What Are the Tax Consequences When I Sell My Business?Atlanta CPA: Tax Issues Relative to Selling a Business
Though you cannot change the facts you can we well informed about the tax implications of selling a business and how best to be prepared for the tax consequences of selling your business. These issues are presented in a checklist for you review and to make you aware of many of the options and different tax treatments to which they are afforded. As your facts may dramatically vary it is most advantageous to consider all of these variables and to consult with a tax professional well before the transaction is finalized to ensure that any documents you agree and sign to fairly and adequately protect your interests as well as your tax positions.
Regarding Like Kind Exchanges
- Like Kind Exchanges where the total gain is deferred does not apply to business/partnership interests, the sale of Goodwill or going concern values.
- Like kind exchanges can apply to the selling of contracts, licenses, investment/fixed assets, and real estate.
- Please be reminded that, if we do find any assets which qualify under the above, then that Like Kind Exchange rules do not allow you to receive/hold any of the monies at closing and that you have to identify the new property with 45 days of selling of the old and then to buy the new/replacement property within 180 days. There are many more stipulations regarding the like kind exchange transaction and if you feel you have any assets that qualify, we would want to have someone who does like kind exchanges to handle the entire transaction and to include them in its planning.
Regarding Capital Gains Treatment
Below are items we might be able to receive capital gains treatment if we can document and it would be critical to amend the agreement accordingly to reflect this in the allocation of the purchase price:
- Selling Contracts/licenses
- Going Concern
- Customer Lists
- Capital gains under present law would be taxed at a maximum rate of 15% to the IRS & the state’s tax rate (which is 6% in GA).
Regarding Ordinary Income Treatment
- Loss Profits
- Previously Unpaid Monies
- Unpaid Royalties
Ideally you will want to be able to reflect any and all allocations in the sales agreement so that a Form 8594/Asset Acquisition Allocation Statement can be prepared with your year-end income taxes when they are filed.
"We help business owners in determining their tax liability to ensure that prompt payment of your true and just tax is paid avoiding unnecessary penalties and interest. Call us today to help guide you through avoiding this costly pitfall. Tax liability determination and payment are essential building blocks for selling your Gwinnett/Metro Atlanta business."
— Atlanta CPA, John Dillard CPA