What are the laws when it comes to taxes?

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What are the laws when it comes to taxes? What forms do I have to fill out? The Internal Revenue Service publishes a “Tax Guide for Small Businesses” which can be reviewed at the IRS website. Make a list of any questions you might have.

Also review the websites at the Business Owners Toolkit by BizFilings (look at Controlling Your Taxes) and Internal Revenue Services Small Business Taxes & Management (IRS regulation updates).

Review the tax material provided in Chapter 12. Make a list of all tax forms you will need and print them out. Read through the IRS Small Business Tax Guide. Make a list of any questions you might have and any tax forms needed. Recap your findings in a one to two page paper addressing the necessity of good record keeping and compliance with tax regulations.

Submit this assignment to your instructor via the dropbox “LP9 Assignment: The Small Business Owners Tax Compliance.” This assignment is worth 75 points.

LP10 Assignment: ABC Sporting Goods

ABC Sporting Goods

Examining the asking price of a business includes reviewing all past records and assessing the future financial outlook for the business, the economy, and the industry. You are buying the future not the past.

Critical Assumptions for ABC Sporting Goods:

ABC Sporting Goods is a small business, operating as a corporation.
ABC has been in business for 15 years.
The owner draws a salary listed under officers compensation.
The store has been in the same location for the past seven years and has a Triple Net Lease (i.e. pay real estate taxes, building insurance, and maintenance).
Sales decreased slightly in the past two years, but the company has tried to maintain market share by lowering their prices. This has impacted both gross and net profit.
The owner wishes to sell his business and retire. The stress of running the business for the last 15 years, for 10 or 12 hours a day has begun to impact his health.
The owner feels that the business has a good reputation with many loyal customers.
He believes the business should be valued at $750,000.

Review attached spreadsheet for Financial Information on ABC Sporting Goods: Profit & Loss

Directions:

Part I. Complete the following ratio analysis for ABC sporting Goods.

Utilize: BizStats at http://www.BizStats.com

Go to Industry Financials on the Blue Navigation Bar

Select – Corporations 249 not Sole Proprietorships 141

Select Retail Trade

Select Sporting good – Hobby book – Music

Calculate the following ratios: (Based on the last 3 year average)

Return on sales (net profit divided by gross revenues)
Return on assets
Return on net worth
Quick ratio
Current ratio
Inventory turnover (gross sales divided by inventory)
Assets to sales ratio
Total liabilities to net worth

Compare these ratios to those found in BizStats. Comment on any differences and how they impact the value of the business. Identify any significant trends in the business.

Part II. Estimate the business value using BizStats – Valuation Rule for Sporting Goods Stores at BizStats.

Under reports/valuation/valuation-rule-thumb.php

Adjust the business valuation based on your completed calculation and the ratio and trend analysis performed in step I.

Part III. Calculate the viability of purchasing the business based on the following parameters:

You can finance the business for 20% down with an interest rate of 5%, amortization over 20 years. Use the following formula:

Purchase price $100,000, down payment 20% or $20,000 which results in $80,000 being financed.

For $1,000 financed at 5%, the factor to calculate your monthly payment is .66x for every $100 borrowed. That equals $66/month or $792/year.

We now can calculate the free cash flow available to pay the loan amount. We can use the following formula:

Net Profit

+interest paid (use previous years amount from P&L)

+Depreciation and amortization