The need for specialist accounting advice during the purchase of a motel is crucial. Ultimately, potential buyers should seek advice from an accountant who has experience within the motel and resort industry. So why do you need advice from an accountant during the purchase of a motel? There are many reasons. But if it is a first time purchase then one of the simplest reasons is to have someone experienced to guide you into the new arena of small business ownership.

This can be a daunting experience for many entrants and has many requirements that need attention.

So why do you need an accountant that is a ‘specialist’ in the motel and resort industry? This industry is unique from others and you need an expert in the industry to help you make the right decisions in relation to your motel purchase. Each motel is unique.

Some areas that require specialist accountant advice:

• Entity set up;

• Analysis of sales figures;

• Due diligence process;

• Finance;

• Capital gains advice;

• Contract apportionment and depreciation;

• GST; and

• Bookkeeping.

Entity set up - I stress the emphasis on correct entity set up, as it is absolutely critical to get this right before you actually purchase any motel or resort business. There are different structures you can purchase a motel in, including: sole proprietor, partnership, company, trusts and even a combination of the above and a superannuation fund. Each option has its own strengths and weaknesses and these must be examined to suit the individual purchaser. An entity that may suit one potential purchaser may not suit another.

A specialist accountant will interview the potential purchaser and identify things such as:

• Individual purchaser or two;

• Husband and wife or non related purchasers;

• Children and family unit;

• Asset protection (existing assets and future acquisitions);

• Future business goals; and

• Other income sources.

These then assist us in matching you to your most suitable purchasing entity.

We must also analyse the business that you are purchasing and whether it suits the purchasing entity. Examination of the business’ past year financials and other data would show whether the business will:

• Make generous trading profits and need effective income tax minimisation in place; or

• Whether the business is better placed to make capital profits and an effective capital gains tax structure would be required.

Only after looking at both of these factors can a good accountant make the correct decision with your purchasing entity. The use of an incorrect purchasing entity can result in horrible capital gains tax debts upon sale. On the flip side we can position your business to best take advantage of generous capital gains tax discounts upon sale of the business. Or, if the circumstances are right… pay no tax at all.

Analysis of sales figures - this is important to assist the purchaser to examine whether the sale price is fair in relation to the business’ previous net profits, trading figures and industry trends.

Due diligence process - this is a process accountants perform to reassure the purchaser of the accuracy of the sales figures that sellers provide during the purchase process. Due diligence should occur with any considerable purchase! Buyers should strongly think about contracting a specialist in this field to perform a due diligence. How can you buy a business based upon its profit and loss statements if you are not sure they are true and correct?

Finance – so you have a business to purchase in mind and now you need finance from the bank and they want you to provide them with cash flow and profit and loss projections. Specialist accountants can assist you in this process and help you obtain finance from your bank.

Save on tax/capital gains advice – isn’t it everyone’s dream to eventually sell their business for big profits and retire? You need assistance in setting up a strategy to minimise tax before you decide to sell. Correct application of capital gains tax concessions and effective retirement strategies can result in great tax savings when you exit your business.

Contract apportionment – good advice in relation to the contract price of the business and the split between buildings, stock, plant and equipment and goodwill can affect the amount of deductions you can claim for depreciation.

GST – accountants who are experienced in contract law can give invaluable advice in relation to a contract and its GST implications. Correctly worded contracts can result in buyers paying no GST on a business.

Obviously an advantage when you are trying to get finance for the purchase.

If a contract is incorrectly worded, post sale audits from the Australian Tax Office may order the buyer to cough up extra for the GST on the contract!

Bookkeeping – usually the thing we all hate to do but it must be done.

Your accountant should advise you the best way for you to keep your books up to date and easy to manage, so you can focus your energy on your business.

As you can see from the above the need for good advice from an accountant who specialises in the motel and resort industry is crucial for your peace of mind during the buying pro-cess, running your business and eventually selling your business. One mistake at the beginning can prove to be costly at the end and result in tax debts no one with specialist advice should have to endure.

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