Why You Need To Think About Taxes Early When Selling a Business

About the Episode

Taxes – taxes – taxes. The best way to deal with them is to be prepared, and Bill Wiersema returns to M&A Talk to do a short show with a big punch. He covers some of the little-known issues that come up around taxes when selling a middle-market business. He talks about the tax implications of stock deals vs. asset deals, double taxation, and tax differences between an S-Corp and a C-Corp. He explains what an F reorganization is, how it may be a solution, and the advantages and limitations of an LLC vs. an S-Corp. 

Listen on Apple Podcasts | Listen on Spotify | Listen on Deezer | Listen on Pandora | Listen on Google Podcasts | Listen on TuneIn

“You definitely need a tax advisor involved [when selling a business] – the earlier, the better. Not only with regard to how to structure the transaction but also planning for this liquidity event. Unfortunately, when people don’t do the planning, they find out post-closing that they pay taxes needlessly and that they should have planned and had people involved before the transaction because once you’re in a transaction and working on it, it becomes too late to bring a lot of those strategies to bear. So you need to have an advisor in from the beginning.”

 Bill Wiersema

In this Episode

2:23 What are the unknown issues that come up when it comes to selling an S corporation?
4:16 What is the definition of S corporations?
5:25 What certain types of entities cannot own an S corporation?
9:14 How soon do sellers need to engage their CPAs?
10:02 What is an F reorganization?
16:10 How does the pass-through entity tax work?
18:55 When and why did S corporations come into existence?
19:20 Concise explanation of how an F reorg works in conjunction with an S corp and a C corp.
21:56 Why can’t S corporation shares be owned by the majority of entities?
23:01 What are the advantages and limitations of an LLC versus an S corp?
24:59 Who should consider a C corp?
27:52 Why do middle-market owners need a tax advisor involved when selling their business?

Learn More About This Episode

Resources Mentioned in This Episode

Listen to Other Episodes

Acronyms or Terms Used in This Episode

  • S Corporation: Short for “Subchapter S Corporation,” a state-incorporated business that elects to receive special tax treatment. Most small and mid-sized companies are structured as LLCs or S Corporations, whereas most larger companies are structured as C Corporations.
  • LLCs: limited liability corporations
  • C Corporation: A corporation that has been elected to be taxed as an entity separate from its shareholders in accordance with Subchapter C of the Internal Revenue Code and may be subject to double taxation if the sale is structured as an asset sale.
  • FEIN: Federal Employer ID Number

Meet Our Guest

Bill Wiersema

Bill Wiersema

Audit Principal, specializing in M&A financial due diligence

Bill Wiersema is an Audit Principal with Miller, Cooper & Co., specializing in M&A financial due diligence, and author of several books on finance. His experience has a global reach as he has assisted international entities with their locations in Asia, Europe, and Latin America. His clients include middle-market companies, private equity groups, and financial institutions. Bill has extensive experience in assisting sellers across diverse industries in preparing for sale, conducting due diligence, creating business plans and projections, assisting in negotiations with financial institutions, and advising clients on post-acquisition financial issues.

Bill is a frequent speaker, presenter, and contributor for various organizations and publications, including the Alliance of M&A Advisors (AM&AA) and the Chicago Bar Association. He is a graduate of Economics from Northwestern University, and before joining Miller, Cooper, Co., he was a Graduate Fellow in Accounting at the University of Illinois. Bill serves on the Midwest Chapter Committee of the AM&AA. He is a member and has served on the Board of Directors of the Association for Corporate Growth (ACG) and the Midwest Business Brokers and Intermediaries. He is a member of the AICPA and the ICPAS.

Location Location: Chicago, Illinois

Selling Your Business?

Work with an industry leader that gets you results.

We invested over a decade perfecting every step of the process. The result is a method proven to reduce your risk and maximize your price.

View Our Process Now

Any questions about selling your business?