Exiting Your Business Can Be Taxing

Joe Bazzano of Beacon Exit Planning LLC in the US discusses the tax implications of selling your business and explains how various decisions impact on the tax to which business owners find themselves subject.

With so much of their wealth trapped in the closely held business, there is a real fear that once they exit their businesses, they will outlive their money. This emotional fear can be the largest obstacle for business owners to overcome when transferring…

2. Deal Structure — Generally, transferring a business is accomplished through either an asset sale or equity/stock sale. Selling a stock carries a capital gains tax. Selling assets is taxed as income. Each method proposes advantages and disadvantages to both the buyer and seller and is often subject to much negotiation…

Exiting Your Business Can Be Taxing

While the article has a US focus, several of the points he makes are valid anywhere with a bit of, er, translation.

In the UK there are various tax concessions and ways to mitigate the tax bill – Entrepreneurs’ Relief is available, subject to some qualifying conditions, when selling the shares of a limited company. However, it could be more tax efficient to sell the assets …with proper planning. Gains could be used towards tax free pension contribution, for example or to pay dividends (though gains are usually subject to corporation tax at the going rate for your size of business, but with the possibility of “roll-over” relief).

Professional advice is, of course, always recommended. Here’s TaxDonut’s summary.  As you can probably tell, tax planning in business sale situations calls for considerable expertise and familiarity with latest tax legislation.