If you're planning to sell your business in 2025, you might think tax season is just another routine task.
But for potential buyers, your 2024 tax filings are a critical part of their due diligence. Late or incomplete filings can cause delays, or even kill the deal entirely.
Here’s why filing on time is crucial and how you can set yourself up for a smooth sale.
Buyers Need Up-to-Date Financials
Serious buyers will request at least three years tax returns during the due diligence period. They use these documents to verify your company’s performance.
If your 2024 return is filed late, your buyer might become concerned about financial mismanagement. It can shake their confidence in the business.
Timely filings provide clear financial transparency. Buyers want to see that the revenue and profit margins you report to the IRS are consistent with the financials you’ve shown them.
They also give your business a sense of credibility and trust. A history of on-time tax filings signals that your business is well-run and compliant.
On the flip side, missing documents can cause delays and frustrate buyers.
Having your 2024 taxes filed on time results in a faster and smoother due diligence process.
Late Filings Can Delay (or Derail) Your Sale
If your 2024 tax return isn’t available, buyers may pause the process until they can see the full financial picture.This is especially true when the bank gets involved.
It’s extremely common for a buyer to secure a loan to purchase your business. Most lenders require 3-5 years of tax returns before issuing funding.
A missing return could result in loan delays or denials.
That means banks might hesitate to approve financing. This could kill a deal before it even begins.
Even for cash buyers, late filings can cause buyers to reconsider or renegotiate. Uncertainty about your business’s financials could lead buyers to lower their offer or walk away.
Closing could be postponed – Any missing paperwork extends the timeline, and deals that drag on are more likely to fall apart.
Tax Liabilities Can Impact Your Valuation
Your 2024 tax return provides insights into your business’s tax liabilities. If you owe back taxes, have unresolved IRS issues, or show significant discrepancies, buyers may see it as a risk.
They might:
Adjust their offer to account for potential tax liabilities.
Require tax-related contingencies in the purchase agreement.
Walk away to avoid complications altogether.
In any case, it’s likely that your business valuation will take a hit. The hard truth is that a business is worth much less when tax liabilities are present.
A clean tax record makes for a smoother negotiation process and a higher likelihood of closing the deal.
You’ll Need Time to Optimize Your Tax Strategy
Beyond compliance, filing your 2024 taxes early allows you to work with a tax professional to minimize taxable income strategically.
Proper planning can help you reduce tax burdens before the sale.
You also want to ensure accurate financial reporting. Clean books lead to a more favorable valuation.
If there are any tax concerns, address them proactively. When issues arise, you’ll have time to resolve them before buyers start asking questions.
How to Prepare for a 2025 Sale
If selling your business is on the horizon, here’s what you should do now:
Work with your accountant – Ensure accurate and timely filings.
Organize your financial records – Keep tax returns, profit-and-loss statements, and balance sheets in order.
Resolve any tax issues now – Don’t wait for a buyer to find them.
Consider a tax planning strategy – Structure your business finances for a smooth transition.
Filing your 2024 taxes on time is not just about following IRS deadlines—it’s about ensuring a seamless sales process in 2025. Late filings can delay negotiations and scare off buyers.
By staying ahead of tax deadlines, you’ll put yourself in the best position to sell your business quickly, efficiently, and at the best possible price.
Looking to sell in 2025? Start preparing your taxes now to keep the process on track.
About Robbins Pellegrino: Robbins Pellegrino is a Florida-based business brokerage firm led by Chandler Robbins and Joe Pellegrino, Jr. that is committed to redefining industry standards. We focus on creating meaningful partnerships and ensuring successful business transitions for both buyers and sellers. For more information, visit us at www.robbinspellegrino.com or call (239) 360-6273
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