Hughes Pittman & Gupton, LLP (www.hpg.com), one of the largest CPA firms headquartered and staffed in the Research Triangle Park region of North Carolina, recently co-hosted a forum titled: Planning and Executing a Successful Liquidity Event. More than 50 Triangle-area CEOs and business leaders attended the four-hour event. Heather Dean, HPG tax partner, and Amy Smith, HPG senior tax manager, were two of the featured speakers at the event, held on May 10 at Umstead Hotel and Spa in Cary, N.C.

The forum offered insight into proactive planning, including mergers and acquisitions strategies, succession planning to family or management, and valuation and tax considerations.

During the discussion, Dean and Smith highlighted the importance of planning an exit strategy when making initial structure and tax decisions, such as choosing between becoming a C Corporation, S Corporation, or Partnership (LLC). Likewise, they explained how it is vital to understand the total economics of the deal to consider the difference between the treatment of a taxable versus tax-free transaction, or a stock versus asset acquisition, as well as how the company’s entity type treats the transaction for tax purposes.

“There are very significant tax decisions that can affect a liquidity event,” explained Smith. “These issues can have a huge impact on both owners and employees; therefore, they should be planned for and reviewed regularly during the life of a company.”

Dean and Smith also explained that before agreeing to a sale price for a company, it is imperative to consider the transaction’s structure, as it could affect the ultimate net consideration received. Buyers and sellers typically have differing goals, so the tax impact of differing potential structures should be quantified and considered in the price negotiation process.

“Planning for an exit strategy should begin at the birth of the entity and develop throughout the company’s life cycle. It is very rewarding for us to work with companies from the beginning stages of structuring, both domestically and internationally, all the way through to a successful exit.” Dean added.