You started your business with dreams of making millions. When the time comes to sell your business, you will want to keep as many of those after tax dollars as you possibly can in exchange for your blood, sweat and tears. Advance planning can make a big difference in the amount you pocket after the sale of your business.
Consider this. Under prevailing tax rates, Owner A sells a business for $1 million in cash and nets $800,000 in after tax proceeds. Owner B also sells his/her business for $1 million in cash, yet only nets $500,000 (or less) in after tax proceeds. The difference in the cash you keep has everything to do with the form of ownership and elective tax status, the nature of the transaction, and the tax structuring that you and the buyer agree upon.
One hundred percent of all businesses will experience a change of ownership. In some cases, this change will be involuntary and take the form of a bankruptcy or closure. However, in the vast majority of cases, it will result in the owners receiving significant amounts of money as they transfer the earning power and good will of their businesses to others.
Because there is not a centralized...
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