Taxes and selling a business are no small matter. As a business owner, you should start thinking about what tax structure you should use when you sell your business. In his article titled, “What Tax Structure Should You Use When Selling Your Business”, Tim Fries at The Tokenist, explores many aspects of the topic of taxes.
For those selling a business for the first time, taxes involving the sale of a business can be complex. Your tax structure can influence how much money you receive at the closing of your deal. For this reason, it is very important that you pay attention to all aspects of taxation and your business. Fries says that it is key to remember, “When you are selling your business-as far as taxes are concerned, you’re ultimately selling a collection of assets.”
Fries points out that it is possible that up to 50% of the sale of a business can go to taxes. It is very important to set up the right tax structure for your business. By investing the time and effort to set up the right structure for your business, you can keep from paying more taxes than is necessary.
Key Questions
There are many variables that go into how much you will have to pay in taxes. Here are some of the key questions that Fries raises in his article.
- Is your sale considered ordinary income or is the sale considered capital gains?
- What portion of the sales price goes to tangible assets as compared to intangible assets?
- Are you operating as an LLC, a sole proprietorship, a partnership or a corporation?
- Is there a difference between your tax basis and the proceeds from your sale?
- What does your depreciation look like?
- Is an installment sale right for your business?
- Cashing out immediately will increase your tax liability.
- Have you consulted with experts to decide which tax structure is best for you?
The process of selling a business requires dedicated, professional attention. EBIT Associates will save business owners money by helping them avoid costly mistakes. We can help you find the right buyer with the best deal structure.