Selling your business can be a major life milestone, potentially giving you a handsome return on the investments you’ve made in the company and setting you up for bigger and better things. If you’re not careful, though, you could end up paying up to half of the selling price in taxes and fees, especially if you made a substantial profit on the deal. While the IRS is going to get a share of your sale, some skillful tax preparation and planning can help reduce your tax burden.

Allocating the Price for Maximum Tax Benefits

When negotiating a sale price, you and the buyer must decide together how much of the selling price goes to each individual asset, including everything from machinery and equipment to bank accounts and goodwill. Because different assets are taxed differently, how you allocate the sales price can have a major impact on your final tax bill.

In general, you’ll want as much as possible to go toward assets taxed as capital gains, which are much lower than the rates for normal income. Because of the IRS’s rules about how the sales price must be allocated, effectively reducing your tax burden and maximizing deductions requires the expertise of a trained tax preparation and planning professional.

Selling a Corporation

Selling an LLC or sole proprietorship is complex enough, but liquidating a C corporation is where things really get complicated. One common approach is to sell all the stock to the buyer, who will then take over the assets.

This helps you avoid paying double taxes, but buyers will usually prefer to purchase the corporation’s assets, which has its own tax benefit. When selling a corporation, it’s always in your best interest to consult with a skilled professional who can help you avoid common pitfalls and expensive mistakes.

If you’re arranging the sale of a business, the experts at ZP Tax in Silver Spring, MD have the updated knowledge and expertise to help ensure you keep as much of the proceeds as possible. For a comprehensive list of their services, visit their website today, get more tax advice on Facebook, or call (301) 587-4829 to speak with a tax preparation and planning professional today.