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 a Medicare tax, 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 a viable option. Uncle Sam will eventually take their share, but there are options to consider that allow you, the seller, some control. There are many reasons to defer tax obligations.
- The seller may be staying on with a management service contract. The seller may wish to take the desired amount of cash at closing and live on a new salary.
- The seller may be starting a new business and may wish to take the desired amount of start-up cash at closing and set up installment payments for “supportive income” to offset future expenses.
- Seller “burn out/other interests” – Seller may want time off to consider “options”/a new business. The seller may take the desired amount of cash at closing and defer the balance to a specified future date.
A solution is a Structured Sale.
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 the sales tax. The seller can defer taxes for a period of several months to several years. A Structured Sale can provide the seller with considerable flexibility in managing tax payment options and is worth considering for those concerned about what comes next after selling their 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: