How To Minimize Your Taxes when you Sell Your Business
Businesses which are not incorporated are more likely to pay additional taxes when they are looking to sell. However, there is a simple solution: an easy process that will minimize your taxes when you sell your business.
Step 1: Incorporate your business.
Step 2: Transfer all active business assets into the corporation.
Step 3: Sell qualified small business corporation shares.
The first step to minimize your taxes is to open a corporation.
Once a corporation is set up, you can transfer all of the active business assets into that corporation using a Section 85 rollover. According to Investopedia.com, an active asset is an asset that is used by a business in its daily or routine business operations. Active assets can be tangible–such as buildings or equipment–or intangible–such as patents or copyrights. They are reported in the asset section on a business’s balance sheet. Then, if your company’s shares meet certain criteria to be considered qualified small business corporation shares; you would then be able to sell those shares and claim a lifetime capital gain exemption. This means if you have a capital gain of almost $900,000 you will pay close to zero dollars in taxes.
At BBS Accounting CPA we are here to help guide you to the right decision for your business. If you have any questions or concerns, call BBS today.