Legal Structure of Business
• Sole Proprietor (or SMLLC)
• LLC (Multi Member)
• S Corporation
• C Corporation
Tax Result from Sale – Why it Matters
• Sale of Assets or Equity
• LTCG v. Ordinary Income
• Section 1231- Gain almost but not quite = LTCG
• Ordinary Income Recapture
• Purchase Price Allocation
Tax Results from Sale – the Results by Entity Form• Sole Proprietor (SMLLC) = Asset Sale• MMLLC = Asset Sale (for all intents and
purposes)• S Corporation – Choice and flexibility
– Section 338(h)(10) election– Purchase Price Allocation
• C Corporation– Downside of double taxation– Who has negotiating leverage– Desire not to purchase contingent liabilities
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Other Considerations
• Non-compete Agreement?• Personal Goodwill• Installment Sale
– Recapture issue– $5 million rule
• Charitable or Estate Planning– CRT? – converting LTCG to Ordinary Income– Income of gain shifting – Current gifts of
equity– GRATs– Other
Other Considerations
• Contingent Liabilities
• Key Executives/Shadow Equity
• Contingent Purchase Price/Earnout
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Other Tax Related Concerns• Due Diligence
– Representations re current on tax filings
– Property Taxes (personal and real)– Payroll Taxes– Sales Taxes– Unclaimed Property
• Escrow/Hold Back
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