3 Tax Issues When Selling Your Business. . -- Kiritsis Law Firm Group 212 922 0005

Apr 27, 2021

When incorporating or forming an LLC, your choice of entity, should consider exit tax strategies, such as, the selling of certain assets.

1. Entity structure tax impact could be huge. Different tax consequences could depend, largely on how a business was operated and is currently owned, at the point of sale. An identical business sale, could receive different tax treatment, depending, if it was a sole proprietorship, a General Partnership, a Limited Partnership, an LLP, an LLC, a C Corp, an S Corp, a trust owned enterprise, or a corporate subsidiary.

2. Dealing with appreciated assets. If the business's assets have received, what tax lawyers and accountants refer to a step up (fancy word, for an increase in an asset's value for tax purposes, could trigger a taxable event for taxpayer, depending on the circumstances.

3. Selling stock vs selling assets vs acquisition vs merger.

The way business is sold could be as important as the previous 2 factors, and in many cases, even more important.   A business could be sold to an individual, or be broken up and sold to one party or many parties. A business could sell its assets or shares, with original owners who are selling, planning to keep all, most, some or none of their stake in the business. A business could be acquired to serve as part (i.e. division, subsidiary) of a larger business or Firm Group of business. A business could merge into another business, while retaining a lot, some or none of its core identity.  Bottom-line, the way a business is sold, often determines on what tax forms have to be filed with tax authorities, as well how rhea tax bill gets calculated, and who picks which portion of the tab.

 

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