Tax Aspects of Selling Your Business

1. Tax Aspects of Selling Your Business Bradley S. Dimond, CPA Henry & Horne, LLP February 3, 2011

2. Overview Assumptions

3. Tax Aspects

4. Legal Structure of Business • Sole Proprietor (or SMLLC) • LLC (Multi Member) • S Corporation • C Corporation

5. 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

6. 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

7. 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

8. Other Considerations Contingent Liabilities Key Executives/Shadow Equity Contingent Purchase Price/Earnout

9. 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

10. Summary

11. Thank You!