An acquisition is the purchase of a business enterprise by another entity or individual. Oftentimes, individuals with an accounting degree are involved in the acquisition process. Businesses of all sizes can be the subject of this type of purchase process.
Two Types of Business Acquisitions
There are two basic ways in which a business can be acquired, according to Cornell Law School. First, if a business is a type of corporation, the enterprise can be acquired through the purchase of its stock. If a business is acquired in this manner, it normally is an ongoing concern that will continue in operation in a similar manner after the sale is completed.
Second, a business can be acquired through the purchase of its assets. When this type of sale takes place, the enterprise that was purchased ends up being an empty shell. The money paid for the assets is divided among the owners of the enterprise. In the case of a corporation, the money paid for the assets would be distributed among the stockholders.
In the final analysis, the key to a successful business acquisition is making sure all legal and other requirements are in order and properly addressed.
Tax Consequences of a Business Acquisition
There can be a variety of different types of tax consequences associated with an acquisition. The tax consequences depend in part on the manner in which a business is acquired. The tax consequences associated with an equity or stock purchase can be different from those connected with an asset purchase.
When it comes to understanding and addressing the tax consequences associated with the purchase of a business, the assistance of a person with an accounting degree can prove to be helpful. In addition, in order to ensure that all legalities are satisfied during the course of an acquisition, engaging the services of an experienced merger and acquisition attorney is wise.
There are instances in which a business acquisition must obtain some type of regulatory approval. A prime example involves the acquisition of a corporation traded on a major stock exchange. Acquisitions of this nature may necessitate the approval of the Securities and Exchange Commission or SEC.
If a business is in some type of regulated industry, regulatory approval may be necessary. For example, the purchase of a company that owns radio or television stations may be subject to approval by the Federal Communications Commission or FCC.
Small Business Acquisitions
A person with an accounting degree is likely to play a more substantial role when a small business is being acquired. In many cases, when a small business is being acquired, an individual is the buyer as opposed to another business. The individual might set up a shell company to effect the purchase.
Due to the background of a person with an accounting degree, that individual is likely equipped to address the various issues associated with the buying and selling of a small business. This includes everything from addressing tax issues to making any regulatory or governmental filings that may be necessary.
Business acquisitions tend to occur at a steady rate when the economy is in a positive or negative condition. Either scenario can make an enterprise ripe for an acquisition.