Nightmare: 'I Sold My Company and Owe More in Taxes Than I Actually Made!'

Imagine selling your company and owing more money than you actually got paid.

While it might sound ridiculous, I’ve seen it happen. I’m a lawyer and an accountant, but in this particular case, another lawyer did the paperwork for the deal. When they came to me to complete the tax return, I had to break the news to the business owners that, because they’d failed to plan, they would have to pay more money than they were receiving to sell their own company. And not just a little more - nearly four times more.

A purchase letter of intent, especially an unexpected one, can be a thrilling moment for any entrepreneur. This is what you’ve been waiting for, right? But too many business owners trip over their own feet running towards the check. Ultimately, many entrepreneurs fall prey to the lure of a purchase offer and do themselves more harm than good. These are the most common ways I see entrepreneurs hurt themselves when an offer comes in.

1. They don’t know the market value of their own company.

It’s easy to get impressed by a big number. But what if your company is actually worth double whatever you’ve been offered? Do you know your own market value?