Tax Consequence of the Sale of a Business

Selling a business may mean big profits for you, but it may also come with a substantial tax bill. The taxes you pay are collected by the IRS, based on the nature of the business transaction. At Global Resources LLC, our strategic tax planning experts will ensure you and your company take the necessary precautions to come out ahead. 

Consequence - Capital gains tax differs from ordinary income tax. Capital gains refers to a flat tax assessed on the difference between the amount of money you put into the business as "seed capital" or "principal" and how much you receive back as profit when you sell. When you sell your business, you must add the values of all of the business's assets and determine what the fair market value of the combined assets is. 

Benefit - The rates of capital gains are typically lower than general income tax rates, which means you won't pay a progressively higher rate that depends on the final sales price of your business. Because of this, you'll end up with more profit than you otherwise would under a progressive tax.

Disadvantage - You must add the complete value of your business assets when selling, which may require hiring an accountant. However, if your business is large and your profit margin slim, then the cost for assessing the value of your business may erase most or all of the profits from the sale.

Consideration - The IRS allows you to exchange business property for other business property. If the sale is influenced by your desire to start another business, consider a "like-kind" exchange. This avoids tax on all of your gain until you dispose of the new property you acquire. The experts at Global Resources will walk you through every step of the way. 

To learn more and / or to schedule your complimentary appointment with the business tax experts at Global Resources LLC, call us at 855-338-0266.