Selling a business may be a natural progression for your company as discussed in Parts I and II of this series by Senior Tax Manager, Naila Sharifova. As Naila explained, there are tax considerations for your company and shareholders which impact the amount of income generated by the sale. But whether you are selling a startup with intellectual property or you are selling your company as part of your retirement plans, the acquirer will want to review your company’s financial statements to determine what they are willing to pay for your company. (more…)
Selling your business may seem like a natural progression for your company and the possibility of early retirement may look closer than ever, but without careful planning and execution and thorough consideration of the tax impact of sale, eventual financial outcome may end up being much smaller than anticipated.
You can structure sale of your business in two primary ways: 1) sale of the stock or interest in the company or 2) sale of underlying assets. Depending on the structure chosen, special elections made and type of underlying assets, composition of gain as ordinary vs capital may differ significantly and so may the tax liability.
Now let’s consider tax consequences of selling your business under two different scenarios. Under the first scenario, you are the owner of a closely held C corporation. Under the second scenario, you are the owner of a pass-through entity, an S corporation or a partnership. (more…)