Georgia Pharmacy Transactions and Capital Gains Tax

By Brad MacLiver
Authorship and profile at Google


How can a capital asset affect a Florida pharmacy business owner wanting to sell their business, and what is it?

Looking solely a Georgia pharmacy business and not the personal property of the pharmacy owner, if the pharmacy owner wanted to sell their pharmacy business, it then is a “capital asset.” Now the pharmacy owner would look at the disparity in the cost they paid for the pharmacy business (the basis), and the monetary figure the pharmacy business sells for, either for loss or gain, and this is deemed a “capital gain or loss” by the U.S. government, it has to be stated and can be taxed.

Capital gains may also be identified as Investment income due to its relation to real assets, such as property, intangible assets such as donations, and financial resources.

Finding financing for a potential pharmacy business buyer will be increasingly more difficult and the amount of cash available will be less with the current economic down turn, while selling a Georgia pharmacy business for a net profit will become increasingly more problematic. Now couple this with the possibility that the seller of the pharmacy business might need to reduce the asking price so buyers have the opportunity to get financing, and then, still pay an increased tax percentage.

How can an owner of a Georgia Pharmacy business combat these issues? There are some good tools and strategies out there, but first the pharmacy owner requires a specialist in the pharmacy business industry that is knowledgeable in these strategies and tools. Washburn & Associates are these specialists that are keenly aware of the practice of selling a Georgia pharmacy for the highest profit available, while paying the least in taxes.

One tool is the “Charitable Remainder Trust” or CRT; this used to assist with the capital gains tax burden.

Now, what is a Charitable Remainder Trust? Legally explained as “Split Interest Trust,” which are used because to the mix of charitable donations and personal financial positions; CRT’s may enhance the pharmacy business owner’s finances, and allow for charitable giving, while decreasing tax liabilities.

A CRT is created from charitable donations when a pharmacy owner donates from their own assets, such as real estate, cash, etc and is donated to this special type of Trust. The trust is then put in place for a specific time period or until the donor’s death; during this time the pharmacy owner may collect income and if desired, buy life insurance from the Trust’s assets, and without state tax liability to provide for their designated heirs after they (the pharmacy owner) are gone. CRT’s are for use by financial specialists in the pharmacy business industry, such as Washburn & Associates, to raise the pharmacy owner’s assets and charitable donations by understanding the U.S. government’s strict and nebulas tax laws revealed in Internal Revenue Code 644, which states when and how a CRT can be set up.

Georgia pharmacy business owners need to receive the greatest amount of cash for their pharmacy business. By utilizing Washburn & Associates as their pharmacy business industry specialists, Georgia pharmacy business owners can rest assured they would garner the best from their business investment.

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Buy-Sell Agreements for Pharmacy Owners in Georgia

By Brad MacLiver
Authorship and profile at Google


Buy-Sell Agreements for Pharmacy Owners in Georgia

When a GA pharmacy is owned by two or more people the stockholders/partners should have a Buy-Sell Agreement. A buy-sell agreement is a written document that provides the procedures and governs the future sale of the Georgia pharmacy business.
               
Pharmacy buy-sell Agreements protect the interest of the parties who own the pharmacy in Georgia and directs the actions triggered by a stockholder leaving the business due to death, disability, divorce, dissolution, or retirement. The agreement will govern how and when the shares of the pharmacy business can be sold, or transferred. It will also provide guidance as to how the Georgia pharmacy will be valued along with the obligations of the remaining shareholders of the pharmacy.

Buy-sell agreements are important because the different elements of a future sell are predetermined and won’t need to be negotiated during a heated dispute, or during a grieving period. It provides both the stockholder and the family a comfort level that when the inevitable time comes for an exit strategy that the process was thoroughly thought out in advance.

There are disadvantages to not having a buy-sell agreement between pharmacy owners.  A disability can leave one partner working while another does nothing to add to the productivity.  Also, in the case of a death, one partner may be left with a nonproductive heir if there is no agreement, or a new partner with personality conflicts with the surviving partner may be inserted. The wrong partner could be a devastating situation for the Georgia pharmacy business.

Various types of buy-sell agreements exist, such as the Entity Buy-Sell Agreement, Cross-Purchase Buy-Sell Agreement, Wait and See Buy-Sell Agreement, and Disability Buy-Sell Agreement.  Buy-sell agreements are also called a Buyout Agreement or Business Will.

Potential elements of a Buy-Sell Agreement in GA:
1. The names, voting rights, and number of shares belonging to stockholders.
2. Guidance for the certified pharmacy valuation and purchase of a stockholder’s shares.
3. Mutual covenants and considerations.
4. Restrictions on the transferring, purchasing, or encumbering stock belonging to the company.
5. Necessary protocol in the event of a shareholder’s divorce/termination of a shareholder's employment.
6. Any obligations to buy or sell shares from an estate.
7. Purchase of insurance to ensure ability to meet obligations.
8. Purchase of stock paid in lump sum or by installments.
9. Remedies for breach of the agreement or default of payment.
10. Until transfer is complete the right to inspect books and records.
11. Amendments and notices for offers or legal matters.
12. Enforceability of the agreement, the binding effects, and arbitration procedures for disputes.
13. Process for dissolution, or liquidation, of the corporation.
14. Maintaining the premises during a transition.
15. Preserving representations and warranties.
16. The terms of transfer.
17. Bill of Sale.

To ensure that the money required is available, buy-sell agreements are often funded with a life insurance policy. Should the death of one of pharmacy owners occur, the life insurance settlement will provide the funds for the remaining pharmacy owner in Georgia to buyout the partners shares from the estate.

Life insurance coverage for each partner needs to be in place, because without a way to accomplish the purchase of the pharmacy shares the buy-sell agreement will not be functional. As the business grows and develops the amount of insurance need to be adjusted to provide an adequate coverage. Without the insurance the surviving stockholder may not have enough cash to satisfy the amount required to buy out the estate - leaving the survivor with an unwanted partner.

To have the adequate insurance coverage and to determine the specifics of the buy-out terms, a certified GA pharmacy business valuation is needed. There are a large number of companies that provide business valuations. Due to the dynamics and current market conditions of the pharmacy industry a valuation firm should have extensive pharmacy experience. Simple accounting formulas and multipliers will not provide an adequate, or realistic, valuation for a pharmacy business in Georgia.

Pharmacy buy-sell agreements are extremely important documents that need to be completed with seriousness and care. Even with a long standing partnership, it is only too late to create a buy-sell agreement when an event has already occurred....that would require the document.

Tips for Georgia Pharmacy Owners:
1. Buy-Sell Agreements are critical documents that should not be taken lightly. Consult a licensed professional.
2. Documents must address the proper laws and regulations which vary from state to state. Seek the proper guidance.
3. Premiums for insurance that will fund the buy-sell agreement might be deductible.
4. Ensure that the pharmacy valuation is performed by an established Georgia pharmacy industry expert.