How much tax will I pay selling my business?
Andrew Rogerson
in Andrew's Money 2.0 radio show, Management and Planning, Selling your business
How much tax will I pay selling my business? Many business sellers have worked out that the final amount they receive from the buyer at the close of escrow when they sell their business is not the final amount they get to put in their pocket. The reason is very simple. The IRS or tax man wants his share. Equally, many sellers are not sure what they can do to lower the amount they pay the taxman.
Monty Walker is the principal of Walker Advisory Services. By training and profession, Monty is a CPA but instead of conducting a general CPA and tax advice practice, Monty chooses to focus on a very specialized area of the tax and accounting profession and that’s when a business is sold and the seller and/or buyer want specialized advice on the best tax structure for a deal.
It’s not unusual for a buyer and/or seller to work for many months on the sale of the business, have every main detail agreed upon and then find everything is about to fall apart because the two parties cannot agree on a fair tax structure. The seller thinks he has to pay too much tax or the buyer thinks they are not getting enough tax deductions. What adds to the tension at this point in the transaction is that there have generally been a lot of other negotiations and this tax negotiation can be the proverbial straw to break the camel’s back.
To help ease the tension in this situation and provide an impartial third party perspective, Monty is able to put his advice together in the form of a report called a Transaction Structuring Report. This was one of the two topics that I spoke to Monty about on April 30, 2013 when Monty was the guest on my radio show. One of the best benefits is that Monty can actually do this report with the seller before the business goes onto the market so the seller can present his preferred tax position before any stressful and difficult negotiations.
My conversation with Monty covered two topics. The first topic was a conversation about using retirement funds in a 401k or IRA plan as part of the down payment to buy a business. The second part of my conversation with Monty was about a Tax Structuring Report. I was able to ask Monty a number of questions and these include:
- What is the real purpose of a Tax Structuring Report and what’s the best way to use it?
- What documents do you need to create the report?
- How much does it cost?
- How long does it take to produce?
The primary benefit of a Tax Structuring Report includes tax deferral, minimization and elimination strategies.
You are welcome to listen to my conversation with Monty on my radio show and you can do this by clicking on the following link – Tax conversation with Monty Walker.
There were two separate topics when I had my conversation with Monty. The first topic was about using 401k or IRA money to fund the purchase of a business or franchise. You may therefore wish to skip this part of my conversation and move to our discussion about structuring the tax component when you are selling your business.
