Pay Your Taxes. That's Right! It is Ok.

A business that reports all their income and pays taxes will be worth more than the business that did not.  We call this investing in taxes.  Take a look at the scenario below:

	A	B
Sales	$500,000	$500,000
Unreported		$(100,000)
Expenses	$(300,000)	$(300,000)
Net Income (Seller’s Discretionary Earnings)	$200,000	$100,000
Multiple	2.45	2.45
Value	$490,000	$245,000
Taxes Paid	$(80,000)	$(40,000)
Proceeds to Seller	$410,000	$205,000

Business A reported all of their income and paid $80,000 in taxes.  Business B chose not to report $100,000 of their income.  The result was a savings of $40,000 in taxes paid.  However, when it came to value the business, A was worth 2 times as much as B.  


Bottom Line:  Report all income; invest in taxes, and in the long run your business will sell for a higher price.