Importance of intellectual property when selling a business.
Intellectual Property can sneak up on some businesses as it may start from a “good idea” that helps the business survive then gradually become an integral part of the business and later become a critical part of its existence. Interestingly, intellectual property also comes in many ‘shapes and sizes.’ A business therefore needs to recognize these different ‘shapes and sizes’ so if they choose to sell their business, they have the right legal protection in place that protects an intellectual property asset and therefore rightly earns the owner the amount it is worth.
So what are the different types of intellectual property? The IRS recognizes the following when they are part of a business transaction.
• Computer Software
• Engineering Designs
• Copyright resale
• Trade Secrets
• Architectural Designs
The bottom line is that intellectual property carries both legal and tax implications. An attorney is the expert to engage to understand and obtain the necessary legal protection. Not all attorneys have the necessary knowledge, so if this is an important component of your business, you may want help from an attorney who understands and specializes in intellectual property law.
Similarly, the tax treatment of intellectual property when a business is being bought or sold requires research to arrive at the right position and this is best provided by a CPA or similar tax professional. That is, the tax treatment for a patent may be different for a copyright which may be different for computer software etc.