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Deferring taxes

Structured sales and selling a business

Deferring taxes and selling a business

When you sell your business, you may face a surprising tax bill. Depending on your local county and state tax implications, you can face anywhere from 23% in Federal Capital Gains and the new Medicare Surtax, all the way up to over half of the purchase price!

Isolating an effective solution for managing “tax shock” and your cash flow following the selling of your business is recommended. Uncle Sam will eventually take their share, but there are options to consider that allow you, the Seller, some control. The reasons to defer tax obligations are many.

  • Seller may be staying on with a management service contract – Seller may wish to take desired amount of cash at closing and live on a new salary.
  • Seller may be starting a new business – Seller may wish to take desired amount of start-up cash at closing and set up installment payments for “supportive income” to be offset by future expenses.
  • Seller “burn out/other interests” – Seller may want time off to consider “options”/a new business. Seller may take desired amount of cash at closing and defer the balance to a specified future date.

One such option to defer tax when selling your business is to organize a Structured Sale. A Structured Sale is a “secured” installment sale. Under this option, designated installment payments are secured by Treasury Obligations, purchased by TFSS-I, and are rated AAA by S&P and Fitch and Aaa by Moody’s.

A Structured Sale enables the seller to defer up to 100% of sale year taxes. Taxes can be deferred for a few months up to several years. A Structured Sale can give the Seller a lot of flexibility in managing tax payment options and is worthy of investigation for those concerned about what comes next after selling your business.  

For more information go to Defer the Tax.

For general information on the steps you should take when selling a business, you can access free downloads here:

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