more educated financial decisions. Contact us today for a consultation.