Tax Advice and Tax Planning when Selling your Business

Selling your business can be an extremely complex and a time consuming exercise, and can require the expertise of professionals such as consultants, accountants, and tax advisors. If you find you don’t really want to sell your business, you have the option of reorganizing your business on a tax-deferred basis. This is one of the decisions you need to make as you draw up the plans for selling your business.

The main revenue that one can generate by selling the business is obviously the income that comes from the sale. However, there’s a tax planning implication attached as to everything else. The government views the income generated by the sale of your business in one of two ways. It is seen either as personal income or capital gains. Personal income is generally subject to tax more than capital gains, giving capital gains a decidedly greater tax advantage. Thus, when selling your company, the structure of the company and the nature of what’s being sold determine whether the income is personal or capital gains.

Tax implication when selling businesses are based on the business structure. Property sold by sole traders and partnerships subject to tax in terms of capital gains, and all other assets, such as inventory, are treated as personal income. Companies have the advantage of selling both their stocks and assets, but in the case of assets it is subject to tax twice. Companies avoid the double tax of assets, but require that companies meet certain criteria. A company must be a incorporated business for a certain amount of time prior to the sale for the tax advantages to be completely effective.

What options are there for the seller in tax point of view?

As the seller, you have the option of bargaining for terms that give you a better tax advantage. If you accept payments, you can select to be subject to tax as capital gains at the end of the transaction. Selling the stock of a corporation means that the buyer accepts all the aspects of the company, including any of the liabilities. Because of this, buyers prefer to buy the assets rather than the stocks.

As tax planning is something that has to be done carefully and over a period of time, you will need a professionally qualified accountant in your tax planning exercise. Contact KVS Accountants for all your tax planning needs. We serve clients based in Fulham, Chelsea, Barnes, Hammersmith, West Kensington and Wimbledon

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