What are the tax consequences of buying or selling a business?
Inevitably, taxes become a big issue when a business is being bought or sold. From a seller’s perspective, any profit realized on the sale of a business is probably going to be subjected to taxation at some level. The goal of the seller will oftentimes be to defer the taxation (for example, by agreeing to accept installment payments), or by getting the most favorable characterization of the transaction so as to minimize the tax consequences (for example, capital gains rather than ordinary income). From the buyer’s perspective, there would be a huge incentive on the other end to characterize a purchase or a sale to maximize tax benefits that can be realized by, for example, being able to expense payments made so as to reduce taxable income. If payments can’t be expensed, a company will at least want to depreciate any assets acquired as quickly as possible. Return to index . . .
