Minimizing the Payment to Uncle Sam when You Sell your Company
Today's episode of #PoisedforExit featured Lance Madson, CPA and Tax Partner with Boulay. Lance got his start in tax and stayed there. Imagine his level of expertise when working with business owners!
We started out talking about one of the basic quandary's owners face when selling their companies; should it be a stock sale or asset sale? Well, sellers like stock sales and buyers like asset sales. “Frankly, most small businesses are asset sales”, Lance said. Buyers like to get the step up in basis on the tax side, so they will prefer an asset sale. Sellers would prefer a stock sale, because they'd get taxed at the capital gains rate, which is lower than ordinary income, and their whole company goes with a stock sale, not just the assets….
Most of the value in a business lies in the goodwill of the business, which is an intangible asset. What consists of goodwill? Customer/client lists, reputation, brand, vendor relationships and employees! When a valuation leans heavily on goodwill (which lenders don't like) it's an advantage for the sellers because there's less tax to pay on intangible assets.
Lance also gave advice on how to defer tax in a sale as well as how to even eliminate it! He cited a tax code that allows for the sale of qualified small business stock (you have to be a C-corp) and provides for an exclusion of the gain up to $10M! Structure your next venture on this premise, but only after you've consulted with Lance on the details. Listen to the show and learn more!
Find Lance Madson here and find Julie here
Thank you to this month’s sponsor! Sunbelt Business Advisors and John A Knutson & Co, PLLP, JAK + Co
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BTR program
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Owner's Forum Registration | October 6
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Business Transition Readiness Workshop | October 19
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