If the potential tax implications of selling your business seem daunting, a crucial first step is to have a business valuation performed.

How are Business Sales Taxed?

Business sales are taxed on the principle of capital gains, essentially the profit that you make from the sale of your business.

Capital Gains Tax on Selling a Business

Capital gains are generally taxed as ordinary income, yet the IRS draws a line between short-term and long-term capital gains.

7 Tax Considerations Before the Sale of a Business

1. A Stock Sale or an Asset Sale?
2. Establishing Value of Business Assets
3. Purchase Price Allocation
4. Type of Entity
5. Tax-Free Stock Exchanges
6. Income Tax Rates
7. State Considerations

Tips for Small Business Owners

• Consider Hiring a Tax Advisor for Your Business Sale
• If Your Business is a Sole Proprietorship, Sell Assets Separately
• Consider Selling to Employees
• Think About Gifting Some of the Business Sale Money to Family
• Structure the Deal as an Installment Sale
• Consider an Opportunity Zone

Reach out if you are interested in selling your business.