The Smart Way to Sell Your Business How to Minimize Capital Gains Tax
So, you’ve grown your business successfully and received an offer — congratulations! In this situation, it can be easy to only see the dollar signs and move quickly, letting the Internal Revenue Service (IRS) and the state of California take a big cut of your transaction. Don’t cave to that temptation. Instead, work with your attorney to develop a proper tax strategy that will help you avoid a large capital gains tax on the growth of your business. WHY BUSINESS STRUCTURE MATTERS? The structure of your business will impact the way the IRS calculates the capital gains tax. If your business does not deal in stock sales (such as sole proprietorships and LLCs), the IRS will consider the value of the individual assets held by your business instead of viewing the business as one asset. This means the value of each asset will have a capital gains tax attached to it.
Other business types avoid this individual capital gains tax application. HOW TO LESSEN YOUR TAX BURDEN. If possible, avoid selling your business in the first year you own it in order to avoid triggering a short-term gains tax. After the one-year threshold, you have a number of options to lessen this tax burden. If your business does not deal in stock sales, then structure the sale to apply a majority of the purchase price to assets that fall into long-term gains as opposed to any that have been owned for less than a year. Additionally, if your business has assets that you have claimed depreciation on, then keep the purchase price on those assets low. The IRS looks favorably upon internal sales to employees or shareholders. If you own a C-Corp, you can minimize capital gains taxes by offering employees the
opportunity to purchase a portion or all of the business. Putting this money into an employee stock ownership plan moves the proceeds of the sale into an investment plan, which defers the capital gains tax. Finally, alternatives such as receiving payments through installments, allocating payments to an Opportunity Zone Investment or using a Charitable Remainder Trust can help you avoid these high tax bills. The more care you take during the sales process, the more money you’ll walk away with in the end!
Goat Cheese and Thyme Stuffed Chicken Ingredients • 2 skinless, boneless chicken breasts • 3.5 oz firm goat cheese • 1 tsp fresh thyme leaves, plus 2–3 sprigs
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Inspired by BBCGoodFood.com
• 4 pieces of thin-sliced bacon • Olive oil • 2 zucchinis, thinly sliced • 1 large tomato, thinly sliced
can create a precious gift for your children, grandchildren, and other loved ones that will preserve your memory for decades to come.
Directions 1. Preheat oven to 375 F. 2. Split the chicken breasts almost in half along the long side, open them like a book, then flatten the sides out. 3. Put the goat cheese on the “open book” side of the chicken and sprinkle with thyme leaves. Fold the chicken over to enclose the cheese, then wrap each breast in 2 slices of bacon. 4. Lightly oil a shallow gratin or casserole dish, then arrange overlapping rows of zucchini and tomatoes on the bottom. Drizzle with olive oil, sprinkle with salt and pepper, then set chicken on top. Place thyme sprigs on chicken. 5. Bake for 40–45 minutes until the bacon is crisp and golden and the zucchini is tender.
“Whenever you see a successful business, someone once made a courageous decision.” –Peter F. Drucker
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