Why You Need to Consider Taxes Before Selling Your Business

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About the Episode

The subject of taxes may be dry, but when it comes to selling a business, taxes can’t be avoided forever. Tax attorney Alex Denault discusses the differences between a CPA and a tax attorney, how an asset sale versus a stock sale impacts tax implications, successor liabilities and how they influence a transaction, the IRS ramifications of asset allocation, double taxation risks for C-corps, when sales taxes apply, and some general rules on what sellers can expect in terms of paying taxes when they sell a business.

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“One of the biggest challenges is getting the parties to align and compromise on the overall structure of a deal so you can move it forward and not let taxes get in the way of a transaction closing.”

Alex Denault

In this Episode

2:32 What is the difference between a CPA and a tax attorney when dealing with the tax implications of an M&A transaction?  
6:28 What are some of the first questions a tax attorney asks when retained by a sell-side client?
8:11 What are the tax differences between asset sales and stock sales?
13:40 What are successor liabilities?
15:56 How are LLCs taxed?
18:25 How are asset purchases or asset sales structured, and what are the tax implications?
21:03 What is goodwill, and can it impact a transaction?
26:01 What are the requirements for a business to be considered a qualified small business stock (QSBS) company?
29:56 How much can a seller expect to pay in taxes when they sell their business?
33:18 Can an owner move prior to a sale and change their tax consequences?
35:42 When does sales tax apply to an M&A transaction?
37:07 Under what circumstances might a buyer have to pay sales tax on the acquisition?
41:17 When should a seller consider bringing a tax attorney onto their team beyond an accountant?
43:15 How far in advance should a seller engage with a tax attorney or an accountant to start considering the implications of tax planning?
44:20 What are some of the advanced strategies that might be considered for tax implications or succession planning, such as trusts?

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Terms Mentioned in This Episode

  • C-Corp: A C-Corporation, or C-Corp, is a type of legal business structure that is a separate legal entity from its owners, offering liability protection to shareholders and allowing for various tax benefits.
  • S-Corp: An S-Corporation, or S-Corp, is a type of corporation that elects to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. It provides limited liability and certain tax advantages.
  • LLC: An LLC, or Limited Liability Company, is a business structure that combines the limited liability protection of a corporation with the flexibility and pass-through taxation of a partnership or sole proprietorship.
  • 338(h)(10) Election: A 338(h)(10) election is a tax election made by buyers and sellers of S-Corporation stock to treat the transaction as if the assets of the S-Corporation were sold, providing certain tax advantages in certain acquisition scenarios.
  • IRS 8594: IRS Form 8594 is used to report the sale of a business and allocate the purchase price among the assets being sold, which can have tax implications for both the buyer and the seller.
  • QSBS: This is the designation of a business according to the United States tax code where an active domestic C corporation can be deemed a qualified small business (QSB), and its shares of stock are called QSBS shares. This designation may provide some tax benefits to QSB holders who meet specific criteria.

Meet Our Guest

Alex Denault

Alex Denault

Tax Attorney

Alex M. Denault is a Partner and member of the Business, Finance, and Tax Team of the law firm of Berger Singerman LLP in Miami, Florida. Alex focuses his practice on advising about the federal tax aspects of mergers and acquisitions, joint ventures, partnerships, and other transactional tax matters. Recently, Alex’s practice has included counseling clients about the Corporate Transparency Act, which is a new law that requires most US corporations and LLCs to disclose beneficial ownership information to FinCEN beginning in 2024.

Prior to joining Berger Singerman, Alex was Managing Director of KPMG’s Mergers and Acquisitions Tax practice in Miami, Florida, where he assisted clients on the tax aspects of mergers, acquisitions, reorganizations, and other transactions.

Alex earned his undergraduate degree in accounting and law degree from the University of Florida and his LL.M. in Taxation from New York University. He is a frequent speaker and author on a wide variety of tax topics.

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