Most agency owners will sell an insurance agency once in their lifetime. Many insurance agency buyers have purchased more than one, have more experience with the process and have an advantage when it comes to negotiating. When selling your agency you need to assemble a team consisting of your CPA, Attorney and Insurance Agency Consultant or Business Broker. Each person plays a vital role in the process. This post will discuss the CPA’s role in the selling process.
A big benefit of an insurance agency is the proceeds are often taxed at a flat 15% capital gains rate plus state taxes. (9% for California). However, the way your purchase is allocated can determine how much tax you’ll actually pay. If your furniture and fixtures were depreciated in previous years and a large sum of your sale is derived from the sale of furniture, there can be taxes due in addition to the 15%. If you carry a note and charge interest, you can be taxed differently.
Do you receive payments for the sale through your corporation or personally? Different entities can be taxed differently when a business is sold. Please understand, we’re not tax experts which is why the message here is let your CPA review your letter of intent, promissory note if there is one AND purchase agreement before signing.
Your CPA can offer advice to help structure the transaction so you pay the least amount of tax possible.
There’s a lot to learn when selling an insurance agency. Some owners choose to sell it on their own to save a money in legal and CPA fees but chances are you’ll make those fees back 10 fold from the advice provided.
The individual or company purchasing your agency most likely has experience buying insurance agencies, you should have experienced professionals on your team too.