| I'm selling my s-corporation, but I'm not entirely sure if I should sell it as an asset purchase or a share purchase.====>> Deciding whether to structure your S corp sale as an asset sale or a stock sale is complicated because the parties involved benefit from opposing structures. In general, a buyer prefers asset sales, whereas a seller prefers stock sales. Every business transaction is unique, and buyers and sellers should always consult with the appropriate professionals , Enrolled Agent/ a CPA doing taxes, when considering a business sale structure. An asset sale is the purchase of individual assets and liabilities, whereas a stock sale is the purchase of the owner's shares of a corporation.
The company is a drop-ship eCommerce site, I have no inventory and only a few hundred dollars in depreciable assets. I'm selling the company for less than $30,000, so I was wondering if there would be much benefit to going with a share purchase over an asset purchase as far as taxes go?======>>Since your business is incorporated,as a sub-S corp, you, the seller must decide whether to structure the deal as an asset sale or a stock sale. In an asset sale, you, the seller, retain possession of the legal entity and the buyer purchases individual assets of the S corp, such as equipment, fixtures, leaseholds, licenses, goodwill, trade secrets, trade names, telephone numbers, and inventory. Asset sales generally do not include cash and the seller typically retains the long-term debt obligations. Normalized net working capital is also typically included in a sale. Net working capital often includes accounts receivable, inventory, prepaid expenses, accounts payable, and accrued expenses. However, asset sales may also present problems for buyers. Certain assets certain intellectual property, contracts, leases, and permits. are more difficult to transfer due to issues of assignability, legal ownership, and third-party consents. For you, asset sales generate higher taxes because while intangible assets, such as goodwill, are taxed at capital gains rates, other "hard" assets can be subject to higher ordinary income tax rates. Through a stock sale, the buyer purchases the selling shareholders' stock directly thereby obtaining ownership in the seller's legal entity. The actual assets and liabilities acquired in a stock sale tend to be similar to that of an assets sale. Assets and liabilities not desired by the buyer will be distributed or paid off prior to the sale;sellers often favor stock sales because all the proceeds are taxed at a lower capital gains rate. Likewise, sellers are sometimes less responsible for future liabilities, such as product liability claims,or etc. However, the purchase agreement in a transaction can shift responsibilities back to you.Many other factors, such as the company's structure and the industry, can also influence the decision. It is important for both parties to consult with their business intermediaries, legal counsels, and accounting professionals early in the process to fully understand the issues and reach a decision that will produce the desired results
I want to minimize the amount of taxes I pay because of the sale (My wife and I make a combined income of less than $75k per year, I live in FL, and the buyer is out of state). I know that going to a M&A attorney would be best, but since I would end up paying them a significant percentage of the total sale, I figured I could do some initial leg-work. (I have a background in finance. I have my CFA charter and currently work as an analyst at boutique asset management firm).=======>> as mentioned previouslyWhile there are many considerations when negotiating the type of transaction, tax implications and potential liabilities are the primary concerns
 |
Linear Mode
