There are two options sale vs sell when selling a business: An “entity sale” and an “asset sales.” This can reduce the amount of taxes you’ll owe after the sale is completed.
You can either sell your shares of corporate stock, or your membership interest in an LLC. The assets of the business (equipment and furniture, inventory, real estate, accounts receivables etc.) are sold. The entity will continue to own the assets, while the entity purchased by the buyer. A asset sale is when your LLC or corporation sells its assets to a buyer. You still own the stock and membership interests of the LLC. This system allows you to still own the entity, even though it may be worthless. Asset sales often allow buyers to get depreciation benefits earlier than with an entity. However, selling an entity will likely make you a better seller from a tax perspective, since you’ll be subject to the low long-term capital gains rate. Your part of the tax bill for an asset sale may be based at the normal, higher income rate. A seller should be cautious about selling assets to a C corp as there is a risk of double taxes. This discrepancy can often be resolved by a compromise between buyer and seller. The adjustment of the selling price and payment terms will reflect this. You should not compromise on a sale of assets if negotiations lead to you agreeing to it. Otherwise, you will be subject to higher taxes and other liability risks.
When selling a business, managing assets
You should carefully consider which assets you will sell with the company if you agree to an asset sales. You should remove non-productive and unnecessary assets as you prepare to sell the company. These assets are unlikely to be purchased by the buyer, so it may be a better idea to sell them yourself. You can negotiate valuable assets like real estate and equipment. Patents, trademarks and copyrights you want to keep and license back to buyers can also be important. You can reduce the purchase price of your business and make it more affordable for buyers by keeping some assets. You can also retain real estate from your business to generate rental income for the future , and you still have the option to sell it to the buyer (or another buyer) later.sale vs sell
