Merry Christmas - Utah Pharmacy Owners

Utah (UT) pharmacy and drug store owners the year ahead come bring new challenges. When you need a reliable source to discuss the options for the pharmacy industry you can count on www.PharmacyValuations.com.

Merry Christmas and Happy New Year!

Watch our Christmas video:    http://youtu.be/Lm-6ls-rzrY

Estate Planning in Utah for Pharmacy Owners

By Brad MacLiver
Authorship and profile at Google


With the current market conditions many Utah pharmacy and drug store owners are experiencing lower profit margins and have considered selling. A roll-up of the pharmacy industry has been occurring for a number of years, consolidating the pharmacy seller’s customer traffic into fewer pharmacy locations in Utah. However, there are a number of pharmacies that are not in a geographic location with other nearby pharmacies, so consolidation can’t take place. Some pharmacy and drug store owners, despite where they are located or what is happening in the industry, have taken a stance and won’t consider selling. However, just like paying taxes, an exit of the business, is eventually inevitable.

In all industries, estate planning is a topic many people shy away from. For the pharmacy owner who works 6 days a week, takes very few vacations, fills scripts all day, then mops the floor and does the books at night, there usually isn’t much time to consider additional things such as estate planning. However, knowing that there will eventually be a transfer of the business, it is important for the pharmacy owner to consider a proper succession plan for the Utah pharmacy business.

Developing a plan to transfer the business will be time consuming, but done correctly will allow the business to be successfully transferred in an acceptable manner. An estate plan for a Utah pharmacy owner does not need to be changeless process. Fine-tuning, updating, and amendments are recommended as government regulations, economic conditions, and personal expectations change.

Estate planning allows a pharmacy owner to anticipate and arrange for the transfer of the drug store. The plan will be formatted in attempts to eliminate uncertainties, assist the transfer by trimming expenses, and reduce taxes.

The process may involve Trusts, Wills, Living Wills, Power of Attorney, Medical Power of Attorney, Business Valuations, Life Insurance, Charitable Remainder Trusts, Buy-Sell Agreements, and other legal documents. All of the different aspects of the estate planning are to provide the pharmacy owners in Utah coordinated directives.

When there are non-family members as partners in the drug store business, it is essential that the estate planning incorporate a Buy-Sell Agreement. A buy-sell agreement, governs the transfer of the business between pharmacy partners. The agreement may also be known as a partner buyout agreement, or a business will. To help protect an owner's family in the event of a partner’s death, the buy-sell agreement is often funded with a life insurance policy.

Buy-sell agreements, estate planning, and the pharmacy transfer should incorporate a Utah pharmacy business valuation completed by a third party who has expertise in the pharmacy industry.  It is wise to consult a company that performs a large number of pharmacy business valuations each year, and has up-to-date industry data as a basis for the conclusions. Using simple accounting formulas or multipliers with valuators inexperienced in the pharmacy industry will not provide an accurate business valuation.

Most pharmacy owners in Utah spend a major part of their life building the business. Their efforts should not be thrown away because the pharmacy owner refuses to accept their mortality and plan accordingly. In some small pharmacies, the only pharmacist is the owner.  If the scripts are unable to be filled by a licensed pharmacist, the customer files must be transferred to another pharmacy by law. Due to this, a pharmacy’s business value could drop to a negligible figure in a few days after the passing of the owner. The contingencies outlined in an estate plan can address this issue.  Unfortunately, a number of Utah pharmacy owners die and their family is left with an asset with very little value each year to not having an effective plan in place.

Five Additional Tips for Utah Drug Store Owners:       
1. When the family pharmacy is the sole means of income for several family members it is even more crucial to have a succession plan in place.
2. Estate plans should be developed with clear directives to avoid disputes.
3. Minimizing tax liabilities is a major objective for most completing an estate plan, therefore expert tax advice should be sought.
4. Many on-line documents and books are available that provide advice and documents for developing an estate plan. When going the self-help route, it is advisable to have a paid expert review the completed documentation to ensure that it can be legally complied with when the time comes.
5. While developing the estate plan it is essential to talk with children and other family members of the UT pharmacy owner especially if there are some family that work in the business and others that don’t.


 

Utah Purchase & Sale Agreements

By Brad MacLiver
Authorship and profile at Google


A Pharmacy Listing Agreement is the contract that provides a Utah pharmacy broker the business seller’s permission to sell their retail or specialty drug store. During the process of presenting the business being sold to qualified drug store buyers there are negotiations and preliminary offers.

After the preliminary stages have been negotiated, it is then time to put the details of the potential pharmacy transaction forth in contract form. This contract will usually be called the Purchase and Sale Agreement, but it is known as several other names, such as an Asset Purchase and Sale Agreement, a Pharmacy Asset Purchase Agreement, an Asset Purchase Agreement, or other variations of these titles. Whatever the title on the contract, this document should be considered the “blueprint” for transferring pharmacy businesses to their new owners.

The Pharmacy Purchase and Sale Agreement details how much the buyer agrees to pay and what assets the seller in Utah is conveying to the buyer. When the agreement is put in writing, describes the transaction in some detail, and is accepted and signed by both parties, this contract becomes a legally binding agreement. Therefore, during the negotiated development of the Pharmacy Purchase and Sale Agreement proper diligence should be taken.

It is rare that a pharmacy’s corporate stock will be purchased due to issues regarding liability. Because of this, these transactions are almost always only asset purchases.

Elements of the Pharmacy Purchase and Sale Agreement include, but are not limited to: assets being purchase, assets being excluded, aspects of counting and purchasing the inventory, both electronic and hard copies of pharmacy customer files, liabilities, purchase price, closing date, transferring title of the assets being purchased, pharmacy customer file conversion, representations and warranties, non compete, restrictive covenants, transferring the phone, notifying customers, signs, Board of Pharmacy notification, accounts receivables, employment of business seller and pharmacy employees, confidentiality, counting the pharmacy’s inventory, costs associated with the closing, lien searches, actions to be taken before the date of closing, along with the pharmacy’s computers, office equipment, and any automated filling machines.

Even though it covers many aspects of transferring the business assets from the Utah pharmacy seller to the new owner, one should take note that the Purchase & Sale Agreement does not provide tax and legal guidance for the seller. Those issues do not pertain to the buyer of the assets. Therefore, the Utah pharmacy seller should be well advised by a knowledgeable pharmacy broker, accountant, or attorney regarding tax consequences, restrictive covenants, and the structure of the deal. These aspects of the deal may not have any impact from the buyer’s point of view, but if not considered carefully may have affects to the seller’s financial position after the transaction is closed.

Pharmacy owners in Utah who are considering selling will benefit when working with a specialist who operates exclusively in the pharmacy industry and can provide expert guidance in bringing about a transaction that provides the most benefits regarding the seller’s tax consequences, family and estate planning. Proper planning and a blueprint that structures the transaction appropriately will increase the net amount of money the seller receives for the Utah pharmacy’s assets.

************************