Tax Implications when Selling or Buying a Business

TaxImplications when Selling or Buying a Business


TaxImplications When Selling or Buying a Business

Wheneverone wants to buy or sell a business, there are many factors thatshould be considered by both the buyer and the seller. One of thesefactors is implications of tax. So as to limit tax liability, theowner of a business must consider some initial factors (Rose, 2014).This paper looks at some of these issues and things that can be donespecifically to minimize tax liabilities and other concerns.

Priorto selling their business, the business owner must consider some keypoints so as to limit tax liability. The owner must know that he/sheis only taxed if there is a profit on the transaction or if revenueis grossed. He has to distribute as much of the buying cost tobenevolence as well asstock. The owner has to consider inventory aswell as accounts receivable. On the issue of inventory, an ordinaryincome tax rate will apply to the seller when he/she decides to sellthe inventory at a higher price than the one he/she acquired it.There will be no profit attained at this point by the seller whenreassigning this asset to the buyer (Rose, 2014).

Theacquisition cost share commands the tax outcomes for the seller aswell as the buyer. The main objective is to strike a common groundthat has constructive outcomes appropriate for both the seller andthe buyer to proceed and seal off the deal. It is advisable forbusiness proprietors to get their financial advisors involved earlyin the business so as to avoid unforeseen tax disadvantages that mayarise as a result of them selling the business.


Rose,S. (2014).TaxImplications of Selling or Buying a Business. CBB