At PEAK Business Advising, we understand you have spent many years and hard work building your business. We know the ins and outs of buying or selling a business and what the tax implications could be. We structure deals where you can keep more money in your pocket.
The transfer of a private business to new ownership generally occurs as either a "stock sale" or an "asset sale." The legal and tax structure of your business (corporation, sub-s corporation, partnership, or proprietorship) can have a significant impact on the tax outcome of a sale. Given the appropriate amount of time, it is possible to rearrange the tax structure to better accommodate an exit.
Regardless of the existing tax structure, the terms of sale or merger will also significantly impact the net after-tax outcome for the seller. Incorporating the best terms into a deal is essential in minimizing tax implications.
When a business is sold, both buyer and seller must agree to a "purchase price allocation." This allocation must be carefully vetted and can often be adjusted to the benefit of both buyer and seller (or to the detriment of either). Having a transaction advisor with tax expertise is vital to ensuring the best outcome.
Tax regulations allow for a "stock sale" to be treated as an "asset sale." Under the right circumstances, this can be to the advantage of both buyer and seller. There are other costs beyond federal and state income tax that can be mitigated or avoided by conducting a "stock sale."
Goodwill is generally the most important asset in a successful enterprise. Classifying goodwill as either "corporate" or "personal," or a combination of both, requires proper valuation and consideration of tax regulations. Advantages of such can be extensive in the overall tax outcome.